tanla solutions ltd Management discussions

Global Economy

The world economics, in recent years, has faced numerous challenges ranging from the pandemic, the Russia-Ukraine conflict and weakening growth due to monetary tightening across nations. With the reopening of economies as COVID-19 subsided, the macro economic environment was greatly influenced by the ongoing geopolitical crisis. Headline inflation figures across global economies continue to remain elevated and above the threshold levels despite recent moderation.

As a result of the synchronized monetary tightening measures adopted by the countries, global inflation is expected to be reduced, although more slowly than initially anticipated, from 8.7% in 2022 to 7% in 2023 and 4.9% in 2024. The IMF predicts annual inflation of 4.6% and 8.1% for advanced and emerging economies respectively in 2023.

Five-year-ahead growth forecasts declined steadily from 4.6 % in 2011 to 3.0 % in 2023. Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023. Emerging market and developing economies could see a modest rise in growth to 4.0% in 2023.Going forward, with persisting inflation across advanced economics, defiant labour market scenario and the hawkish tone set by the majority of the central banks, the global economic outlook is likely to experience a slowdown.

Indian Economy

Indias growth story has seen a substantial rebound from the pandemic era and continues to exhibit immense confidence. As per World Bank estimates, GDP growth is expected to be 6.9% in FY23.

Throughout the year, the RBI calibrated interest rate hikes, while global commodity prices began to stabilize in the latter part of the financial year. This helped bring inflation back to an acceptable level. Indias exports displayed consistent momentum, growing by 14% to reach USD 770 Bn including merchandise and services. However, this was accompanied by a widening trade balance.

With resilient domestic demand and capital investment, the World Bank projects Indias GDP to grow at 6.3% in FY24, with contributing nearly 17% of the global growth (IMF).

Business overview

The digital communication and interaction market is large, global, and growing. Enterprises universally acknowledge that their competitive edge relies on delivering an outstanding digital customer experience. This awareness drives them to prioritize customer engagement and actively seek solutions to enhance their marketing, delivery, and customer service strategies. While our global market is inevitably influenced by overarching macroeconomic trends, it is also shaped by evolving shifts in how enterprises, their end-users, and individuals at large communicate with each other over time.

This fluidity shapes the trajectory of our market. We expect the Total Addressable Market (TAM) for the CPaaS space to be around USD 5-6 billion solely in India by 2027. When factoring in adjacent emerging markets like the Middle East and Southeast Asia, where we have started making inroads, TAM could potentially reach around USD11 billion by 2027.

Global trends shaping digital interactions

Management Discussion and Analysis

Result of operations

— Revenue increased by 5%, YoY to 3,355 crore

— Gross profit was at 837 crore for FY23.Gross margin at 24.9%, decreased by 338 basis points YoY

— EBITDA was at 588 crore for FY23. EBITDA margin at 17.5%, decreased by 431 basis points YoY

— Profit after tax was at 448 crore. PAT margin at 13.3%, and decreased by 348 basis points YoY

— Earnings per share was at 33.05 for FY23

— Free cash flow was at 91 crore for FY23

The Consolidated financial statements of the Group have been prepared in accordance with Indian Accounting Standards ("Ind AS") as notified under Section 133 of the Companies Act, 2013 (the "Act") read with Rule 3 of the Companies (Indian Accounting Standards) Rules 2015 as amended, issued by Ministry of Corporate Affairs (‘MCA).

Accounting policies have been consistently applied to all the years presented except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

Revenue

Revenues are derived from our Digital Platforms and Enterprise Communications businesses. Revenue is recognized upon provision of service to customers that reflects the consideration we expect to receive in exchange for that service.

Digital platforms revenues are computed by way of revenue share measured as a rate applicable to transaction processed on mobile carriers network and other suppliers.

Revenues from Enterprises communications are computed based on total transactions processed through our platforms at the agreed fixed value per transaction.

Particulars (In crore)	FY23	FY22	Change
Digital Platforms	303	252	20%
Enterprise Communications	3,052	2,954	3%
Total Revenue	3,355	3,206	5%

Revenue grew by 5% YoY to 3,355 crore. The revenue growth is driven by both Digital Platforms and Enterprise Communications businesses.

Consolidated Profit & Loss account

	March 31 (Audited)
In crore unless otherwise stated	FY23	FY22	Change
Revenue from operations	3,355	3,206	5%
Cost of services	(2,518)	(2,298)	10%
Gross profit	837	908	(8%)
Gross Margin	24.9%	28.3%	(338 bps)
Operating expenses
Sales and Marketing	(42)	(37)	15%
General and administrative	(207)	(171)	21%
Total operating expenses	(249)	(208)	20%
EBITDA	588	700	(16%)
EBITDA margin	17.5%	21.8%	(431 bps)
Depreciation and Amortization	(46)	(41)	13%
EBIT	542	659	(18%)
EBIT margin	16.2%	20.6%	(442 bps)
Finance cost	(1)	(1)	3%
Other income	26	16	62%
Profit before tax	567	674	(16%)
Tax expenses	(119)	(135)	(12%)
Profit after tax	448	539	(17%)
PAT Margin	13.4%	17.0%	(348 bps)
Earnings per share ( )	33.05	39.77	(17%)

Digital platforms revenue grew by 20% YoY to 303 crore, led by Trubloq and Wisely. Trubloq – worlds first blockchain-enabled compliance platform processed over 300 billion transactions in FY23. Wisely- Platform of Platforms contributed 32% to overall digital platforms revenue. Wisely- Network and OTT scaled up during the year, driving growth.

Enterprise communications revenue grew by 3% YoY to 3,052 crore. The growth in enterprise communications was led by WhatsApp, new customer additions, improved pricing in international business, and partly offset by the impact on domestic business. In Q1 FY23, market disruptions in pricing, particularly in the National Long Distance (NLD) business for select customers, had an overall impact on the growth.

In FY23, we added 269 new customers, generating a revenue contribution of 50 crore. 28% of these new additions were on WhatsApp. We witnessed 3.5x revenue growth in WhatsApp from FY22 to FY23, and we have reached an annualized run rate of 150 crore for this business.

Customers with annual revenue greater than 1 Crore grew by 4% YoY to 3,234 crore. In FY23, the product penetration from our top 120 customers increased to 2.17, showing an improvement from the previous years figure of 1.95. WhatsApp demonstrated the highest level of adoption among customers, second only to Application to Peer (A2P) solutions. Customer concentration from top twenty customers reduced from 61% in FY22 to 58% in FY23.

Customer segmentation

	FY22		FY23
Particulars (In crore)	Count	Revenue	Count	Revenue	Growth in count	Growth in revenue
> 50 crore	17	1,791	19	1,904	12%	6%
> 10 crore - < 50 crore	36	851	33	746	(8%)	(12%)
> 1 crore- < 10 crore	139	462	171	584	23%	26%
Total	192	3,104	223	3,234	16%	4%

Cost of services

The cost of services consists of a service transaction fee paid to mobile carriers and other suppliers.

Particulars (In crore)	FY23	FY22	Change
Cost of services	2,518	2,298	10%

Cost of services grew by 10% YoY to 2,518 crore, led by volume growth. The cost of services is primarily associated with the enterprise communications, while it remains minimal for the digital platforms business.

Gross profit

Revenue less cost of services. The cost of services consists of a service transaction fee paid to mobile carriers and other suppliers.

Particulars (In crore)	FY23	Gross margin	FY22	Gross margin	Change
Digital Platforms	291	96.0%	236	93.5%	23%
Enterprise Comnunications	546	17.9%	672	22.8%	(19%)
Total Gross profit	837	24.9%	908	28.3%	(8%)

Gross profit de-grew by 8% YoY to 837 crore. The gross margin decreased by 338 basis points to 24.9% YoY. Gross profit growth was primarily impacted by pricing pressure in the enterprise communications business.

Digital platforms business gross profit grew by 23% YoY to 291 crore driven by Trubloq and Wisely. Wisely contributed to over one-third of digital platforms business gross profits. The digital platforms business gross margin contribution at 35% to the total gross margin.

Enterprise communications business witnessed a decline in gross profit in Q1 FY23 due to market pricing disruptions. However, as the year progressed, the gross profit steadily improved by the end of the year.

Operating profit - EBITDA

Particulars (In crore)	FY23	FY22	Change
Gross profit	837	908	(8%)
Sales & Marketing expenses (S&M)	(42)	(37)	15%
General & Administrative expenses (G&A)	(207)	(171)	21%
Operating profit- EBITDA	588	700	(16%)
EBITDA/Gross Profit conversion	70%	77%	(684 bps)

EBITDA de-grew by 16% YoY at 588 crore. The EBITDA margin decreased by 431 basis points YoY to 17.5%. The Gross profit to EBITDA conversion stood at 70% in FY23.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a measure that represents the profit generated by the operating business, obtained by deducting operating expenses from revenue. It serves as a reflection of the operating businesss profitability.

Sales & Marketing expenses consist of employee costs and other expenditures directly related to sales, marketing, and promotional activities.

General & administrative expenses encompass various costs, including employee expenses (excluding the salary costs mentioned earlier), charges for cloud and data center hosting, as well as expenses associated with day-to-day operations. These day-to-day operational expenses include rent for facilities, professional fees, office maintenance, and other general expenditures.

Operating expenses break up

Particulars (In crore)	Category	FY23	FY22	Change
Employee Cost	S&M and G&A	134	127	5%
Professional charges	G&A	34	29	18%
Cloud and data center hosting charges	G&A	14	13	7%
Foreign exchange fluctuation	G&A	13	4	199%
Other expenses	G&A	13	10	23%
Travelling expenses	S&M	11	4	181%
Marketing expenses	S&M	8	6	31%
Allowance for doubtful debts	G&A	5	6	(24%)
Rent, rates & taxes	G&A	5	2	103%
Office maintenance	G&A	5	2	132%
Corporate social responsibility	G&A	4	1	172%
Advertisement expense	S&M	3	1	130%
Total		249	208	20%

Detailed variance analysis is explained below Employee cost

Particulars (In crore)	FY23	FY22	Change
Salaries and wages	108	111	(3%)
Employee stock option cost	17	9	87%
Contribution to provident and other funds	6	5	16%
Staff welfare expenses	3	2	75%
Total	134	127	5%

Employee cost remains constant at 4% of revenue in FY23, as compared to FY22. The increase in employee costs is primarily attributed to salary increments and the costs associated with restricted stock units (RSUs).

We have adopted a compensation policy aimed at attracting, retaining, and rewarding talented individuals while aligning their long-term interests with the Companys objectives. As part of this policy, high-performing employees are granted performance-based restricted stock units. These awards vest upon the achievement of specific goals over designated performance periods. A total of thirty-nine employees, which represents 6% of the total headcount (615), participate in this program.

A summary of the restricted stock unit (RSU) activity and related information for the year ending March 31, 2023:

Particulars	No of RSUs
Opening balance as on April 01, 2022	2,97,000
RSUs granted	1,25,000
RSUs vested	79,500
RSUs exercised	71,500
RSUs lapsed	30,000
Balance as on March 31, 2023	3,20,500

RSU vesting schedule

Particulars	No of RSUs
RSUs vested yet to be exercised for FY23	8,000
FY 23-24	1,08,503
FY 24-25	1,16,499
FY 25-26	74,998
FY 26-27	12,500
Balance as on March 31, 2023	3,20,500

Cloud and Data center hosting

Particulars (In crore)	FY23	FY22	Change
Data center and hosting charges	9	8	14%
Internet and cloud computing charges	5	5	(3%)
Total	14	13	7%

Cloud and data center hosting charges remain constant at 0.4% of revenue in FY23, as compared to FY22. The Increase in hosting charges is primarily attributed to the addition of new products and features on our Platforms.

Other S & M expenses

Particulars (In crore)	FY23	FY22	Change
Travelling expenses	11	4	181%
Marketing expenses	8	6	31%
Advertisement expense	3	1	130%
Total	22	11	93%

Other S&M expense grew by 93% YoY to 22 crore. The increase in these expenses can be attributed to targeted investments in branding and product marketing initiatives. We actively participated in Mobile World Congress in Barcelona, where Wisely-ATP was launched. Additionally, we attended and hosted various events aimed at enhancing customer success.

Other G&A expenses

Particulars (In crore)	Category	FY23	FY22	Change
Professional charges	G&A	34	29	18%
Foreign exchange fluctuation	G&A	13	4	199%
Other expenses	G&A	13	10	23%
Allowance for doubtful debts	G&A	5	6	(24%)
Rent, rates & taxes	G&A	5	2	103%
Office maintenance	G&A	5	2	132%
Corporate social responsibility (CSR)	G&A	4	1	172%
Total		79	57	39%

Other G&A expenses grew by 39% YoY to 79 crore. This increase can be attributed to several factors, including foreign exchange fluctuations, Corporate Social Responsibility (CSR) initiatives, additional expenditures on professional charges, and various other expenses.

During the first half of the year, the EURO experienced a sharp depreciation against the USD, resulting in a currency translation loss of 13 crore.

Trade receivables are assessed at the end of each reporting period, and provisions are made based on an approved norm-based policy. The provision created will be the higher of the Expected Credit Loss (ECL) or the provision as determined by the policy.

Earnings before Interest & Taxes (EBIT)

Particulars (In crore)	FY23	FY22
Amortization on	31	32
Platforms	17	13
Customer Relationship	12	12
Trade Name	0	4
Technology	1	2
Non-compete	1	1
Depreciation on	15	9
Right-of-use assets	4	3
Tangible assets	11	6
Total Amortization & Depreciation	46	41

EBIT de-grew by 18% YoY to 542 crore and EBIT margin decreased by 442 basis points to 16.2%.

Earnings before Interest & Taxes is a measure that represents operating profit, which is derived by deducting operating expenses from revenue and excluding interest and tax expenses.

Fixed assets, including IT assets, are depreciated over their estimated useful lives using the straight-line method. Intangible assets, created at the time of acquisition based on the purchase price allocation methodology, are amortized over their estimated useful lives using the straight-line method. The right-of-use asset represents leased assets, such as leased office space, and is depreciated over its useful life.

Depreciation and Amortization increased by 13% YoY to 46 crore. The increase in amortization can be primarily attributed to the capitalization of platform. During the year, 56 crore was capitalized towards Wisely OTT, and this amount will be amortized over a period of six years. Additionally, the increase in depreciation on right-of-use is due to capitalization Innovation and Experience center.

Other Income

Particulars (In crore)	FY23	FY22
Interest income on deposits	19	13
Interest on income tax refunds	6	2
Miscellaneous income	1	1
Total	26	16

Investments can take the form of liquid funds such as fixed deposits or term deposits with banks, housing finance companies, and savings schemes.

Additionally, we may invest in securities and bonds issued by the central government, provided they have a minimum rating of "AAA."

Our cash, cash equivalents, and current investments, in the form of fixed deposits, are predominantly held in both Indian Rupees (INR) and U.S. Dollars (USD).

We generated an average interest yield of 4.4% in FY23. Other income also includes interest received on income tax refund of 6 crore. Cash balance held in current (USD accounts) generates no interest. Refer to cash, cash equivalent section for more details Profit after tax (PAT)

Particulars (In crore)	FY23	FY22
Profit before tax	567	674
Tax expense	(119)	(135)
Profit after tax	448	539
Effective tax rate	21.0%	20.0%

Profit after tax de-grew by 17% YoY at 448 crore. Profit after tax margin decreased by 349 basis points YoY to 13.3%. The reduction in profit after tax can be attributed to a decrease in gross profit, coupled with increase in operating costs, as well as depreciation and amortization expenses.

In FY23, our total tax and social contribution to the exchequer amounted to 885 crore. This contribution includes corporate income taxes, withholding taxes payments, indirect taxes like GST in India and Singapore, and VAT in UAE along with other social security contributions. For more details, please refer page no 09 of our Tax Transparency Report FY23.

Income tax assessment across the group have been completed up to AY2020-21. For more details, please refer page no 12 of our Tax Transparency Report FY23.

Earnings per share

Particulars (In crore)	FY23	FY22
Profit after tax	448	539
Weighted-average basic shares outstanding	13,44,79,523	13,56,00,998
Effect of dilutive shares	89,508	85,934
Weighted-average diluted shares outstanding	13,48,69,031	13,56,86,931
Basic earnings per share	33.05	39.77
Diluted earnings per share	33.04	39.74

Earnings per share de- grew at 17% to 33.05. The decrease in EPS was primarily a result of lower profitability, but it was partially offset by the benefits of the buyback.

Consolidated balance sheet

Particulars (In crore)	March 31, 2023	March 31, 2022
EQUITY AND LIABILITIES
Equity share capital	13	14
Other equity	1,504	1,340
Total equity	1,517	1,354
Non-Current liabilities
Financial liabilities
Lease liabilities	73	45
Other financial liabilities	1	0
Provisions	2	7
Other non-current liabilities	1	1
Total Non Current Liabilities	77	53
Current liabilities
Trade payables	539	679
Lease liabilities	9	9
Other financial liabilities	244	244
Other current liabilities	20	27
Short term provisions	2	0
Liabilities for current tax (net)	5	16
Total Current liabilities	819	975
Total liabilities	896	1,028
TOTAL EQUITY AND LIABILITIES	2,413	2,382
Assets
Non-current assets
Property, plant and equipment	166	43
Platforms	87	48
Customer Relationships	13	26
Brands	-	1
Technology	-	1
Non-Compete	2	3
Intangible assets under development	57	40
Goodwill	135	135
Right-of-use-lease assets	80	48
Capital work in progress	8	13
Other Financial assets	15	71
Deferred tax assets (net)	36	40
Other non-current assets	79	31
Total non-current assets	678	500
Trade receivables	570	560
Cash and bank balances	712	862
Other Financial assets	420	395
Other current assets	33	65
Total current assets	1,735	1,882
TOTAL ASSETS	2,413	2,382

Equity and Liabilities

The Company has only one class of shares equity shares with a par value of 1/- each. The authorized share capital of the Company is 20,00,00,000 equity shares. As on March 31, 2023, paid-up share capital at 13.44 crore, compared to 13.57 crore as of March 31, 2022. Equity share movement is detailed below:

	As on March 31, 2023		As on March 31, 2022
Particulars (In crore)	No. of Shares		No. of Shares
Shares outstanding at the beginning of the year	13,57,45,523	13,57,45,523	13,60,36,450	13,60,36,450
Add: Issued and allotted during the year	71,500	71,500	4,14,750	4,14,750
Less: Shares bought back during the year	(14,16,666)	(14,16,666)	(7,05,677)	(7,05,677)
Shares outstanding at the end of the year	13,44,00,357	13,44,00,357	13,57,45,523	13,57,45,523

Equity share buyback update

The Board of Directors approved buyback of equity shares at 1,200 per equity share for an amount not exceeding 170 crore payable in cash, through tender route mechanism.

The buyback program was completed in January 2023, and the Company has bought back 14,16,666 equity resulting in cash outflow of 212 crore including transaction cost.

Securities premium reverse decreased from at 428 crore as on March 31,2022, to 215 crore as of March 31, 2023, primarily due to buyback of equity shares during the year.

Employee stock options outstanding increased from 9 crore as on March 31,2022, to 26 crore as of March 31, 2023, primarily due to issue of Restricted stock units (RSU) during the year. For more details refer employee cost section for RSU movement.

The movement in retained earnings is on account of profit generated of 448 crore and payment of dividend of 109 crore to the shareholders.

Reserve & Surplus

Particulars (In crore)	31-Mar-23	31-Mar-22
Capital reserve	7	7
Capital redemption reserve	2	2
General reserve	25	25
Securities premium reserve	215	428
Employee stock options outstanding account	26	9
Retained earnings	1,191	852
Foreign currency translation reserve	39	16
Other items of other comprehensive income	(1)	1
Total	1,504	1,340

Lease liabilities

As per Ind-AS 116 on lease accounting, leased assets recognition as assets and liabilities is mandated in the lessees financial records. Accordingly, the asset and liability associated with leased office premises of the group companies have been determined and presented within non-current and current assets/liabilities. This classification pertains to values anticipated to occur after one year and within one year, respectively.

Other non-current financial liabilities

An amount of 1 crore is held within the unclaimed dividend account, reflecting unpaid dividends to shareholders over the years due to various reasons. The Company has established oversight for this liability through its registrar and secretarial team. Upon the lapse of a seven-year period from the date of dividend declaration, this amount is transferred to the central governments Investor Education and Protection Fund (IEPF) account.

Long term and Short term provisions

Provisions represent liabilities accrued for leave encashment ( 2 crore) and gratuity ( 1 crore) payable to employees on retirement, resignation, or superannuation, quantified and charged to expenses at the end of each reporting period.

Gratuity liability is managed through a policy held with Life Insurance Corporation of India, to cover the liability as and when the claim arise. Leave encashment represents the accrued liability in accordance with the Companys leave policy, which becomes payable to employees upon retirement, resignation, or superannuation.

Both gratuity and leave encashment are accrued based on independent actuarial valuation reports.

Other non-current liabilities

Other non-current liabilities consists of security deposits received from customers.

Trade payables

Trade payables consist of payables towards cost of services (mobile carriers) and other suppliers and stood at 539 crore as of March 31, 2023 ( 679 crore as of March 31, 2022). The decrease in trade payables is due to working capital investments towards strategic partnership.

Other current financial liabilities

Other financial liabilities consists of cost of services not yet billed to the Company and payable to capital creditors. As on date of reporting, 1% of unbilled cost remains to be billed by mobile carriers.

Other current liabilities

Other current liabilities consist of statutory liabilities, payable towards GST and TDS These liabilities are settled with government authorities on a monthly schedule, adhering to specified due dates.

Liabilities for current tax

Liabilities for current tax represents tax payable in India and overseas subsidiaries.

Assets

Property, Plant and Equipment

Particulars (In crore)	31-Mar-23	31-Mar-22
Land	8	8
Buildings	2	2
Leasehold improvements	61	-
Furniture	20	0
Computers	73	32
Office Equipment	2	1
Vehicles	0	0
Total	166	43

The increase in net block of Property, Plant and Equipment is primarily attributed due to investments in leasehold improvements and furniture, amounting to 81 crore. Additionally, we invested 41 crore towards IT & networks, focusing on platform infrastructure upgrade and establishing new platform infrastructure.

Intangible assets and intangible assets under development

Particulars (In crore)	31-Mar-23	31-Mar-22
Platforms	87	48
Customer Relationships	13	26
Brands	0	0
Technology	0	1
Non-Compete	2	3
Total Tangible assets	102	78
Intangible asset under development	57	40

During the year, an amount of 56 crore was capitalized as platform deployment cost of Wisely OTT and amortized over the remaining duration of the year. Other intangible assets such as customer relationships, trade name, technology and non-compete that arose as a part of the Karix and Gamooga acquisitions are being amortized over their useful life as ascertained under Purchase Price Allocation (PPA).

Intangible assets under development represent platforms that are currently in the process of internal development. The cost of these assets encompasses expenditures related to salaries, wages, and professional consultancy charges that are directly associated with their development.

Goodwill

Goodwill is tested for impairment at the end of each reporting period using a "value-in-use model. For the year-end assessment, we obtained a valuation report from an external valuer, and it concluded that fair value exceeds the carrying value for Gamooga. The carrying value of goodwill as of March 31, 2023, stood at 135 crore.

Other financial assets

Particulars (In crore)	31-Mar-23	31-Mar-22
EMD deposits	8	6
Rental deposits	4	4
Other deposits	3	1
Bank deposits with more than twelve months maturity	0	60
Interest receivable	-	-
Total	15	71

Deferred tax asset

Deferred tax arises on account of the timing differences in depreciation charge between the Income Tax Act and Companies Act and is subsequently reversed in future periods. During the year, deferred tax assets decreased by 3 crore due to the reversal of timing differences on depreciation of assets.

Other non-current assets

Particulars (In crore)	31-Mar-23	31-Mar-22
Income tax asset	78	27
Capital advances	0	4
Total	78	31

Income tax assets increased by 51 crore due to an increase in TDS receivable, which will be offset against subsequent years income tax payable.

Particulars (In crore)	Karix	Gamooga	Total	Useful life	Impairment/ Amortization	Net carrying value
Goodwill	158	25	184	-	48	135

Capital work in progress

Capital work in progress represent on-going work towards leased offices.

Trade receivables

Trade receivables stood at 570 crore as of March 31, 2023. Day sales outstanding (DSO) increased by eight days to 62 days in FY23. All our receivables net of provisions are less than 365 days except for bilateral receivables where our payables are significantly more than receivables.

Cash, Cash Equivalents

Cash, cash Equivalents stood at 712 crore for the year ended March 31, 2023. Cash, cash equivalents composition is given below

Particulars (In crore)	31-Mar-23	31-Mar-22
Restricted cash	26	19
Current account- INR	42	60
Current account- USD	175	321
Fixed Deposits	469	462
Fixed Deposits having maturity > 12 months	-	60
Total	712	922

Restricted cash are held as margin money deposits given for bank guarantees and cash credit limits. The increase in restricted cash is attributed to the issuance of bank guarantees for new contracts and participation in RFP.

Cash balance in overseas accounts, decreased due to working capital investments made towards strategic partnership.

Investments in fixed deposits is in line with our investment policy.

Independent bank balance confirmation for 100% of cash and investments are obtained by our statutory auditors from banks.

Cash, cash equivalents break up

Particulars (In crore)	Current accounts- INR	Current accounts-USD	Fixed deposits	Restricted cash	Total
HDFC Bank	10	-	343	20	373
HDFC Limited	-	-	60	-	60
State Bank of India	4	-	15	-	19
Axis Bank	3	-	-	-	3
Kotak Mahindra Bank	5	-	19		24
Citibank (Dubai)	-	56	-	-	56
DBS Bank (Singapore)	-	119	-	3	122
ICICI Bank	19	-	32	-	51
Others	1	-	-	3	4
Total	42	175	469	26	712

Other financial assets

Particulars (In crore)	31-Mar-23	31-Mar-22
Accrued Income	412	386
Interest receivable	7	7
Other receivable	1	2
Total	420	395

Accrued Income encompass revenue that has been accrued but not yet billed at the end of each month. This is a common industry practice where invoicing occurs in the following month after reconciliation. Contract assets for FY23 is at 12% of revenue. As on date of reporting, 2% of unbilled revenue is yet to be billed to customers.

Interest receivable represents the interest that has been accrued on fixed deposits but has not yet been credited to the deposit account by the banks and are recognized under other financial assets.

Other current assets

Particulars (In crore)	31-Mar-23	31-Mar-22
Advances recoverable in cash or kind	22	6
GST Input credit	3	17
Balances with revenue authorities	8	42
Total	33	64

The balances with revenue authorities represents tax deducted at source (TDS), which is adjusted against subsequent tax dues or refunded with interest on completion of tax assessments.

Liquidity management

The primary source of our cash, cash equivalents and current investments is funds generated from our operational activities. Over the past few years, the principal use of cash has been to support operations, facilitate capital expenditure stemming from growth, and to distribute cash to shareholders through dividends and buybacks. On March 31, 2023, our cash, cash equivalents, and current investments (in form of fixed deposits) were primarily held in INR, U.S. dollars. We generally invest only in the financial assets of issuers or funds with a minimum credit rating of "AAA".

We are a debt-free Company, and our working capital is sufficient to fulfil operational needs. We have access to additional liquidity through various credit facilities, should the need arise.

Condensed cash flow is given in the table below:

Particulars (In crore)	31-Mar-23	31-Mar-22	Change
Operating Cash flow	247	486	(49%)
Capital expenditure	(156)	(62)	153%
Free cash flow	91	424	(79%)

Analysis of Consolidated Statement of Cash Flow

The cash generated from operating activities for the year ended March 31, 2023, decreased by 239 crore due to reduction in profit after tax coupled with changes in working capital. Cash generated from operating activities primarily decreased due to working capital investments made towards strategic partnerships.

Cash used in investing activities for the year ended March 31, 2023, was at 70 crore. The cash was primarily utilized for capital investments related to Platforms, IT& Network and for our Innovation and Experience center housed in Hyderabad.

Cash used in financing activities for the year ended March 31, 2023, was at 328 crore. This is primarily on account of payment towards dividend of 109 crore and buyback of equity shares of 212 crore.

Cash flow movement is given below

Particulars (In crore)	31-Mar-23	31-Mar-22	Change
Net cash flow from operating activities	247	486	(49%)
Net cash flow from investing activities	(70)	(111)	(37%)
Net cash flow from financing activities	(328)	(97)	236%
Net increase in cash, cash equivalents	(151)	278	(154%)
Cash, cash equivalents at the beginning of the year	862	584	NA
Cash, cash equivalents at the end of the year	712	862	(18%)
Fixed deposits with maturity greater than twelve months	-	60	-
Cash, cash equivalents at the end of the year	712	922	NA

Financial Ratios

Following are ratios for the current financial year and their comparison with the preceding financial year, along with explanations where the change has been 25% or more.

Particulars	31-Mar-23	31-Mar-22	Change	Explanation
Current ratio	2.12	1.90	11.3%	NA
Return on equity ratio	31.2%	48.0%	(35.0%)	Note-1
Day sales outstanding	62	54	15%	NA
Trade payables turnover ratio	3.14	3.16	(0.5%)	NA
Net capital turnover ratio	3.66	3.59	2.1%	NA
Return on capital employed	38.7%	51.7%	(25.1%)	Note-1

1. The decline in return on equity can be attributed to a 17% decrease in profit after tax for FY23 in comparison to FY22.

Internals controls and adequacy

The primary objective of the internal control system over financial reporting is to provide reasonable assurance that the financial statements are reliable and in alignment with generally accepted principles and regulations.

We have defined and implemented internal controls across the entirety of the value chain, with a focus on addressing individual processes and subprocesses. This concerted effort is undertaken to ensure that internal controls are aligned with the strategic, operational, financial and compliance objectives of the Company.

An external consultant conducted an independent evaluation of the efficacy of internal controls pertaining to financial reporting. This assessment is deliberated by the management and subsequently presented to the Audit Committee.

Additionally, the statutory auditor also reviews the internal controls for financial reporting.

The assessment carried out by the management and the statutory audit, concludes that internal control systems over financial reporting were effective for Tanla and its subsidiaries.

Starting from FY19, independent reviews of all receipts and payments throughout the Group have been conducted by KPMG Assurance and Consulting services LLP. Beginning FY20, M/s MSKA and Associates have been our GST auditors. Ernst & Young LLP reviews all the secretarial compliance for the group.

Since FY20, M/s Deloitte Touche Tohmastu India LLP has been serving as the internal audit and will continue to remain internal auditors for FY24. The internal audit is carried out in accordance with the internal audit plan, which is subject to annual evaluation in consultation with the statutory auditor and approved by the Audit Committee. The internal audit process is designed to review the adequacy of internal controls with significant coverage of all areas of the Companys operations.

The Audit Committee reviews internal audit reports submitted by the internal auditors. The progress of implementing suggested corrective actions is monitored through the review of the action taken tracker. The Audit Committee also engages in discussions with the statutory auditors to obtain their assessments of the adequacy of the internal control systems.

Risk Management

Our strategic plan and regular operations expose us to several risks that can affect our stakeholders, prevent us from achieving our targets, invoke legal liability. We have put in place structure, procedures and control systems to detect risks and implement appropriate measures to prevent and mitigate them. Our enterprise risk management framework is based on the principals laid out below:

Emerging Risks Identified By Tanla (Risk That Matter)

Risk category	Description and Impact	Mitigation Plan
Competition	The risk from competitive pricing strategies impacting deal margins and reducing profits.	We have a dedicated team focused on customer success, providing solutions, timely delivery, successful product implementation, and ongoing support
Geography concentration	A significant percentage of Tanlas total revenue comes from operations in India. High geographic concentration makes the company more vulnerable to geopolitical, regulatory, and economic developments in that region.	We continuously diversify our customer base to minimize the impact of industry-specific eco - nomic, social, and regulatory changes. With the acquisition of ValueFirst we will accelerate our global expansion to mitigate the risk associated with being concentrated in specific geographic areas
		The Information Security Policy establishes and implements a system for managing information security, safeguarding both the Companys and customers information assets against threats from both external and internal sources
Cyber security	Risk of system breaches and loss of confidential customer data due to cyberattacks, leading to damage to our brand image and customer relationships.	Our Information Security Management System encompasses all information, data, and related IT and other assets across our service line operations. We conduct regular cybersecurity audits and assessments to identify and mitigate vulnerabilities in our IT systems
		•Third-Party Service Governance Frame- work: We have established process and defined service level agreements (SLAs) to monitor performance of our partners and third-party service providers. These SLAs include availabil- ity, expected service levels, response time, and uptime
Partner Services	Tanla relies on services from cloud infrastructure companies that host products, platforms, and critical internal functions. Potential interruptions, delays, and outages in service and availability pose a risk, caused by infrastructure changes, errors, disruptions in hosting, and capacity constraints.	•Service Monitoring: We continuously monitor services of partner and third-party services providers, utilizing tools to gather performance and availability data. These tools trigger alerts in case service levels drop below acceptable standards
		•Incident Management: We have also developed an incident management process for responding to service disruptions/outages, including root cause analysis and resolution procedures. Alternate strategies in place, including the use of multiple internet service providers and secure colocation data centers for critical services.
		We have established a comprehensive Business Continuity and Disaster Recovery Management Policy to mitigate this risk. This policy safeguards our critical business processes from system failures or disasters, ensuring their timely resumption.
Business Continuity plan and disaster recovery plan	An effective Business Continuity Plan (BCP) and Disaster Recovery Plan are crucial in the event of unforeseen disruptions such as natural disasters, cyberattacks, or system failures. Any weakness in these areas may lead to service interruptions, loss of critical data, financial implications, reputational harm, and potential non-compliance with regulatory standards.	Our IT and network teams regularly conduct risk assessments and business impact analyses to evaluate the likelihood and potential impact of various disruption scenarios. To further strengthen our BCP and DRP, we have engaged an expert consultant who provides ongoing guidance and recommendations for instituting best practices in these areas, helping us main- tain resilience and continuously improving our response to potential disruptions.
People and Talent	The companys operations depend significantly on a few key individuals, including top management and those with specialized knowledge. Failure to build a strong leadership pipeline and succession plan may result in not achieving long-term goals and loss of knowledge about the services, the business, and the industry	We have identified the critical roles and are developing a succession plan with the support of an external consultant. Furthermore, we have collaborated with global executive search firms to recruit exceptional leadership talent to help us recruit the best-in-class talent

For more details on Risk Management refer page no 19 onwards of our Sustainability Report FY23.

People

We are committed to create a vibrant workplace reflecting our core values- Integrity, Innovation and Impact. Our People make a significant contribution to our success. We want to attract and retain talent, while nurturing their growth and evolution. We strive to cultivate a working atmosphere that inspires and connect people.

At a glance

— 615 employees

— Promoting diversity and continuous learning

Strategy

Our people are key to the successful implementation of our strategy. That is why we rely on our people. Empowering our workforce with the necessary tools and skills is paramount, enabling them to deliver tailor-made products and services to our customers. We promote a working atmosphere based on mutual trust with attractive working conditions, in which employees can develop their individual skills and potential.

We have institutionalized garage way of working and collaborate with garage owners to foster continuous learnings and drive innovation. By teaming up with garage owners, we strive to create a mutually beneficial environment that fosters skill development and encourages creation of innovative platforms and products. We are committed to enhancing our innovation capabilities, investing in attractive working conditions, and ensuring a comprehensive compensation and benefits package that supports a balance personal and professional life. For more details on Our People refer page no 37 onwards of our Sustainability Report FY23.