MANAGEMENT DISCUSSION AND ANALYSIS REPORT
GLOBAL ECONOMIC OVERVIEW
The Global Economy recovered strongly from the COVID-19 pandemic, supported by the
release of pent-up demand as movement restrictions were scaled back, as well as huge
amounts of fiscal and monetary support. Chinas recent reopening has paved the way for a
faster than expected recovery. But it is now being buffeted by two major shocks: high
inflation and rising interest rates.
The IMF has projected that global growth will fall to 2.9 percent in 2023 but rise in
2024. Global inflation is expected to fall to 6.6 percent in 2023 and 4.3 percent in 2024,
still above the pre-pandemic levels.
Labor markets are tight, household spending and business investment remain strong, and
European economies proved quite resilient against the energy crisis. Global growth is
expected to slow from 3.4% in 2022 to 2.9% in 2023. The slowdown will be more pronounced
for advanced economies. China and India will account for 50% of global growth. (Source:
IMF Global Economic Outlook)
INDIAN ECONOMIC OVERVIEW
The IMF has forecast Indias growth at 6.1% in 2023 as compare to 6.8% in 2022, terming
the country a bright spot and major engine of growth amid an expected fall in global
growth. India is shifting toward greater renewable energy generation while striving to
improve energy access, affordability, and security. Its also poised to be one of the
fastest growing economies in coming years, which will in turn sharply boost energy demand.
As per survey by Ministry of Finance, the economy is expected to grow at 7% for the
year ending March, 2023. Despite the three shocks of COVID-19, Russian-Ukraine conflict
and the Central Banks across economies led by Federal Reserve responding with synchronized
policy rate hikes to curb inflation, leading to appreciation of US Dollar and the widening
of the Current Account Deficits (CAD) in net importing economies, agencies worldwide
continue to project India as the fastest-growing major economy at 6.5-7.0 percent in FY
23.
INDUSTRY STRUCTURE AND DEVELOPMENTS
While FY2022 was a year of milestones and resurgence-an outlier for the Indian
technology industry, FY2023 has been the year of continued revenue growth with a focus on
strengthening industry fundamentals and building on trust and competencies. The volatile
global economic scenario and impending recession continues to support the demand for
technology adoption and digital acceleration. Consequently, technology continues to be a
strategic imperative that is a critical component of business innovation and
transformation, as well as a source of improving operational and cost efficiencies.
OPPORTUNITIES
India, currently holding the prestigious Presidency of G20 nations, has grown from
being the tenth largest economy ten years ago to the fifth largest today. India has been
the fastest growing major economy for the third year in a row—poised for further
growth, driven strongly by, among other factors, a robust and diverse technology
ecosystem. Diverse and inclusive new-age skilled talent pool with strong entrepreneurial
mindset people first innovation, responsible & ethical tech & governance built on
trust, commitment to Environmental, Social & Governance (ESG) goals, & Corporate
Social Responsibility (CSR), form the cornerstones of this vibrant ecosystem.
Cost competitiveness and efficiencies, stable and trusted Government consistently
building a conducive business environment and infrastructure through reforms and policies,
along with the largest and youngest working population and consumer market, makes the
industrys foundation even stronger.
Indias inherent leadership skills have ensured Indian origin leaders occupy a seat at
the table in global organizations, fronting global charters across various verticals.
THREATS
Cybersecurity, IT governance, and data security will be the number one risk in 2023.
Ransomware has been a significant threat in 2022, but the nature of cyberattacks is
changing. Relatively new hackers now take advantage of sophisticated ransomware as an
opportunity.
ESG (Environmental, Social, and Governance) reporting is in its infancy, but the
requirements will be broader and all-encompassing. Therefore, a lack of preparedness could
be a threat. Organizations should ensure governance structures to provide reliable
information on ESG risks and opportunities. Define ESG disclosures and metrics and
identify the data to be captured and curated to comply with local ESG regulations on time.
SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE
(i) The Technical Division revenue increased (94.29%) to Rs.5,809.57 Lakhs in FY
2022-23 as against Rs.2,990.21 Lakhs in FY 2021-22.
(ii) The Projects Division revenue decreased (25.23%) to Rs.7,270.45 Lakhs in FY
2022-23 as against Rs.9,724.04 Lakhs in FY 2021-22.
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
The Companys total revenue increased (19.66%) to Rs.15,595.96 Lakhs in FY 2022-23 as
against Rs.13032.72 Lakhs in FY 2021-22 and Net Profit is Rs.236.94 Lakhs for FY 2022-23
as against Net Loss of Rs.130.15 Lakhs for FY 2021-22. Your Company has achieved this by
reduction of Financial Costs. Post Covid period your company could recover the billed
amounts and utilised in reduction of financial costs.
OUTLOOK
E-governance in India is progressively evolving from basic digitization of government
data and processes to actually facilitating delivery of various citizen services online. A
common vision and strategy are being deliberated and firmed up across all levels of
government Central, State and local bodies. This approach has huge potential in garnering
cost savings, increasing transparency, and presenting a seamless view of government to
citizens.
ACCOMPLISHMENTS OF TERA SOFTWARE
• Tera Software has successfully completed the (SMART CITY) for implementation of
PAN City ICT project in Davanagere City, State of Karnataka from Davanagere Smart City
Limited, Government of Karnataka to implement and integrate City Surveillance System,
Smart Health Management, Solid Waste Management System, Water supply system, Underground
Drainage, Intelligent Traffic Management System, Smart Parking, Intelligent Transport
System, City Wi-Fi, Environment Sensors, e-Learning Centres, Smart energy/Roof Top Solar
System, Smart Street Lighting and Quality Monitoring System.
• This Davanagere project has been awarded as "City with the Best Safety and
Security System & Record" by Government of India during the financial year. We
currently providing maintenance & support services extended up to 5 years i.e. till FY
2027-28.
• The successful completion adds a feather on Tera Software Cap and brings pre
qualifications for your company to participate in the prospective bid opportunities in the
Surveillance which was mandated in the Police Stations and Public places by the Honorable
Supreme Court.
• Tera Software completed in the current financial year the implementation of
Bharat Net Project in the state of ODISHA. Bharat net is a Central Government of India
Initiative to enrich the Rural India with the Broad Band Services, targeted to extend
2,50,000 Gram panchayats across India.
• The Govt. of India is emphasizing on the digital financial transactions which
requires Broad Band services coverage to reach 90% of population from the current 35%
coverage. This enhances the business opportunities to your company to build infra and
maintenance services.
• Tera Software will be delivering the Maintenance services for Bharat net
projects for next 6 Years to upkeep the network for delivery of services.
• Tera Software is more focused in the Broad Band services which is very essential
post corona Pandemic to deliver on line services. Tera software is currently establishing
the connectivity to 16,000 Gram panchayats under the Bharat Net project. And focused to
bid for the same services in other parts of the Country under Bharat Net project.
• Tera Software will strive in technology in future days to extend the Fiber to
Home services across rural India as it had the expertise and delivered the technology to
10 lakh Households in the state of Andhra Pradesh.
• We are ISO 20000-1:2011, ISO 27001:2013 and ISO 9001:2015 certified Company
offering innovative, flexible and affordable software solutions to customers across the
globe.
• FTTH Solutions. (Broad band services)
• Mobile Applications.
• Surveillance.
• Safe and
• SMART City.
RISKS AND CONCERNS
Human capital, diversity, and talent management is the second-highest business risk.
The succession challenges and ability to recruit and retain top talent in the tightening
market may limit the ability to achieve business goals. The pandemic has accelerated
skills shortages with hard-to-fill gaps for crucial projects, such as digitalization - a
process to alleviate such deficiencies in the future. Businesses must tackle wage
inflation, skill shortages, and the need to offer better psychological support to staff.
That entails retooling their organizational culture.
The companys management is continuously making efforts to mitigate this risk. The
Company has a structured approach for handling risks. The Company has adequate mitigation
plans for the risks based on the probability of their occurrence, potential impact and
volatility. The emerging risks are discussed periodically with the management to ensure
implementation of proper control mechanism.
INTERNAL CONTROLS SYSTEMS AND ADEQUACY
Companys internal controls are commensurate with its size and the nature of its
operations. These have been designed to provide reasonable assurance with regard to
recording and providing reliable financial and operational information, complying with
applicable statutes, safeguarding assets from unauthorised use, executing transactions
with proper authorisation and ensuring compliance of corporate policies. Processes for
formulating and reviewing annual and long-term business plans have been laid down.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER
OF PEOPLE EMPLOYED
The Company constantly reviews the man power requirements and has a properly equipped
department to take care of the requirements. The total number of people employed by the
Company as on 31.03.2023 is 1004.
Details of significant changes (i.e. change of 25% or more as compared to the
immediately previous financial year) in key financial ratios, along with detailed
explanations therefor, including:
| Particulars |
Numerator |
Denominator |
31.03.2023 |
31.03.2022 |
Variance |
| a) Current Ratio |
Current assets |
Current liabilities |
1.93 |
1.45 |
46.00% |
| b) Debt-Equity ratio |
Total liabilities |
Shareholders equity |
0.83 |
1.55 |
-71.00% |
| c) Return on equity ratio |
Net Income |
Equity |
0.03 |
(0.01) |
2.00% |
| d) Inventory turnover ratio |
Inventory |
Turnover |
0 |
0.02 |
-2.00% |
| e) Debtors (Trade receivable) turnover ratio |
Receivables |
Turnover |
0.86 |
1.47 |
-61.00% |
| f) Net Profit ratio |
Net profit |
Turnover |
0.02 |
(0.01) |
2.00% |
| g) Interest coverage ratio |
EBITDA |
Interest expenses |
2.40 |
0.97 |
143% |
| h) Operating Profit Margin ratio |
Operating Profit |
Net Sales |
9.47 |
4.93 |
454% |
Explanation
a) Current Ratio
During the year, the company accounted for outstanding payables/creditors as credit
balances written back, resulting in back-to-back liabilities for the bad debts that were
written off. This approach caused a significant decrease in current liabilities when
compared to the previous year. This resulted increase in Current Ratio.
b) Debt-Equity Ratio
During the year, the company made the decision to treat outstanding payables/creditors
as credit balances written back, resulting in back-to-back liabilities along with the
write-off of bad debts. Additionally, the company successfully cleared a short-term loan
from others amounting to Rs. 1,306 Lakhs compared to the previous year. As a result, the
total liabilities decreased by 50%, leading to a decrease in the debt equity ratio. This
reduction in liabilities and improved debt equity ratio signify a positive financial
outcome for the company.
c) Debtors Turnover Ratio
During the year, the company exercised prudence by writing off long-outstanding bad
debts, aligning its financial position with sound accounting practices. The decision to
write off these debts was necessary to accurately represent the companys financial
standing. Consequently, the debtors turnover ratio experienced a decrease, indicating a
slower pace of collecting outstanding receivables.
d) Interest Coverage Ratio
During the Year, the company had a lower Utilization of funds, resulting in a reduction
in the interest component. As a result, the companys Earnings before Interest, Taxes,
Depreciation and Amortisation (EBITDA) increased compared to the previous Year.
e) Operating Profit Margin Ratio
The Operating Profit Margin increased during the Year due to reduced expenses in
subcontracting works, offsetting the drop in sales of services. This improvement can be
attributed to the implementation of the operating Profit Method, emphasizing cost
reduction and resulting in a higher Profit Margin.
|
For and on behalf of the Board of Directors |
|
Tummala Gopichand |
| Place: Hyderabad |
Chairman and Managing Director |
| Date: 27th May, 2023 |
DIN:00107886 |
+91-9892691696
