Adtech Systems Ltd Management Discussions

OVERVIEW

The Management Discussion and Analysis Report (MDA) is an integral part of, and is to be read along with, the Company’s financial statements and has been prepared by the Management with the purpose of providing a descriptive explanation from the management’s point of view, of how the company has performed in the past, its financial condition and its future prospects. This report should be read in conjunction with the Company’s financial statements , the schedules and notes thereto and other information included elsewhere in this report. The Company’s financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) complying with the requirements of the Companies Act, 2013 and the guidelines issued by the Securities and Exchange Board of India (SEBI).

Some of the information contained in this MDA may contain forward looking statements. These forward- looking statements may include,among others, statements regarding our plans,costs, objectives or economic performance, or the assumptions underlying any of the foregoing. Forward looking statements are based on information available at the time they are made, on the date of this report, and should not be read as guarantees of future performance or results as they are subject to risks and uncertainties, many of them beyond our control. We do not undertake any obligation to publicly update or revise any forward looking statement except as expressly required by applicable laws.

Adtech Systems Limited is a leading solution provider in electronic security/ surveillance industry. We provide our clients with cost effective solutions for total security protection and also efficient after sales service which is difficult to match. The Company has also diversified into Solar Power Projects and has successfully commissioned several floating solar power projects including one for Kerala State Electricity Board at Banasura Sagar Dam and for Larsen and Toubro in Andhrapradesh. The Company is in the process of executing large projects for BHEL and Tata Solar with many more projects in pipeline

The Company is a Public Limited Company having its registered office in Chennai, Tamilnadu. The Company had been listed in the regional stock exchanges of Cochin, Chennai and Ahmedabad all of which had to close down following exit order by the Securities and Exchange Board of India (SEBI). The Company has subsequently listed its equity shares in Metropolitan Stock Exchange of India Limited, Mumbai

Financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) as prescribed under Section 133 of the Companies Act, 2013 read with rule 7 of the Companies(Accounts) Rules, 2014 to the extent applicable. Accounting policies have been consistently applied, except where a newly issued accounting standard is initially adopted or a change in an existing accounting standard requires a corresponding change in the accounting policy hitherto in use.

GLOBAL ECONOMY

In the year under review, global economic activity, got badly thrashed by outbreak of the pandemic Covid19 which originated in Wuhan, China towards later part of December 2019. This has produced a humane and economic crisis unlike any in recent memory. Global economy experienced its deepest recession since World War II, disrupting economic activity, travel, supply chains and many more. Governments have responded with lock down measures and stimulus plans, but the extent of these actions has been unequal across countries. Within countries, the most vulnerable populations have been disproportionately affected, both in regard to job loss and the spread of the virus. The outbreak resulted in shutdowns and lockdowns across the world causing deep cuts and massive bleeding in the global economy, which is still reeling under the Covid19 impact. The hope is that policy makers can rise to the challenge in the medium term to tackle the Covid19 virus and the related challenges that the pandemic has exacerbated.

INDIAN ECONOMY in view of the Impact of Covid19

Overall rate of contraction in India was (in real terms, adjusted for inflation) 7.3% for the whole 2020-’21 financial year. This means that 2020-’21 is the worst year in terms of economic contraction in the country’s history and much worse than the overall contraction in the World. While economies worldwide have been hit hard, India has suffered one of the largest contractions. During the 2020-’21 financial year, the rate of decline in GDP for the world was 3.3% and 2.2% for emerging market and developing economies.The fact that India’s growth rate in 2019 was among the highest makes the drop due to Covid-19 even more noticeable. The pandemic has brought severe economic hardship, especially to young individuals who are over-represented in informal work. India has a large share of young people in its workforce and the pandemic has put them at heightened risk of long-term unemployment. To avoid another livelihood crisis, India turned to local lockdowns during the second wave of the virus. But the second wave has made India’s position significantly worse. The total confirmed cases per million now are comparable to those in the rest the world and the rate of vaccination is lower in India.

OUTLOOK ON INDUSTRY

Electronic Security industry goes along with retail industry and with development of new facilities, be it in the retail malls or in software companies facilities, all of which has been badly affected by Covid19 pandemic. Lockdowns have resulted in total stoppage of activity for retail industry and construction of new shopping malls and places of business along with new plans for real estate sector can be estimated only once the pandemic subsides, either by way of complete vaccination or by the country achieving herd immunity, as pointed out by WHO. Either of these events being expected in Q3 of FY 2021-22 or later will be the single most factor that will serve to kick start business in retail segment and thereafter for the Electronic Security Segment.

Solar Segment does see immense activity in the year 2021-22 and afterwards, with many PSUs floating tenders for utilizing water bodies for construction of floating solar farms.

OUTLOOK OF ADTECH SYSTEMS LIMITED

The Company, being pioneer in electronic security integration segment, has most of the prominent retailers PAN India in its client list. Closure of shopping malls and locking down of the country has affected the revenue and future expansion plans of all such retailers and in turn has started affecting revenue of the Company. State specific lockdowns having started in the last week of April 2021at the outset of 2^nd wave has somewhat affected Q1 of FY 2021-22 but is expected to ease by Q2. What is in store for the year to come will be decided partly by any third wave of the virus or the extent and pace of vaccination.

OPPORTUNITIES AND THREATS

The Company is engaged in providing sophisticated solutions in the electronic surveillance segment . Due to statutory requirements, need for protection by way of electronic security solutions is increasing not only among corporates but also among individuals. The Company seeks to make full use of this growing awareness of the requirement of electronic security protection. The Company provides integrated solution and employs professional work force. We now cater to numerous corporates as their exclusive electronic security solutions provider which position is not unassailable. Constant attempts both from the organised and unorganised sector remains a threat to our business and earnings. The Team works hard to retain the customers which affects by providing the latest solution at the best price and support. Solar Division which caters to solutions by way of providing floating solar platforms has the first mover advantage in this field and gets numerous enquiries PAN India. Solar projects being of high value requires substantial amounts as working capital to execute the projects which is found to be the main hindrance. Our efforts to access funds from banks by way of working capital has so far not met with success in view of stringent requirements collateral security requirements demanded by banks. In spite of repeated announcements by the Government of India to make credit easily available to MSMEs, banks are shying away from providing much needed credit facilities even when the purchase orders from PSUs are well received.

RISK FACTORS AND CONCERNS

Our success largely depends on the continued services and performance of our management, our technical team and other key personnel as our business is revolving around technical capabilities of our personnel’s which is human approach to be precise with. The loss of service of the management, our technical team and key personnel could seriously impair the ability to continue to manage and expand the business efficiently. Further, the loss of any of the senior management or other key personnel may adversely affect the operations, finances and profitability of our Company. Any failure or inability of our Company to efficiently retain and manage its human resources would adversely affect our ability to implement new projects and expand our business.

The growth of our business depends on the operations to realize our vision of attaining size and to improve our cost competitiveness. In order to achieve such future growth, we need to effectively manage our new project, our resources and accurately assess new markets, attract new customers, obtain sufficient financing, control our input costs, maintain sufficient operational and financial controls and make additional capital investments to take advantage of anticipated market conditions and keep on learning and inventing on technology. We expect our growth to place significant demands on our management and other resources. Any inability to manage our growth could have an adverse effect on our business, financial condition and results of operations.

The cost of implementing any new technologies could be significant and could adversely affect our business and financial condition. While we regularly upgrade our technology, the emergence of newer technologies could render our current technology ineffective or obsolete and may adversely affect the cost structure and competitiveness of our products and services. Changes in technology with which we are unable to keep pace, or which render our products and services less useful to customers and the market, could affect our growth, business, financial condition and results of operations.

We commit resources to projects prior to receiving advances or other payments from customers in amounts sufficient to cover expenditures on projects as they are incurred. We may be subject to working capital shortages due to delays or defaults in customer payments. If customers default in their payments on a project to which we have devoted significant resources or if a project in which we have invested significant resources is delayed, cancelled or does not proceed to completion, it could have a material adverse effect on our business, financial condition and results of operations.

The input costs of the products/services of the Company may increase due to *various reasons. In case the Company is not able to p on such increase to the consumers because of competition or otherwise, it may affect the profitability of the Company.

Competition would have an adverse impact on our business and financial performance. The industry, in which we are operating, is highly and increasingly competitive and unorganized and our results of operations and financial condition are sensitive to, and may be materially adversely affected by, competitive pricing and other factors. Competition may result in pricing pressures, reduced profit margins or lost market share or a failure to grow our market share, any of which could substantially harm our business and results of operations.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The philosophy we have with regard to internal control systems and their adequacy has been formulation of effective systems and their strict implementation to ensure that assets and interests of the Company are safeguarded; checks and balances are in place to determine the accuracy and reliability of accounting data. The internal audit, an independent appraisal function to examine and evaluate the adequacy and effectiveness of the internal control system, appraises periodically about activities and audit findings to the Audit Committee. The Company’s internal controls are supplemented by an extensive programme of internal audits, review by management and documented policies, guidelines and procedures. The Audit Committee also holds discussions with statutory auditors, internal auditors and the Management on matters pertaining to internal controls, auditing and financial reporting.

SEGMENT WISE OR PRODUCT WISE PERFORMANCE

The Company had till been operating in a single segment viz electronic security systems. In the current year, the Company has diversified into Solar Power business which turnover has crossed that of electronic security systems, details of which are mentioned elsewhere in this report.

The Company operates primarily in India, hence there is no other significant geographical segment that requires disclosure.

FINANCIAL PERFORMANCE

Sale and service of Electronic Surveillance Systems and accessories form major portion of income for the Company.

Total Income was Rs. 7103.15 lakhs during the financial year 2020-21 as against Rs.4725.50 lakhs for the previous year.

Total expenses for the year ended 31^st March 2021 was Rs 6713.88 lakhs which consists of purchase cost of Rs. 5247.42 lakhs , employee benefit expenses Rs.535.07 lakhs,finance charges Rs.166.47 lakhs ,other expenses Rs. 639.32 lakhs and depreciation Rs. 100.22 lakhs.

The Company has been sanctioned a cash credit facility of Rupees 25 crores including a project specific working capital demand loan of Rs. 15 crores mainly meant to diversify into solar power projects, of which an amount of 23.01 crores has been utilised as at end of the year.

The Company has total manpower of 97 employees as on 31^st March 2021. The Company had made most of its recruitments in the Marketing and Engineering divisions. Company has a reasonable salary structure and provides attractive incentives to help employees to build a career in the Company. The Company imparts proper training and development to all the new recruits and also imparts periodic training sessions so that employees are abreast with technical updates and remain competent. Your Company considers its employees to be the most valuable asset of the Company and appreciates their dedicated hard work.