affle india ltd share price Management discussions

MACRO-ECONOMIC SCENARIO

Global Outlook: Treading cautiously amid risks

The global economy faced severe headwinds for most part of 2022 induced by surging commodity prices and supply disruptions leading to high inflation amid weaker growth, has begun to show early signs of stabilization and improvement in 2023. While trade disruptions, legacy effect of the COVID-19 and the recent financial sector turmoil in the US and Europe impacted the economic activity worldwide, many economies performed better than anticipated supported by declining commodities and energy prices.

Stubbornly high inflationary pressure has begun to somewhat ease, with global energy prices back at levels last seen prior to the Russia-Ukraine war. In addition, base effect from the rise in energy prices following the invasion is now slowly coming off, putting downward pressure on the projected inflation for the rest of this year. Prices of other commodities as well as global food prices have also eased. Side effects from the fast rise in policy rates have become apparent as banking sector vulnerabilities came into focus and fears of contagion rose across the broader financial sector.

Policymakers have a narrow path to walk to improve prospects and manage risks. Central banks need to remain steady with their tighter anti-inflation stance, while there is less room left for expansionary fiscal policy any further. Global economic growth is projected to be relatively modest but to stay below its long-term average in the near term.

According to the International Monetary Fund (IMF), the global economy is projected to grow at 2.8% in 2023, with a gradual increase to 3.0% in 2024. Advanced economies are expected to experience growth rate of 1.3% and 1.4% in 2023 and 2024 respectively, while US is expected to outperform the Advanced economies by few percentage points in 2023. The macroeconomic factors that shaped the global economy in 2022 are expected to persist in 2023 as well, however, their intensity will vary.

Emerging Market and Developing Economies (EMDEs) are expected to achieve growth rate of 3.9% and 4.2% in 2023 and 2024 respectively. Within this, Emerging and Developing Asia including countries such as India, China, Indonesia, Malaysia, Philippines, Thailand, Vietnam and more, is expected to significantly outperform growing at 5.3% and 5.1% in 2023 and 2024 respectively. In terms of growth prospects, Emerging and Developing Asia will be followed by Sub-Saharan Africa, Middle East & Central Asia and Latin America & the Caribbean, with Emerging and Developing Europe projected towards the lowest.

Asia-Pacific: Resilient Growth

Despite weakening external demand, such as the downturn in demand for tech exports toward the end of 2022, domestic demand in Asia-Pacific region has so far remained strong. The IMF has revised its forecast for the Asia-Pacific region primarily due to the resilient growth of India and Chinas recovery expected to provide fresh impetus. Growth in Asia-Pacific is projected to increase in 2023 to 4.6% from 3.8% in 2022, an upgrade of 0.3% relative to the October 2022 World Economic Outlook; and this region is expected to contribute around 70% of global growth.

India and China, the two largest emerging market economies of the region, are projected to contribute over half of the worlds growth in 2023, with India expected to grow at a rate of 5.9% and 6.3%, and China at 5.2% and 4.5% in 2023 & 2024 respectively.

* Asia-Pacific is expected to contribute 70% of the global growth in 2023.

Source: IMF World Economic Outlook, April 2023; IMF Regional Economic Outlook: Asia and Pacific, May 2023; KPMG Global Economic Outlook, March 2023

INDUSTRY STRUCTURE, DEVELOPMENTS AND OPPORTUNITIES

Digitization: One of the Most Influential Global Mega Trends

Digitalization is one of the most influential megatrends that will not only affect development outcomes in the short and medium term, but also determine the future we ought to live in. The Fourth Industrial Revolution, accelerated by COVID-19 pandemic and digitization, has acted as a catalyst and developed transformative ways of connecting with customers and reshaping the business landscape. One of the distinguishing features of digital transformation has been the exponential growth in machine-readable information over the Internet, powering at scale a data-driven digitally intelligent ecosystem.

The World Bank estimates that the digital economy contributes to over 15% of GDP at present and it increased 2.5x faster than the physical world GDP in the last decade.

• 70% of the new value created in

? next decade will come from digitally enabled platform business models.

Global Mobile Economy and the 5G Opportunity

The demand for mobile internet has experienced exponential growth over the past five years, expanding more than eightfold. By the end of 2022, over 5.4 billion people globally subscribed to a mobile service and 4.4 billion people used the mobile internet. The mobile internet usage gap has narrowed markedly in the last five years. In

2022, mobile technologies and services generated 5% of global GDP, contributing to USD 5.2 trillion of economic value added and supported 28 million jobs across the wider mobile ecosystem. The growing affordability of smartphones has contributed to the increased adoption of mobile, as average selling prices continue to decline.

The growing significance of smartphones in enabling mobile internet access and driving connectivity on a global scale underscores the potential of digital technologies to reshape industries and drive economic growth. The increasing usage of mobile internet and fast-paced digitalization will enable businesses to leverage faster and more reliable connectivity for enhanced productivity and innovation, thereby further boosting the digital economy.

The Global 5G Opportunity

The key determinant of future competitiveness in the digital economy is the next generation of networks such as 5G. With faster speed, lower latency, lower energy consumption and more connected devices per base station, 5G is expected to enable new connected businesses. By 2030, 5G adoption is projected to reach 54% globally and it is anticipated to contribute an additional USD 1 trillion to the global economy across a wide range of industries.

X5G adoption will be over 85% in the top 5G markets by 2030, led by the developed Asia Pacific, North America and GCC.

Emerging trends shaping the mobile ecosystem

1. 5G consumer monetisation comes into focus:

Throughout 2023, some 30 new markets will launch 5G services; importantly, many of these will be developing markets across Africa and Asia, making 5G a truly global trend. As 5G adoption continues to scale, the monetisation imperative will grow.

2. Mixed Reality to gain traction:

Momentum for the mixed reality to grow, alongside advancements in enabling technologies like 5G, AI and wearables. The growing interest from key stakeholders and ecosystem players has led to the emergence of important building blocks for its advancement, notably content and applications, standards and devices, which will be at the forefront of activities in 2023 and beyond.

3. Mobile Industry shifts towards Circularity:

Across the mobile ecosystem, sustainability has extended beyond corporate social responsibility to become a core strategic priority. Original Equipment Manufacturers (OEMs) and Mobile Operators are increasingly adopting a model of production, service offering, consumption and partners that involves sharing, leasing, reusing, refurbishing and recycling materials and products for as long as possible. This circular approach is important to operate in a more sustainable and energy-efficient way, and will reshape the business partnerships in the mobility space.

Global Mobile Apps Landscape

In 2022, the mobile industry witnessed substantial growth across various metrics including app downloads, usage and ad spends. The total number of new app downloads on mobile platforms (including iOS, Google Play and third-party stores in China) reached 255 billion, averaging over 485,000 app downloads per minute throughout the year. Emerging markets, led by China and India, played a significant role in driving this growth, and countries like Brazil, Indonesia, Mexico, Philippines, Turkey and Vietnam also experienced significant increase in app downloads.

Global mobile usage increased 9% y-o-y to 4.1 trillion hours spent on mobile in 2022. This trend is expected to continue and gradually surpass 6 trillion hours spent on mobile, by 2028. The sustained growth in mobile usage can be attributed to several factors such as mobile-centricity, advancements in connected technology, expansion of casual and core gaming, rollout of 5G networks, demand for digital connection, self-expression and deepened personalization of apps.

Mobile web browsers accounted for only 8% of the users time spent. While web continues to be a touchpoint for marketing and user acquisition funnel, mobile apps commanded most of the consumers attention and meaningful engagement.

INDIAS "DIGITAL DECADE"

India holds a significant position in the global digital landscape, with a rapidly expanding digital economy. By 2030, it is projected that Indias digital

economy will reach USD 1 trillion, driven by various government initiatives to promote digitization, availability of affordable data plans driving internet and smartphone penetration and a large untapped market in Tier-2 & 3+ cities. It will be a broad-based growth, to be witnessed across diverse categories of products, services and industries. A strong policy framework has ushered India towards mainstream adoption of digital solutions, enabling Indians to gain better access to public and private services digitally.

Note: 1. Technology Sector includes information technology (IT), business process management (BPM) and the internet economy.

Indias internet usage numbers tell the story of a connected, young country with nearly half of the population younger than 25 years old, adopting technology for greater convenience and having significant room to grow further. As of 2022, India had 840 million internet users and 600 million smartphone subscribers. The swift pace of digital adoption has fueled Indias digital economy, which accelerated at 2.5 times the pace of the overall economy in the past five years.

Indias digital economy has grown ~2.5 times faster than the overall Indian economy since 2016

While digital adoption has swept the country, digital commerce still has a low share. Out of the 840 million Indians using the internet, about 450 million were avid consumers of digital content, spending an average of 7 hours a day on activities such as social media, messaging, and entertainment. But only 165 million engaged in digital commerce i.e. buying goods and services online. That means around 75% of Indians who have internet access are yet to turn to online shopping. This offers headroom for massive growth for many years to come.

Spurring on a fast-growing Digital economy

By the end of 2030, the number of digital commerce users in India are expected to reach 500 million with a significant increase in the online presence of MSMEs, a 10 times rise in the count of self-employed individuals and a 4-5 times surge in the utilization of digital products and services.

The expansion of Indias internet economy lies on three pillars to achieve digital maturity.

Large, traditional businesses	MSMEs	Startups
With the strongest reach, brand equity and potential to scale, large corporations are investing significantly in building a strong digital core. Once they become digital mainstream, they can potentially shift consumption dynamics considerably.	Being the backbone of Indias economy, MSMEs require the most effort to digitize. However, once they reach a tipping point, there will be sizable step-change in growth and efficiency. Critical challenges stand in the way of MSMEs digitisation journey, but supportive efforts including various government initiatives and digital solutions offered by startups, are proving effective.	Startup-led innovation, supported by favourable regulations has been central to the rise of Indias digital reputation - at home and around the world. Now operating in a more mature ecosystem, there needs to be a greater focus on balancing profitability, growth and innovation.

1. Large Traditional Businesses

Indias biggest companies are building large digital ecosystems, at pace

	Digital-first Investments and Initiatives
Reliance	JioSaavn, Netmeds, Zivame, Urban, Ladder, Clovia, Milkbasket	Subsidiary for digital ventures - Jio Platforms Digital commerce platforms Jiomart, Ajio, Tira
Tata Group	BigBasket, 1mg, Curefit	Wholly owned subsidiary Tata digital for digital ventures Umbrella app, Tata Neu, enables access to all its consumer businesses. Digital commerce initiative Tata CLiQ
Aditya Birla Group	Bewakoof, Berrylush, Juneberry, Natilene, Nauti Nati, Nobero, Urbano, Veirdo	B2B e-commerce platform for building materials Digital-first house of brands, TMRW, is an incubator of fashion and lifestyle brands
ITC	Mylo, Yoga Bar	Has its own direct-to-customer (D2C) website for its portfolio of brands
Emami	Tru Native F&B, The Man company	Has its own D2C websites for flagship brands Zandu, Kesh King, Boroplus
Marico	Beardo, Just Herbs, True Elements	Saffola Stores owns its D2C website for its Saffola brands. Portfolio of digital-first personal care brands, Pure Sense and Coco Soul

2. Micro, Small & Medium Enterprises (MSMEs)

MSMEs can present huge impetus to Indias economy

3. New-Age Startups

Indias fast-growing startup culture has played a pivotal role to drive innovation and contributed meaningfully to the overall growth of digital economy. Additionally, the governments support through policies and initiatives such as Digital India, Make in India and Startup India created an enabling environment for the digital ecosystem. In 2022, India became the worlds third-largest hub for unicorn companies, with 108 unicorn firms. Most of these unicorns (98%) are digital-first companies, indicating a promising future for Indias digital economy.

X Investor confidence and interest in India remains strong despite short-term headwinds, with deal value surpassed USD 60 billion for a third consecutive year

Source: Data.ai Report titled "State of Mobile", 2023; Ericsson Mobility Report Business Review 2023 and June 2023 edition; GSMA Report titled "The Mobile Economy 2023"; World Economic Forum blog titled "The Digital Economy", August 2022; India: Economic Survey 2022-23; Google, Temasek and Bain & Company Report titled "India e-Conomy Report" 2023; ONDC Report titled "Democratising digital commerce in India", May 2023

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Digital Advertising Ecosystem

Global Digital Advertising Trend and Opportunities

Digital is now well established as the largest and most adaptable advertising medium globally. It is often the medium that marketers turn to in times of macro headwinds, both to build revenue and brand equity in a measurable and accountable way.

After a record-breaking year for global digital ad spends in 2021, grown globally by 32.4% y-o-y to USD 347 billion in 2021, growth continued in 2022 at 13.7% y-o-y. Over the past two decades, Digitals share of ad spend has jumped on average 3% points each year, but it accelerated during the pandemic in 2020 and 2021 when it increased by 5% points per year due to surge in consumer demand.

The overall share of digital media in global ad spending continues to be on the rise and accounted for 55.3% (USD 394 billion) in 2022. It is expected to increase to 57.1% in 2023 with over 70% of spending allocated to programmatic advertising. Given increasing emphasis on performance and measurable outcomes, global programmatic ad spend is expected to grow by 17.9% in 2023.

Within digital, mobile advertising accounted for a considerable and growing chunk of the digital ad spends in 2022. With significant increase in consumers adoption of mobile, engrained mobile habits, on-demand content consumption, gaming and short video platforms, mobile advertising landscape continued to rapidly evolve, powering advertisers to target deeper funnel audiences with increased ROI. Thus, ad dollars continued to flow to mobile as the primary channel for engaging consumers online.

As another digital touchpoint, Connected TV (CTV) in particular witnessed significant growth of 23.7% y-o-y in 2022. While linear television remains a major advertising platform, brands are recognizing the need to include CTV to effectively reach younger audiences and maximize their reach. As a targeted and measurable advertising platform, CTV complements the omnichannel digital strategy, allowing brands to optimize their campaigns and effectively engage their desired audience.

Indian Digital Advertising Market

Indias digital economy is geared up towards reaching a milestone of USD 1 trillion by 2030. This generational leap is revolutionizing Indian digital advertising ecosystem and digital ad spends are projected to reach USD 6.61 billion in 2024, up from USD 3.85 billion in 2022. India is one of the select markets in the world where digital advertising spends continue to grow at a rapid pace.

The improving digital infrastructure has accelerated the growth of digital advertising share from 29% in 2021 to 35% in 2022 and it is expected to increase further to 45% in 2024. This growth is attributed to the consistent improvement in digital infrastructure, governments push to boost the digital economy, growing internet penetration, rise in smartphone adoption, innovation in mobile technologies and increased adoption of digital payments.

Sources: Dentsu Report titled "2023 Global Ad Spend Forecast"; Denstu Report titled "Digital Advertising in India", 2023; Google, Temasek and Bain & Company Report titled "India e-Conomy Report" 2023; ONDC Report titled "Democratising Digital Commerce in India", May 2023

BUSINESS REVIEW

Affle is a global technology company with a proprietary consumer intelligence platform that delivers consumer recommendations and conversions through relevant Mobile Advertising. Affle powers unique and integrated consumer journeys for marketers to drive high ROI, measurable outcome-led advertising through its Affle2.0 Consumer Platform Stack which includes Appnext, Jampp, MAAS, mediasmart, RevX, Vizury and YouAppi.

The Company operates through two business platforms:

1. Consumer Platform: Delivers user acquisitions, recommendations and conversions through relevant mobile advertising for leading brands and B2C companies globally. Our Consumer Platform primarily provides the following services: (1) new consumer conversions

(acquisitions, recommendations, engagements and transactions); (2) retargeting existing consumers, taking them closer to transactions; and (3) online to offline ("O2O") engagements that convert online consumer engagement into measurable in-store walk-ins.

2. Enterprise Platform: Provides end-to-

end solutions for enterprises to enhance their engagement with mobile users, such as developing Apps, enabling offline to online commerce for offline businesses with e-commerce aspirations and providing enterprise-grade data analytics for online and offline companies.

Unique Revenue Model

We primarily earn revenue from our Consumer Platform on a Cost Per Converted User ("CPCU") basis, which comprises user conversions based on consumer acquisition and transaction models. Our revenue model is largely driven by performance marketing spends of advertisers, which has milestone-based payments based on the achieved outcomes.

Our CPCU revenue for FY2022-23 on a consolidated basis was Rs. 13,175 million, a y-o-y growth of 35.3% and it contributed 91.9% to our Revenue from contracts with customers. Our Consumer Platform also earns revenue through brand awareness type advertising, further combined with the revenue from our enterprise platform (jointly categorized as non-CPCU business), which contributed 8.1% to our Revenue from contracts with customers in FY2022-23.

CONSOLIDATED FINANCIAL RESULTS

In Rs. million	FY2022-23	FY2021-22	Change (%
Revenue from contracts with customers	14,339.56	10,816.56	32.6%
Inventory and data costs	8,843.32	6,789.26	30.3%
Employee benefits expenses	1,872.14	1,296.06	44.4%
Other expenses	736.46	600.01	22.7%
Add: Liabilities written back (other operating income)	42.06	3.76
EBITDA	2,929.70	2,134.99	37.2%
% EBITDA Margin	20.4%	19.7%
Depreciation and amortisation expenses	494.18	324.40
Finance costs	114.08	70.77
Other income (Excl. Liabilities written back, if any)	501.18	712.99	(29.7%
Profit Before Tax and Share of (loss) of an associate	2,822.62	2,452.81	15.1%
Share of (loss) of an associate	(7.11)	(4.85)
Profit Before Tax (PBT)	2,815.51	2,447.96	15.0%
Less: Total tax	360.85	301.04
Less: Non-controlling interest	8.77	8.14
Profit After Tax (PAT) net of non-controlling interest	2,445.89	2,138.78	14.4%
% PAT Margin	16.4%	18.5%
Normalized PAT (net of non-controlling interest)	2,453.00	1,833.57	33.8%
% Normalized PAT Margin	16.5%	16.4%

Key Financial Ratios

As of
Key Ratios	March 31, 2023	March 31, 2022
Return on Net Worth (%)*	20.0%	27.2%
Return on Capital Employed (%)*	19.7%	18.5%
Total Debt/Equity (x)*	0.10x	0.20x
Days Sales Outstanding (DSO)	89	105
Interest Coverage Ratio (x)	21.3x	25.6x
Current Ratio (x)	2.9x	2.2x
Diluted Earnings per Share (Rs.)	18.43	16.18

Adjusted to normalize the unutilized portion of QIP Proceeds as of March 31, 2023

CONSOLIDATED RESULTS OF OPERATIONS (P&L)

Revenue Profile

Our Revenue from contracts with customers comprises of (a) Revenue from Consumer Platform and (b) Revenue from Enterprise Platform.

In Rs. million	FY2022-23	FY2021-22	Change (%)
Consumer Platform	14,233.89	10,722.55	32.7%
Enterprise Platform	105.67	94.01	12.4%
Revenue from contracts with customers	14,339.56	10,816.56	32.6%

Revenue from our Consumer Platform increased by 32.7% y-o-y primarily on account of our ROI-driven CPCU business model which continued to be well recognized by advertisers resulting in higher business wins from both existing and new customers across the industry verticals.

Our total revenue consists of (a) Revenue from contracts with customers and (b) Other income.

In Rs. million	FY2022-23	FY2021-22	Change (%)
Revenue from contracts with customers	14,339.56	10,816.56	32.6%
Other income	543.24	716.75	(24.2)%
Total revenue	14,882.80	11,533.31	29.0%

The Company reported Revenue from contracts with customers of Rs. 14,339.56 million and total revenue of Rs. 14,882.80 million in FY2022-23, an increase of 32.6% and 29.0% respectively as compared to FY2021-22.

Other income declined to Rs. 543.24 million in FY2022-23 as compared to Rs. 716.75 million in FY2021-22 primarily due to non-operating gain on fair value assessment of financial instruments of Rs. 350.80 million during FY2021-22, which was nil in FY2022-23. However, this was partially offset by the increase in interest income on fixed deposits, gain on overnight funds and net gain on foreign exchange.

Total Expenses

Our total expenses comprise: (a) Inventory and data costs; (b) Employee benefits expenses; (c) Finance costs; (d) Depreciation and amortisation expenses; and (e) Other expenses.

In Rs. million	FY2022-23	FY2021-22	Change (%)
Inventory and data costs	8,843.32	6,789.26	30.3%
Employee benefits expenses	1,872.14	1,296.06	44.4%
Finance costs	114.08	70.77	61.2%
Depreciation and amortisation expense	494.18	324.40	52.3%
Other expenses	736.46	600.01	22.7%
Total expense	12,060.18	9,080.50	32.8%

Inventory and data costs were Rs. 8,843.32 million for FY2022-23 and is a major part of our total expenses. Inventory and data costs as a percentage of revenue from contracts with customers stood at 61.7% in FY2022- 23 from 62.8% in FY2021-22. We continued to strategically invest in the Inventory and data costs to expand our reach across connected devices and build deeper insights toward the next billion online shoppers.

Employee benefits expenses increased by 44.4% y-o-y, driven by our efforts to deepen access across existing and new markets globally.

Finance costs are comprised of: (a) interest on borrowings; (b) interest on lease liabilities; (c) interest on income tax; (d) bank charges; and (e) others. Our Interest Coverage Ratio (EBIT/Finance cost) stood 21.3x, which represents that the Companys ability to service its interest obligations out of its operating income was 21.3 times during FY2022-23.

Depreciation and amortisation expense was Rs. 494.18 million for FY2022-23, an increase of 52.3% y-o-y. This was primarily due to the increase in amortisation of software application development.

Other expenses for FY2022-23 were Rs. 736.46 million and represented 5.1% of our revenue from contracts with customers vs. 5.5% in FY2021-22.

Profitability

In Rs. million	FY2022-23	FY2021-22	Change (%)
A. Profit After Tax (net of non-controlling interest)	2,445.89	2,138.78	14.4%
1. Other Income (Excl. liabilities written back) comprises:
a. Gain on fair valuation of financial instruments	-	350.80
b. Other income in ordinary course of business	501.18	362.20
2. Tax outgo on gain on financial instruments	-	40.73
3. Share of (loss) of an associate	(7.11)	(4.85)
B. Normalized PAT (net of non-controlling interest)	2,453.00	1,833.57	33.8%
% Normalized PAT Margin	16.5%	16.4%

Profit before tax was Rs. 2,815.51 million in FY2022-23 as compared to Rs. 2,447.96 million in FY2021-22, an increase of 15.0% y-o-y.

Profit attributable to equity holders of the parent (i.e. Profit after tax net of non-controlling interest) registered a growth of 14.4% on a y-o-y basis and was Rs. 2,445.89 million for FY2022-23 as compared to Rs. 2,138.78 million in FY2021-22. This profit has been further normalized to exclude the impact of non-operating gain on fair value assessment of financial instruments and the related tax impact. Our Normalized PAT stood at Rs. 2,453.00 million in FY2022-23 as compared to Rs. 1,833.57 million in FY2021-22, a y-o-y growth of 33.8%.

CONSOLIDATED FINANCIAL POSITION (BALANCE SHEET)

Total Shareholders Equity

As of
In Rs. million	March 31, 2023	March 31, 2022
Equity share capital	266.35	266.50
Other equity attributable to equity holders of the parent	14,384.16	11,514.65
Non-controlling interests	21.15	12.38
Total equity	14,671.66	11,793.53

The paid-up equity share capital of the Company as of March 31, 2023 was Rs. 266.35 million comprising 133,251,060 equity shares of face value Rs. 2/- each. The difference in the paid-up equity share capital of the Company for the year under review as compared to the previous year was on account of treasury shares acquired by the Companys ESOS Trust from the secondary market. The par value of treasury shares was reduced from paid-up equity share capital and the corresponding premium reduced from Securities premium, to be stated as a separate line item of Treasury shares, as per applicable accounting standard. For further details, refer to our Consolidated statement of changes in equity on pages 201-203 for the year ended March 31, 2023.

Other equity attributable to equity holders of the parent increased by 24.9% on a y-o-y basis. This increase was primarily driven by growth in retained earnings of 51.0% and growth in other reserves of 452.3% on a y-o-y basis.

The growth in other reserves of 452.3% on a y-o-y basis was primarily on account of Rs. 542.92 million added due to translating the financial statements of foreign subsidiaries.

Debt Position (Short-term and Long-term Borrowings)

As of
In Rs. million	March 31, 2023	March 31, 2022
Current borrowings	510.15	593.09
Non-Current borrowings	520.75	891.26
Total Debt	1,030.90	1,484.35
Total Debt/Equity(x)*	0.10x	0.20x

‘Adjusted to normalize the unutilized portion of QIP Proceeds as of respective financial year end.

Total debt for the Company as of March 31, 2023 was Rs. 1,030.90 million and the debt-to-equity ratio was 0.10x as of March 31, 2023 as compared to 0.20x as of March 31, 2022. The decrease in Companys debt was primarily on account of repayment of loans amounting to Rs. 453.45 million during FY2022-23.

Assets Position (Line items with significant changes)

As of
In Rs. million	March 31, 2023	March 31, 2022
Current assets (key line items)
Cash & cash equivalent and Other bank balance (combined)	6,457.08	6,046.19
Trade receivables	2,452.45	2,347.11
Investment held for sale	1,338.33	-
Contract assets (unbilled revenue)	1,035.72	757.90
Other financial assets (current)	94.28	46.52
Non-current assets (key line items)
Goodwill	6,640.01	6,162.97
Intangible assets	1,163.29	804.05
Intangible assets under development	485.18	422.21
Investment in an associate	-	1,345.44

Cash & cash equivalent and Other bank balance increased to Rs. 6,457.08 million as of March 31, 2023 from Rs. 6,046.19 million as of March 31, 2022 on account of net cash generated from operations, partially offset by cash utilised in repayment of loans, payment of contingent incremental consideration and investment in internally generated software.

Trade receivables increased to Rs. 2,452.45 million as of March 31, 2023 from Rs. 2,347.11 million as of March 31, 2022, primarily due the growth in our revenues from contracts with customers.

Contract assets comprises revenue that is not yet billed to customers. The contract assets as a percentage of revenue from contracts with customers was 7.2% for FY2022-23 as compared to 7.0% in FY2021-22.

Other financial assets (current) increased during the year under review primarily on account of interest accrued but not due on fixed deposits in FY2022-23.

Goodwill increased to Rs. 6,640.01 million as of March 31, 2023 from Rs. 6,162.97 million as of March 31, 2022, on account of foreign exchange differences on restatement of balances as at March 31, 2023.

Intangible assets and Intangible assets under development (combined) increased to Rs. 1,648.47 million as of March 31, 2023 from Rs. 1,226.26 million as of March 31, 2022 primarily due to Rs. 710.36 million added on account of new technology modules developed or under development phase. This increase was partially offset by the amortisation of other intangible assets amounting to Rs. 465.11 million charged during FY2022-23.

- Investment in Talent Unlimited Online Services Private Limited ("Bobble")

During the previous year FY2021-22, w.e.f. January 1, 2022, the Company had received the right to

appoint its nominee as a director on the Board of Bobble, which was duly exercised. Given the shareholding of 17% on such date and the board seat, the Company had considered Bobble as an associate over which it was deemed to have significant influence.

However, during the year under review i.e. FY2022-23, the Company in its board meeting, had authorized the management to either divest or invest further in Bobble. Accordingly, the management decided to classify the investment in Bobble as held for sale in accordance with Ind AS 105 considering a possibility of divestment. Bobble ceased to be an associate of the Company w.e.f May 14, 2022, and the investment in Bobble has been disclosed as an investment held for sale as of March 31, 2023. The Company holds 26.24% stake on fully diluted basis in Bobble.

Hence, the decrease in Investment in an associate was on account of its reclassification under the Current assets as an Investment held for sale of Rs. 1,338.33 million (adjusted for share of loss of associate of Rs. 7.11 million for the period of April 1, 2022 to May 14, 2022), during the year under review.

LIQUIDITY AND CAPITAL RESOURCES (CONSOLIDATED) Cash Flows Position

Net Cash generated from / (used in) (In Rs. million)	FY2022-23	FY2021-22
a. Operating activities	2,603.03	2,059.83
b. Investing activities	(1,974.32)	(5,559.19)
c. Financing activities	(590.45)	6,149.72
Net change in cash and cash equivalent (a+b+c)	38.26	2,650.36
Net foreign exchange difference	109.25	21.31
Impact of reinstatement of overnight funds	9.46	-
Cash and cash equivalent as at the beginning of year	3,163.16	491.49
Total Cash and cash equivalent as at the end of year (excluding Other bank balance)	3,320.13	3,163.16

Our liquidity requirements arise principally from our operating activities, working capital needs and investment activities (primarily acquisition of businesses and strategic investments).

Our net cash flows generated from operating activities were Rs. 2,603.03 million and Rs. 2,059.83 million during FY2022-23 and FY2021-22, respectively.

Our cash and cash equivalent as of March 31, 2023 (excluding Other bank balance) was Rs. 3,320.13 million, as compared to Rs. 3,163.16 million as of March 31, 2022.

This increase was primarily driven by (a) Increase in Profit before tax adjusted for gain on fair value assessment of financial instruments, other non-cash items such as (depreciation, amortisation expense, unrealised foreign exchange loss/(gain), Interest income and more), and adjusted for changes in working capital and taxes; (b) lower outgo on Acquisition of a subsidiary; (c) lower outgo on Investments in bank deposits (having original maturity of more than three months); (d) nil outgo on Investment in associate; (e) Interest received on bank deposits; (f) Gain/Loss on overnight funds; and (g) lower outgo on Repayment of borrowings.

However, the above increase was partially offset by (a) higher outgo on Purchase of property, plant and equipment, intangible assets including intangible assets under development; (b) lower value of Redemption of bank deposits (having original maturity of more than three months); (c) nil Proceeds from sale of investment; (d) no Proceeds from borrowings; and (e) Purchase of treasury shares.

ACQUISITION UPDATE (Recent Event)

On May 24, 2023, the Company through its subsidiaries ("Affle"), announced the signing of a definitive agreement to acquire 100% ownership of YouAppi, a global gaming focused programmatic mobile app marketing platform.

Key Transaction Details:

• Acquirer: Affle International Pte. Ltd., a wholly- owned Singapore subsidiary of the Company

• 100% ownership of YouAppi Inc., USA ("YouAppi")

• Total consideration of USD 45 million

• Upfront cash consideration of USD 35.44 million

• Contingent incremental consideration of USD 9.56 million

YouAppi Inc. was incorporated in USA in 2011 and they have a strong ground presence with teams based out of USA, Israel and Japan. YouAppi delivers a comprehensive range of programmatic mobile app marketing solutions with real-time results optimization for the gaming industry globally. YouAppis programmatic mobile app marketing platform deploys AI & ML-powered proprietary technology with sophisticated algorithms and granular audience segmentation for many of the global companies.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Affle has well-established Internal Control Systems, commensurate with the size, scale and nature of its operations. Stringent controls and processes are in place to monitor and control our operations across the markets we operate in. These controls have been designed to provide reasonable assurance with regard to maintaining of proper accounting controls for ensuring the reliability of financial reporting, monitoring of operations, protecting assets from unauthorized use or losses and compliance with applicable regulations.

The Company has appointed Mazars Advisory LLP as Internal Auditors, an outside independent agency to conduct the internal audit to ensure the adequacy of an internal control system, compliance of rules and regulations applicable to the Company and adherence to the management policies. To maintain its independence, the Internal Auditor reports to the Audit Committee chaired by an Independent Director of the Board. The internal Audit team conducts quarterly audits, which include a review of the operating effectiveness of internal controls. Based on the report of the Internal Auditor, reviewed quarterly by the Audit Committee, process owners undertake corrective action in their respective areas and thereby strengthen the controls.

The Risk Management Committee oversees the overall process of risk management throughout the organization. Business Heads and Support Function Heads are also responsible for establishing effective internal controls within their respective functions. The Companys business units and corporate functions address risks through an institutionalized approach aligned to the Companys objectives.

HUMAN RESOURCES REVIEW

We continue to expand the horizon of our technology, products, offerings and our aspiration to achieve even higher milestones with each passing year. We immensely value the contribution of our human resources to drive our vision forward. We are committed to nurturing an environment that promotes inclusive growth and drives thought leadership. To achieve this goal, we have developed a comprehensive human resource strategy that encompasses various essential elements of human resource development. These include (i) adoption of fair and ethical business practices; (ii) promotion

of workforce diversity and inclusiveness; (iii) evolution of performance-based compensation packages to attract and retain the talent; (iv) implementation of rewards & recognition programs to inspire and encourage a culture of excellence and continuous improvement; and (v) delivery of continuous learning and development programs to improve technical, functional and managerial competence. By implementing these key aspects of our human resource strategy, we aim to create an environment that nurtures talent, fosters growth and drives excellence within our organization.

As of March 31, 2023, our total employee count (including contractual and full-time consultant workforce) on a consolidated basis was 562, with 178 employed in Technology, 168 employed in Data Platforms and Operations, 126 employed in Sales and Marketing, 74 employed in General Administration and 16 in the Management team. Of the total 562 employees, 63.7% were men and 36.3% were women employees.

Affle strives to provides a workplace environment that is safe, hygienic, humane and offers dignified workplace environment for our employees. During the year, the company conducted various training sessions, covering topics such as Prevention of Sexual Harassment, Human Rights, AntiCorruption and Anti-Bribery. Affle believes in providing equal opportunities and fostering an inclusive culture where employees are valued and treated with respect, resulting in enhanced creativity, productivity, innovation and overall business performance. To support technical skill development of certain departments, the company offered NetSuite Training in multiple languages, including English, Spanish and Portuguese. Additionally, Affle conducted various training programs such as Web Development Bootcamp, Practical Accounting and Digital Product Management to empower employees with relevant skills. To ensure well-being of our employees, we continued to support them through Affle Care Program which was launched in FY2021-22 as an organization-wide holistic initiative to promote the overall well-being of all Afflers and their families 24x7 through consistent, free support and impactful counseling.

Further details on our human capital are available on pages 48-53 of this integrated annual report.

THREATS, RISKS & CONCERNS

As a global company, Affle may be exposed to a range of external as well as internal risks that can have an impact on its performance. In order to efficiently manage these, we have built a strong risk management framework which includes identification of the identified risks, their impact and our mitigation strategy. You should carefully consider these risks and all other information in the Annual Report. Any of these risks could adversely affect our business, operating results, financial condition and prospects.

Further details on the risks and our risk management approach, are available on pages 62-67 of this integrated annual report.

GROWTH STRATEGY AND OUTLOOK

Affle is anchored in India - our dominant and largest market, and in international markets particularly emerging markets including South East Asia, Middle East & Africa and Latin America, where we have a strong on-ground presence. We are also investing our resources to expand in developed markets in certain high growth verticals such as gaming, etc., leveraging our unique CPCU business model to offer a one-stop ROI driven solution for advertisers to engage and re-engage with their consumers, spanning across the users digital journey.

We have grown in scale significantly and have a well-defined Affle2.0 strategic roadmap for organic and inorganic growth:

CAUTIONARY STATEMENT

Certain statements in this Management Discussion and Analysis Report concerning the future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, ability to manage growth, intense competition in our industry including those factors which may affect companys cost advantage, seasonality of business, wage increases, companys ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, client concentration, companys ability to manage its international operations, companys ability to successfully complete and integrate potential acquisitions, liability for damages on companys contracts, the success of the companies in which Affle has made strategic investments, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry or the global economy.