Ajel Ltd Management Discussions.

The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013 and Indian Accounting Standards (Ind AS) in India. Management of Ajel Limited (the "Company") accepts responsibility for the integrity and objectivity of these financial statements, as well as for the various estimates and judgments used in the preparation of the financial statements. These estimates and judgment have been made on a reasonable and prudent basis, so that the financial statements reflect the form and substance of transactions in true and fair manner and showcase the state of affairs of the Company.

Results discussed herein include consolidated results for the Company, including its wholly owned Indian subsidiary and its US subsidiary and US Branch office.

1. Ajel Business Overview

Ajel is a leading provider of next-generation Cloud Computing, Infrastructure management, networking, enterprise IT solutions, Application Development & management and Professional Consulting Services. The Company delivers its services primarily to customers in the USA and India, it continues to focus on delivering its development and support projects on an offshore basis. As the bulk of its services are currently delivered in other countries, the Company remains subject to the effect of changes in the relative values of the respective country currencies.

Companys success stems from its strong technology and business partnerships with industry leaders like CISCO, Citrix, CA, Informatica, Kalido, IBM, Oracle and MICROSOFT. Company works strategically with its partners to deliver mission critical solutions for leading businesses and government establishments across the globe.

The Company has also invested its capital in Datacenter in Edison, NJ USA. The Company realizes income from infrastructure management services.

Operations of the Company are completely integrated with its subsidiaries. The Company performs delivery management including offshore development and support, finance and administrative functions for the consolidated group. Ajel Technologies, Inc. (USA) is the wholly owned US subsidiary of the Company and Ajel Limited US branch office formed in July 2011. This Subsidiary and Branch office focuses on customer facing and business development activities including pre-sales, marketing, sales and onsite project/program management activities and also focus is to sell both on-site and offshore Information Technology services in the practice areas mentioned above.

The Companys consolidated customer base can be classified into two groups:

a. Commercial Sector

This group includes all commercial organizations in the US and elsewhere. The Company targets the SME (small and medium sized businesses up to $1B) market sector as well as Enterprise (Global) corporations. We believe this market holds significant potential for Company growth, largely driving offshore business for the company. This marketplace represents approximately 60% of the companys business.

b. Public Sector and Utility Companies

This includes national, state and local governments, non-profit entities and utility companies, primarily in the US. The Company has several large public sector and utility customers that comprise approximately 40% of the Companys business. Although these services typically are not delivered in an offshore format, there is a significant market due to our experience and depth of expertise in areas useful to public sector and utility clients. Current market focus is to additionally deliver services in this segment in the domestic market as well as the Middle East.

1.1 BRAND BUILDING

The Company undertook marketing initiatives to promote the Ajel brand, and the brand promise of ‘The Difference is Depth to its clients. The Company participated in leading industry and business events around the world, reaffirming its commitment to delivering a complete brand and organizational experience. Apart from regular channels, Ajel continues to invest in building the brand in the digital space using premium business and technology solutions.

Ajel continued to articulate the brand promise internally, using various channels and internal marketing assets and leveraged them to activate the brand amongst employees as well as other important stake holders.

The company has been exploring new areas which have the potential growth to Companys business and recently has come up with an application catering to various Local Governments.

1.1.1 Technology and Innovation

Ajel continues to invest in futuristic areas related to Cloud Computing, Networking, and Enterprise IT Solutions to make a difference to its customers and society. The Company continuously strives to improve quality and efficiency of current offerings to customers and enable them prepare for future challenges.

1.1.2 Intellectual Property (IP)

Company continues to build an effective portfolio of Intellectual Property for future monetization, collaboration and risk mitigation. In fiscal 2018-19 company continued to focus on building and managing of IPs. Company emphasizes to its employees for collaborative mining of Intellectual Property. IPs gives multiple advantages like cost and time saving, technical edge, risk mitigation etc.

The Company continuously engages in customer focused innovation and launches new offerings that use technology to address its clients business problems.

1.1.3 Products of the Company

DEM: Dynamic Enterprise Management (DEM) is a Professional Services business management solution that provides growing and midsize organizations with complete and scalable financial and operational functionality, such as advanced Consultant Resource Management, robust business intelligence, rich reporting, Payroll, Human Resource Management System, Financials and Sales Force Automation. DEM is accessed irrespective of any geographical or language limitations. DEM gives total control of consulting process from sourcing of the consultant to payroll generation to HRMS.

DEM is a bespoke ERP designed as a complete end to end recruitment system. DEM offers the stability you require, so you know your solution will support your business-critical needs, today and in the future. This rationalized, comprehensive solution automates key processes and connects Information across your business, empowering you and your employees to focus on core business initiatives, respond swiftly and make better strategic decisions.

2. GLOBAL ECONOMY OVERVIEW

The acceleration in global activity that started in 2016 gathered steam in 2017, reflecting firmer domestic demand growth in advanced economies and improved performance in other large emerging market economies. Global growth is set to be just over 3.5% in this calendar year 2018, the fastest for seven years, with improved outcomes in both advanced economies and the EMEs. Confidence measures and levels of new orders for businesses remain strong. This long-awaited lift to global growth, supported by policy stimulus, is being accompanied by solid employment gains, a moderate upturn in investment and a pick-up in trade growth. The continued expansion depends on robust global growth and governments support for right trade policies. However, there are signs that escalating trade tensions may already be affecting business confidence and investment decisions, which could compromise the current outlook. (Source: IMF and OECD).

3. INDIAN ECONOMY OVERVIEW

Indian economic growth is giving a positive signal for the current and future scenario. It is projected to strengthen to above 7%, gradually recovering from the transitory adverse impact of rolling out the Goods and Services Tax (GST) and measures to choke off the black economy, including demonetisation. Indias GDP grew 7.2% in the third quarter of 2018, surpassing expectations and wresting back the mantle of fastest growing economy from China on the back of a rebound in industrial activity, especially manufacturing and construction, and an expansion in agriculture. Reserve Bank of India has estimated GDP growth in a range from 7.4% to 7.9% for the Financial Year 2019-2020. (Source: OECD and Economic Times)

Fiscal deficit for 2017-18 is revised to INR 5.95 lakh Cr at 3.5% of the GDP which is approximately the same as 2016-17 inspite of transformation in the economy. In addition to initiatives like; "Make in India", "Housing for All", "Digital India" government has also introduced "Sagar Mala" and "Bharat Mala" initiatives which is expected to boost the domestic growth of the country. (Source: IBEF and

Trading Economics)

4. IT GLOBAL OUTLOOK

(https://www.comptia.org/resources/it-industry-trends-analysis)

The global information technology industry surpassed $4.5 trillion in 2017, according to the research consultancy IDC. If growth expectations materialize in the year ahead, spending will eclipse the $4.8 trillion mark.

The United States is the largest tech market in the world, representing 31% of the total, or approximately $1.5 trillion for 2018. In the U.S., as well as in many other countries, the tech sector is one of the most significant contributors to GDP.

In the aggregate, the Asia-Pacific region, which encompasses Japan, China, Australia, India, and surrounding countries, accounts for one- third of the total. APEC has increased its share of the global IT pie, driven by the rise of countries such as China and India, and the slower growth rates experienced in parts of Europe and other markets. By 2032, China is projected to claim the mantle of worlds largest economy.

(https://blog.aspiresys.com/software-product-engineering/product-engineering-trends-2018/)

Table 1 Worldwide IT Spending Forecast (Billions of U.S. Dollars)

5. MANAGEMENT DISCUSSION & ANALYSIS

2017 2017 2018 2018 2019 2019
Spending Growth (%) Spending Growth (%) Spending Growth (%)
Data Center Systems 178 4.4 179 0.6 179 (0.2)
Enterprise Software 355 8.9 389 9.5 421 8.4
Devices 667 5.7 704 5.6 710 0.9
IT Services 933 4.3 985 5.5 1,030 4.6
Communications Services 1,393 1.3 1,427 2.4 1,443 1.1
Overall IT 3,527 3.8 3,683 4.5 3,784 2.7

in Millions Source: Gartner (January 2018)

All workers employed by U.S. technology companies represent tech industry employment. In 2017, an estimated 6.1 million workers were employed in this category, an increase of 2.0% over 2016. For 2018, the growth outlook should roughly mirror the previous year.

In 2017, nearly 5.4 million individuals worked as technology professionals across the U.S. economy. This represents an increase of 2.1%, or nearly 110,000 net new jobs. Growth in the tech occupation category is also expected to hold steady in the year ahead.

Amid the wave of emerging technologies, artificial intelligence stands out as the one most likely to drive changes to the IT ecosystem. Technology solutions are growing more complex and technology demands are growing more specific. The answer to these issues is not found in constantly adding resources but in leveraging benefits of modern technology. AI requires significant compute resources (which can be procured in the cloud), various algorithms that allow learning (which can be baked into products or provided as a service), and contextual awareness (which can come from IoT devices or massive collections of data). By adding a layer of intelligence to the technical solutions they are building, companies can both manage a more extensive IT architecture and solve a broader range of problems. Not every Company will necessarily need the skills to build new AI functions, but they will at least need the skills to manage AI components so that they are not just dealing with mysterious black boxes producing unexplained output.

IT OUTLOOK INDIA

(https://www.ibef.org/industry/information-technology-india.aspx)

Outlook for the Indian information technology (IT) sector is cautiously positive in 2018 as challenges remain amidst prospects of greater IT spending with global and US economies improving- as per industry body Nasscom. More importantly, the industry has led the economic transformation of the country and altered the perception of India in the global economy. Indias cost competitiveness in providing IT services, which is approximately 3-4 times cheaper than the US, continues to be the mainstay of its Unique Selling Proposition (USP) in the global sourcing market. However, India is also gaining prominence in terms of intellectual capital with several global IT firms setting up their innovation centers in India.

The IT industry has also created significant demand in the Indian education sector, especially for engineering and computer science. The Indian IT and ITeS industry is divided into four major segments IT services, Business Process Management (BPM), software products and engineering services, and hardware.

Indian IT exports are projected to grow at 7-8 per cent in 2017-18 to US$ 126 billion, in addition to adding 130,000-150,000 new jobs during the same period. Indian technology companies expect Indias digital economy to have the potential to reach US$ 4 trillion by 2022, as against the Government of Indias estimate of US$ 1 trillion.

The computer software and hardware sector in India attracted cumulative Foreign Direct Investment (FDI) inflows US$ 29.825 billion from April 2000 to December 2017, according to data released by the Department of Industrial Policy and Promotion (DIPP).

Leading Indian IT firms like Infosys, Wipro, TCS and Tech Mahindra, are diversifying their offerings and showcasing leading ideas in blockchain, artificial intelligence to clients using innovation hubs, research and development centers, in order to create differentiated offerings.

MOBILITY SEGEMENT

(http://markets.businessinsider.com/news/stocks/global-mobility-on-demand-market-forecast-opportunities-report-2017-1002912715)

Global

Global mobility on demand market is expected to cross $ 228 billion by 2022, on account of growing traffic congestions, continuous initiatives being taken by several vehicles manufacturing players and increasing inclination of consumers.

Asia-Pacific region accounted for the largest share in global mobility on demand market in 2016; and China and Japan registered more than half of the demand for mobility on demand services in the region in the same year. Moreover, the region is anticipated to maintain its dominance in global mobility on demand market during the forecast period as well.

Infrastructure-as-a-Service (IaaS), currently growing at a 23.31% Compound Annual Growth Rate (CAGR), will outpace the overall market growth of 13.38% through 2020. Software-as-a-Service (SaaS) revenue is predicted to grow from $58.6B in 2017 to $99.7B in 2020. Taking into account the entire forecast period of 2016 2020, SaaS is on pace to attain 15.65% compound annual growth throughout the forecast period, also outpacing the total cloud market.

(https://www.forbes.com/sites/louiscolumbus/2017/10/18/cloud-computing-market-projected-to-reach-411b-by-2020/#650c3c9e78f2)

India

The public cloud services market in India is slated to grow 35.9 per cent to reach US$ 1.3 billion according to IT consultancy, Gartner. Increased penetration of internet (including in rural areas) and rapid emergence of e-commerce are the main drivers for continued growth of data centre co-location and hosting market in India. The Indian Healthcare Information Technology (IT) market is valued at US$ 1 billion currently and is expected to grow 1.5 times by 2020. Indias business to business (B2B) e-commerce market is expected to reach US$ 700 billion by 2020 .

The countrys public cloud services revenue growth rate is the second highest globally after China. Public cloud is a virtual infrastructure to store data and applications of multiple organisations and make them available through internet.

While software as a service (SaaS) continued to be the largest segment of the public cloud market in India with $694 million revenue in 2017 and expected to reach $932 million this year; Gartner has estimated that the fastest-growing segment of the public cloud market will be infrastructure as a service (IaaS) and expected to increase by 46% to $1 billion in 2018. IaaS is gaining as a business service since organisations are not interested in building their own data centre infrastructure, pointed out Gartner.

Enterprise mobility Managed mobility services to grow at 30.5% CAGR in 2014 2019 period. Approximately 40% of revenue growth by 2020 expected to come from new industries turning to offshoring and new geographies, particularly Asia-Pacific and Europe.

Digital technologies continue to define the sector and is likely to have a 23% revenue share by 2020 and >38% by 2025.Indian service providers face a significant opportunity as digital technologies continue to be embedded in an ever-widening range of products and services.

PRODUCT ENGINEERING

(https://globenewswire.com/news-release/2016/03/04/816971/0/en/Global-Product-Engineering-Services-Market-CAGR- Growth-of-9-95-by-2020-Trends-Technologies-Opportunities-Report-2016-2020-Key-Vendors-TCS-Wipro-Alten-Calsoft-Labs.html)

The term Product Engineering, in Software Engineering terms, is a multi-dimensional solution approach that encompasses all the necessary processes to successfully launch and run software in the market. With such rapid changes, Product Engineering cannot be attributed to just one finished lifecycle; it is a continuous development model.

This comprehensive report predicts that the global product engineering services market will grow with a CAGR of 9.95% during the period 2016-2020.

Commenting on the report, an analyst from the research team said: IoT solutions are gaining traction in the market as demand for connected and intelligent solutions expands. IoT is no more a buzzword in the IT market and numerous vendors are offering IoT solutions for engineering services for numerous industry verticals, such as healthcare, energy, manufacturing, and automotive.

The rising popularity of industrial Internet of Things (IoT) is expected to have a positive influence on the growth of product engineering services market in the forthcoming years. Manufacturers are expected to use IoT to develop new hybrid business model and leverage latest technologies to stir up new product development with the objective of boosting revenue. The rising need for manufacturing stages to be cost efficient is anticipated to fuel the demand for product and component design services segment of product engineering services market.

Asia Pacific is anticipated to be the leading regional market for product engineering services due to the increasing demand to organize its huge workforce. Asia Pacific is expected to have a major traction in the product engineering services market due to the increasing need to organize the massive workforce in this region. An aging population heading towards retirement and an increasing size of multigenerational workforce in this region is displaying the demand for product engineering services among enterprises for resource management.

6. OPPORTUNITIES AND THREATS

Opportunities:

Information Technology support services remains an increasingly competitive business environment. With the change in emerging technology areas, companies have become dependent on technology not only for day-to-day operations, but also for the use of technology as a strategic tool to enable them to re-engineer business processes, restructure operations, ensure regulatory compliances, etc. As systems continually become more complex, companies increasingly turn to external IT services provider to develop & implement new technologies & integrate them with existing applications in which companies have made considerable prior investments. Additionally, many companies continue to explore methods to reduce their cost of IT operations. This provides an opportunity for providers to support and integrate company IT systems on an ongoing basis. The Indian IT Industry becomes a powerful tool used by companies to reduce their costs.

Ajel has Alliance partnerships with several leading technology companies in its practice areas including CISCO, Citrix, CA, Informatica, Kalido, IBM, Oracle and MICROSOFT. The company is well poised to take advantage of the new advanced technologies provided by these alliance partners. These technology alliance partners expect to see major technology opportunities for their customers in the United States.

Ajel continues to focus as a priority on obtaining and providing offshore sourced services for its customers. Any increase in offshore related services should have the effect of increased company margins and profitability and increased longevity of business contracts. The company intends to continue to grow its share in existing clients. This has the supplemental effect of reducing the cost of overhead and delivery cost.

Threats:

The economic uncertainty of the current worldwide markets makes the future less predictable than in the past due to the current demand environment. Worldwide IT spending growth has significantly reduced with budget cutbacks on IT spending by customers, buyers in "wait and watch" mode, government units significantly cutting budgets to match expected revenue shortfalls and delayed decision making. Reduction in new client additions, absence of large deals, vendor consolidation, downsizing for greater efficiencies and cost savings as well as pricing pressures in both onsite and offshore realization put greater pressures on revenues and margins in the last fiscal year and are expected to track lower for some time.

The US market is under increasing pressure from general economic conditions as growth diminishes. US spending on off-shoring services have slowed in the face of these market conditions as well as the adoption of protectionist measures by policy makers. Ajel is also subject to the threats of competing against much larger International IT service providers, the large global Indian IT service providers and more entrenched US and Global System integrators, many of which also provide services to established markets on an offshore basis. The good news is that, global sourcing is expected to increase as focus on cost and value increases with buyers "stretching the dollar" to include greater value delivery.

As with other Indian IT Services companies, other general threats to the business continue to include competition among Information and Technology units in India for talented people, which has resulted in rising employee compensation packages and shrinking margins available to IT Companies. We are also seeing a potential backlash in the US from the increasing loss of employment due to outsourced services overseas, resulting in an impact on the countrys immigration enforcement procedures.

7. OUTLOOK and RISKS

The Company is expected that its strengthened relationships and alliances with partners such as CISCO, Citrix, CA, Informatica, Kalido, IBM, Oracle and MICROSOFT will continue to lead to business and revenue growth and increasing profitability with a continued focus on offshore revenue as and when the global market improves. The Company continues its focus aligning its sales and delivery structure to an Indian Model.

The Company has not kept up with industry growth trends, primarily due to decreased spending in the US public sector and a corresponding decrease in activity at several of our large clients. Additionally, the absorption of new customers in the targeted small/medium client base has not grown as expected. US market conditions continue to soften making it harder to locate new development opportunities. The Company intends to continue to grow its offshore business while exploring new opportunities domestically and in adjacent markets, including new ventures in the Middle East and India domestically. New opportunities will focus on leveraging our US public sector expertise and delivering our market solutions and products to these markets. Companies continue to look for specialized expertise and cost saving methods, both of which are provided by the Company.

The Companys US subsidiary generated a loss after tax for the period. The Company has been impacted by the worldwide slowdown in discretionary IT spending which has impacted several of our targeted sectors. Due to this slowdown, our clients and many other companies are deferring the implementations of new systems and other discretionary spending. The new paradigm has become one of "reducing the total cost of ownership including the ongoing maintenance and support of IT systems". The Company has focused its efforts on driving cost effective support offerings resulting in improved offshore revenue while realizing a detriment to onsite business. This coupled with reduced spending in the public sector and increased pressure by the government to reduce the number of foreign IT workers has negatively impacted growth in the United States. These actions do not forecast a quick turnaround in the US market. The company continues to take all reasonable steps to reduce and optimize costs to improve profitability. Focus remains on expanding the benefits from our alliance partners and creating offshore opportunities where relationships are of a long-term nature and recurring services can be provided at a lower cost.

Some of the key strategic risks the company faces, their impact and corresponding risk mitigation actions undertaken by the company are discussed in the table:

Key Risks Impact on Ajel Mitigation
Lack of diversification The Companys potential for growth is driven by one market segment, namely IT services, with a focus on several technology areas. Company management has purposely remained focused in the near term as opposed to spreading its manpower too thin to achieve its goals. The company is also taking measures to change the perspective from the pure services providers company to market "Product" and "IP"
Excessive dependence on one geographic segment A large percentage of companys revenue comes from USA heavy dependence on this one geographic segment could lead to volatility because of the economic and political situation there. The Company has successfully penetrated into the local Indian market apart from the setting operations in Middle East.
Legal and Statutory Risks The companys international operations are subject to local legal and statutory risks including compliance with local laws and regulations, one of which is compliance with immigration laws and regulations, which may change from time-to-time. Other risks include contractual risks when delivering complex technology solutions. As of the date of this report, the company is not aware of any noncompliance with local laws or regulations that would have a material impact on the financial statements.
Risk of attracting and retaining of IT Professionals in a highly competitive environment In the IT services industry, people are the most valuable assets. Attrition of the key technical talent is one of the major risks. The company reviews its compensation policies regularly to determine that compensation is competitive with the market conditions. The company also determines that there is a defined career path for all employees and the work environment provided to all employees is of very high standard.
Currency Risk The changes in currency rate between Indian Rupees and US dollars have been a major cause of concern. The fluctuation of rates coupled with the shocks emerging from various parts of the world relating to the economic meltdown has increased the currency risk. The company has tried to protect itself through various measures using available financial instruments from time to time.

8. INTERNAL CONTROL SYSTEM & THEIR ADEQUACY

The company strictly adheres to the internal control systems proven to be effective over the years. The internal audit team carries out extensive audit on all operations at regular intervals. The company implements the policies and procedures so as to safeguard the assets and interests of the company.

The internal control systems are implemented with a view to achieve good ethical culture within the organization. The internal control systems would ensure that any vulnerability in the achievement of companys objectives caused by risk factors whether internal or external, existing or emerging, is detected and reported in a timely manner and is meted out with appropriate corrective action. Strong internal controls minimize the risk of frauds by introducing effective checks and balances into the financial system.

9. FINANCIAL CONDITION

Your company had consolidated revenues of Rs.15.12 crores and Rs.0.78 crores net loss in the current year. We expect to achieve significant growth in revenue and net income in the coming year.

The financial health of your company indicates adequate and sustainable financial resources to meet with the needs of its business. The Company and/or its wholly owned subsidiary have:

Generated cash from its business

Gained more productivity from its assets and properties

Maintained its current dividend level

The Company believes it has adequate and dependable resources to meet its liquidity needs, including the ability to raise short term debt, and manage the ongoing mismatched cash flows inherent in a consulting business.

10. HUMAN RESOURCES

The Company not only provides a safe & healthy working environment to all its employees but also emphasizes to create an environment where performance is rewarded, individuals are respected, and employees get opportunities to realize their potential. Our focus is to develop individual and team competencies and capabilities for driving operational excellence and building a high-performance organization. Hence our Talent Management program is focused on Talent Acquisition, Development and Retention. The Company regularly reviews the performance of its employees and provides them job enrichment opportunities. The Company has been successful in building a performance driven culture through a systematic performance appraisal process influencing total compensation.

Ajel Management and Leadership Program

The Company holds regular programs to develop team spirit and to motivate its employees to perform better. The company has launched a Ajel Management Leadership (AML) Program. The objective of the AML program is to select, recruit and groom young leaders and next generation managers of Ajel. The program will:

Provide AML managers opportunities for professional growth within Ajel.

Groom, develop and build AML alumni as key managers and leaders of the Company.

Tap their energy and vast potential to support growth of Ajel as an organization.

Take Leadership roles in Ajels core IT business units, Financial, Real Estate and human

Capital management

Need for Multidisciplinary Education and Experience

Ajel believes in a multi-disciplinary education as a robust base for general management and leadership. All real-life problems and opportunities require multi-disciplinary education and management skills. Our management experience over the years has proved that leaders need to be experienced in at least two or three distinct disciplines (examples such as Management and Accounting; Law and Finance; Engineering and Management; Finance and HR).

11. CAUTIONARY STATEMENT

Statements in this Management Discussion & Analysis Report describing the Companys objectives, projections, estimates, expectations or projections may be ‘forward looking statements. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic developments, particularly in the USA, & improvements in the state of Information Technology Services markets, changes in the Government regulations in India & USA, tax laws & other incidental factors.