Alankit Ltd Management Discussions.

GLOBAL ECONOMY OVERVIEW

The calendar year 2019 started off with rising tensions between the worlds two largest economies - US and China. US and China together account for 40% of the global GDP and the trade disputes between them had an adverse effect on the global economy and sentiment overall. This impact was not only seen in the commodities and financial markets (equities, bonds, currencies), but also impacted the output and profitability of firms leading to deterred investment decisions of businesses. However, as the year progressed, market sentiments were boosted by tentative signs on intermittent favourable news on US-China trade negotiations.

If the pain felt across global economies was not enough in 2019, the year ended off on a worse footing with the Corona Virus or COVID-19 being first detected in December and quickly spreading across the world. COVID-19 triggered a global crisis like no other, that of a global health crisis, but also leading to the deepest global recession since the second world war. The baseline forecast envisions a 5.2 percent contraction in global GDP in 2020—the deepest global recession in eight decades, despite unprecedented policy support. Growth forecasts for all regions have been severely downgraded, while many countries have avoided more adverse outcomes through sizable fiscal and monetary policy support measures. Other than essential commodities like Foods, Pharmaceuticals and FMCG, all other sectors across the world were impacted through reduced demand, supply chain disruptions, labour problems, creating a domino effect on the financials and working capital cycles.

Indian Economic Overview

The Indian economy started FY20 on a dull note due to the ongoing liquidity crisis. In order to achieve the governments vision of making India a USD 5 trillion economy by 2025, the finance mi nistry slashed domestic corporate tax rates to 25.17% midyear.

The Current Account Deficit narrowed primarily on account of lower non-oil, non-gold imports and robust services exports supported by software, travel and financial services. Indias crude oil import bill fell by 9% Y-o-Y to $102 billion in 2019-20 on account of price crash; though volumes remained fairly unchanged. Foreign fund outflows and the Feds grim prognosis for the US economy further weighed on the rupee as it touched 77 against US dollar in April 2020. The CPI inflation stood at 5.84% YoY in March 2020 higher from 2.86% in March 2019. According to the Indian Budget 2020, the real GDP growth was estimated at 5.0% in the financial year 201920 but due to the recent COVID -19 crisis has ensured that FY2021 will be a challenging one for India and the world. As per Fitch ratings, Indias GDP growth is likely to slip to 0.8% for FY21.

E-Governance Industry Overview

India has been consistently improvising its e-governance capabilities, and now, state governments, universities, service providers, app developers and scientists are also working improving the access to e-governance and are increasing the acceptability among Indians.

The latest UN e-government survey rankings have placed India at the 100th rank out of 193 countries for the year 2018. India has improved from 107th rank in 2016 and 118th rank in 2014. India has transformed the middle to the high-EDGI (e-government development index) level group, “reflecting improved online presence regulated by strategies linking digital policies to national development.” Indias EDGI score is 0.5669.

Business Outlook

Alankit Limited is focused on its vision and committed to fulfilling its mission through ensuring consistent delivery of quality products, unsurpassed service and premium value to its esteemed customers. It also aims to work diligently as a team with high standards of integrity, across borders as well as emerge as a winner in the marketplace in all aspects of its business.

Industry Structure and Developments

As your company is mainly in E-Governance services and E-Governance products in both state and Centre Government under various schemes promoting public/private participation in order to promote E-Governance in the Country. Since your company have rich experience in providing and implementing various E-Governance project which will be going to help your company managing and implementing various projects.

Company Overview

The Company is mainly in the business of E-governance and E-Governance products. Your company is the fastest growing player in the e-Governance sector, believes in providing quality information and high standard of service delivery, encouraging new advanced technology, thus making the system more accountable, transparent and effective for the clients. With an objective of reaching out to the masses with increased credibility & accountability in its services, your companys e-governance business has developed a proven track record through successful completion of several e-governance projects. Brief details about the companys products are discussed below:

PAN Centres

The Government of India is making it mandatory for the Indian citizens to have a Pan card. It is compulsory to mention PAN in all financial transactions above a certain prescribed limit. As per the information provided by the Government, against total population of 1.31 Bn, the number of Aadhaar assigned were 1.17 Bn, translating into 89.2% penetration.

Currently your company has pan India network of 6119 TIN/PAN centers. With advent of GST, our T arget is to double our presence in near future.

Business Correspondent (BC)

Your company has ventured into Business Correspondent segment since 2015 and has joined hand with banks such as State Bank of India and IDBI Bank provide services as Business Correspondent to them. The BC arrangement essentially means enrolling customer and enabling the transactions of the customers at the customer service point (CSPs) besides sourcing various deposit and loan products for the Bank as a business facilitating.

Your Company is representative(s) appointed by the bank to act as their agent and provide banking services in remote location where the bank does not have a presence in order to promote Financial Inclusion.

Our major focus is enrolling CSP from Rural Areas along with our other e-Gov products, which enhances their viability & sustainability in shorter period, compare to our competitors.

Your company has recently signed up the National BC agreement with Bank of Baroda also and processes of signing with some other Banks including Payment banks are in process.

With GOI focus on cash less transaction and launch of Aadhar Payment scheme, we forse e a huge business potential for your Company as a National BC .

Manpower Staffing

Under this Division your company is emerging as fast growing service provider to serve Government, Private, PSU, and Autonomous body in the field of various business services like Data Management Solution, Manpower outsourcing, Data Entry projects, Data Processing, Data Conversion, Scanning Digitization, e-Return & e-TDS& Smart ID Card printing.

Your company has been able to establish a reputation for excellence and reliability among our associates / customers which inter-alia includes departments like Directorate of Income Tax (Ministry of Finance), Ministry of Chemical & Petrochemicals, Ministry of Power, Ministry of Forest & Environment, Ministry of Textiles, DRDO, All India Radio, Prasar Bharati, Ministry of Information & Broadcasting, Ministry of Tribal Affairs .

GST (Goods & Services Taxi

The Government of India has dropped the GST collection target for the current fiscal to INR 11.47 lakh crore in the revised estimates as compared to INR 13.71 lakh crore budgeted initially. For the next fiscal 2019-20, the GST collection target has been estimated at INR 13.71 lakh crore. Goods and Services Tax (GST) collected in the current fiscal till February was INR 10.70 lakh crore.

The Government of India has extended IGST (Integrated Goods and Service Tax) and compensation cess exemptions for goods procurement under certain export promotion schemes till March 2020. These exemptions have been extended for exporters buying inputs domestically or importing for export purposes under export oriented unit (EOU) scheme, Export Promotion Capital Goods (EPCG) scheme and advance authorisation .

During April-February of the current fiscal year, exports grew 8.85 per cent to USD 298.47 billion, while imports rose by 9.75 per cent to USD 464 billion. The trade deficit has widened to USD 165.52 billion during the 11 months of the current fiscal from USD 148.55 billion compared to the year-ago period.

Your company is working vigorously for creating a robust IT infrastructure as per GSTN specification. Your company is also roping in multiple ASPs, who are developing their IT systems to cater to the needs of various business segments such as Small & Medium, Big Corporates, and Traders etc. We are of the view that due to GOI thrust on digital payments, ceiling on cash payments/receipts and cap on cash expenditure to be incurred for claiming under Income T ax, and implementation of GST, all the informal/unorganized business will come under formal structure and due to this the present number of registered dealers which are approximately 8 million at present may increase to many fold in due course, which will create huge business potential for GSPs. Management is of the view that this business line is going to be game changer for your company and in near future prove to be one of the robust profit centres of your company.

Digital Signatures

A digital signature is a mathematical technique used to validate the authenticity and integrity of a message, software or digital document. The digital equivalent of a handwritten signature or stamped seal, a digital signature offers far more inherent security, and it is intended to solve the problem of tampering and impersonation in digital communications.

According to the Digital Signature Market information report, the global digital signature market is estimated to grow at a CAGR of 30.5% over the period of 2018-2024. Factors which influence the growth of this segment are the ever increasing needs of verifying digital documents such as patient consents, court documents, cash management documents, policies, claims, etc.

Hardware Distributor

Your company is the Distributor for Smartcard Printers. These Printers provide an instant solution for printing of Plastic Aadhaar Cards. One can also print and deliver Voter ID Cards, Health Cards, Drivers Licenses, Membership Cards, Payment Cards, Employee ID Cards, Loyalty Cards, and Visiting Cards etc. In view of thrust of our PM on Digital India, smart Identity has gained momentum and in turn has created lot of demand in the system for plastic cards. The revenues under this stream have increased at a rate of 300% in comparison to previous year. In the process of selling various type of printers a lot of demand get generated for consumables like Ribbon, Heads etc. which is becoming a continuous source of revenue stream for the company

Financial Review

Your Companys consolidated revenue from operations for the year stood at INR 1,561 Mn, witnessing a growth of 19.97% on YoY basis.

Recent Developments

Alankit Limited enter into agreement with the UTI Infrastructure Technology and Services Limited (UTIITSL) PAN Card services that includes New PAN Card application, PAN Correction, Duplicate PAN, PAN card of NRIs, Lost PAN, e -PAN Card etc. Alankit through its wide PAN India network, through its Business Associates, will offer these services, making it easy for the customers.

Further, Discontinuance of Agreement with NSDL e-Governance Infrastructure Limited as a Tax Information Network facilitator for PAN, e-TDS statement filing services may not have any significant impact on our business, revenue and profitability of the Company as present business and the stream of new businesses will take care of any shortfall, if any. The dispute between the Company and the NSDL has now been referred to arbitration between the parties wherein Alankit is seeking payment of its arrears of long pending dues.

Alankit Limited has entered into a “Business Correspondent Agreement” with the IDBI Bank Limited to act as a Corporate Business Correspondent (BC) for providing individual BC agents (BCA)/Village Level Entrepreneurs (VLEs) at Sub Service Area (SSAs)/other identified locations of IDBI Bank.

Alankit Limited enters into partnership with IDP, an industry leader in innovative identification card printer technology. Alankit is launching innovative Smart Card Printing solutions range (SOLID series - first in India) for secure, smart& seamless access through ID - cards such as Pan, Aadhaar, Corporate ID cards, student ID cards etc. IDP is an industry leader dedicated to improving the photo identification market by developing card printers, encoders and software with diverse and innovative uses of technology. Alankit has printed over 90 - million different types of ID-cards under the E Governance partnership presence. Alankit is catering to a wide range of audience including corporate entities, Schools, individual investors as well as general public through its wide network of business /locations/branches across the country. The new products of the Alankit- the SOLID-510 and Alankit ID Software ALSSEC-ID will provide “contactless card” solution for a smart, secure, and seamless access to the premises post lockdown. The Company believes that IDPs features like, FINE Image technology, WIFI, Linux support, Quick Laminator extension, smaller yield budget friendly ribbons clubbed with

Alankits own ALSSEC-ID software to be used for various e-Gov card applications would be wise choice for our customers, for their perpetual success.

Foreign Exchange Department of Reserve Bank of India (“RBI”) has granted Money Transfer Service Scheme (MTSS) License to one of our Subsidiary Alankit Forex India Limited, Full Fledged Money Changer (FFMC) as Indian Agent to undertake Inward cross-border money Transfer Service activities in India in association with Overseas Principal M/s Western Union Financial Services Inc., Colorado, USA.

E-Sign Service Provider

The subsidiary of the Company Verasys Technologies Private Limited (“Vsign) which is Certifying Authority under Section 21 of the IT Act, 2000, is now also empanelled as e-Sign Service Provider (ESP) to provide e-Sign Service based on Aadhar which is a substantial move for the Company.

Products/ Services offered by Vsign

1) Esign

For a document to be signed digitally, we need to possess a Digital Signature Certificate from the Central Authorities of the country. One of the notable features of eSign is that it can be done anywhere, anytime without much hassle with the use of OTP. It makes use of digital signature technology which is used to sign a said document.

2) Paperless DSC

A digital signature certificate is an electronic form of a signature that can be used to validate the identity of the signer. It ensures that the original content of the message or document has remained intact during transit. Paperless Digital Signature is easily transportable and cannot be imitated by someone else. The paperless digital signature can be issued by authenticating an individual via Aadhaar e-KYC. Any individual whose Aadhaar Card is linked with the mobile number can procure paperless digital signatures.

3) PDF Signer

Vsigner is a desktop based application that allows user to sign single or bulk PDF documents using Digital Signature Certificates (DSC tokens). It works with DSC token issued by any Certifying Authority in India. Vsigner also enables user to mail digitally sign documents in faster and more secure way.

4) Encryption decryption software

By using PKI infrastructure, we can encrypt and decrypt our data.

Risk Concern

Your Companys risk management structure works on identifying with the distinguishing proof, investigation, assessment, treatment, moderation and observing of the vital, operational, and legal and consistence threats to accomplish its key business goals. Risk Management at Alankit looks to limit the unfriendly effect of these threats, in this way, empowering the Company to use advertise openings successfully and improve its drawn out upper hand. The focal point of the management executives is to identify risks and look for relief measures. This is done through intermittent audit gatherings of the administration.

Human Resource

Your Company firmly believes that the personal development of individual employee contributes to the stable and sustainable growth of the company as a whole. The companys HR strategy is focused on attracting the best talent, reskilling and transforming the workforce and providing a stimulating work environment which is flexible, nurtures social contract, fosters innovation, and builds a result oriented, high performance culture.

Your Company encourages employees to utilize their strengths, and provides opportunities for them to use their skills and to develop their abilities. The Company is providing an equal opportunity to all the employees to utilize their full potential and grow with the organization. Our employees are the foundation of our success, and we believe in sharing our success with them. We reward their outstanding work in many ways, like providing competitive pay, giving instant reward and recognition for path-breaking contribution.