ASM Technologies Ltd Management Discussions.

Overview

ASM along with its subsidiaries has been providing world class consulting and product development services in the areas of Engineering Services and Product R&D with successful Offshore Development & Support Centers in India and Overseas for its global clientele. The company is a public limited company incorporated in India and having its registered office in Bengaluru, Karnataka, India. The companys shares are listed with BSE Limited.

The Ministry of Corporate Affairs (MCA) vide notification dt February 16,2015,notified the Ind AS applicability to certain classes of companies. Ind AS has replaced the existing Indian GAAP prescribed under Section 133 of the Companies Act 2013, read with Rule 7 of the Companies (Accounts) Rules 2014. For ASM group Ind AS is applicable from 1st April 2017.

1. Industry Structure and Development

Indias IT industry is increasingly focusing on digital opportunities as digital is poised to be a major segment in the next few years. While overall IT spend is estimated to decline in FY2021, momentum in digital spend has only strengthened through the course of COVID-19, led by demand for remote working solutions and enterprise-scale transformations being pulled forward several years ahead. Indian Tech industrys performance is an indication of resilience and readiness to take on the new virtual world. At an estimated $194 billion, the sector is set to add $4 billion in revenues in FY2021. It is also expected to add 138,000 employees to reach a total direct employment of 4.47 million, and will contribute 52% to overall services exports. IT Services itself is nearing the $100 billion mark backed by a strong deals pipeline and strong digital tailwind. Domestic spend has kept momentum, estimated to grow by 3.4% in FY2021 to clock $45 billion, backed by sustained demand for robust, connected, and secure infrastructure. In fact, domestic demand is set to leapfrog exports growth in FY2021, by nearly 2X. At28-30% of industry revenue, digital revenues are the true growth story, clocking 5X the rate of overall services growth.

2. Opportunities

Digitisation, disruptive technologies and innovation will fuel growth with new opportunities in the years ahead. Technologies such as artificial intelligence (AI), Internet of things (IoT), augmented reality, virtual reality, machine learning (ML), big data analytics, blockchain are providing numerous new opportunities for large enterprises as much as they are aiding the start-ups in developing new products and service lines, improving efficiency, productivity, and competence levels, giving thrust to the economic growth of the country. Indian IT companies have to adopt these new technologies in a big way by skilling their employees and by taking risks in building products around these technologies. the focus of the government to expand the domestic market through a focus on indigenisation and self-reliance has led to capability building among Indian organizations for future relevant domains such as Product Engineering, Data Analytics, Embedded software etc.

We believe in our competitive strengths and with our Global Delivery Model and core competencies consider to address the changing economic scenarios as an opportunity to provide greater value to existing clients and add new clients. Our specific industry, domain and technology expertise allows us to enable clients to transform their businesses through innovative strategies and solutions. Our process driven engineering and planning ensures in delivering quality products in the optimum time and cost. ASM is a pioneer in Mechanical, Electrical/Electronics System and Sub System design.

3. Outlook

This has been provided elsewhere in the Annual Report.

4. Risks and Concerns

a. Competition Risk

In this highly competitive global business environment only firms that continually upgrade their capabilities and offerings in line with emerging technologies and market imperatives can hope to survive and even prosper in this environment. Capability building and continual upgrading are essential for organizational survival and growth.

Technologies are moving rapidly from traditional technologies to Analytics, Big data, Artificial Intelligence and Robotics. The Company stays invested in enhancing the value proposition for its customers by way of deepening its domain expertise, technological capabilities and customer engagement. We compete with other technology service providers in response to requests for proposals and in certain services there is increased competition resulting in pressures in pricing. The companys capability to offer innovative and value added solutions and services by integrating its diverse domain knowledge. The unrivaled blend of engineering culture and technology skills adopted by the company and its strategic acquisitions and management resources adds to its capability to offer innovative and value added solutions and services by integrating its diverse domain knowledge experience. .

b. Financial Risk.

The IT sector would have to re-adopt technology disruptions by reshaping enterprises and focus on technology-led platforms, as the currency volatility and innovative technologies such as artificial intelligence, automation, etc have disrupted the sectors traditional products and solutions.

With a significant portion of the companys revenues coming from exports, volatility in exchange rates may impact Companys business adversely. The company however mitigates the risks with robust accounts receivable management, centralised framework to control expenses and currency hedging strategies by the management. The company has a defined policy for managing its foreign exchange exposure. The company tracks the foreign exchange markets closely and takes appropriate hedging decisions from time to time if need be. The risk policy of the Board covers some of this large macro level risk and the remedial measures taken by the company to face and mitigate some of these risks.

c. New Technologies and Business Models

Engineering Research & Development continues to be the fastest growing segment, driven by global majors increasingly embedding Software & Engineering into their products. India continues to be the core for digital innovation with a rich ecosystem of start-ups, tech providers and services providers engaging in global delivery and investing in IP, solutions and Centers of Excellence (CoEs). Digital became mainstream during the year, with the industry increasingly investing in digitized solutions to drive future growth opportunities The Indian ER&D companies need to speed up the process of adopting technology in order to stay future proof as today ,the Industry is fraught with challenges and. opportunities, with Artificial Intelligence ( AI), automation and machine learning having permeated every facet of a business. As a System Design House, ASM is fully equipped to handle complex Software, Electronics, Mechanical and Embedded software design and development to complete the product under one roof. Further, working prototype and manufacturing results in the entire product realization for the client. In our effort to step up non-linear growth, some of the key designs by the Engineering Services group are being prototyped and will be manufactured in limited quantities through partner companies and delivered to strategic customers. The company also regularly audits and verifies its compliance with security and disaster recovery measures. The impact of investments in Innovation and R&D has accelerated growth of ASM and has set the company into the forefront of Product Development, whilst getting a global recognition. The initiative has therefore been on developing the products of the future, to align with the changing technologies, market and customer demands.

d. Geography Risk

Business environment in the past year has been volatile and uncertain given the current pandemic. The company has insulated its overall performance from the impact of market exigencies and vagaries with a domestic international spread of business and combinations of its various solutions and services. The companys well honed skills enable it to spread efficiently its business across various geographies. The company moreover derives most of the revenues from off shoring business resulting in a healthier bottom line and protection from risks from any downward spiral in any economy. The companys growth is not dependent on any specific geographic area or specified industry segment.

5. Internal Control System and their adequacy

The Internal Control System has been designed to ensure that assets and interest of the company are protected and dependability of accounting data and its accuracy are ensured with proper checks and balances. The internal control systems adopted by the company are adequate and appropriate to its operations so as to ensure uninterrupted functioning of its business. The system has been designed to ensure that assets and interest of the company are protected and dependability of accounting data and its accuracy are ensured with proper checks and balances. The existing internal control systems and their adequacy are frequently reviewed and improved upon to meet the changing business environment.

The Company has internal audit to examine and evaluate the adequacy and effectiveness of Internal Control system. The internal audit ensures that the system designed and implemented to provide adequate internal control commensurate with the size and operations of the company. The Audit Committee of the company chaired by the independent director and consisting of other non-executive independent directors, periodically review and commend the quarterly, half yearly and annual financial statement of the company. A detailed note on the functioning of the audit committee forms part of the chapter on Corporate Governance in this Report.

The management duly considers and takes appropriate action on the recommendations made by the statutory auditors, internal auditors and independent Audit Committee of the Board of Directors.

Financial Overview

a. Share Capital

The Company has at present only one class of shares. The authorized share capital is 1,50,00,000 Equity shares of Rs. 10/- each, constituting to Rs. 150.00 Mn There was increase in the issued, subscribed and paid up capital of Rs. 100.00 Mn during the year under review. Company issued Bones Shares of 1:1 during the year undre review.

b. Shareholder Funds

The total shareholder funds was Rs. 650.75 Mn as at 31st March, 2021 against Rs. 558.74 Mn as of the previous year end.

c. Fixed Assets

As on 31st March 2021 the gross block of assets stood at Rs. 45.97 Mn for the standalone and Rs. 122.98 Mn for the consolidated.

d. Net Worth

The return on Net worth ( RONW) for the year ended 31st March 2021 was 1.74% for the standalone and 2.34% for the consolidated.

e. Earnings per share

Earnings per share for the year ended 31st March 2021 was Rs. 12.65 for the standalone and Rs. 8.60 for consolidated.

f. Revenue

On the standalone front the company registered a total revenue of Rs. 1132.17 Mn for the year ended 31st March 2021 compared to Rs. 838.40 Mn, the previous year. Domestic sales at Rs. 281.27 Mn and Export sales at Rs. 850.90 Mn contributed to the revenue.

The Consolidated total revenue for the year ended 31st March 2021 was Rs. 1373.88 Mn compared to Rs. 920. 13 Mn, the previous year.

g. Operating Profit (EBIDTA)

We earned an operating profit Rs. 208.60 Mn representing 18.42% of total revenues for the year ended 31st March 2021 as compared to Rs. 43.29 Mn representing 5.16% of total revenues, during the previous year.

On the consolidated front, EBIDTA was at Rs. 201.49 Mn representing 14.67% of the total revenues for the year ended 31st March 2021.

h. Net Profit after Tax

Net profit after tax was Rs. 126.53 Mn. on the standalone front and Rs. 86.01 Mn for the consolidated, for the year ended 31st March, 2021.

i. Developments in Human Resources/ Industrial Relations

The total employee strength of the company, as on 31st March, 2021 was 1107 as compared to 629 the previous year.

At ASM, employees are the Companys biggest asset and the Company continuously focuses towards innovative initiatives to attract, train, retain and motivate its employees. The Companys endeavors are driven by a strong set of values imbibed in it and policies that it abides by. All the Companys policies are focused towards a healthy, happy and prosperous work environment for its employees and thereby also fulfill the aspirations of the people at work. . Your company believes that people are the primary drivers in the success of an organization and hence people and HRD remain at the forefront of its mission. In this pursuit, the Company is providing timely and cost effective recruitment system for attracting the cream of talented professionals, ensuring a clear compensation and benefit policy in tune with the latest IT market trends. Our endeavors are driven by a strong set of values imbibed in us and policies that we abide by.