Aurionpro Solutions Ltd Management Discussions.

1. Overview

Aurionpro Solutions Limited ("Aurionpro") financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as prescribed under section 133 of the Companies Act, 2013 ("the Act"), read with the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time and other provisions of the Act to the extent notified and applicable. The management of Aurionpro accepts responsibility for objectivity and integrity of these financial statements, as well as for various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner, the state of affairs and profits for the year. The management of Aurionpro is committed to continuously improving the level of transparency and disclosure. As such, an attempt has been made to fully and completely disclose information herewith about the company, its business, operations, outlook, risks, and financial condition. The forward-looking statements contained herein are subject to certain risks and uncertainties, including, but not limited to, the risks inherent in the companys growth strategy, dependency on strategic clients, and dependency on availability of qualified technical personnel and other factors discussed in this report. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect Aurionpro managements analysis only as of the date hereof.

2. Economic Outlook

The global economy is facing an unexpected crisis of uncertain proportions. Unlike earlier economic crises, which were outcome of war, financial market failures or economic cycles, the present crisis is of different of character. It is underlying to the larger health crisis the world is facing since last few months. The outbreak of novel Covid-19 virus, which initially was thought to have con_ned within China, turned into a pandemic, spread across large parts of the world, within few weeks. In the absence of drugs / vaccine, the governments worldwide had to adopt alternative measures such as extensive lockdowns, travel restriction etc which would reduce human to human interface. It was expected that such measures would severely impact economic activities, however, human life was rightfully given priority over economic costs at the beginning. The unprecedented measures taken to contain the pandemic has shaken macros and micros of the economies worldwide. As per the World Economic Outlook Update, published by International Monetary Fund, in June 2020, the global growth is projected at -4.9%, sharp contraction compared to its previous such update. The pandemic continues to worsen and intensify in many emerging and developing countries, necessitating extended lockdowns and restrictions. Consequently, the global supply chains have broken and global trade has been pushed into deep negative. The economic uncertainty has severely impacted consumer confidence, leading to a sharp reduction in consumption. The uncertainty about the continuing spread of the coronavirus makes people fear for their health and their lives and uncertainty about their livelihoods makes them cautious about spending. This uncertainty is toxic for our economic recovery. We may still be far from a vaccine, in such case the priority of the governments is to balance economic interests with human life which entails calibrated re-opening of economies and keeping spread of the infections within reach of the health infrastructure.

The economic outlook in India is no different from the global scenario. The domestic economy was facing headwinds, at the beginning of the FY 20, amid general elections in India, recessionary trends in the economic cycles. Whilst, green shoots were visible by the end of year 2019, the sudden outbreak of COVID-19 has impeded the momentum and has delayed recovery. The IMF estimates Indian economy to contract by 4.5% during 2020, whilst some economists predict even sharper contractions if lockdowns continue for longer time. The Government and the Reserve Bank of India ("RBI") have announced several measures, in order to support the economy in the time of distress and have indicated willingness to announce further measures as situation warrants in future to boost economic activity. It is hoped that the fundamentals of the domestic economy remain strong and sharp recovery may be witnessed during FY 21.

3. Industry Structure and Developments

According to the latest forecast by Gartner Inc., worldwide IT spending is projected to total $3.4 Trillion in 2020, a decline of 8% over 2019 due to the effects of COVID-19. The report further states that the effects of global economic recession are causing companies to priorities spending on technology and services those are critical over the initiatives aimed and growth or transformation. Clearly, the worldwide trend is to postpone the discretionary spends amid uncertainties subsisting presently. However, it is expected that the sector will witness and sharper and faster recovery as soon as the restrictions are eased. The pause and restart are expected to push to growth to the year 2021. The NASSCOM, in its recent research paper concerning Technology Industry and COVID impact has noted that the Indian IT industry has shown phenomenal resilience in ensuring continuity of services to its clients in spite of the stringent lockdowns. The pandemic was a litmus test for IT Service Providers to activate their Business Continuity Plans ("BCP") and support employees to work from home without diluting the quality of services to its clients. The outlook for the Fintech sector looks robust particularly after COVID-19 pandemic as it will lead to the acceleration of the momentum towards technology adaptation and more and more businesses would tend to invest more in the automation and digitization. This will also lead to the increased demand in the digital security space, particularly the cyber security business. The Smart Mobility segments has been impacted in the wake of lockdowns and travel restrictions imposed amid COVID19. However, this segment is expected to witness recovery as restrictions are eased and may witness healthy growth as people may prefer contactless technology over the human interface in the wake of necessity of maintaining social distancing to minimize the risk of infections. The government has committed more investments and increase spending on infrastructure building in order to boost economy impacted by the COVID-19 shock, which may see _urry of activity in the Smart City segment.

4. Segment wise Offerings and Performance

Aurionpro is a global technology solutions providers with a wide range of offerings catering to the varied customers which includes large banks & financial institutions, governments, government undertakings and other business organizations. Aurionpro promotes innovation and invests in newer technologies which can enhance customer experience. Through constant research and innovation, we keep upgrading our offerings to enhance customer experience and also look for the future technologies which would also enhance our enterprise value multifold. Our offerings are described below: a. Banking & Fintech:

Aurionpro is a leading player in this segments offering IP based solutions since more than two decades. We have a leadership position in ASEAN Region and our clientele includes all marquee names in the banking & financial industry in this region.

Our ACE Platform is the industrys most comprehensive platform to rapidly deploy customer-facing technologies across a wide range of industry verticals. Our integrated ACE platform aims to digitize the entire branch operations covering account opening, transactions and account servicing.

Our Corporate Banking Suite consists of Transaction Banking Platform and the Lending Banking Platform. The iCashpro+ is the next generation transaction banking platform which has been built from the ground up incorporating the best breed tools and cutting edge technologies to drive operational efficiencies while retaining the highest level of accuracy and precision in servicing a complex ecosystem of banks, large corporates and SME customers.

Our Smart-Lender Product Suite is an end to end integrated credit risk management system which improves productivity, enhances credit quality and improves operational efficiency. It incorporates Basel-II risk management framework with the best of breed credit risk management practices from international banks and it continues to be the platform of choice across lending banks in South Asia. b. Cybersecurity:

Cyber Security is another emerging opportunity we are poised to grab. Our Isla Isolation Platform is differentiated for its ability to deliver a seamless end-user experience while creating a Zero Trust environment to secure all code, media objects, and scripts in a remote virtual browser, and transforming it into a stream of harmless pixels that are then rendered to each end device. The Isla Isolation Platform offers protection against web, email, and document-based attacks by eliminating the organizations attack surface and reducing the impact of the major threat vectors. Isla covers both unmanaged and managed endpoints through a proxy-based agentless deployment to secure all standard browsers. With the recently launches ISLA 5.1 and through the network of prime partnerships we are poised to tap the immense opportunities in the segment.

c. Smart Transport and Smart Mobility:

Aurionpro is a leading player in the Smart City segment in India and has successfully implemented 3D City, City Surveillance projects in various states. With rapid urbanization and the budgetary boost to the ‘Smart City Mission of India, this sector creates huge opportunities for the Aurionpro. Smart Mobility is an emerging idea which has potential to change the face of city transportation. According to a study, globally smart mobility segment is expected to grow at a highest CAGR in next decade. Aurionpro offers Automated Fare Collection ("AFC") Solutions panning different technologies like open loop EVM based ticketing, close loop based ticketing and account based ticketing. With the strategic acquisition of SC Soft Technologies, Aurionpro has positioned itself as the market leader having both software and hardware solutions required for the AFSC Solutions. Aurionpro is now best placed to expand its footprint in this segment and is poised to tap opportunities in India as well as in other parts of the globe.

5. Opportunities and Threats

The outbreak of Coronavirus (COVID- 19) pandemic is causing significant disturbances leading to slowdown of economic activities globally. However, the same has not majorly impacted the businesses of the Company. We are able to continue our operations by enabling resources to work from home. Except Smart Mobility segment & KIOSK division, all our businesses are minimally impacted. The extent of impact on the future operational and financial performance will depend on certain developments, including duration and spread of the pandemic, the impact on customers, vendors, employees, all of which are uncertain and cannot be predicted. However, in the medium to long term, this crisis will turn up the financial sector to adopt digital technologies, particularly, low touch screen products like Aurionpro offers. The management remains watchful of the evolving situation and will keep evaluating challenges and opportunities posed to us.

6. Risks and concerns

An organization is exposed to various risks which may be of strategic, systemic or operational nature. Some of such risks may be concerning the external environment and systems in which they operate and some risks are inherent internal risks within the organization. At Aurionpro, the management has deployed disciplined mechanism to evaluate various such risks, foresee future risks and devise necessary controls and plans to avoid and mitigate risks. The management periodically reviews the risk exposure and implements appropriate measures wherever required. The key risks and uncertainties faced by Aurionpro have been highlighted below:

TheCOVID-19pandemichasdeliveredanunprecedented shock to the global economy. The nationwide lockdowns, travel restrictions have paralyzed global trade. The world is still grappling with the pandemic and in the absence of vaccine in sight, the world will have to learn to strike the difficult balance between health of the citizens and the economic activities. Amid these uncertainties, businesses may turn conservative in its investment plans and tend to postpone discretionary spending. This may result in prolonged phase slowdown and the same may impact businesses of the Company.

In order to contain spread of the COVID-19 pandemic, the countries have imposed lockdown and other restrictions which have impacted mobility of the sales personnel and also the onsite services. The uncertainties are expected to continue until we get complete control over the pandemic. The elongated restrictions may have impact on our revenue prospects this year, particularly revenue earned from onsite services and smart mobility segments.

The world is changing fast, particularly after COVID-19 crisis. The broken global supply chains, intensi_ed trade wars amongst large economies, rising protectionism amid economic uncertainties due to COVID-19 shock are adding to the economic disruptions. The businesses may have to be watchful of these developments and will have to be resilient to adapt to these dynamics and revise strategies to quickly respond thereto.

The Aurionpro keeps investing in future technologies and enhancement of offerings which would dominate the markets. The success of such offerings would largely depend on the ability of the Aurionpro to position rightly in the market and focused marketing approach. Aurionpro understand this and adopts right marketing and promotion activities to educate and apprise the market about Aurionpros innovations

The meeting of the customers and markets expectations is the key challenge for any organization and in order to meet this challenge, the companies will have to keep investing in its offerings and keep upgrading the same as per the customer needs and market trends. All the industry players face this challenge. Aurionpro constantly invests in newer technologies and innovations in order to improve the performance of its offerings and the customer experience.

Aurionpro faces strong competition in the markets and industries it serves. Its biggest vertical of focus – financial services have strong competitors who seek to win over Aurionpro share of customers budget. The most effective strategy has been to focus in providing exceptional customer experience and adopt a model of co-owning the customers business objectives and rallying to deliver and exceed them.

Attracting and retaining of the talent is critical for any organization. Aurionpros success depends upon its ability to attract and retain highly skilled resources and managers. The loss of key resources, specially to the competitors, could materially impact our business/ we adopt risk-reward model for all our top management and managers thereby creating additional incentives for them to drive the Companys objective forward.

7. Research and Developments

Aurionpro continues to invest in newer technologies and innovation in order to enhance customer experience and create future value. The COVID-19 crisis is expected to accelerate momentum in the technology adaptation and digitization. The Aurionpro hires key resources who focus on research and new age technologies. Aurionpro also continues to maintain healthy levels of R&D investments across products as well as service offerings which is absolutely critical for its future growth.

8. Future Outlook

The disruptions caused by the COVID-19 pandemic has spared no business. The IT sector is expected to face headwinds during this year, however, sharp recovery may be witnessed during the year 2021. In the wake of social distancing needs the businesses are expected to rely upon technologies which would reduce human interface. Immense opportunities will be created particularly in the fintech space. The increased digitization and technology adaptation will also boost demand for the enterprise security solutions like ISLA in coming years. Further, in order to boost the economies, impacted due to the pandemic, the governments are expected to boost spending on infrastructure in future. This will boost business opportunities in the smart city and smart mobility space.

Consolidated Financial Performance FY 2019-20

The Company recorded Revenue of Rs 455 Crs during FY20, as against Rs 522 Crs in FY19 a decline of 13%.

EBITDA for the FY20 stood at Rs 85 Crs as against Rs 111 Crs in FY19 an decrease of 24%. EBIDTA margins stood at 18.6% as compared to 21.2% for FY19 an decrease of 264 bps.

PAT for the FY20 stood at Rs 32 Crs as against Rs 61 Crs in FY19 an decrease of 48%. PAT margin decreased by 466 Bps as compared to FY19. PAT margins for the year stood at 6.96%.

On the Balance Sheet side, as on 31 March, 2020, our Gross Debt stood at Rs 129 Crs and cash position stood at Rs 114 Crs backed by higher profitability and constant cash flows.

DISCUSSION ON CONSOLIDATED FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Revenue From Operations

Our revenues are derived from information technologies & consultancy services and sale of equipment and software licenses. During the year, the total revenue from operations was Rs 45,502.04 lakhs against Rs 52,215.08 lakhs for the previous year.

Operating and Other Expense

Our operating and other expense comprises of Software licenses and material costs, Administration and other general functions, travelling, communication, legal and professional charges, rent, repairs and maintenance, recruitment and training and other allocated infrastructure expenses.

During the year, the operating and other expense were

Rs 20,356.40 lakhs as againstRs 24,746.38 lakhs in the previous year.

Employee Benefit Expense

During the year, employee cost was Rs 16,691.19 lakhs as against Rs 16,387.89 lakhs in the previous year.

Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding Other Income.

During the year, our operating Profit was Rs 8,454.46 lakhs as against Rs 11,080.80 lakhs for the previous year.

Depreciation and Amortisation Expense

Depreciation and Amortisation Expense was Rs 4,219.75 lakhs for the year as against Rs 3,098.84 lakhs during the previous year. As percentage of revenue, depreciation was 9.27 % and 5.93 % for the year and previous year respectively.

Other Income

Other Income primarily consists of interest income, dividend income, Foreign exchange fluctuation gain, Rental income and other miscellaneous income. Other income for the year was Rs 978.79 lakhs compared to Rs 726.81 lakhs for the previous year.

Tax Expense

Current tax expense was Rs 428.21 lakhs as against Rs 1,629.11 lakhs for the previous year and Deferred tax credit was

Rs 169.46 lakhs as against Rs 136.44 lakhs for the previous year.

Profit Before Tax (PBT)

Net Profit / (Loss) before tax from Operations for the year was Rs 3,427.85 lakhs, i.e. 7.53 % of revenue, Rs 7,564.60 lakhs, i.e.14.49% of Revenue for the previous year .

Profit After Tax (PAT)

Net Profit / (Loss) after tax for the year was Rs 3,169.10 lakhs, i.e. 6.96% of revenue, Rs 6,071.93 lakhs, i.e. 11.63 % of Revenue for the previous year.

Other Equity

Other Equity as at 31 March, 2020 increased to Rs 52,059.92 lakhs as compared with Rs Rs 47,399.09 lakhs as at 31 March 2019.

Short-Term and Long-Term Borrowing

The total short-term and long-term borrowing as at 31 March 2020 was Rs 12,959.10 lakhs as against Rs 11,464.49 as at 31 March, 2020.

Trade Payable and Other Current Liabilities

The total Trade Payable and other current liabilities (financial and Non Financials) decreased by Rs 5,923.01 lakhs from

Rs 22,736.08 lakhs on 31 March, 2019 to Rs 16,813.07 lakhs on 31 March, 2020.

PPE, Intangible Assets and Capital Work in Progress The Net Block of PPE, Intangible Assets and capital work in progress increased by Rs 3,074.37 lakhs from Rs 33,127.25 lakhs as on 31 March, 2019 to Rs 36,201.62 lakhs on 31 March, 2020.

Non-Current Investments

There was an increase in the investments of Rs 2,385.80 lakhs from Rs 1,783.38 lakhs as on 31 March, 2019 to Rs 4,169.18 lakhs on 31 March, 2020.

Other Non-Current Assets (Financials and Non Financials) There was an increase in Long-term loans and advances from

Rs 1,391.76 lakhs on 31 March 2019 to Rs 1,500.72 lakhs on 31 March, 2020.

Trade Receivables

Trade receivables as on 31 March, 2020 was Rs 13,338.17 lakhs against Rs 19,023.69 lakhs on 31 March,2019. In the opinion of management, all the Trade receivables are good, recoverable and necessary provision has been made for debts considered to be bad and doubtful. The level of receivables is normal and is in tune with business requirements and trends.

Cash and Cash Equivalents

The cash and bank balances lying with the Company as on 31 March, 2020 were Rs 2,001.48 lakhs as against Rs 3,523.08 lakhs in the previous year.

Key Financial Ratios

Sr. Ratio 31 March, 31 March,
No 2020 2019
1 Debtors Turnover Ratio 2.81 3.29
2 Current Ratio 1.6 1.5
3 Debt Equity Ratio 0.2 0.2
4 Interest Coverage Ratio* 2.9 7.3
5 Operating Profit Margin 29.74% 33.79%
6 Net Profit Margin** 7.0% 11.6%
7 Inventory Turnover Ratio** 4.67 7.76
8 Return on Net Worth (RONW)** 5.9% 11.4%

([*] [**] Considered Significant, as defined under the amended SEBI (LODR) Regulations i.e. over 25% compared to previous year.) * Change on account of increase in interest cost in current year on first time adoption of Ind AS 116.

** Change on account of decrease in sale of product license and equipment as compare to previous year.

9. Internal control systems and their adequacy

The Directors Report section in the Annual Report discusses the adequacy of our internal control system and procedures.

10. Material developments in Human Resources / Industrial Relations front, including number of people employed

The Employees being our critical asset for any organization specially an IT company. Over a period Aurionpro has built a strong team consisting of domain experts. Our personal policies are focused on creating an environment which will derive best returns for the organization as well as the concerned employees. The Company had strengthened its workforce by employing 1029 permanent employees as compared to 1058 employees in the preceding year.