CG VAK Software & Exports Ltd Management Discussions.

1. INDUSTRY STRUCTURE

The global economy is estimated to have grown at 3.7% in 2017 and is projected grow at 3.9% in 2018.The growth may be accelerated by the economic activity of developed and emerging economies. USA grew at 2.3%in the year 2017 and is expected to grow at the same level in the year 2018. The European economy is estimated to have grown 2.4% in 2017 and is expected to grow at 2.2% in 2018.

Year 2017 has been a challenging year in terms of technological disruptions and political changes mainly due to the protectionism by leading markets like USA. Due to these factors the decision making and investment process of the clients has been slow. However, businesses around the world are adopting Digital Technology to transform every aspect of their business process to improve customer experiences and their operational efficiency. On technology front AI,Machine learning , IOT are becoming main stream. India remains to be the top outsourcing destination in the world due to its unique approach in the industry.

North American market continues to be the major contributor to India’s IT service exports and companies are increasingly making investments in technology to drive growth in their business.

2. OPERATIONAL PERFORMANCE

During the year under review your Company has achieved a turnover of Rs. 1425.81 lakhs as against Rs. 1161.77 lakhs in the previous year. The net profit for the year is Rs.108.29 lakhs as against the net profit of Rs. 36.17 lakhs in the previous year. The company strengthened its focus on the offshore software services and Outsourced Product Development (OPD) market segment.

3. SEGMENT-WISE PERFORMANCE

The contributions of business from various Geographical area were:

North America contributed to 75% and Rest of the world 25%.

The company has strategically increased the focus on offshore software services.The revenue from onsite services is Rs.69.20 lakhs and the business from Offshore Software Services is Rs. 1302.11 lakhs for the year 2017-2018 as against Rs.1077.71lakhs in the previous financial year. The increase has been at 21% compared with previous year.

4. OPPORTUNITIES, THREATS, RISKS AND CONCERNS

Good traction is seen in Cloud services, Outsourced Product Development (OPD), Automation and Mobile application development services. We see good opportunities from existing customers as they continually invest in latest technology upgradation. We seek to deepen the client relationships by improving the value we offer to our clients and we expect a good growth in the repeat business we get. The sales pipeline has been growing well and this provides good opportunities for growth. There is stiff competition from many Indian and International IT companies for business.

Our Industry is marked by high attrition rate and the prime challenge is to retain the best talent. We are trying to mitigate the risk by offering good HR practices and providing an opportunity to work in our US subsidiary. The company is exposed to the risks and benefits of foreign exchange fluctuations. The company is now adopting a very cautious approach in hedging the currency. High dependency on the North American market is again a risk, which we are trying to mitigate by expanding the geographical spread of our market. Currently we get over 75% of our business from the North America.

5. OUTLOOK FOR THE FUTURE

Global economic growth is expected to reach 3.9% in 2018 which is better than 2017. This reflects a more positive outlook. The IT-BPM exports from INDIA grew at 7.7% over last year and the same level of growth is expected in 2018 as well.

The growth is expected to be driven by the Digital technologies. Our company has successfully delivered solutions/projects in the areas like Cloud, Mobile, Social media and Analytics. We are also investing our efforts in emerging technologies like AI and we are well positioned to capitalize on the opportunities that are thrown open due to these trends.

The Company has been building domain expertise, innovative delivery methods in the Outsourced Product Development space that has helped in differentiating our service offerings to win deals. A positive growth is expected to continue in the current financial year as well.

6. INTERNAL CONTROLS & THEIR ADEQUACY

We have a good control mechanism in place at all our departments. As we are an ISO 9001:2015 Certified Company, it has a well-matured development process in place where there is continuous enhancement of the processes in all our departments.

Every department has Performance Objectives fixed for each year and the same is reviewed every month. The Company has also a Risk Management plan in place where the potential risks are identified and a mitigation plan is also in place for each of the identified risks.

7. HUMAN RESOURCES

One of the top priorities for the company has been recruiting and retaining good talent. The company has made various HR initiatives to ensure that higher level of job satisfaction is attained for its engineers. Also company adopts continuous skill enhancement practice for its engineers. As of 31st March 2018 the employee strength stood at 195.

8. CAUTION

The views and statements expressed or implied in the Management Discussions and Analysis are based on available information, experience and our own assessments. They are subject to alterations. The Company’s actual Performance may differ due to national or international ramifications, Government Regulations, Policies, Tax Laws and other unforeseen factors over which the Company do not or may not have any control..

(By Order of the Board)
For CG-VAK SOFTWARE AND EXPORTS LIMITED
Place: Coimbatore C.Ganapathy
Date : 28 May, 2018 Chairman
DIN 00735840