Several new technology solution and service providers have emerged over the
years, offering different models to potential clients to utilize their solution and
service offerings. This development created several market opportunities for the industry
and their associates. The Company has generated revenue of INR 15020.96/- (In Thousands)
for the FY 2022-23 & Profit after Tax stood at INR 8483.34/- (In Thousands). It is
imperative that affairs of our Company are managed in a fair and transparent manner. This
is vital to gain and retain the trust of our stakeholders. There is an expectation of
better performance in the coming years as the Company is looking for more business in
future.
INDUSTRY OVERVIEW
IT Services
Global economic activity experienced a sharper-than expected slowdown in the
fiscal year 2023. With central banks raising interest rates and food and energy prices
coming down, global inflation is gradually subsiding. This has resulted in marginal
improvement in business and household buying power. The near-term outlook remains highly
uncertain with downside risks from the unpredictable course of the geopolitical conflict
in Europe, continued impact from tighter monetary policy, inflation and recession fears,
pressures in global energy markets reappearing, and financial market volatility. Rapid
tightening of fiscal policies has exposed vulnerabilities both among banks and non-bank
financial institutions, with fluctuations in financial conditions due to shifts in market
sentiment. This may result in slowdown in demand in certain markets and lead to delayed
decision making.
Technology spending is forecasted to increase with enterprises investing in
value-driven transformation focused on areas like cloud transformation, automation,
integration of AI, data analytics and cyber security as their top priorities. The demand
for digital transformation and infrastructure modernization will continue to drive growth
for the industry with accelerated adoption of digital and emerging technologies, such as
next generation AI, augmented reality ("AR"), virtual reality ("VR"),
extended reality, web3 and metaverse, 5G and edge, cyber and bio convergence. While
emerging technologies will disrupt industries, they will also pose new risks in the areas
of data privacy, surveillance, and ownership.
Global IT service providers are equipped to support enterprises across various
industries to overcome the current challenges, with a wide range of offerings in software
development, digital transformation, IT business solutions and consulting, research and
development, technology infrastructure and business process services.
The IT services industry is expected to accelerate and drive decisions in fiscal year
2024 based on investments made by clients in cost optimization, operational excellence,
digital transformation, vendor consolidation, productivity improvement, customer
experience programs, innovation in products and services, talent management, future of
workplace and workforce, and environmental, social, and governance initiatives.
According to the Strategic Review 2023 published by NASSCOM ("NASSCOM
Report"), revenue for the Indian IT services sector is expected to witness
growth of 8.3% year-on-year in fiscal year 2023, led by IT modernization including
application modernization, cloud migration and platformization. Digital revenues are
estimated to account for 32%-34% of total
ANNUAL REPORT FY 2022-23
industry revenue, growing at 16% annually in fiscal year 2023. IT services
contracts will include a significant digital component, led by digital transformation,
cloudification, platform engineering, AI, building software-as-a-service
("SaaS") enabled products and associated consulting services.
According to the NASSCOM Report, next-generation technologies, such as sensor
technology, smart robots, autonomous driving, computer vision, deep learning, autonomous
analytics, AR/VR, sustainability technology, edge computing, distributed ledger, spacetech
and 5G/6G are expected to witness twice the average growth in fiscal year 2023.
The NASSCOM Report estimates that revenue for the engineering services sector will grow
11% year-on-year, reaching $41 billion in fiscal year 2023, led by increasing
softwarization of equipment and devices, ad cloudification, next-generation connectivity
solutions (e.g. Industrial IoT), autonomous tech, 5G, cloud engineering, EV technology
(e.g. electric batteries) and digital engineering (e.g. platform engineering and
device-as-a-service).
Enterprises are prioritizing cost takeout and operational excellence initiatives and
are bearish on discretionary spends. Significant opportunities exist as clients realign
vendor portfolios. Industry verticals such as Banking & Financial services, Hi-tech,
and Retail & Consumer are showing signs of caution in their technology spending in
response to financial market instabilities, cost pressures, lingering inflation, and weak
consumer spending. Telecom clients are expected to prioritize monetizing their 5G
investments while verticals such as Healthcare, Utilities, Automotive are expected to be
the bright spots and stay resilient.
Focus on ESG parameters will continue to be a driver for differentiation. Clients
expect providers to not only meet the global standards on ESG, but also help the client
make progress on their ESG goals across key focuses such as climate change, diversity and
inclusion, corporate governance, and cyber security.
IT Products
According to the NASSCOM Report, Indias domestic market for hardware is
estimated to be
$17.4 billion in fiscal year 2023, compared to $16.6 billion in fiscal year 2022, and
overall revenue for the hardware industry is expected to be $17.8 billion in fiscal year
2023, compared to $17 billion in fiscal year 2022. The growth is expected to be driven by
computer hardware and peripherals due to remote work, online learning, rise of e-commerce,
and government initiatives that increase digital and internet connectivity. The Indian
domestic hardware market will continue to grow due to the demand for remote networking
infrastructures.
ISRE
The GoI is accelerating digitalization initiatives, with increased IT spending
driven by the its Digital India initiative, focused on citizen experience and digital
inclusion. According to the NASSCOM Report, the GoI played a prominent role as both
adopter and enabler for technology adoption through various GoI initiatives like Make in
India and the ease of doing business, and Production Linked Incentive ("PLI")
schemes for foreign companies, as well as by reworking legacy labor laws and agricultural
policies.
In fiscal year 2023, the GoI and Indian public sector enterprises are expected to spend
$9.5 billion on technology with an increased focus on cloud, with the NASSCOM Report
indicating an additional investment of $2-3 billion in cloud alone.
ANNUAL REPORT FY 2022-23
New-age technologies have been adopted across various industries, and Indias
central and state governments are expected to invest $2-3 billion more in these
technologies. The GoI budget for fiscal year 2023, as well as updates to Indias data
protection laws, the GoI continues to encourage investment in data centers with the intent
to make India a data center hub. Given the consolidation of trends and customer needs in
the IT Services segment and ISRE segment, effective as of April 1, 2023, we will be
merging the ISRE segment with the IT Services segment.
RISKS AND CONCERNS
There are certain issues which may hamper the growth of the industry, these
issues require urgent attention and are as follows:
Regulatory Risk:
Government Regulations though well intended, are creating an environment of over
regularization resulting in more time spent in Compliance reporting than business
planning. There is always a possibility of unintentional non-compliance.
Credit Risk:
Credit risk is the risk that counter party will not meet its obligations under a
financial instruments or customer contract leading to a financial loss. The Company is
exposed to credit risk from its operating activities (primarily trade receivables) from
its financing activities including deposits with banks and investment in quoted and
un-quoted equity instruments.
Market Risk:
The Company is exposed to equity price risk from investments in equity securities
measured at fair value through profit and loss. The Management monitors the proportion of
equity securities in its investment portfolio based on market indices and based on company
performance for un-equity instruments. Material investments within the portfolio are
managed on an individual basis and all buy and sell decisions are approved by the Board of
Directors. Further, major investments in un-quoted equity instruments are strategic in
nature and hence invested for long-term purpose.
Interest rate Risk:
Interest rate risk is the risk that the future cash flows of a financial instrument
will fluctuate because of changes in market interest rates. The Companys exposure to the
risk of changes in market interest rates relates primarily to its short-term borrowings in
nature of working capital loans, which carry floating interest rates. Accordingly, the
Companys risk of changes in interest rates relates primarily to the Companys debt
obligations with floating interest rates.
Liquidity Risk:
Liquidity is the risk that the Company will encounter difficulty in meeting the
obligations associated with its financial liabilities that are settled by delivering cash
or another financial asset. The Companys approach to managing the liquidity is to ensure,
as far as possible, that it will have sufficient liquidity to meet its liabilities when
they are due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Companys reputation.
ANNUAL REPORT FY 2022-23
Unforeseen /Unavoidable Risk:
There may be certain unforeseen /unavoidable Risk, which may hamper the business
operations of the company.
STRATEGIC OVERVIEW
- Accelerate growth–Focus and scale;
- Strengthen clients and partnerships;
- Lead with business solutions;
- Building talent at scale;
- Operational excellence.
| Risk and Impact |
Mitigation Strategy |
| Risk: Risk of economic slowdown or recession in key global economies. Impact:
Macroeconomic headwinds viz., muted GDP projections, unrelenting inflation, high
interest rates, and instability in the financial systems caused uncertainty which in turn
may cause customers to proceed with caution, adversely impact
business sentiments. |
Macroeconomic headwinds viz., muted GDP projections, unrelenting
inflation, high interest rates, and instability in the financial systems caused
uncertainty which in turn may cause customers to proceed with caution, adversely impact
business sentiments. |
| Risk: Revenue Risk - Slackness in demand from existing customers impacting
revenue growth. Impact: Reduction in customers spend or
share of wallet may adversely impact our revenue growth. |
To offset the possibility of lower spend, newer offerings and tech
solutions, along with clients-focused solutions to either optimize costs or promote
customers digital initiatives, are being pursued. |
| Risk: Price Pressure / Margin Risk Impact: Customers facing business
and cost challenges may potentially negotiate for greater competitive pricing, adding
further
pressure on margins. |
Cost optimization strategies like cloud deployment, higher automation,
offshoring and changing resource profile may need to be adopted, in consultation with the customer. |
| Risk: Cyber Security and Privacy Risks - Risk of data theft, deviation to
information security requirement and cyber-attacks. Impact: Unauthorized use or
disclosure of employee or company or customer data may lead to either breach of customer
contract or fines/penalties from regulators and/or damage companys reputation. |
Data protection controls (encryption, data leakage prevention etc.) and
Cyber security tools (firewalls, antivirus, etc.) are deployed to prevent cyber-attacks
and data exfiltration. User awareness and supplier risk management is rigorously
implemented to ensure effective deployment of data security controls. Security controls
are continuously monitored and rigorously assessed through Annual Privacy Audit, IT
Audits, External Health Check Audits and Customer Audits. |
| Risk: Impairment Risk Impact: Possibility of declining business
performance of acquired companies, due to weak economic environment or other strategic or
operational factors, leading to impairment. |
A dedicated team monitors the business performance of the acquired
companies and corrective actions are initiated as required. Synergy benefits of large
customer network, competencies, or cost optimization possibilities of TechM are leveraged
upon, to the extent possible. |
ANNUAL REPORT FY 2022-23
| Risk: Statutory Compliance Risk - Tracking changing compliance requirements
across geographies Impact: Tracking the changing compliance requirements in
multiple countries and adhering to the same for multiple entities is a challenge, and
non-compliances could hurt our reputation as well as result in penal
action by the concerned authorities |
Applicable statutory compliances are tracked through our Global
Compliance Management System (GCMS) with a bottoms-up process and dashboarding prior to
compliance certification. A refresh of the laws and compliances in the tool is underway to
ensure that all requirement in the tool as updated and relevant. |
| Risk: Technology Risk - Risk of deficiencies in emerging competencies Impact:
Inability to timely adopt and invest in emerging competencies may result in a
competitive disadvantage. Further, developing or acquiring new technologies or
capabilities and organization-wide adoption has significant cost implications. |
Investment in the right technological competencies is key to maintaining
our competitive edge. Our strategy of NXT.NOW drives us towards embracing newer
technologies that have the potential for being adopted by enterprise at scale. Investment
in new-age technological skills, including carefully curated training programs for
upskilling the existing workforce, are underway. |
| Risk: Delivery Capability / Capacity Risk Impact: The risk of not being
able to deliver on time, or within budget or not meeting customer specifications is an
inherent project-level risk in our industry. Inability to surmount these challenges could
lead to penalties and/or loss of business and loss of reputation. |
A robust physical and digital infrastructure is maintained to adhere to
the highest quality standards. From a program governance perspective, a dedicated
‘Program Office monitors and reports on various parameters of each engagement. Large
engagements undergo additional review by ‘Delivery Heads. Additional ‘Steering
Committee reviews are undertaken by leadership each month for critical
engagements. |
| Risk: Legal and Contractual risks Impact: Legal,
litigation and contractual risk arising out of contract execution and matters arising out
of IPR, tax, regulations, employment contracts, adverse rulings, mergers, etc. |
Contract-level risks are managed by our in- house legal
team who thoroughly review each contract to ensure appropriate contractual liabilities are
assumed and necessary approvals are obtained as per the defined authority matrix. A
contract management system has been deployed to digitize the contract lifecycle and
effectively manage the authoring, obligation management and risk management aspects of
contracting. Additional oversight at the executive and board level is exercised through
discussion on high-risk contracts at the Risk Management Committee meeting. The legal team
provides necessary support on matters relating to compliance, local in- country laws,
taxation, etc. and seeks external counsel wherever required. We also have a robust
mechanism for appropriately
dealing with litigations. |
ANNUAL REPORT FY 2022-23
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Company has appropriate systems for Internal Control. The systems are
improved and modified continuously to meet with changes in business conditions, statutory
and accounting requirements. The Companys internal control systems and procedures
commensurate with the size and nature of its operations. These systems are designed to
ensure that all the assets of the Company are safeguarded and protected against any loss
and that all the transactions are properly authorized recorded and reported. High accuracy
in recording and providing reliable financial & operational support is ensured through
stringent procedures.
The Audit Committee of Board of Directors reviews the internal audit report, efficiency
and effectiveness of internal control systems and suggests the solution to improve and
strengthen. The Internal control system during the year and no material weakness in design
or operation was observed.
FUTURE OUTLOOK
The Company is confident and aims to focus on operational excellence and to
tide over the current difficult period and capitalize on the future opportunities,
however, the same goes in line with global and Indian economy scenario. The Company is
confident and aims to focus on operational excellence and to tide over the current
difficult period and capitalize on the future opportunities, however, the same goes in
line with global and Indian economy scenario.
CAUTIONARY STATEMENT
The statements in this Management Discussion and Analysis Report could differ
materially from those expressed or implied. Though the statement and views expressed in
the above said report are on the basis of best judgment but the actual future results
might differ from whatever is stated in the report. The Company takes no responsibility
for any consequence of decisions made based on such statements and holds no obligation to
update these in future. Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of their dates.
**************
+91-9892691696
