Covance Softsol Ltd Management Discussions

The following discussion of our financial condition and results of operations should be read in conjunction with our restated audited financial statements on page 63. Unless the context requires otherwise, the financial information in this Information Memorandum is derived from our audited standalone summary statement of assets and liabilities as at March 31, 2024 and September 30, 2024 and the audited standalone summary statement of profit and loss (including other comprehensive income), audited cash flow statement and changes in equity for the period ended March 31, 2024 and September 30, 2024 of the Company together with the summary statement of significant accounting policies, and other explanatory information thereon. For further information, see “Financial Statements" on page 63.

A Scheme involving SoftSol India Limited (the “Demerged Company”) and Covcance SoftSol Limited (the “Resulting Company” / “Company”) and their respective shareholders and respective creditors (“Scheme”), in accordance with Sections 230 to 232 and other applicable provisions of the Companies Act has been approved by the NCLT, Hyderabad Bench on 12.09.2024. Inter alia, the Scheme provides, for demerger, transfer and vesting of the Demerged Undertaking (as defined in the Scheme) from the Demerged Company into the Resulting Company on a going concern basis and issue of Equity Shares by the Resulting Company to the shareholders of the Demerged Company, in consideration thereof, in accordance with Section 2(19AA) of the Income Tax Act and cancellation of the entire pre Scheme share capital of the Resulting Company.

Business Overview

Since, the Company was recently incorporated, prior to the Scheme becoming effective, the Company did not carry out any activity. The Company was incorporated with the objective of providing software services. For a detailed discussion on the Companys business please see section titled “Business Overview"" on page 35.

Financial Performance

Since, the Company was recently incorporated, prior to the Scheme becoming effective, the Company did not carry out any activity. For details of Financial Performance, see Financial Statements at page 63.

Factors that may affect the results of the operations

Our business and results of operations are affected by a number of factors, including the following:

• Economic uncertainty in the software industry

• Potential mergers, acquisitions, or restructurings

• Technological advances

• Competition from existing and new disruptive players

• The effect of changes in our accounting policies

• Our ability to manage our growth effectively

• Outcome of legal or regulatory proceedings to which we, are a party to or might become involved in

• Changes in political and social conditions in India and other geographies we or our subsidiary are present in

• Epidemic situation in and outside India

• Our ability to control cost and retained key personnel

• Our ability to compete effectively, particularly in new customer segments

• Other factors discussed in this Information Memorandum, including "Risk Factors"

Significant Accounting Policies

These financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time. These financial statements have been prepared by the Companys management solely for inclusion in the information memorandum to comply with the requirements of Master Circular No.

SEBI/HO/CFD/POD-2/P/CIR/2023/93 dated June 20, 2023 issued by the Securities and Exchange Board of India (‘SEBI), and the checklist issued by issued by BSE Limited for listing of equity shares of the Company pursuant to the Scheme of Arrangement, and are prepared in the manner specified under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (as amended).

For details of Significant Accounting Policies, please refer to Financial Statements in the section titled “Financial Information” on page 62 of this Information Memorandum.

Results of Operations:

Restated Consolidated Statement of Profit and Loss for the Financial Year ended March 31, 2024 and September 30, 2024, is provided in the table below. The components are also expressed in absolute terms and as percentage of total revenue for such periods in the table below:

(Amount in Rs. In Lakhs)

Note: Consolidated financials for FY24 & half-year ended 30.09.2024 have been restated which includes the impact of transfer of the Demerged Undertaking to the Company from the Appointed Date of April 1, 2023. For further details refer “Financial Information ” on page 62 of this Information Memorandum.

Discussion on Results of Operations as per restated standalone financials:

• Revenue

Our total Revenue for the FYE 31.03.2024 was Rs.1,867.69 Lakhs & HYE 30.09.2024 was 1,102.77 Lakhs.

• Revenue from operations

Our Revenue from operations for the financial year end 31.03.2024 was Rs.1,104.59 Lakhs & HYE

30.09.2024 was 716.68 Lakhs.

• Other Income

Our aggregate other income for the financial year end 31.03.2024 was Rs.763.11 Lakhs & HYE

30.09.2024 was 386.09 Lakhs.

• Total Expense

Our Total Expense for the financial year end 31.03.2024 was Rs.1,761.33 Lakhs & HYE 30.09.2024 was 928.50 Lakhs.

• Profit before Tax

Profit before Tax for the financial year end 31.03.2024 was Rs. 106.36 Lakhs & HYE 30.09.2024 was 174.27 Lakhs.

• Related Party Transactions

The Related Party Transactions during FY 2023-24 and half-year end 30.09.2024 - Kindly refer Notes to the “Financial Statements" on page 63 of this Information Memorandum.

• Reservations, Qualifications and Adverse Remarks Included in Financial Statements

There have been no reservations or qualifications or adverse remarks of our Statutory Auditors for the financial year ended 31.03.2024 and half-year end 30.09.2024.

Cash and Cash Equivalents (as per restated standalone financials):

(Amount in Rs. In Lakhs)

Cash and Cash Equivalents:

The Cash and Cash Equivalents as on 31.03.2024, stood at Rs.16.68 Lakhs & 30.09.2024 stood at Rs.57.84 Lakhs.

• Net Cash from Operations for FY24 was -Rs.818.04 Lakhs & HYE 30.09.2024 was -Rs.197.98 Lakhs.

• Net Cash from Investing activities for FY24 was Rs.432.52 Lakhs & HYE 30.09.2024 was Rs.239.16 Lakhs.

• Net Cash from Financing activities in FY24 was Rs.1.00 Lakh & HYE 30.09.2024 was Nil.

Capital and Other Commitments

Capital Expenditure

The Company has not incurred any capital expenditure except that of transferred along with the Demerged Undertaking from the Demerged Company.

Contingent Liabilities

There were no claims against the Company, disputed by the Company.

Financial Indebtedness

The following table sets forth our secured and unsecured debt position (on a consolidated basis) as at

(Amount in Rs. In Lakhs)

Contractual Obligations and Commitments

The Company does not have any long-term commitments or material non-cancellable contractual commitments or contracts, including derivative contracts for which there were any material foreseeable losses.

Off-Balance Sheet Commitments and Arrangements

We do not have any off-balance sheet arrangements, derivative instruments, swap transactions or relationships with affiliates or other unconsolidated entities or financial partnerships that would have been established for the purpose of facilitating off-balance sheet arrangements.

Interest Coverage Ratio

The interest coverage ratio for FY24 was 0.23.

Our Business Segments on Consolidated Basis

The Company operates as a single segment viz. “Software Services”. The consolidated revenue from operations for the year was Rs.6,117.12 Lakhs and HYE 30.09.2024 was 4340.98 Lakhs (on the basis of restated consolidated financials).

Seasonality of our Business Not Applicable

Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss related to adverse changes in market prices, including foreign exchange rates. In the normal course of business, we are exposed to certain market risks including foreign exchange rate risk.

Foreign exchange rate risk

Changes in currency exchange rates influence our results of operations. Our services are priced typically priced in local currencies including USD and INR etc. while a larger proportion of expenses are in INR due to off shoring. Although we selectively enter into hedging transactions to minimize our foreign currency exchange risks, there can be no assurance that such measures will enable us to avoid the effect of any adverse fluctuations in the value of the Indian Rupee against the U.S. Dollar.

Liquidity risk

We require a certain amount of working capital for our operations and the failure to obtain such capital may adversely affect our growth prospects and future profitability. While the Company maintains adequate liquidity, delay in payments by customers can lead to increase in working capital requirements thus adversely impact the operations.

Unusual or infrequent events or transactions

Except as described in this Information Memorandum, there have been no other events or transactions that, to our knowledge, may be described as “unusual” or “infrequent”.

Total turnover of each major industry segment

The Company is engaged only in the business of providing software services and 100% revenue is from software industry for FY24.

Significant economic changes that materially affected or are likely to affect income from operations Other than as described in this section and the sections of this Information Memorandum titled

“Business Overview”, “RiskFactors” and “Industry Overview” on pages 35, 15 and 35, there have been

no significant economic changes that materially affected or are likely to affect our Companys income from operations.

Known trends or uncertainties

Other than as described in this Information Memorandum, particularly in the sections “Risk Factors” and “Management Discussion and Analysis of Financial Condition and Results of Operations” on pages 15 and 180, respectively, to our knowledge, there are no known trends or uncertainties that are expected to have a material adverse impact on our revenues or income from continuing operations.

Future relationship between cost and revenue

Other than as described in “Risk Factors”, “Business Overview” and “Management Discussion and Analysis of Financial Condition and Results of Operations” on pages 15, 35 and 180, respectively, to our knowledge there are no known factors that may adversely affect our business prospects, results of operations and financial condition.

New products or business segments

The Company is not engaged in outcome of any new products or business segments.

Competitive conditions

We operate in a competitive environment. For further details see “Business Overview”, “Industry Overview” and “RiskFactors” on pages 35, 35 and 15, respectively.