Annexure - B
Forward looking statement
Statements in this Management Discussion and Analysis of Financial Condition and
Results of Operations of the Company describing the Companys objectives, expectations or
predictions may be forward looking within the meaning of applicable securities laws and
regulations. Forward looking statements are based on certain assumptions and expectations
of future events.
The Company cannot guarantee that these assumptions and expectations are accurate or
will be realized. The Company assumes no responsibility to publicly amend, modify or
revise forward looking statements, on the basis of any subsequent developments,
information or events. Actual results may differ materially from those expressed in the
statement. Important factors that could influence the Companys operations include changes
in government regulations, tax laws, economic developments within the country and such
other factors globally.
The financial statements are prepared under historical cost convention, on accrual
basis of accounting, and in accordance with the provisions of the Companies Act, 2013 (the
Act) and comply with the Indian Accounting Standards as pronounced by the Institute of
Chartered Accountants of India (ICAI) from time to time. The Management of Creative
Newtech Limited has used estimates and judgments relating to the financial statements on a
prudent and reasonable basis, in order that the financial statements, reflect in a true
and fair manner, the state of affairs and profit for the year.
The following discussions on our financial condition and result of operations should be
read together with our audited financial statements and the notes to these statements
included in the annual report. Unless otherwise specified or the context otherwise
requires, all references herein to "we", "us", "our",
"the Company", "Creative" are to "Creative Newtech Limited".
INDUSTRY OVERVIEW Global Industry Overview
The IT industry is experiencing constant development, and new trends are emerging year
after year, making the market one of the most significantly growing markets in the
technology industry. Revenue in the IT Services market is projected to reach US$1,204.00bn
in 2023. The largest market within IT Services is IT Outsourcing with a projected market
volume of US$430.50bn in 2023. Revenue is expected to show an annual growth rate (CAGR
2023-2027) of 6.86%, resulting in a market volume of US$1,570.00bn by 2027. The average
Spend per Employee in the IT Services market is projected to reach US$345.50 in 2023. In
global comparison, most revenue will be generated in the United States (US$440.20bn in
2023).
Accelerated by the COVID-19 pandemic, many organizations have recognized the need for
digital adoption in their business activities (e.g., remote work support, software
support, and data security). In order to embrace new technological solutions in a fast,
modern, and innovative way, more companies are likely to use external support. Cloud
technology will continue to expand and gradually become a foundation of digital
transformation. The increasing demand for cloud services and infrastructure upgrading
activities is significantly driving the demand for managed IT services across the emerging
market. This is the reason why the growth rate of IT services has been on a growth
trajectory since 2021. With ongoing digital transformation and automated business
processes, the global IT Services market is expected to reach approximately US$1,570
billion in 2027.
Sources: https://www.statista.com/outlook/tmo/it-services/worldwide#analvst-opinion
Indian Industry Overview
The IT Sector has become one of the most significant growth catalysts for the Indian
economy, contributing significantly to the countrys GDP and public welfare. The IT
industry accounted for 7.4% of Indias GDP in FY22, and it is expected to contribute 10%
to Indias GDP by 2025.
As innovative digital applications permeate sector after sector, India is now prepared
for the next phase of growth in its IT revolution. India is viewed by the rest of the
world as having one of the largest Internet user bases and the cheapest Internet rates,
with 76 crore citizens now having access to the internet.
According to National Association of Software and Service Companies (Nasscom), the
Indian IT industrys revenue touched US$ 227 billion in FY22, a 15.5% YoY growth. Indian
software product industry is expected to reach US$ 100 billion by 2025. Indian companies
are focusing on investing internationally to expand their global footprint and enhance
their global delivery centres. The data annotation market in India stood at US$ 250
million in FY20, of which the US market contributed 60% to the overall value. The market
is expected to reach US$ 7 billion by 2030 due to accelerated domestic demand for AI.
India is one of the countries with the quickest pace of digital adoption. This was
accomplished through a mix of government action, commercial innovation and investment, and
new digital applications that are already improving and permeating a variety of activities
and different forms of work, thus having a positive impact on the daily lives of citizens.
The IT industry added 4.45 lakh new employees in FY22, bringing the total employment in
the sector to 50 lakh employees.
Sources - https://www.ibef.org/industrv/information-technologv-india
B2B eCommerce
Being one of the biggest economies in the world, India is set to be the next big market
for B2B e-commerce, with large entrepreneurs pouring in resources to leverage it. During
the pandemic, conventional supply chains that served Indian businesses were disrupted.
Access to capital and financing became extremely difficult, giving opportunities to B2B
e-commerce players to step in and help enterprises that were running out of raw materials
and industrial products.
The digital transformation of organizations, including corporations, financial
institutions, hospitals, small businesses, government, and others, has been attributed to
the B2B industrys present success in India. Every startup is adding efficiency to the B2B
supply chain, leveraging rich data and automated processes.
In recent years, Indias expanding digital penetration has made e-commerce a
particularly profitable retail choice for enterprises across the nation. As a result,
India is a key trading hub for companies looking to explore import, export, and local
selling prospects in the area. With a turnover of US$ 50 billion in 2020, India became the
eighth-largest market for e-commerce, trailing France, and a position ahead of Canada.
Propelled by rising smartphone penetration, the launch of 5G network and increasing
consumer wealth, the Indian E-commerce market is expected to grow to US$ 200 billion by
2026. According to a report published by IAMAI and Kantar Research, Indias internet users
are expected to reach 900 million by 2025 from ~622 million internet users in 2020,
increasing at a CAGR of 45% until 2025.
Moreover, the government is also supporting this sector through various policies. 100%
FDI is allowed in B2B eCommerce. Going forward, B2B eCommerce is likely to be the
preferred model for most supply chain players, especially in the IT sector.
Source: https://www.ibef.org/industry/ecommerce.aspx
https://seller.alibaba.com/businessblogs/px001ual5-a-guide-to-b2b-e-commerce-in-india
Indian Licensing Industry
Licensing is one of the most powerful business models for brand expansion and Indian
organizations are finally coming to accept the fact. While at a nascent stage, the
nations licensing landscape is slowly evolving, thanks to the better implementation of
law and development of the pro-innovation ecosystem. With the world becoming a global
village, the licensing business has the capability to become a billion- dollar sector in
the coming years. India have the opportunity to be at the forefront of this transition if
positioned smartly by the enterprise and law.
Indian companies looking to enter licensing agreements bet high on manufacturing. Key
drivers of the industry include the changing behavior of Indian consumers, who seek
products that align with their interests and passions. The exposure to international media
and brands through digital platforms has fostered a desire for globally recognized
products.
The manufacturer or service provider that licenses a brand, character, design or
another piece of intellectual property encash on the marketing power it brings to the
product. It can take hundreds of thousands or millions of dollars to build a brand from
scratch and licensing represents a way for a manufacturer to take advantage of all the
brand building and image building that has gone on before. The markets going to grow with
a lot of investment also flowing in and government policies changing for the better.
People in India and across the globe are looking at various kinds of licenses based on
the type of intellectual property and the manner in which they intend to grow their
business. These could range from limited licenses, term restricted licenses to white
labelling and the likes. Being an evolving space, Licensing promises further development
and growth in both the technology market and the user market.
Between components and completed equipment, EMS is the vital connection. To avoid
uncertainties and supply chain interruptions, all major OEMs are eager to create alternate
suppliers. This should encourage global companies to collaborate with local firms that
provide contract manufacturing services for a particular area.
The electronic contract-manufacturing sector in the country is projected to grow by
over six-fold to USD 152 billion by 2025. Globally, the electronic manufacturing services
(EMS) sector was valued at USD 832 billion in 2019 and is estimated to grow to USD 1,055
billion by 2025. It has the potential to grow from less than 3 per cent of the global
industry to about 14 per cent within 5 years. China exports USD 685 billion of electronics
to the world. India has set a target of USD 100 billion exports of mobiles alone by 2025,
which is possible with the support of the production-linked incentive (PLI) scheme. The
Global Brand Licensing Market is projected to grow from USD 274.9 billion in 2022 to USD
385.4 billion by 2027 at a CAGR value of 4.1% from 2022 to 2027.
India is a market with a significant development potential for foreign brands as it
becomes a more technologically advanced country. Indian consumer electronics market size
is anticipated to expand quickly through 2025, according to industry estimations.
Looking ahead, the Indian licensing industry holds significant promise. Expansion into
tier 2 and tier 3 cities offers a new consumer base, while collaborations with local
designers, artists, and brands can lead to culturally relevant products. Innovative
marketing strategies and localization efforts are expected to engage consumers more
effectively. The industrys growth potential remains considerable as brands, entertainment
properties, and artists continue to explore licensing opportunities in this dynamic
market.
Sources: https://economictimes.indiatimes.com/industry/cons-products/electronics/electronic-contract-manufacturing-in-india-to-grow-over-6-fold-to-152-bn-bv-2025/articleshow/80032751.
cms?from=mdrhttps://www.grandviewresearch.com/industrv-analvsis/india-consumer-electronics-market
https://www.entrepreneur.com/en-in/growth-strategies/where-is-indias-licensing-industry-heading/332386
About Creative Newtech Limited
Established in 1992, Creative Newtech Ltd is a well-established company in Indias
Information and Communication Technology distribution market. Through a robust network of
partners and distribution channels, the Company has made a strong foothold in the IT
distribution market in the country. The Company has an omni-channel network across all
three channels of online, offline and retail trade.
Creative Newtech specializes in market entry and penetration for global brands. The
Company offers demographic intelligence, and enables the formulation and execution of
marketing strategies for its clients. In addition to such services, Creative continues to
focus on timely delivery, diversification of its product portfolio, sustained long-term
relationships with its channel partners, and extending value- added services over and
above distribution.
These efforts have enabled the Company to win long running contracts as well as garner
accolades in the Industry as amongst the best distributors in India by leading brands.
Creative is associated with over 20 renowned brands globally. These brands encompass a
wide range of applications and help the Company to cater to a broad array of customers,
both in the consumer and industrial businesses. Moreover, the Company is well-positioned
to leverage the changing trends in the technology industry and be a part of the paradigm
shift towards digitization in India.
Over the past year, we have continued to focus on strengthening our brand identity and
reputation by consistently delivering high-quality products and services. Our commitment
to innovation and customer satisfaction has allowed us to maintain a competitive edge in
the market.
One of the key factors behind our growth is "Honeywell" which has been our
dedication to delivering high- quality products and services. We have invested significant
resources in research and development, ensuring that our offerings are at the forefront of
technological advancements. By leveraging cutting- edge technologies, we have consistently
delivered innovative solutions that meet the evolving needs of our customers. This Year,
we witnessed significant milestones that have further strengthened our brand and
positioned us for sustained growth. Our investments in research and development have
fostered a culture of innovation, enabling us to introduce groundbreaking solutions that
address the evolving needs of our customers.
Creative has a unique value-added business model.
Seamless Solutions: Your End-to-End Partner for Success:- Creative provide
end-to-end solutions, from market research and competition analysis for brands, to import,
distribution, sales and servicing for the brand. Additionally, the Company suggests and
executes marketing strategies and recommends viability in specific regions across India
for their clients. This is enabled by specialized skill sets, local insights and
experience, along with relevant market intelligence. Creative also prepares strategic
plans for market entry for foreign brands and their target category.
Market Entry Specialist: Furthermore, the Company conducts pre-sales and marketing
activities for the success of the brands as well as to enable the channel partners to
leverage their expertise and bottom line. Creative works closely with partners across
channels including Large Format Retail (LFR), e-commerce and specialized retailers. The
Company is one of the few large market entry specialist who conduct specialized training
modules, events and promotional activities at the ground level with channel partners and
have also conduct live workshops, demos for the resellers which is all possible due to the
dedication and experience of the corporate and sales teams who constantly track latest
market developments to build a closer market connect.
Operational Efficiency: The Companys wide reach and superior logistics
capabilities helps it provide end-to-end services including warranty and post-warranty,
high-level repair services, and response centres, among others. Such expertise and
superior quality of service has led to increased confidence of brands, many of which have
chosen Creative as exclusive partners and have been with the Company since over five
years. The Company focuses on higher operational efficiencies and adding higher- margin
and value-added products to its existing product portfolio and such brand associations are
a concrete step in that direction.
| Vendor |
Product Category |
| AOC |
Monitors & TV |
| Babyliss |
Cosmetics |
| BPL |
Fans, Light Bulbs etc. |
| COOLER MASTER |
PC Casing and Cooling products |
| COLORFUL TECH |
SSDs |
| CRICUT |
Craft and cutting products |
| DUSTOR |
Vacuum Cleaner |
| HONEYWELL |
Air Purifiers, Home Audio, Laptop Enhancement & Mobility products, Structured
Cabling Systems |
| LEXAR |
Storage/Memory cards |
| iBALL |
Computers & accessories |
| INSTAX FUJIFILM |
Cameras |
| INVUE |
Retail security protecting mobile electronics devices |
| RAZER |
Gaming products |
| MSI |
Mini-PCs and desktops |
| OLYMPUS |
Cameras, Lenses, Binoculars |
| PNY |
Graphics Cards and SSDs |
| PHILIPS |
Signage and Monitors |
| POLYCAB |
Wires |
| HAMA |
Photography products |
| RAPOO |
Keyboards, Mouse, Headphones, Power bank |
| SAMSUNG |
Monitors |
| TRANSCEND |
Memory, Storage |
| VIEWSONIC |
Projectors, 3D Glass |
FINANCIAL OVERVIEW -
The consolidated financial performance of the Company for the financial year ended
March 31st, 2023, is as follows:
Total revenue from operations stood at Rs. 1,402.25 crore for the year ended March 31,
2023, as against Rs. 947.81 crore for the corresponding previous period, an increase of
47.95%, mainly on account of strong sales driven by FMCT and EB product segments. Strong
demand from brands such as Samsung, Cooler Master, Viewsonic and Honeywell supported
growth.
The cost of raw materials rendered for the financial year ended March 31, 2023 was Rs
1,296.01 crore as against Rs 856.52 crore for the corresponding previous period, an
increase of 51.31%.
The staff expenses for the financial year ended March 31, 2023 were Rs 13.70 crore as
against Rs. 11.47 crore for the corresponding previous period, an increase of 19.46%.
The other expenses for the financial year ended March 31, 2023 were Rs. 47.43 crore as
against Rs 47.20 crore for the corresponding previous period, an increase of 0.48%.
The EBIDTA (earnings before interest, depreciation and tax) was Rs. 45.12 crore for the
year ended
March 31, 2023, as against Rs. 32.62 crore for the corresponding previous period, an
increase of 38.31%.
The depreciation for the financial year ended March 31, 2023 was Rs. 1.57 crore, as
against Rs. 1.49 crore for the corresponding previous period, an increase of 5.11%.
The interest for the financial year ended March 31, 2023 was Rs. 9.40 crore as against
Rs. 6.07 crore for the corresponding previous period, an incline of 54.85%.
The PAT (profit after tax) was Rs. 27.25 crore for the year ended March 31, 2023, as
against Rs. 19.25 crore for the corresponding previous period, a growth of 41.56%.
EPS was Rs. 19.53 for the year ended March 31, 2023, as against Rs. 13.32 for the
corresponding previous year, an increase of 46.62%.
RESOURCES AND LIQUIDITY
As on March 31, 2023, the consolidated net worth stood at Rs. 126.16 crore and the
consolidated debt was at Rs. 88.93 crore.
The cash & cash equivalents and bank balances at the end of March 31, 2023 were Rs.
9.19 crore.
The net debt to equity ratio of the Company stood at 0.70 as on March 31, 2023.
Business Category wise Performance
Creative Newtech operates in four broad product categories: distribution of fast moving
social media gadgets (FMSG), fast moving consumer technology (FMCT), fast moving
electronics goods (FMEG) and Enterprise business (EB).
The Company is performing well in all the categories and expects the momentum to
continue in next financial year.
1. Fast Moving Social Media Gadgets (FMSG)
Creative offers a broad range of products driven by social media penetration, which are
targeted for the young and aspirational demographic. These cover imaging, lifestyle and
gaming categories, among others. Some of the key brands under this segment include
Honeywell, Cooler Master, Cricut, Olympus, Instax Fujifilm etc. FMSG contributed 14.33% to
the total revenue in FY23.
2. Fast Moving Consumer Technology (FMCT)
This category encompasses a range of high-volume IT products. Some of the key brands
under this segment are Samsung, Viewsonic, Rapoo, iBall etc. This category contributed
17.93% to revenue in FY23.
3. Fast Moving Electronics Goods (FMEG)
This segment covers high volume electrical products such as lights, bulbs, fans and
small domestic appliances from well established household brands such as BPL and Polycab.
This category contributed 0.78% to revenue in FY23.
4. Enterprise Business (EB)
The Enterprise business comprises of products which are supplied primarily to large
corporates and enterprises. Some major brands in this category include AOC, Philips and
retail security specialist InVue. Revenue from this segment comprised 66.97% of total
revenue in FY23.
BUSINESSES DEVELOPMENTS DURING THE YEAR:
• Creative tied up with Razor Inc., a leading global gaming brand, to distribute
its products in India.
• The Company won a distribution agreement with Cricut to offer their range of
craft and cutting products in India.
• The Company signed a distribution agreement with Fuji Instax for their range of
cameras.
• The Company signed distribution agreements with Lexar Memory Cards.
• Expanded Honeywell mandate to additional countries across APAc and GCC
RISKS AND CONCERNS
Like every business, the Company faces risks, both internal and external, in the
undertaking of its day- to-day operations and in pursuit of its longer-term objectives. A
detailed policy drawn up and dedicated risk workshops are conducted for each business
vertical and key support functions wherein risks are identified, assessed, analyzed and
accepted / mitigated to an acceptable level within the risk appetite of the organization.
The risk registers are also reviewed from time to time.
The Company faces the following Risks and Concerns:
Rapid Obsolescence of Technology & Change in Consumer Preferences
A technology business is always exposed to sudden and unanticipated changes in
technology and consumer trends and preferences. This exposes the company to the risk of
becoming uncompetitive in terms of product/services offering to the customers. There is a
need to constantly upgrade the product and service portfolio (e.g. Cloud, IoT, Mobility
Analytics, etc.), and stay on top of changing consumer preferences.
Credit Risk
To manage its credit exposure, Creative Newtech has determined a credit policy with
credit limit requests and approval procedures. Company does its own research of clients
financial health and project prospects before entering into an agreement with them. Timely
and rigorous process is followed up with clients for payments as per schedule. The company
has suitably streamlined the process to develop a focused and aggressive receivables
management system to ensure timely collections.
Interest Rate Risk
The Company has judiciously managed the debt-equity ratio. It has been using a mix of
loans and internal cash accruals. The Company has well managed the working capital to
reduce the overall interest cost.
Competition Risk
Like in most other industries, strong scope of opportunities come with intense
competition. We face different levels of competition in each of our operating categories,
from domestic as well as multinational companies. Creative has created strong
differentiators in project execution, portfolio, level on involvement in marketing and
delivery, which make it resilient to competition. Furthermore, the Company continues to
invest in technology and people to remain ahead of the curve. A strong and stable client
base, comprising large and mid-sized corporations, further helps mitigate this risk. We
counter this risk with the quality of our infrastructure, our customer-centric approach,
value-added services and our ability to innovate customer specific solutions, focusing on
pricing and aggressive marketing strategy, disciplined project executions, along with
prudent financial and human resources management and better control over costs. Thus, we
expect to be significantly insulated from this risk.
OPPORTUNITIES
• Large and Growing Market: India has a massive consumer base with a rapidly
increasing number of internet users, making it an attractive market for e-commerce and B2B
platforms.
• Increasing Digital Penetration: The widespread adoption of smartphones and
affordable internet access has led to a surge in online shopping and B2B transactions.
• Convenience and Accessibility: E-commerce platforms provide convenience to
consumers by allowing them to shop from anywhere at any time. B2B platforms streamline the
procurement process for businesses, making it more efficient.
• Wide Product Range: E-commerce platforms in India offer a wide variety of
products, including both local and international brands, catering to diverse consumer
preferences.
• Distribution agreements with renowned brands: An increasing number of
international brands want to come to India to tap into the market potential. Such brands
typically want ready and modern distribution system covering the geographical territories
of the country and serving customers on a pan-India basis which will grow their brand
quicker.
THREATS
• Competition from local and multinational players
• Offline retail competition
• Regulatory changes including unfavorable tax changes or import regulations.
• Attraction and retention of talented human resources
• Frequent and rapid technological advancements leading to early obsolescence of
products in inventory
• Over-dependence on few brands which account for majority revenue
INTERNAL CONTROL SYSTEMS AND ADEQUACY
The Company is a ISO 9001:2015 certified and has an internal audit function designed to
review the adequacy of internal control checks in the system which covers all significant
areas of Companys operations such as accounting and finance, procurement, business
operations, statutory compliances, IT processes, safeguarding the assets and their
protection against unauthorized use, among others. The Internal Audit function performs
the internal audit of Companys activities based on an internal audit plan, which is
reviewed each year and is approved by the Board of Audit Committee. The Audit Committee
reviews the report submitted by the internal auditors. Suggestions for improvement are
considered and the audit committee follows up on corrective action. Disciplinary action is
taken, wherever required, for non-compliance to corporate policies and controls.
The Company has also implemented effective systems for achieving highest level of
efficiency in operations, to achieve optimum and effective utilization of resources,
monitoring thereof and the compliance with provisions all laws including the Companies
Act, 2013, Listing Agreement, directions issued by the Securities and Exchange Board of
India, labour laws, tax laws etc. It also aims at improvement in financial management, and
investment policy. The System ensures appropriate information flow to facilitate effective
monitoring.
HUMAN RESOURCES
We believe that our employees are key contributors to our business success. We focus on
attracting and retaining the best possible talent. Our Company looks for specific
skill-sets, interests and background that would be an asset for our business.
As on March 31, 2023, the Company had 300+ employees on payroll. The manpower is a
prudent mix of experienced and young professionals which gives us the dual advantage of
stability and growth. The work progress and skilled/ semi-skilled/ unskilled resources,
together with the Companys strong management team, have enabled it to successfully
implement our growth plans.
The Company also imparts behavioral, technical and on the job training to our
employees. Technical trainings are mandated by the vendor whenever the employees have to
deal with pre-technical or post technical issues. Training calendars are set by the
vendors and nominated employees from our Company attend the program and obtain a feedback
on the completion of the program.
OUTLOOK
Organizations across industries are actively pursuing digital transformation, creating
a significant demand for IT services & solutions and diversified product range. This
trend is expected to continue, driving the growth of the overall market in India. India
has a large pool of skilled IT professionals, making it well positioned to capitalize on
emerging technologies. These include AI, machine learning, blockchain, Internet of Things
(IoT), and augmented/virtual reality. The IT sector is expected to embrace these
technologies and develop innovative solutions for both domestic and international markets.
The shift towards digital technologies continues to drive demand. Creatives agile
business model, selective strategies and niche portfolio helps the Company navigate market
cycles successfully. Moreover, the value-addition in terms of executing marketing
strategies and post-sales services, allows the Company to command better margins.
Creative has an extensive network and strategically concentrates on important niche
brands where there is room for growth. The addition of Cricut and Razer to the brand
portfolio will help further increase margins as they are among the leading names in their
respective fields of craftwork and gaming.
On the Honeywell front, Creative now has license in 38 nations across APAC, Middle East
& Africa, driving growth in this line of business. As the synergies from Honeywell
start to build up, top line as well as profit margins will expand. The Company is prepared
to launch a larger variety of product lines under Honeywell at full speed now that all
certifications, permits, etc. are in place.
In line with the ethos of Creative to be at the forefront of new technologies, the
Company continuously manages its brand portfolio to keep it relevant to ongoing and
anticipated consumer trends. The focus remains on keeping a lean business model and
ensuring long-term, sustainable growth for all stakeholders.
ECommerce business is also prospering as more and more players use the internet as a
channel for conducting business. Ckart is likely to play a crucial part in the paradigm
shift of distribution business from a brick and mortar to an online-based business.
Overall, based on the market demand and Creatives annual performance as a whole, the
outlook for the next year appears upbeat.
For and on behalf of the Board of Directors Creative Newtech Limited
Ketan Patel
Chairman & Managing Director
DIN 00127633
Date: August 10, 2023
Place: Mumbai
+91-9892691696
