MANAGEMENT DISCUSSION AND ANALYSIS REPORT
INDUSTRY OVERVIEW
Global Economic Scenario
The global economic outlook for 2024 is characterized by a mix of cautious optimism and persistent uncertainties. According to the International Monetary Fund (IMF), global growth is expected to moderate to around 3.1%, supported by resilience in the United States and several emerging markets, as well as fiscal measures in China. Inflation is projected to decline significantly, with global headline inflation expected to drop to 5.8% in 2024 and 4.4% in 2025.
In South and East Asia, growth is anticipated to remain robust, especially in India, which benefits from strong investment and service sector performance. (Source: World Bank, McKinsey & Company). Worldwide IT spending is expected to grow driven by significant investments in various segments with notable increases in data center systems, software, IT services, and communications services.
The global market for internet, networking, and hardware equipment that keeps everything connected is substantial and expected to continue growing.
Indian Economic Scenario
The International Monetary Fund (IMF) has raised Indias growth forecast for 2024-25 to 6.8% from 6.5% on the back of strong domestic demand and a rising working-age population. The Reserve Bank of India, (RBI), estimates the economy to grow at 7% in the current financial year.
Indias economic outlook remains positive, supported by stronger consumer demand, increased capital expenditure, and enhancements in both physical and digital infrastructure. Private and government investments are expected to be the primary driver for economic growth in 2024, backed by improving prospects of rural consumption due to the easing of inflation, increased spending in an election year, and proactive government policy measures.
INDUSTRY OUTLOOK IN INDIA
The networking equipment market refers to the industry involved in the manufacturing, sales, and distribution of hardware and software components used to establish and manage computer networks. This market encompasses a wide range of products and technologies, including routers, switches, hubs, modems, network cables, wireless access points, network adapters, network security devices, network management software, and more. These components are designed to facilitate data transmission, routing, switching, and network management to ensure efficient and reliable communication between devices and systems.
The networking equipment market caters to diverse sectors, including telecommunications, IT and data centers healthcare, government, education, financial services, manufacturing, and various other industries. With the increasing demand for high-speed data transfer, reliable connectivity, and secure network infrastructure, the market continues to evolve and innovate to meet the ever-growing networking needs of organizations and individuals.
The Indian government is taking several initiatives to promote the growth of the IT hardware industry in the country. These initiatives include the Production-Linked Incentive (PLI) scheme, the National Manufacturing Policy, and the Startup India initiative. These initiatives are expected to provide a boost to the growth of the Indian IT hardware industry by attracting investments, creating jobs, and boosting exports.
The Production Linked Incentive (PLI) scheme has led to significant increase in investment in the sector, with many global companies announcing plans to set up manufacturing plants in India. The PLI scheme encourages companies to source components and subassemblies locally. This will help to develop the domestic supply chain for IT hardware and reduce Indias reliance on imports.
The IT hardware market in India, which includes switches, routers, and WLAN devices, is experiencing promising growth. This growth is fueled by several factors including increasing digitization across government sectors, the rise of remote work culture, expanding use of Internet of Things (loT) devices and the rollout of 5G networks, which necessitates upgrades in networking equipment.
OPPORTUNITIES AND THREATS
The IT hardware market in India is on a positive trajectory. IT is crucial in various sectors, including business, healthcare, education, finance, entertainment, and government. As the industry continues to expand and evolve, the demand for IT hardware increases correspondingly. The increasing digitization of the public sector is a significant driver for the IT hardware market. Local governments recognize the benefits of digital technologies and are implementing various initiatives to enhance their service delivery, improve efficiency, and provide better citizen-centric solutions. Hardware for servers and data centers is in greater demand as companies strive to improve their digital capabilities.
India offers a favorable business environment for the IT hardware industry. The country has a large pool of skilled and low-cost labor, a robust manufacturing sector, and a strategic location. These factors make India an attractive destination for IT hardware manufacturing.
In addition to these key opportunities, the Indian IT hardware industry is also expected to benefit from the growth of new technologies such as artificial intelligence (AI), cloud computing, and the Internet of Things (loT). These technologies are expected to create new demand for IT hardware products and services.
The Indian IT hardware industry is expected to create new jobs, boost exports, and contribute significantly to the Indian economy. However, the IT hardware industry in India faces a number of challenges and threats, such as the rising concern over e-waste and the impact of macroeconomic developments like inflation on the affordability of IT equipment.
Further, compared to software startups, hardware businesses require significantly more funding for research, development, and manufacturing facilities. This makes it difficult for domestic companies to compete with established brands that have larger economies of scale.
The talent pool for hardware experts in India is limited as compared to the software sector. This makes it difficult for companies to find qualified engineers, designers and other technicians needed for hardware development and production.
Well-known international companies often dominate the Indian hardware market, making it difficult for domestic manufacturers to gain brand recognition and market share.
Price is a major factor influencing buying decisions in India. This can put domestic manufacturers at a disadvantage, as they may struggle to compete with the lower prices offered by international brands that can leverage economies of scale.
Despite these challenges, the Indian IT hardware industry is still growing rapidly. The industry is expected to reach a value of $400 billion by 2025, and it is expected to create millions of jobs in the coming years. With the right strategies and investments, Indian IT hardware companies can position themselves to capture a significant share of this growing market.
D-Link is a principal player in the Small Office Home Office and Small and Medium Business segment, closely aligned with System Integrators. In parallel, the company also targets other key verticals, including Government, Education, BFSI and Manufacturing, among others. We believe that our understanding of high-performance networking technology, our strategy, and our brand legacy positions us well to capitalize on the industrys growth.
The growing IT spending and increasing government initiatives in India are expected to fuel growth in the Indian enterprise networking market over the coming quarters. The industry players are continuously expanding and innovating their product portfolio to adapt to the technological changes and cater to the growing consumer needs.
OPERATIONAL REVIEW
D-Link, is a well-established player in the Indian networking market, known for its range of networking products that includes Home & Business Wireless, Network Switches Surveillance, Network Racks, and Structured Cabling. The Company has a comprehensive range of structured cabling products components, for creating a robust and scalable network infrastructure and is one of the major players in the Indian structured cabling market. The future of the structured cabling market in India is bright. The market is expected to continue to grow at a rapid pace in the coming years, driven by the increasing demand for higher bandwidths, the rapid digitization of the economy, and the governments focus on infrastructure development.
D-Link India enjoys a substantial market share in the consumer wireless and switching sectors. Its unmanaged and smart managed switches are among the most popular products among small and medium-sized businesses (SMBs).
The "Make in India" initiative is a government program that aims to make India a global manufacturing hub. One way to achieve this goal is through outsourced manufacturing.
D-Link India is aligned with government program of supporting local manufacturing. As a result, the company continues to strongly focus on promoting locally manufactured products as part of its Make in India initiative. D-Link India has been granted exclusive rights/license by the parent company to use the D-Link trademark for such locally manufactured products. The Company had made strategic decisions on manufacturing certain products locally through third-party or contract manufacturing with its own brand names, under its own proprietary designs, quality control and supervision. The Company has made noteworthy progress in this direction and has entered into arrangements with local manufacturers.
D-Link India is committed to providing world-class customer services and keeps working towards enhancing its existing countrywide distribution and support infrastructure. It has a strong network of National Distributors, Business Distributors, and over 15000+ resellers reaching out to its customers across the length and breadth of the country, ensuring that its products are available in the remotest parts of the country.
To serve its customers in a holistic way, D-Link India has invested in state-of-the-art support infrastructure for both consumers and enterprises. Adopting the digital route, D-Link India has recently announced customer support via WhatsApp for efficient complaint resolution. Now customers can connect with D-Link support team anytime, from anywhere for real-time support.
PRODUCT & SOLUTIONS:
Consumer Networking Solutions:
ADDON Series:
The recently introduced ADDON series by D-Link is a comprehensive accessory range that currently features a variety of mobile chargers designed for efficient and versatile charging solutions. With the existing ADDON range, we are catering to different power needs for smartphones, tablets, and other devices. D-Link plans to expand this range further by introducing more innovative accessories to enhance this product line.
HomeWi-Fi:
D-Links Home Wireless range features cutting-edge connectivity solutions, prominently highlighted by the EAGLE PRO series that combines Wi-Fi with artificial intelligence (AI) offering advanced Al-based optimization for seamless high-speed Wi-Fi coverage.
D-Link EAGLE PRO range also includes whole home mesh solutions. Mesh M15 router provides seamless and reliable Wi-Fi coverage throughout the entire home. It eliminates dead zones, ensuring a consistent and strong signal in every room, making it ideal for larger homes or spaces with challenging layouts. D-Links mesh solution offers the flexibility and performance to keep all devices connected smoothly.
D-Link offers a comprehensive home Wi-Fi range. This includes cutting-edge Wi-Fi 6 routers and AC routers for high-speed activities, along with reliable Wireless routers for everyday needs. Range Extenders:
D-Links range extenders are designed to eliminate Wi-Fi dead zones and improve coverage throughout the home or office. These devices amplify existing wireless signals, ensuring a stable and strong connection in areas where the signal is weak. They are easy to set making them a convenient solution for enhancing home network performance.
Unmanaged Switches:
D-Links unmanaged switches provide a simple and cost-effective solution for expanding network connectivity. These plug-and-play devices require no configuration, making them ideal for small businesses and home networks. It offers various port options, including Gigabit and Fast Ethernet, ensuring high-speed data transfer and reliable performance. With sturdy designs and energy-efficient technology, D-Link unmanaged switches deliver seamless connectivity and enhanced network efficiency without the need for complex setup or management.
Enterprise Networking Solutions:
Switches:
D-Links enterprise-grade switches are designed for high- performance networking in business environments. The range includes smart managed, managed, data centre, and industrial switches, offering features like 10 to 100 Gigabit connectivity, robust security, and flexible management solutions. These switches support high throughput, advanced software features, and Power over Ethernet (PoE) capabilities, making them ideal for demanding infrastructures. Further D-Links energy-efficient designs and support infrastructure ensures reliable and cost effective network operations. Surveillance:
D-Links surveillance solutions offer a diverse range of network cameras including IP and Analog options, supported by Network Video Recorders (NVRs) and D-Link Video Management Software (DVMS). Available in bullet and dome styles with resolutions from 2MP to 5MP, these cameras feature audio capabilities and infrared (IR) for night vision, ensuring reliable security monitoring in various settings. D-Link also provides essential accessories to complement their camera systems, facilitating comprehensive and scalable security solutions for businesses. With a focus on quality and innovation, D-Links products are designed to meet the rigorous demands of modern surveillance environments, offering enhanced operational efficiency and peace of mind.
Wireless:
D-Links enterprise wireless solutions cater to diverse business needs with robust and scalable networking options.
From access points to controllers and management software, their offerings ensure reliable connectivity and seamless integration for modern workplaces. Designed for efficiency and performance, D-Links enterprise wireless solutions empower businesses to enhance productivity and connectivity across their operations.
Structured Cabling:
D-Link Indias structured cabling solutions offer dependable connectivity tailored for diverse networking environments. Our portfolio includes a wide range of copper Solutions in UTP/STP (Cat5/cat6/Cat6A), Fiber Vertical & Horizontal solutions, and connectivity accessories, all engineered to facilitate seamless data transmission and ensure network reliability. With scalability and efficiency at the forefront, D-Links structured cabling solution enables straightforward deployment and maintenance, making them ideal for businesses looking to enhance their network infrastructure performance.
Network Enclosure:
D-Link Indias Network Enclosure portfolio encompasses a variety of robust solutions designed to accommodate diverse network setups. D-Links enclosures prioritize durability and ease of installation, catering to both small office environments and large- scale deployments. These solutions ensure reliable protection and efficient management of network infrastructure, enhancing operational efficiency across various business environments.
Financial Performance
The companys financial performance for the year ended March 31,2024, was strong. The Company posted a revenue of Rs. 1,22,742.64 lakhs as compared to Rs. 1,17,128.99 lakhs in the previous year. The Profit before Tax for the year under review was Rs. 12,166.26 lakhs as against Rs. 11,341.76 lakhs in the previous year, while Profit after Tax stood at Rs. 9,073.89 lakhs as against Rs. 8,433.39 lakhs in the previous year.
Key Financial Ratios
Sr. No. Particulars | FY 2024 | FY 2023 |
1 Current Ratio | 2.45 | 2.31 |
2 Return on Equity Ratio (%) | 23.38% | 26.05% |
3 Net Profit Ratio | 7.39 | 7.20 |
4 Earning Per Equity Share | 25.56 | 23.75 |
5 Trade payables turnover ratio | 4.55 | 4.77 |
6 Inventory Turnover Ratio | 9.32 | 8.28 |
7 Debtors Turnover Ratio | 3.83 | 4.40 |
Other financial ratios are disclosed in note 40 to the Standalone Financial Statement.
Human Resources
Your company provides a fair working environment and transparent policies to support the personal growth of employees, while also helping them achieve corporate objectives. Your Company will continue to maintain its focus on Human Development, as it considers its people resources central to meeting its business objectives. We are committed to creating a workplace where our employees can reach their full potential and make a significant contribution to our success.
HR is integrated within the business framework to provide a foundation for building the skill sets required. At D-Link, employees are given opportunities to develop their competence in challenging roles by leveraging on the exposure and responsibilities entrusted to them.
D-Links dedicated and talented workforce of more than 249 people across India has played a significant role in the Companys achievements and success.
Business Risks and Concerns Technology Risk:
The inability to stay up to date with the changing technologies and latest trends is detrimental to business. Digitalization is emerging as a disruptive force for customers, buyers and technology. This disruption coupled with changes in delivery models and consumer spending patterns, could be a threat to the growth in traditional IT spending and technology obsolescence. D-Link operates in an ever-evolving and dynamic technological environment, and it is of utmost importance that the Company continuously reviews and upgrades its technology, resources and processes lest it faces technological obsolescence. The company addresses this with strong support from its parent company on R&D so that it stays ahead of the curve in technology and continuously sets new benchmarks with cutting-edge innovation.
Cybersecurity Risk:
In the hyper-connected world we are in, the risk of cybersecurity incidents that can cause economic losses and/or breach of company and personal information is a reality for any business. In keeping with best practices, the Company has a robust intrusion prevention system in place, which coupled with the strong risk management framework protects the Company against possible cyber security threats. The Company continues to evaluate and assess on ongoing basis the threat landscape and takes measures as appropriate to safeguard against cyber-attacks.
Competition:
The IT services industry is highly competitive, with competition arising from local IT companies and MNC IT hardware companies having a sizable presence in low-cost technologies. The competition can lead to pressure on pricing, vendor consolidation and hence can impact Company growth and profitability. New competitors are emerging from adjacent markets and distant geographies.
D-Links differentiation strategy incorporating its unique business approach has led to its emergence as a leader in the dynamic IT industry. D-Link has developed competencies in various technologies, platforms and wide range of product options to customers based on their needs. The Company has deep domain knowledge, a skilled workforce, delivery capabilities and an efficient sales force to help retain its competitive positioning amongst peers.
Currency risks:
The Companys functional currency is the Indian Rupee and volatility in currency exchange movements results in transaction and translation exposure. D-Link has substantial exposure to foreign exchange related risks on account of imports of finished traded products from its parent group companies. The management predicts that the USD currency position will continue to remain volatiIe. D-Link has a well-established hedging poIicy which has been followed consistently over the past years. Hedging is undertaken to protect the Company from unfavourable currency movements and the Company does not undertake any speculative hedging.
Supply Chain Volatility:
Supply chain volatility is a complex and ever-changing challenge. The supply chains of the global semiconductor industry, which was severely affected after the pandemic and faced further disruptions due to the Russia-Ukraine conflict. Any sudden disruption of global and domestic supply chains poses a risk for the Company. The Company has the right strategies for mitigating the risks and protecting the supply chain.
Internal Control Systems and their Adequacy:
The Company has aligned its current systems of Internal Financial Control with the requirement of the Companies Act 2013. Management maintains internal control systems designed to provide reasonable assurance that assets are safeguarded, transactions are executed in accordance with managements authorization and properly recorded, and accounting records are adequate for the preparation of financial statements and other financial information. The internal audit function also carries out Operations Review Audits to improve the processes and strengthen control of the existing processes.
The Audit Committee periodically reviews the functions of internal audit.
D-Links internal control systems and procedures adhere to industry standards in terms of effective resource utilisation, operational efficiency and financial reporting. The Company has appointed reputable firms of Chartered Accountants to oversee and carry out Internal Audits. The Audit is based on an Internal Audit Plan, which is reviewed each year in consultation with the Audit Committee. In line with international practice, the conduct of Internal Audit is oriented toward the review of Internal Controls. The adequacy of the Companys internal controls is tested from time to time and control deficiencies, if any, identified during the assessments are addressed appropriately.
Disclaimer:
Certain statements made in this report relating to the Companys objectives, projections, outlook, estimates, etc. may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ from such estimates or projections etc., whether expressed or implied. Several factors, including but not limited to economic conditions affecting demand and supply, government regulations and taxation, input prices, exchange rate fluctuation, etc., over which the Company does not have any direct control, could make a significant difference to the Company operations. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned not to place undue reliance on any forward-looking statements. The MD&A should be read in conjunction with the Companys financial statements included herein and the notes thereto. Information provided in this MD&A pertains to D-Link (India) Limited unless otherwise stated.
For and on behalf of the Board | |
Tushar Sighat | Madhu Gadodia |
Managing Director & CEO | Director |
DIN: 06984518 | DIN: 07583394 |
Mumbai, Dated: May 11,2024 |
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