datasoft applications software india ltd Management discussions

A. Indian Economic Overview:

According to NASSCOM Insights, the COVID-19 crisis has amplified the existing challenges faced by traditional banking business models. Factors such as revenue pressure, low profitability due to low-interest rates and high capital levels, stricter regulations following the previous financial crisis, and increasing competition from shadow banks and new digital entrants have become more pronounced.

The pandemic has accelerated the adoption of digital ecosystems, with more individuals incorporating electronic payment systems into their daily lives. Traditional financial services are undergoing a transformation through digitalization. Consequently, banks are facing greater pressure to become “digital-first” businesses and compete with established service providers.

By the end of 2023, many banks are expected to transition into pure technology businesses, leveraging their extensive customer bases and distribution networks to offer digital solutions. This transformation highlights the importance of partnering with the right company to successfully execute digital strategies.

B. Outlook:

Software product sector has evolved substantially over the past few years. Growing at >10% CAGR from 2019-22 to reach $13.3 Bn the growth has been propelled by cloud shift and global market penetration. Software product industry has outperformed the overall industry growth in FY2022E and has grown by 18.7% compared to the tech industry which has grown by 16.3% in the same period.

Software as a service (SaaS), Enterprise Digitization, and SMBs are the key enablers for this growth with SaaS global market share alone growing by 2X - indicating strong acceptance of Indian products globally. If we talk about horizontals, customer relationship management, and enterprise resource planning continues to dominate software product business accounting for ~50% of the revenue, new emerging horizontals like DevOps, Dev Tools, content/data, management, etc also getting traction. Software products see high acceptance in verticals like BFSI and Hi-Tech accounting for ~65% of the revenue, other verticals generating revenue are manufacturing, retail, telecom etc.

C. Industry structure and development:

Indias software products sales are likely to hit $30 billion mark by 2025, as domestic companies expand their footprints globally and many new players get into the products space, according to a report by industry body Nasscom and market research company Unearth Insight.

Indias software product unique value proposition has helped the growth of the sectors substantially. India software product companies managed to tweak their products to adjust to the market needs. They customize prices and offer different pricing models to its customer. The solution developed by these companies is cloud-ready which makes them scalable and easy to deploy. Another uniqueness they have is the majority of products offered by Indian firms is easily extensible through native integration and open APIs. Another important value proposition is easy implementation where all maintenance activities can be done over the air (OTA) via the cloud.

Positive outlook for the industry with SaaS product expected to dominate with $30-40 Bn revenue potential of B2B SaaS players by 2030, Deep tech penetration in software product expected to reach 40-60%, verticalization to become more prominent with >50% products to be vertically focused by 2030. Emerging areas like low code no code, APIs etc. will further amplify the software product ecosystem growth.

D. Opportunities and Threats:

The increasing adoption of digital banking and lending solutions presents significant opportunities for Fintech companies like Datasoft Application Software (India) Limited. As more consumers and banks shift towards digital platforms, there is a growing demand for innovative and user-friendly software solutions that were previously unavailable. Nucleus Software is well-positioned to capitalize on this trend by providing advanced software platforms that support digital banking and lending services while ensuring the highest levels of security and compliance. Additionally, emerging technologies such as artificial intelligence and machine learning offer opportunities to enhance credit risk assessments and improve the efficiency and accuracy of financial services.

Another potential threat is the risk of cyber security breaches. With more financial transactions taking place online, Fintech companies need to invest in robust security measures to protect customer data and maintain their trust. We recognizes the importance of cyber security and is committed to implementing stringent security protocols to safeguard sensitive information.

Moreover, the Fintech industry is subject to regulatory scrutiny as it disrupts the traditional financial sector. Navigating complex regulatory frameworks and complying with evolving regulations require ongoing efforts and resources. Our Company is dedicated to ensuring compliance with regulations and proactively adapting to regulatory changes to operate within legal boundaries.

Additionally, Fintech companies could face challenges in an economic downturn, as consumers and businesses become more cautious with their spending. This may lead to a decrease in demand for financial services. To mitigate this threat, Company will focus on enhancing its product offerings, exploring new markets, and strengthening customer relationships to weather potential economic challenges.

E. Segment-wise or product-wise performance:

The Company is operating in only one segment i.e. Software Products. Therefore, there is no requirement of Segment wise reporting.

F. Risks and concerns:

Changes in the buyer behavior cause disruptions in the market and can impact the Company. Preference for a Subscription/cloud based purchases is gaining prominence while buying decisions are shifting from enterprise to granular purchase. Customer engagement is also shifting from traditional in-person engagement to virtual multi-point engagement. Such disruptive changes impact the industry dynamics, could provide room for emergence of new competition. The Company faces competition from traditional as well as new vendors across the globe. Legal risk is the risk of loss to the Company primarily caused by a claim being made, or some other event occurring, which results in a liability for the Company or failing to take appropriate measures to protect assets owned by the Company.

G. Internal control systems and their adequacy:

Internal control systems are a set of, processes and procedures put in place to help achieve the strategic objectives of an organization. Good controls encourage operational efficiency and compliance with laws and regulations, as well as minimizing the chance of errors, theft and fraud. At the same time internal controls also enhance the reliability and accuracy of accounting data.

The Company has an Internal Control System commensurate with the size, scale and complexity of its operations. This has been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance of corporate policies.

H. Discussion on financial performance with respect to operational performance:

The financial performance of the Company for the Financial Year 2022-23 is described in the report of Board of Directors of the Company.

I. Material developments in Human Resources / Industrial Relations front including number of people employed:

The cordial employer - employee relationship also continued during the year under the review. The Company has continued to give special attention to human resources.

Registered Office: By the Order of the Board

Plot No. OZ-13, Sipcot Hi-Tech SEZ, For, Datasoft Application Software (India) Limited

Oragadam, Sriperumbudur, Kancheepuram,

Tamil Nadu - 602 105

Sd/-

Sd/-

Place: Kancheepuram, Tamil Nadu Date: 6^th September, 2023

Uma Nandam

Director

DIN:02220048

Karuppannan Tamilselvan Director DIN:09542029