Diensten Tech Ltd Management Discussions

GLOBAL ECONOMY OVERVIEW

The year 2026 unfolded against a global economy that entered the period on a firmer footing than many had anticipated, only to be tested in its initial months by the outbreak of geopolitical conflict in the Middle East. Having absorbed successive waves of trade- policy uncertainty and elevated borrowing costs over the preceding two years, world output proved notably resilient through much of 2025. The conflict, however, disrupted energy markets, firmed up inflation expectations and prompted a wholesale re-evaluation of the interest-rate path that had been widely expected at the start of the year. According to the International Monetary Fund (IMF), global GDP growth averaged 3.5% in 2024-25, then moderated to 3.0% in calendar 2026.1

On the downside, the war in the Middle East and higher energy prices weigh most heavily on commodity importers and vulnerable emerging economies. On the upside, the technology cycle, driven by investment in and adoption of artificial intelligence (AI), is lifting economies that are well integrated into the global technology value chain.

Growth among the advanced economies remains subdued in 2026, with the United States projected at 2.3%, the euro area at 0.9%, the United Kingdom at 1.0%, Canada at 1.1%, and Japan at 0.6%. Emerging market and developing economies (EMDEs) continue to outperform, expanding by a projected 3.9%, led by China at 4.6% and by a cluster of technology-linked Asian economies. India retains its position as the fastest-growing major economy, underpinned by resilient private consumption and services activity.

The most consequential shift during the year was the interruption of global disinflation. According to the IMF, the global headline inflation is expected to rise to 4.7% in 2026, up from 4.1% in 2025, before easing to 3.9% in

2027. The revision is attributed chiefly to higher energy and food costs: crude oil is assumed to average close to US$89 a barrel in 2026, with energy prices running roughly 25% above their pre-conflict levels.

2026 marked a turning point for real estate, transitioning from stagnation to recovery after two years of declining values. Global property markets gained momentum with improved capital markets and limited development, showing divergence across sectors and regions. Transaction volumes reached about US$216 billion in early 2026, up 18% year-on-year, led by Asia-Pacifics 31%. In the US, commercial real estate investment is expected to grow 16% to US$562 billion, nearing pre- pandemic levels, with slight cap-rate compression. Recovery is uneven: industrial, residential, and data centres lead due to demand, while office and life-science sectors face challenges. India is the top destination for increased investment, with 86% of European and Asia- Pacific investors intending to invest more, followed by Canada (80%) and France (78%). The main factor influencing the market is policy rate movement; rising yields after conflict slowed the recovery pace, though the cycle remains strong and debt is available.

OUTLOOK

Risks to the global outlook remain tilted to the downside. A longer or wider conflict, greater geopolitical fragmentation, disappointment over AI productivity, or trade tensions could weaken growth and shake markets, with high public debt limiting policy room. Conversely, de-escalation, faster AI gains, and disinflation could lead central banks to ease policy and boost recovery.

For real estate, policy rates and energy prices will be crucial. Despite this, limited new supply, demand for logistics, data centres, housing, and returning liquidity support a continued recovery, especially for India, which has a growth premium and strong investor interest.

INDIAN ECONOMY OVERVIEW

India retained its position as the fastest-growing major economy in FY26. As per the Provisional Estimates released by the Ministry of Statistics and Programme Implementation (MoSPI) in June 2026, the Indian economy expanded by 7.7% in real terms in FY2025-26, an acceleration from the 7.1% growth recorded in FY2024- 25. Nominal GDP rose 8.9% to approximately Rs. 346.36 lakh crore. Growth momentum held firm throughout the year, with real GDP expanding 7.8% year-on-year in the fourth quarter (January-March 2026), underscoring the resilience of domestic activity amid persistent global trade uncertainty and geopolitical volatility.

The expansion was broad-based across sectors. The services sector, the largest contributor to GDP, grew by an estimated 9.1% during the year, with financial services, real estate, and professional services acting as the key drivers of services-sector growth. Industrial activity remained robust, with manufacturing expanding around 7.0%, while the construction sector, a bellwether for real estate, sustained healthy momentum. Sustained private consumption and elevated government capital expenditure continued to anchor demand.

On the price front, the macro environment became benign. Headline CPI inflation averaged 1.7% from April· December, driven mainly by food-price disinflation, while core inflation stayed subdued, indicating limited demand pressures. This easing allowed the Reserve Bank of India to cut rates: a total of 125 basis points since February 2025, along with liquidity measures, improved monetary transmission. Lower borrowing costs reduced home-loan rates, boosting affordability and housing demand.

Fiscal management remained disciplined, with strong tax revenue and controlled spending, supporting capital expenditure and keeping the FY26 fiscal deficit forecast at 4.4% of GDP. The emphasis on infrastructure-led growth benefited the built environment, with the Union Budget 2026-27 increasing public capital expenditure to Rs. 12.20 lakh crore from Rs. 11.20 lakh in FY26. Structural reforms enhanced the operating environment for real estate, including the National Real Estate Policy 2025s single-window clearance system and incentives for green developments. SEBIs reforms, like reclassifying mutual fund investments in REITs as equities from January 2026, boosted transparency and investor participation.

Taken together, a fast-growing economy, moderating inflation, an accommodative interest-rate cycle, rising urbanisation and continued policy support create a constructive demand environment for real estate.

INDIAN MSME SECTOR

Indias MSME sector remains key to the economy, contributing about 31.1% to GDP, 35.4% to manufacturing, and 48.58% to exports. Formalisation increased with over 8.7 crore registrations by June 2026 and employment nearly 38.9 crore. The revised MSME classification from April 2025 allowed enterprises to scale up, supported by measures like doubled collateral- free credit limits and CGTMSE support. In real estate, MSMEs drive demand and employment, especially in Tier-II and Tier-III cities, boosting commercial, industrial, and residential sectors.

OUTLOOK

Indias medium-term growth outlook remains one of the strongest among major economies. Projections from leading agencies estimate real GDP growth of about 6.5- 6.6% for FY2026-27, with the Reserve Bank of India and the World Bank forecasting 6.6%, and the IMF around 6.5%. This is despite global growth expected to slow to approximately 3.0% in 2026. In the near term, risks mainly stem from external factors such as high global energy prices, geopolitical tensions in West Asia, and changing trade and tariff policies. On the domestic front, growth remains robust, supported by resilient private consumption, low inflation, an accommodative interest- rate cycle, ongoing government capital spending, and continued urbanisation.

INDIAN STAFFING INDUSTRY

Indias organised staffing industry has shifted from a peripheral hiring channel to a core part of the talent supply chain over the past decade. It operates in two segments: general staffing for manufacturing, retail, logistics, and e-commerce, which involves high volume, rapid turnover, and thin margins; and IT staffing for technology professionals in IT services, GCCs, and enterprise tech, characterized by longer cycles, higher rates, and closer budget ties.

The business model relies on the staffing company being the employer of record, responsible for wages, benefits, and compliance, while the client controls the worker. This allows firms to turn fixed costs into variable costs, scale with demand, and gives workers formal employment. Scale, compliance, and financial strength, rather than recruitment reach, are the main entry barriers, leading to sector consolidation around organized players.

During FY 2025-26, the industry added approximately 1.18 lakh formal flexi workers, taking the workforce represented by members of the Indian Staffing Federation (ISF) to about 1.91 million, an increase of close to 8% year-on-year. General staffing accounted for 1.15 lakh of these additions, with 7.9% growth, while IT staffing returned to positive territory, with new employment growing 10.1% year-on-year after a subdued preceding cycle. The industry body has characterised the years performance as evidence that Indias staffing ecosystem has decoupled from a slowing global expansion to remain a primary engine of formal job creation.

The staffing industry mainly contributes by formalising jobs, turning undocumented work into jobs with payslips, provident fund, insurance, and employment records. This matters because Indias challenge is about job quality and security, not availability. Data shows organised manpower suppliers made up nearly half of net payroll additions in FY26, with most new workers aged 18-25, acting as the main entry point. Nationally, regular employment increased from 22.4% in 2024 to 23.6% in 2025, while self-employment and casual labour remained stable. Employment shifted from agriculture (43%) to manufacturing and services. This indicates a move toward formal, wage-based jobs, with staffing actively involved. Formalisation also boosts tax revenue through payroll, provident fund, and indirect taxes, unlike informal jobs.

GROWTH OPPORTUNITIES

The near-term opportunity set is focused on sectors with strong flexi-staffing demand for FY27: e-commerce, quick commerce, FMCG, retail, logistics, healthcare, pharmaceuticals, and GCC-led tech hiring. For IT staffing, the last sector is most accessible, offering longer deployments and lower churn than general staffing. Beyond headcount, durable opportunities include services like payroll, compliance management, recruitment outsourcing, contract-to-hire, and training programs, which deepen client relationships and improve margins. As labour codes elevate compliance, offering compliance as a managed service becomes a key differentiator. The platform and gig economy, with Indias gig workforce expected to grow from 77 lakhs in 2020-21 to 2.35 crore by 2029-30, presents further opportunities. Non-agricultural gig work may comprise 6.7% of the workforce by then, adding about Rs. 2.35 lakh crore to GDP. Labour codes integrating gig workers into social security frameworks narrow the gap between platform work and organized staffing, positioning provides well. Two gaps·female participation at 40.0% in 2025 versus 79.1% for men, and a quarter of 15-29-year-olds outside employment, education, or training·represent a latent demand for sourcing, skilling, and onboarding, addressable through geographic expansion into tier-II and tier-III markets where formal employment infrastructure is limited.

OUTLOOK

The outlook for the Indian staffing industry is positive but cautious in the near term. FY26 Q4 data shows stabilisation, with net flexi employment up 0.9% after a seasonal slowdown. General staffing grew over 0.9%, while IT staffing rose 0.2%, indicating an uneven recovery in tech hiring. Global macroeconomic headwinds have slowed hiring worldwide, though Indias staffing sector continues to grow. The key drivers- a young workforce entering formal employment, a regulatory framework favouring compliance, ongoing GCC and tech demand, and a skills gap bridged by organised intermediaries, remain strong. These factors suggest continued growth of the organised sector ahead of overall employment, with further consolidation due to rising compliance costs for smaller operators. Next year, important factors include state-level rule updates under labour codes, wage inflation and pass-through effects, indirect tax treatment of manpower services, global tech spending trends affecting GCC hiring, and pricing competition as players formalise the market.

INDIAN IT FLEXI STAFFING

IT flexi staffing supplies technology professionals on temporary, contractual, or project-based engagements, with the staffing company as the employer of record and the client directing work. Unlike general staffing, deployments are longer (quarters), with higher bill rates, margins, and lower replacement churn. Success depends on specialist talent depth rather than speed. The segment is tied to enterprise tech budgets, making it sensitive to capital expenditure cycles but less affected by seasonal retail or logistics shifts. India, the second-largest IT flexi staffing market in South Asia- Pacific, benefits from a strong talent pool, established IT services, and growth in global capability centres. In FY 2023-24, the Indian market was valued at USD 4.9 billion with around 597,000 professionals, projected to grow 7% CAGR through FY 2025-26.

The IT client base is concentrated, with IT and IT-enabled services companies and GCCs making up half the market, employing 49% of the IT flexi staffing workforce and contributing around 51% of value. The rest is spread across banking, manufacturing, telecom, healthcare, and the public sector, each vying for the same tech talent after expanding their in-house tech in the past decade. Geographically, the market is expanding beyond traditional corridors to cities like Ahmedabad, Coimbatore, Visakhapatnam, Surat, Kochi, and Nagpur, driven by cost savings, better digital infrastructure, and GCCs willingness to distribute delivery across multiple sites. This dispersion alters staffing providers operating models, requiring broader sourcing networks, compliance, and payroll infrastructure beyond metros.

FY26 was a year of two distinct halves for the segment. IT staffing recorded 10.1% year-on-year growth in new employment over the full year, comfortably ahead of the 7.9% recorded by general staffing, and represented a clear return to growth after a subdued preceding cycle.

GCCs made up 73% of new IT hires, mainly in AI, machine learning, cloud, cybersecurity, and data engineering. A new category for applied AI roles emerged later, including prompt engineering and QA. Traditional IT services hiring stayed subdued due to global uncertainty, with growth driven by a specific client cohort rather than a broad recovery. Momentum was uneven throughout the year. IT staffing started FY26 strong, with a 5.5% quarter- over-quarter and 12.3% year-over-year growth in Q1, amid overall flexi employment deceleration to 6.1%, its slowest since 2020. By Q4, IT staffing growth slowed to

0.2%. The full-year figure reflects early gains, which were consolidated rather than extended in the second half.

The main challenge in IT flexi staffing isnt candidate availability but the availability of current, deployable skills. Demand favours AI, cloud, data, and security skills, yet certified professionals in these areas are scarce. This shift in staffing focus from sourcing to capability building, assessment, training, certification, and bench management influences fill and bill rates. Workforce diversity is another key factor. Female participation is about 37%, higher than the national average, especially in states with strong tech infrastructure and inclusive policies. Delhi-NCR leads with a 55:45 male-to-female ratio, serving as both a client differentiator and an expansion of the talent pool.

OUTLOOK

The outlook for IT flexi staffing is positive structurally but cautious cyclically. GCC-led technology hiring is a major source of demand for FY 2026-27, driven by the migration of high-value engineering, data, and security work into India-based centres, a multi-year trend. The rise of applied AI roles adds a new, rapidly growing demand that didnt exist two years ago. The implementation of four labour codes from November 2025, providing parity for fixed-term employees and gratuity after one year, increases compliance and costs, favouring scaled, compliant providers but squeezing margins for those unable to pass costs.

Key focus areas include the pace of GCC mandate additions, the sustainability of AI-linked demand beyond pilots, the recovery in traditional IT services, and providers ability to convert skilling into pricing power.

COMPANY OVERVIEW

Diensten Tech Limited is an IT services company offering professional resourcing, staffing, IT consultancy, managed services, corporate training, and digital learning solutions. It helps clients build and scale technology capabilities without fixed costs. Originally named JKT Consulting Limited and renamed in 2021, it strengthened its staffing and training through acquiring JK Technosoft Limiteds Professional Services and Training business in April 2022. Listed on NSE Emerge, the company focuses on the specialist flexi staffing market, which involves longer deployments, higher rates, and lower churn than volume staffing. This positioning favors stable demand tied to enterprise tech budgets over seasonal cycles, providing resilience against fluctuations.

The Companys revenue is generated across a set of related service lines, each addressing a different point on the clients capability curve:

• Contract and contract-to-hire services: Deployment of technology professionals on defined-term engagements, with the option for the client to absorb the resource into permanent employment.

• Professional staffing: IT staff augmentation across enterprise technology functions, with the Company as employer of record.

• IT and infrastructure services: Support and delivery capability across enterprise infrastructure, applications and associated technology operations.

• Managed services: Outcome-linked engagements in which the Company assumes responsibility for a defined service rather than for individual headcount.

• Statement of work services: Project-scoped delivery against agreed deliverables and milestones, sitting between staff augmentation and full managed services on the risk and pricing spectrum.

• Learning solutions and corporate training: Technology, behavioural and domain-specific training together with e-learning and digital content solutions, a capability that also supports the Companys own bench readiness.

These services span IT, telecommunications, banking, automotive, healthcare, retail, and entertainment, diversifying the companys exposure and offsetting IT sector hiring softness. The company uses an employer- of-record model, handling wages and compliance while clients direct operations. Compliance and financial strength are assets that equalise benefits for fixed- term staff. Delivery depends on sourcing and screening skills to convert a large candidate pool, with demand now focused on AI, cloud, data, and security skills. The company is at the crossroads of Indias workforce formalisation and the shift of high-value tech work to India-based centers, shaping its financial and operational performance.

FINANCIAL PERFORMANCE

The financial year ended 31 March 2026 was a year of scale expansion and a return to profitability for the Company. Revenue from operations more than doubled, and the Company moved from a loss position in the preceding year to a modest profit, marking an inflection in the operating model rather than an incremental improvement on it.

FINANCIAL HIGHLIGHTS

(Rs. IN CRORES)

Particulars	FY 2025- 26	FY 2024- 25	Change
Revenue from operations	139.36	64.86	+114.9%
Net profit / (loss)	0.41	(2.12)	+2.53
Net profit margin	0.29%	(3.27)%	+356 bps

Revenue increased to Rs. 139.36 crore in FY 2025-26 from Rs. 64.86 crore, a rise of Rs. 74.50 crore or 114.9%. Growth was mainly due to higher demand for staffing services, expanding existing client engagements, and volume growth in IT staffing. The growth rate was much higher than the overall staffing industry, indicating a share gain rather than market growth.

The Company earned Rs. 0.41 crore profit, reversing a Rs. 2.12 crore loss from last year, a Rs. 2.53 crore change. This underscores the staffing models operating leverage: a larger revenue base helped absorb fixed costs for delivery, sourcing, and administration. Cost control and resource use improvements lowered expenses per associate. Managing the bench and maintaining fill-rate discipline are crucial, as idle bench costs heavily impact staffing margins.

The Company acknowledges that net margin for the year, at 0.29% of revenue, remains modest. This is partly structural, as staffing revenue is booked on a gross basis and includes associate wages and statutory costs, making margins across the industry inherently low. Still, it provides a foundation to build upon.

Looking ahead, management is focused on strengthening margin quality rather than chasing volume, by shifting towards managed services and statement-of-work engagements, maintaining pricing discipline on renewals, and enhancing skilling capabilities to support deployment into higher-value roles.

OPPORTUNITIES

The Company continues to witness significant opportunities arising from changing workforce dynamics and increasing demand for specialised talent solutions. The principal opportunities are set out below.

• Growing adoption of flexible staffing models drives industry growth, adding about 1.18 lakh flexi workers in FY 2025-26. As companies shift to variable costs, the market for contract and contract- to-hire expands.

• Demand for IT, digital, engineering, and niche professionals centers on AI, machine learning, cloud computing, cybersecurity, and data engineering. Supply falls short of these needs, creating opportunities for filling roles and increasing prices.

• Expansion of Global Capability Centres in India. GCCs made up about 73% of new IT staffing mandates in FY 2025-26. The shift of high-value engineering, data, and security work to India-based centres is a long-term structural change, favoring providers with specialized rather than volume focus.

• Adoption of AI-driven recruitment and digital HR solutions streamlines sourcing, screening, matching, and compliance, reducing time-to-fill and costs, thus improving margins on current volume. AI has become a distinct demand category, with roles like prompt engineering and AI quality assurance emerging in FY 2025-26.

• Demand for learning, reskilling, and workforce development services is high. Few in India have formal vocational or technical certification, and about a quarter of those aged 15-29 are not in employment, education, or training. The Companys learning and development serve as both a revenue stream and a way to convert candidates into deployable staffing supply.

• Hiring activity in tier II and III cities is growing as IT flexi staffing expands beyond major tech corridors into cities like Ahmedabad, Coimbatore, Visakhapatnam, Surat, Kochi, and Nagpur. Distributed delivery footprints and cost advantages support this shift, favoring providers with broader sourcing, compliance, and payroll infrastructure.

• Focus on diversity, equity, and inclusion. Female participation in IT flexi staffing averages 37%, well above the national female labor force rate. Diversity commitments are now part of client evaluation, serving as a competitive edge and expanding the talent pool.

• The four labour codes effective from 21 November 2025 formalise the workforce, raising compliance standards across hiring. This benefits organised, audited providers over unorganised contractors who have historically competed on cost by under- compliance.

THREATS

• The Company operates in a competitive business environment and remains exposed to a number of external and structural risks.

• Revenue is concentrated in one service line, with IT staffing making up about 98% of revenue. This reflects the companys focus on specialists but also means a downturn in enterprise tech hiring could significantly impact the company. To mitigate this risk and promote growth, the company aims to diversify its revenue across managed services, statement of work, and learning solutions.

• Economic slowdown is impacting hiring, with staffing demand tied to enterprise confidence and global tech spending. Q4 FY 2025-26 data shows IT staffing growth slowed to 0.2%, highlighting high quarterly volatility even in a strong year.

• Competitive intensity and pricing pressure increase as formalisation shifts volume to organised providers, intensifying competition for mandates. The thin net margin means slight bill rate reductions or higher bench costs disproportionately impact profitability.

• Changes in labour laws and regulations aim for parity between fixed-term and permanent employees, including wages and benefits, with gratuity after one year of service. Central and state rules are pending notification. Wage and gratuity cost inflation poses a margin risk as it cant always be passed through in bill rates, and compliance obligations will evolve during the transition.

• Rapid technological change demands ongoing investment in assessment, training, certification, and sourcing platforms to keep up with faster skill demand shifts, surpassing traditional training cycles.

• Cybersecurity and data privacy risks are significant. Digital recruitment platforms and payroll systems hold large amounts of personal data. Breaches could lead to regulatory, contractual, and reputational damage, and client due diligence on information security is now standard in evaluations.

• Talent shortages in specialised skills mainly stem from deployability constraints, not availability. This limits converting mandates into billed deployments and drives up associate pay.

• Staffing businesses face client concentration and receivables risk because they incur wage costs before collecting payments, making the working capital cycle sensitive to payment delays or defaults by major clients that could harm liquidity and profitability.

BUSINESS SEGMENTS

• The Company offers comprehensive workforce solutions across a set of related service lines, each addressing a different point on the clients capability curve.

• Contract staffing. Deployment of personnel on defined-term engagements, with the Company as employer of record carrying the associated statutory and compliance obligations.

• Professional staffing. Staff augmentation across enterprise functions, including contract-to-hire arrangements that allow clients to absorb resources into permanent employment.

• IT staffing. Supply of technology professionals to enterprise technology functions, IT services organisations and global capability centres. This is the Companys core segment.

• Infrastructure staffing. Support and delivery capability across enterprise infrastructure, applications and associated technology operations.

• Learning and development solutions. Technology, behavioural and domain-specific training together with e-learning and digital content solutions, supporting both client requirements and the Companys own bench readiness.

• Managed services. Outcome-linked engagements in which the Company assumes responsibility for a defined service rather than for individual headcount, carrying a different risk and pricing profile from staff augmentation.

The IT staffing business continued to be the Companys principal revenue contributor during the year, accounting for approximately 98% of total revenue. Demand remained strong from clients operating in banking, financial services and insurance, healthcare, retail, telecommunications, technology services and other sectors driven by digital transformation. This concentration is a direct consequence of the Companys specialist positioning and has served it well during a year of rapid revenue expansion. Management is nonetheless conscious that a broader revenue base would improve resilience, and the development of managed services, statement of work engagements and learning solutions into meaningful contributors remains a stated priority for the years ahead.

RISKS AND CONCERNS

The staffing industry is influenced by overall economic activity and employment trends. The Company continuously monitors emerging risks and adopts appropriate mitigation strategies.

Major risks include:

• Changes in macroeconomic conditions affecting client hiring plans.

• Regulatory and statutory compliance requirements.

• Dependence on availability of qualified talent.

• Client concentration and competitive pricing.

• Information security and protection of employee and client data.

• Rapid technological changes in recruitment and workforce management.

The Company has established appropriate internal processes and compliance mechanisms to identify, monitor, and mitigate these risks.

Internal Control Systems and Their Adequacy

The Company has established adequate internal control systems commensurate with the size and nature of its business. These controls are designed to ensure operational efficiency, safeguarding of assets, compliance with applicable laws and regulations, reliability of financial reporting, and timely identification and mitigation of business risks.

The internal audit function periodically reviews the effectiveness of internal controls, and significant observations, along with corrective actions, are presented before the Audit Committee for review.

HUMAN RESOURCES

The Companys employees remain its most valuable asset. As on March 31, 2026, the Company continued to maintain a diverse and competent workforce comprising experienced professionals and young talent.

The Company continued to invest in:

• Employee training and skill development.

• Leadership development initiatives.

• Compliance and workplace safety awareness.

• Employee engagement programmes.

• Diversity, equity, and inclusion initiatives.

• Performance management and career development.

• Industrial relations remained cordial throughout the year.

OUTLOOK

The long-term outlook for the Indian staffing industry remains positive, supported by continued economic growth, digital transformation, increasing formalization of employment, and rising demand for flexible workforce solutions.

The Company remains committed to expanding its customer base, strengthening strategic client relationships, leveraging technology-enabled recruitment platforms, enhancing operational efficiency, and delivering value-added workforce solutions.

Management believes that its focus on quality service delivery, customer-centric approach, digital capabilities, and prudent financial management will support sustainable growth and improved financial performance in the coming years.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis that discuss the Companys goals, forecasts, estimates, or expectations may be considered "forward-looking statements" under applicable laws and regulations. Actual outcomes could differ significantly from these statements due to factors such as economic conditions, government policy changes, market trends, competition, technological advances, and other risks outside the Companys control. The Company is not obligated to update or revise any forward-looking statements publicly in light of future developments or events.