Esconet Technologies Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management of Esconet Technologies Limited is pleased to present the Management Discussion and Analysis Report (MDAR) for the financial year ending March 31, 2024, in accordance with the SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations 2015.

Esconet Technologies Limited (ETL) is a leading system integrator operating in the IT infrastructure, cloud computing, managed services, and data security sectors. Over the years, ETL has evolved from a hardware and software vendor to a trusted advisor, manufacturer, integrator, and service provider for numerous private and public sector organizations.

This report aims to provide a comprehensive analysis of the companys performance, industry dynamics, operational highlights, and future outlook. This outlook is based on assessment of current business environment. It may vary due to future economic and other developments both in India and Abroad.

It contains financial highlights but does not contain the complete financial statements of the Company. It should be read in conjunction with the Companys Audited Financial Statements for the year ended on March 31,2024.

INDUSTRY OVERVIEW

The IT sector continues to witness a paradigm shift propelled by technological innovation and digital transformation. Esconet Technologies operates at the forefront of this evolution, leveraging its expertise to integrate complex IT systems and deliver tailored solutions to clients across diverse industry verticals. In an era characterized by cloud adoption, data proliferation, and cybersecurity concerns, ETLs role as a system integrator has become increasingly pivotal in ensuring seamless operations and safeguarding critical assets for organizations.

COMPANY OVERVIEW

Esconet Technologies Limited is an IT solutions provider founded in 2012, which offers a wide range of services including high-end supercomputing solutions, data center facilities, storage servers, network security, virtualization, and data security. Their solutions cater to the needs of SMEs, large enterprises, and public sector clients.

Esconet has built a solid reputation by delivering customized strategies and solutions that enable its clients to succeed in the rapidly evolving technology landscape. They have gained valuable experience and a loyal customer base of private and public sector organizations.

Esconet Technologies business operations span multiple segments, each contributing uniquely to the companys overall success. The IT infrastructure segment encompasses hardware, networking, and storage solutions, where ETL excels in architecting scalable and resilient IT environments. In the realm of cloud computing, ETL offers end-to-end cloud solutions, encompassing migration, optimization, and management services, tailored to clients specific requirements. The managed services segment encompasses proactive monitoring, maintenance, and support services, ensuring optimal performance and reliability of IT infrastructure. Lastly, ETLs expertise in data security encompasses robust cybersecurity solutions, safeguarding organizations against evolving threats and vulnerabilities.

Esconet Technologies Limited is well-equipped to address the server, storage, network, security, virtualization and data protection requirements of SMEs, large enterprises, and public sector customers. Esconet Technologies Limited stands as a leader in providing innovative and comprehensive IT solutions. With a focus on cutting-edge technology and tailored client strategies, Esconet empowers businesses to navigate the rapidly evolving tech landscape efficiently.

FINANCIAL PERFORMANCE

Your Company reported a 45.23% rise in revenues from operations to Rs 137.48 crore, compared to Rs 94.66 crore in FY23. EBITDA increased by a substantial 53.01% to Rs.9.74 crore in FY24, up from Rs.6.36 crore in the corresponding previous fiscal year.

In H2FY24, the companys revenue from operations declined to Rs 66.20 crore, down from Rs 71.28 crore in H1FY24, representing a decrease of around 7.13%. The decline in revenue is primarily attributed to the nearby General Elections, which slightly impacted the companys operations during this period. EBITDA in H2FY24 was Rs.4.53 crore down from Rs.5.20 crore in H1FY24, PAT was Rs.2.25 crore compared to Rs.3.04 crore in H1FY24.

On a consolidated basis, revenue from operations registered a growth of 48.48% to Rs.140.55 crore in FY24 from Rs.94.66 crore in FY23. EBITDA in FY24 grew by 60.56% to Rs.10.22 crore from Rs.6.36 crore. The company reported an EBITDA margin of 7.27% in

FY24, an improvement of 55 basis points from 6.72% over the previous year. PAT for the full year stood at Rs.5.43 crore, up by 79.21 % from Rs.3.03 over the previous corresponding period.

These numbers are largely driven owing to strong tie ups and rapid execution in Sales, better brand visibility & higher quality training, leading to relatively better realizations and increasing the proportion of higher margin product sales, a strategy which has started to yield significantly positive results.

OUR COMPETITIVE STRENGTHS

1. Strong Brand value.

2. Most of our clients give us repeat orders and have been with us for last many years

3. Cost effective and Quality Manufacturing

4. Strong Geographical Footprint

5. Efficient after sales Support Teams

OPERATIONAL HIGHLIGHTS

Esconet Technologies continued to strengthen its operational capabilities during the year. We made significant investments in research and development to enhance our product offerings and maintain our competitive edge in the market. Our sales and marketing efforts were intensified to penetrate new market segments and acquire new clients. Additionally, we focused on optimizing our supply chain and operational efficiency to ensure timely delivery of products and services to our customers.

RISK MANAGEMENT AND COMPLIANCE

Esconet Technologies Limited recognizes the importance of robust risk management and compliance practices in safeguarding our business operations and preserving stakeholder value. We have implemented comprehensive risk management frameworks to identify, assess, mitigate, and monitor risks across various dimensions, including operational, financial, regulatory, and cybersecurity. Additionally, we remain committed to upholding the highest standards of corporate governance and regulatory compliance in accordance with SEBI LODR Regulations, The Companies Act, 2013 and other applicable laws, Rules and Regulations as applicable from time to time.

THREATS

While Esconet Technologies operates in a promising industry, we acknowledge the presence of certain risks that may impact our business operations. These risks include intense competition, rapid technological advancements, cybersecurity threats, and regulatory challenges. To mitigate these risks, ETL has implemented robust risk management frameworks, including regular risk assessments, cybersecurity protocols, and compliance measures. Furthermore, we remain vigilant and adaptive to market dynamics, enabling us to proactively address potential challenges.

The Company is concerned about prevailing exposure norms, financial position, entry of new players in the market, rising competition, uncertain business environment, fluctuation in rupee, likely increase in cost of capital due to volatile market conditions. Further, the state of business and policy environment in the country also has a cascading effect on the interest-rate regime, cost and availability of raw materials and gestation period & capital outlays required for raw material. General economic conditions may also affect the capacity and production of the manufacturing of the products.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company at present is engaged in the Information Technologies Services which constitutes a single business segment. In view of above, primary and secondary reporting disclosures for business/ geographical segment as envisaged in AS -17 are not applicable to the Company.

FUTURE OUTLOOK

The Company believes that customers will continue to spend on IT, looking for better value from their IT spend and a deeper relationship with service providers. Esconet Technologies Limited has built lasting relationships with clients and continues to build capabilities in high potential domains. On the margin front, while the Company is making investments for long term growth, some of which has already happened, it is also taking measures to improve profitability during FY25. Over the long term, the Company should be able to deliver good performance as its strategic initiatives begin to yield results.

Looking ahead, Esconet Technologies is well-positioned to capitalize on emerging opportunities in the IT sector. We remain committed to driving innovation, delivering exceptional value to our customers, and maximizing shareholder returns. With a focus on product differentiation, market expansion, and operational excellence, we aim to sustain our growth momentum and achieve long-term success.

THREATS, RISKS AND CONCERNS

The Company is concerned about financial position, entry of new players in the market, rising competition from new entrants, uncertain business environment, fluctuation in rupee, and likely increase in the cost of capital due to volatile market conditions.

Further, the state of business and policy environment in the country also has a cascading effect on the interest-rate regime, cost and availability of human resources.

INTERNAL CONTROL SYSTEMS

Your company has in place adequate systems of internal control. These have been designed to provide reasonable assurance with regard to maintaining proper accounting controls, efficiency of operations, protecting assets from unauthorized use or losses and ensuring reliability of financial and operational information. Your Company continued its efforts to align all its process and control with best practices and is also controlling its operating process through well-defined various international standard certification and accreditation and some of them are listed below. Some significant features of the internal control systems are preparation and monitoring of annual budgets, internal audit and its review, clear delegation of authority and responsibility, corporate policy on accounting and periodic management meeting to review operation and plans in business areas.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFORE

ENVIRONMENT CARE, SOCIAL ACCOUNTABILITY AND QUALITY SYSTEM

Esconet Technologies Limited is committed to maintaining the highest standards of social accountability & quality standards. Ensuring sound corporate governance is imperative to improve and retain investors trust.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES AND INDUSTRIAL RELATION FRONT INCLUDING NUMBER OF PEOPLE EMPLOYED

Our Company believes that a good Human Resource Policies are very effective for supporting and building the desired organisation culture and to maintain the same our company taking actions on the day-to-day problems of the organization. The Company continues to focus on creating strong and long-term relationship with all employees as employee retention and development are among the highest priorities of the Company.

The Company is working on enhancing its competencies to take care of current and future business. Its employee strength as on March 31,2024, was 40 and 10 number of the contractors to execute the assignment of the Company. Human Resource and Industrial Relations departments have developed systems and policies on recruitment, performance management, learning and development, and employee engagement. Providing and ensuring health, safety, and environment for all became an imperative and required significant commitment more than ever before under the new pandemic situation. The other critical need was to maintain employee engagement at very high levels in a tough environment.

MANAGEMENT COMMENTS:

We understand the importance of adapting to changing market conditions and evolving customer needs and believe that continuous improvement is key to staying ahead of the competition. Our focus is on streamlining processes, improving efficiency, and leveraging technology to drive growth and improve client satisfaction. Our aim is to create a more agile and innovative organization that is better equipped to respond to market changes and capitalize on new opportunities.

We align with our goal of bolstering our financial performance by Increasing our profitability, while growing revenues strongly. We are confident that this transformation will position our company for long-term success and growth, and we look forward to working with our team to make this vision a reality.

In conclusion, Esconet Technologies Limited has delivered a strong performance in the fiscal year 2023-24, marked by revenue growth, operational efficiency, and strategic initiatives. As we navigate through dynamic market conditions, we remain steadfast in our commitment to excellence, innovation, and sustainable growth. We extend our gratitude to our shareholders, customers, employees, and stakeholders for their continued support and trust in Esconet Technologies.

We would like to thank our employees for their efforts and our investors/stakeholders for their continued trust, support and encouragement.

CAUTIONARY STATEMENT AND DISCLAIMER

> This section of the Annual Report has been included in adherence to the spirit enunciated in the Code of Corporate Governance approved by the Securities and Exchange Board of India. Shareholders and Readers are cautioned that in the case of data and information external to the Company, though the same are based on sources believed to be reliable, no representation is made on its accuracy or comprehensiveness. Further, utmost care has been taken to ensure that the opinion expressed therein contain its perceptions on most of the important trends having a material impact on the Companys operations.

> The opinions expressed by the management may contain certain forward-looking statements in the current scenario, which is extremely dynamic and increasingly fraught with risk and uncertainties. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this report, consequent to new information, future events, or otherwise. Estimation and expectation made in the Report may differ from actual performance due to various Economic conditions, Government Policies and other related factors.

> The management has tried wherever possible to identify such statements by using words such as ‘anticipate, ‘estimate, ‘expects, projects, ‘intends, ‘plans, ‘believes, and words of similar substance in connection with any discussion of future performance. The management cannot guarantee that these forward-looking statements will be realised, although we believe we have been prudent in assumptions. The operations of the Company may be affected due to various reasons like changes in political and economic front of the country; fluctuations in exchange rate, tax laws, litigations, labour relations, interest costs and overall scenario of the infrastructure sector. Hence, the achievements of results are subject to risks, uncertainties, and even inaccurate assumptions. Should know or unknown risks or uncertainties materialise, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated, or projected. Readers should keep this in mind. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.