Euphoria Infotech (India) Ltd Management Discussions

FY2024 represents the fiscal year 2023-24, from 1 April 2023 to 31 March 2024, and analogously for FY2023 and previously such labelled years.

More than four years after the global economy suffered the largest shock of the past 78 years, the wounds are still healing, amid widening growth divergences across regions. After a strong initial rebound from the depths of the COVID-19 pandemic, the pace of recovery has moderated. Several forces are holding back the recovery. Some reflect the long-term consequences of the pandemic, Russias war in Ukraine, and increasing geo-economic fragmentation. Others are more cyclical, including the effects of monetary policy tightening necessary to reduce inflation, withdrawal of fiscal support amid high debt, and extreme weather events. Despite signs of economic resilience earlier this year and progress in reducing headline inflation, economic activity is still generally falling short of pre-pandemic (January 2020) projections, especially in emerging market and developing economies.

The strongest recovery among major economies has been in the United States, where GDP in 2024 is estimated to exceed its pre-pandemic path. The euro area has recovered, though less strongly—with output still 2.8 percent below pre-pandemic projections, reflecting greater exposure to the war in Ukraine and the associated adverse terms-of-trade shock, as well as a spike in imported energy prices. In China, the pandemic-related slowdown in 2022 and the property sector crisis contribute to the larger output losses of about 4.2 percent, compared with pre-pandemic predictions. Its GDP grew by 4.7%, which was below expectations of a 1.1% increase. The secondary industry (manufacturing and industry) saw the highest growth rate at 5.8%, followed by the tertiary sector (services) at 4.6%, and the primary sector (agriculture and resource extraction) at 3.5%. Other emerging market and developing economies have seen even weaker recoveries, especially low-income countries, where output losses average more than 6.5 percent. Higher interest rates and depreciated currencies have exacerbated the difficulties of low-income countries, placing more than half either at high risk of distress or already in distress. Overall, global output for 2024 is estimated at 3.2 percent. This is the same rate of growth as in 2023, and the WEO also predicts that global inflation will continue to decline, from 6.8% in 2023 to 5.9% in 2024. However, the WEO also notes that services inflation could make it difficult to normalize monetary policy, which could lead to higher interest rates in the future. Private consumption has also recovered faster in advanced economies than in emerging market and developing economies, owing to an earlier reopening in the former group facilitated by greater availability of effective vaccines, stronger safety nets, more ample policy stimulus, and greater feasibility of remote work. These factors supported livelihoods during the pandemic, and household consumption is now broadly back to pre-pandemic trends. Among advanced economies, private consumption has been stronger in the United States than in the euro area, with households receiving larger fiscal transfers early in the pandemic and spending the associated savings more quickly; being better insulated from the rise in energy prices resulting from the war in Ukraine; and feeling relatively confident amid historically tight US labour markets, which have supported real disposable incomes. by 2030. One report indicates that 640,000 low-skilled service jobs in the IT sector are at risk due to automation, while only 160,000 mid- to high-skilled positions will be created in the IT and BPO service sectors. Goldman Sachs has predicted that advances in artificial intelligence (AI) could potentially automate the equivalent of 300 million full-time jobs globally.

The tech industry witnessed a significant increase in layoffs in 2024, with companies like Google, Amazon, Meta, and Cisco announcing job cuts. While AI is a contributing factor, economic downturns and cost-cutting measures often influence such decisions. It was said that automation may lead to a decrease in the workforce size needed for specific tasks, particularly for repetitive or data entry-heavy IT jobs.

STPI envisaged under Digital India program launched the India BPO Promotion Scheme (IBPS). this scheme seek to incentivize establishment of 48,300 seats in respect of business process outsourcing (BPO) and information technology-enabled services (ITES) operations in India. STPI is the nodal agency of this scheme under the Ministry of Electronics and Information Technology. In 2017 the Director General of STPI announced the launch of 48,000 such seats across the country, with a target employment of 72,450 in the sector. The government provides financial support of up to Rs 1 lakh per seat under two plans (India BPO Promotion Scheme and North East BPO Promotion Scheme). The Scheme was distributed among each State in proportion of the States population with an outlay of Rs. 543 Crore. 50,000 employment were reported as of August 2023 under the India BPO Promotion Scheme (IBPS).

Indias technology industry revenue is estimated to be $245 Billion in FY 2023. Technology are expected to grow at 9.4% in reported currency terms. In terms of FDI equity inflow, the computer software and hardware sectors attracted the highest FDI in FY 2021-22.

India is one of the most preferred destinations when it comes to setting up Global Capability Centres (GCCs). Total number of GCCs in India are 1580+. The total installed GCC talent is 1.66 Million+. Over 45 new data centres are expected to come up in India by 2025. Data centres in India have attracted investment of $10 Billion since 2020. There are 286.94 Million Registered Users on the Digi locker in India.

Indian SaaS companies saw 2x growth in share of global markets. India has as many as 59 number of SaaS unicorns and potential unicorns. Internet connections rose to 918.19 Million in 2022 from 251 Million in 2014.

Optical fibre in panchayats have increased from less than 100 in 2014 to 1.7 Lakh panchayats in 2022. As per NASSCOM, the total amount of IT export is estimated to be $200 Billion in FY 2024.

Strong economic growth in the first quarter of FY23 helped India overcome the UK to become the fifth-largest economy after it recovered from the COVID-19 pandemic shock. Nominal GDP or GDP at Current Prices in the year 2023-24 is estimated at Rs. 293.90 lakh crores (US$ 3.52 trillion), against the First Revised Estimates (FRE) of GDP for the year 2022-23 of Rs. 269.50 lakh crores (US$ 3.23 trillion). The growth in nominal GDP during 2023-24 is estimated at 9.1% as compared to 14.2% in 2022-23. Strong domestic demand for consumption and investment, along with Governments continued emphasis on capital expenditure are seen as among the key driver of the GDP in the first half of FY24. During the period January-March 2024, Indias exports stood at US$ 119.10 billion, with Engineering Goods (25.01%), Petroleum Products (17.88%) and Organic and Inorganic Chemicals (7.65%) being the top three exported commodity. Rising employment and increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the coming months.

Future capital spending of the government in the economy is expected to be supported by factors such as tax buoyancy, the streamlined tax system with low rates, a thorough assessment and rationalisation of the tariff structure, and the digitization of tax filing. In the medium run, increased capital spending on infrastructure and asset-building projects is set to increase growth multipliers. The contact-based services sector has demonstrated promise to boost growth by unleashing the pent-up demand. The sectors success is being captured by a number of HFIs (High-Frequency Indicators) that are performing well, indicating the beginnings of a comeback.

India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.

Indias appeal as a destination for investments has grown stronger and more sustainable because of the current period of global unpredictability and volatility, and the record amounts of money raised by India-focused funds in 2022 are evidence of investor faith in the "Invest in India" narrative.

Indias IT sector is one of the oldest industries in the Indian economy, dating back to several centuries. The Bhabha Committee was created 10 year plan back in the year 1966 laying the foundation of Indias IT Service Industries. Within 90 days of its establishment, the committee produced an extensive background report on the state of technology in India and an IT Action Plan with 108 recommendations. The proposal was also consistent with the thinking and recommendations of international bodies like the World Trade Organization (WTO), International Telecommunication Union (ITU), and World Bank. In 1991 the Department of Electronics creates a corporation called Software Technology Parks of India (STPI) that, being owned by the government, could provide VSAT communications without breaching its monopoly. STPI set up software technology parks in different cities, each of which provided satellite links to be used by firms; the local link was a wireless radio link. In 90s the government began to allow individual companies their own dedicated links, which allowed work done in India to be transmitted abroad directly. Indian firms soon convinced their American customers that a satellite link was as reliable as a team of programmers working in the clients office. In the last decade most of the IT companies developed indigenous R&D and innovation capabilities to develop home grown IT products.

As the IT–BPM sector evolves, many are concerned that artificial intelligence (AI) will drive significant automation and destroy jobs in the coming years. The rise of AI-powered code generation tools like Chat-GPT, Gemini, and Copilot has sparked discussions about their potential impact on programming jobs. These tools can automate some coding tasks, potentially affecting the skillset required for certain programming roles. In 2024, the tech industry witnessed a significant increase in layoffs, with companies like Google, Amazon, Meta, and Cisco announcing job cuts. While AI is a contributing factor, economic downturns and cost-cutting measures often influence such decisions. Automations role in the IT industry has been a topic of discussion. Some industry leaders have suggested that automation may lead to a decrease in workforce size needed for specific tasks. According to Layoffs, there have been over 500,000 layoffs from 2022 until April 2024. It is predicted that India, which has 65 percent of global IT off-shore work and 40 percent of global business processing, will have 69 percent of its jobs in the formal employment automated

Business process management (BPM)

Software products and engineering services

Hardware

The Indian Information Technology/ Software industry is a global powerhouse today, and its impact on India has been incomparable. It has contributed immensely in positioning the country as a preferred investment destination amongst global investors and creating huge job opportunities in India, as well as in the USA, Europe and other parts of the world. In the last decade, the industry has grown many folds in revenue terms, and relative share to Indias GDP is around 7% in FY2023-24. India is the topmost off-shoring destination for IT companies across the world. Having proven its capabilities in delivering both on-shore and off-shore services to global clients, emerging technologies now offer an entire new gamut of opportunities for top IT firms in India. Indian IT/Software industry offers cost-effectiveness, great quality, high reliability, speedy deliveries and, above all, the use of state-of-the-art technologies globally.

The Indian IT/ ITeS industry has a leading position globally and has been progressively contributing to the growth of exports and creation of employment opportunities. Indias IT-BPM industry (excluding e-commerce) is expected to reach at USD 254 billion, including exports of around 200 USD Billion in FY2023-24 (E). The IT-ITeS Industry has also created large employment opportunities and is estimated to employ 5.43 million professionals, an addition of 60,000 people over FY 2022-2023 (E). Women employees account for 36% share in total industry employee base.

The Ministry of Electronics and Information Technology is coordinating strategic activities, promoting skill development programmes, enhancing infrastructure capabilities and supporting R&D for Indias leadership position in IT and IT-enabled Services.

STPI envisaged under Digital India program launched the India BPO Promotion Scheme (IBPS). this scheme seek to incentivize establishment of 48,300 seats in respect of business process outsourcing (BPO) and information technology-enabled services (ITES) operations in India. The Government has regularly supported the industry by providing schemes like MeitY Digital India Internship Scheme 2024, Digital India Internship Scheme for NIC (Summer 2023), BPO promotion Schemes, Electronic Hardware Schemes and PhD Scheme.

Ministry of Electronics and Information Technology (MeitY) is responsible for formulation, implementation and review of national policies in the field of Information Technology, Electronics and Internet (all matters other than licensing of Internet Service Provider). Its mission is to promote e-Governance for empowering citizens; promoting the inclusive and sustainable growth of the Electronics, IT and ITeS industries; enhancing Indias role in Internet Governance; adopting a multipronged approach that includes development of human resources; promoting R&D and innovation; enhancing efficiency through digital services; and ensuring a secure cyber space. It is an opportunity for a student to secure first hand and practical work experience under the guidance of a qualified and experienced Supervisor/Mentor. It also aims at active participation in the learning process through experimentation and putting into practice the knowledge acquired in the classrooms. For the larger benefit of the student community and with a view to enrich the management/implementation of its various schemes/ programmes, the Ministry of Electronics and Information Technology has decided to notify these "Internship Guidelines", to provide a framework for engagement of Interns for a limited period.

National Informatics Centre (NIC) has been instrumental in steering e-Government / e-Governance applications in Government ministries / departments at the Centre, States, Districts and Blocks, facilitating improvement in government services, wider transparency, promoting decentralized planning and management, resulting in better efficiency and accountability to the people of India. "Informatics-led-development" programme of the government has been spearheaded by NIC to derive competitive advantage by implementing ICT applications in social & public administration. NIC has implemented many nationwide e-Governance projects in close collaboration with Central and State Governments such as PFMS, e-Hospital, Vahan, Sarathi, e-Office, e-Prisons, Service Plus etc. (www.nic.in) which are also implemented in many other countries. For the larger benefit of the student community and with a view to enrich the management / implementation of its various schemes / programmes / projects, NIC has notified these "Internship Guidelines", to provide a framework for engagement of Interns for a limited period at NIC, Headquarter, New Delhi and at NIC State Centres.

The India BPO Promotion Scheme (IBPS), envisaged under Digital India Programme, seeks to incentivize establishment of 48,300 seats in respect of BPO/ITES operations across the country. It is distributed among each State in proportion of States population with an outlay of Rs. 493 Crore. This would help in capacity building in smaller cities in terms of infra & manpower and would become basis for next wave of IT / ITES led growth.

Ministry of Electronics and Information Technology (MeitY), Government of India has launched "Visvesvaraya PhD Scheme for Electronics and IT" with an objective to enhance the number of PhDs in Electronics System Design and Manufacturing (ESDM) and IT/IT Enabled Services (IT/ITES) sectors in the country. "Visvesvaraya PhD Scheme" is an Institutional Scheme, where the PhD seats are allocated to the institutions and the institutes enroll the PhD candidates on these seats following their admission procedures. Support to 1500 PhD Candidates including both Full-Time (500) and Part-Time(1000) in each of ESDM and IT/ITES sectors. Support 200 Young Faculty Research Fellowships in the areas of ESDM and IT/ITES with the objective to retain and attract bright young faculty members in these sectors.

Indian IT companies have consistently achieved robust economic growth, leveraging skilled manpower, cost advantages and favourable outsourcing policies. As technology remains pivotal in global enterprises, investments in Indian IT firms indicate a sector well-positioned for ongoing expansion and innovation.

• Indian IT companies have consistently achieved robust economic growth, leveraging skilled manpower, cost advantages and favourable outsourcing policies. As technology remains pivotal in global enterprises, investments in Indian IT firms indicate a sector well-positioned for ongoing expansion and innovation.

• The IT sector contributes 7.5 percent to Indias GDP and serves as a hub for IT and software companies worldwide.

• National Strategy on Block-chain to reduce fraud, speed up contracts, and increase transparency.

• Remote work enablement.

• National Optical Fiber Network (NOFN) – 178,000 gram panchayats (village councils) connected by optical fiber.

• Digital India program – ambition to make India the second fastest digitalizing economy in the world.

• Startup revolution – focus on facilitating IoT, machine learning, AI, and healthcare innovation and skill development.

• Artificial intelligence and other emerging tech will boost Indias growth rate by 2035.

The Indian government has launched initiatives under the Digital India Scheme, established Software Technology Parks and Centres of Entrepreneurship, and has in place various sector-specific incentives to promote manufacturing and exports. The federal budget for FY 2023-24 has allocated US$11.77 billion for the IT and telecom sector.

Startups receive an 80% rebate on patent filing and a 50% rebate on trademark filing compared to other businesses. They can also wind up operations within 90 days, compared to 180 days for other companies. The government also offers tax exemptions for IT companies for three years, and capital gains exemptions for those who invest in government-recognized funds.

The government has established a Centre of Excellence in Hyderabad to provide resources for startups in gaming, animation, VFX, computer vision, and AI. The government also has a project called AIRAWAT, which provides a common platform for AI research and knowledge sharing.

As of April 2024, Indias IT sector was experiencing strong growth and projected to reach $138.9 billion by the end of the year. The sector is expected to continue growing, with IT spending projected to reach $124.6 billion in 2024, an 11% increase from 2023. However, the sector also faces some challenges, including:

As technology evolves rapidly, the workforce needs to continuously upskill and reskill to meet the industrys changing demands.

This can limit access to technology in rural areas and worsen inequalities.

As India becomes a data powerhouse, strong security is important to protect citizens privacy and data.

The sector has seen a significant increase in attrition over the past two decades, with leading IT firms like Wipro and Cognizant recording high rates.

The highlights of the financial results for the year ended March 31, 2024 and the corresponding figure for the previous year are as under: (Rs in Lakhs except EPS)

StatementsinthisManagementDiscussionandAnalysisreportdetailingtheCompanysobjectives,projections,estimates,expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and Indian demand supply conditions, raw material prices, finished goods prices, cyclical demand and pricing in the Companys products and their principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries with which the Company conducts business and other factors such as litigation and / or labor negotiations.