Expleo Solutions Ltd Management Discussions

We continued to see compelling demand for our services across the markets. The opportunity for specialised testing services, automation, and digital services continues to see traction. Digital Services for the final quarter of FY 24 contributed 44.35% of our total business, as against 44% for the same period last year. We continue to invest in our people, skills, and partnerships. We are delighted to be voted as a ‘Great Place to Work with a continuing positive trajectory of Employee Satisfaction and Customer NPS. Though the attrition situation has improved, however, attracting the right talent continues to be a challenge. Our investments in training and upskilling have been key in helping bridge this gap.

Our total income during the financial year 2023-24 grew by 6% compared to the previous year - from INR 9,194 million to INR 9,724 million. EBITDA witnessed a downfall of 28% from INR 2162 million (23.9%) to INR 1558 million (16.2%) and our PAT reduced by 32.5% from INR 1,339 million (14.6%) to INR 904 million (9.30%). The cost optimization measures that we took last quarter is expected to show increase in profitability over the next couple of quarters. There is continued effort in ensuring that we are optimizing our utilization rates and G&A costs while balancing with expected future demand. DSO as of 31^st March 2024 was at 104 days as compared to 113 days as of 31^st March 2023.

The details of significant changes (i.e., change of 25% or more as compared to the immediate previous financial year) in key financial ratios, along with detailed explanations, therefore:

The future of technology is no longer a distant vision. Artificial intelligence (AI) is already deeply embedded in our daily lives. According to Forrester Research, a remarkable 73% of consumers have interacted with a chatbot in the past year, highlighting AIs growing role in customer service. But its influence extends far beyond chatbots, revolutionizing industries and the way we navigate the world.

This transformation significantly impacts the key industries Expleo works with. In the Banking, Financial Services, and Insurance (BFSI) sector, AI is crucial in combating fraud. Gartner estimates that AI can prevent up to 80% of financial fraud attempts. The healthcare sector is another area experiencing substantial disruption, with leading research firms like McKinsey & Company predicting that healthcare will invest over $260 billion in AI by 2030. AI is set to personalize financial advice, automate processes, and aid in medical diagnoses, showcasing endless possibilities.

AIs impact also reaches the skies. Airlines are using AI to optimize flight paths, reducing fuel consumption by up to 5%, and predicting maintenance needs to enhance safety and efficiency. Closer to home, the auto industry is experiencing a massive shift with the advent of self-driving cars and advanced driver-assistance systems, all reliant on AI. In retail, AI personalizes marketing campaigns, manages inventory, and interacts with customers via chatbots to enhance the shopping experience. McKinsey & Company estimates that AI can boost productivity by up to 40% by streamlining production lines and predicting equipment failures before they occur. AI not only ensures smooth operations but also improves quality control.

The message is clear: AI is more than a buzzword—its a revolution in progress. From shaping daily interactions to transforming entire industries, its impact is undeniable. With immense potential for growth, AI promises to further reshape the global landscape in the years to come.

With the dawn of unprecedented transformation comes risk. And overcoming risks leads to sustainable benefits in the long run for every type player in the industry. AI poses significant threats to the IT service industry. One major risk is job displacement, as AI-driven automation can replace roles traditionally performed by human workers, leading to potential job losses. Additionally, the rapid evolution of AI technology may outpace the ability of IT professionals to keep their skills updated, creating a skills gap and making it harder to find qualified personnel.

Moreover, AI systems can introduce new cybersecurity vulnerabilities. If not properly secured, AI algorithms and data can be exploited by malicious actors, leading to data breaches and other cyber threats. There is also the risk of over-reliance on AI, where critical thinking and problem-solving skills may diminish among IT professionals. Lastly, ethical concerns about AI decision-making processes can lead to regulatory challenges and potential legal issues, complicating the deployment and management of AI technologies in the industry.

However, Expleo is poised for a significant transformation driven by AI. We are committed to leveraging cutting-edge technology to help our clients revolutionize various industries. Over the past year, we have focused on aligning our vision and strategy with this transformation, and the coming year will be dedicated to driving change.

Industry-Specific Solutions: Expleo will use AI to develop specialized solutions tailored to different industries. This includes AI-powered tools for predictive maintenance in manufacturing, optimizing logistics in transportation, and personalizing customer experiences in retail. For example, Expleo collaborated with an automotive manufacturer to analyze reviews across multiple languages using AI. This analysis pinpointed specific features and issues, allowing for proactive problem-solving and data-driven product development.

We also helped a renowned multinational food chain optimise its global AI strategy. We created a unified platform that lets their users find, understand, trust, and collaborate on data. This enabled them to make data-driven decisions, significantly boosting productivity, quality, and efficiency. Opportunities like these allow us to showcase our Digital Assurance (Quality Assurance & Engineering) offerings, perfect for customers ready to transform or scale. Such granularity makes generative AI a game-changer for businesses.

Democratizing AI for Businesses: Many businesses lack the expertise or resources to implement AI independently. We see an opportunity to bridge this gap by offering AI-as-a-service (AIaaS) solutions. This enables businesses of all sizes to leverage AI without significant upfront investment. AIaaS can be utilized for tasks like data analysis, automating workflows, and gaining customer insights, empowering businesses to compete more effectively.

Enhanced Security and Risk Management: Cybersecurity threats are continually evolving. AI is a powerful tool for Expleo to build advanced security solutions with governance and compliance at the core. AI-powered systems can analyze data patterns to detect and prevent cyberattacks in real-time, and identify potential vulnerabilities before they are exploited. This proactive approach provides our customers with greater peace of mind and helps mitigate security risks.

Faster Innovation and Development: The traditional software development lifecycle can be slow and cumbersome. AI can streamline this process by automating repetitive tasks, allowing us to develop and deploy new solutions faster. This enhances product quality control, operational efficiency, and customer experience, helping businesses stay ahead of the curve and adapt to changing market demands.

Data-Driven Decision Making: In todays data-driven world, businesses need to make informed decisions based on insights from vast amounts of data. AI can analyze this data and provide actionable insights that businesses can use to optimize operations, improve marketing strategies, and personalize customer experiences. Expleo leverages AI to offer data analytics services that empower businesses to make smarter decisions.

Across all the Industry that Expleo is servicing, we see a significant scope for building the right and cost-effective solutions for infrastructure and platforms for consolidating Enterprise Data. This is also a significant part of the conversations we are having for Enterprise Platform Modernization. This is in line with organizations trying to get ready to leverage AI and Machine Learning. Customers are looking for innovative partners like Expleo who have a strong Domain, Technology and Quality Assurance Perspective to deliver strong data platforms with focus on Data Quality. Expleos deep understanding of processes and data associated with it positions it to deliver these solutions.

Industry focus on digitization of their products and services continuous to persist however there is a growing focus on cloud cost optimization. Making Application Cloud agnostic with orchestration through Kubernetes and Open shift is a growing trend. Certain applications that do not have performance and scalability needs are being pulled back on premise. Organizations are also pursuing Super Apps strategy for their backends which can support multiple versions of front ends driving efficiencies for their backend infrastructure.

Key theme being doing more with less without compromising on quality and performance. Expleo with is focus on optimal super app architecture and high-quality focus is uniquely positioned to deliver such modernisation solutions.

With high productivity focus, customers are exploring new way to enhance efficiency across their teams. Process automation has been a growing theme for the last few years. New themes with AI include improvement of individual productivity leveraging co-pilots for technical and non-technical tasks. Expleo believes that with higher productivity pace for digitisation and innovation will quicken in the next few years and therefore Expleo is well positioned to address these changes with its ability to bring in the right tools for productivity enhancement for the overall transformation of client organisations.

Low-Code No-Code solutions are seeing significant traction, but clients are also struggling to choose the right platforms for themselves. With Expleos deep domain and technology understanding, Expleo has helped many of its clients to choose the right tools for Low-Code platforms and integrate them in the client landscape.

As AI and its implications take center stage in many conversations, Expleo has been at the forefront in pioneering Digital Transformation and Product Engineering solutions leveraging AI.

Expleo has also been at the forefront helping its client mine and prioritize impactful use cases for creating impact with this transformative technology. From this perspective, Expleo is well positioned and is also right sized to reap the benefits of this transformative technology.

Expleo is built on a robust foundation essential for AI-driven transformation. Cloud computing offers the processing power and scalability required for complex AI tasks. Our investment in DevSecOps fosters collaboration to build secure AI systems, while rigorous QA-QE practices ensure the accuracy, fairness, and reliability of AI models. This combined approach, with cloud as the launchpad and AI/ML as the engine, unlocks the true transformative potential of AI. For example, Expleos data governance services guide clients in accessing high-quality data for informed decisions, ensuring data accuracy and implementing strict privacy controls. Leveraging our expertise, Expleo helps clients extract more value from their data and make better decisions.

Our digital world thrives on innovation, but at what cost to the environment? AI can unlock a future where progress meets sustainability. AI can optimize cloud infrastructure to allocate resources intelligently and reduce energy consumption. It automates repetitive tasks in development and IT operations, eliminating wasted effort and human error. AI-powered predictive maintenance extends IT equipment lifespan, reducing unnecessary replacements. Responsible data governance minimizes storage waste and protects sensitive information.

Beyond efficiency, AI enhances cybersecurity by proactively identifying and preventing threats, reducing the risk of data breaches. Integrating security into the development process (DevSecOps) helps avoid costly rework from vulnerabilities discovered later. AI-powered testing tools streamline quality assurance and engineering (QA-QE), catching issues early and preventing future fixes. By embracing AI, cloud, and responsible practices, organizations can significantly reduce their IT footprint, lower operational costs, and minimize environmental impact.

The tech industry faces a talent crunch amid rising costs and economic uncertainty. The pandemic accelerated digital transformation, creating new business avenues. Embracing a hybrid work model offers flexibility and boosts retention. Investing in upskilling and reskilling is crucial to stay ahead. AI can mitigate bias in recruitment, ensuring a more diverse workforce. AI-driven sourcing tools and skills-based assessments expand the talent pool, while AI-powered learning platforms bridge skill gaps with personalized training programs.

The future of tech lies in the synergy between human and machine intelligence. Robotics expertise will be crucial for sophisticated automation, while "techno-functional skills" blend technical and business knowledge. By leveraging AI to build a diverse workforce and focusing on both robotics and techno-functional skills, the tech industry can increase productivity and efficiency.

Expleo is ready to harness AIs potential to reshape businesses, ensuring on-time deliveries, budget adherence, and client satisfaction. AI streamlines project management by predicting bottlenecks and optimizing costs. It assists in talent acquisition and training, fostering continuous learning and innovation. By leveraging AI for efficiency, talent development, and client satisfaction, businesses can create a future of success built on innovation and trust.

AI introduces several risks in the IT services industry, including job displacement due to automation, creating a skills gap as technology evolves rapidly. Cybersecurity vulnerabilities arise if AI systems arent properly secured, and over-reliance on AI can diminish critical thinking skills. Ethical concerns, such as bias and transparency in AI decision-making, complicate regulatory compliance. Data privacy is at risk due to AIs data needs, and high implementation costs can be a barrier, especially for smaller firms. Dependence on data quality affects AI accuracy, and resistance to change among employees can hinder successful AI integration.

To reduce the possibility or the impact of an adverse event, the CEO and CFO of the Company have provided a certificate, which forms a part of this annual report, which confirms the adequacy of the internal control systems and procedures.

Expleo is the home of bold and reliable minds. We combine and balance these two forces of business innovation to deliver excellence for our customers. As at March 31, 2024, Expleo Solutions Limited employed around 4,291 employees, including trainees with 32% women in the workforce. This includes employees working in Expleo Solutions Limited branches and subsidiaries.

At Expleo, it is our constant endeavor to make Expleo a place where people can be their best selves. We are proud to receive the Great Place to Work certification again for the period from January 2024 to January 2025. Key highlights of the GPTW 2023 survey results: y GPTW score for 2023 is 80% (+2 from last year). y 77% of employees believe that Expleo will act on the survey results (+1% from 2022) y 84% of employees believe that Expleo is a great place to work (+3% from 2022) y 85% of employees are proud to tell others that they work with Expleo

y Augment the Rewards and Recognition Program to ensure that more employees and even the smallest contribution is recognized. A mixture of both monetary and non-monetary rewards that encourages the individuals and the team. It includes an element of rewards driven through points system.

y Retention Champions Program introduced so that the managers who take the extra effort to retain the talent and develops camaraderie are rewarded, thus ensuring that the attrition is controlled.

y Internal Career Fair to ensure employees are aware of the various business diversities and identify aspiring individuals who are looking for career rotation within Expleo, rather than finding a job outside.

The development of our employees continues to be a key area of strategic focus for us. We launched new programs for leadership development. Internal Trainers programme was launched to encourage employees to provide training internally for new joiners. Proactive trainings on future technologies such as AI are being imparted through our ‘Discover & Share" initiative, a monthly programme where we share best practices and use cases. As part of our induction program, we introduced Global Onboarding program which is mandatory for all employees.

Our partnerships with Coursera and Udemy offer employees access to an extensive library of courses on emerging technologies, essential soft skills, and personalised learning paths. We are committed to upskilling our teams and leadership on the latest technologies and AI, ensuring they are equipped to meet the challenges of tomorrow, today.

At Expleo, our goal has been to create an open and safe workplace where each and every employee feels empowered to contribute to the best of their abilities, irrespective of gender, sexual preferences or any other classification that has no bearing on the employees work output. Expleo has constituted an Internal Complaints Committee (ICC) for all the centers of the Company across India to consider and resolve all sexual harassment complaints reported by women.

At Expleo, employee well-being has taken precedence over the past years and developed into a more substantial model with the help of our Employee Assistance and Wellness Program Partner. Our endeavor has been to enhance the well-being experience for our employees and their families with an increased focus on mental and physical health. Other benefits of this program include discounted medicines, health risk assessment, daily events by experts, blogs by expert professionals, 24*7 Helpline by qualified clinical psychologists, and much more.