fidel softech ltd share price Management discussions

Overview

This was a milestone year in the journey of FIDEL Softech. Year 2022-23 saw shares of Fidel Softech listed on National Stock Exchanges SME platform ‘NSE Emerge. The confidence shown by Investors in Fidel boosted the morale of the company and reiterated the potential of Fidel to achieve sustained and outstanding results in the long run. This MD&A provides an overview of the companys performance, identifies key factors affecting financial results, and presents managements outlook for the future.

Global Economy

The technology industry has not just weathered the pandemic-driven disruptions of the past few years; it has sustained and diversified. Over the last year few years the global crisis has thrust many organisations into the future, accelerating digital transformation and changing work models dramatically.

While tech companies outperformed during the pandemic pressures of 2020—21, the sector saw considerable declines in 2022. A major challenge now for tech companies is how to weather a potential economic slowdown by trimming costs, increasing efficiency, and growing revenues. At the same time, many are likely looking for ways to remain innovative and build a strong competitive position for the future.

Tech companies are also seeking to improve efficiency and spur innovation in other areas that are ripe for transformation, including real estate, manufacturing, and retail.

In 2023, all these issues will likely be top priority list of many prominent tech companies as they reassess partnerships, suppliers, and the markets in which they do business.

Industry Structure and Developments

LangTech refers to the combination of Language (or Linguistics) + Technology. At core this is a technology space with the last mile delivery in local languages. At present, the Language localisation space has product companies, engineering services firms, vanilla translation companies or individual freelancers. Globally there are Localisation Service Providers (LSP) but the combination of Language + Technology + IT Consulting is where Fidel has a lead and differentiation. Fidel relies on its ability to work with end-user firms as well as system integrator firms. Fidel has the systems and tools in place for taking on an integrated project banking on its capabilities to provide a holistic solution for corporates, multinational companies, governments etc.

The recent frenzy around AI also relies on Large Language Models (LLMs) where huge datasets are to be collected/created, data modelled, fine-tuned, of engines to get desired results. Fidel is already positioned and has been assisting clients in this space with multi-lingual data collection and fine-tuning. Besides this as part of IT & Consulting services, Fidel also continues to expand its offerings around pure play IT Services in the enterprise solution space (eg. ServiceNow / Infor Syteline), AI, cloud infrastructure & security services. Fidel sees a convergence or integration of languages around technology, customer services, support functions and can leverage its lang+tech+consulting competencies.

Huge opportunity for growth in this space for next 10 years or so is seen due to several factors. Indian startups are hungry to go global. Most of these SaaS firms are launching their solutions in different Asian / Latin American / European /Middle Eastern markets where local language UI / UX is mandatory for consumers to make the purchase decision. At the same time, global companies are coming to Asia & India and want a pie of these markets. These companies need user support, consumer education, branding etc. as well as implementation & post-implementation support in local languages.

The government also announced that legal cases or legal information to be made available in local languages. There are 100+ portals such as tracking missing children portal, agriculture related portals which if localised in local languages, would help in dissemination of information across the country.

Indian Government is also keen to bridge the social digital divide by making Government services (e.g., tax filing, passport application) available online in local languages using innovative technology solutions. Further if government makes local language support (UI / UX /customer education) mandatory to private companies in the field of healthcare, finance, real estate that affects an individual citizen / consumer, this would open up an additional few billion USD market in India.

Gone are the days where knowing English was the sign of literacy. With the proliferation of smartphones, lowering of data pack costs and growing aspirations amongst common person, there is a huge push and requirement for all services including e-commerce, food and delivery, healthcare, insurance, banking across urban, semi-urban and rural areas. All this, if made available in local language UI /UX then it would help in growth of consumption of these services fuelling growth for the company. The option of decision making in localised web or mobile applications contributes heavily towards consumer education and awareness, prevention of frauds and establishment of trust.

Hence, Fidel is very positive and believes that globally there would be a need for Language+ Technology+ Consulting, localisation & language engineering services and IT & consulting services in coming year. Fidel is committed to grow and build the required ecosystem for India.

Opportunities, Threats, Risks & Concerns

Fidel Softech is a recognised and reputable brand and has had its presence in this field for 15+ years. Fidel is committed to the highest standards of ethical conduct and corporate governance.

While Fidel is confident in its ability to achieve the strategic objectives, it is important to note potential risks and uncertainties that could impact the performance. These include changing market conditions, regulatory challenges, and economic fluctuations. Fidel actively monitors these factors and implements contingency plans to mitigate associated risks.

Since Fidel is not a pure-play agency, AI replacing translation is not seen as a threat. Rather AI requires huge sets of multi-lingual data creation and data fine-tuning opportunities which Fidel can harness due to its internal competencies around linguistic plus technological skillsets.

In the translation field, Fidel is poised to leverage automation and MTPE (Machine Translation Post Edit) model using more automation into translation projects and allow for faster delivery of translation projects where human input will still be clearly required at within the process, especially at the LQA stage.

Segment-wise or product-wise performance

There were several new initiatives and projects undertaken with successful expansion into new markets, both domestically and internationally. This strategic initiative contributed significantly to revenue growth.

The Slator 2022 Language Industry Market Report provides a comprehensive view of the global language services and language technology industry - an addressable market of USD 26.6 billion in 2021, according to Slator research. In 2021, the language industry made a full recovery following a relatively challenging 2020. Slator estimates the total addressable market grew by 11.75% compared to 2020.

Fidels Key Market Segments are:

By Type (Sales, Growth Rate, USD Million, 2018-2033)

- Localisation Services including translation, interpretation, data collection, transcription & annotation, video subtitling

- Language engineering services including programming, tool creation, testing, managed services

- Other Services

Details about Division wise updates (Localisation; Consulting etc.)

- IT Services & Consulting Services

- IT Services & Consulting services is globally a huge market. Fidel focuses on enterprise product solutions (eg. ServiceNow / Infor Syteline), cloud infrastructure services, AI and digital transformation services

- Fidel has moved beyond Japan and now focused on US and EMEA geography

By Type of Services

- Digital transformation including Software development, Product development, Application maintenance

- Cloud infrastructure support, bilingual managed services including L1-L2 support, Security Services

- Enterprise product implementation, upgrade and migration

Region

- Japan, India and Asia-Pacific

- North America

- EMEA (UK, Ireland, Germany etc)

Type of Clients

- System Integrator firms

- Product firms

- End User firms

Internal control systems and their adequacy

Ethical conduct, transparency and accountability are some of the core values of Fidel Softech.

The Internal Controls and systems in place are adequate for the size and turnover of the Company.