Fidel Softech Ltd Management Discussions

Annexure II

The fiscal year 2024-2025 represented the third year following Fidels listing on the National Stock Exchanges SME platform, a period that was instrumental in demonstrating sustained quarter-on-quarter growth. This achievement was underpinned by the operational expansion of the Hyderabad center, the establishment of a new office in the United States, and the initiation of revenue generation from international operations. Throughout the year, Fidel upheld consistent investor confidence, resulting in enhanced liquidity despite considerable volatility in global and domestic markets in early 2025, which exerted downward pressure on the companys stock price. Notwithstanding these external challenges, Fidels core investors remained committed to the organization. This Management Discussion and Analysis (MD&A] report presents a comprehensive assessment of the companys performance, identifies the principal factors influencing financial outcomes, and articulates managements strategic outlook for the future.

GLOBAL ECONOMY

Over FY 24-25, the global economy has been influenced by rising geopolitical tensions, interest rate cuts, and mixed employment signals, which have created both uncertainty and cautious optimism. Central banks have concentrated on controlling inflation while striving to balance economic stability with growth. However, the global outlook remains uncertain, particularly with the possibility of escalating tariff conflicts. Global growth is projected to slow slightly in 2024, with some improvement expected in 2025, though another potential dip may occur in 2026 due to policy shifts following the U.S. elections. Inflation is predicted to ease through mid-2025, primarily driven by lower energy prices and tighter monetary policies, although risks such as geopolitical instability and ongoing trade tensions continue to pose challenges. Throughout the year, interest rate cuts and currency fluctuations have been prominent, affecting global financial conditions. Despite these challenges, coordinated efforts and resilience may guide the global economy toward greater stability in the coming years.

INDUSTRY STRUCTURE AND DEVELOPMENTS.

Fidel Softech is a LangTech consulting company helping clients go global by delivering technology-driven solutions and services with last-mile delivery (UI/UX) in local languages. With the global language localization industry valued at over $80 billion, Fidel differentiates itself through a unique blend of language, technology, and consulting expertise. In addition to LangTech, Fidel is also actively supporting clients in their digital transformation journeys, AI adoption, enterprise application development, support and maintenance, cloud and infrastructure services, and staffing consulting. Expanding its service portfolio further, Fidel has recently introduced Japan-India consulting services to strengthen cross-border collaboration and business integration.

Our innovation strategy focuses on three core pillars:

• Adoption of emerging technologies

• Development of intelligent, customizable tools

• Institutionalization of agile and scalable processes

This approach enabled us to achieve a 20% reduction in project turnaround time, a 15% improvement in translation accuracy for domain-specific content, and a 20% increase in internal productivity across teams involved in content localization, automation, and platform development.

We proudly serve a diverse clientele, including:

> Global Enterprises seeking secure and scalable localization solutions

> Government & PSU Sector Clients requiring compliance-driven translations

> System Integrators collaborating on multilingual, multi-platform digital transformation initiatives

Below is a snapshot of our standout technology-driven projects that demonstrate this commitment:

In addition to our core language localization and engineering services, Fidel has significantly expanded its presence in the IT and consulting services space. This strategic growth includes the delivery of enterprise technology solutions such as Service Now and Infor Syteline, along with services in cloud infrastructure, artificial intelligence and cybersecurity. Over the past year, Fidel continued supporting enterprise application implementation projects, particularly for Infor Syteline, offering services ranging from product development and customization to legacy system modernization, support and maintenance. These initiatives reflect our ongoing commitment to innovation and our ability to align with the evolving technological needs of our clients.

With a strong presence in the Japanese market for over two decades, Fidel has built longstanding relationships with enterprises and SMEs, offering bilingual support and culturally attuned solutions. Our teams are trained in the Japanese language to ensure seamless communication and delivery. In recent years, we have observed a growing interest among

Japanese companies to explore India—not just as a market, but as a strategic delivery centre leveraging its vast technical talent and demographic dividend. Fidel has positioned itself as a bridge between Japan and India, supporting Japanese businesses in their India entiy strategy. This includes comprehensive services such as market research, office setup assistance, participation in industry events, and direct engagement with potential clients and partners. We also provide on-ground operational support to help Japanese firms establish and scale their presence in India.

Through these efforts, Fidel continues to adapt, expand and innovate reinforcing our role as a trusted technology partner and cross-border enabler for clients around the globe.

Looking ahead, the global localization industry shows significant promise. The language services market, which grew by 5.6% to reach USD 71.7 billion in 2024, is projected to continue expanding, reaching USD 75.7 billion in 2025. Although previous pre-AI projections anticipated a 7.0% compound annual growth rate (CAGR), emerging trends and the impact of AI have moderated the forecast to a more linear progression, with a projected CAGR of 5.0% through 2029. By then, the industry is expected to reach USD 92.3 billion.

Several key factors are driving this growth. Government initiatives are increasingly focused on promoting multilingual communication to ensure inclusivity and accessibility. The rise of e-commerce and its ambition to penetrate every regional market has made localization a fundamental business requirement. Local and regional language optimization is now central to search engine strategies. At the same time, the AI revolution has highlighted the need for large multilingual datasets to effectively train engines capable of serving global audiences. Sectors such as life sciences and legal continue to rely on high-quality, manual translation services due to the critical nature of their content. Additionally, speech-to-speech translation technologies are gaining rapid adoption and AI-powered video dubbing is quickly becoming mainstream in digital media, entertainment and education sectors.

In this rapidly evolving landscape, Fidel remains committed to driving innovation, embracing technological advancements and delivering reliable, scalable and culturally aware solutions that empower our clients to succeed in global markets.

OPPORTUNITIES AND THREATS. RISKS AND CONCERNS.

Fidel Softech, a trusted and well-established brand, has maintained a strong presence in the industry for over 20 years. The company is committed to the highest standards of ethical conduct and corporate governance, ensuring transparency, accountability, and long-term sustainability in all its operations.

While Fidel remains confident in its ability to meet strategic goals, it also recognizes the importance of anticipating and managing risks. Changing market dynamics, evolving regulatory landscapes, and economic fluctuations present ongoing challenges. Fidel proactively monitors these external factors and deploys well-defined contingency plans to mitigate potential impacts on performance.

Amidst these challenges lie significant opportunities. Globalization has intensified the demand for multilingual communication, unlocking new markets and sectors where Fidels localization and translation services are highly relevant. The growing integration of Artificial Intelligence, particularly in the form of Machine Translation and advanced natural language processing models, presents substantial opportunities for service enhancement. These technologies enable faster, more accurate, and scalable translation workflows, aligning perfectly with Fidels dual strength in technology and linguistics.

Moreover, strategic alliances with technology partners and industry leaders allow Fidel to remain at the forefront of innovation. These collaborations not only expand access to cutting- edge tools but also introduce Fidel to new customer segments and industry domains. A key part of this forward-looking approach is continuous investment in workforce development. By training its team in the latest technologies and practices, Fidel ensures it can deliver high- quality services that meet global standards.

However, the company also acknowledges the highly competitive nature of the translation and localization industry, which demands constant innovation and superior service delivery. Rapid advancements in technology require a proactive mindset to avoid obsolescence. In addition, regulatory shifts in various jurisdictions necessitate ongoing compliance and adaptability.

Operational risks must also be managed effectively. Global economic uncertainty can affect client budgets and influence spending on localization services. Data security remains a top priority, as Fidel handles sensitive and confidential content across projects. Ensuring robust cybersecurity frameworks is vital to protect client trust and operational integrity. Furthermore, attracting and retaining top talent is critical, as high employee turnover can impact delivery timelines and quality. Over-dependence on a limited number of key clients also presents a risk, which Fidel addresses through diversification strategies.

As a technology-driven company—not a pure-play language service provider—Fidel views the rise of AI not as a threat but as a catalyst for growth. The ability to generate, manage, and fine-tune large-scale multilingual datasets uniquely positions Fidel to leverage AI advancements, creating differentiated solutions that blend linguistic accuracy with technological sophistication.

With a balanced approach that embraces innovation, manages risk, and focuses on longterm growth, Fidel continues to strengthen its position as a leading cross-border technology partner in the localization and IT services landscape.

SEGMENT-WISE ORPRODUCT-WISE PERFORMANCE.

In FY 2024-25, Fidel made notable advancements across its key business segments, with strong performance in Language Localization, Engineering Services and IT & Consulting Services. The year was marked by impactful deliveries, expansion into rare language capabilities and entry into new verticals all underscoring Fidels commitment to quality, innovation and global reach.

Language Localization Services

Fidel continued to lead in large-scale multilingual projects, making significant contributions across industries including education, governance, life sciences and investor relations. Key highlights include:

Rare Language Expansion: Successfully added languages such as Fula, Siswati, Berber, Nyanja, Chichewa, Bahamian, Samoan, Visaya and Wolof to our linguistic portfolio, reinforcing our global language coverage and inclusivity.

Major Projects Delivered:

• A high-volume English-to-Japanese localization project, completed in record time.

• Localization of a mental health support app for an International Government Organization (IGO) in 15 languages across Indian, Asian, and European regions.

• High volume Translation for investor relations documentation.

• A long-term multilingual initiative covering 10 Indian languages for the education sector.

• Localization of academic and professional content for Indian Institute of Management (IIM) in 22 Indian languages, across themes like Artificial Intelligence, Human Resources and the Electronics Industry.

• A comprehensive DTP project covering 5,000 pages across 2 3 languages.

• Corporate video localization with voiceover and subtitling in 9 languages.

• Support for data collection projects focused on rural and tribal dialects of Hindi and Marathi.

These achievements reflect Fidels growing reputation as a trusted language partner for complex, high-impact localization needs.

Engineering Services

Hyderabad Operations: Our Hyderabad center, launched last year, performed in line with expectations, generating projected revenues and reinforcing our regional delivery capabilities.

IT & Consulting Services

• Business Intelligence Transformation: Reengineered Infer Syteline Reporting using Power BI for a leading OEM manufacturing underground piping solutions optimizing performance across casting, machining, painting and assembly processes.

• Cloud Migration Project: Successfully migrated a Centralized Monitoring System for a Japanese company managing water and gas utilities—ensuring seamless and secure data access for critical infrastructure operations.

Financial Performance

Fidels revenue distribution by region and division wise sales is as follows:

These achievements underscore Fidels commitment to delivering high-quality services and expanding its reach across different geographies and industry segments.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY.

Fidel maintains a robust and well-structured internal control system designed to ensure the reliability of financial reporting, the effectiveness and efficiency of operations, and adherence to all applicable laws and regulatory requirements. These systems are regularly evaluated to ensure they remain aligned with the evolving nature of our business operations.

Our internal controls are supported by a dedicated in-house finance and compliance team, supplemented by subject matter experts when specialized guidance is required. We have comprehensive audit mechanisms in place, including internal audits, statutory audits, and secretarial audits. These are conducted rigorously with the involvement of third-party auditors to maintain objectivity and strengthen our internal governance framework.

Regular reviews and assessments by our internal audit function are instrumental in identifying areas for process improvement and ensuring that any risks or inefficiencies are addressed proactively. The most recent evaluations revealed no material weaknesses or significant deficiencies in our internal control environment.

Fidel remains committed to upholding high standards of corporate governance and accountability. Our internal control framework not only facilitates accurate financial reporting but also supports informed decision-making and continuous operational improvement across the organization.

In addition to robust internal control mechanisms, the Company has secured comprehensive insurance coverage including Cyber Insurance, Commercial General Liability (CGL) Insurance, and Professional Indemnity (PI) Insurance policies. These policies are designed to protect the Company against a wide range of operational, legal and cyber-related risks, thereby reinforcing our overall risk management framework.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Financial Year 2024-2025: Sustained Growth and Strategic Impact

In the financial year 2024-2025, Fidel achieved steady quarter-on-quarter growth, underpinned by increased revenues, sustainable profit margins, and strong positive cash flows. The following strategic initiatives and business drivers played a key role in our financial performance:

• Strong Strategic Client Base

Fidel continues to nurture a focused portfolio of over 25 strategic clients, with the top 10 contributing nearly 75% of total revenue. This high contribution from existing clients reflects our consistent delivery excellence across quality, communication, timeliness and overall value.

• Robust New Client Acquisition

This year, Fidel successfully onboarded 50+ new clients, enhancing our market footprint and contributing to diversified and sustainable revenue streams across geographies and sectors.

• Active Industry Engagement

We actively participated in targeted industry events and seminars, helping us connect with the right audiences, strengthen brand visibility and deepen our client and partner ecosystem.

• Targeted Marketing & Digital Presence

Our marketing initiatives remained sharp and consistent, including:

> Regular website enhancements

> Strategic social media outreach

> Periodic newsletters to clients and prospects

> Improved SEO and digital presence for higher-quality inbound lead generation

These efforts have significantly boosted our brand visibility and contributed to a healthier sales pipeline.

• Investment in Emerging Competencies

We made focused investments in building capabilities around ServiceNow, Infor Syteline, and Cloud technologies, while continuously reskilling our teams to adapt to evolving technological landscapes positioning Fidel as a progressive and future-ready service provider.

• U.S. Office Expansion

The establishment and operationalization of our U.S. office marked a key milestone in Fidels international expansion strategy enabling us to better serve clients and prospects through a stronger nearshore presence.

• Operational Efficiency and Process Automation

By adopting a process-oriented and automation-led approach, we effectively managed operating expenses. These efficiencies translated into improved margins and a larger share of revenue being converted into healthy operating cash flows.

• Currency Risk Management

With a substantial share of revenues derived from the Japanese and European markets, we encountered currency volatility this year—primarily driven by changes in repo rates. We proactively implemented currency risk mitigation strategies to minimize exposure and safeguard profitability.

Financial Performance over the years -

Ratios	FY25 (Current year)	FY24 (Previous Year)	% Variance	Reason for variance
Current Ratio	8.63	7.76	11%	NA
Debt-Equity Ratio	NA	NA	NA	NA
Return on Equity Ratio	0.20	0.16	27%	Variance is due to higher net profit and revenues during the current year.
Trade payables turnover ratio	11.28	10.76	5%	NA
Trade Receivables turnover ratio	3.90	3.6	6%	NA
PBIT %	0.28	0.22	28%	Variance is due to higher Net Profit and Revenues

HUMAN RESOURCES

HUMAN RESOURCES: EMPOWERING PEOPLE, DRIVING GROWTH

At the start of FY 2024-2025, Fidels team comprised 191 employees and 85 consultants. With the successful expansion and operationalization of our Hyderabad center, we closed the year with 204 employees and 113 consultants. To sustain this growth, we strategically onboarded professionals across Sales, HR, Marketing, and Localization, thereby strengthening both our leadership capacity and delivery effectiveness.

At Fidel, people are our greatest strength. We are committed to fostering an inclusive, empowering, and performance-oriented culture. Our hiring approach focuses on identifying individuals not just with the right qualifications, but also with the right mindset and growth potential. New joiners undergo a structured onboarding process to ensure they integrate seamlessly and start contributing meaningfully from the outset.

Continuous learning is a core part of our culture. We provide diverse opportunities for upskilling through hands-on sessions, domain-specific workshops, industry- recognized certifications, and leadership development programs. In FY 2024-2025, the HR team facilitated 28 targeted training and skilling sessions across departments. Highlights included Service Now certification and PL-300 (Power BI) preparation in IT, Python Strings training, and self-paced learning initiatives. The Sysadmin team participated in Information Security Management Systems training and received specialized sessions on Windows and MacBook operations. Engineering teams engaged in advanced training on AI, ML, and audio processing technologies, supplemented by an AI Tools workshop. In Finance, advanced Excel training sharpened analytical skills, while the HRteam undertook iSmart and Linkedln training to enhance strategic capabilities. These initiatives underline our focus on building a future- ready, agile, and high-performing workforce.

Our performance management process is anchored in clarity and impact. Through structured goal-setting, regular check-ins, quarterly reviews, and annual appraisals, we ensure consistent alignment and accountability. Recognition plays a vital role through peer appreciation, spot awards, and formal accolades for excellence, innovation, and collaboration.

Work-life balance remains a key priority.

Flexible schedules, remote work options, and generous leave policies support employees in managing personal and professional responsibilities. Wellness initiatives ranging from fitness challenges and meditation sessions to preventive health checkups promote holistic well-being.

Our compensation framework is benchmarked against industry standards, with variable pay and performance-linked rewards fostering a merit-based culture. Comprehensive health insurance and thoughtfully designed benefits further support our employees physical and financial security.

Open communication is central to our culture. Regular dialogue between leadership and employees, pulse surveys, and engagement events help us build trust, foster alignment, and strengthen organizational cohesion.

We are guided by a strong ethical foundation. Our Code of Conduct, supported by ongoing ethics training and accessible grievance redressal mechanisms, ensures a safe, respectful, and compliant work environment.

Career growth at Fidel is transparent and opportunity-rich. We provide well-defined career paths, cross-functional exposure, and mentorship programs to help employees thrive and grow within the organization.

This year, we also advanced our digital transformation in HR by automating key workflowsfrom onboarding to exit resulting in improved efficiency and a smoother employee experience.

We view offboarding as an opportunity for reflection and ongoing connection. Insightful exit interviews inform continuous improvement, and our alumni network ensures lasting relationships rooted in mutual respect and shared success.

At Fidel, we understand that employee engagement is more than just an activity; its a key factor in driving business success. Engaged employees are not only more productive and innovative but also more committed, leading to better retention, stronger teamwork, and improved collaboration. Over the past year, Fidel has consistently focused on initiatives that promote a positive, inclusive, and high- performance work environment.

Celebrating Cultural Diversity:

We celebrate cultural diversity by hosting vibrant festival celebrations such as Diwali, Christmas, Independence Day, and Pongal. These events bring employees together to enjoy traditional attire, festive food, and cultural activities, helping to build unity and a sense of belonging across teams.

Health and Wellness Programs:

Fidel also prioritizes employee health and wellness through a variety of programs, including Yoga Day celebrations, health checkups, fitness challenges, meditation classes, and friendly sports matches. These initiatives not only improve physical health but also reduce stress and boost overall morale.

Annual Party and Community Building:

Our annual party is a highlight of the year, offering employees a chance to relax, build personal connections, and celebrate shared achievements. The festive atmosphere reinforces the sense of community and camaraderie within the company.

Recognition and Rewards:

We believe in recognizing and rewarding hard work and success. Our structured recognition program includes Spot Awards, Employee of the Month honors, and Milestone Achiever Awards. These recognitions motivate employees, reinforce a culture of appreciation, and encourage high performance.

Team Bonding through Outings

To further promote team bonding, we organize regular picnics and fun team outings. These recreational activities allow employees to interact beyond their workstations, strengthening interdepartmental collaboration and building stronger relationships.

Welcoming New loiners:

Fidel also ensures that every new joiner feels welcomed and valued. We greet new employees with personalized welcome kits, team lunches, and thorough onboarding sessions to help them integrate into our culture and become productive quickly.

Womens Day Celebrations:

International Womens Day is an important occasion at Fidel, where we celebrate the achievements and contributions of women across departments. We host inspirational talks, panel discussions, and other activities thathonor the women in ourworkplace.

Corporate Social Responsibility f CSR):

In addition to these events, we actively involve our employees in CSR initiatives, such as tree plantation drives and volunteering to teach professional skills to underprivileged communities. These efforts contribute to skill development and employability, making a positive impact beyond the company.

By investing in these engagement activities, Fidel creates a workplace where employees are motivated to grow and thrive, both personally and professionally. These initiatives foster a culture of collaboration, well-being, recognition, and purpose, making Fidel a great place to work