Genesys International Corporation Ltd Management Discussions.

Industry Overview and Developments

The most important component of Geographic Information Systems (GIS) is its requirement for spatial data. Data that describes different instances through space and time is referred to as spatial data. The representation of the real-world in the form of 2D and 3D spatial data (digital intelligent maps) is done for both surface and subsurface features in various scales and projection systems for solving various problems. Taking into consideration the importance of spatial data, there are few components that play important roles in the GIS Industry. These components are Data collection and extraction, Data conversion and compilation, Data management and integration, Infrastructure implementation, Software application development, Information query, location analytics and distribution of these datasets in the form of intelligent maps to the clients through various platforms. Training of the professionals to have skill sets to operate systems and generate new and update old spatial datasets is important and is a continuous process.

Spatial Data may come from a variety of sources and in a variety of formats. The thrust is to collect these datasets accurately using faster methods. Most implementations of GIS at an organizational scale involve a great deal of effort in collecting and compiling a usable spatial data set. New collection systems are not the only source for spatial data. There is a great volume of data existing as Single Line Diagrams, As-built, map libraries, historical data sets and archives that are utilized in GIS. They provide a valuable secondary source of spatial information and a significant sector of the spatial information market. The datasets available in secondary sources are integrated with the primary datasets. Datasets also comes from wide variety of sources from multiple platforms and processed in different industry standard and open source softwares. It requires interoperability. There is a growing awareness amongst the user groups on data interoperability. These are achieved through complying global and Indian interoperability standards lead by institutions like ISO, OGC, BIS etc.

Besides conventional surveys, the usage of Multi-sensor vehicle-borne laser mapping system (LiDAR), Unmanned Aerial Systems (UAS), Ground Penetrating Radars (GPR) are increasing for more accuracy of the measurements. In the mapping front, plenty of automations are taking place to complete the job more accurately in lesser time. In the areas of geospatial software development, virtual reality through uses cases on 3D visualisation of the real world objects in web centric environment, augmented reality and Block chain technologies are taking place. Cloud based services, artificial intelligence and Big data technologies are on rise.

According to the Geo Buiz Report 2018 as published by Geospatial Media and Communications, the GIS and Spatial Analytics market is expected to grow from US$ 66.2 Billion in 2017 to US$ 88.3 Billion in 2020 growing at a CAGR of 12.4%. While the software GIS market is expected to be US$ 17.9 Billion in 2020, the Services and Solutions, and the Content segment is going to hold the largest share of the pie with US$ 46.2 Billion and US$ 24.2 Billion in 2020 respectively.

Government Initiative and GIS Industry in India

Government of India has embarked on several initiatives such as Smart Cities, AMRUT, Pradhan Mantri Awas Yojna (PMAY) Bharatmala, Bharatnet, National Rural Health Mission, Pradhan Mantri Fasal Bima Yojna. In FY 2018-19 these initiatives have gained momentum. The Smart cities programme received a 54% jump in the budget for 2018-19 compared to 2017-18, and emerged as the governments flagship scheme in the area of urban renewal GIS based Enterprise systems are being implemented in these cities. 6000 crores have been allocated for the AMRUT mission during 2018-19 as against last years allocation of 5000 crore which is an increase of 20%. GIS based Property Tax Management System being implemented in AMRUT Cities. Under the Phase-1 of the Bharatmala Pariyojana, approximately 35,000 km of road construction has been approved.

In the sector of Digital Infrastructure, the General Budget 2018-19 announced a doubling of allocation on Digital India Program to 3073 crores. 10000 crores have been provided in Budget 2018-19 for creation and augmentation of telecom infrastructure. The Government proposed to set up 5 lacs Wi-Fi hot spots which will provide broadband access to 5 crore rural citizens.

The government is committed towards agriculture and rural economy with a total of 14.34 lacs crore (US$ 225.43 billion) to be spent for creation of livelihood and infrastructure in rural areas. Institutional credit to the agriculture sector is targeted at 11 lacs crore (US$ 172.93 billion) for 2018-19, compared to 10 lacs crore (US$ 157.2 billion) for 2017-18. Budget allocation for the crop insurance scheme-Pradhan Mantri Fasal Bima Yojana has been increased by 44 percent year-on- year to 13,000 crore for 2018-19.

Budgeted expenditure on health, education and social protection for 2018-19 is 1.38 lacs crore (US$ 21.69 billion) which is expected to increase by 15,000 crore (US$ 2.36 billion) after additional allocations during the year. Role of technology in the education sector will be increased with a focus on increased digital intensity.

For 2018-19, the government has given 8,860 crore to the water resources segment, 2000 crores up from 6,887 crore in 2017-18. The ministry of water resources is implementing key projects such Namami Gange, Pradhan Mantri Krishi Sinchayi Yojana and river inter-linking. A total of 187 projects have been sanctioned under the NamamiGange programme for infrastructure development, river surface cleaning, rural sanitation and other interventions at a cost of 16,713 crore.

In all the aforementioned segments use of geospatial data and technologies are immense.

Global Geospatial Trends

Geospatial information has a key role to play in delivering sustainable social and economic development across the globe. This is achieved through collaboration of multiple technologies. As per the United Nations Committee of Experts on Global Geospatial Information Management (UN GGIM) there is a global trend of moving from two dimensional (2D) mapping to three dimensional (3D) mapping. The use of the fourth dimension (4D) is also likely to increase over the coming five to ten years in geographic information systems (GIS), with GIS companies increasingly providing time functionality as an additional dimension alongside conventional x, y and z coordinates. Unmanned aerial vehicles (UAVs) in the civilian sector are likely to be used increasingly as an additional method of data capture and will complement satellite remote sensing and aerial imagery. The accuracy of optical imaging sensors will continue to improve significantly over the coming years, bringing with it the ability to identify features on the ground better.

Mobile mapping systems will be upgraded for capturing and processing both street level visual information, points of interest (POI) and attribute data in more detail. The network of tomorrow, built on an increasing number of sensors and thus increasing data volumes, will produce a hyper connected environment or Internet of Things, with estimates of over 50 billion things connected by 2020 and geospatial data and technologies will be in the heart of it.

Projects / initiatives undertaken by Genesys

Genesys continued with the acceptance and delivery of the projects from both domestic and international markets. Broadly the projects were carried out in the domain of Urban, Roads, Telecom, Mining and natural resources segments. The company is carrying out 3D mapping projects for one of the city and its environ in India. The exercise has been carried out by aerial survey with a modern aerial LiDAR sensor. OGC complaint enterprise software built by Genesys continues to have a demand in the African market for geospatial data dissemination specially for urban domain. New modules are being added to the existing software for enhanced revenue management.

Opportunities and Challenges

The GIS Industry covers a broad range of areas of opportunity. The new initiatives by Government of India in infrastructure development under Smart Cities, AMRUT, Bharatmala, Bharatnet, Digital India and Make in India schemes are driving demand for geospatial content and services especially mapping and surveying. With the release of the drone policy by the government, there is low dependency on high resolution satellite data for a city level datasets. City level mapping drone surveys provides higher resolution datasets compared to satellite data. There is a now a growing demand for LiDAR based mapping for identifying the assets in the telecom, roads and gas sectors. Mapping the underground utilities using Ground Penetrating Radars (GPR) and viewing it with the Augmented reality technology has immense potential.

Government has a thrust on telecom sector. Large scale telecom route survey using Mobile mapping system integrated with LiDAR and Panoramic imaging sensors for identifying the missing OFC assets is an opportunity. Also this technology is now used for laying new Optical Fibre cables and other utilities in the road corridors. The large businesses in India, public and private, are incorporating location-based technologies at enterprise level for increasing the efficiency in the business processes.

Identifying underground utilities accurately still remains a challenge. Mapping the indoors continues to be a challenge as its benefits are largely not realized, since the indoors are private in nature and access is mostly restricted. However, once the benefits are understood by the Mall owners, airport authorities and competent authorities of critical infrastructures like Hotels, Important heritage and government buildings, business will continue to flow in this sector too.

Discussion on Financial Performance Ratios

Standalone

Consolidated

Ratios FY 2018-19 FY 2017-18 FY 2018-19 FY 2017-18
Debtors Turnover Ratio 2.21 2.86 2.29 2.74
Interest Coverage Ratio* 6.93 18.84 1.14 11.85
Current Ratio 2.59 2.62 2.17 2.15
Debt Equity Ratio 0.24 0.21 0.23 0.22
Operating Margin Ratio** 15% 34% 3% 23%
Net Profit Margin*** 10% 26% -3% 14%
Return on Net Worth (RONW)**** 5% 12% -1% 6%

* Change in interest coverage ratio is on account of increased borrowing cost and reduced earnings before interest and tax.

** While the revenue remained at the same level over the previous year, operating margin ratio has come down due to fall in the earnings before interest and tax (EBIT). Such reduction in the EBIT is attributable to increase in the employee benefit cost, depreciation and amortization expenses and other expenses necessitated by the nature of projects executed during the year.

*** While the revenue remained at the same level over the previous year, operating margin ratio has come down due to fall in the net profit after tax (PAT). Such reduction in the PAT is attributable to increase in the employee benefit cost, depreciation and amortization expenses, finance cost and other expenses necessitated by the nature of projects executed during the year.

**** Reduction in the return on net worth is attributable to the fall in PAT for reasons explained above.

Equity

Equity Share Capital

During the year, under the ESOP scheme 2010, 162,800 equity shares (previous year: 341,300 equity shares) of 5 each, were issued to the eligible employees. Each such share carried a premium of 21 per share payable at the time of application for allotment of the shares. Consequently, the Paid up Capital increased to 1,555.62 lacs at the end of March 31, 2019, as against 1,547.48 lacs at the end of March 31, 2018.

The authorised equity share capital remained unchanged at 2,550.00 lacs comprising of 51,000,000 shares of 5 each at the end of March 31, 2019.

Other Equity

Other Equity as on March 31, 2019 was 20,832.77 lacs as against 20,934.77 lacs as on March 31, 2018. Other equity includes Capital Reserve of 1,735.06 lacs, General reserve of 2345.85 lacs at the end of 2018-19 and the balances on these two accounts remain the same as at the end of 2017-18. Other items in the Other Equity include Share Application Money of 0.62 lacs (previous year: nil) , securities premium reserve of 5,075.99 lacs (previous year: 4,961.30 lacs), Employees Stock Options Outstanding of 511.40 lacs (previous year: 373.48 lacs), Foreign Exchange Fluctuation reserve of (3,014.16 lacs) (previous year: (4,048.98 lacs)),Balance of surplus in the Profit & Loss Account of 14,178.01lacs (previous year: 15,568.07 lacs).

Borrowings

While here has been a reduction in the Non-Current Borrowings at the end of 2018-19, Current Borrowings has gone up during the same period. Non-Current Borrowing has gone down to 110.46 lacs at the end of 2018-19 as compared to 152.44 lacs at the end of previous year, Current Borrowings have risen to 1,888.89 lacs as on March 31,2019 as against 1,555.51 lacs at the end of earlier year. Current Borrowings primarily represent borrowings from banksfor working capital / overdraft and others.

Provisions

Non-Current Provisions are related to Employee Benefits and include Compensated Absences and Gratuity estimated as payable beyond 12 months period. Such provisions stood at 524.23 lacs as on March 31, 2019 as compared to 435.62 lacs at the end of March 31, 2018.

Current Provisions include estimated liability on account of Employee Benefits and Others which are expected to be paid within 12 months period. At the end of 2018-19,current provisions were at 304.87 lacs, down from 331.43 lacs at the end of previous year.

Trade Payables

There has been an increase in Trade payables at the end of 2018-19. It has risen to 1,525.43 lacs at the end of 201819 from 956.09 lacs at the end of previous year. Of the total trade payables, amount payable to MSME was 1.27 lacs (previous year: nil) as on March 31, 2019. Details about MSME have been determined based on information provided to us by such units.

Current Liabilities

Current Liabilities, other than Borrowings, Trade Payables and Provisions,include Other Current Financial Liabilities, Other Current Liabilities and Current Tax Liabilities (net).

Other Current Financial Liabilities include current maturities of long-term debt and finance lease obligation, unclaimed dividend, and other payables including salary payable, etc. aS on March 31,2019, Other Current Financial Liabilities stood at 1,627.59 lacs as against 1,470.74 lacs as on March 31, 2018.

In Other Current Liabilities, there has been a decline in the balance as on March 31, 2019 at 546.04 lacs from 936.59 lacs at the end of March 31, 2018.

Current Tax Liabilities (Net)

Current Tax liabilities (Net) represents tax balance of respective assessment years net of advance, self assessment tax and TDS receivables. Current Tax Liabilities (Net) balance as on March 31, 2019 was, 255.14 lacs as against 704.49 lacs as on March 31, 2018.

Non-Current Assets

Property, Plant and Equipment, net of depreciation, were at 2,395.88 lacs at the end of March 31, 2019. It was at 2,486.12 lacs as on March 31, 2018

Gross Block includes Tangible and Intangible Assets, besides Capital Work-in-progress. Total of Gross Block was at 32,624.05 lacs as on March 31, 2019, up from 31,784.98 lacs at the end of previous year. During the year, 1,060.91 lacs worth of assets were added to the Gross Block.

Value of Net Block of the assets, net of depreciation, stood at 20,770.62 lacs as on March 31, 2019. Corresponding number for the previous year was at 21,705.80 lacs. 1,877.26 lacs was charged to the Profit & Loss Account during the year 2018-19 as against 1,420.23 lacs in the earlier year.

Investments

Total value of Investment, both at cost and at amortised value, remained at the same level as the last year and there was no purchase and sale of Investments during the year like the previous year. Consequently the total value ofInvestments remained at 1,104.06 Lacs as on March 31, 2019, same as previous year.

Trade Receivables

Trade Receivables, net of allowance for expected doubtful amount, rose to 5,852.70 lacs, as on March 31, 2019; as against 4,176.19 lacs, at the end of March 31,2018.Steep rise in the balance of trade receivables at the end of 2018-19, is attributable to the fact that there was a sharp increase in the invoicing to the customers towards the end of March, 2019.

Cash and Bank Balance

Total cash and bank balance as on March 31, 2019, was at 423.50 lacs as against 3,790.30 lacs at the end of earlier year. Such balances are being maintained in current and deposits accounts with scheduled banks.

Other Financial Assets

Non-Current Other Financial Assets include Deposits given to prospective customers for business (EMDs), to government / other agencies (security deposits) for various utility services, to landlords to secure rented premises, etc. Balance of such deposits was 131.40 lacs as on March 31, 2019 as against 129.00 lacs in the previous year.

Current Other Financial Assets represent unbilled revenue, interest accrued and due, and facility deposits. Balance of Current Other Financial Assets as on March 31, 2019 was 4,287.51 lacs,up from 3,499.17 lacs at the end of previous year.

Other Assets

Other Assets include Other Non-Current Assets representing Capital Advance, Other Advances and Prepaid Expenses. Balance as on March 31, 2019 was 615.28 lacs as against 261.40 lacs in the previous year.

Other Current Assets include Other Advances, Balance with Revenue Authorities and Prepaid Expenses. Balance as on March 31, 2019 has increased to 2,730.31 lacs as against 1,086.34 lacs in the previous year.

Current Tax Assets, net of provision, include Advance Income Tax and Loans include loans and advance given to employees. Deferred Tax Assets (Net)

Deferred Tax Assets (net of Deferred Tax Liability) balance as on March 31, 2019 was 2,379.36 lacs as against 2,454.94 lacs as at the end of previous year. Deferred Tax Assets (net of Deferred Tax Liability) also include MAT Credit to the tune of 1,842.42 lacs as on March 31, 2019 as against 1,877.54 lacs at the end of previous year.

Income and Expenditure Income

In the 2018-19, revenue from operation remained almost at the same level vis-a-vis 2017-18. While there was increase in the revenue in the previous compared to the year before, revenue from operations remained at close to the same level in 2018-19 largely on account of dependency on the customers, etc. for inputs and others. Revenue from Operations in 2018-19 was of 11,473.09 lacs, marginally up from 11,376.74 lacs in the previous year. Other income comprises of miscellaneous income, exchange gain and Interest income. During the year 2018-19, Other Income reported was of 294.45 lacs as against 395.62 lacs in the previous year.

Expenditure

Total expenditure during 2018-19 increased to 11,730.49 lacs from 9,421.01 lacs in 2017-18. Increase in the expenditure in primarily attributable to increase in the Employee benefit expenses, depreciation and amortisation expenses and project expenses.

Internal Control & Cost Control

Necessary structured and well-defined internal control systems, commensurate with the size and nature of our operations have been put in place. The system, which includes policies and procedures, covers all aspects of our operations. We have an internal audit process in place, which is being reviewed by the Audit Committee.

We have put good amount of emphasis on the cost control initiative to remain effective in this competitive world. It includes weighing different alternatives before taking any decision on any corporate as well as operational initiatives.

MIS and other reports are being regularly discussed to ensure effectiveness of the internal control and cost control systems.

Human Resources

Success of a service company largely depends on its human resources. We have necessary policies and processes in place for performance management of our employees to help us to identify training needs, etc. We have taken measures to empower and incentivise our employees to enable them to contribute towards our organisational goals.

Note: Unless otherwise indicated, all financial numbers are extracted from Consolidated Financials

CAUTIONARY STATEMENT

Certain statements made in the Management Discussion and Analysis Report may constitute ‘forward-looking-statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections, etc., whether express or implied. Several factors could make a significant difference to the Companys operations. These include climate and economic conditions affecting demand and supply, government regulations and taxation, natural calamities, etc. over which the Company does not have any direct control.