HP Telecom India Ltd Management Discussions

"ANNEXURE – 3" TO DIRECTORS REPORT

This chapter on Managements Discussion and Analysis ("MD&A") is to provide the stakeholders with a greater understanding of the Companys business, the Companys business strategy and performance, as well as how it manages risk and capital.

The following management discussion and analysis is intended to help the reader to understand the results of operation, financial conditions of HP Telecom India Limited

(1) ECONOMIC OVERVIEW, INDUSTRY STRUCTURE AND DEVELOPMENTS:

MACRO ECONOMY:

The demand for a wide range of consumer durable goods is growing as a result of the ongoing increase in disposable income and technological innovation in India. This in turn is fueling fierce competition among the various consumer durable brands that are available across the country. India is viewed by multinational organizations as one of the primary markets from which future growth is likely to originate.

In F.Y. 2023 (April-November), electronics exports grew by 13.8%, the highest in the last 6 years. With robust growth, India aims to achieve electronics manufacturing worth US$ 300 billion in electronics exports of US$ 120 billion by F.Y. 2026.

By 2025, Indias Consumer Electronics and Appliances Industry is predicted to be the fifth-largest in the world. The Indian Appliances and Consumer Electronics (ACE) market is predicted to nearly double in the next 3 years, reaching approximately US$ 17.93 billion (Rs. 1.48 lakh crore) by 2025. The Indian appliances and consumer electronics industry stood at US$ 9.84 billion in 2021 and is expected to more than double to reach Rs. 1.48 lakh crore (US$ 21.18 billion) by 2025. Electronics hardware production in the country stood at US$ 87 billion in 2022. Indias consumer electronics and home appliances market is set to grow by US$ 2.3 billion between 2022 and 2027, registering a CAGR of 1.31%.

INDIAN ECONOMY:

The Indian electronics industry is one of the most rapidly growing industries worldwide. Electronic products have continuously impacted and shaped our lifestyles in the current digital era. The advent of technology has led to seamless activities and accelerated the digital revolution to the next level. Furthermore, demand for electronic devices is anticipated to rise steadily and continue to be a key economic driver worldwide.

India has been one of the pioneers of the Local Goes Global movement. The country is focusing on developing its share in the global value chain, establishing export hubs in different states, constructing a high-quality and seamless supply chain, and increasing its overall market share in the electronics export market.

The Indian economy accounts for nearly 3.2% of the global economy, and its population is almost 3.2% of the total global population. The Government of India aspires to make the country a substantial manufacturing and design hub for electronics as part of its Aatmanirbhar Bharat scheme. The Digital India Programme has led to a paradigm transition towards digitization and e-governance in India. Indias market share in the global electronics manufacturing industry increased to 3.6% in 2020 from 1.3% in 2012.

The Production Linked Incentive (PLI) scheme has effectively enticed international champions while giving an impetus to domestic manufacturers and creating national champions with global ambitions. Indias electronic manufacturing industry has witnessed a sharp transition in the last few years with various initiatives to market electronics manufacturing. The governments lucrative plans and initiatives have led the electronic manufacturing industry to a high growth trajectory. Additionally, the availability of skilled labour, large domestic market and low-cost labour have contributed to its sharp rise.

Technology has been a crucial driver across industries, influencing all spheres of life. The electronics market share in India is on the rise. In the past few years, India has captured a sizeable market share of the electronics manufacturing ecosystem that drives the technology sector. For the country to be the global electronics production unit of the future and become a US$ 5 trillion economy by 2025-26, it shall aim to be a US$ 1 trillion digital economy. Furthermore, special focus will be given to exports in order to accomplish the objectives.

The government aims to make electronics one of the top three export categories by 2025-26. A US$ 1 trillion digital economy target is projected to boost demand for electronics, which may stand at around US$ 180 billion by 2025-26. If India can accomplish the manufacturing goal of US$ 300 billion for electronics, the local market requirement may be fully met by such manufacturing. The US$ 300 billion target also requires US$ 120 billion of exports in the global market. Global competitiveness with optimum scale would be pivotal in achieving the aforesaid targets. Adequate fiscal measures, along with policy measures, would help in meeting the objectives of NPE 2019.

BUSINESS OVERVIEW:

HP Telecom India Limited, originally incorporated as HP Telecom India Private Limited on March 26, 2011, initially focused solely on distributing mobile phones, accessories, and related products. During the fiscal year 2014-15, the company secured exclusive distribution rights for brands such as Sony LED TVs and Mobiles and other mobile brands, for the different Regions of Gujarat. Also, the company expanded its product portfolio to include LCD/LED home theatres, indoor/outdoor air conditioners, and other home appliances. In the fiscal year 2015-16, the company further expanded its distribution portfolio by obtaining exclusive rights for Jio products in the West Region Trade Partner for Gujarat. In 2016, Apple made a strategic move to establish its presence in India, recognizing the immense potential of the market. Sensing the opportunity, our company secured the distribution rights for the Vapi Region, aligning with Apples vision to expand its reach and provide cutting-edge technology solutions to customers.

Currently, the Company operates as the exclusive distributor of Apple products across significant territories, including Madhya Pradesh & Chhattisgarh, select cities in Uttar Pradesh, and major urban centres in Gujarat. We proudly offer Apples iconic range of devices, comprising the iPhone, iPad, Mac, Apple Watch, and more, catering to the discerning tech-savvy consumers in these regions.

In F.Y. 2023-24, the Company secured the exclusive distribution rights for ‘Nothing in the state of Gujarat, allowing it to enhance the product lineup with innovative offerings. Further expanding its market footprint, the Company commenced trading operations in Karnataka in the year.

Despite this diversification, Apple products continue to drive a significant portion of the Companys revenue, contributing over 80% to overall earnings. The remaining revenue is generated through the sale of other brands, including JIO Recharge, JIO Phones, INFINIX Mobiles, etc.

The Product wise bifurcation of Revenue is as follows:

S. N. Particulars	Amount (in Lacs)	%
1. Mobile Phones	145212.03	96.50
2. Tablet	2167.21	1.44
3. Smart Watch	952.42	0.63
4. Audio Device	1085.46	0.72
5. Accessories	1018.58	0.68
6. Home Appliances	0.66	0.00
7. Apple Care Plan	49.86	0.03
Total	150486.22	100.00

(2) OPPORTUNITY AND THREATS:

Apple is planning to increase its manufacturing production outside of China, with India and Vietnam both likely to benefit from this decision. Apple is currently in discussions with some of its suppliers about expanding production in India, and potentially even producing goods for export. Apple wants to move more than 18% of its iPhone production to India by 2025, up from 7% in 2023.

According to a Morgan Stanley report, owing to a thriving economy and demographic shifts driving consumer demand, the markets for smartphones could triple to US$ 90 billion by 2032. According to the ‘A call to action for broadening and deepening electronics manufacturing report by the Ministry of Electronics and IT, India aims to achieve electronics manufacturing worth US$ 300 billion by 2026. Furthermore, the report highlights various segments established to add substantially to this objective, including contributions from Indias electronic goods exports. The report demonstrates an execution strategy by proposing short and long-term actions required to achieve the desired goal.

However, our financial performance and growth are necessarily dependent on economic conditions prevalent globally. The global economy may be materially and adversely affected by political instability or regional conflicts; a general rise in interest rates; inflation; exchange rate fluctuations; changes in tax including antidumping duties and countervailing duties, trade, and monetary policies; occurrence of natural or man-made disasters; downgrade in debt rating; and adverse global economic conditions due to various reasons such as ongoing dispute between Russia and Ukraine, terrorists attacks etc.

(3) OUTLOOK ON RISK AND CONCERNS:

Your Company is of the view that most of the regulatory un-certainties have already played out and with a stable GST, things would only improve in the long term. Further the organized/branded market may see better gains because of indirect tax reforms however there are certain concerns that may impact the Company-

1. The Companys ability to execute its strategy.

2. Consumer sentiments and economic stability in the Country.

Further, Your Company is exposed to a number of risks such as economic, regulatory, taxation and environmental risks. Following can be some of the risk and concern the Company needs to be keeping in mind:

- The largely unorganized structure of the market can affect the systematic functioning of the Company.

- Likely opening up of the economy, which can be a double-edged sword. The Diamond market in India is heavily influenced by the US Markets and other Countrys Market.

- Increasing competition among the Indian Exporters in this industry.

Some of the risks that may arise in its normal course of its business and impact its ability for future developments include inter-alia, credit risk, liquidity risk, counterparty risk, regulatory risk, commodity inflation risk, currency fluctuation risk and market risk. Your Company has chosen business strategy of focusing on certain key products and geographical segments are also exposed to the overall economic and market conditions. Accordingly, your Company has established a framework and process to monitor the exposures to implement appropriate measures in a timely and effective manner.

(4) INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has a proper and adequate system of internal controls. This ensures that all transactions are authorized, recorded and reported correctly, and assets are safeguarded and protected against loss from unauthorized use or disposition. In addition, there are operational controls and fraud risk controls, covering the entire spectrum of internal financial controls. An extensive programme of internal audits and management reviews supplements the process of internal financial control framework. Properly documented policies, guidelines and procedures are laid down for this purpose. The internal financial control framework has been designed to ensure that the financial and other records are reliable for preparing financial and other statements and for maintaining accountability of assets.

In addition, the Company has identified and documented the risks and controls for each process that has a relationship to the financial operations and reporting. The Company also has an Audit Committee to interact with the Statutory Auditors, Internal Auditors and Management in dealing with matters within its terms of reference. This Committee mainly deals with accounting matters, financial reporting and internal controls.

Discussion on financial performance with respect to operational performance

The Income from Operation of your Company for the year 2024-25 was increased to Rs. 159615.81 lacs as against Income from operation of Rs. 107861.56 lacs of the previous year. Accordingly, the Net Profit after tax of the Company was increased to Rs. 1257.84 lacs for the current year as against the Net Profit after tax of Rs. 859.06 lacs of the previous year.

(5) HUMAN RESOURCES & INDUSTRIAL RELATIONS:

The Companys human resources philosophy is to establish and build a strong performance and competency driven culture with greater sense of accountability and responsibility. The Company acknowledges that its principal asset is its employees. The expertise of the management team, the professional training provided to the staff, their personal commitment and their spirit of teamwork together enhance the Companys net worth. The Company has taken various steps for strengthening organizational competency through the involvement and development of employees as well as installing effective systems for improving their productivity and accountability at functional levels. Ongoing in-house and external training is provided to employees at all levels to update their knowledge and upgrade their skills and abilities. The effort to rationalize and streamline the workforce is a continuous process. The industrial relations scenario has remained harmonious throughout the year.

(6) DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIO:

Particulars	F. Y. 2024-25	F. Y. 2023-24	% variance	Reason for variance of more than 25%
Current Ratio (Times)	1.32	1.07	23.26	-
Inventory Turnover Ratio (Times)	15.65	15.12	3.54	-
Trade Receivable Turnover (Times)	26.09	28.00	-6.84	-
Trade Payable Turnover Ratio (Times)	15.52	15.19	2.17	-
Net Capital Turnover Ratio (Times)	39.36	78.09	-49.59	The Net Capital Turnover ratio has decreased primarily due to reduction in trade payables.
Debt Equity Ratio (Times)	1.76	3.44	-48.79	The Companys debt-equity ratio has decreased during the financial year due to an increase in equity base on account of additional share capital infused through IPO and profits earned during the year.
Debt Service coverage Ratio (Times)	2.90	2.09	38.40	The Debt Service Coverage ratio has increased due to increase in EBITDA.
Return on Capital Employed (%)	33.31	66.53	-49.94	The Return on Capital Employed has declined during the financial year, primarily due to an increase in capital employed.
Return on Investment (%)	5.98	5.61	6.58	-
Return on Net Worth (%)	24.05	34.60	-30.48	The Return on Net Worth has decreased during the year primarily due to an increase in shareholders funds, resulting from capital infusion and retained earnings from current year profits. While the Company continues to generate healthy earnings, the expanded equity base has led to a proportionate reduction in the RoNW ratio.
Operating Profit Margin (%)	1.58	1.80	12.17	-
Net profit Margin (%)	0.79	0.80	-1.06	-
Interest Coverage Ratio	3.11	2.49	25.03	The Interest Coverage Ratio has improved during the year primarily due to an increase in Earnings Before Interest and Taxes.

(7) CAUTIONARY STATEMENT:

Statement in this management analysis detailing the Companys objectives, projections, estimates, expectations, or predictions may be "forward looking" statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that may influence your Companys operations include Global and domestic supply and demand conditions affecting selling prices, input availability and prices, changes in Government policies, regulations, tax regimes, economic development within and outside the 61 country and other allied factors. The Company assumes no responsibility to publicly amend, modify or revise the forward-looking statement on the basis of subsequent developments, information or events.

For and on behalf of Board of Directors	Sd/-
HP TELECOM INDIA LIMITED	Seemabahen Vijay Yadav
Sd/-	Whole Time Director
Vijay Lalsingh Yadav	DIN: 02008064
Managing Director
DIN: 01990164
Place: Surat
Date: 30/06/2025