IKF Technologies Ltd Management Discussions

FORWARD LOOKING STATEMENT:

This report contains forward-looking statements which are presented for the purpose of assisting the reader to contextualize the Companys financial position and understand managements expectations regarding the Companys strategic priorities, objectives and plans. The Companys actual results, performance or achievements can thus differ materially from those projected in any such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.

OVERVIEW

IKF Technologies Limited ("IKF" or "the Company") is a "Category A" ISP License Holder from Department of Telecommunication (Govt. of India). Over a period, it has steadily developed its network and subsequent subscriber base across India. The Company has a well calibrated growth strategy that includes a mix of effective sales and marketing spends as well as optimal utilization of technology, analytics and innovation. IKF has established its brand "IKF POWERNET" in the industry in the retail and corporate broadband segments. The efforts are supported by significant internal domain expertise and consumer insights in the internet business space developed through a rich experience of operations spanning. Consequently, the Company lays considerable emphasis on increasing the return on capital employed and in maintaining a strong cash position in the balance sheet.

India is the worlds second-largest telecommunications market, with around 1.20 billion subscribers as of December 2018. The telecom market can be split into three segments - wireless, wireline and internet services. The wireless market segment comprises of 98.17 per cent of the total subscriber base, as of March 2019. Wireless subscriptions witnessed a CAGR of 19.61 per cent to reach 1,183.41 million at the end of FY18

The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth in the Indian telecom sector. The government has enabled easy market access to telecom equipment and a fair and proactive regulatory framework that has ensured availability of telecom services to consumer at affordable prices. The deregulation of Foreign Direct Investment (FDI) norms has made the sector one of the fastest growing and a top five employment opportunity generator in the country.

FY18 was a decisive year for the Indian Telecom Sector on numerous counts. Industry revenue table continued to remain under pressure, with the launch of aggressive price offerings by the latest entrant. The continuing disruption hastened consolidation and operators with stretched balance sheets found it difficult to survive.

The sector is witnessing exponential data traffic growth led by increased smartphone penetration, cheaper data tariffs, and proliferation of regional content. Though the mobile broadband penetration is approximately 30% today, it is expected to grow manifold and make India the second largest smartphone market (ahead of US and just behind China). Further, data traffic is expected to grow 7-fold from 2016-2021.

The year saw financial stress across the industry ultimately leading to hastening of the eventual consolidation in the industry. The year saw a host of operator shut downs and M&A announcements. This has fast tracked the customer consolidation and consequently the customer base has registered a muted growth of 1% in FY18 vis-a-vis 1,194.6 million last year and there has been a marginal decline in the tele-density from 93% last year. The tele-density level stood at about 92.8% as on 31 March 2018.

The sector has witnessed a strong growth of internet users and remains to have worlds second highest number of internet users. The wire-line customer base was at 22.8 million at the end of 31 March 2018 as against 24.4 million at the end of 31 March 2017.

In the given scenario, IKF POWERNET aims to cater retail broadband users segment along with the enterprise segment with premium Corporate ILL Services and other cloud - based solutions. IKF give a complete solution to its both service segment.

The Financial Statements have been prepared in accordance with Indian Accounting Standards ("Ind AS") as prescribed under Section 133 of the Companies Act, 2013 read with rule 7 of The Companies (Accounts) rules, 2014. We continue to see customers viewing technology as a key enabler to drive their growth strategies. Our Management accepts the responsibility for the integrity and objectivity of these financial statements, as well as for the various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, so that the financial statements reflect a true and fair view.

India GDP Annual Growth Rate

The Indian economy expanded 5.8 percent year-on-year in the first three months of 2018, higher than a downwardly revised 5 percent in the previous quarter. "Real" or inflation-adjusted GDP grew 6.8 percent in 2018-19, lower than previous years 7.2 percent.

Indias growth of real GDP has been high with average growth of 7.5 per cent in the last 5 years (2014-15 onwards). The Indian economy grew at 6.8 per cent in 2018-19, thereby experiencing some moderation in growth when compared to the previous year. This moderation in growth momentum is mainly on account of lower growth in Agriculture & allied, Trade, hotel, transport, storage, communication and services related to broadcasting and Public administration & defence sectors. Acreage in 2018-19 for the rabi crop was marginally lower than last year, which affected agricultural performance. The contraction in food prices may have contributed to inducing farmers to produce less. On the demand side, lower growth of GDP in 2018-19 was accounted for, by a decline in growth of government final consumption, change in stocks and contraction in valuables.

On the external front, current account deficit (CAD) increased from 1.9 per cent of GDP in 2017-18 to 2.6 per cent in April- December 2018 . The widening of the CAD was largely on account of a higher trade deficit driven by rise in international crude oil prices (Indian basket). The trade deficit increased from US$ 162.1 billion in 2017-18 to US$ 184 billion 218-19. Merchandise imports reduced from 21.1 per cent to 10.4 per cent. Growth in service exports and imports in US dollar terms declined to 5.5 per cent and 6.7 per cent respectively in 2018-19, from 18.8 per cent and 22.6 per cent respectively in 201718.

Rupee depreciated by 7.8 per cent vis-a-vis UD dollar, 7.7 per cent against Yen, and 6.8 per cent against Euro and Pound Sterling in 2018-19. During 2018-19, Indian rupee traded with a depreciating trend against UD dollar and touched Rs. 74.4 per US dollar in October 2018 before recovering to Rs. 69.2 per uS dollar at end March 2019.

The foreign exchange reserves in nominal terms (including the valuation effects) decreased by US$ 11.6 billion end-March 2019 over end-March 2018. Within the year, foreign exchange reserves were declining until October 2018 due to RBIs intervention to modulate exchange rate volatility.

GVA during 2018-19 grew 6.6 percent while it was 6.9 percent in 2017-18. GVA is a considered to be a more realistic proxy to measure economic activity. The manufacturing sector grew 3.1 percent in January-March 2019, from 9.5 percent in the same quarter last year. For the whole year, the manufacturing sector stood at 6.9 percent in 2018-19 from 5.9 percent in 2017-18.

The agriculture sector, which has been hit by falling farm produce prices and flat income growth, stood at -0.1 percent in January-March 2019 and 2.9 percent in 2018-19.

Indias long slowdown in food prices may well be symptomatic of a problem of abundance. Procurement is taking place at higher prices only for fourteen (14) cereals by government agencies such as the Food Corporation of India (FCI). Vegetables, potatoes and onions however, are not procured by government agencies.

The new government has to quickly move on policies to raise farm incomes and also ensuring that retail inflation remains within the central banks tolerable level of 4 percent.

Industry Structure and Developments

India is currently the worlds second-largest telecommunications market with a subscriber base of 1.20 billion and has registered strong growth in the past decade and half. The Indian mobile economy is growing rapidly and will contribute substantially to Indias Gross Domestic Product (GDP), according to report prepared by GSM Association (GSMA) in collaboration with the Boston Consulting Group (BCG). As of January 2019, India has witnessed a 165 per cent growth in app downloads in the past two years.

The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth in the Indian telecom sector. The government has enabled easy market access to telecom equipment and a fair and proactive regulatory framework that has ensured availability of telecom services to consumer at affordable prices. The deregulation of Foreign Direct Investment (FDI) norms has made the sector one of the fastest growing and a top five employment opportunity generator in the country.

With daily increasing subscriber base, there have been a lot of investments and developments in the sector. FDI inflows into the telecom sector during April 2000 - March 2019 totalled to US$ 32.82 billion, according to the data released by Department for Promotion of Industry and Internal Trade (DPIIT).

Some of the developments in the recent past are:

• During the first quarter of 2018, India became the worlds fastest-growing market for mobile applications. The country remained as the worlds fastest growing market for Google Play downloads in the second and third quarter of 2018.

• Bharti Airtel is planning to launch 6,000 new sites and 2,000 km of optical fiber in Gujarat in 2018-19.

• The number of mobile wallet transaction increased 5 per cent month-on-month to 325.28 million in July 2018.

• As of June 2018, BSNL is expected to launch its 5G services by 2020.

The Indian telecom sector is expected to generate four million direct and indirect jobs over the next five years according to estimates by Randstad India. The employment opportunities are expected to be created due to combination of governments efforts to increase penetration in rural areas and the rapid increase in smartphone sales and rising internet usage.

According to a report by leading research firm Market Research Store, the Indian telecommunication services market will likely grow by 10.3 per cent year-on-year to reach US$ 103.9 billion by 2020.

Government Initiatives

The government has fast-tracked reforms in the telecom sector and continues to be proactive in providing room for growth for telecom companies.

Some of the other major initiatives taken by the government are as follows:

• The Government of India is soon going to come out with a new National Telecom Policy 2018 in lieu of rapid technological advancement in the sector over the past few years. The policy has envisaged attracting investments worth US$ 100 billion in the sector by 2022.

• The Department of Information Technology intends to set up over 1 million internet-enabled common service centres across India as per the National e-Governance Plan.

• FDI cap in the telecom sector has been increased to 100 per cent from 74 per cent; out of 100 per cent, 49 per cent will be done through automatic route and the rest will be done through the FIPB approval route.

• FDI of up to 100 per cent is permitted for infrastructure providers offering dark fibre, electronic mail and voice mail.

• The Government of India has introduced Digital India programme under which all the sectors such as healthcare, retail, etc. will be connected through internet

• The Ministry of Communications & Information Technology has launched Twitter Sewa, an online communications platform for registration and resolution of user complaints in the telecommunications and postal sectors.

• The TRAI has released a consultation paper which aims to offer consumers free Internet services within the net neutrality framework and has proposed three models for free data delivery to customers without violating the regulations.

• The Department of Telecommunications (DoT) has amended the Unified Licence for telecom operations which will allow sharing of active telecom infrastructure like antenna, feeder cable and transmission systems between operators, thereby lowering the costs of operations and leading to faster rollout of networks.

• The TRAI has recommended a Public-Private Partnership (PPP) model for BharatNet, the central governments ambitious project to set up a broadband network in rural India and has also envisaged central and state governments to become the main clients in this project.

• The Ministry of Skill Development and Entrepreneurship (MSDE) signed a Memorandum of Understanding (MoU) with DoT to develop and implement National Action Plan for Skill Development in Telecom Sector, with an objective of fulfilling skilled manpower requirement and providing employment and entrepreneurship opportunities in the sector.

• The TRAI has directed the telecom companies or mobile operators to compensate the consumers in the event of dropped calls with a view to reduce the increasing number of dropped calls.

IKF is operating under Internet Providing Services, the Industry Structure and developments in India is stated below:

Indias internet user base has already surpassed the US, and today is second largest after China. Globally, the number of internet users is expected to touch 4,170 million by 2020, growing at a CAGR of 6%, and adding 960 million in the next five years. However, internet user growth in India is expected to be 3x the world average, growing at a CAGR of 20%. India will add 400 million users, which is over 40% of incremental internet users worldwide in the next five years.

While the Governments Digital India initiative aims to deploy the National Optical Fibre Network (NOFN) providing broadband connectivity to cover 250,000 gram panchayats, the onus of bringing this Internet to end users falls on telcos and technology companies. The NOFN will have to be linked with telecom towers to deliver wireless broadband services to rural households, but setting up telecom infrastructure in remote areas remains a challenge.

It is estimated that the Internet economy will grow to over 4 percent of GDP by 2020. As Shri Prasad said, "For the Internet Economy to touch USD 200 billion by 2020 that will contribute 5 percent of GDP we need to move at a fast pace towards computer literacy. The other key areas which will help the internet economy to grow are Mobile internet. The government is committed to digitization and we look at extensive PPP to the have successful implementation."

Mumbai has retained its position at the top of the list- it was placed at the same position with 12 million users last year. With 16.6 million users out of total 243 million in India coming from Mumbai indicates that 6.74% of the web users in India are from Mumbai, a city which accounts for less than 2% of the population (1.67%, to be precise).

Delhi has seen a tremendous increase in the number of users but remains a distant second, having been outdistanced by Mumbai by a huge margin.

Kolkata, which was placed at No. 5 last year, has risen to the third spot with the number of web users in the city rising from 4.7 to 6.27 million during the last one year.

Segment-Wise Performance

IKF AT ITS BPO SEGMENT

IKF Technologies Limited offers end-to-end Contact Centre Management and Business Process Management Services. We help our clients effectively serve their customers through our range of services from Customer Acquisition, Maintenance, Enabling Services and Retention. Our offer is the right blend of Inbound, Outbound and Back-End services under one roof to cater to our clients varied service delivery requirements.

SERVICES OFFERED BY IKF:

• Customer support services: 24/7 inbound/outbound call center services that address customer queries and concerns through phone, email and live chat.

• Technical support services: Installation, product support, running support, troubleshooting, usage support and problem resolution for computer software, hardware, peripherals and internet infrastructure.

• Telemarketing services: Interacting with potential customers and creating interest for the customers services/products. Upselling, promoting and cross selling to existing customers and completing online sales processes.

• IT help desk services: Level 1 and 2 multi-channel support, system problem resolutions, technical problem resolution, office productivity tools support, answering product usage queries and performing remote diagnostics.

• Insurance processing: New business acquisition and promotion, claims processing, policy maintenance and policy management.

• Data entry and data processing: Data entry from paper, books, images, e-books, yellow pages, web sites, business cards, printed documents, software applications, receipts, bills, catalogs and mailing lists.

• Data conversion services: Data conversion for databases, word processors, spreadsheets and software applications.

• Data conversion of raw data into PDF, HTML, Word or Acrobat formats.

• Bookkeeping and accounting services: Maintenance of the customers general ledger, accounts receivables, accounts payables, financial statements, bank reconciliations and assets /equipment ledgers.

• Form processing services: Online form processing, payroll processing, medical billing, insurance claim forms processing and medical forms processing.

• Online research: Internet search, product research, market research, surveys, analysis, web research and mailing list research.

CLIENTS SERVED:

ISP SEGMENT

IKF Technologies has registered a rapid and substantial growth in ISP Segment in last 3 years. IKF has come out with its retail wing "IKF POWERNET" in FY 2016-17. IKF has already extended its network across India and counts number of subscribers PAN India.

IKF ISP has been able to develop its own infrastructure by large in previous financial year. Major highlights of infra structure development as follows.

IKF has joined hands with all major ISPs in India mainly Bharti Airtel Ltd. /Vodafone /Reliance/TCL/TTSL/Power grid.

IKF has developed its Central National Operating Center in Kolkata, Mumbai, Delhi, Patna, Siliguri, Lucknow with more than 100 POPs across India.

Network Multiplexer of all Major ISP are installed at its Kolkata NOC.

NOC working capacity has grown up 40G in this FY Year.

IKF has successfully convinced Google, Microsoft, Facebook, Akamai, NIXI to create a hub at IKFs Central NOC by providing a Google Global Cache Server.

In the edge of cut through connectivity its speed to subscriber is crucial and IKF has managed to i.e peer its network with all Content Provider. Google/Hotstar/Facebook/Akamai/Microsoft/Amazon, NIXI, MCH, Netmagic, and many more to its NOC.

IKF is putting up extra yard in creation of its Optic Fiber Network. IKF has successfully managed a OFC network of around 2500+ KMs in all parts of Kolkata and suburbs. We aim to take this forward to 7000KM by next financial year.

"IKF POWERNET" the retail wing of IKF Technologies Limited in ISP Division is the outcome of its expansion process, whereas the ISP giant has come up with more new products and services in the market. Product are as below:

IKF Powernet Broadband Service

IKF Powernet Corporate ILL

PowerFI - Hot Spot Zones

Global Peering and Content Delivery Services

Web & Application Services for corporate customers

Cloud Services for business

Cloud for Individuals

Digital Security and Surveillance

IOT Platform.

In-Line Products:

• IPTV

• FTTH Solutions

• AI

IKF Technologies Ltd. is also prime member of Indian Internet Foundation. Where forum has successfully gained Akamai Server and also working on getting more content provider and as a corporate social responsibility IKF is actively involved in securing the internet cyber space through its various awareness programs in line up with IIFON.

Bio Fuel Division

The quick development and expansion of biofuel production technologies have created remarkable interest within the body of world economic in order to make out the influence of biofuel growth on bioenergy market. One of the most notable factors responsible for the growth of this market is that these are produced from any form of oil-rich crop like as, soy, oil palm or sunflower by simple biochemical processes. These crops are grown naturally in all the regions across the globe. Hence, production of biofuels is cost-effective and the most eco-friendly form of energy to use. The market analysis report refects

The quick development and expansion of biofuel production technologies have created remarkable interest within the body of world economic in order to make out the influence of biofuel growth on bioenergy market. One of the most notable factors responsible for the growth of this market is that these are produced from any form of oil-rich crop like as, soy, oil palm or sunflower by simple biochemical processes. These crops are grown naturally in all the regions across the globe. Hence, production of biofuels is cost-effective and the most eco-friendly form of energy to use. The market analysis report refects the global biofuels market of bioethanol and biodiesel. The biofuels (bioethanol and biodiesel) production in the countries such as USA, Brazil, China, India, and Russia are expected to be the witness of increasing growth in the upcoming years. Due to the rapid increase of greenhouse gases in the atmosphere has boosted the research interest of the scientists towards the renewable energy. Biofuels are the class of renewable energy derived biologically from carbon fixation. In the recent days, the focus on the biofuels have increased significantly in the market due to some factors such as government support, energy sustainability, low volatility, low carbon emissions, increasing crude oil prices, limitation of crude oil and increase in automobile industry.

OUTLOOK

Increase in internet subscribers to boost data revenue the number of mobile Internet users in the country at the end of March 2018 was at more than 600 million. It is expected to continue increasing at a faster pace with affordable handsets and cheap tariffs. The growth in user base is faster in rural parts of the country as the addition is propelled by falling data charges and smartphones becoming more affordable. Urban users mostly consume communication, social networking and entertainment on mobile Internet; while in rural India, entertainment rules the roost. The younger consumers in urban India are spending a greater proportion of their monthly bill on data usage, while voice component increases steadily with age - the average monthly bill is highest for the age group of 45 years and both mobile data and voice expenditures for this age group are the highest. Thus, while in terms of uptake, the younger generation is driving the growth of telecom services in urban India; senior generations provide higher average revenue per user (ARPU) for telecom companies. While we are seeing a competitive "more for less" offering by all players in the industry, including your Company, we see ARPUs improving in the medium to long term. Industry friendly regulation by the government will help the sector to grow faster Government policy and the telecom regulatory authorities will continue to play a key role in the industrys journey into the future. Industry players expect that policy makers would take requisite steps immediately to infuse financial and operational vigour in the sector.

Human Resource and Employees Relations

To retain and develop, the best people is vital to our success. To achieve this, we focus on:

• Providing attractive career development paths for new recruits, starting with a structured induction programme and ongoing training as they progress their careers;

• Equipping consultants with the latest technology, tools and products and embrace digital technology as an enabler to make them as effective as possible;

• Strategic Connect & Organization realignment.

• We are an equal opportunity employer.