Yaari Digital Integrated Services Ltd Management Discussions.

ECONOMIC OVERVIEW

The pandemic was an unforeseen health catastrophe, which has had enormous impact on the global economy, contracting by 3.3% in

2020. Although the economy is being seemingly supported by multiple fiscal measures taken by the government to ease supply constraints and inject liquidity, the path to recovery has been inconsistent. The pandemic induced additional pressures on the already stressed Indian economy, which saw a steep economic slowdown, and is reported by National Statistical Office (NSO) to have contracted by 7.7% in FY 2021. This decline was sharper than expected.

However, multiple economic indicators have contributed positively towards broad-based resurgence of economic activity. The path to recovery will carry likelihood of further mobility restrictions, less stringent restrictions, targeted lockdown approach, and shorter duration of lockdowns, going forward. Resilient consumer and business behaviour to the New Normal will mitigate the economic impact of the second wave. Vaccination drives across country are a source of optimism and an enabler of continuity in an environment of uncertainty

As lockdown conditions have been progressively eased, early signs of recovery are evident in the most recent economic data. The most important growth factor for India is its large and fast-growing middle class, which is helping to drive consumer spending. The second-largest population, highest young and working population coupled with rapid urbanisation and rising affluence are key indigenous advantages to achieve stronger economic growth rate in India in the middle to long term.

INDUSTRY OVERVIEW

The Indian economy was distressed because of the operational challenges on back of social distancing, remote working and closure of commercial activities. COVID-19 has reshaped consumer decisions and journeys forever; loyalties are be influenced by diverse macro and micro factors. Consumers are becoming more restrained in their purchases, with trading down for value buying, choosing convenience over anything else and sometimes opting for a combination of both.

The Company believes, despite the stressed economy there is a huge market potential in the social commerce space. The pandemic accelerated the adoption of multiple contactless services, including video and WhatsApp shopping and home delivery. Digital channel adoption for food delivery, grocery to all kind of shopping and services gained a higher share than before. Online sales increased by over 10% across most categories they are available in. The trend is expected to stay in India.

BUSINESS OVERVIEW

As stated in the last couple of years, the Company, through two of its wholly owned subsidiaries, viz., Indiabulls Life Insurance Company Limited (IBLIC) and Indiabulls General Insurance Limited (IBGIL) intended to venture into Life and Non-Life insurance businesses, and had applied to the insurance regulator, Insurance Regulatory and Development Authority of India (IRDAI), for the necessary licenses for the same. Both IBLIC and IBGIL, got the preliminary approval (R1) for their proposed Life and Non-Life Insurance business, respectively, and then after satisfying all necessary pre-conditions and putting in place the necessary manpower and technology systems, had applied for necessary registration (R2) with IRDAI to commence their life insurance and general insurance business in India. However due to Covid-19 and other conditions, the companies faced inordinate delay in getting the next stage of approval (R2). All the necessary paperwork had been filed with the IRDAI and the necessary presentations made before the authorities, but still the final approval has not been forthcoming.

Meanwhile, due to change in business environment and economic scenario, which got impacted by the ongoing pandemic, the Company decided to upscale its digital platform business, being new age business ventures, where the Company management has a competitive edge, given Companys cutting edge technology platform and digital reach and in order to charter right direction for its continuous focus around promoting digital platform businesses and to grow to next frontier, the Company launched a social commerce marketplace Yaari, which enable small businesses and individual resellers to start their business online via social channels such as WhatsApp, Facebook, Instagram etc.

Yaari app is a social commerce marketplace for a bouquet of curated consumer products including, but not limited to, Fashion, Beauty and Personal care and electronics. Yaarii is a mobile first business available for access anywhere anytime through its Android & iOS Application. Ever since its inception, Yaarii has managed to help customers with their personal requirements of various financial products and is now venturing into business to fulfil customers personal requirements in terms of consumer goods.

The Yaari app is designed to easily allow manufacturers and suppliers, list their products online and make a viable alternate channel to market their products Pan India. The resellers then leveraging the power of existing social networks, will market these products to their contacts and thereby supplementing their income through the platform. The app also provides aspiring entrepreneurs, especially women, the ease to start an online business from home by taking away risk of inventory management, payments and even order fulfilment.

Yaari app coupled with digitally connected Bharat, will accelerate the growth of online commerce and create an ecosystem that enables income support for aspiring Indians. Yaari is further looking to aggregate marketplace model to other online commerce verticals.

BUSINESS RESTRUCTURING

To streamline the operations and ownership structure of the Company, in a manner leading to maximization of stakeholders value and diversification of shareholders portfolio by providing them direct ownership in each business segments, and to have a focused approach towards upcoming insurance business and digital platform business, the Board of Directors of the Company had approved the composite Scheme of Amalgamation and Arrangement amongst the Company, its direct and indirect subsidiaries (viz. SORIL Infra Resources Limited, Albasta Wholesale Services Limited, Sentia Properties Limited, Lucina Infrastructure Limited, Ashva Stud and Agricultural Farms Limited, Mahabala Infracon Private Limited, Store One Infra Resources Limited, Indiabulls Enterprises Limited and Indiabulls Pharmacare Limited) and Indiabulls Pharmaceuticals Limited and their respective shareholders and creditors ("Scheme"). Pursuant to the Scheme, the shareholders of the Company will get shares of Indiabulls Enterprises Limited, free of any cost, in lieu of their shareholding in the Company. The shares of Indiabulls Enterprises Limited will get listed on NSE and BSE and with this, post effectiveness of the Scheme, they will have shares of two listed entities -

(1) the Company, the equity shares of which are listed and will remain listed on NSE and BSE, focusing on the business of digital platform, upcoming life and general insurance and related businesses, and

(2) Indiabulls Enterprises Limited, equity shares of which will be listed on NSE and BSE, focusing on non-insurance businesses of the Company and its subsidiaries (including proposed pharma business and rural finance business).

Subsequent to receipt of NOCs (observation letters) from the National Stock Exchange of India Limited and BSE Limited, the Company had filed the Scheme and Company Application, under Sections 230 to 232 of the Companies Act, 2013 and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, before jurisdictional bench of NCLT ("NCLT") and NCLT, vide its order dated July 7, 2021, inter alia directed the meeting of the Companys equity shareholders to be convened on August 21, 2021, through Video Conference ("VC")/Other Audio-Visual Means ("OAVM") for the purpose of considering, and if thought fit, approving the Scheme by the shareholders. Your directors are pleased to inform that the shareholders of the Company, at aforementioned meeting, have approved the Scheme with requisite majority and thereafter, the Company has filed second motion application with NCLT.

INDUSTRY STRUCTURE AND DEVELOPMENT AND BUSINESS OUTLOOK

The Company aims to build a stable, secure and sustainable business that is focused on maximizing growth opportunities within the industry. We envision as an upcoming online commerce company that is based on key principles of strong business fundamentals, predominantly focused on good governance, low cost operations, innovation and trust.

The Indian social commerce industry is still at the nascent stage is expected to grow to US$ 70 billion by FY 2030, as it serves distinct needs of the consumers. Social commerce is expected to democratize the entire e-commerce industry, primarily driven by more distributed models that are built on trust and community. Also, it will help in structuring the unstructured long tail segments in the online commerce industry.

The Companys digital app Yaari coupled with the digitally connected Bharat, will accelerate the growth of online commerce and create an ecosystem that enables income support for over 40 million aspiring Indians.

The Government of India has announced various initiatives, namely Digital India, Make in India, Start-up India, Skill India and Innovation Fund. The timely and effective implementation of such programs will likely support growth of E-commerce in the country. Some of the major initiatives taken by the Government to promote E-commerce in India are as follows:

1. 100% FDI is allowed in B2B Commerce and 100% FDI under the automatic route is permitted in the marketplace model of ecommerce.

2. As of February 15, 2020, the Government eMarketplace (GeM), listed 1,071,747 sellers and service providers across over 13,899 product and 176 service categories. For the financial year 2020-21, government procurement from micro and small enterprises was worth Rs. 23,424 crore (US$ 3.2 billion).

3. National Retail Policy: The government had identified five areas in its proposed national retail policy-ease of doing business, rationalisation of the licence process, digitisation of retail, focus on reforms and an open network for digital commerce-stating that offline retail and e-commerce.

4. Under the Digital India movement, Government launched various initiatives like Umang, Start-up India Portal, Bharat Interface for Money (BHIM) etc. to boost digitisation.

5. Heavy investment made by the Government in rolling out fiber network for 5G will help boost E-commerce in India.

Apart from this, adoption of technology, positive demographics changes and education, have contributed to this growth. As a result, the outlook for online commerce markets in emerging economies remains largely positive, even as cyclical and structural factors weigh on the overall macro growth prospects.

OUR STRATEGY

Our strategy focuses on ensuring that our customer is at the core of everything we do. We believe in building a sustainable organization that remains relevant to the agenda of our stakeholders, and providing value to our clients, and aim to create growth opportunities to our employees and profitable returns to our investors. The Companys strategy for long term profitable growth is based on continuously scaling its various businesses in India, while investing in new markets and venturing into new businesses.

The customer experience is at the centre of the industry.

Customers now demand a transparent and seamless experience enabled by technology that provides quick information/ feedback. Customers are now setting new standards of ease, convenience and value, expecting 24-hour access along with customized products at competitive prices. Customer journeys and an increasing focus on customer experiences is now emerging as a key imperative for the online commerce sector.

Digitisation

Digital technology has proved to be a game changer in online commerce. Increasing internet penetration (expected to be 900 million by 2024) will continue to influence the online commerce business as well as other industries.

Blurring lines of business coupled with increased flow of information have created an ultracompetitive marketplace where it has become important to continuously innovate and be agile. Rapidly evolving customer behaviour means that providing a frictionless end-to-end buying experience to customers has become of utmost importance.

Considering Yaari existing & future digital customer base and huge potential in digital business, going forward, the Company intends to pursue its substantial existing and future businesses, including social commerce business, digitally under the brand Yaari, through its Yaari app, without any physical branches. Yaari will use its reach to millions of customers to sell, service & cater the Consumer products of Companys subsidiaries, as and when these products become available. This will be done through intuitive product UI with smart product recommendations & hassle free claims process.

OUR STRENGTHS

Presence of dynamic leadership and professional management team

The Company and the group companies are headed by professional industry leaders and are overseen by Boards comprising of eminent industry veterans. The Group benefits immensely from the diverse and collective experience of these individuals and the social commerce business will also draw from their inputs and experience. The Company will further have online commerce experts and will benefit from highly skilled and experienced key management personnel, well-trained employee force, business partners, strong analytics and technical background.

Technological expertise

Yaarii digital integrated service is a technology leaders within the sector pioneering many cost-effective and customer-centric innovations. The company has also effectively deployed technology to further expand its reach into the hinterlands. The technology thrust of the Group is customer focused and aims at offering utmost customer convenience and maximum cost effectiveness. While entering into the proposed social commerce business, the Company shall be highly benefited with groups technological expertise

Robust systems and process

The Company believes that the systems and processes are its major strength. Considering the long-term nature of the business, the Company will put in place robust processes and systems for the orderly growth of the Company. We shall develop appropriate systems and processes to ensure that the investments of the Company are in line with the regulatory requirements and asset-liability norms

OPPORTUNITIES

There are huge potential and opportunities in social commerce sector in India. Today, with a regulatory environment, increasingly aware digital customer and technological enablers, we believe we are in a good position to utilize the existing opportunities. The current market is focused primarily on the urban population, however, by re-imagining the social commerce way, we believe there is potential market to be unlocked. The Company believes that following are the key growth drivers that exist in the current market for its various business operations and opportunities:

Favourable demographics and economic factors

India currently has over 600 million internet user, and is still in early stage of online commerce as only 28% of the active users purchase online. The active user base is expected to increase up to 900 million by 2024. While most of the active users are currently based in urban India, the shift is expected by 2024 wherein most the active users will be from Rural India. This changing demographic profile means that innovation in products, distribution and on-boarding, is of utmost importance to be able to provide a superior customer experience. These factors also highlight the wide array of growth opportunities for the social commerce industry.

Shifting towards Online Commerce

Fear around Covid-19 has made greater awareness amongst people about online commerce. Pandemic induced lockdowns have pushed the new buyers and sellers onto the digital platform. Social Distancing compulsion coupled with increased internet penetration has galvanised the online commerce adoption beyond the metro cities and into small towns and rural areas. The structural shift in consumer behaviour has resulted in faster adoption of the online commerce. According to Forrester Research, Indian e-commerce sales increased by 7-8% in 2020. Also, the e-commerce sector recorded growth as most consumers shifted to online shopping as opposed to stepping outside due to lockdown restrictions.

Untapped Market

India ranks second in terms of the number of internet users. This number is split almost equally among urban and rural users. The number of internet users is further set to rise, with initiatives such as Digital Village providing internet access to more people. While the primary focus of the industry has been urban population, the potential to tap the tier 2 and tier 3 consumer is huge.

The majority of the consumers from tier 2, tier 3 cities and rural areas engage in value-based shopping driven via people they know-family members, friends, acquaintances or connections

RISKS AND THREATS

Economic Slowdown

As the Covid-19 cases continued to rise exponentially, the economy declined sharply. If the slowdown continues, its consequences will impact consumer confidence and customers spending behaviour as a result this might affect new business logins and persistency of social commerce business.

Uncertainty

Uncertainty is the inability to predict the future with confidence. Because of the presence of uncertainty, we need to consider the effects of possible deviations from the projected figures. Due to overall uncertainty in the environment, the market volatility and consumer confidence we could experience a drop in demand as consumer confidence in the stock market is shaky.

Supply chain management

The manifold disruptions due to Covid-19 related lockdowns, challenges in production, managing supply and distribution networks pose multi-dimensional risks that are rapidly evolving. These can disrupt supply chain and manufacturing processes and adversely impact business.

Cyber security risk

Our operations are increasingly dependent on IT systems, digital interactions and management of information. The cyber-attack threat of unauthorised access and misuse of sensitive information or disruption to operations can inhibit business operations in several ways.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS AND CHANGE IN RETURN ON NETWORTH

In compliance with the requirements of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, the details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with other key financial ratios and changes in Return on Networth of the Company (on standalone basis) including detailed explanations therefor are as under:

Particulars 2020-21 2019-20
Ratios - Balance Sheet
During the year 2020-21, the debt of the Company has increased due to which debt-equity ratio has increased to 0.33 as compared to 0.12 in the previous year.
Liquid cash as a % of total assets* 50% 52%
Debt Equity Ratio 0.33 0.12
Ratios - Financial performance
The basic and diluted EPS of the Company decreased during the FY 2020-21, as the Company has incurred losses of ^88.09 crore as compared to loss of ^ 22.45 crore in the previous year. The finance cost of the Company has increased during the FY 2020-21 due to additional borrowings.
Net Profit Margin (18.23) (2.21)
Basic EPS (in ^) (9.86) (2.51)
Diluted EPS (in ^) (9.86) (2.51)

*Liquid cash includes current loans and investment in mutual funds less book overdraft.

Change in Return on Networth:

During the FY 2020-21 and FY 2019-20, the Company has incurred losses and hence return on networth is negative in both the years.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place adequate systems of internal control commensurate with its size and nature of business. It has institutionalised a robust and comprehensive internal control mechanism across all the major processes to ensure reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedures, laws, and regulations. The Board Audit Committee oversees the compliance framework of the Company. The Company has formulated various internal policies/procedures and an employee code of conduct, which govern the day-today activities to ensure compliance. The Internal audit function provides independent and reasonable assurance about the adequacy and operating effectiveness of the Internal Controls to the Board and the Audit Committee.

HUMAN RESOURCES

The Company firmly believes that its employees are the key to driving performance and developing competitive advantage. The emphasis has been on proper recruitment of talent and empowerment while devoting resources for their continuous development. The structured recruitment process, which the Company employs, focuses on recruiting people who have the right mindset for working, supported by structured training programs and internal growth opportunities. As on March 31, 2021, the Company had a strong team of 74 employees, who are aligned and dedicated towards the Companys goals.

CAUTIONARY STATEMENT

Statements in this Report on Management Discussion and Analysis describing the Companys objectives, estimates and expectations may be forward looking based on certain assumptions and expectations of future events. Actual results might differ substantially or materially from those expressed or implied. The Company here means the consolidated entity consisting of its subsidiary(ies).

The Company assumes no responsibility nor is under any obligation to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events.