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InfoBeans Technologies Ltd Management Discussions

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Apr 2, 2025|03:57:09 PM

InfoBeans Technologies Ltd Share Price Management Discussions

Economic overview

Global economy

The global economy demonstrated surprising resilience throughout the global disinflation period of 2022-23. As inflation descended from its mid- 2022 peak, economic activity grew steadily, defying earlier warnings of stagflation and a potential global recession. Employment and income growth remained stable, supported by greater-than-expected government spending, robust household consumption, and an unexpected expansion in the labour force participation rate.

As global inflation converges toward target levels, central banks are pivoting towards policy easing in many economies. However, a tightening of fiscal policies, aimed at curbing high government debt through higher taxes and lower government spending, is expected to weigh on growth.

Global growth, estimated at 3.2% in 2023, is projected to continue at the same pace in 2024 and 2025. Despite this, the pace of expansion remains low by historical standards due to near-term factors such as high borrowing costs and the withdrawal of fiscal support, as well as long-term effects from the COVID-19 pandemic and geopolitical tensions like Russia-Ukraine conflict and conflict in the Middle East. Additionally, weak productivity growth and increasing geoeconomic fragmentation contribute to this trend.

Global headline inflation is expected to decrease from an annual average of 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025. Advanced economies are expected to return to their inflation targets sooner than emerging markets and developing economies. However, the forecast for global growth five years from now, at 3.1%, is at its lowest in decades. The pace of convergence towards higher living standards for middle and lower-income countries has slowed, implying a persistence in global economic disparities.

The relatively weak medium-term outlook reflects lower growth in GDP per person, stemming from persistent structural frictions that prevent capital and labour from moving to more productive firms. Furthermore, dimmer growth prospects for China and other large emerging market economies, given their increasing share of the global economy, will weigh on the growth prospects of their trading partners.

Despite these challenges, the global economy has shown remarkable adaptability and resilience. As we navigate the complexities of the current economic landscape, it is crucial to remain vigilant and adaptable to sustain growth and stability.

Overview of the world economic outlook projections (%)

Economy Actual Projections
2022 2023 2024 2025
World output 3.4 3.2 3.2 3.2
Advanced economies 2.7 1.6 1.7 1.8
United States (US) 2.1 2.5 2.7 1.9
Eurozone 3.5 0.4 0.8 1.5
Japan 1.1 1.9 0.9 1.0
United Kingdom (UK) 4.0 0.1 0.5 1.5
Other advanced economies 2.6 1.8 2.0 2.4
Emerging market and developing economies 4.0 4.3 4.2 4.2
China 3.0 5.2 4.6 4.1
India 6.8 7.8 6.8 6.5

Source: IMF - World Economic Outlook - April 2024

Industry overview Global IT industry

Worldwide IT spending is projected to reach USD 5.06 trillion in 2024, marking an 8% increase from 2023, according to the latest forecast. This growth is an upward revision from the previous forecast of 6.8% and sets the global IT spending trajectory to surpass USD 8 trillion before the decade ends.

IT services are expected to grow by 9.7%, reaching USD 1.52 trillion, making it the largest market segment tracked. Enterprises are increasingly investing in consulting services rather than internal IT staff due to a talent shortage, marking a significant shift in spending patterns.

Spending on data centre systems is forecasted to grow from 4% in 2023 to 10% in 2024, largely driven

by preparations for generative AI (GenAI). In 2023, enterprises focussed on storytelling around GenAI, while 2024 will see them planning for execution in 2025. Technology providers are already integrating GenAI capabilities into their products and services to meet enterprise demands.

AI servers are expected to account for nearly 60% of total server spending by hyperscalers in 2024.

With more than half (aggregate 63%) of all enterprises planning to grow their tech and telecommunications spending, the 2024 market outlook for IT services represents a healthy 9.7% point increase from last year.

Worldwide IT Spending Forecast (in million USD)

2023 2024
Spending Growth % Spending Growth %
Data centre systems 236,179 4.0 259,680 10.0
Devices 664,028 -9.1 687,943 3.6
Software 914,689 12.6 1,042,174 13.9
IT services 1,385,120 6.1 1,519,928 9.7
Communications services 1,487,161 3.3 1,551,288 4.3
Overall IT 4,687,177 3.8 5,061,013 8.0

Source: Gartner, McKinsey

Indian IT industry

The Indian IT industry continues to demonstrate resilience and a moderate level of growth, even amidst global economic uncertainties and geopolitical tensions. Industry projections indicate that Indias technology sector revenue, including hardware, is expected to reach USD 254 billion in FY24 - a 3.8% YoY increase as compared to 8.1% growth in FY23, translating to an addition of over USD 9 billion in FY24.

Driving this robust performance, the industrys export segment is expected to surpass the USD 200 billion mark, growing at a healthy 3.3% YoY. Also, the domestic technology sector is forecasted to cross the USD 54 billion threshold, expanding at an even more impressive 5.9% YoY, on account of increased focus on GCCs. Despite the challenging market conditions, the industry continues to be a net hirer, adding approximately 60,000 new employees and taking the total workforce to 5.43 million, a 1.1% increase from the previous year.

The industrys resilience and moderate growth is being supported by the stable demand from key markets such as America, Europe, the Asia-Pacific region, as well as the manufacturing, retail, and healthcare sectors.

The main themes that have defined the industrys trajectory in FY24 include the continued resilience of technology in the face of uncertainty, the technology-led transformation of traditional services using platforms like Salesforce, ServiceNow, and Azure, the prominence of engineering, research, and development (ER&D) as a poster child for tech services, the omnipresence of AI (artificial intelligence), and the advancements in deep tech beyond AI.

Source: NASSCOM

Company overview

InfoBeans Technologies Limited is a global digital transformation organization that designs, build and manages digital application. Founded in the year 2000, we have come a long way since our initial days, evolving into a publicly-listed, globally recognised leader in its field.

With robust domain expertise spanning a wide range of digital technologies, we continuously innovate to deliver meaningful work and create long term value for our clients using cutting-edge technologies. The trust that we create within the stake holders, may it be our clients, our team, our people, our vendors or community at large is a key differentiator, as we nurture a team of over 1500+ passionate makers who are committed to making a positive impact through their work. This resolute focus on the well-being and growth of our team members has enabled InfoBeans to foster a culture of joy and engagement, further strengthening our ability to deliver exceptional results for our clients.

Having built strong partnerships with Salesforce, ServiceNow, Microsoft, and agenio, our services enable clients to digitally transform their businesses and gain competitive advantage. Driven by a mission to create long-term value for our entire ecosystem, including our team, clients, partners, shareholders, and the environment, InfoBeans measures success not just by financial returns, but also by the ‘WOW moments created for all stakeholders.

FY24 performance discussion

Profit & Loss Statement

On a consolidated basis, the Company registered a total revenue of Rs. 384 Crore (including other income of Rs. 15 Crore) for the year ended 31 March 2024, as compared to Rs. 399 Crore (including other income of Rs. 14 Crore) for the year ended 31 March 2023, registering a marginal drop of 4%. The Company registered a net profit of Rs. 22 Crore for the year ended 31 March 2024, as compared to Rs. 36 Crore in the year ended 31 March 2023. The drop in profits is primarily on account of a marginal drop in the overall revenue, increased cost pressure, and lower utilization. However, because of the persistent efforts on all three fronts, Q4 of the financial year showed signs of recovery with net profits doubling to Rs. 9.2 Crore in Q4 of 2023-24 as compared to 4.7 Crore in Q4 of 2022-23.

Balance Sheet

APPLICATION OF FUNDS

NON CURRENT ASSETS

1. Property plant and equipment: Property, plant and equipment as on 31 March 2024, were Rs. 12 Crore as compared to Rs. 14 Crore in the previous year. The net movement of Rs. 2 Crore is explainedbelow:

a. Additions during the year: Rs. 2 Crore

b. Depreciation for the year: Rs. 4 Crore

2. Goodwill: Goodwill as on 31 March 2024, stood at Rs. 37 Crore, as compared to Rs. 51 Crore in the previous year. The movement of Rs. 14 Crore is because of the impairment. For more details on the impairment, kindly refer to Note 43 : Contingent Consideration and Impairment of Goodwill, of the Consolidated Financial Statements.

3. Other intangible asset: Other intangible assets as on 31 March 2024, were Rs. 99 Crore as compared to Rs. 118 Crore in the previous year. The movement of Rs. 19 Crores is explained below:

a. Amortization for the year: Rs. 14 Crore

b. Impairment of Customer contract and other intangible assets: Rs. 5 Crore

For more details on the impairment, kindly refer to Note 43: Contingent Consideration and Impairment of Goodwill, of the Consolidated Financial Statements.

4. Right-of-use assets

Right-of-use assets as on 31 March 2024, stood at Rs. 22 Crore, as compared to Rs. 33 Crore in the previous year. The movement of Rs. 11 Crore is on account of the depreciation of the lease-hold assets. For more details, kindly refer to Note 36 : Leases, of the Consolidated Financial Statements.

5. Non-current financial assets

A. Other financial assets

Other financial assets as on 31 March 2024, did not observe any significant movement from the previous year and remained stable at Rs. 3 Crore.

6. Deferred tax assets

A. Deferred tax assets (net) as on 31 March 2024, were Rs. 16 Crore as compared to Rs. 17 Crore in the previous year.

B. Income tax assets (net) as on 31 March 2024 were Rs. 1 Crore as compared to Nil in the previous year.

7. Current financial assets A. Investments

The current investments as on 31 March 2024, were Rs. 83 Crore as compared to Rs. 70 Crore in the previous year. The increase is on account of investments done by the company in bonds and liquid funds.

B. Trade receivables

Trade receivables as on 31 March 2024, were Rs. 76 Crore as compared to Rs. 64 Crore in the previous year. The movement is attributed to the increase in sales and unbilled revenue during the last quarter of the financial year 2023-24. For more details, kindly refer to Note 8 : Trade Receivables, of Consolidated Financial Statements.

C. Cash and cash equivalents

Cash and cash equivalents as on 31 March 2024, were Rs. 37 Crore as compared to Rs. 33 Crore in the previous year.

Bank balance other than cash and cash equivalents as on 31 March 2024, were Nil as compared to Rs. 11 Crore in the previous year. FDRs of Rs. 11 Crore were liquidated during the year and invested in liquid fund.

D. Other financial assets

Other financial assets as on 31 March 2024, were at Rs. 12 Crore as compared to Rs. 1 Crore in the previous year. The increase in other financials assets is on account of increase in deposits with banks amounting to Rs. 11 Crore.

8. Other current assets

Other current assets as on 31 March 2024, did not observe any significant movement from previous year and remained stable at Rs. 6 Crore.

SOURCES OF FUNDS EQUITY AND LIABILITIES

9. Total equity

We have only one class of equity share of par value ? 10 each. The issued, subscribed and paid-up capital along with other equity stood at Rs. 296 Crore as at 31 March 2024, which was Rs. 272 Crore in the previous year. The movement of Rs. 24 Crore is explained below:

• During the year, we have allotted 47,640 Equity Shares to the eligible team members as per the InfoBeans Partnership Programme, (Employee Stock Option Plan 2016), resulting in an increase in the number of Equity Shares and also increase in the Total equity by Rs. 4 Crore.

• During the year, the company has earned a profit of Rs. 22 Crore and distributed divided of Rs. 2 Crore, resulting in an increase of

Rs. 20 Crore

10. Non-current financial liabilities

Non-current financial liabilities (including the lease liability and other financial liability) as on 31 March 2024, were Rs. 17 Crore as compared to Rs. 61 Crore in the previous year. The movement of Rs. 44 Crore is explained below:

• Lease liabilities of the company reduced by Rs.10 Crore, from Rs. 26 Crore to Rs. 16 Crore on account of De-recognition of lease liability for our office in New York

• Other financial liability of the company reduced by Rs. 34 Crore on account of reclassification of the deferred consideration from non-current to current, payable to the Founders of InfoBeans CloudTech Limited

11. Long term provisions

The long term provisions as on 31 March 2024, were Rs. 12 Crore as compared to Rs. 9 Crore in the previous year. The movement is on account of increase in the provision for employee benefits by Rs. 3 Crore.

12. Current financial liabilities

Current financial liabilities (includes lease liability, trade payables and other financial liability). The current financial liabilities as on 31 March 2024, were Rs. 41 Crore as compared to Rs. 40 Crore in the previous year, and observed a marginal movement of Rs. 1 Crore.

13. Other current liabilities

The short-term other current liabilities did not observe any significant movement and remained stable at Rs. 10 Crore as on 31 March 2024.

14. Short term provisions

The short-term other current liabilities as on 31 March 2024, were Rs. 4 Crore as compared to Rs. 3 Crore in the previous year, and observed a marginal movement of Rs. 1 Crore.

15. Current tax liabilities

The current tax liabilities as on 31 March 2024, were Rs. 1 Crore as compared to Rs. 2 Crore in the previous year, and observed a marginal movement of Rs. 1 Crore.

Financial ratios

Particulars 31 March 2024 31 March 2023 Change Remarks
Debtors Turnover Ratio 5.25 5.85 -10.26% -
Current ratio 3.84 3.41 12.78% -
Debt-Equity Ratio 0.08 0.13 -38.56% Improved due to cancellation of lease agreement in USA.
Operating Profit Margins 9.50% 13.65% -30.37% Marginal drop in the overall revenue, increased cost pressure, and lower utilization. However, with persistent efforts, we have started seeing signs of recovery in Q4 FY2023-24
Net Profit Margin 5.80% 9.02% -35.66%
Interest Coverage Ratio 6.36 6.97 -8.70% -
Return on Equity ratio 7.92% 14.29% -44.56% Decrease due to decrease in profitability

Note: Remarks are given for changes more than 25%

Outlook

InfoBeans mission is to do meaningful work that creates long-term value for the entire ecosystem - our team, clients, partners, shareholders and the environment. And we want it to be constant, responsible, and sustainable. Our focus is to remain relevant in the current competitive industry by making the right investments, and have a positive attitude with perseverance. Our long term plan is to accomplish this through a good mix of organic and inorganic means and methods.

Organic

We are focused on deepening our relationship expanding our business with existing clients, and landing into new enterprise clients with strong balance sheets who have long term needs for digital transformation.

Our strong partnerships with cutting-edge cloud platforms like Salesforce and Service, our investments in building capabilities around AI-based technologies, and a solid engineering team to deliver outcome-based solutions, is helping us create meaningful impact for our clients which in turn leads to 90% of our clients coming back to us for more work every year.

While we continue to expand our presence in North America, Germany and Middle East with our sales and client success team, we have also struck a significant partnership with agineo, the largest German ServiceNow elite partner to expand our presence in the European and the Global markets.

There have been some green shoots towards the last quarter of this financial year and we are hopeful to grow from here.

In-organic

In addition, InfoBeans has a clear inorganic growth strategy in place, supported by ample cash on hand and a strong desire to meet the growth goals we have set for ourselves. We have a focused approach and a dedicated team to explore acquisition opportunities in defined capabilities, geographies, and cultures. We are cautious of the valuations in the private market and should only strike a deal where we have clearly defined value drivers, a clear path to integration, and achievable synergies.

We will be aggressive but also selective at the same time before we enter into a definitive agreement with any suitable organization.

Opportunities & Threats

Opportunities

• Growing demand for AI, cloud, and cybersecurity services

• Expansion into tier-2 cities for talent acquisition and cost optimization

• Increased spending by Global Capability Centers (GCCs) in India

• Rising adoption of digital transformation initiatives across industries

• Potential for higher growth compared to larger IT firms

• Agility & flexibility of small-to-mid IT firms to adapt as per client needs

Threats

• Global macroeconomic uncertainties leading to sluggish growth

• Intense competition for skilled tech talent

• Reduced hiring of fresh graduates affecting talent pipeline

• Cybersecurity risks and data breaches

• Pressure on margins due to increasing operational costs

• Rapid technological changes requiring continuous upskilling

People

Material Development in Human Resource

At the heart of InfoBeans success lies people. As a leading technology services provider, we recognise that our success is defined by our team members - a dedicated cohort of passionate, innovative individuals who drive the organisation forward.

To cultivate and empower the next generation of leaders, we have forged strong partnerships with prestigious institutes like the Indian Institutes of Management (IIMs), providing comprehensive training and skill development opportunities. In the last financial year alone, we logged an impressive 14,84,792 man-hours of training, ensuring that our team is equipped with the latest industry knowledge and cutting-edge capabilities.

Fostering an open and collaborative work environment is another key priority for InfoBeans. Our Innovation Day events have become a hallmark of our culture, generating a remarkable 60+ new ideas this year, and strengthening bonds across all levels of the organization.

Team members are encouraged to actively participate in envisioning the future, engaging in strategic thinking and aligning their goals with the broader vision of InfoBeans. This inclusive approach not only empowers individuals but also cultivates a sense of ownership and pride within the team.

Recognizing the importance of work-life balance and overall well-being, we have implemented a range of employee-centric initiatives. The recent inauguration of a state-of-the-art office in Bengaluru brings the workplace closer to the homes of team members, promoting a better quality of life. Additionally, we provide financial aid and flexible work arrangements, demonstrating our commitment to prioritizing the needs and priorities of our people. This holistic approach to employee welfare has fostered a strong sense of belonging and value, where team members feel truly cared for and appreciated.

Reinforcing all these efforts is InfoBeans firm belief in the power of compassion and empathy. By treating our people with the utmost care and respect, we have cultivated a culture where individuals feel valued, supported, and motivated to contribute their best.

This compassionate approach has not only bolstered employee engagement and retention but has also solidified InfoBeans reputation as a premier employer of choice in the industry.

We are proud to highlight the InfoBeans Partnership Programme, through which 173 of our team members hold 5,73,435 ESOPs. This initiative not only rewards our team for their dedication but also aligns their interests with the companys long-term success. Additionally, we are actively engaging our team in envisioning the next 10x growth for InfoBeans. By fostering strategic thinking and goal alignment, we empower our team to contribute meaningfully to our collective future.

Internal control and their adequacy

In light of the amendments to the Companies Act, we have undertaken additional measures to bolster our internal control systems. These enhancements include fraud risk assessment, mandatory leave for employees, a more robust background verification process for new joiners, an enhanced whistle-blower policy, and a strengthened risk management process.

Our internal control system is meticulously designed to ensure the highest levels of effectiveness and efficiency in operations, safeguard assets, maintain reliable financial controls, and ensure compliance with applicable laws and regulations. The Company operates within a well-structured framework, with comprehensive policy guidelines and clearly defined authorities.

We have implemented robust controls to guarantee optimal resource utilisation, accurate financial transaction reporting, and strict adherence to legal requirements.

Our systems ensure that assets are protected against unauthorised use or disposition and that all transactions are properly authorised, recorded, and reported.

Our exhaustive budgetary control system allows us to continuously monitor expenditures against approved budgets. Recognising the critical role of internal scrutiny, we have an empowered internal audit function tasked with examining the adequacy of, and compliance with, policies, plans, and statutory requirements. This function also assesses and enhances the effectiveness of our risk management, control, and governance processes. Periodic audits and system verifications enable our business groups to address any shortcomings promptly.

As part of our commitment to improved risk management, we continuously evaluate and suggest enhancements to our risk mitigation measures for all key operations, controls, and governance processes.

Our auditor rigorously tests these controls. The top management and the Audit Committee of the Board regularly review the audit findings to ensure timely corrective actions are implemented.

Industrial relations

During FY24, InfoBeans Technologies Limited maintained harmonious industrial relationships.

Risks & concerns

This section lists forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these statements as a result of certain factors.

Cautionary statement

This document contains forward-looking statements regarding expected future events, financial performance, and operating results for InfoBeans Technologies Limited. These statements inherently involve assumptions and are subject to inherent risks and uncertainties. While we strive for accuracy, there is a significant risk that these assumptions and predictions may not prove to be entirely accurate.

Readers are advised not to place undue reliance on forward-looking statements. Various factors could cause actual future results and events to differ materially from those expressed in these forward-looking statements. Therefore, this document is subject to the disclaimer and should be considered in its entirety, including the assumptions, qualifications, and risk factors discussed in the managements analysis within InfoBeans Technologies Limiteds Annual Report for FY24.

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