Intrasoft Technologies Ltd Management Discussions.

U.S. economy

Driven by a cyclical recovery in inventory accumulation, solid consumption growth, and an easing fiscal policy stance, the U.S. economy is projected to expand at a faster pace in 2017 and 2018, with growth forecast at 2.3% and 2.5%, respectively.

Since the U.S. election, expectations of declining fiscal restraint in the United States have contributed to a stronger dollar and higher U.S. Treasury interest rates, pushing up yields elsewhere as well. Projected growth has been revised upward in the United States, with a strongly picking up consumer price inflation, strengthening wage growth and rising domestic demand. The anticipated shift in the policy mix so far has buoyed financial markets and strengthened business confidence, which could further fuel the current momentum and diminish the economic slack.

E-commerce industry

In 2016, total retail sales across the globe is expected to reach $22.1 trillion, up 6.0% from the previous year and is set to top $27 trillion in 2020. The retail e-commerce sales are projected to increase to $4.1 trillion in 2020, making up 14.6% of total retail spending that year.

With driving factors such as favourable demographics, increasing penetration of internet and smartphones changing consumer preferences, there will be strong growth for the e-commerce industry going forward.

(Source: eMarketer latest article)

The U.S. e-retail industry

Online retail sales to consumers in the U.S. touched nearly $400 billion in 2016 by the U.S. Commerce Departments measure—a three-year high 15.6% jump compared with 2015. The growth in retail sales in physical stores was far eclipsed, which barely reached 2.6% last year.

E-commerce now comprises 11.7% of total retail sales when factoring out the sale of items not normally purchased online, such as fuel, automobiles and sales in restaurants. It also signifies that in only a decade, the web has more than doubled its share of retail sales as e-commerce was only at 5.1% of total retail purchases ten years back.

(Source: 2017 Internet Retailer, U.S. Department of Commerce)

During the year under review, consumer sentiment in the United States was maintained over 95%.

2017 Top 500 Retailers

The Top 500 has long been a great representation of whats happening at the top of the online retail market as a whole. Top 500 retailers collectively sold roughly $333.24 billion online to U.S. consumers last year representing 84.4% of total U.S. e-commerce sales. It can easily be said that as the Top 500 fares, so goes the online retail market in the U.S. With 38 retailers making their way into the Top 500 Rankings for the first time this year, there remains plenty of room for new players to build successful online retail businesses.

(Source: 2017 Internet Retailer, U.S. Department of Commerce)

The category-wise online and total sales are shown in the table below:

2016 Online & Total Sales by Category .

Category % of Total % of Total
U.S. Top 1000 on-line sales U.S. Retail sales
Apparel/ Accessories 17.6 8.0
Automotive Parts/ 1.0 3.1
Books/ Music/ Video 7.2 0.9
Computers/ Electronics 13.2 3.6
Flowers/ Gifts 1.3 0.7
Food/ Drug 2.3 34.8
Hardware/ Home 5.3 12.4
Health/ Beauty 2.7 1.9
Housewares/ Home 4.3 3.8
Jewellary 1.0 1.1
Mass Merchant 36.6 23.5
Office Supplies 1.9 0.5
Specialty 2.3 3.3
Sporting Goods 1.9 1.7
Toys/ Hobbies 1.3 0.7

Source: Internet Retailer, U.S. Commerce Department

Industry outlook

The e-commerce industry is seen to be fast-growing and consumer-amiable. The technology era further supports the expansion of e-commerce as there is more and more diversion towards digital devices. Virtual reality shopping at home is expected to be a natural next step in 2017. As the Internet becomes mainstream, the number of connected devices will almost triple by 2020, from 13.4 billion to 38.5 billion and the proportion of products sold via e-commerce will be more than double, from 6% in 2014 to 12.8% by 2019.

(Source: Global Competitiveness Report 2016-17)

IntraSoft Technologies Limited – Overview

123stores was ranked 223rd largest online retailer in U.S., with a step up from the last years 262nd position. Our efficient business model and robust distribution network creates consistent stakeholder value. We endeavour to offer our customers a unique shopping experience through a wide product range, attractive price points along with speed and convenience of delivery at their doorsteps. We focus on growing revenues and attaining customer loyalty by providing superior technology, efficient supply chain and profound relationships with suppliers. These relationships have facilitated us to widen our reach to a large percentage of online U.S. population.

Business Performance

123Stores was also ranked 19th amongst the fastest growing web only retailers, having a growth of 50% from $95.2 million in 2015 to $142.1 million in 2016. Having shipped more than 2.8 million orders during the year, with a 97% customer feedback rating, and growing 50% as compared to 22% for web only retailers, it had been a remarkable year for us.

Financial snippet

FY 2016-17 was a remarkable year for IntraSoft and the biggest accomplishment has been the achievement of financial sustainability. It was marked by high growth opportunities corroborated with increased revenues.

Consolidated Profit & Loss For The Year Ended 31 March 2017

(Amount in Lacs)

Year ended 31 March 2017

Year ended 31 March 2016
Income from Operations 93,901.06 71,687.54
Cost of Goods Sold (Incl. Shipping) 74,747.62 57,440.51
Gross Profit 19,153.44 14,247.03
Sales & Marketing Expenses 13,573.23 10,060.86
Employee Benefit Expenses 2,333.35 2,278.60
General & Administrative Expenses 1,490.93 1,065.44
Earnings /(Deficit) from Operations 1,755.93 842.13
Other Income (Net) 745.26 460.24
Earnings Before Interest, Tax, Depreciation & Amortisation & Exceptional Item 2,501.19 1,302.37
Depreciation & Amortisation 187.44 159.55
Earnings Before Interest, Tax & Exceptional Item 2,313.75 1,142.82
Finance Costs 355.53 237.05
Profit Before Tax & Exceptional Item 1,958.22 905.77
Exceptional Items - 3,441.12
Profit Before Tax (PBT) 1,958.22 4,346.89
Tax Expense 578.47 196.2
Profit After Tax (PAT) 1,379.75 4,150.69

Growth Drivers

Technological advancement

With extensive use of technology, the scope for e-commerce industry has improved significantly. The rapid evolution of online and mobile commerce has given rise to financial technology and a wave of new payment methods. People are now technologically advanced and prefer digitally smart ways to transact. This has given a lot of impetus to the industry.

Significant surge in use of multiple digital devices

E-commerce companies constantly have to upgrade their offerings with changing technology. Significantly more users are accessing the web from tablets, smartphones alongwith desktops; they are doing so with more e-commerce intent than ever before. People are increasingly shopping through mobile phones which create the need to devise easy to use mobile apps, hence creating growth.


In rush-hour times, online shopping provides customer convenience and saves a lot of time as compared to in-shop retail. E-commerce ensures maximum consumer satisfaction and enriches the shopping experience. It allows us to reach consumers and service them conveniently and economically.

Risk Management

The Companys business is seasonal. Generally, a third of the annual revenue is generated in the third quarter of the financial year.


This is most pertinent for the E-commerce space, which is concentrated in the US market where the third quarter is the festive season. The Company has ensured redundancies are removed from its systems and processes to ensure that it seamlessly addresses the demand spike in the third quarter of the fiscal. In 2016, the Company has already shipped as high as 37,000 packages a day during the week before Christmas. Besides, the proprietary technology, the efficient logistic partners also facilitate the Company to take this number even higher in the coming years.

Managing growth through improved processes and systems could be a challenge.


We eye expansion by targeting the larger group of consumers. We continue to invest business surplus to strengthen the proprietary technology platform and automate processes better through innovative software solutions. Solutions enabling seamless integration of back-end and front-end infrastructure, customer experience enhancement initiatives, integrated inventory management and analytics would be crucial for the e-commerce firms. It will enable us to stay ahead of the curve of customer expectations.

Operational challenges in building up a large supplier network.


We see our suppliers as our customers. We are investing more in manpower who can go on the ground and sign up suppliers. The increased investment in people will help overcome the challenges. The Company has also invested a lot of time in visiting trade shows and conferences where they have successfully been able to sign on new products.

Human Resource Management

Our success is vested in the hands of our trusted employees. We highly value the sustained efforts of our people and take steps for their mature advancement. We are focussed in building a team of exceptional individuals by giving them the best work culture and environment.

At IntraSoft, we provide a large bouquet of opportunities to nurture our peoples career. Several training initiatives for the development and skill enhancement of our employees are undertaken to keep them updated of the latest industry developments. We recognise the best talent through various rewards and recognition programmes that keeps our employees motivated and engaged.

As a concerned organisation, we focus primarily on health and safety of our employees and conduct various programmes to address any safety issues. The Company and its subsidiary had 220 employees on its rolls as on 31 March 2017.

Internal Controls

IntraSoft Technologies has a vigorous internal control system in place. Adequate internal control systems safeguard the various process and functions of the company with timely identification and intervention to alleviate risks. The internal control system is designed to maintain efficiency, measurability and reliability of accounting and management information. Internal audit is conducted for all the processes to identify risks and verify whether all systems and processes are commensurate with the business size and structure.

Regular internal checks are carried out to ascertain the existence of adequate system. The Management also reviews the control systems and procedures to ensure its application. The internal controls are verified by the Chairman of Audit Committee to keep a check on the existing systems and take corrective action to further enhance the control measures.