Majesco Ltd Management Discussions.

I. INDUSTRY STRUCTURE AND DEVELOPMENTS Global economy and Information Technology

FY 2020-21 was an exceptional year as the global economy was hit hard by a significant shrinkage in economic activities mainly due to the sudden outbreak of the COVID-19 pandemic. According to the International Monetary Fund’s (IMF) World Economic Outlook Report, the global economy contracted sharply by 3.2% in 2020 and is forecasted to grow by 6.0% in 2021 and 4.9% in 2022. The speed of the recovery would vary significantly across economies, depending on access to medical interventions, vaccination rollouts, effectiveness of fiscal policy measures and structural factors entering the crisis. The United States of America economy contracted by 3.5% in 2020 and is expected to move up to 7.0% in 2021 before witnessing a moderate growth of 4.9% in 2022. The United Kingdom contracted by 9.8% in 2020 and is estimated to pick up to 7.0% in 2021 and 4.8% in 2022. India’s GDP shrank by 7.3% in fiscal year 2021 and is estimated to grow at 9.5% and 8.5% in fiscal year 2022 and 2023 respectively.

Global growth projections are improving as momentum is seen in vaccine rollouts, fiscal stimulus measures announced for 2021 in some countries, including a USD 1.9 Trillion coronavirus rescue package in the United States, together with the unlocking of Next Generation EU (NGEU) funds, economies adapting to social distancing/new normal work culture. However, resurgence of infections, slower-than-anticipated vaccine rollout that would allow the virus to mutate further, reimposing lockdowns, tight financial conditions, rising price pressures are some of the factors that would severely set back recovery and drag global growth projection. In FY 2020-21, most of the governments/central banks across geographies took strong and swift steps regarding monetary, fiscal, and unconventional financial policies which helped to prevent worse outcomes due to pandemic. It is expected that governments/central banks would continue to maintain their current policy settings throughout the end of 2022. Thus, financial conditions are expected to remain broadly at current levels for advanced economies while steadily improving for emerging markets and developing economies.

The Information Technology (IT) industry witnessed significant uptick in FY 2020-21 due to disruption caused by the COVID-19 pandemic. It had a wide range of after-e_ects, however one of the most important is acceleration in technology adoption at work and home. The customers requirement changed drastically to operate virtually, drove this adoption acceleration. The speedy rise in the need for digitalization across the globe is the key reason why technology-driven businesses are now leading the way to a faster global recovery. The push to go digital has been enormous in traditionally low-tech sectors during the year. To gain a competitive advantage in the new hybrid world, to continue doing business and drive customer engagement, enterprises are fast-tracking their transition to digital platforms, so that they are prepared for a never-normal world. According to NASSCOM’s Strategic Review 2021 report, India’s IT industry is estimated to grow by 2.3% to USD 194 Billion in FY 2021 (excl. e-Commerce) and reach USD 300 - USD 350 Billion in revenues by FY2025 mainly driven by increasing demand for emerging technologies such as Cloud Migration, Artificial Intelligence (AI), Machine Learning (ML), Customer Experience (CX), Robotics Process Automation (RPA), Internet of Things (IoT) and many others. To conclude, the IT industry was one of those industries which did not slow down due to the COVID-19 pandemic. In fact, it shifted into elevated gear to contain the abrupt demand for remote working and collaboration solutions as most of the organization wanted to shift to digital channels at the earliest to reduce shocks. The pandemic acted as a litmus test for IT industry with the commitment to maintain corporate stability, assist remote staff and deliver high-quality service to customers. The world is recovering faster than anticipated, with people-centric innovation, trust-based alliances, rapid go-to-market strategies, unwavering talent orientation and adaptability to hybrid work models, the next decade will emerge as an accelerated techade ushering in a new realm and a virtual future.

II. COMPANY OVERVIEW

On March 21, 2021, Aurum, a Mumbai based Real Estate group, signed a definitive share purchase agreement with erstwhile Promoters to acquire the 14.78% promoter stake in Majesco Limited, through its subsidiary Aurum Platz IT Private Limited for Rs. 32.58 Crores at Rs. 77 per share. This triggered mandatory open offer as per Indian law, thus, Aurum made an open offer bought another 20.26% of Majesco Limited from its public shareholders for Rs. 67 Crores. This development came after Thoma Bravo (PE firm) acquired Majesco’s Nasdaq-listed Subsidiary in September 2020 in a deal that valued the cloud insurance software provider around USD 729 Million. Majesco Limited received Rs. 3,777.68 (USD 514 Million) from the sale of its US subsidiary. The US subsidiary accounted for almost all of Majesco’s revenue.

Pursuant to the mandatory open offer, the control of Majesco Limited is now with the Aurum Group. The acquisition portrays Aurum capability, expertise and confidence in real estate, which is going through a paradigm shift. Aurum is a new age technology driven real estate company with a track record of value creation in sectors like telecom wireless, renewable energy, residential real estate, mineral exploration, commercial real estate, residential real estate and lifestyle retail. Its experience in technology goes back to 1999 when it was the first company in the country to create a metro area network by laying optic _ber in Mumbai. Since then, the company has successfully invested in multiple sectors and for last decade into real estate.

III. STRENGTHS AND OPPORTUNITIES

The Indian real estate market is expected to touch USD1 Trillion by 2030 driven by rising demand and various recent reforms such new realty law RERA. The real estate sector su_ered a setback during the first and second waves of the COVID-19 pandemic, however it is now recovering to pre-covid levels. There are more than 100,000 registered real estate developers in India. The registered real estate developers today can be divided between the ones who are well organized and ones who are not so well organized. Aurum is seeing the trend of increasing market share of corporate developers in real estate sector and believe that this sector will be consolidated in hands of organized developers in near future.

Real Estate sector is also increasingly attracting large global capital from sovereign wealth funds as well as, from the large international investors. This is helping the sector to become even more organized. Aurum management is also seeing a trend of organized developers making more active participation and global capital catalyzing the sector to become even more organized. Management believes that as the market grows with compliant participants and, more organized developers, the requirement for technology and digital transformation will increase significantly in real estate sector.

With acquisition of control of Majesco Limited, Aurum management sees an opportunity to bring digital transformation into the complete value chain of the real estate sector. Over last decade, there has been a tremendous acceleration of technology adoption in India across industries such as Fintech, Medtech, Retailtech, Cleantech, Foodtech, Edutech, Femtech and many more. Majesco Limited has built a very successful business under Insurance segment, and Aurum management is confident that Majesco Limited will lead real estate industry and will be first such company into emergence of an Integrated PropTech Ecosystem. Property Technology, which is also known as PropTech, is the application of technology for efficiently creating, monetizing, maintaining and allocating capital to real estate industry. At present, PropTech is at emerging stage and is expected to evolve rapidly in near future. Globally, there are around 8,000 technology companies in real estate sector. Europe and North America which has 17% of their global population have 73% of these 8,000 companies. India has huge opportunity for digital transformation in real estate sector.

IV. BUSINESS OUTLOOK

AurumRs.s vision in Majesco Limited is to build an integrated PropTech ecosystem with users persona-driven interfaces following an organic and inorganic path. The company would automate this with API framework and support this with its in-house integrated contact center capabilities. Additionally, the company is looking to drive this with data analytics to bring efficiency and enhanced decision-making into real estate sector, all this rolled into one Super App. Majesco Limited recently approved the acquisition of 51% stake in Pune-based software technology firm K2V2 for a consideration of Rs. 40 Crores. With this acquisition, it has jumpstarted its journey of creating India’s first Real Estate Technology Ecosystem. K2V2 provides Software as a Service (SaaS) products, services and Enterprise Software catering to the real estate industry and holds wide portfolio of PropTech, real estate brokerage and digital marketing product and services. Also, it has a portfolio of PropTech products like Sell.

Do and Kylas. This investment is in line with Majesco’s strategy to bring digital transformation in real estate sector by creating a PropTech ecosystem covering customer digital journey, property and asset management, development, investment and financing of assets.

As a company, we are well poised to create a difference in real estate sector through technology.

V. PERFORMANCE REVIEW Key Financials

On a standalone basis, we registered total operating revenue of Rs. 951 Lakhs as on March 31, 2021 vis--vis Rs. 1,024 Lakhs as on March 31, 2020. The profit before tax for the year ended on March 31, 2021 is Rs. 3,26,972 Lakhs. This includes income from sale of subsidiary of Rs. 3,23,682 Lakhs.

During the year, the Company had sold entire stake / investment in US Subsidiary and the process was consummated on September 21, 2020. Accordingly, operation of US Subsidiary has been considered till September 21, 2020 in the consolidated financial results as discontinued operations. The operating revenue from discontinued operations is of Rs. 59,790 Lakhs in FY 2020-21. Profit from discontinued operations is of Rs. 4,477 Lakhs in FY 2020-21.

Profitability

On a standalone basis, profit for the year ended on March 31, 2021 and March 31, 2020 is Rs. 2,53,694 Lakhs and Rs. 2,397 Lakhs respectively. Other comprehensive loss for the year ended on March 31, 2021 and March 31, 2020 is Rs. 1 Lakhs and Nil respectively. Total comprehensive income for the year ended on March 31, 2021 and March 31, 2020 is Rs. 2,53,693 Lakhs and Rs. 2,397 Lakhs respectively.

BALANCE SHEET ITEMS Non-current Assets Fixed Assets

Tangible assets as on March 31, 2021 were Rs. 869 Lakhs vis--vis Rs. 932 Lakhs as on March 31, 2020. This included a gross addition of Rs. 4 Lakhs for the purchase of computers, office equipment, etc., and depreciation of Rs. 66 Lakhs for the year ended March 31, 2021.

Financial Assets

Non-current financial assets were Rs. 47 Lakhs as on March 31, 2021 vis- -vis Rs. 51,544 Lakhs as on March 31, 2020.

CURRENT ASSETS

Current Investments and Cash & Bank Balances

Total current investments and cash & bank balances as on March 31, 2021 was Rs. 14,949 Lakhs vis--vis Rs. 2,818 Lakhs in the previous year. Net cash used in operations was Rs. 74,136 Lakhs and payment for purchase of fixed assets was Rs. 939 Lakhs, proceeds from sale of investment in subsidiary (net of expenses) was Rs. 3,75,364 Lakhs, proceeds from the issue of equity shares were Rs. 3,104 Lakhs, payment for buyback of equity shares was Rs. 16,943 Lakhs, payment for dividend including dividend distribution tax was Rs. 2,78,126 Lakhs.

Current Financial Loans, Financial Assets and Other Current Assets

Other financial assets were at Rs.120 Lakhs as on March 31, 2021 vis--vis Rs.126 Lakhs as on March 31, 2020. The decrease is mainly on account of reduction in other advances and receivable due. Other current assets were at Rs. 263 Lakhs as on March 31, 2021 vis--vis Rs. 259 Lakhs as on March 31, 2020.

Shareholders’ Funds

Total shareholders’ funds as on March 31, 2021 stood at Rs. 17,534 Lakhs vis- -vis Rs. 56,132 Lakhs as on March 31, 2020.

NON-CURRENT LIABILITIES

Provisions and Non-current other liabilities

Total non-current other liabilities stood at Rs. 32 Lakhs as on March 31, 2021 vis--vis Rs. 27 Lakhs as on March 31, 2020.

CURRENT LIABILITIES Financial Liabilities

Current financial liabilities (including trade payables) as on March 31, 2021 decreased to Rs. 1,370 Lakhs vis-a-vis Rs. 1,148 Lakhs as on March 31, 2020.

Other Current Liabilities and Provisions

Other current liabilities and provisions as March 31, 2021 decreased to Rs. 15 Lakhs vis--vis Rs. 137 Lakhs as on March 31, 2020.

KEY FINANCIAL - STANDALONE BASIS

Key Financial Ratios 2020-21 2019-20
(i) Operating Profit Margin (%) 63.14 39.10
(ii) Net Profit Margin (%) 4,764.21 130.34
(iii) Current Ratio 11.07 2.49
(iv) Debt Equity Ratio (%) 0.00 0.00
(v) Return on Net Worth (%) 1,446.86 4.27

Return on Net Worth is higher for the year ended March 31, 2021 due to profit earned on the sale of the US subsidiary.

HUMAN ASSETS

As on March 31, 2021, our workforce strength stood at 5 in the Company.

VI. RISK GOVERNANCE

Risk resistance forms the core of our DNA. Majesco Limited has a strong Enterprise Risk Management (ERM) function in place which oversees our risk management on an ongoing basis. The primary objective of ERM function is to provide a framework that improves risk response decisions; reduces operational surprises and thereby, losses; and identifies & manages cross-enterprise risks. The ERM policy, approved by the Board, lays down the risk management process, expected outcomes, governance and reporting structure. The policy also stresses on the importance of the existence of a strong risk culture for the ERM to succeed. Our solid risk governance model ensures that risk management principles are followed across the organization, along with the inculcation of a risk culture. The ERM process and policy, both, are executed through the Risk Management Committee (RMC), represented by the business and functional heads within Majesco Limited. The Board of Directors oversees the risk management process and together with the Audit Committee, reviews the progress of action plans for the identified key risks on a quarterly basis. A discussion of key risks and concerns and measures aimed at mitigating them, are discussed below. Strategic: We could be vulnerable to strategy, innovation and business or product portfolio related risks if there is any significant and unfavorable shift in industry trends, customer preferences or returns on R&D investments. Mitigation: Majesco Limited does have the benefit of being very well entrenched with many of its customers, involved in their critical and strategic initiatives. Therefore, client concentration related risks are mitigated to an extent. Further, we mindfully indulge in the investments towards intellectual property creation. These are done in a measured manner and are intentionally focused more towards extending and strengthening existing offerings, rather than building new business or end-use/ application areas.

Macroeconomic: Risks emanating from the changes in the global markets, like the recent financial meltdown, regulatory or political changes and alterations in the competitive landscape, can affect our operations and outlook. Any adverse movement in economic cycles in our target markets and volatility in foreign currency exchange rates, can negatively impact our performance.

Mitigation: Our diversified presence in multiple geographies right from Europe to Malaysia and India helps us mitigate this risk to a great extent. We also take necessary steps like foreign exchange hedging to further mitigate exchange rate risks.

Competition: We operate in a highly competitive industry and compete with bigger players. Shifts in clients’ and prospective clients’ dispositions can affect our business.

Mitigation: We focus and leverage on our strong domain expertise, robust delivery capabilities and significant project experience as an attempt towards staying ahead of the competition.

Dependence on key personnel: Our management team – one of the best in the industry – is a critical enabler of our operational successes. Any loss of personnel through attrition or other means, may impact our performance negatively.

Mitigation: We aspire to have an effective succession plan in place to mitigate this risk.

Clients and accounts: Our Company’s strategy entails engagement with a few key customers and building long-term relationships with them. Any shift in customer preferences, priorities and internal strategies can adversely affect our operations and outlook.

Mitigation: We share enduring bonds with many of our customers. Our long-standing customer relationships help mitigating this risk to an extent.

Cyber security: With more organizations moving to newer areas of engagement like cloud-driven business model and mobile computing, among others, this risk has emerged as a high category risk across the IT industry.

Mitigation: Our best security practices implemented across multiple domains and the necessary insurance coverage help mitigate this risk to an extent.

Contractual, execution and delivery: Our operating performance can be subjected to risks beyond our control like the termination or modification of contracts and non-fulfillment of contractual obligations by clients, due to their own financial difficulties or changed priorities or other reasons. Mitigation: We have implemented mechanisms that try and prevent such situations for us. We also have necessary insurance coverage in place. Together these measures help mitigate this risk.

Data protection and privacy: The leakage and misuse of confidential and proprietary information increases the risk of non-compliance of privacy and data protection laws.

Mitigation: To mitigate this risk, we have policies and processes laid down to ensure robust data protection measures in compliance with the global standards and requirements such as General Data Protection Regulation (GDPR).

M&A: Well-considered, properly evaluated and strategic acquisitions form part of our growth strategy. There is no guarantee, however, that an acquisition will produce the business synergies, revenues and profits, as anticipated at the time of entering the transaction.

Mitigation: We take due care and diligence in the process of making any acquisition to mitigate the risk.

COVID-19: The COVID-19 pandemic is rapidly evolving and having a material impact on how many businesses are operating.

Mitigation: We responded immediately by setting up remote connectivity and adopting work from home culture. The swift implementation of the plan has ensured that we have not experienced any disruptions to our operations.

Additionally, there are multiple other risk factors that we need to consider and manage. The Board and the senior management continually assess our operations and the external environment, to identify potential risks and take meaningful mitigation actions against each, ensuring that the growth targets and strategic objectives are achieved.

VII. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

A strong internal control system is pervasive in our Company. It is commensurate to our business’s nature, size and complexity. We have a robust and comprehensive internal control system for all the major processes. This helps us ensure reliability of financial reporting. Our systems for internal control and risk management, go beyond what is mandated. It adapts and encourages best practices and reporting matrices to identify opportunities and risks regarding our business operations. Our internal controls are supplemented by an internal audit program and periodic reviews by the management. We also have an independent audit firm, appointed as our Internal Auditor and the Audit Committee reviews its findings and recommendations on a quarterly basis.