mindteck india ltd share price Management discussions

In addition to historical information, this Annual Report contains certain forward-looking statements which are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause the difference include, but are not limited to, those discussed in the Management Discussion and Analysis of financial performance and elsewhere in this report. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect managements analysis as of the date hereof.

MACROECONOMIC OUTLOOK

According to McKinsey, geopolitical instability is now cited as the top risk to both global and domestic economies. Executives worldwide have cited the COVID-19 pandemic as a leading risk to growth for the past two years.

According to World Bank Groups flagship report, amid the war in Ukraine, surging inflation, and rising interest rates, global economic growth is expected to slump in 2022. Several years of above-average inflation and below-average growth are now likely, with potentially destabilising consequences for low- and middle-income economies. Its a phenomenon—stagflation—that the world has not seen since the 1970s. The fallout from the war in Ukraine compounds the challenges for many of them. Middle-income countries will see a sharp downgrade to growth in 2022. The danger of stagflation is considerable today. The dollar is strong, a sharp contrast with its severe weakness in the 1970s. Reducing the risk of stagflation will require targeted and impactful measures by policy makers across the world. The adverse spill overs from the war will be most severe for Europe and Central Asia, where output is forecast to sharply contract this year. Output growth is projected to slow this year in all other regions except the Middle East and North Africa, where the benefits of higher energy prices for energy exporters are expected to outweigh those prices negative impacts for other economies in the region.

Russias invasion of Ukraine has disrupted global energy markets and damaged the global economy. Growth in advanced economies slowed during the first half of 2022, reflecting the war in Ukraine, pandemic resurgences at the turn of the year, persistent supply chain disruptions, reduced fiscal support, and tightening financial conditions.

According to International Monetary Fund (IMF), in the European region, the war will have severe economic consequences for Europe, having struck when the recovery from the pandemic was still incomplete. GDP growth is now forecast to decline in 2022 to 3 and 3.2 percent in advanced European economies and emerging European economies (excluding Belarus, Russia, Turkey, and Ukraine), respectively, down by 1 and 1.5 percentage points with respect to the January 2022 World Economic Outlook Update forecasts. The war and its aftermath will add to the structural challenges facing postpandemic Europe.

INDUSTRY OUTLOOK

Deloitte recommends tech companies to double down on their digital transformation efforts, emphasising cloud infrastructure improvements, data and analytics capabilities, cybersecurity, and business model evolution. Deloitte also suggested that organisations reorient and reskill their workforces in order to optimise remote work capabilities and take full advantage of advanced technologies such as Artificail Intelligence (AI). At the start of 2022, many of these issues remain front and center for technology companies.

Some of the themes, as per Deloitte, playing a foundational role in 2022 and beyond include:

¦ Taking cloud and everything-as-a-service to the next level: As more companies embrace cloud and service-based IT to drive innovation and transformation, and as Anything as a Service (XaaS) providers multiply, more work will be needed to manage the technical and Operational complexities of hybrid, multi-cloud approaches.

¦ Creating the supply chains of the future: As technology companies continue to recover from pandemic-induced supply chain disruptions, they will start proactively preparing for future uncertainty and other systemic risks.

¦ Building the next iteration of the hybrid workforce: With more experience utilising a hybrid workforce, tech companies will evolve their cultures, accelerate experimentation with collaboration solutions, and develop better approaches to managing tax implications.

¦ Leading the charge to create a sustainable future: Although the tech industry is working to address critical sustainability issues, growing pressure from stakeholders and potential changes to Environmental, Social, and Governance (ESG) reporting rules will incite tech companies to heighten their focus on reducing and reversing environmental impact. As per Grant Thornton, the tech sector will continue to critically examine its processes as part of the ongoing ascension of ESG factors to the top of the strategic agenda.

However, in 2022, the technology industry will likely continue to grapple with pandemic-driven challenges such as supply chain disruptions, hybrid workforce issues, and fluctuating IT needs, as well as the increasingly urgent need to address climate change.

According to International Data Corporation (IDC), the Americas services market is forecast to grow by 5.3% in 2022. Canada and Latin America will continue to see recovery well into 2022 and 2023. IDC believes that while Chinas GDP growth is expected to cool down, digital transformation remains central to the countrys long-term new infrastructure initiatives, which will further drive services spending in both the public sector and strategic industries such as Banking, Financial Services and Insurance (BFSI), manufacturing, and energy.

2022 growth forecast for EMEA (Europe, Middle East, and Africa) was raised by more than 220 basis points.

Top Outsourcing Trends

According to research firm IDCs most recent predictions, over the past two years, digital transformation strategies have accelerated as fundamental to business survival. Companies are expected to spend USD 6.3 trillion on direct digital transformation investments between 2022 and 2024.

Key trends in outsourcing industry:

Hybrid virtual model: As per Mckinsey, the new model promises greater access to talent, increased productivity for individuals and small teams, lower costs, more individual flexibility, and improved employee experiences.

Cloud Computing Services: As per Deloitte, 90% of their participants saw cloud computing as a huge enabler in their entire outsourcing journey. Cloud-based outsourcing services even brought more flexibility and scalability to their clients.

Cybersecurity: The World Economic Forums Global Cybersecurity Outlook report indicates that cyberattacks increased 125% globally in 2021, with evidence suggesting a continued uptick through 2022. In this fast-changing landscape it is vital for leaders to take a strategic approach to cyber risks.

MARKET OUTLOOK BY INDUSTRY Storage

According to IDC, worldwide Solid State Drives (SSD) industry revenue is expected to grow at a 2020-2025 Compound Annual Growth Rate (CAGR) of 9.2%, thanks to increasing demand from client devices, enterprise storage customers, and cloud service providers. Despite many unexpected challenges that unfolded in 2021, IDC expects demand for storage and memory technology to remain robust for industry participants in 2022.

As per Markets and Markets, the major drivers for this market include: the massive growth in digital data volume; proliferated use of smartphones, laptops, and tablets; growth of the Internet of Things (IoT) market; and increasing penetration of high-end cloud computing.

The lockdown has severely impacted manufacturing companies as almost every plant has come to a halt. Many essential commodity manufacturing companies are also unable to continue with production due to the lack of workforce amidst the pandemic. Thus, there is a slight decline in the next-generation data storage market.

As per Forbes, several factors are driving the self-storage industry higher, including growing urbanisation, increased downsizing from the coronavirus, lifestyle changes and more.

Analytical Instrument

The increasing concern for product quality, increasing investments in Research & Development (R&D), and stringent government regulations are the major factors driving the growth of the analytical instrumentation market. Increasing customer awareness, especially in emerging regions, and the need for analytical instruments across multiple sectors are expected to expand the market growth. Stringent regulations on drug safety, increasing focus on the quality of food products, expansion of crude and shale gas production, and technological advancements in mass spectrometers would aid the market growth. However, along with the cost of instruments, various other costs are associated, such as staffing, maintenance, and laboratory expenses, thereby restraining the markets growth.

As per Research and Markets, the global analytical instrumentation market was valued at USD 43.2 billion in 2021 and is projected to be worth USD 66.27 billion by 2027, registering a CAGR of 7.52% during the period of 2022-2027.

The demand for analytical instrumentation has been growing significantly in the Asia Pacific region. Specifically, these products have been utilised in the region to address climate change, an aging population, food production, and newer energy sources. Further, countries such as India have been one of the emerging markets in the analytical instrumentation industry owing to higher investment in testing and R&D activities.

Medical Device

The Indian healthcare industry has been growing at double-digit rates and has evolved significantly in the last decade. However, a number of challenges need to be addressed in providing access to quality and affordable healthcare in the country. Factors such as changing demographics, rising life expectancy, and growing public awareness have contributed to a higher demand for medical care.

The medical device industry is poised for steady growth. These projections reflect increasing demand for innovative new devices (like wearables) and services (like health data), as lifestyle diseases become more prevalent, and economic development unlocks the huge potential in emerging markets - particularly China and India. Governments around the world are desperately trying to reduce the cost of healthcare - especially in the most expensive part of the system: hospitals.

According to KPMG, while the outlook for medical device companies appears positive, unsustainable healthcare costs and new competitive forces threaten to alter the future industry landscape.

Medical device companies have delivered value primarily through manufacturing and selling their products. But as pressures on the healthcare system mount, there are foundational shifts in the care delivery model, and as a result, the industry value chain is up for a drastic overhaul.

The competitive landscape for medical devices in 2030 is poised to look completely different than it does today, thanks to new and non-traditional entrants, disruptive technologies, and players with global ambitions emerging from high growth markets. Medical device manufacturers should take a closer look at their existing organisations and reinvent their traditional business and operating models to adapt to the future, by - integrating intelligence into their portfolios and offerings, to positively influence the care journey and connect with customers, patients and consumers - delivering services beyond the device, and intelligence beyond these services - a true shift from cost to smart value - investing in enabling technology - making the right choices to support a wide range of parallel business models tailored by segment to customers, patients and consumers (prospective patients) - and, ultimately, the financial ambition for the organisation.

The traditional medical device value chain will rapidly evolve, and by 2030 companies will take on significantly different roles. Following their reinvention and repositioning, medical device companies will need to reconfigure their respective value chains and define their place.

In the new normal, companies will need to step out of their conventional manufacturing role. Services and data intelligence will need to be integrated with products to offer holistic solutions, requiring a power play across the value chain - strengthening existing business-to-business (B2B) plays and creating new ones, while introducing business-to-consumer (B2C) plays. These power plays will likely include a continuous slew of deal activities - Mergers and Acquisitions (M&A), strategic alliances and partnerships. By 2030 the leading medical device players will be those that play an active role in delivering value by connecting with customers, patients and consumers (end users). This will require a shift from treatment and cure to prevention through integrated smart services and solutions that bring down the cost of care and improve outcomes.

Data and analytics allow companies to directly and continuously connect with users, placing prevention ahead of treatment and cure, and giving patients greater control over their care. To quickly enhance their technology capabilities and effectively introduce smart offerings to their portfolio, medical device companies may consider partnerships with other players. Manufacturers are also integrating intelligence into their devices, offering real-time insights based on patient data. The proliferation of data also poses another grave threat to the industry

in the form of cybersecurity risks. Their connected nature makes certain medical devices especially prone to hacking, and companies need to adhere to stringent standards to ensure patient privacy and safety. Following a spate of cyber-attacks, the US Food and Drug Administration (FDA) has recently issued specific guidance to handle vulnerabilities.

Following five technologies will be widely adopted by companies by 2030, collectively, also called as Patient and consumer data sharing technologies:

¦ Wearables

¦ Smart device apps

¦ IoT

¦ Cloud-based data and analytics, and

¦ Blockchain

Although the US will continue to dominate the medical device industry in 2030, crossing USD 300 billion in sales, the top five markets will also include China (in second place, with more than 25% of the global market at over USD 200 billion) and India (fifth largest, with over USD 40 billion in revenues). China and India are already growing at twice the pace of the overall market, driven by healthcare reform, local government incentives and overall rising demand for healthcare. Both countries are also fast becoming innovation hubs - India is already known as the global center for frugal engineering, producing a number of indigenous (and low cost) devices with global market potential.

Semiconductor

As per Mc Kinsey, about 70% of growth is predicted to be driven by just three industries: automotive, computation and data storage, and wireless. Another article published in McKinsey, reports that the massive global disruptions caused by the COVID-19 pandemic gave the already rapid adoption of digital technologies an extraordinary boost, as electronic devices proved vital to connecting people and businesses during lockdowns.

Although the semiconductor industrys economic profit has substantially increased, companies and industry segments vary significantly because value pools have shifted over time, and the strongest players have increased their lead over competitors. The global semiconductor industry is poised for a decade of growth and is projected to become a trillion-dollar industry by 2030.

As the impact of digital on lives and businesses has accelerated, semiconductor markets have boomed, with sales growing by more than 20% to about USD 600 billion in 2021. McKinsey analysis based on a range of macroeconomic assumptions suggests the industrys aggregate annual growth could average from 6 to 8 percent a year up to 2030. Across multiple end markets, the absence of a single critical chip, often costing less than a dollar, can prevent the sale of a device worth tens of thousands of dollars.

According to Deloitte, global industry will grow 10% in 2022 to over USD 600 billion for the first time ever. Chips will be even more important across all industries, driven by increasing semiconductor content in everything from cars to appliances to factories, in addition to the usual suspects—computers, data centers, and phones.

Shortages and supply chain issues to remain front and center for the first half of the year, hopefully easing by the back half, but with longer lead times for some components stretching into 2023, possibly well into 2023.

The ongoing talent shortage will be made even more severe by the addition of increased semiconductor manufacturing facilities outside Taiwan, China, and South Korea. The higher demand for software skills required to program and integrate chips into fast-growing markets will further exacerbate the shortage.

According to IDC, demand by industry in 2021 was strongest in the industrial and automotive industries with 30.2% and 26.7% year- over-year growth, respectively. Leading growth applications were 5G phones, game consoles, wireless access points, data centers, and wearables. IDC expects those applications to continue growing in 2022, but more moderately as a whole as consumer-facing markets begin to see a slowdown by the fourth quarter of the year. The global nature of the semiconductor industry has been challenged by COVID-19 and continues to be impacted by regional shutdowns.

Energy and Utilities

According to Deloitte, in 2022, the tough challenges remain—boosting clean energy, ensuring reliability and resiliency, and maintaining security, while keeping costs down. To tackle this tall order, the electric power industry will likely continue to advance in its "3D" transformation: decarbonisation, digitalisation, and decentralisation.

As per PwC, COVID-19 pandemic has created a unique supply-and- demand shock for the industry, resulting in both near- and long-term uncertainty and operational challenges. Companies also need to rapidly transition to net zero to prevent the worst impacts of climate change. This will require a new energy mix - including green hydrogen and other alternative fuels- that will break down the traditional barriers between energy sectors, and with other industries as well.

All of this will accelerate industry consolidation and drive utilities to explore new business activities. The energy transition is fully underway around the world, with a major shift from fossil fuels to renewable sources.

Five power and utilities industry trends as per Deloitte:

1. Sustainability

In the next year, more utilities will likely announce decarbonisation goals and interim targets, increase existing targets. Overall utility ESG reporting will likely become more detailed and consistent as well.

2. Resiliency

Experts have made it clear that global weather patterns are in uncharted territory and planners can no longer use the past to predict the future. In 2022, utilities are expected to continue proactively preparing for that uncertain future.

3. Digital transformation

5G and cloud could expedite the clean energy transition. As the electric power sector continues modernising the grid, companies are envisioning how 5G communications technologies and cloud can help them harness the power of the growing wave of connected devices and data. In the year ahead, many utilities will likely prepare to benefit from 5G technologies by planning for the services they can provide.

4. Smart grid operations

In 2022, more utilities will likely include flexible load in their resource planning as a supply-side resource and to help meet decarbonisation targets.

5. Electrification

Looking into 2022 and beyond, many expect that the grid will be able to handle increased electricity demand, but additional investment may be needed in home weatherisation and grid- responsive appliances to help manage energy use and shape load.

OPPORTUNITIES AND THREATS

Opportunities

¦ Niche Expertise and Knowledge: Clients across the globe value our unique blend of engineering expertise, domain knowledge and technology know-how. Our services and solutions, together with flexible and mindful approach, have consistently provided innovative options for R&D spend, cost and time advantages for technology investments, reduced integration risk, improved user productivity, and positive client experiences. The impact of the pandemic is anticipated to increase demand for wearables, localised asset tracking, remote monitoring, and point-of-care devices - all part of the Mindteck Solutions portfolio.

¦ Emerging Technologies: Mindteck remains committed to building capacity in newer technologies. Currently, its legacy expertise in embedded systems, enterprise applications and testing are a powerful complement to competencies in data services, such as Artificial Intelligence (AI)/Machine Learning (ML), and cloud, cybersecurity, and IoT.

¦ Long-standing and Diverse Client Base: Our client relationships are strong, with some lasting for over 18 years across industries and geographies. Additionally, we have engaged with industry leaders, including the top 5 data storage companies, top 3 medical device companies, top 6 semiconductor companies, and top 7 analytical instrument companies.

¦ Offshore Delivery Centres: Mindtecks global delivery capabilities provide clients - multinational, in particular - the specialised knowledge and expertise they are increasingly seeking. The Companys offshore delivery centres in Kolkata and Bengaluru, India provide a skilled pool of talent, agile processes, plus cost and productivity efficiencies for new, enhanced, and reengineered product development, software development and maintenance, as well as testing.

¦ Practices Team: Enable continuous innovation and provide subject matter expertise in select technologies, such as data services, AI, IoT, cloud and edge computing for our focused industries - semiconductor, medical device, analytical instrument, data storage, energy and utilities, insurance, and consumer electronics.

¦ Automation: The increased focus on AI and automation technology is a great opportunity for outsourcing providers. Businesses will also start to rely more heavily on outside vendors with expertise in this field. Instead of developing their own tools and strategies for AI and Al-powered automation (which could take years), many companies will instead outsource this function to a third party.

Threats

¦ Fierce Competition: Mindteck continues to face strong and varied market competition from domestic and international service providers who are both large and small. Nevertheless, our longstanding and enviable client relationships, financial strength, as well as niche knowledge and expertise, provides an edge for remaining relevant.

¦ Increased Cost Burden: Most of our top-tier clients use upwards of ten or more service providers. Higher labour and benefits costs continues to be impacted by margins, thus threatening profitability. As in the recent past, Mindteck is striving to overcome such pressures via increased operational efficiencies, new sales models and, as appropriate, pitching the outcome-based business model.

¦ Consolidations: M&A deal making appears to have become the way for developing and maturing companies to unlock growth and build capabilities to survive or win. Fallout from the pandemic, improved credit availability, and attractive interest rates could be key factors that will heighten the deal competition. Mindteck is currently focused on creating a strong partnership ecosystem, building delivery capacity and resource capabilities, improving client experience, as well as developing a future-ready solutions portfolio.

RISKS AND CONCERNS

Risks

¦ Offshore Delivery: According to a NASSCOM report, enterprise, Chief Experience Officers (CXOs) anticipate that more work will shift from companies global headquarters to Global In-house Captives (GICs) in India in the next three to five years. Analytics, traditional IT, digital-age IT, domain expertise, leadership quality and cost savings are the six focus areas for Indian GICs to invest in, as per the report. CXOs are also pushing to reduce legacy IT spending so as to fund digital efforts in the new operating model. Mindteck operates an offshore development centre in India supported by highly qualified and talented teams with expertise in end-to-end product engineering, IT and testing. World-class infrastructure, best-inclass tools, methodologies and processes, and international quality accreditations are more of the many reasons why clients opt for this cost-efficient and high-performance model.

¦ Global IT Skills Shortage: According to a KPMG survey, the shortage of technology skills is soaring. This often delays staffing for new projects. Mindteck reduces this risk by continually building the talent database and, when necessary, partnering with other companies who have their own talent pool. The Company, however, recognises the potential risks associated with changing US immigration policies as well as the pandemics impact on evolving workforce environments.

¦ Attrition Rate: Market demand for highly skilled employees impacts attrition. Mindteck strives to mitigate this challenge through an Employees-First approach - continually focusing on providing a good work environment, a positive work-life balance and a strong culture.

¦ Reputation: There has always been a risk of direct or indirect actions adversely impacting Mindtecks reputation. Clearly, the risk has become more difficult to manage due to social media and other channels and venues where information exchange is quick and easy. A small team continues to monitor and manage such activities.

Concerns

¦ Enormous Uncertainty: Prior to the global spread of COVID-19, economic, geopolitical, regulatory uncertainties were causes for concern to the Company. This uncertainty remains and is further exacerbated by the pandemics continuing waves and a relatively slow vaccination progress in many countries.

¦ Reduced Demand: The COVID-19 pandemic paused, and in some cases, halted business that was anticipated to either close out in 2021-22 or put us on a good footing to start 2022-23. According to a NASSCOM report, the majority of Indian tech companies expect to focus on recovery and restart through 2022.

¦ Selling, General and Administrative Cost Containment (SG&A): Throughout the last year, we continued our efforts to reengineer internal processes and systems, as well as restructure parts of the organisation, in order to contain costs and work as an ensemble more efficiently and productively.

DISCUSSION ON FINANCIAL PERFORMANCE Business

During the year under review, your Company recorded Consolidated Revenue of Rs. 2,987.8 million as against Rs. 2,867.2 million in the previous year. Of the revenues that were recorded, 48% is attributed to the US and the rest to Europe and Asia.

Mindtecks Consolidated Net Profit for the year stood at Rs. 333.1 million, as against Rs. 108.6 million in the corresponding previous year. On an operating margin level, Mindteck recorded Consolidated EBITDA (including other income and excluding exceptional items) of Rs. 258.4 million this fiscal year as against of Rs. 241.7 million last year.

Share Capital

As on March 31, 2022, Mindteck has an issued share capital base of 2,57,13,784 equity shares of Rs. 10/- each at face value. All shares are fully paid up. In addition, 38,579 equity shares are reserved for allotment to certain allottees as on March 31, 2022, in relation to discharge of consideration for the acquisition of Chendle Holdings Limited, one of the Companys wholly owned subsidiaries. The allotment has been pending owing to the non-availability of Permanent Account Number (PAN) for these shareholders.

Further, issued capital also includes 4,16,000 equity shares allotted to the Mindteck Employees Welfare Trust (MEWT). The trust was set up with the objective of transferring its holding in Mindteck (India) Limited to deserving employees, by way of share-based compensation. Owing to the consolidation of the Trusts accounts with that of Mindteck, the number of shares and corresponding capital and share premium held by the Trust are deducted from the issued share capital and securities.

Reserves and Surplus

Mindteck has retained earnings of Rs. 246.6 million in the Consolidated Balance Sheet as on March 31, 2022. Shareholders Funds, excluding capital reserves, increased from Rs. 1,318.7 million in FY 2021 to Rs. 1,675.2 million in FY 2022 on account of profit earned during the year.

Non-Current Liabilities

Non-Current Liabilities in the Consolidated Balance Sheet include rental deposit, deferred rental income, provision towards service concession arrangement, lease liabilities, non-current portion of deferred social security taxes and provision for employee benefits. Non-Current Liabilities decreased from Rs. 82 million in FY 202021 to Rs. 81.9 million in FY 2021-22. The decrease is mainly due to movement of deferred social security taxes to current portion, offset by recognition of lease liabilities on account of extension of lease agreement.

Current Liabilities

Current Liabilities in the Consolidated Balance Sheet include borrowings, trade payables, provision for employee benefits, provision for tax, and other current liabilities. Current Liabilities decreased from Rs. 585.8 million in FY 2020-21 to Rs. 456.5 million in FY 2021-22.

The US Federal government in the wake of COVID 19 pandemic provided support to business through Paycheck Protection Program (PPP). Mindteck Inc. obtained a benefit under this scheme for Rs. 1,806 Lakhs during April 2020. During the year ended March 31,

2022, Mindteck Inc. has received complete waiver/forgiveness of the loan amount from Small Business Administration, United States government agency and accordingly the aforesaid loan forgiveness has been shown as income under exceptional item.

Trade payables increased from Rs. 135.0 million in FY 2020-21 to Rs. 183.2 million in FY 2021-22. Other current liabilities comprise unearned income, statutory liabilities such as PF, TDS, etc., current portion of deferred social security taxes and payroll payables amounting to Rs. 81.2 million as on March 31, 2022 compared to Rs. 75.5 million as on March 31, 2021.

Provisions under Current Liabilities stood at Rs. 41.3 million as on March 31, 2022 compared to Rs. 49.9 million as on March 31, 2021.

Non-Current Assets

Consolidated Non-Current Assets include Property, Plant and Equipment, Right of use asset, Intangible assets, Investment property, Deferred Tax Asset (net), long-term loans and advances and other non-current assets.

Mindteck invested Rs. 11.3 million in Property, Plant and Equipment during the fiscal year, which relates to Computer Equipment.

Other financial assets comprise of security deposits and Fixed deposits with bank with remaining maturity of more than 12 months totalling to Rs. 225.4 million as on March 31, 2022 compared to Rs. 35.5 million as on March 31, 2021.

Other Non-Current Assets consist of prepaid expense amounting to Rs. 1.1 million as on March 31, 2022.

Current Assets

Consolidated Current Assets include trade receivables, cash and bank balances, investments, short-term loans and advances, and other current assets.

Mindtecks accounts receivables as on March 31, 2022 amounts to Rs. 726.2 million, representing about 92 days of sales. All debts doubtful of recovery have been provided for in the financial statements.

Cash and Bank balances amounted to Rs. 769.1 million compared to Rs. 776.6 million in the previous year which includes both rupee and foreign currency accounts.

Other financial assets under Current Assets include claimable expenses, accrued expenses, employee advances and security deposits. The balance as on March 31, 2022 stood at Rs. 26.8 million compared to Rs. 14.5 million as on March 31, 2021.

Other current assets include prepaid expenses, advances recoverable and balances with government authorities and unbilled revenue. The balance as on March 31, 2022 stood at Rs. 73.3 million.

Investments

Mindteck (India) Limited has six wholly owned subsidiaries and two step-down subsidiaries as on March 31, 2022. The nature of operations of these subsidiaries is as follows:

¦ Mindteck, Inc. - Operating company

¦ Mindteck Singapore Pte. Limited - Operating company

¦ Mindteck (UK) Limited - Operating company

¦ Mindteck Middle East Limited WLL - Operating company

¦ Mindteck Software Malaysia SDN. BHD. - Operating company

¦ Chendle Holdings Limited - Investment arm, holding stock in Mindteck, Inc., US

¦ Mindteck Germany GmbH - Selling and marketing company (step- down subsidiary)

¦ Mindteck Canada, Inc.- Selling and marketing company (step- down subsidiary)

Note: Mindteck Solutions Philippines Inc. is under closure and Hitech Parking Solutions Private Limited closed during the year.

Internal Control Systems and their adequacy

The CEO and CFO certification provided in the annual report discusses the adequacy of our internal control systems and procedures.

RESULTS OF OPERATION Income

The Company recorded consolidated revenue from operations of Rs. 2,987.8 million in FY 2021-22 as against Rs. 2,867.2 million in FY 2020-21. The items of other income include rental income from owned property, net foreign exchange gain, government grants received as part of COVID-19 relief, interest income from deposits, rent concession and other miscellaneous items. The Company recorded other income of Rs. 50.7 million in FY 2021-22 as against Rs. 45.5 million in FY 2020-21.

Expenses

Employee benefit expenses and cost of technical sub-contractors for the FY 2021-22 stood at Rs. 2,525.8 million as against Rs. 2,438.9 million in FY 2020-21. Percentage of Manpower expense to revenue stood at 85%, same as previous year.

Finance cost in FY 2021-22 was Rs. 9.2 million as compared to Rs.

16.5 million in FY 2020-21. The decrease is mainly due to reduction in interest expense on lease arrangement, majorly due to termination of lease agreement.

Other expenses of FY 2021-22 amounted to Rs. 254.3 million compared to Rs. 232.1 million last year. The increase is mainly due to increase in travel and project supplies and services. Mindteck will continue to focus on cost-effective measures to further improve productivity and increase efficiency in the operations. Tax expense for the year amounting to Rs. 47.7 million (net) is the aggregate of current tax liability in all tax jurisdictions in which the Company operates, and deferred tax. Tax provision in India is based on the normal tax computation in accordance with the prevailing tax laws.

Operating Profit and Net Profit

Consolidated EBITDA (including other income and excluding exceptional items) for the year amounted to Rs. 258.4 million as against Rs. 241.7 million in the previous year. Net profit is Rs. 333.1 million in FY 2021-22, as against Rs. 108.6 million in FY 2020-21.

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 detailed explanations for Standalone Financial Statements:

Sl. No.	Description	As at March 31, 2022	As at March 31, 2021	Reasons for variance
i	Debtors Turnover	4.47	4.54	-
ii	Inventory Turnover	NA	NA	-
iii	Interest Coverage Ratio	NA	NA	-
iv	Current Ratio	3.09	3.24	-
v	Debt Equity Ratio	NA	NA	-
vi	Operating Profit Margin (%)	10.94	11.96	-
vii	Net Profit Margin (%)	9.61	8.20	-
viii	Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof (%)	9	7	FY 2020-21 includes prior year taxes whereas no such taxes were incurred during FY 2021-22.

Human Resources Initiatives

During a year marked by varying fluctuations in the spread of the COVID-19 virus, the Company placed a special focus on ensuring employee well-being, health and safety. Specifically, this included:

¦ Extending the work-from-home facility to all employees during the year.

¦ Conducting virtual Employee Connect gatherings to keep the dialogue open between employees and their Managers, the CEO, and HR.

¦ Administering a variety of technical, behavioural and leadership development training sessions online - curated to upskill, future skill, cross-skill, and foster learning overall.

¦ Hired fresh engineers from various campus and finishing schools. Trained them for a period of 3-6 months and deployed them to projects.

¦ Initiated various Employee Engagement Programs across the organisation, such as Pre-joining connect, Post hire connect for new hires and existing employee with the Senior Management Team.

¦ Conducted various Fun & Frolic Programs.

¦ Various on-line wellness programs were conducted for employees.

Mindtecks annualised attrition rate during FY 2021-22 was higher compared to previuos year.

Headcount Details:

Year	Permanent	Contractual	Total
2021-22	709	46	755
2020-21	672	42	714

Chief Executive Officer (CEO) and Chief Financial Officer (CFO) Certification

To,

The Board of Directors

Mindteck (India) Limited

We, Anand Balakrishnan, Managing Director and Chief Executive Officer, and Ramachandra M S, Chief Financial Officer, to the best of our knowledge and belief, certify that:

1) We have reviewed the financial statements for the Quarter and Year ended March 31, 2022 and that to the best of our knowledge and belief:

a) These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;

b) These statements together present a true and fair view of the Companys affairs and are in compliance with existing accounting standards, applicable laws and regulations.

2) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year ended March 31, 2022, which are fraudulent, illegal or which violate the Companys code of conduct.

3) We are responsible for establishing and maintaining internal controls for financial reporting and we have:

a) Evaluated the effectiveness of the internal control systems of the Company pertaining to financial reporting;

b) Disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if any, of which we are aware; and

c) The steps we have taken or propose to take to rectify these deficiencies.

4) We have indicated to the Companys Auditors and the Audit Committee of the Board of Directors

a) Significant changes that have occurred in the internal control over financial reporting during the quarter;

b) AIL significant changes in accounting policies during the quarter, if any, and that the same have been disclosed in the notes to the financial statements; and

c) Instances of significant fraud, if any, of which we are aware and the involvement therein of the management or an employee having a significant role in the Companys internal control system over financial reporting;

d) All deficiencies, if any, in the design or operation of internal controls, which could adversely affect the Companys ability to record, process, summarize and report financial data, and have identified for the Companys Auditors, any material weaknesses in internal controls over financial reporting including any corrective actions with regard to deficiencies.

Bengaluru, India	Anand Balakrishnan	Ramachandra M S
May 20, 2022	Managing Director and CEO	Chief Financial Officer