Mindteck (India) Ltd 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 World Banks Global Economic Prospects Report released in January 2024, Global growth is set to slow further this year, amid the lagged and ongoing effects of tight monetary policy, restrictive financial conditions, and feeble global trade and investment. Downside risks to the outlook include an escalation of the recent conflict in the Middle East and associated commodity market disruptions, financial stress amid elevated debt and high borrowing costs, persistent inflation, weaker-than-expected activity in China, trade fragmentation, and ciimate-reiated disasters. Against this backdrop, policy makers around the world face enormous challenges. Even though investment in emerging market and developing economies (EMDEs) is likely to remain subdued, lessons learned from episodes of investment growth acceleration over the past seven decades highlight the importance of macroeconomic and structural policy actions and their interaction with well-functioning institutions in boosting investment and thus long-term growth prospects. Commodity-exporting EMDEs face a unique set of challenges amid fiscal policy procyclicality and volatility. This underscores the need for a properly designed fiscal framework that, combined with a strong institutional environment, can help build buffers during commodity price booms that can be drawn upon during subsequent slumps in prices. At the global level, cooperation needs to be strengthened to provide debt relief, facilitate trade integration, tackle climate change, and alleviate food insecurity.

Global growth is expected to slow to 2.4 percent in 2024—the third consecutive year of deceleration—reflecting the lagged and ongoing effects of tight monetary policies to rein in decades-high inflation, restrictive credit conditions, and anemic global trade and investment. Near-term prospects are diverging, with subdued growth in major economies alongside improving conditions in emerging market and developing economies (EMDEs) with solid fundamentals. Meanwhile, the outlook for EMDEs with pronounced vulnerabilities remains precarious amid elevated debt and financing costs. Downside risks to the outlook predominate. The recent conflict in the Middle East, coming on top of the Russian Federations invasion of Ukraine, has heightened geopolitical risks. Conflict escalation could lead to surging energy prices, with broader implications for global activity and inflation. Other risks include financial stress related to elevated real interest rates, persistent inflation, weaker-than-expected growth in China, further trade fragmentation, and climate change-related disasters.

Against this backdrop, policy makers face enormous challenges and difficult trade-offs. International cooperation needs to be strengthened to provide debt relief, especially for the poorest countries; tackle climate change and foster the energy transition; facilitate trade flows; and alleviate food insecurity. EMDE central banks need to ensure that inflation expectations remain well anchored and that financial systems are resilient. Elevated public debt and borrowing costs limit fiscal space and pose significant challenges to EMDEs—particularly those with weak credit ratings—seeking to improve fiscal sustainability while

meeting investment needs. Commodity exporters face the additional challenge of coping with commodity price fluctuations, underscoring the need for strong policy frameworks. To boost longer-term growth, structural reforms are needed to accelerate investment, improve productivity growth, and close gender gaps in labor markets.

INDUSTRY OUTLOOK

As the technology market faced heightened global challenges over the past few years—geopolitical tensions, supply chain volatility, raw material shortages, and emerging regulations—Deloitte urged tech leaders to evaluate where manufacturing happens, to improve the transparency and resiliency of their supply chains, and to prepare proactively for future systemic risks. Deloitte suggested leaders use technology to streamline business processes, rely more on intelligent automation, reduce tech debt by implementing leading practices for software development, and modernize legacy architectures by migrating to cloud resources and XaaS. Deloitte also recommended that tech companies consider how to extend their reach into other industries, using digital advancements to spur transformation. Finally, Deloitte advised leaders to build up talent in critical areas such as artificial intelligence (AI), robotic process automation (RPA), and cybersecurity.

Some of the strategies Deloitte expects tech leaders to focus on in 2024 and beyond include:

• Angling for a comeback, with help from cloud, AI, and cybersecurity. Enterprise spending on software and IT services— particularly artificial intelligence, cloud computing, and cybersecurity technology—is expected to enable the most growth in the tech market over the coming year. Tech leaders should assess how they might shift or augment their offerings to meet that demand. While generative AI has sparked imaginations and headlines, with tech giants investing billions and startups playing a key role, enterprise purchasing in this specific category isnt expected to ramp up until at least the second half of 2024. Deloitte expects nearly all enterprise software and service companies to integrate generative AI capabilities into at least some of their offerings in the coming year.

• Striking a balance between globalization and self-reliance.

The worldwide, interconnected nature of the tech industry heightens the risk of disruptions from geopolitical unrest, supply chain volatility, raw material shortages, and new regulations and policies. Leaders should diversify their supply chains and manufacturing and development locations, spreading operations among trusted regions and ensuring redundancy. As governments refine trade policies, tech companies should be agile in adapting their strategies.

• Setting the stage for growth with generative AI. The next year is expected to be transitional for generative AI, with tech companies experimenting and finding applications that can drive efficiency and productivity. Some will likely evaluate how to speed up software development with generative AI-enabled tools. At the same time, providers can determine how to best deliver generative AI capabilities and how to monetize them. As generative AI investment and experimentation accelerate in the coming months, the legal and regulatory landscape may evolve rapidly, setting the stage for greater adoption in the second half of 2024 and into 2025.

• Reckoning with regulations for the tech industry. Governments around the world are evaluating the impacts that massive tech platforms and social networks have on businesses and consumers. In the coming months, regulations in the European Union and the United States will likely take effect, pushing tech companies to prioritize data protection, harm reduction, the ethical use of AI, and commitment to sustainability goals. A global minimum tax aims to close loopholes and push corporations to pay more, while new credits and incentives are designed to spur sustainable growth and job creation. With strong collaboration between business, legal, accounting, and finance teams, tech companies can elevate compliance efforts into competitive advantages.

According to International Data corporation (IDC), This years predictions are centered around the emergence of AI as a groundbreaking inflection point in the technology domain. While AI is not a new concept, the release of the GPT-3.5 series from OpenAI in late 2022 acted as a catalyst, capturing global attention and leading to a surge in investments in generative AI. In light of this, IDC foresees global spending on AI solutions surging to over $500 billion by 2027. This, in turn, will usher in a remarkable shift in the allocation of technology investments toward AI implementation and the adoption of AI-enhanced products and services.

TOP OUTSOURCING TRENDS

In a recent IDC report, IDC predicts, spending on digital technology by organizations will grow at 2X the economy in 2024, as companies are compelled by market demands to grow digital business models and strengthen digital capabilities.

Recently, amidst economic challenges, enterprises have seen digital technology as a cornerstone of sustainable growth. The market demands digital experiences in the products and services they consume, putting an emphasis on expanding digital capabilities. Despite inflationary and budgetary pressures, organizations continue to prioritize digital technology. Laggards will accelerate digital technology spending to remain competitive. This trend has led to a significant surge in digital technology spending, outpacing GDP growth in recent years, which will continue in 2024.

According to IDCs India Digital Business Survey, 2023, about 60% of Indian enterprises revenue is expected to come from digital business models in the next three years.

Key trends in outsourcing industry

The key trends in the outsourcing industry for 2024 include:

1. Increased adoption of artificial intelligence (AI) and automation

to streamline tasks, improve efficiency, and reduce costs. AI- powered chatbots, virtual assistants, and language translation tools are enhancing customer support and facilitating global collaboration.

2. Growing demand for outcome-based contracts that focus on results rather than just cost savings. Businesses are seeking strategic partnerships with outsourcing providers to drive growth and foster innovation

3. Heightened focus on data security and compliance as companies handle sensitive information. Outsourcing providers are investing in robust security measures to protect client data.

4. Shift towards ecosystem-based outsourcing, where businesses collaborate with multiple providers to access specialized expertise and advanced technologies.

5. Hybrid outsourcing models combining on-site and remote resources are becoming more prevalent as companies adapt to the changing work environment.

6. Increased outsourcing of AI and machine learning development and integration to drive operational efficiency, advanced data analytics, and innovative product features.

7. Partnerships between businesses and outsourcing providers for strategic growth, with providers offering specialized expertise, advanced technology, and innovative solutions.

8. Legacy application modernization is evolving with the rise of cloud computing. Companies are increasingly adopting cutting- edge technologies like serverless computing, edge computing, and microservices-based architecture. These advancements significantly improve scalability, performance, and security of applications. Additionally, the Lift and Shift approach to cloud migration is gaining traction as a strategy for modernization.

These trends demonstrate the evolving nature of the outsourcing industry, with a focus on leveraging technology, fostering strategic partnerships, and delivering measurable outcomes for businesses.

MARKET OUTLOOK BY INDUSTRY

Data Storage

The data storage market is poised for significant growth in 2024 and beyond. Here is a summary of the market outlook based on the information from the provided sources:

• The Data Storage Market Size was valued at USD 188 billion in 2023 and is expected to reach USD 661.1 billion by 2031, growing at a CAGR of 17.02% over the forecast period.

• Another report forecasts a CAGR of 26% for the data storage market between 2024 and 2032, highlighting drivers like digitalization and technological advancements.

• A different source estimates the data storage market to reach $12.9 billion by 2030, with a CAGR of 32.3% from 2024 to 2030, driven by the rapid increase in consumer and machine data developments.

• Furthermore, the global data storage market is projected to grow from $218.33 billion in 2024 to $774.00 billion by 2032, at a CAGR of 17.1% during the forecast period, emphasizing the rise in big data and the need for advanced storage solutions.

• In India, the Data Center Storage Market is expected to reach USD 2.53 billion in 2024 and grow at a CAGR of 14.68% to reach USD 5.77 billion by 2030, showcasing the countrys significant growth in this sector.

Overall, the data storage industry is witnessing substantial growth driven by factors like the explosion of data due to digitalization, the adoption of cloud storage technology, and the increasing need for high-speed storage solutions to manage and analyze vast amounts of information securely and efficiently.

Analytical Instrument

The analytical instrumentation market is expected to grow significantly between 2024 and 2032, driven by various factors such as the increasing demand for water and wastewater treatment, the cost-effectiveness of analytical instrumentation, and the integration of technologies in chromatography. The market is projected to reach a value of nearly USD 99.03 billion by 2032, growing at a compound annual growth rate (CAGR) of 7.7% during the forecast period.

The scientific instrument market, which includes laboratory analytical instruments and consumables, is also expected to grow during the forecast period. This market is forecast to grow by USD 16 billion between 2020 and 2024 at a CAGR of 5%, with laboratory analytical instruments and consumables contributing significantly to the market growth.

In India, the analytical instrument market size reached a value of around USD 3.77 billion in 2023 and is further expected to grow at a CAGR of 11% during the forecast period of 2024-2032, likely to attain a market value of around USD 9.65 billion by 2032. The growth of the market is driven by the stringent regulatory compliance in food and beverage, Pharmaceutical and environmental monitoring. With increasing investment in research and developments as well as growing emphasis for product quality and technological advances, analytical instrument market is poised to grow at healthy rate.

The global market for analytical laboratory instruments was valued at $57.4 billion in 2022 and is forecast to grow from $60.9 billion in 2023 at a CAGR of 6.3% to reach $82.5 billion by 2028. This growth is driven by the increasing demand for rigorous quality control, environmental testing, and research outcomes across various end-user industries.

Key Trends

The analytical instrumentation market is experiencing profound changes driven by technological advancements, regulatory shifts, and evolving industry demands. Key trends influencing the market include:

- Miniaturization and Portability: There is a rising demand for compact, portable analytical instruments tailored for on-site testing and field applications, especially in environmental monitoring, food safety, and clinical diagnostics.

- Automation and High Throughput: Automation is gaining momentum to boost efficiency, productivity, and data consistency. High-throughput instruments are pivotal for managing large sample volumes in genomics, proteomics, and drug discovery.

- Data Analytics and Artificial Intelligence: Integration of data analytics and AI is enhancing data processing and interpretation from analytical instruments, yielding more precise insights and facilitating informed decision-making.

- Hybrid Instrumentation: Combined analytical techniques on a unified platform are providing expanded capabilities and comprehensive analysis.

- Emphasis on Data Security and Privacy: The growing value of data from analytical instruments underscores the heightened focus on ensuring robust data security and privacy measures.

The analytical instrumentation market is poised for substantial growth in the upcoming years, fueled by technological advancements, rising demand for quality control and assurance, and heightened requirements for rigorous environmental testing and research outcomes.

Medical Device

The medical device industry is poised for significant growth in 2024, with an expected global revenue of $595 billion and a projected Compound Annual Growth Rate (CAGR) of 6.1% from 2022 to 2030. Key trends and predictions for the industry in 2024 include:

Stabilizing Growth

Overall medtech revenue growth is expected to stabilize at 100 to 150

basis points above prepandemic rates. Underlying growth factors such as aging populations and innovative technologies addressing unmet needs will continue to drive patient volumes.

Increased Innovation

The pace of innovation in 2024 is expected to exceed 2020 to 2022 levels, with segments like cardiovascular, digital-health-device, and neuromodulation gaining momentum. Advanced imaging, microelectronics, miniaturization, and new treatment modalities are fueling innovation in underserved disease areas.

Emerging Markets

China, Japan, and the United States are projected to contribute two- thirds of near-term industry growth. Indias medical device market is also rapidly growing, with an estimated value of over $8 billion in 2021 and a predicted growth rate of about 17% annually to exceed $20 billion by 2027.

Trends in India

India has launched a National Single Window System to facilitate the efficient importation of medical devices. The countrys National Medical Devices Policy 2023 aims to support the industrys growth from $11 billion in 2022 to $50 billion in 2030, with an annual growth target of at least 15%.

Top Device Areas

The top medical device areas by sales in 2024 are projected to be in vitro diagnostics, cardiology, diagnostic imaging, orthopedics, and ophthalmics. Neurology is expected to be the fastest-growing device specialty, with sales reaching $15.8 billion and expanding at a 9.1% CAGR. The medical device industry is poised for a transformative year in 2024, driven by innovative technologies, personalized healthcare, and a focus on minimally invasive techniques and sustainable solutions. Companies embracing these advancements are well-positioned to shape the future of healthcare technology.

Semiconductor

The global semiconductor industry is expected to witness robust growth in 2024, with the market size projected to reach USD 617 billion, an annual growth of 16.6%. Key trends driving this growth include:

• Surging demand for semiconductors in data centers, high- performance computing (HPC), and the automotive industry

• Growing interest in generative AI among enterprises, fueling demand for AI chips like GPUs within data center infrastructure

• Increasing semiconductor content per vehicle

• Adoption of next-generation memory technologies like MRAM, which is set to dominate the market in 2024, with HPC and data centers being key applications

• Breakthrough year for quantum computing commercialization

The industry is also expected to see a rebound in revenue growth, with double-digit growth year over year projected to return in 2024. The Semiconductor Industry Confidence Index, which had peaked at an all-time high of 74 in 2022, is 56 percentage points higher than last years survey.

However, the industry still faces some challenges, including inflationary pressure, geopolitical uncertainty, inventory surpluses, ongoing supply chain disruption, and a scarcity of skilled talent. The memory chip market, which was the biggest swing factor in 2023, is expected to recover in 2024, with sales projected to reach 2022 levels.

Despite the challenges, the semiconductor industry remains a powerhouse of innovation, with the workforce swelling to 2.7 million globally and over 104,000 patents held by companies in the sector. The United States, China, Germany, South Korea, and India are the leading country hubs, while Shenzhen, Shanghai, Singapore, San Jose, and Tokyo are top city hubs.

Energy and Utilities

The energy and utilities industry is expected to face both opportunities and challenges in 2024, as it continues its transition towards clean energy and adapts to evolving market conditions.

Clean Energy Transition Momentum

The clean energy transition is expected to gain further momentum in 2024, driven by technological advancements, growing global consciousness about climate change, and supportive policies. Key trends include:

- Increasing adoption of renewable energy sources, such as solar and wind power

- Deployment of advanced energy storage solutions to support intermittent renewable energy sources

- Investments in smart grid technologies and AI-driven optimization to improve grid reliability and flexibility

- Electrification across end-use sectors, impacting long-term electric power industry forecasts and strategies

Regulatory and Policy Landscape

The regulatory environment is expected to play a significant role in shaping the industrys outlook for 2024. Key considerations include:

- Continued support for clean energy initiatives through policies like the Inflation Reduction Act (IRA)

- Regulatory scrutiny on customer bills and the need for utilities to obtain regulatory approval for rate increases to recover higher costs

- Varying approaches by state regulators, with some approving customer rate increases to fund utilities capital investment plans, while others taking a tougher stance

Operational and Financial Challenges

The industry will likely face several operational and financial challenges in 2024, including:

- Ongoing supply chain issues and higher financing costs, which could constrain renewable energy growth and increase project costs

- Rising interest rates, which could increase borrowing costs for utilities and make their dividend yields less attractive for income- focused investors

- Upward pressure on customer bills due to record-high capital expenditures, rising interest rates, and increasing costs for weather and climate disaster recovery, wildfire prevention, and cyber and physical security programs

- Potential constraints on renewable energy growth due to grid capacity limitations in certain regions

Opportunities in Technology and Innovation

The industry is expected to increasingly leverage technology and innovation to address challenges and drive growth in 2024. Key areas of focus include:

- Adoption of artificial intelligence (AI) and machine learning for optimizing renewable energy performance, enhancing demand response programs, and improving asset operations

- Exploration of new business models, such as energy-as-a-service offerings, to drive the adoption of low-carbon energy sources

- Shifting to more accessible data platforms and open industry standards to enable new capabilities and address knowledge management challenges

Overall, the energy and utilities industry is poised for a transformative year in 2024, as it navigates the challenges and opportunities presented by the clean energy transition, evolving market conditions, and technological advancements.

OPPORTUNITIES AND THREATS

Opportunities

- Niche Expertise and Knowledge: Mindteck, a global enterprise, excels in furnishing engineering, domain expertise, and technological proficiency. With a distinctive amalgamation of skills and experience, we deliver innovative solutions tailored to meet the precise requirements of our clients. Our team comprises seasoned engineers proficient in a diverse array of technologies, capable of conceptualizing, developing, and executing groundbreaking solutions customized to our clients needs. Leveraging a profound comprehension of the industries we serve, we craft efficacious solutions. Recognizing the unique nature of each business, we collaborate closely with our clients to devise solutions aligned with their objectives. Mindtecks suite of services and solutions is engineered to streamline processes, diminish costs, and mitigate risks for our clients. Our strategic focus on emerging technologies, including wearables, localized asset tracking, remote monitoring, and point-of-care devices, positions us aptly to address the escalating demand for these advancements.

- Pioneering Technological Advancements: Mindteck is steadfast in its dedication to fostering proficiency in emerging technologies. Presently, its established prowess in embedded systems, enterprise applications, and testing seamlessly augments its capabilities in data services, encompassing AI/ML, cloud computing, cybersecurity, and IoT.

- Established and Varied Clientele: We maintain robust client connections, with several enduring for more than 20 years spanning various industries and geographical locations. Moreover, we have collaborated with industry frontrunners, encompassing the top 5 data storage firms, top 3 medical device enterprises, top 6 semiconductor corporations, and top 7 analytical instrument entities.

- Global Delivery Centers: Mindtecks worldwide delivery capabilities cater to clients, particularly multinational corporations, who are increasingly in search of specialized knowledge and expertise. The companys offshore delivery centers in Kolkata and Bengaluru, India, offer a proficient talent pool, agile methodologies, and cost-effective productivity gains for various endeavors including new product development, enhanced product engineering, software development and maintenance, as well as testing services.

- Practices Team: Facilitates ongoing innovation and offers subject matter proficiency in key technologies like data services, AI, IoT, cloud computing, and edge computing tailored to our targeted industries, including semiconductor, medical devices, analytical instruments, data storage, energy and utilities, insurance, and consumer electronics.

- Automation: The heightened emphasis on artificial intelligence and automation presents a significant opportunity for outsourcing service providers. Companies will increasingly lean on external specialists in this domain. Rather than investing years in developing their own AI tools and strategies, many businesses will opt to delegate this task to third-party vendors.

Threats

- Fierce Competition: Mindteck encounters substantial competition from both local and global service providers, spanning from major corporations to smaller enterprises. Despite the companys robust client base, financial resilience, and specialized skills, navigating this competitive arena presents a formidable obstacle. Sustaining relevance amidst such fierce competition demands relentless innovation, strategic positioning, and agility in response to market shifts..

- Increased Cost Burden: Many of our premier clients engage with ten or more service providers, leading to mounting labor and benefits expenses that encroach on margins, jeopardizing profitability. Similar to previous instances, Mindteck is actively addressing these pressures by enhancing operational efficiencies, exploring novel sales models, and, where suitable, advocating for an outcome- based business approach.

- Consolidations: Merger and acquisition activity seem to have emerged as the primary strategy for fledgling and evolving firms to unlock growth and bolster their capacities for sustainability or competitive advantage. The aftermath of the pandemic, improved access to credit, and favorable interest rates are likely to intensify competition in deal- making. At present, Mindteck is concentrating on cultivating a robust partnership network, enhancing delivery capabilities and resources, refining client experiences, and crafting a portfolio of solutions poised for the future.

RISKS AND CONCERNS

Risks

- Offshore Delivery: According to a NASSCOM report, enterprise 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-in-class 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: The skills crisis is expected to intensify, with IDC predicting that by 2026, over 90% of organizations worldwide will feel the effects of the IT skills crisis, amounting to significant financial losses and operational challenges. In response to the skills shortage, Mindteck is focusing on broadening the skill sets of the tech teams, cross-training employees from other parts of the organization, offering more apprenticeships, and widening geographical net to source new talent.

- Attrition Rate:

- Market Demand Impact: The attrition rate at Mindteck is influenced by the high demand for skilled employees in the market, leading to potential talent turnover.

- Mitigation Strategies: Mindteck focuses on an "Employees-First" approach, emphasizing a positive work environment, work-life balance, and a strong organizational culture to retain valuable IT talent and prevent project disruptions.

- Learning and Development (L&D) Programs: The company has a curated L&D program to enhance employee skills and knowledge, contributing to employee satisfaction and retention.

- Consultant Care Initiative: Mindtecks "We Care" umbrella includes the Consultant Care initiative, which aims to support and retain valuable IT talent, further strengthening the companys ability to manage attrition challenges.

- Reputation Management:

- Risk of Reputation Impact: Mindteck acknowledges the risk of actions negatively affecting its reputation, especially in the era of quick and easy information exchange through social media and other channels.

- Monitoring and Management: A dedicated team is tasked with monitoring and managing activities that could impact Mindtecks reputation, demonstrating the companys commitment to safeguarding its image and brand perception.

By prioritizing employee well-being, professional development, and reputation management, Mindteck is actively working to mitigate attrition risks and maintain a positive brand image in the face of evolving challenges in the IT industry.

Concerns

- Enormous Uncertainty: The world is changing every day, with global issues like war, global pandemics, natural disasters, etc., posing challenges to the economy. The competition is fierce, and talent retention is a challenge due to the rise of remote work and freelancing.

- Reduced Demand: The IT services sector is experiencing a decline in demand, which is impacting the hiring trends across top IT firms. This decline is attributed to various factors, including macroeconomic uncertainties, reduced discretionary spending, and deferment of projects. The sector, which was once a key driver of job growth, is now witnessing a significant drop in talent demand, with a 67% year-on-year decline in active talent demand in May. This decline is unprecedented and has further diminished the sectors position as a key talent-consuming sector.

- Selling, General and Administrative Cost Containment (SG&A): Mindteck has been focusing on Selling, General and Administrative (SG&A) cost containment to work more efficiently and productively in response to the evolving business landscape. This effort reflects the companys proactive approach to managing costs and optimizing operations.

Some key points about SG&A cost containment at Mindteck:

- The company has been reengineering internal processes and restructuring parts of the organization to contain costs.

- These measures are aimed at working more efficiently and productively in the face of challenges posed by the changing business environment.

- SG&A cost containment is crucial for Mindteck to maintain profitability and competitiveness amidst rising costs and economic uncertainties.

By prioritizing SG&A cost containment, Mindteck demonstrates its commitment to operational efficiency and financial discipline. This approach allows the company to navigate the current business landscape more effectively and allocate resources strategically to drive growth and innovation.

DISCUSSION ON FINANCIAL PERFORMANCE

Business

During the year under review, your Company recorded Consolidated Revenue of Rs. 3855.3 million as against Rs. 3,367.3 million in the previous year. Of the revenues that were recorded, 44.8 % is attributed to the US and the rest to UK, Europe and Asia.

Mindtecks Consolidated Net Profit for the year stood at Rs. 273.1 million, as against Rs. 207.7 million in the corresponding previous year.

On an operating margin level, Mindteck recorded Consolidated EBITDA (including other income and excluding exceptional items) of Rs. 388.9 million this fiscal year as against of Rs. 315.2 million last year.

Share Capital

As on March 31, 2024, Mindteck has an issued share capital base of 2,53,46,776 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, 2024, 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.

The Company has implemented a Scheme named as Mindteck Employees Stock Option Scheme 2020 in lieu of earlier Companys Share Incentive Scheme which was wound-up on March 06, 2024, by the Board of Directors. MEWT has not transferred any shares to the employees of the Company under the said scheme. The shares held by Mindteck Employees Welfare Trust (MEWT) will be sold in the secondary market as permitted under Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

The Trust sold 191,551 shares held by it (out of the total of 416,000 shares) at an average price of Rs. 202.80 per share during the quarter ended March 31, 2024. The shares had a face value of Rs. 1.9 million, and an aggregate purchase value of Rs. 18.6 million. Net profit of Rs. 17.7 million, post tax, generated from the sale of shares has been credited to equity reserves. As a result of disposal of shares by the Trust, consolidated Equity Share Capital has increased by Rs. 1.9 million, consolidated Securities Premium account by Rs. 16.7 million and Other Equity by Rs. 17.7 million (towards profit from sale of shares - net of taxes).

As on March 31, 2024, the MEWT holds 2,24,449 shares of the Company. To give effect to the consolidation of the MEWT, Rs. 2.2 million (March 31, 2023: Rs. 4.1 million) has been reduced from equity share capital and Rs. 19.5 million (March 31, 2023: Rs. 362 lakhs) has been reduced from securities premium account.

Reserves and Surplus

Mindteck has retained earnings of Rs. 655.1 million in the Consolidated Balance Sheet as on March 31, 2024. Shareholders Funds, excluding capital reserves and capital redemption reserve, increased from Rs. 1821.5 million in FY 2023 to Rs. 2,124.2 million in FY 2024, other than profit for the year, majorly on account of sale of shares by MEWT amounting to Rs. 36.2 million (profit on sale of shares by MEWT, net of taxes Rs. 17.7 million, addition to share capital Rs. 1.8 million, addition to securities premium Rs. 16.7 million), reduction in reserves on account of dividend paid during the year amounting to Rs. 24.9 million.

Non-Current Liabilities

Non-Current Liabilities in the Consolidated Balance Sheet include rental deposit and provision for gratuity. Non-Current Liabilities decreased from Rs. 57.4 million in FY 2022-23 to Rs. 48.1 million in FY 2023-24. The decrease is mainly due to payment of lease liability nearing lock in period and offset by increase in provision for gratuity.

Current Liabilities

Current Liabilities in the Consolidated Balance Sheet includes trade payables, current portion of lease liabilities, provision for employee benefits, provision for tax, and other current liabilities. Current Liabilities increased from Rs. 463.5 million in FY 2022-23 to Rs. 498.1 million in FY 2023-24.

Trade payables increased from Rs. 155.9 million in FY 2022-23 to Rs 164.1 million in FY 2023-24. Other current liabilities comprise unearned income, statutory liabilities such as PF, TDS, etc., and advance from customers amounting to Rs. 125.3 million as on March 31, 2024, compared to Rs. 101.3 million as on March 31, 2023.

Provisions under Current Liabilities stood at Rs. 40.5 million as on March 31, 2024 compared to Rs. 41.4 million as on March 31, 2023.

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. 15.0 million in Property, Plant and Equipment during the fiscal year, which relates majorly relates to vehicles.

Other financial assets comprise of security deposits and Fixed deposits with bank with remaining maturity of more than 12 months totalling to Rs. 1.0 million as on March 31, 2024, compared to Rs. 27.9 million as on March 31, 2023. Decrease in other financial assets is due to reclassification of security deposits from non-current to current as they are apporaching the end of their lockin period.

Other Non-Current Assets consist of prepaid expense amounting to Rs. 2.4 million as on March 31, 2024.

Current Assets

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

Accounts receivables as on March 31, 2024, amounts to Rs. 934.10 million, representing about 85 days of sales. All debts doubtful of recovery have been provided for in the financial statements. During the year company has written off trade receivable amounting to Rs. 6.1 million.

Cash and Bank balances amounted to Rs. 1249.6 million compared to Rs. 1,003.4 million in the previous year which includes both rupee and foreign currency accounts.

Other financial assets under Current Assets include claimable expenses, accrued interest, employee advances and security deposits. The balance as on March 31, 2024, stood at Rs. 47.8 million compared to Rs. 21.4 million as on March 31, 2023. Increase in other financial assets is majorly on account of reclassification of Security deposits from non-current to current.

Other current assets include prepaid expenses, advances recoverable and balances with government authorities and unbilled revenue- contract assets. The balance as on March 31, 2024, stood at Rs. 86.2 million.

Investments

Mindteck (India) Limited has six wholly owned subsidiaries and two step-down subsidiaries as on March 31, 2024. 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 (stepdown subsidiary)

- Mindteck Canada, Inc.- Selling and marketing company (stepdown subsidiary)

Note: Mindteck Solutions Philippines Inc. is under closure.

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. 3855.3 million in FY 2023-24 as against Rs. 3,367.3 million in FY 2022-23. The company recorded other income of Rs. 64.6 million in FY 2023-24 as against Rs. 44.3 million in FY 2022-23.

Expenses

Employee benefit expenses and cost of technical sub-contractors for the FY 2023-24 stood at Rs. 3,234.3 million as against Rs. 2,842.4 million in FY 2022-23. Percentage of Manpower expense to revenue stood at 83.9% compared to 84.4% during FY 2022-23.

Finance cost in FY 2023-24 was Rs. 8.9 million as compared to Rs. 10.1 million in FY 2022-23.

Other expenses of FY 2023-24 amounted to Rs. 296.7 million compared to Rs. 254.0 million last year. 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. 62.2 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. 388.9 million as against Rs. 315.2 million in the previous year. Net profit is Rs. 273.1 million in FY 2023-24, as against Rs. 207.7 million in FY 2022-23.

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, 2024	As at March 31, 2023	Reasons for variance
i Debtors Turnover	4.35	4.66	-
ii Inventory Turnover	NA	NA	-
iii Interest Coverage Ratio	Na	NA	-
iv Current Ratio	5.43	4.67	-
v Debt Equity Ratio	NA	NA	-
vi Operating Profit Margin (%)	12.56	13.02	-
vii Net Profit Margin (%)	13.08	11.48	-
viii Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof (%)	1.51	2.58	Reduction of shares and reserves in previous year on account of buy back of shares

Human Resources Initiatives

Employee Engagement and Wellbeing

During the year various employee initiatives were implemented such as Employee Connect Program, Pre-Hire Connect Program, CEO Connect Programs to ensure there was continuous engagement with employees.

Employee Well-being continues to be our major focus - conducted various programs such as Womens Day program, Yoga & Meditation sessions for the well-being of our employees.

Extended Hybrid Working model for the year so that employees can come weekly 2-3 days to office.

Initiated Internship Program where Mindteck has signed the MOU with 2 Colleges to hire interns for a period of six months. This initiative will help in building internal capabilities & competencies for future ready projects.

Culture & Training

While a performance-driven culture remains central to Mindteck, we prioritize training our technical team on the latest technologies beyond the project-specific requirements.

In addition to various technical training programs, we ensure that all our Project Managers are PMP certified. We have also conducted the Catalyst Program for our managers, providing comprehensive insights into project management, people management, mentoring & coaching, performance discussions, and enhancing employee productivity.

Headcount Details:

Year	Permanent	Contractual	Total
2023-24	760	40	800
2022-23	716	46	762

Mindtecks annualized attrition rate during the FY, 2023-24 has reduced to 12.7% compared to 27.4% of previous year.