mt educare ltd Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Economic Review Global economic overview

The year 2021 began with a strong sense of optimism driven by the rollout vaccination across countries. Hence, 2021 saw robust global rebound, with the world economy growing by 6.1% driven by strong consumer spending and an uptick in investments and trade. However, the end of 2021 was marked by rising inflationary pressures, supply chain disruptions and a steady pullback of fiscal stimuli. The situation was further compounded by the emergence of the highly transmissible Omicron variant of COVID-19 which exacerbated infection numbers globally. As a result, major global economies the US, the EU and China- witnessed a slowing momentum of growth, which was reflected by other emerging economies, including India.

In 2022, we expect the pace of global economic recovery to slow down to 3.6%; weighed down by pandemic- related challenges such as new variants in addition to income inequalities, continued supply chain issues as well as rising inflation and debt levels. The impact of the geopolitical crisis in Ukraine on the global economy is yet to be analyzed, although the market sentiments in the current atmosphere remain slightly bearish. However, as in the past, India, China and other Southeast Asian countries are expected to drive global growth although slower growth in mainland China could add to some downside risk to the regional economy in 2022.

Global growth trend (%)

	2021	2022(P)	2023(P)
Global	6.1	3.6	3.3
Advanced Economies	5.2	3.3	2.4
Emerging Markets and Developing Economies	6.8	3.8	4.4

Indian economic overview

India continues to reinforce its position as one of the fastest growing economies in the world. India was one of the key drivers of the global economic rebound witnessed during the year under review. The countrys GDP growth stood at 8.7% for FY 2021-22, albeit with a few downside risks. The gross Goods and Services Tax collection soared to a record high of Rs.27.07 lakh core rupees for the year ended 31^st March 2022, reflecting a strong recovery in the economic activities in the country.

Vaccination has played an important role in minimising loss of lives, boosting confidence in the economy towards the resumption of activity, and containing the sequential decline in output due to the second wave. More than 193 crore dosages of COVID vaccines were administered across the country by May 2022.

Going forward, persistently high inflation levels and another spurt in infections (which can cause a consumption slump) could be some of the biggest concerns facing the Indian economy. Coupled with supply chain disruptions (which are likely to ease down the line), rising commodity prices (on account of the geopolitical crisis in Ukraine), and a possible scale down in government expenditure. These factors could have a bearing on the pace of growth.

Indian economic growth (%)

2017-18	2018-19	2019-20	2020-21	2021-22
7	6.5	4	-6.6	8.7

Education Industry review

Education is a very important factor in the economic development of any country. India since the early days of independence has always focused on improving the literacy rate in our country. Even today the government runs many programs to promote Primary and Higher Education in India. The education sector in India is growing swiftly with large private individuals collaborating with the government to develop this sector. The government is also considering many steps to enhance the quality of education in India. Primary education is increasing and many international schools are making their presence felt in India. Parents are now willingly enrolling their children into international schools for good quality education straight from the primary level.

India has the worlds largest population in the age bracket of 5-24 years of about 500 million people, which provides a great growth opportunity for the education sector. The education sector in India was estimated to be worth US$ 117 billion in FY20 and is expected to reach US$ 225 billion by FY25. India has over 250 million school-going students, more than any other country.

In 2021-22, as of February 2022, there are 8,997 total AICTE approved institutes in India. Out of these 8,997 institutes, there were 3,627 undergraduate, 4,790 postgraduate and 3,994 diploma institutes.

The Indian education sector is at a crucial stage in its growth phase. The countrys demographic advantage of a large young population coupled with low gross enrolment ratios (GERs) presents a huge opportunity to players in the education sector.

Government initiatives for the sector

• 100% FDI under automatic route is allowed in the Indian education sector.

• To liberalise the sector, the Government has taken initiatives such as the National Accreditation Regulatory Authority Bill for Higher Educational and the Foreign Educational Institutions Bill.

• The government schemes of Revitalising Infrastructure and System in Education (RISE) and Education Quality Upgradation and Inclusion Programme (EQUIP) are helping the government tackle the prominent challenges faced by the education sector.

• As per the Union Budget 2022-23, allocation towards the Samagra Shiksha Scheme has increased by around 20.3%, from Rs.31,050.16 crore (US$ 4.16 billion) in FY22 to Rs.37,383.36 crore (US$ 5.01 billion) in FY23.

• In February 2022, the central government approved the "New India Literacy Programme" for the period FY 2022-27 to cover all the aspects of adult education to align with National Education Policy 2020 and Budget Announcements 2022-23.

• In February 2022, the Ministry of Education approved the scheme of Rashtriya Uchchatar Shiksha Abhiyan (RUSA) to continue till 2026.

• National Education Policy (NEP) 2020 emphasis on early childhood care and education. The 10+2 structure of school curricula is to be replaced by a 5+3+3+4 curricular structure corresponding to ages 3-8, 8-11, 11-14, and 14-18 year, respectively.

• The Cabinet accepted the continuance of the Samagra Shiksha School Education Scheme in 2021 from April 1, 2021, to March 31, 2026.

• In October 2021, the National Skill Development Corporation (NSDC) launched the largest Impact Bond in India, with a US$ 14.4 million fund, to help 50,000 youngsters in the country acquire skills necessary for employment.

• In September 2021, the ATL Space Challenge 2021 was launched by the Atal Innovation Mission (AIM) in cooperation with the Indian Space Research Organisation (ISRO) and the Central Board of Secondary Education (CBSE) for all school students in India.

• In September 2021, The National Commission for Women started a country-wide capacity building and personality development programme for women undergraduate and postgraduate students in an effort to make them more independent and job- ready. The commission will partner with central and state institutions to prepare women students for the job market by providing sessions on personal capacity building, professional career skills, digital literacy and effective use of social media.

• STEM-based edtech companies are partnering with Niti Aayog and the government to build a STEM ecosystem by establishing Atal Tinkering Labs (ATL) to spread knowledge about STEM, STEAM, AI, ML, AND Robotics for K-12 students.

• On September 17, 2021, Mr. Ashwini Vaishnaw, the Minister of Railways, Communications, Electronics and Information Technology, launched Rail Kaushal Vikas Yojana, a programme under Pradhan Mantri Kaushal Vikas Yojana (PMKVY), to empower youth by providing entry-level training in industry relevant skills through railway training institutes.

Way forward

In 2030, it is estimated that Indias higher education will:

• Combine training methods that involve online learning and games, and is expected to grow by 38% in the next 2-4 years.

• Adopt transformative and innovative approaches in higher education.

• Have an augmented Gross Enrolment Ratio (GER) of 50%.

• Reduce state-wise, gender based and social disparity in GER to 5%

• Emerge as the single largest provider of global talent with one in four graduates in the world being a product of the Indian higher education system

• Be among the top five countries in the world in terms of research output with an annual R&D spend of US$ 140 billion

• Have more than 20 universities among the global top 200 universities

Education sector has seen a host of reform and improved financial outlays in recent years that could possibly transform the country into a knowledge haven. With human resource increasingly gaining significance in the overall development of the country, development of education infrastructure is expected to remain the key focus in the current decade. In this scenario, infrastructure investment in the education sector is likely to see a considerable increase in the current decade.

National Education Policy 2020

The National Education Policy 2020 (NEP 2020), launched on 29 July 2020, outlines the vision of Indias new education system. NEP 2020 focuses on five pillars: Affordability, Accessibility, Quality, Equity, and Accountability - to ensure continual learning. It has been crafted consistent with the needs of the citizens as a demand for knowledge in society and economy called for a need to acquire new skills on a regular basis. Thus, providing quality education and creating lifelong learning opportunities for all, leading to full and productive employment and decent work as enlisted in United Nations Sustainable Development Goals 2030, forms the thrust of NEP 2020. The new policy replaces the previous National Policy on Education, 1986 and forms a comprehensive framework to transform both elementary and higher education in India by 2040. The NEP 2020 calls for key reforms in both school and higher education that prepare the next generation to thrive and compete in the new digital age. Thus, there is much emphasis upon multi-disciplinary, digital literacy, written communication, problem-solving, logical reasoning, and vocational exposure in the document.

Threats and Opportunities

The Covid-19 pandemic has driven the fastest changes to higher education across the globe, necessitated by social distancing measures preventing face-to-face teaching. This has led to an almost immediate switch to distance learning by higher education institutions. The coronavirus (Covid-19) pandemic is an unprecedented emergency that has affected all global industries, including education. With the widespread implementation of social distancing and self-isolation policies, it was not feasible for the students to attend the classes. The Covid-19 pandemic has disrupted our long-standing educational practices and has precipitated an urgent need for many institutions to rapidly implement alternative educational and assessment strategies.

The long term shutdown of educational sector and other business operations to contain the Covid-19 menace, the resultant liquidity crunch along with the time and resources needed to return to normalcy of business operations, are threats that your Company shares with other business entities globally. Times of such adversity pose challenges to outperform and your Directors and Senior Management of the Company with co-operation and dedication of its personnel at all levels stand committed to counter the threats with innovative strategies and over extending the reach of technological boundaries.

The Company is pro-actively identifying and pursuing opportunities by developing new key accounts and focusing on other available opportunities.

Financial Performance and Key Financial Ratios

Consolidated Results

Income

The total consolidated revenue for the year FY22 stood at Rs.6,803 lakhs as against Rs.11,308 Lakhs in FY21, decrease by 39.84% mainly on account of decline in enrolment of students and decrease in Interest Income during the year under review.

Expenditure

Total expenditure stood at Rs.9,089 lakhs during the year under review as compared to 13,097 Lakhs in FY21, the decrease is due to lower scale of operations on account of Covid situation.

Operational Expenses

The Direct expenses mainly includes fees paid to visiting faculties, Rent & Printing Expenses for the study materials which are issued to students as a part of course material. The direct expense for the year FY22 was Rs.3,105 Lakhs as against Rs.3,904 Lakhs in FY21, the reduction is on account of lower scale of operations due to Covid situation.

Employee Benefit Expenses

The employee benefit expense for the year FY22 stood at Rs.1,427 Lakhs as against 1,946 Lakhs in FY21, decreased by 26.67% primarily on account of rationalisation in number of employees.

Other Expenditure

Other expenses for the year FY22 stood at Rs.2,024 lakhs as against Rs.2,950 lakhs in FY21, the reduction is mainly on account of decrease in provisions for bad and doubtful debts.

Finance Costs

Finance costs for the year FY22 stood at Rs.1,062 lakhs as against Rs.1,663 lakhs in FY21, the reduction is mainly on account of non-recognition of interest expense on disputed loans.

Depreciation and Amortisation Expenses

Depreciation & Amortisation expenses for the year FY22 stood at Rs.1,472 lakhs as against Rs.2,634 lakhs in FY21 on account of de-recognition of ROU assets.

Profit After Tax

The profit/(loss) after tax is Rs.(2,552) lakhs for FY22 as compared to for Rs.(3,023) Lakhs for FY21.

Source Of Funds Share Capital

The equity share capital remains the same for Rs.7,223 Lakhs during the year under review.

Other Equity

Other equity decreased by Rs.2,542 Lakhs from Rs.7,073 Lakhs as on March 31,2021 to Rs.4,531 Lakhs as on March 31, 2022 on account of Net loss incurred during the year.

Non-Current Liabilities

Non-current liabilities decreased by Rs.937 Lakhs from Rs.6,536 Lakhs as on March 31, 2021 to Rs.5,599 Lakhs as on March 31, 2022 largely on account of repayment of loans and payment of lease liability during the year.

Current Liabilities

Current liabilities decreased by Rs.968 Lakhs from Rs.16,898 Lakhs as on March 31,2021 to 15,930 Lakhs as on March 31, 2022 reduction is due to decrease in the operational creditors on accounts of payments and settlement.

Application of Funds Non-Current Assets

Non-Current Assets decreased by Rs.806 Lakhs from Rs.23,279 Lakhs as on March 31,2021 to Rs.22,473 Lakhs as on March 31, 2022, mainly on account of de-recognition of right-of use asset and decrease in non-current tax asset.

Current Assets

Current assets decreased by Rs.3,641 Lakhs from Rs.14,451 Lakhs as on March 31, 2021 to Rs.10,810 Lakhs as on March 31, 2022, mainly due to re-classification of Loans and advances from Current to Non-Current in nature and recovery from receivables as well as additional provisions for Doubtful debts against the receivables during the year under review.

Standalone Results Income

The revenue for the year FY22 stood at 4,045 lakhs as against Rs.7,561 lakhs in FY21, decline in enrolment of students and decrease in Interest Income during the year under review.

Total Expenditure

Total expenditure reduced by Rs.3,493 lakhs in FY22, the decrease is due to lower scale of operations on account of Covid situation.

Operational Expenses

The Direct expenses mainly includes fees paid to visiting faculties & Printing Expenses for the study materials which are issued to students as a part of course material. The direct expense for the year FY22 was Rs.1,565 Lakhs as against Rs.2,178 Lakhs in FY21, the reduction is on account of lower scale of operations due to Covid situation.

Employee Benefit Expenses

The employee benefit expense for the year FY22 stood at 1,132 Lakhs as against Rs.1,849 Lakhs in FY21, decreased on account of rationalisation in number of employees and control on hiring as a cost optimising measure.

Other Expenditure

Other expenses for the year FY22 stood at Rs.1,432 lakhs as against Rs.2,207 lakhs in FY21 mainly on account of decrease in provisions for Doubtful debts and legal and professional charges.

Finance Costs

Finance costs have decreased by Rs.368 lakhs on account of non-recognition of interest expense on disputed loans.

Depreciation and Amortisation Expenses

Depreciation and amortisation expenses decreased by Rs.1,021 lakhs on account of de-recognition of ROU asset.

Profit After Tax

The profit/(loss) after tax is Rs.(2,516) lakhs for FY22 as compared to Rs.(3,004) Lakhs for the FY21.

Source of Funds Share Capital

The equity share capital remains the same for Rs.7,223 Lakhs during the year under review.

Other Equity

Other equity decreased by Rs.2,501 Lakhs from Rs.6,650 Lakhs as on March 31,2021 to Rs.4,148 Lakhs as on March 31, 2022 largely on account of Net loss incurred during the year.

Non-Current Liabilities

Non-current liabilities increased by Rs.172 Lakhs from Rs.4,739 Lakhs as on March 31,2021 to Rs.4,911 Lakhs as on March 31,2022 largely on account of increase in non-current lease liabilities and decrease in non-current borrowings during the year under review.

Current Liabilities

Current liabilities decreased by Rs.1,222 Lakhs from Rs.12,103 Lakhs as on March 31,2021 to Rs.10,881 Lakhs as on March 31, 2022 largely on account of decrease in lease liabilities and decrease in the operational creditors due to payments and settlement.

Application of Funds Non-Current Assets

Non-Current Assets increased by Rs.786 Lakhs from Rs.17,294 Lakhs as on March 31,2021 to Rs.18,080 Lakhs as on March 31, 2022, mainly on account of de recognition of right-of- use asset, reclassification of current loans becoming noncurrent in nature.

Current Assets

Current assets decreased by Rs.4,338 Lakhs from Rs.13,422 Lakhs as on March 31, 2021 to Rs.9,084 Lakhs as on March 31, 2022, mainly due to re-classification of Loans and advances from Current to Non-Current in nature and recovery from receivables as well as additional provisions for Doubtful debts against the receivables during the year under review.

Outlook

While the world and businesses are recovering from the impact of the COVID-19 pandemic of the last two years, new external and internal risks continue to challenge businesses in every possible way amplifying existing risks. Not only are the nature of risks evolving, but the speed of risk is increasing with faster time to impact. Geo-political situations like the Russia Ukraine war have further forced global businesses to revisit their operations, delivery, supply chains and contractual aspects. Operating in an uncertain and ever-changing environment, efforts of the Board, Management team and the on-ground staff has brought smooth flow of online as well as physical Class mode with same quality of education, at par with the

pre-pandemic time, further, the Company had started many new centres for physical class to cater the growing demand. Risks are assessed and managed at various levels with a top-down and bottom-up approach covering the enterprise, the business units, the geographies, the functions, the customer relationships and projects.

The management will continue to take incremental steps in its commitment to deliver world class coaching and nurturing students to achieve their goal to secure top ranks in all the competitive exams, to satisfy all our Stakeholders.

Risk and Concerns

The Companys Board of Directors have put in place adequate risk assessment and risk mitigation measures. The Executive Management has an appropriate framework that generates confidence of foreseeing and mitigating the risks, which every company in the sector faces in the form of fluctuations in the student counts, income level of parents, infrastructural availability, supply of study materials etc. However, no measures are adequate when confronted by force majeure event like COVID-19.

Internal Control Systems and Their Adequacy

The Company has adopted global practices for evaluating and reporting on internal controls, based on its operational experience. It has also implemented one of the leading ERP solutions in its operations to integrate various facets of business operations, including Human Resources, Finance, and Sales. This has enabled the Company to control and monitor its operations and strengthen the internal controls function optimally. These procedures ensure that the transactions are properly authorized, validated and reported and that the assets of the Company are safeguarded. Additionally, the Company has laid down policies, wherever required, the Company has desired internal control & mechanism in place & more has designated internal auditor from internal source to complete the audits as per a defined plan in place from time to time. The Statutory Auditors also verify the adequacy of the internal financial controls as well as compliances with the applicable laws and statutory regulations.

The Audit Committee of the Board with an Independent Director as its Chairman, meets quarterly and as and when required with the Management and Auditors to review the reports and to address the exceptions, if any.

Human Resource

At MT Educare, our HR strategy is focused on attracting and retaining the best industry talent. Over the years, we have strengthened interventions in nurturing our people and promoting a performance-based culture. Our interventions include trainings to enhance skills and upgrade knowledge. These interventions help us motivate our team and achieve organisational excellence. We provide leadership and managerial development trainings for improved performance of our team. Besides, we have several curriculum-based learning programmes to impart functional and behavioural skills that help our people to consistently enhance efficiency. We promote employee- friendly HR policies to help keep the workforce motivated and aligned with the Companys vision. As on 31^st March 2022, our team strength was over.

Cautionary Statement

Some statements in this Report are forward looking statements and are based on the optimism that the massive efforts of the Central Government, State Government and determination of the people of the Country would soon overcome the battle against Covid-19, and that the Countrys and global economy both move once again towards sustainable growth. The Companys performance is based on these caveats and it is therefore cautioned that the actual results may differ from those set out or implied herein.