Naapbooks Ltd Management Discussions

OVERVIEW

Naapbooks is engaged in the business of developing and providing Information Technological solutions to corporates for their requirements. The company develops and provides Fintech App, Cloud Consulting, Block chain App, Mobile App, Web App, Embedded App products to its clients. The services broadly cover designing, developing, operating, installing, analyzings, designing, maintaining, converting, porting, debugging, coding and programming software to be used on computer or any microprocessor-based device or any other such hardware. The Company is also engaged in Software Consultancy services. The Company adheres to all necessary regulatory specifications. We firmly believe in maintaining our service quality against the highest standards, are unflinchingly customer centric, deeply people focused, and follow ethical business practices and corporate governance standards overall. We draw our strength from an age-old tradition of quality services as the best strategy for sustained growth.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Technology is transforming businesses in every industry around the world in a profound and fundamental way. In fiscal 2023, we saw emerging technologies, like generative AI, and 5G to shape the future of industries. Responsible business approaches including embracing ESG, have gained traction. We continued to witness businesses attempting to reimagine their cost structures, increase business resilience and agility, personalize experiences for customers and employees, and launch new and disruptive products and services.

Indias IT market size growing

The IT industry added 2.90 lakh new employees in FY23, bringing the total employment in the sector to 54 lakh employees.

Indias technology industry is on track to increase the revenue to US$ 500 billion by 2030.

Direct employment in the IT services and BPO/ITeS segment is estimated to reach 5.4 million in FY23 with an addition of 290,000 people.

Estimated market size was US$ 125 billion in 2023.

Over 81% revenue comes from the export market.

IT services is estimated to account for about 51.2% of the IT & BPM market revenue in India in 2023.

The IT-BPM services revenue reached US$ 128.4 billion in FY23.

In FY2023 the Indian domestic IT & Business Services market was valued at US$ 53 billion as against US$ 57 billion in FY2022.

By 2025-26, India is expected to have 60 65 million jobs that require digital skills, according to a Ministry of Electronics & IT report titled "Indias trillion-dollar digital opportunity."

In November 2021, Mr. Piyush Goyal, Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, lauded the Indian IT sector for excelling in its competitive strength with zero government interference. He further added that service exports from India had the potential to reach US$ 1 trillion by 2030.

Indias IT spending is anticipated to reach US$ 124.6 billion in 2024, reflecting a 10.7% increase from 2023, according to Gartner.

Indias public cloud services market grew to US$ 3.8 billion in 1H2023, expected to reach US$ 17.8 billion by 2027.

Indias digital economy is estimated to reach US$ 1 trillion by 2025.

Artificial Intelligence (AI) is expected to boost Indias annual growth rate by 1.3% by 2035, according to NITI Aayog.

The Karnataka government signed three MoUs worth US$ 13.4 million to help the states emerging technology sector.

As an estimate, Indias IT export revenue rose by 9% in constant currency terms to US$ 194 billion in FY23

Export of IT services was the major contributor, accounting for more than 53% of total IT exports (including hardware)

BPM and engineering and R&D (ER&D) and software products exports accounted for 22% and 25%, respectively of total IT exports during FY23.

According to STPI (Software Technology Park of India), software exports by the IT companies connected to it stood at Rs. 1.20 lakh crore (US$ 16.29 billion) in the first quarter of FY22.

In August 2021, the Minister of Electronics and Information Technology, Skill Development and Entrepreneurship, Mr. Rajeev Chandrasekhar, announced that the IT export target was set at US$ 400 billion for March 2022. In addition, the central government was planning to focus on areas such as cybersecurity, hyper-scale computing, artificial intelligence and blockchain.

US has traditionally been the biggest importer of Indian IT exports, as it absorbed over 62% of Indian IT & BPM exports during FY23.

UK stood second to the US, with 17% of the services being exported to it.

Even though, US and UK were the leading customer markets with a combined share of nearly 79%, there is a growing demand from APAC, Latin America and Middle East Asia regions.

Being the low-cost exporter of IT services, India is going to attract more markets in other regions in the same way it tapped the US market.

Indian software product industry is expected to reach US$ 100 billion by 2025. Indian companies are focusing on investing internationally to expand their global footprint and enhance their global delivery centers.

The revenue of Indias public cloud services market totaled US$ 6.2 billion in 2022, and it is expected to reach US$ 17.8 billion by 2027 growing at a CAGR of 23.4%.

Infrastructure software revenue in India was forecasted to reach US$ 4.6 billion in 2021, an increase of 12% YoY, driven by rising demand for security-as-aservice offerings, and detection and response capabilities.

Export of IT Services

As an estimate, Indias IT export revenue rose by 3.3% YoY in constant currency to US$ 199 billion in FY24.

Export revenue from the industry grew at a CAGR of 6.75% to US$

199 billion in FY24 from US$ 126 billion in FY18.

SEZs to drive IT sector; tier II cities emerge as new centres

IT-SEZs have been initiated with an aim to create zones that lead to infrastructural development, exports and employment.

As of November 2021, there were 425 approved SEZs across the country, and of these, 276 were from IT & ITeS and 145 were exporting SEZs.

Over 50 cities already have the basic infrastructure and human resources to support the global sourcing and business services industry. Some cities are expected to emerge as regional hubs supporting domestic companies.

Software Technology Parks of India (STPI) has set up 65 centers across the country to provide single window clearance and infrastructure facilities. STPI units can avail excise duty exemptions on procurement of indigenously manufactured goods. Notably 57 centers are in Tier-II/III cities.

In June 2022, STPI Director General Mr. Arvind Kumar stated that exports through STPI units have increased from Rs. 17 crore (US$ 2.14 million) in FY92 to Rs. 5.69 lakh crore (US$ 71.65 billion) in FY22.

In October 2021, STPI Fin Blue in Chennai selected 20 start-ups from the FinTech domain including trading, banking and lending to explore cross-border collaboration. It has signed an MoU with ASEAN Financial Innovation Network Ltd. The Cabinet approved an allocation of over US$ 1.2 billion (Rs 10,300 crore) for the IndiaAI Mission, marking a significant step towards bolstering Indias AI ecosystem. This substantial financial infusion, slated over the next 5 years, is poised to catalyse various components of the IndiaAI Mission, including pivotal initiatives like the IndiaAI Compute Capacity, IndiaAI Innovation Centre (IAIC), IndiaAI Datasets Platform, IndiaAI Application Development Initiative, IndiaAI Future Skills, IndiaAI Startup Financing, and Safe & Trusted AI. A cornerstone of this effort is the IndiaAI Compute Capacity, envisioned to erect a cutting-edge, scalable AI computing infrastructure by deploying over 10,000 Graphics Processing Units (GPUs) through strategic public-private collaborations. Technologies, such as telemedicine, health, remote monitoring solutions and clinical information systems, would continue to boost demand for IT services across the globe. The US$ 227 billion Indian IT industry directly employed nearly 5.4 million people and indirectly employed another

15 million people in FY23. India ranked third among global start-up ecosystems with more than 68,000 tech startups. Indias rankings improved six places to the 40th position in the 2022 edition of the Global Innovation Index (GII).

(Source:https://www.ibef.org/download/172127914 7_IT_and_BPM_May_2024.pdf)

OPPORTUNITIES AND THREATS i) OUR STRATEGY

Our clients and prospective clients are faced with transformative business opportunities due to advances in software and computing technology. These organizations are dealing with the challenge of having to reinvent their core offerings, processes and systems rapidly and position themselves as ‘digitally enabled or ‘digital first organizations. The journey to the digital future requires not just an understanding of new technologies and new ways of working, but a deep appreciation of existing technology landscapes, business processes and practices. Our strategy is to be a navigator for our clients as they ideate, plan and execute on their journey to a digital future. ii) Our strengths

We believe that we are well-positioned for the principal competitive factors in our business. With almost 5 (five) years of experience in managing the systems, we believe we are uniquely positioned to help them steer through their digital transformation with our Digital Navigation Framework. We believe that the following strengths have contributed to success and will be of competitive advantages for us, supporting our strategy and contribution to improvements in financial performance.

Quality Assurance and Standards The company holds I ISO 9001:2015 (Quality Management System) and ISO 27001:2013 (Information Security Management) certificates. We believe in providing our customers the best possible quality. We adopt stringent quality control process which is managed at every stage of our service to ensure the adherence to desired specifications and quality. Since, our Company is dedicated towards quality services; we get repetitive clients as we are capable of meeting their quality standards.

Growing Domestic Economy

India is moving as developed country from developing country now. The GDP rate of India is also higher as compared to the other developing countries. It forecasts more demand for our services and there will be a huge expansion of disposable incomes and our main services will have huge demand. With the changes in landscape because of Covid19, India have become a manufacturing and trade hub in Asia because of highly skilled manpower and infrastructure available in abundance. With MNCs coming to India for new manufacturing set up with high end automation, we seek greater requirement of office automation and information technology. We update and upgrade our Software/Digital Products with the latest developments in all the mobile technology platforms by leveraging: 1) Vertical specific and in-depth domain and industry knowledge 2) Agile Cloud based Mobility Technology platform and solutions 3) Center of Excellence where constant innovation happens on both the technology and the applications front.

Experienced & Qualified Management Our Company is managed by well experienced persons i.e. i) Nirmal Kumar Jain, Chairman & Director ii) Yaman

Saluja, Whole-Time Director & CFO and iii) Ashish Jain, Director & CEO. We believe that the leadership and exemplary vision of our Promoters have been instrumental in driving our growth and implementing our business strategies. Our management team has the requisite experience to manage the current scale of business as well as the expansion plans for the future. We believe that we have achieved a measure of success in attracting an experienced senior management team with operational and technical capabilities, management skills, business development experience and financial management skills. For more details, please visit to our website: www.naapbooks.com.

Skilled and dedicated manpower We believe that Human resource is the most important resource. Our Company is managed by a team of well experienced and highly knowledgeable personnel. The team comprises of personnel having technical, operational and business development experience. We take pride in relating our success to our employees, for their consistent efforts and dedication has brought us to where we are today. We also require application of high levels of technology at key stages of design and development processes as an important part of the business procedure.

Strong customer relationship

We believe that we constantly try to address our customers needs which help us to maintain a long-lasting working relationship with them and improve our customer retention strategy. We believe that our existing relationship with our customers represents a competitive advantage in gaining new customers and increasing our business.

TALENT MANAGEMENT

The Company aims to attract, develop, motivate and retain diverse talent that is critical for its competitive differentiation and continued success. The companys talent management strategy seeks to maximize the potential of every employee by creating a purpose-driven, inclusive, stimulating, and rewarding work environment, delivering outstanding employee experience, while fueling business growth. The Company strives to create a vibrant workplace and an engaged workforce by encouraging four behaviors: follow your passion, stay hungry, commit to lifelong learning and thrive together.

TALENT ACQUISITION AND DEVELOPMENT Our focus on attracting top talent and investing in employee development continued to be a priority. We believe that a skilled and motivated workforce is instrumental in driving our success. In 2023, we hired professionals with diverse skill sets and provided them with opportunities for growth and advancement within the organization.

OUR COMPETITION

The Software Consultancy industry in India is highly competitive, and we expect that the competition in this industry will continue to increase. Our Industry is fragmented consisting of large established players and niche players. We compete with organized as well as unorganized sector on the basis of availability of consumers. Thus, our customers have the option of choosing any competitor providing similar services. Further, there are no entry barriers in this industry and any expansion in capacity of existing competitors would further intensify competition. If we are not able to compete effectively with existing or future competitors, our business and financial condition could be adversely affected.

FINANCIAL CONDITION

The discussions in this section relate to the standalone, Rupee-denominated financial results pertaining to the year that ended March 31, 2024. The financial statements of Naapbooks Limited are prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards prescribed under section 133 of the Companies Act, 2013, read with relevant rules there under and other accounting principles generally accepted in India. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year All assets and liabilities have been classified as current and non-current as per normal operating cycle of the Company and other criteria set out in the Schedule III of the Companies Act, 2013.

RESULTS OF OUR OPERATIONS

The Consolidated and Standalone Statement of Profit and Loss is as follows:

( in Lakhs)

	Consolidated				Standalone
	FY 2024		FY 2024		FY 2023
Particulars	Amount	% of Total Income	Amount	% of Total Income	% Growt h	Amou nt	% of Total Incom e
I. Net Sales/Income from Operations	776.94	99.82	776.94	99.82	49.02	521.38	98.91
II. Other Income	1.38	0.18	1.38	0.18	0.00	5.76	1.09
III. Total Income (I+II)	778.32	100.00	778.32	100.00	47.65	527.14	100.00
IV. Earnings Before Interest,
Taxes, Depreciation and	284.30	36.53	284.43	36.54	101.92	140.86	26.72
Amortization Expense
V. Finance Cost	15.18	1.95	15.18	1.95	124.22	6.77	1.28
VI. Depreciation and Amortization Expense	48.50	6.23	48.50	6.23	2.47	47.33	8.98
VII. Profit Before Tax (IV-V-VI)	220.62	28.35	220.75	28.36	154.4 4	86.76	16.46
VIII. Tax Expense:
i Current Tax Expense	56.03	7.20	56.02	7.20	150.42	22.37	4.24
ii MAT Credit	0.00	0.00	0.00	0.00	0.00	0.00	0.00
iii MAT Credit Relating to prior years	0.00	0.00	0.00	0.00	0.00	0.00	0.00
iv Tax Expense Relating to prior years	-0.10	-0.01	-0.10	-0.01	- 108.93	1.12	0.21
v Deferred Tax (Asset /Liabilities)	-0.90	-0.12	-0.90	-0.12	- 257.89	0.57	0.11
IX. Profit After Tax before Minority Interest (VII-VIII)	165.59	21.28	165.73	21.29	164.32	62.70	11.89
X. Minority Interest	-0.03	0.00	0.00	0.00	0.00	0.00	0.00
XI. Profit for the year after tax and Minority Interest (IX-X)	165.62	21.28	165.73	21.29	164.32	62.70	11.89

During the year under review, the Company achieved significant growth in its financial performance. The standalone total revenue from operations amounted to 776.94 lakhs, representing a substantial increase of 49.02% compared to the previous years revenue of 521.38 lakhs. This robust revenue growth underscores the companys successful operational strategies and market demand. Furthermore, the standalone profit after tax soared to 165.73 lakhs, marking an impressive rise of 164.32% from the previous years profit of 62.70 lakhs. This remarkable increase in profitability reflects the companys efficient cost management and enhanced operational efficiency. In addition, the company reported consolidated financial results for the year. The total revenue from operations on a consolidated basis also stood at 776.94 lakhs. The consolidated profit after tax and after accounting for minority interests was

165.62 lakhs. These consolidated figures highlight the overall strength and stability of the companys financial position and its ability to generate substantial returns for its stakeholders.