Paramatrix Technologies Ltd Management Discussions

OPERATIONS

You should read the following discussion of our financial condition and results of operations together with our restated financial statements included in the Prospectus. You should also read the section entitled "Risk Factors" on page 18, which discusses a number of factors, risks and contingencies that could affect our financial condition and results of operations. The following discussion relates to our Company and is based on our restated financial statements, which have been prepared in accordance with Indian GAAP, the Companies Act and the SEBI Regulations. Portions of the following discussion are also based on internally prepared statistical information and on other sources.

Our financial statements have been prepared in accordance with Indian GAAP, the Companies Act and the ICDR Regulations and restated as described in the report of our auditor dated July 26, 2024 which is included in this Prospectus under "Financial Statements". The Restated Financial Information has been prepared on a basis that differs in certain material respects from generally accepted accounting principles in other jurisdictions, including US GAAP and IFRS. Our financial year ends on March 31 of each year, and all references to a particular financial year are to the twelve-month period ended March 31 of that year.

Significant Developments Subsequent to the Last Financial Period

In the opinion of the Board of Directors of our Company, since the date of the last financial statements disclosed in this Prospectus, there have not arisen any circumstance that materially or adversely affect or are likely to affect the business or profitability of our Company or the value of its assets or its ability to pay its material liabilities within the next twelve months.

Key factors affecting the results of operation:

Our Companys future results of operations could be affected potentially by the following factors:

Economic conditions in the markets in which we operate

Our results of operations are dependent on the overall economic conditions in the markets in which we operate, including India. Any change in macro-economic conditions in these markets, including changes in interest rates, government policies or taxation and political, economic or other developments could affect our business and results of operations. The IT Industry in India may perform differently and be subject to market and regulatory developments that are dissimilar to the markets in other parts of the world. While stronger macro-economic conditions tend to result into higher demand for our products, weaker macro-economic conditions tend to result into lower demand. Change in demand in the market segments we currently supply or improvement/deterioration in the market or a change in regulations, customs, taxes or other trade barriers or restrictions could affect our operations and financial condition.

Regulatory developments

Our Company is regulated by the Companies Act and some of its activities are subject to supervision and regulation by statutory and regulatory authorities. It is therefore subject to changes in Indian law, as well as to changes in regulation and government policies and accounting principles.

Our investments in new products and distribution channels may not be profitable and may be loss-making

In order to maintain a competitive position, we continue to invest in our technology and employees training. Our investments in new products and delivery platforms, whether developed in-house or through third parties, may be less profitable than what we have experienced historically, may be loss-making, may consume substantial financial resources and/or may divert managements attention from existing operations, all of which could materially and adversely affect our business, results of operations and financial condition.

RESULTS OF OPERATIONS

Description of the major components of revenue and expense items: -

Revenue

Revenue from Operations

Our revenue from operations primarily accrues from software consultancy services in local as well as export market and other related items like sale of software, training fees etc.

Other Income

Our Income mainly includes Interest on FD, Dividend Income, Foreign exchange gains and miscellaneous income.

Expenses

Employee Benefit expenses is the major expenses for our Company and it includes, salaries, bonus and other benefits, incentives, directors remuneration, contribution to gratuity and other statutory funds and staff welfare expenses.

Other expenses mainly include expenses towards Rent, software expenses, office expenses, electricity and water charges, travelling and conveyance, membership & subscription charges, legal & professional fees, Insurance expenses, loss on forward contracts, Internet, Telephone and email and web services, repairs and maintenance etc.

Depreciation and Amortization Expenses

Depreciation and Amortization Expenses comprised depreciation on fixed assets both tangible and intangible.

Tax Expense

Our tax expense or credit for the period represents the tax payable on the current periods taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

OUR SIGNIFICANT ACCOUNTING POLICIES

For Significant accounting policies please refer Significant Accounting Policies, "Annexure IV" beginning under "Auditors Report and Financial Information of our Company" on page 101.

DISCUSSION ON RESULTS OF OPERATIONS:

The following discussion on results of operations should be read in conjunction with the audited financial results of our Company for the financial years ended March 31, 2024, 2023 and 2022.

(RS. lakhs)

Particulars	31.03.24	31.03.23	31.03.22
Income
Revenue from Operations	2799.48	2,836.48	2,732.71
Increase/Decrease (%)	-1.30%	3.80%	10.50%
Other Income	60.45	495.96	91.95
Total Income	2859.93	3,332.44	2,824.66
Increase/Decrease (%)	-14.18	17.98%	9.79%
Expenditure
Employee Benefit Expenses	1676.11	1,848.81	1,436.54

 

Particulars	31.03.24	31.03.23	31.03.22
Increase/Decrease (%)	-9.34%	28.70%	-7.21%
% to Total Income	58.61%	55.48%	50.86%
Other Expenses	618.79	509.99	423.76
Increase/Decrease (%)	21.33%	20.35%	31.08%
% to Total Income	21.64%	15.30%	15.00%
Total Operating Expenditure	2294.90	2,358.80	1,860.30
Increase/Decrease (%)	-2.71%	26.80%	-0.60%
% to Total Income	80.24%	70.78%	65.86%
PBIDT	565.03	973.64	965.11
Increase/Decrease (%)	-41.97%	0.96%	37.52%
% to Total Income	19.76%	29.22%	34.14%
Depreciation and Amortization Expenses	41.03	59.42	80.52
Increase/Decrease (%)	-30.95%	-26.20%	-15.69%
% to Total Income	1.44%	1.78%	2.85%
Profit Before Interest and Tax	524.00	914.22	883.84
Increase/Decrease (%)	-42.68%	3.44%	45.90%
% to Total Income	18.32%	27.43%	31.29%
Financial Charges	0	0.24	3.03
Increase/Decrease (%)	-100%	-92.08%	-62.27%
% to Total Income	0.00%	0.01%	0.11%
Profit before Taxation	524.00	913.98	880.81
Increase/Decrease (%)	-42.67%	3.77%	47.36%
% to Total Income	18.32%	27.43%	31.18%
Tax Effect	110.83	206.42	201.87
Increase/Decrease (%)	-46.31%	2.25%	58.98%
% to Total Income	3.88%	6.19%	7.15%
Income
Profit After Tax but Before Extra-ordinary Items	413.17	707.56	678.94
Increase/Decrease (%)	-41.61	4.22%	44.22%
% to Total Income	14.45%	21.23%	24.04%
Total Adjustments	0.00	0.00	0.00
Increase/Decrease (%)	100.00%	100.00%	100.00%
% to Total Income	0.00%	0.00%	0.00%

 

Particulars	31.03.24	31.03.23	31.03.22
Profit After Tax after Extra ordinary Items	413.17	707.56	678.94
Increase/Decrease (%)	-41.61	4.22%	44.22%
% to Total Income	14.45%	21.23%	24.04%

Comparison of FY 2024 with FY 2023:

Revenue from operations

The Revenue from operations for the FY 2024 is 2,799.48 lakhs as compared to 2,836.48 lakhs during the FY 2023 showing an decrease of 1.30%. The sales breakup for two periods and reason for variation is as under:

Particulars	FY 2023	FY 2022	Reason for variation
Software Consultancy Services
			Multiple Domestic & Exports clients were closed and few
Domestic Sales	1823.69	2,024.26
			were added in FY 2023-24
Export Sales	967.16	785.40	One project got completed in FY 2022-23 & business enhance from one another project
License Trade	7.33	7.43	No change in license cost
Other Operating Revenue
SEIS Script Sales	0	14.54	SEIS Incentive benefit not availed during FY 2023-24
Training Fees / Software Sales	1.30	4.85	Less response from Trainee students in FY 2023-24
Total	2799.48	2,836.48

Other Income

Other Income for the FY 2024 and FY 2023 was 60.45 lakhs and 495.96 lakhs respectively. Other Income mainly included Interest on FD, Dividend Income, Foreign Exchange gains and Miscellaneous Income. During FY 2023 there was one Income of 423.81 lakhs from Sale of Property due to which there is variation in FY 24.

Expenditure:

Employee Benefit Expenses

Employee Benefit Expenses decreased from 1848.81 lakhs for the year ended March 31, 2023 to 1676.11 lakhs for FY

2024 showing an decrease of 9.34%.

Other Expenses

Other Expenses increased to 618.79 lakhs for FY 2024 from 509.99 lakhs for FY 2023 showing an increase of 21.33%.

Other Expenses was 21.64% of Total income during FY 2024 as against 15.30% during FY 2023. This increase in Other Expenses was contributed mainly by increase in Travelling and Conveyance, Legal and professional charges.

EBIDTA

EBIDTA decreased to 565.03 lakhs for FY 2024 from 973.64 lakhs for FY 2023. During FY 2024, our Company recorded EBIDTA margin of 19.76% of the Total income as against 29.22% during FY 2023. This decline in EBIDTA margin is mainly due to decrease in other income during FY 2024.

Depreciation

Depreciation on fixed assets was 1.44% of Total income during FY 2024 as compared to 1.78% during FY 2023. The total depreciation during FY 2024 was 41.03 lakhs and during FY 2023 it was 59.42 lakhs.

Financial Charges

Foreign Currency Term Loan was closed.

Profit after Tax and restatement adjustment (PAT)

PAT decreased to 413.17 lakhs for the FY 2024 from 707.56 lakhs in FY 2023.decrease is due to onetime other income recorded in FY 23, our Company recorded PAT margin of 14.45% as against 21.23% for FY 2023.

Comparison of FY 2023 with FY 2022:

Revenue from operations

The Revenue from operations for the FY 2023 is 2,836.48 lakhs as compared to 2,732.71 lakhs during the FY 2022 showing an increase of 3.80%. The revenue from operations has increased by 3.80 % in FY 2023 as compared to FY 2022 due the following reasons:

- Due to increase in offering Software Consultancy Services to our newer clients within India, additional Software Consultancy Services to our existing clients to within India.

- In addition to above, there has been an increase in providing the License trade-software licensing services (a connection between our current clients and vendors) (in the previous financial years the same was categorized under "Software Consultancy Services") to our existing and newer clients within India.

- Further, the Company had launched in the year 2022 a program named SPTC (Software Programmers Training Center) for students in their final year of graduation and the nominal deposits earned from the students enrolling for SPTC which was refunded if the students accepted the companys enrollment offer after successfully completing the training added to the existing revenue from operation in FY 2023.

- Further, the Government of India (GOI) offers Service Export Incentive Scheme (SEIS), wherein Exporters of certain services as listed out by the GOI could get the incentives on the foreign exchange earned by them in the form of Duty

Credit Scrips, which could be used to pay either pay import duty or sold to importers. The Companys certain services such as Management Consulting Services and Accounting Auditing & Bookkeeping Services etc. as listed down by GOI under SEIS qualified for obtaining the incentives. Based on this the company the made application for obtaining the incentives and said Duty Credit Scrips for FY 2018-19 were received in February 2022 (FY 2021-22), then sold to an Importer in June 2022 (FY 2022-23). This sale of Duty Credit Scrips added to the existing revenue from operation in FY 2023.

The sales breakup for two periods and reason for variation is as under:

Particulars	FY 2023	FY 2022	Reasons for variation
Software Consultancy Services
			New Domestic Clients and Projects started in
Domestic Sales	2,024.26	1,764.52	FY2022-23
Export Sales	785.40	961.94	One-time projects got completed and were not carried forward in FY2022-23.
License Trade	7.43	6.25	Increase in License cost by OEM
Other Operating Revenue
SEIS (Service Export from India Scheme) Script Sales	14.54	0.00	SEIS Incentive benefit availed during FY 2023 on some of eligible export services
			Training Program started for freshers Engineer
Training Fees / Software Sales	4.85	0.00	Candidates during FY 2023
Total	2,836.48	2,732.71

Other Income for the FY 2023 and FY 2022 was 495.96 lakhs and 91.95 lakhs respectively. Other Income mainly included Interest on FD, Dividend Income, Foreign Exchange gains and Miscellaneous Income. During FY 2023 there was one of Income of 423.81 lakhs from Sale of Property and similarly during FY 2022 there was one of Income of 35.25 lakhs from Sale of Investments and reversal of excess provisions in earlier years of 24.87 lakhs relating to gratuity and leave encashment.

Hence the Total Income for the FY 2023 and FY 2022 was 3,332.44 lakhs and 2,824.66 lakhs respectively. Expenditure: Employee Benefit Expenses

Employee Benefit Expenses increased from 1,436.54 lakhs for the year ended March 31, 2022 to 1,848.81 lakhs for FY 2023 showing a increase of 28.70%. This increase was mainly due to increase in staff salary, bonus and other benefits. Employee Benefit Expenses stood at 55.48% and 50.86% of Total income for FY 2023 and FY 2022, respectively.

Other Expenses

Other Expenses increased to 509.99 lakhs for FY 2023 from 423.76 lakhs for FY 2022 showing an increase of 20.35%. Other Expenses was 15.30% of Total income during FY 2023 as against 15.00% during FY 2022. This increase in Other Expenses was contributed mainly by increase in Travelling and Conveyance post Covid period and Loss on sale of shares and forward contracts.

EBIDTA

EBIDTA increased from 964.36 lakhs for FY 2022 to 973.64 lakhs for FY 2023. During FY 2023, our Company recorded EBIDTA margin of 29.22% of the Total income as against 34.14% during FY 2022. This decline in EBIDTA margin is mainly due to increase in Employee benefit expenses during FY 2023.

Depreciation

Depreciation on fixed assets was 1.78% of Total income during FY 2023 as compared to 2.85% during FY 2022. The total depreciation during FY 2023 was 59.42 lakhs and during FY 2022 it was 80.52 lakhs.

Financial Charges

Financial Charges decreased from 3.03 lakhs for the year ended March 31, 2022 to 0.24 lakhs for FY 2023 showing a decrease of 92.08%. This decrease was mainly due to decrease in interest expenses. Financial Charges stood at 0.11% and 0.01% of Total income for FY 2022 and FY 2023, respectively.

Profit after Tax and restatement adjustment (PAT)

PAT increased in an absolute term from 678.94 lakhs for the FY 2022 to 707.56 lakhs in FY 2023. This increase was mainly on account of increase in revenue from operations coupled with lower depreciation charge and finance charges. During FY 2023, our Company recorded PAT margin of 21.23% as against 24.04% for FY 2022.

PAT Margin

Particulars	FY24	FY23	FY22
PAT MARGIN	14.45	21.23	24.04

According to the KPI disclosures beginning on page 79 of Prospectus, peers in the same industry reported PAT margin ratio as follows: All E Technologies Limited had a range of 13% to 16%, Softsol India Limited had 13% to 20% and Ksolves India Limited had 31% to 33%, during periods FY 22-24. These margins are influenced by various factors such as operational efficiencies, scale of operations, client base, and the nature of services provided. Our Company has maintained PAT margins that sometimes exceed this industry norm due to strategic decisions and operational efficiencies. Accordingly, our margin looks higher than many other peers in the same industry but is in the normal range of IT industry margins.

Further, difference/ decrease in the profit margin in the FY 2024 vis-?-vis FY 2023 is appearing only because of the Profit from Sale of Property (Rs.423.81 Lakhs) which is appearing under the heading Other Income and the tax payable on the said on the Sale of Property (Rs. 96.43 Lakhs) which is appearing under the heading Provision for Taxation. For comparison purpose if the above amounts (Rs. 423.81 Lakhs and Rs. 96.43 Lakhs) is removed from FY 2023 Other Income and Provision for Taxation, the profit margin has decreased, i.e. 14.45% and 16.83% in FY 2024 vis-?-vis FY 2023 profit margin, respectively. Additionally, revenue from operation has decreased by 1.30% i.e., Rs. 2836.48 Lakhs to Rs. 2799.48

Lakhs in FY 2024 vis-?-vis FY 2023. Further, the reduced PAT margin is attributed to higher other expenses by 21.33%, especially legal and professional charges incurred for PTL, India and our WOS PTL, HK.

Cash Flows

The following table sets forth certain information concerning our cash flows for the periods indicated:

PARTICULARS	31.03.24	31.03.23	31.03.22
Net cash generated from operation	352.33	117.24	886.71
Net cash (used) in investing activities	134.14	90.95	-72.09
Net cash generated/(used) in financing activities	-399.00	-199.74	-398.86
Net Increase / (Decrease) in cash and cash equivalents	87.47	8.45	415.76
Cash and cash equivalents at the beginning of the year	1,219.39	1,210.94	795.17
Cash and cash equivalents at the end of the year	1,306.86	1,219.39	1,210.94

FACTORS THAT MAY AFFECT THE RESULTS OF THE OPERATIONS:

1. Unusual or infrequent events or transactions

An outbreak of COVID-19 was recognised as a pandemic by the WHO on March 11, 2020. In response to the COVID-19 outbreak, the governments of many countries, including India, have taken preventive or protective actions such as imposing country-wide lockdowns, as well as restrictions on travel and business operations. Due to a government mandated lockdown in India, we had to shut down our offices, however we immediately adapted to work from home environment and didnt see much deep in the business.

2. Significant economic changes that materially affected or are likely to affect income from continuing operations.

Our business has been subject, and we expect it to continue to be subject, to significant economic changes arising from the trends identified above in ‘Factors Affecting our Results of Operations and the uncertainties described in the section entitled ‘Risk Factors beginning on page 18 of the Prospectus. To our knowledge, except as we have described in the Prospectus, there are no known factors which we expect to bring about significant economic changes.

3. Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue, or income from continuing operations.

Apart from the risks as disclosed under Section titled "Risk Factors" on page 18 in the Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

4. Future changes in relationship between costs and revenues, in case of events such as future increase in labour or material costs or prices that will cause a material change are known.

Our Companys future costs and revenues will be determined by demand/supply situation, government policies and prices quoted by service providers.

5. Extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices.

Changes in revenues during the last three fiscal years are explained in "Managements Discussion and Analysis of Financial Condition & Results of Operations" under the subsection "Comparison of Financial Years ended March 31, 2024, 2023 and 2022" under the respective paragraphs titled "Operating Revenue".

6. Total turnover of each major industry segment in which the issuer company operated.

For details on the total turnover of the industry please refer to "Industry Overview" on page 85.

7. Status of any publicly announced new products or business segment.

Our Company has not announced any new product or business segment. 178

8. The extent to which business is seasonal.

Our business is not seasonal in nature.

9. Any significant dependence on a single or few suppliers or customers.

Particulars	Financial Year ended	Financial Year ended	Financial Year ended
	March 31, 2024	March 31, 2023	March 31, 2022
Customers contribution Top 10 (%) *	94.33%	92.70%	90.76%
Suppliers contribution Top 10 (%) **	83.88%	78.53%	78.55%
*as a percentage of revenue from operation
** as a percentage of total amount of suppliers

10. Competitive conditions.

Competitive conditions are as described under "Industry Overview" and "Our Business" on pages 85 and 95, respectively.

Following is a summary of our Companys outstanding borrowings as on March 31, 2024 as per certificate dated August 12, 2024 (UDIN : 24402881BKGTSQ7513) issued by our Auditors M/s. E. A. Patil & Associates LLP:

Sr. No.	Nature of Borrowing	Amount (Rs. in Lakhs)
1.	Secured Borrowings *	Nil
2.	Unsecured Borrowings	Nil
	Total	Nil

* Secured borrowings as on March 31, 2024: The Company had an overdraft facility, as mentioned below. However, as of March 31, 2024, there was no outstanding balance of the overdraft facility as per the document provided by the Company. The overdraft was fully settled, and the charges were cleared on August 1, 2024.

(Rs. in Lakhs)

Particulars	Sanctioned Amount	Outstandin g Amount	Rate of Interest (p.a.) (%)	Security	Valid upto
HDFC Bank Limited Overdraft	200.00	Nil	9.35	Primary Charge on current assets and commercial office at E-102, 1st Floor, Sanpada Railway Station Complex, Sanpada, Navi Mumbai - 400705, Maharashtra, India Collateral Personal guarantees by Directors and Promotor.	12 months upto 15/07/2024

Details of the Companys outstanding borrowings as on August 12^th, 2024 are as under (based on the unaudited data):

Sr. No.	Nature of Borrowing	Amount (Rs. in Lakhs)
1.	Secured Borrowings	Nil
2.	Unsecured Borrowings	Nil
	Total	Nil

As on March 31, 2024, our Company has no unsecured borrowings from any entities.