SagarSoft (India) Ltd Management Discussions.

MANAGEMENT DISCUSSION AND ANALYSIS

To avoid repetition in the Directors Report and the Management Discussion and Analysis Report, the information under these reports is furnished below, as a composite summary of the performance of the various aspects of the business of your company.

INDUSTRY REVIEW AND OVERVIEW

Your Company is an IT, Consulting, and next generation Digital Solutions provider, offering business technology and related services to global enterprises. All our services and solutions are designed with ‘High spectrum Customer experience and ‘Business performance (of the customer) as objectives we cater to. We call this ‘Business first approach.

Global impact of the COVID-19 pandemic has led to two major resets or shifts - an acceleration in the pace of digital transformation and a novel, hybrid work model that has redefined the dimensions of already evolving workplace and work culture

The underlying theme this year is the pandemic-led global reset, the digital transformation imperative and the changing value proposition for businesses.

Signals across global industries have unequivocally suggested significant increase in digital investments with heightened urgency to execute in months what was expected in years earlier, the focus is on delivering customer-centric solutions through new data-led business models, while enabling hybrid work and mass-scale digital skilling.

Despite headwinds in 2020, Indian tech industry continues to be a net hirer with significant focus on digital up skilling. Investing in digital continues to rise as an imperative for the industry, with organisations building their capabilities and aligning business models to digital practices.

Enterprises are re-balancing their technology spends to prioritize digitization. Companies saw a significant rise in cloud adoption during the year as against previous year. COVID -19 has accelerated digital adoption across industries and technology service providers are witnessing a sharp growth in digital deals.

As we enter the new normal, however, analysts are cautiously optimistic, and technology is expected to drive frontend operations and customer experience. In terms of hiring, interestingly, as the industry looks forward at leaner structures with more flexibility and faster adoption of cloud-based products and services in 2021, the industry, expect larger digitization deals in 2021, with investments likely to recover in core sectors, Retail and Manufacturing. With hyper-digitization and technology adoption accelerating across sectors, 2021 will put the spotlight on emergence of growth verticals like healthcare, pharma, medical devices, software & internet, consumer electronics. As India stands at the cusp of a re-imagined Techade, 2021 will re-define the industry narrative for the future.

COMPANYS PERFORMANCE

During the year, your company earned a revenue of Rs.4102.58 Lakhs as against Rs.3673.22 Lakhs in the previous year, registering an increase of around 11.69%. Earnings before interest, tax, depreciation and amortization (EBITDA) was Rs.941.51 Lakhs against Rs.486.39 Lakhs in the previous year. Profit after tax (PAT) for the year was Rs.535.02 Lakhs as against Rs.233.54 Lakhs in the previous year.

KEY RATIOS

S.No Ratio 2020-21 2019-20
1 Debtors Turnover Ratio 5.15 4.31
2 Inventory Turnover Ratio Not Applicable Not Applicable
3 Interest Coverage Ratio* Not Applicable 464.55
4 Current Ratio 6.01 7.58
5 Debt Equity Ratio 0.27 0.20
6 Operating Profit Margin (%) 17.71 8.30
7 Net Profit Margin (%) 13.04 6.36
8 Return on Net worth 19.83 10.45

There was an increase in the operating profit margin, net profit margin and return on net worth due to increase in the turnover.

SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES

The company has no subsidiaries, joint ventures or associate companies. During the Financial Year, no company ceased as Subsidiary, joint venture or associate of the company.

OPPORTUNITIES AND THREATS

The client market segments we serve are faced with challenges and opportunities arising from the COVID-19 pandemic and its resulting impact on the economy. We believe the investments we have made, and continue to make, in our strategy will enable us to advise and help our clients as they tackle these market conditions.

OUR STRATEGY

There are many more reasons for optimism, though. As with last year, IT pros see a bright outlook thanks to the high demand for skills, driven by the increasing importance of technology to business strategy. This dynamic has been in play for the past several years, as companies have moved away from a traditional mindset around tactical IT. In some ways, tactical IT will have a resurgence in 2021 as companies continue responding to needs highlighted during the pandemic. However, the long-term trends toward strategic thinking and digital transformation will be the primary forces impacting the technology function.

We have successfully shifted to WFH model, thus achieving the operational stability to deliver on client commitments and ensuring our own business continuity. All our clients are extremely happy with our approach of managing services through WFH infrastructure, employee engagement, and work monitoring-reporting-review mechanisms. Sagarsoft highlights responsiveness on Pandemic disruption highlights need for operational resilience and enterprise adaptability and also looking for market share expansion.

Translating the Business first approach into solutions, services and Corporate messaging: At a very broad level, our focus areas are: Applications (+ platforms/ products), Infrastructure, Data (& Analytics) and Security. Bringing those 4 components together, we crafted a unique and holistic approach to Digital transformation which we call as Digital DAIS™. Digital DAIS delivers Data and Technology services in a ‘Business first manner; amplifying Business capabilities of our customers and enabling enhanced Business Performance.

OUTLOOK, RISKS AND CONCERNS

For everything that changed in 2020, one thing that stayed the same was the importance of technology to business success. In fact, that importance grew as organizations had to quickly restructure their operations in order to support a remote workforce and improve flexibility and resiliency. Heading into 2021, there is no well defined blueprint for the ongoing rebuilding effort, but it is certain that technology will continue to play a pivotal role. It is no surprise, then, that IT professionals overwhelmingly have a positive outlook for their job prospects. Nearly 80% of IT pros feel good about their role as a technologist, with 20% having mixed feelings and a very small minority feeling concerned. This represents a slight drop in sentiment from last year, with most of the shift going from the optimistic end of the scale into mixed feelings. Obviously, the current environment plays a major role-the leading case for pessimism is uncertainty around job security following the COVID pandemic.

New concerns that stem from a remote workforce have been a primary trigger for both security awareness education and security investments. Risk analysis, cyber security analytics, and penetration testing are all areas that need improvement as companies adopt a zero trust mindset. Cyber security metrics rank lowest for the coming year, which signals the ongoing challenge in bridging the gap between cyber security best practices and business health.

The second half of FY2021 is witnessing strong recovery of the technology sector in India, and industry seems to be back to pre-COVID level growth, coupled with strong deal pipelines, and solid margins. Survey expect global Indias technology sector to grow significantly higher in 2021 as compared to 2020.

Your company has engaged Ernst & Young to study the current status of our Infrastructure, security, policies, procedures and associated risks due to the current change to WFH delivery model and advice on measures to mitigate the risks identified.

Other factors that influence revenue growth projections include currency effects, pricing, and product mix. The tech space is somewhat unique in that prices tend to fall, which may result in higher billable hours, but modest revenue growth. In the year ahead, the product mix will be an especially important factor, as the high growth rates of emerging categories are expected to more than offset the slow growth mature categories. Growth expectations are in line with the global projection.

These are forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these statements as a result of certain factors. Your Board is cautiously optimistic about the future outlook taking into overall view of the above.

RISK MANAGEMENT

Sagarsoft attaches utmost importance to the assessment of internal risks and the management thereof in all its dealings. The Company is constantly on the lookout for identifying opportunities to enhance its enterprise value and keeping the need to minimize the risks associated with such efforts, every proposal of significant nature is screened and evaluated for the risks involved and then approved at different levels in the organisation before implementation.

Your Company has identified a suitable approach and framework for risk management which meets its business, legal and regulatory requirements. The management has decided to adopt the same framework for entire organization. It has a Security Management Group with representatives from all functional team and a representative of the senior management team leads the group. Its steering committee meets at least once in 6 months to identify the risks throughout the organization. Your Company attaches utmost importance to the assessment of internal risks and the management thereof in all its dealings. The Company is constantly on the lookout for identifying opportunities to enhance its enterprise value and keeping the need to minimize the risks associated with such efforts, every proposal of significant nature is screened and evaluated for the risks involved and then approved at different levels in the organisation before implementation.

Based on severity level of the risk, corrective action is identified and implemented with prior approval from the risk owners and Top Management, wherever applicable. Controls are identified in the Risk Assessment and Risk Treatment. The first step in risk assessment procedure is to identify the list of information and critical information assets in each function. After identification, these information assets are identified with the Owner and they are classified based on the functions. The steering committee or CISO meets and reviews the implementation status once in every 2 months. To conduct the review, at least one representative from each function is present.

Your company has adequate system to manage the financial risks of its operations. The system is implemented through imposition of checks and balances of customers, audits like internal audit, statutory and secretarial audit, all of which are periodically carried out through external firms and by adequate insurance coverage for the companys facilities.

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

The Board of Directors are satisfied with the adequacy of the internal control system in force in all its major areas of operations of the Company. The Company has an external firm of Chartered Accountants as Internal Auditors to observe the Internal Controls, whether the work flows of organization is being done through the approved policies of the Company and similar matters. Internal Auditors present its report to the Audit Committee. The audit committee assists the board of directors in monitoring the integrity of the financial statements and the reservations, if any, expressed by the companys auditors including, the financial, internal and secretarial auditors and based on their inputs, the board is of the opinion that the companys internal controls are adequate and effective.

The Audit Committee reviewed the physical and digital risks and controls around scenarios arising on account of COVID-19 and the Companys assessment of the impact of COVID-19 on various items of the financial statement ending 31st March, 2021. The Committee also reviewed accounting judgments and other matters in light of COVID-19.

HUMAN RESOURCE DEVELOPMENT

Your company continues to enjoy cordial relationship with its personnel at all levels and focusing on attracting and retaining competent personnel and providing a holistic environment where they get opportunities to grow and realise their full potential. Your company is committed to providing all its employees with a healthy and safe work environment.

Your company is organizing online training programmes wherever required for the employees concerned to improve their skill. Employees are also encouraged to participate in the seminars organized by the external agencies related to the areas of their operations.

SEXUAL HARASSMENT

Regarding the Sexual Harassment of Women at the work place (Prevention, Prohibition & Redressal) Act, 2013, the company has an Internal Complaints Committee. No complaints were received or disposed off during the year under the above Act and no complaints were pending either at the beginning or at the end of the year.

CAUTIONARY STATEMENT

Statements in these reports describing companys projections statements, expectations and hopes are forward looking. Though, these expectations etc., are based on reasonable assumption, the actual results might differ.