saksoft ltd Management discussions

Global economy

Overview: The global economic growth was estimated at a slower 3.2% in 2022, compared to 6% in 2021 (which was on a smaller base of 2020 on account of the pandemic effect). The relatively slow global growth of 2022 was marked by the Russian invasion of Ukraine, unprecedented inflation, pandemic-induced slowdown in China, higher interest rates, global liquidity squeeze and quantitative tightening by the US Federal Reserve.

The challenges of 2022 translated into moderated spending, disrupted trade and increased energy costs. Global inflation was 8.7% in 2022, among the highest in decades. US consumer prices increased about 6.5% in 2022, the highest in four decades. The Federal Reserve raised its benchmark interest rate to its highest in 15 years. The result is that the world ended in 2022 concerned that the following year would be slower.

Global FDI inflows equity, reinvested earnings and other capital declined 24% to nearly US$1.28 trillion in 2022. Global trade expanded by 2.7% in 2022 (expected to slow to

1.7% in 2023). (Source: OECD, WTO data)

The S&P GSCI TR(Global benchmark for commodity performance) fell from a peak of 4,319.55 in June 2022 to 3495.76 in December 2022. There was a decline in crude oil, natural gas, coal, lithium, lumber, cobalt, nickel and urea realisations. Brent crude oil dropped from a peak of around USD 120 per barrel in June 2022 to USD 80 per barrel at the end of the calendar year following the enhanced availability of low-cost Russian oil.

Regional growth (%)	2022	2021
World output	3.2	6.1
Advanced economies	2.5	5
Emerging and developing economies	3.8	6.3

Performance of major economies

United States: Reported GDP growth of 2.1% compared to

5.9% in 2021

China: GDP growth was 3% in 2022 compared to 8.1% in 2021 United Kingdom: GDP grew by 4.1% in 2022 compared to 7.6% in 2021 Japan: GDP grew 1.7% in 2022 compared to 1.6% in 2021 90 : Saksoft Limited

Germany: GDP grew 1.8% compared to 2.6% in 2021 [Source: PWC report, EY report, IMF data, OECD data]

Outlook: The global economy is expected to grow 2.8% in 2023, influenced by the ongoing Russia-Ukraine conflict. Concurrently, global inflation is projected to fall marginally to 7%. Despite these challenges, there are positive elements within the global economic landscape. The largest economies like China, the US, the European Union, India, Japan, the UK and South Korea are not in a recession. Approximately 70% of the global economy demonstrates resilience, with no major financial distress observed in large emerging economies.

The energy shock in Europe did not result in a recession and significant developments, including Chinas progressive departure from its strict zero-covid policy and the resolution of the European energy crisis, fostered optimism for an improved global trade performance. Despite high inflation, the US economy demonstrated robust consumer demand in 2022. Driven by these positive factors, global inflation is likely to be still relatively high at 4.9% in 2024. Interestingly, even as the global economy is projected to grow less than 3% for the next five years, India and China are projected to account for half the global growth (Source: IMF).

Indian economy

Overview: Even as the global conflict remained geographically distant from India, ripples comprised increased oil import bills, inflation, cautious government and a sluggish equity market. Indias economic growth was 7.2% in FY 2022-23. India emerged as the second fastest-growing G20 economy in FY 2022-23. India overtook UK to become the fifth-largest global economy. India surpassed China to become the worlds most populous nation

	Q1FY23	Q2FY23	Q3FY23	Q4FY23
Real GDP growth(%)	13.1	6.2	4.5	6.1

According to the India Meteorological Department, the financial year 2023 delivered 8% higher rainfall over the long-period average. Due to unseasonal rains, Indias wheat harvest was expected to fall to around 102 Million metric tons (MMT) in FY2022-23 from 107 MMT in the preceding year. Rice production at 132 Million metric tons (MMT) was almost at par with the previous year. Pulses acreage grew to 31 Million hectares from 28 Million hectares. Due to a renewed focus, the oilseed area increased by 7.31% from 102.36 lakh hectares in FY2021-22 to 109.84 lakh hectares in FY2022-23.

Indias auto industry grew 21% in FY23; passenger vehicle (UVs, cars and vans) retail sales touched a record 3.9 Million units, crossing the previous high of 3.2 Million units in FY19. The commercial vehicles segment grew by 33%. Two-wheeler sales fell to a seven-year low; the three-wheeler category grew 84%.

The total gross non-performing assets (NPAs) of the banking system fell to 3.9% from 6.5% a year ago. A further drop of 3.6% is expected in FY2023-24. (Source: RBI data)

As Indias domestic demand remained steady amidst a global slowdown, import growth in FY23 was estimated at

16.5% to $714 Billion as against $613 Billion in FY22. Indias merchandise exports were up 6% to $447 Billion. Indias total exports (merchandise and services) grew 14 percent to a record of $775 Billion and is expected to touch $900 Billion in FY2023-24. Indias current account deficit, a crucial indicator of the countrys balance of payments position, was US$67 Billion or 2% of GDP. Indias fiscal deficit was in nominal at ~ Rs 17.55 lakh crore, which is 6.4% of the countrys GDP for the year ending March 31, 2023.

Indias headline foreign direct investment (FDI) numbers rose to a record $84.8 Billion in FY2021-22, However, during the fiscal year 2022-23, the country experienced a 16% decrease in foreign direct investment (FDI) inflows, amounting to $71 Billion on a gross basis. This decline can be attributed to the unfavourable global economic conditions and stands as the first contraction in FDI in the past ten years.

Indias foreign exchange reserves, which had witnessed three consecutive years of growth, experienced a decline of approximately $70 Billion in FY2022-23, primarily influenced by rising inflation and interest rates. Starting from $606.47 Billion on April 1, 2022, reserves decreased to $578.44 Billion by March 31, 2023. The Indian currency also weakened during this period, with the exchange rate weakening from Rs. 75.91 to a US dollar to Rs. 82.34 by March 31, 2023, driven by a stronger dollar and an increasing current account deficit.

Despite these factors, India continued to attract investable capital.

The countrys retail inflation, measured by the consumer price index (CPI), eased to 5.66% in March 2023. Inflation data on the Wholesale Price Index, WPI (calculates the overall price of goods before retail) eased to 1.3% during the period. In 2022, CPI hit its highest of 7.79% in April; WPI reached its highest of 15.88% in May 2022. By the close of the year under review, inflation had begun trending down and in April 2023 declined below 5%, its lowest in months.

Indias total industrial output for FY23, as measured by the Index of Industrial Production or IIP, grew 5.1% year-on-year as against a growth of 11.4 percent in FY2021-22.

India moved up in the Ease of Doing Business (EoDB) rankings from 100th in 2017 to 63rd in FY23. As of March 2023, Indias unemployment rate was 7.8 percent.

In FY2022-23, total receipts (other than borrowings) were estimated at 6.5% higher than the Budget estimates. Tax- GDP ratio was estimated to have improved by 11.1 percent

Y-o-Y in RE 2022-23. The government is also estimated to have addressed 77% of its disinvestment target in FY23 (Rs. 50,000 crore against a target of Rs. 65,000 crore). Gross tax collection of goods and services (GST) for FY23 was

Rs. 18.10 lakh crore, with an average of Rs. 1.51 lakh a month and up 22% from FY22, Indias monthly GST collections hit the second highest ever in March 2023 to Rs. 1.6 lakh crore. For

FY2022 23, the government collected Rs. 16.61 lakh crore in direct taxes, according to data from the Finance Ministry. This amount was 17.6 percent more than what was collected in the previous fiscal.

Per capita income almost doubled in nine years to Rs. 172,000 during the year under review, a rise of 15.8 percent over the previous year. Indias GDP per capita was 2,320 USD (March 2023), close to the magic figure of $2500 when consumption spikes across countries. Despite headline inflation, private consumption in India witnessed continued momentum and was estimated to have grown 7.3 percent in 2022-23.

Outlook: There are green shoots of economic revival, marked by an increase in rural growth during the last quarter and an appreciable decline in consumer price index inflation to less than 5 percent in April 2023. India is expected to grow around 6-6.5 percent (as per various sources) in FY2024, catalysed in no small measure by the governments 35% capital expenditure. The growth could also be driven by broad-based credit expansion, better capacity utilisation and improving trade deficit. Headline and core inflation could trend down. Private sector investments could revive. What provides optimism is that even as the global structural shifts are creating a wider berth for Indias exports, the country is making its largest infrastructure investment. This unprecedented investment is expected to translate into a robust building block that, going ahead, moderates logistics costs, facilitates a quicker transfer of products and empowers the country to become increasingly competitive. This can benefit Indias exports in general, benefiting several

The construction of national highways in 2022-23 was 10,993 kilometers; the Ministry of Road Transport and Highways awarded highway contracts of 12,375 km in the last financial year

The global landscape favours India: Europe is moving towards a probable recession, the US economy is slowing, Chinas

GDP growth forecast of 4.4% is less than Indias GDP growth of 7.2% and America and Europe is experiencing its highest inflation in 40 years.

Indias production-linked incentive appears to catalyse the downstream sectors. Inflation is steady. India is at the cusp of making significant investments in various sectors and emerge as a suitable industrial supplement to China. India is poised to outpace Germany and Japan and emerge as the third-largest economy by the end of the decade. The outlook for private business investment remains positive despite an increase in interest rates. India is less exposed to Chinese economic weakness, with much less direct trade with China than many Asian peers.

Broad-based credit growth, improving capacity utilisation, governments thrust on capital spending and infrastructure should bolster investment activity. According to our surveys, manufacturing, services and infrastructure sector firms are optimistic about the business outlook. The downside risks are protracted geopolitical tensions, tightening global financial conditions and slowing external demand. (Source: IMF data, RBI data, Union budget 2023-24 data, CRISIL report, Ministry of Trade & Commerce, NSO data)

Union Budget FY 2023-24 provisions

The Budget 2022-23 sought to lay the foundation for the future of the Indian economy by raising capital investment outlay by 33% to Rs. 10 lakh crores, equivalent to 3.3% of GDP and almost three times the 2019-20 outlay, through various projects like PM Gati-shakti, Inclusive Development, Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition and Climate Action, as well as Financing of Investments. An outlay of Rs. 5.94 lakh crore was made to the Ministry of Defence (13.18% of the total Budget outlay). An announcement of nearly Rs. 20,000 crores was made for the PM Gati-Shakti National Master Plan to catalyse the infrastructure sector. An outlay of Rs. 1.97 lakh crore was announced for Production Linked Incentive schemes across 13 sectors. The Indian government intends to accelerate road construction in FY24 by 16-21% to 12,000-.12,500 km. The overall road construction project pipeline remains robust at 55,000 km across various execution stages. These realities indicate that a structural shift is underway that could strengthen Indias positioning as a long-term provider of manufactured products and its emergence as a credible global supplier of goods and services Global IT industry

In 2022, the global IT industry slowed, the optimism surrounding the long-term viability of digital advancements was now replaced by scepticism and uncertainty. Despite challenges, the global IT sector provided public healthcare solutions, accelerated business growth, maintained productivity in a new hybrid work culture and underlined its presence across a range of businesses and sectors. Through its innovative solutions and technology-driven approach, the industry continued to play a critical role in shaping businesses and societies. Despite a global economic weakness, businesses continued to invest in digital transformation.

Global IT expenditure is expected to reach $4.5 trillion in 2023, up from 2.4% in 2022.

The Middle East and Africa (MEA) and Asia Pacific (APAC) are expected to experience the fastest regional technology spending growth, despite macroeconomic challenges of slowing liquidity, tight labour markets and geopolitical turmoil. Technology spending in the European market is projected to grow, albeit slower in 2023 and more so than in the US. Companies are responding to futuristic technologies quicker. As a result, purchasing and investing preferences in areas such as Cloud computing, Seamless Customer Experiences,Internet of Things (IoT), Artificial Intelligence (AI), Machine

Learning (ML), Blockchain, Big Data Analytics, Robotics Process Automation (RPA), Data Security & Cyber Protection and many others could emerge as priorities in 2023.

According to the table below, the software and IT services segments could expand in 2023. Spending on core IT segments saw growth, including Enterprise software, grew 7.1% to $783 Billion in 2022 and data center systems grew 12%. The gadgets category is expected to fall 5.1% this year as consumers and businesses extend device replacement periods.

Worldwide IT spending forecast (Millions of U.S. Dollars)

	2022 Spending	2022 Growth (%)	2023 Spending	2023 Growth (%)
Data Center Systems	2,12,376	12	2,13,853	0.7
Software	7,83,462	7.1	8,56,029	9.3
Devices	7,22,181	-10.6	6,85,633	-5.1
IT Services	12,44,746	3	13,12,588	5.5
Communications Services	14,22,506	-2.4	14,23,367	0.1
Overall IT	43,85,270	-0.2	44,91,471	2.4

(Source: Gartner and Forrester)

The rise of corporate application software, infrastructure software and data centre systems in the immediate and long-term confirms the systemic and long-term trend toward digital transformation.

IT service industry

The IT services segment is poised for sustained growth - 5.5%, in 2023. Spending on IT segments is likely to increase, strengthening digital transformation across businesses.

Digital transformation comprises the use of artificial intelligence, process automation and data migration to cloud. Digital technology is being used by businesses to reshape their income streams by introducing new products, altering cash flows of goods & services and enriching the value proposition. Companies will continue to migrate from capex-intensive spending on software to monthly opex SaaS and subscriptions. Software as a service (SaaS) is the leading category of cloud computing, representing the majority of overall revenues and is widely adopted by corporations for application delivery. Platform as a service (PaaS) is the next tier, a platform for application development that includes operating systems, web servers and databases. Infrastructure, as a service (IaaS) offers off-site storage, servers, virtual machines and networking and is increasingly replacing traditional IT infrastructure solutions.

The increase in software spending resulted in a boom in the IT services sector. Businesses that require knowledge-driven personnel are outsourcing implementation and support. Consulting spending is predicted to reach USD 264.9 Billion in 2023, a 6.7% rise over 2022.

Companies moving workloads to the cloud are capitalising on cost savings. By 2027, technology software and IT services could account for 66% of worldwide technology spending, up from 60% before the pandemic. Its expansion could be catalysed by increased cloud applications and platform services. According to Forrester, the public cloud industry could be worth $1 trillion by 2026, accounting for about a quarter of worldwide IT spending. The market is anticipated to accelerate to more than 80% market share by 2025, capitalising on low-cost implementation.

In 2022, North America held a market share of over 40% in the IT services market, followed by Europe and APAC. APAC is expected to contribute 49% to the growth of the global market. The market in APAC is being driven by the rapid adoption of technology across industries and the influx of small and medium-sized businesses. Major vendors are expanding their IT service offerings through M&As and organizations in the region are outsourcing non-critical IT tasks to cut costs. The government, telecom and IT industries in APAC are becoming increasingly aware of the benefits of outsourcing. Many manufacturers and retailers are entering the Asian market, particularly in India, Vietnam and China, which will require significant IT services and contribute to market growth. (Source: technavio.com, Forrester global IT forecast; Feb 2023, statista.com, Source: Gartner; January 2023)

The digital transformation Digital transformation describes how digital technology is integrated into every aspect of a company or organization, significantly altering how they function and provide value to clients. The market for digital transformation encompasses all the goods, services and options that assist businesses in putting their digital transformation plans into action, including cloud computing, AI, machine learning, big data analytics and the Internet of Things (IoT). This market is expanding quickly as a result of the rising need for automation and digitization across a variety of sectors, including healthcare, finance, retail, manufacturing and others.

The BFSI segment led the market and accounted for the biggest revenue share of more than 28.3% in 2022, as banks and other financial institutions shifted their focus to providing superior experiences. Banking firms growing focus on providing seamless help and technical support to establish customer-centric approaches is fundamentally driving the market.

The global digital transformation market was valued at USD 731.13 Billion in 2022 and is expected to reach USD 4,617.78 Billion by 2030, growing at a CAGR of 26.7% between 2023 and 2030. The analytics sector held the biggest market share of 35.3% in 2022, owing to the rising need to integrate massive amounts of company data to provide significant insights.

The USA dominates the market, accounting for 43.2% of the market in 2022, owing to increased internet usage and widespread acceptance of various forms of online payment methods. Asia Pacific is expected to be the fastest-growing regional market with a CAGR of 29.4%, due to the significant expansion in the number of SMEs and the rising service sector. For the past twenty years, Saksoft has been providing customised technology solutions and accelerators across domains.Thecompanysexpertise-consultingtosupport-has established it as a preferred partner for digital transformation projects among our global customers. The companys digital transformation solutions empower businesses to automate, modernize and manage IT systems, improving efficiency and focus. In a rapidly evolving IT industry, the company foresees significant opportunities and is positioned to capitalise (Source: grandviewresearch.com)

Sectoral strengths

• India has a vast pool of skilled IT professionals, known for their technical expertise and problem-solving capabilities.

• The IT services industry in India offers cost-effective solutions compared to many other regions.

• Indian IT services companies have a strong presence in global markets.

• A diverse domain knowledge enables them to provide specialized IT services tailored to specific industry requirements.

Sectoral weaknesses

• India still faces infrastructure challenges, such as inadequate internet connectivity, power supply issues, and transportation limitations.

• Language and cultural differences can pose challenges in global client interactions.

Sectoral opportunities

• Increasing demand for cloud computing and big data analytics.

• Growing trend towards digital transformation across different industries.

• Emerging markets and untapped potential for IT products and services.

• Partnership and collaboration opportunities with other businesses.

Sectoral threats

• Growing competition in the market from other IT companies and emerging startups.

• Rapid technology change and uncertainty around trends.

• Government regulations and policies that could affect the

IT sector.

• Cybersecurity threats and data breaches that could damage the reputation of IT companies.

Company overview

Saksoft Limited, established in 1999, is a global partner for digital transformation solutions, serving mid-tier companies primarily in the USA and Europe. The company provides services like application development, testing & quality control and solutions based on cloud, mobility and Internet of Things (IoT) along with Information Management (IM) and Business Intelligence (BI) solutions. At Saksoft, we have adapted our business model to cater to our clients evolving needs and emphasize our ‘Inch wide, mile deep approach in creating mission-critical, vertical-specific solutions. Saksoft has five wholly-owned subsidiaries and seven step-down subsidiaries across various geographies, including the US, Europe and Singapore.

Revenue break-up (FY23)

Vertical-wise:

Fintech 35% Telecom and Utilities 22% Transportation & Logistics 11% Retail & Health Care 5% Public Sector 4% Others 23%

Offshore vs onsite

Offshore- 55% Onsite- 45%

Strengths

Promoter and team experience: Your company is led by an experienced founder with over 20 years of experience in the banking and financial services industry, as well as a team of skilled IT professionals who manage technologies and geographies within a defined organizational structure. The strong leadership ensures that the company is positioned to deliver quality services and solutions.

Digital transformation partner: Your company facilitates digital transformation by modernizing legacy systems and implementing intelligent automation, with an emphasis on applications development. In the last three years, the company reported a Compound Annual Growth Rate (CAGR) of 18% in this domain by prioritizing the delivery of exceptional service, the company fostered enduring customer partnerships, even though the typical contract duration was limited to a year. Niche focus: Your company concentrates on niche verticals like Fintech, Transportation and logistics, e-commerce, healthcare, telecom, public sector and fintech. By extending into these sectors, the company serves clients whose annual revenues range from USD 200 Million to USD 3 Billion. Growth was observed across all sectors, with logistics, fintech and telecommunications experiencing significant expansion. The company cross-sells products and services to clients in interconnected verticals.

Human resource: Your companys business growth is driven by a dedicated and passionate workforce who are experts in various fields. The diverse and advanced skillset of our workforce helps serve our customers better and enhances our competitiveness in the market.

Challenges

Client and geographic concentration: Saksofts revenue is focussed on certain geographies, with a majority of its income (around 70%) generated from clients located in the USA and Europe during FY23. The companys top 20 clients accounted for a significant portion of its total operating income, with the top ten customers contributing around 59% during the same period. Saksoft established a reputable client base and retains repeat customers. The acquisition of MC Consulting Pte in Singapore is expected to increase revenue from APAC markets, enhancing the companys prospects.

Company verticals and overview

Fintech: The emergence of embedded finance is causing a shift in the fintech industry, moving it from a vertical market to a horizontal one. Businesses across multiple sectors, including retail, technology and banking are integrating fintech into their existing models to provide users with a more valuable and engaging experience. Fintech is no longer just a collection of separate products and services, but an infrastructure layer that established companies can utilize.

This trend is expanding the fintech market and changing the way financial services are distributed.

By leveraging its domain expertise, Saksoft specializes in creating customized solutions for its clients, with a focus on enhancingcustomerexperiencethroughdigitaltransformation. They ensure seamless integration of processes, operations, tools, technology and human interventions. This collaborative approach has enabled Saksoft to innovate and demonstrate leadership in the financial space. Although the company initially provided services aimed primarily at BFSI clients, they have since expanded to work with leading global banks and financial institutions.

The companys offerings in this segment comprise:

• Mobile cash disbursement solution

• API integration, mobile/web development

• Big data analytics

• Credit scoring, fraud prevention and risk assessment

• Anticipate or handle disruptions

The companys customers comprise the following:

• Cards and payment gateways

• Credit management agencies

• Regulatory and compliance

• Asset and wealth management

• SMB and consumer lending

• Mortgages

The key growth drivers of the company in this vertical comprise:

• Rising investments in tech-based solutions

• Widening internet penetration followed by growing traction of digital payments and wallets

• Growing digitization of business services

• Increasing adoption of smart devices

• Emergence of new technologies such as blockchain and decentralized finance

• Fintech as a service makes it easier to launch new fintech products or start-ups

• Growing need for digital data protection

• Rise of big data and artificial intelligence, enabling sophisticated financial analytics and personalized service

• Promotion of open banking and financial inclusion

• Growing interest from investors and venture capitalists in fintech start-ups and innovations

The opportunity for this vertical comprises the following:

• The global fintech market is estimated to be worth $165.17 Billion

• The fintech space is set to surpass $400 Billion by 2027

• The fintech market is growing at a CAGR of 25.18%

• Globally an estimated $8.49 trillion of digital payments were made in 2022 (Source: marketdataforecast.com) The operational matrix of this vertical comprises the following:

• Contributes 35% to total revenues

• Revenue mix is USA 20% and Asia-Pacific and others 15%

• 6 clients in the USD 1Million-plus and 2 clients in the USD 0.5 Million-plus account Healthcare: Over the past few years, the healthcare industry has witnessed the rapid emergence of numerous trends. These include shifting consumer preferences, the integration of life sciences and healthcare, the fast-paced evolution of digital health technologies, innovative care delivery models and clinical advancements. Healthcare executives globally are focused on these trends as they strive to meet the ever-changing needs of patients. Additionally, the demand for telemedicine, mHealth and eHealth segment has become more apparent, as healthcare providers increasingly require accurate patient data, linked records, interoperability and robust cybersecurity measures.

Saksofts group company Faichi comprises a team of healthcare functional and technologists who spearheaded the development of revolutionary healthcare solutions and products for global clients. Saksoft is committed to provide clients with top-of-the-line predictive analytic solutions and services that leverage data to generate actionable insights. By leveraging solutions, clients can drive down costs, enhance outcomes and make informed decisions.

The verticals offerings comprise the following:

• Telehealth

• EHR integration

• Imaging analytics

• Integrated health monitoring via wearables

• HL7/FHIR enabled provider apps

The customer profile comprises the following:

• Healthcare providers

• Healthcare payers

• Healthcare compliance

• Clinical research and life sciences

The key growth drivers of this segment comprise the following:

• Growth in adoption of mHealth, telehealth and eHealth practices

• Increasing adoption of cloud technologies related to HCIT services

• Increasing demand for quality healthcare solutions and services

• Implementation of various healthcare reforms such as Patient Protection & Affordable Care Act (PPACA)

• Increasing number of clinical trials which demands the use of IT applications that provide ease to the researchers.

• Growing need for linked health solutions such as telemedicine, e-prescriptions, remote patient monitoring and other healthcare analytics

• Increasing adoption of big data and AI to improve patient care and clinical operations.

• Increasing demand for wearable devices like fitness trackers, smartwatches and medical gadgets The market opportunity for this vertical has been estimated at the following:

• The global healthcare IT market was estimated to be worth $394.6 Billion in 2022

• Estimated value by 2027 is $974.5 Billion

• Poised to grow at a CAGR of 19.8% during forecast period 2022 2027

North America held a 52.0% share of the market in 2022, owing to factors such as strong economic development and the existence of hospitals, advanced research institutions, universities and medical device manufacturers in this region.

Asia Pacific is the fastest-growing geographical market, with increasing demand for healthcare IT services as government expenditure on healthcare increases. Moreover, an increase in healthcare expenditure in developing Asian nations, as well as improvements in healthcare infrastructure as a result of increased use of modern technologies to simplify hospital workflow and reduce medical expenses, are important drivers of demand in this area. (Source: globenewswire.com) The operational matrix of this vertical comprise the following:

• Contributes to 5% to total revenues

• Revenue mix is 1% each in USA, Europe and Asia -Pacific

• 1 clients in the USD 1Million-plus and 1 client in the USD 0.5 Million-plus account Retail e-commerce: The retail sector has been rapidly adopting various digital technologies like AI, IoT, blockchain and chatbots to enhance the overall customer experience. In recent years, the retail industry has been undergoing a transformation, with an increased focus towards online from offline business models. This has led to a surge in e-commerce growth, resulting from factors like technological advancements and shifting consumer behaviors. Retailers are adopting a more practical and transformative approach to their business models, which has led to increased investment in technologies that help them achieve digital transformation, operational agility and revenue growth. Additionally, retailers are embracing direct-to-customer(D2C) and ecosystem-driven models to accelerate growth and boost consumer engagement. The integration of these technologies aims to provide a seamless experience to customers.

Some notable trends in 2023 include personalized user experiences with AI, augmented and virtual reality, CRM for community building, social selling, headless eCommerce, multiple payment options, voice and visual searches, marketing automation, fast and free delivery, sustainability practices and preparing for future data privacy policies with zero-party data.

The offerings of this vertical comprised the following:

• Social listening (micro-influencer)

• Customer 360

• Customer journey tracking

• E-commerce portal development

The customer profile comprised the following:

• Multi-store e-commerce solutions

• Store-front solutions

• Customer engagement solutions

• Order inventory management

The key growth drivers of this vertical comprised the following:

• Increased internet penetration and usage of smart devices

• Advanced technologies fuel the growth

• Introduction of cross-border and consumer protection policies

• Increased consumers shift toward online platforms for shopping

• Emergence of super apps are gaining popularity as they allow users to purchase at different retailers from a single app

• Proliferation of novel payment mechanisms like QR codes and biometric authentication systems boost customer comfort and convenience

• Emerging trends like live shopping and metaverse commerce provide more personalized experience for customers.

The market opportunities comprised the following:

• Global ecommerce sales are expected to total USD 5.7 trillion worldwide in 2022

• Projected to grow at a 10.4% yearly between 2023 and 2026.

• Global ecommerce sales are expected to total USD 6.3 trillion worldwide in 2023.

• Online purchases are estimated to account for 20.8% of total worldwide retail sales in 2023 i.e. more than $0.20 of every $1 spent on retail products this year will be done online.

Annual Report 2022-23 : 97

• By 2026, global retail e-commerce sales are expected to surpass $8.1 trillion, with e-commerce accounting for

24% of total retail sales. (Source: emarketer.com)

Telecommunication and utilities: The utilities sector witnessed a slowdown due to the Russia-Ukraine war, dampening the chances of a post-Covid economic recovery. The war resulted in economic sanctions, commodity price surges and supply chain disruptions, adversely affecting many markets worldwide. From 2022 to 2023, the global utilities market experienced a 6.9% compound annual growth rate, increasing from $6,000.19 Billion to $6,416.54 Billion.

During the forecast period, the utilities market is expected to be driven by the rapid growth of investments in renewable power generation capacities. Numerous power generation companies are investing in renewable energy sources, particularly in the USA and European countries. Governments worldwide are also incentivizing and subsidizing solar power generation companies to promote renewable energy sources.

The telecom sector is experiencing significant growth opportunities in cloud and networking, as well as in early investments in 5G deployment and rollout. The telecom services industry has remained stable and plays a crucial role in enabling people to communicate, work and entertain themselves. As the global economy recovers, the telecom market is experiencing higher-than-expected growth rates, benefitting from cloud architecture and automation, which move from hype to a revenue generator.

Saksoft offers a comprehensive solution that include automation, customer engagement solutions, big data customer analytics solutions, cloud migration services and enterprise ERP. Through its innovative approach, Saksoft has helped leading telco operators create value chain for its customers and open up new opportunities.

The companys product offerings comprise the following:

• SharePoint development

• Advanced analytics to reduce customer churn

• Oracle support

• Testing CoE

The companys customers comprised the following profiles:

• Business support systems

• Operations support systems

• Enterprise resource planning

• IT strategy consulting

The key growth drivers of the vertical comprise the following:

• The availability of low-cost high-tech gadgets like computers and smartphones

• Low cost of data

• Increased deployment of 5G

• Rising mobile subscribers

• Soaring demand for high-speed data connectivity

• Cutting-edge technology adoption

• Rise in demand for connected cars

• Increasing smart homes

• Availability of OTT services

• Internet of Things (IoT)

• Cloud computing

The market opportunity for this vertical is influenced by the following realities:

• The global telecom services market size was valued at USD 1,805.61 Billion in 2022

• The market is expected to expand at a compound annual growth rate (CAGR) of 6.2% from 2023 to 2030

Expected to reach USD 2,467.01 Billion in 2028 (Source: grandviewresearch.com) The operational matrix of this vertical comprise the following:

• Contributes 22% to total revenues

• Revenue mix is Europe is 17% and Asia-Pacific and others 5%

• 2 clients in the USD 1Million-plus and 1 clients in the USD 0.5 Million-plus account Transportation and logistics: The transportation and logistics industry is evolving due to digitization and shifting customer expectations. Logistics companies need interconnected devices, real-time dashboards and analytics. Technologies like IoT, big data analytics, cloud solutions and AI are improving back-office operations and logistics processes.

These advancements boost supply chain productivity, reduce costs and errors and benefit all sectors of the industry.

In the real-time economy, customers expect deliveries to be provided on time. Nearly 77% of executives agree that the evolution towards a real-time economy impacts their business processes. Digitalizations impact on the industry will only add further.

Saksoft provides digital solutions for the transportation and logistics industry, including digital transportation and management solution, network analytics, carrier compliance solution, digital freight matching application and asset utilization improvement solutions. They leverage the expertise of their group company, DreamOrbit, which specializes in IoT and mobility solutions, along with their own expertise in testing, cloud solutions and analytics, to offer insights and solutions that address complex industry needs. Their intelligent AI-based scheduling solutions maximize asset utility, providing near real-time visibility.

Saksoft acquired MC Consulting, a Singapore-based technology solutions provider for seaports and public sector agencies, in February 2022. With over 300 domain and technology experts and a dedicated offshore model, Saksoft offers custom software, accelerators and dedicated teams to address logistics and supply-chain management challenges. Their network effect is a testament to their capabilities and expertise in IoT, mobile apps, portal development, big data, RPA and blockchain technology.

The companys product offerings comprised the following:

• IoT solutions

• Freight management software

• Warehouse management

• Supply chain management

• EDI integration

• Logistics dashboard

The companys customers comprised the following profiles:

• Third-party logistics

• Shippers

• Carriers

• Independent Software Vendor

• Port operators

The market opportunity has been estimated as per the following realities:

• The global digital logistics market size was estimated at USD 35.15 Billion in 2022.

• The market is projected to grow at a CAGR 13.75% between forecast period of 2022-27

• The market is expected to reach a market size of USD 67.07 Billion by 2027

The operational matrix of this vertical comprise the following:

• Contributes 11%to total revenues

• Revenue mix is USA 9% and Asia-Pacific and others 2%

• 2 clients in the USD 1-Million-plus and 2 clients in the USD 0.5 Million-plus account (Source: businesswire.com) Public sector: Regulatory technology (RegTech) refers to solutions that use machine learning (ML), artificial intelligence

(AI), IoT, cloud computing and blockchain to streamline compliance processes, detect issues in digital payment platforms and monitor in-house regulatory requirements. Its used in banking and financial services for tasks like transaction monitoring, anti-money laundering (AML) screening and compliance risk analysis. RegTech can be deployed on-premises or on the cloud and it enables digitization of manual reporting and compliance processes, providing agility, speed, integration and analytics capabilities.

Taxonomies and knowledge graphs complement these solutions to ensure high reliability and explainability of information gathered. Embedded compliance merges regulatory technology with business processes, providing value-added technology that helps companies reduce costs, mitigate risks and seize business opportunities. Cross-border compliance and regulatory technology are becoming increasingly important for global financial institutions in the

APAC region. These market trends are shaping the compliance landscape, bringing increased efficiency, accuracy and automation to regulatory compliance processes.

Saksoft is a leading technology company that has expertise in digital transformation enablement. With a focus on information management, optimized applications and analytics, the company helps public sector organizations achieve their goals of efficiency, cost savings and improved citizen services. With a track record of success, Saksoft has demonstrated its ability to integrate new technologies and solutions seamlessly into existing systems, resulting in positive outcomes for its clients.

The companys offerings comprise the following:

• Smart cities: Machine learning and facial recognition from IoT data feeds, predictive analytics and business intelligence to provide better healthcare, decrease crime rates and improve citizens life

• People identity management

The companys customer profile comprises the following:

• City councils in UK

• Police departments

• Central government agencies

• Housing communities

• Public utilities

The companys business has been driven by the following realities:

• Technological advancements

• Rising occurrence of fraudulent cases

• Growth in BFSI industry

• Increasing regulatory requirements in various industries

• Rising demand for cost-effective and efficient regulatory solutions

• Advancements in technologies such as artificial intelligence (AI), machine learning (ML) and blockchain

• Growing adoption of cloud-based solutions and services

• Rising use of big data analytics for risk management and compliance purposes

• Increasing demand for cross-border compliance solutions due to globalization

• Growing number of partnerships and collaborations between regulatory technology companies and traditional financial institutions.

The major opportunities related to the space comprise the following:

• Regulatory technology market accounted for US$ 8.2

Billion in 2022

• The market is estimated to be US$ 57.5 Billion by 2032

• Anticipated to register a CAGR of 28.7%, during the forecast period of 2022-2032 The operational matrix of this vertical comprise the following:

• Contributes 4% to total revenues

Key financial ratios

Ratio	FY 22-23	FY 21-22
Operating profit margin (%)	16%	16%
PAT margin (%)	12%	13%
Debt-equity ratio	0	0.01
Interest cover (x)	49.37	30.02
Return on capital employed (%)	27%	26%
Return on net worth (%)	20%	20%

 

Ratio	FY 22-23	FY 21-22
Debtors turnover ratio (days)	61	65
Earnings per share (Rs.)	8.18	6.33
Current Ratio (x)	2.46	2.30
Inventory Turnover Ratio	NA	NA

Risk management

Saksoft recognizes the paramount importance of risk management in todays business landscape. As an innovative IT services company, we understand the diverse range of risks that can impact our operations and objectives. These risks include talent retention challenges, geopolitical uncertainties, intense competition, currency fluctuations, information and cybersecurity vulnerabilities, regulatory compliance complexities and cloud computing risks. At Saksoft, we adopt a proactive approach to risk management, diligently assessing and mitigating potential threats. By identifying and addressing these risks, we strive to enhance our resilience, safeguard our assets and capitalize on opportunities with confidence. Our commitment to effective risk management underpins our long-term success and sustainability in the dynamic world of IT services. Some of the key risks we address and the corresponding mitigation measures we have in place include:

Talent retention risk: The competition for IT talent is increasing, resulting in higher attrition rates. Mitigation: Saksoft is an employee-centric organisation which provides employee benefits, engagement and training and development programs.

Geo-political risk: Adverse political and geographical risks could cause service disruption, potentially impacting regions, customers or verticals that are important for the company. Mitigation: Saksofts entry into a new region, vertical or customer only takes place after passing through the risk assessment filter or framework.

Competition risk: The IT services industry is highly competitive in both domestic and international markets.

Mitigation: Saksoft is nimble and responds quickly to industry changes by adopting new digital tools that strengthens its competitiveness Currency risk: The risk of currency fluctuations is an ongoing challenge depending on global and economic dynamics. Mitigation: Saksofts hedging strategies help mitigate this risk by hedging foreign currency earnings, helping the company to stay protected against any sudden forex fluctuations.

Information and cybersecurity risk: Cybersecurity breaches may lead to loss of critical assets and sensitive information.

Mitigation: Saksoft has strengthened its cybersecurity systems through measures such as regular security audits, penetration testing, vulnerability assessments, employee training and implementing advanced security technologies like intrusion detection and prevention systems, firewalls and encryption

Regulatory risk: Failure to comply with the local rules and regulations of countries where Saksoft operates can lead to business closure and/or penalties.

Mitigation: Saksoft monitors all policy changes and keeps real-time updates on all regulatory developments

Cloud computing risks: It includes service outages, data loss and lack of control over data, which can impact business continuity and reputation.

Mitigation: At Saksoft, we prioritize robust data backup and recovery procedures to prevent any loss in case of an outage or other issue. We establish clear protocols for data access and control to ensure sensitive data is not compromised and we regularly test and update our disaster recovery and business continuity plans to stay prepared for any unforeseen situation.

Internal Financial Controls Systems and their adequacy

Saksofts current system of controls are aligned with the requirements of Companies Act,2013 and is based on the lines globally accepted risk framework. The internal controls available in Saksoft are in commensurate with the size of our business and nature of our operations. All systems, process, operations, functions and activities are subject to evaluations of internal control systems. The overall results of such evaluations provide information on the efficiency and efficacy of Saksofts overall system of control. The controls thereby are designed to provide a reasonable assurance with regard to maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations, protecting assets from unauthorized use or losses, compliances with regulations

Name of the Statute	Nature of the dues	Amount involved (Rs. in Million)	Amount unpaid (Rs. in Million)	Period to which the amount relates to	Forum where the dispute is pending
Income Tax Act,	Income Tax	29.56	8.61	A.Y. 2009-10	CIT (Appeals)
1961
Income Tax Act,	Income Tax	20.45	6.56	A.Y. 2010-11	DCIT
1961
Income Tax Act,	Income Tax	11.36	0.09	A.Y. 2011-12	DCIT
1961
Goods and Services	Goods and	2.05	1.94	F.Y. 2018-19	Deputy
Act, 2017	Services Tax				Commissioner of
					State Tax