saven technologies ltd share price Management discussions

(forming part of Boards Report) a. Industry structure and Developments

Recovering from pandemic-induced contraction, Russian-Ukraine conflict and inflation, the Indian economy is staging a broad-based recovery across sectors, positioning to ascend to the pre-pandemic growth path in FY23. Indias GDP growth is expected to remain robust in FY24. GDP forecast for FY24 to be in the range of 6-6.8%. Global GDP in FY 2023 was affected by the Russia-Ukraine war and resultant dislocations in supply chains, leading to surging food and energy inflation. Central banks raised interest rates sharply in response. As a result, the global GDP is estimated to have grown at a more subdued 3.4% in 2022, versus 5.9% in the prior year.

Global technology spending on Enterprise software and IT services crossed the $2 trillion mark in 2022, growing 5.5% YoY. IT services grew 3.5% YoY, to $1,250 billion. This growth was led by accelerated cloud adoption, preference for external expertise due to severe talent scarcity, and expanding scope of digital transformation to cover more back-office operational areas.

For 2023, economists believe that the downside risks dominate - with talks of mild recession being heard more frequently in investment circles in addition. The labour market is expected to remain tight especially for technology skills. While the global economic scenario might appear grim, the Indian economy continues to push forward steadily, growing at 6.8% in 2022, nearly double the 3.4% growth witnessed at a global level. Agencies worldwide have projected India as the fastest-growing major economy in the year 2022 and 2023.

The IT & BPM sector has become one of the most significant growth catalysts for the Indian economy, contributing significantly to the countrys GDP and public welfare. The IT industry accounted for 7.4% of Indias GDP in FY22, and it is expected to contribute 10% to Indias GDP by 2025. As innovative digital applications permeate sector after sector, India is now prepared for the next phase of growth in its IT revolution. India is viewed by the rest of the world as having one of the largest Internet user bases and the cheapest Internet rates, with 76 crore citizens now having access to the internet.

As per Nasscom, the IT sectors growth slowed down to 8.4% in FY 23 from over 15% in the previous fiscal. ICRA expects the revenue growth to remain subdued in midsingle digits in USD terms in FY2024. The Agency said the growth momentum witnessed a slowdown in last two quarters due to micro economic head winds in the US and Europe which together account for up to 90% of the industrys revenue.

On a sectoral basis, the growth from the BFSI segment, which contributes a nearly a third of the overall revenue tapered more than the other segments because of the crisis in American Banks. There are delays in decision making by customers as visible from the conversion of deals to revenues to some extent on the profitability front. ICRA said in its sample it witnessed a 1.9% narrowing in the operating profit margins.

(Source: IEBF, Google)

b. Opportunities, Threats, Risks and Concerns

The AI and low-code/no-code (LCNC) application development space presents a tremendous growth opportunity for IT services companies, even during difficult market conditions. As organizations across all industries increasingly seek to expedite their digital transformations, demand for advanced AI-powered solutions and rapid application development through LCNC platforms is surging. By leveraging their deep technological expertise, IT services companies like Saven have the potential to develop innovative solutions that enable businesses to operate more efficiently and deliver enhanced customer value.

However, entering this rapidly evolving field is not without its threats and risks. High entry barriers exist in terms of technical know-how and the need for substantial upfront investment in people and technology infrastructure. Moreover, there is fierce competition, both from established tech giants and agile startups.

To overcome these challenges, Saven is focusing on a number of key strategies. Investing in continuous learning and development to up-skill the existing workforce in AI and LCNC technologies is paramount. The company should also consider forming strategic partnerships or alliances with AI and LCNC vendors to accelerate the adoption of these technologies. Distinguishing itself in a crowded market, with an aim to develop unique AI-powered and LCNC solutions that solve real and pressing problems for their customers, while consistently demonstrating their value proposition.

c. Outlook

The current climate for Saven IT Services is proving to be challenging as it navigates a period of contraction and struggles against a multitude of internal and external headwinds. Amidst a perceived slowdown in the US, the company is anticipating a significant downsizing in business growth, underlining the far-reaching impacts of global markets on the sector. The situation is largely attributable to the exorbitant costs involved in procuring and retaining top-tier talent. Customers are allocating fewer resources to IT budgets, with advancements in AI technologies reducing the need for conventional development resources. With market conditions being unfavourable, the company is encountering substantial difficulties in sustaining its growth trajectory and maintaining its competitive edge in the dynamic IT industry. The difficulties are further compounded by an unfavourable shift in customer behaviour. Some existing clients have scaled back on their resource requirements, opting instead to transition roles to their internal teams. This decision not only results in a direct loss of revenue for the company but also sends a worrying signal about the perceived value and efficacy of the companys services. This shift by key clients prompted the company to develop strategies that reinstate the company as a vital partner in their clients success.

d. Internal Control Systems and their adequacy

There are adequate internal control procedures and internal audit systems commensurate with the size of the company and nature of its business. The Management periodically reviews the internal control systems for further improvement.

e. Discussion on financial performance with respect to operational performance

The financial statements have been prepared under the historical cost convention, on the basis of a going concern.

Disclosure of Accounting Treatment

The Companys financial statements for the year ended March 31, 2023 are prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015.

Financial Position as at March 31, 2023 Non-Current Assets (a) Fixed Assets

There has been an addition of Rs.15.67 lakhs to the gross block of fixed assets. The additions are mainly towards Hardware, computer software as well as infrastructure facilities. The entire capital expenditure was funded out of internal accruals.

(b) Investments

The Company Investment in Mutual Funds (Debt Funds) Net Asset Value (NAV) as on March 31, 2023 was Rs.698.66 lakhs as against Rs.584.88 lakhs as at March 31, 2022.

(c) Loans

The Long term deposits as on March 31, 2023 amounting to Rs.2.17 lakhs includes Electricity Advance Consumption Deposit of Rs.2.08 lakhs.

Current Assets

(a) Trade Receivables

The trade receivables decreased from Rs.433.21 lakhs as at March 31, 2022 to Rs.346.45 lakhs as at March 31, 2023. The said Receivables amount was received on April23 of Rs.210.23 lakhs and balance amount of Rs.136.22 lakhs in May and June23. These receivables are considered good and realizable.

(b) Cash and cash equivalents

The cash and bank balances as at March 31, 2023 stood at Rs.668.76 lakhs (including fixed deposits of Rs.666.42 lakhs) as against Rs.510.64 lakhs (including fixed deposits of Rs.506.46 lakhs) as at March 31, 2022.

(c) Loans and Others

Other Current assets have increased from Rs.36.93 lakhs as at March 31, 2022 to Rs.46.76 lakhs as at March 31, 2023.

Share Capital

There has been no change in the authorized, issued, subscribed and paid capital. The paid up Share Capital was Rs.108.79 Lakhs as at March 31, 2023.

Other Equity

The company had at the beginning of the financial year an amount of Rs.550 lakhs in the General Reserve. During the financial year 2022-23 the company did not transfer any amount to Reserves.

There were no changes in Share Premium and Capital Reserve during the year and the same stood at Rs.189.47 lakhs and Rs.46.86 lakhs respectively.

Other Equity as at March 31, 2023 stood at Rs.1,673.83 lakhs as compared to Rs.1,493.06 lakhs as at March 31, 2022.

Trade Payables

Trade payables consist of payables towards purchase of goods and services and stood at Rs.13.91 lakhs as at March 31, 2023 (Rs.11.00 lakhs as at March 31, 2022).

Other Financial Liabilities

Other Financial Liabilities included Unclaimed Dividends Rs.8.95 lakhs as at March 31, 2023 (Rs.11.15 lakhs as at March 31, 2022) and Unclaimed Reduction of Share Capital was Rs.11.58 lakhs as at March 31, 2023 (Rs.11.58 lakhs as at March 31, 2022).

Other Current Liabilities and Provisions

Other Current Liabilities included Statutory Remittances Rs.5.59 lakhs as at March 31, 2023. Provision for employee benefit was Rs.34.25 lakhs as at March 31, 2023.

Current Tax Liabilities (Net)

The Tax Liability was Rs.12.65 lakhs include other comprehensive income tax liability of Rs.14.35 lakhs as at March 31, 2023 as compared to Rs.5.84 lakhs include other comprehensive income tax liability of Rs.6.39 lakhs as at March 31, 2022.

Results of Operations

The total revenue for the year ended March 31, 2023 was Rs.1568.81 lakhs as compared to Rs.1192.50 lakhs for the previous year. The Earnings before interest, tax, depreciation and amortization (EBITDA) for the year under review was Rs.524.49 lakhs as compared to Rs.442.58 lakhs for the previous year. After considering depreciation, interest and Income tax the Net Profit was Rs.373.05 lakhs, as compared to Rs.330.99 lakhs for the previous year.

The Offshore Development & Services income for the year ended March 31, 2023 was Rs.1505.61 lakhs as compared to Rs.1078.80 lakhs for the previous year. The operations of the Company has been carried out without any interruptions based on work from home concept.

The other income included fixed deposit interest income of Rs.37.00 lakhs as compared to Rs.48.51 lakhs in the previous year and Profit on Extinguished Investments (Mutual Funds) was Rs.7.10 lakhs as compared to Rs.59.49 lakhs in the previous year. During the financial year ended March 31, 2023 favourable foreign exchange variance was Rs.19.10 lakhs as compared to Rs.5.70 lakhs for the year ended March 31, 2022.

Financial Ratios

In accordance with the SEBI (Listing Obligations and Disclosure Requirements 2015) (Amendment) Regulations, 2018, the Company is required to give details of significant changes in key financial ratios.

Sr. No. Key Financial Ratios

Fiscal 2023 Fiscal 2022
1. Debtors Turnover 3.86 3.40
2. Inventory Turnover -- --
3. Interest Coverage Ratio -- --
4. Current Ratio 12.45 11.57
5. Debt Equity Ratio -- --
6. Operating Profit Margin (%) 31.92 35.29
7. Net Profit Margin (%) 23.78 27.76
8. Return on Net Worth 20.93 20.66

f. Material developments in Human Resources / Industrial Relations front, including number of people employed

Being engaged in a people-oriented business, it has been the Companys endeavor to create and encourage talent by providing a good working environment, need based training, career growth plans and a competitive remuneration package.


Some of the statements contained in the above discussion are of a forward-looking nature and it will be appreciated that the Company cannot guarantee that these expectations will be realized. Actual results and outcome may, despite efforts on the part of the Company, differ materially from those discussed.