SecUR Credentials Ltd Management Discussions

(Pursuant to Regulation 34(2)(e) ofSEBI (Listing Obligations and Disclosure Requirements)

Regulations, 2015)

1. Industry Structure and Developments

The background screening and verification industry has witnessed significant growth in recent years driven by increasing regulatory requirements, digital transformation, and growing emphasis on risk management by organizations. Companies across sectors such as IT, banking, financial services, manufacturing, healthcare, and e-commerce are increasingly adopting background verification services to ensure compliance, mitigate fraud risks, and enhance operational transparency.

Indias growing formal employment ecosystem, increasing outsourcing of compliance-related processes, and rising cross-border hiring are further contributing to the growth of the background verification industry. Additionally, advancements in Artificial Intelligence (AI), Robotic Process Automation (RPA), and digital verification tools are transforming the industry by improving accuracy, speed, and scalability of verification processes.

Financial institutions and banks are also increasingly using verification services for loan processing, KYC validation, and fraud detection, creating new opportunities for companies operating in this segment.

SecUR Credentials Limited, being one of the leading background verification companies in India and the first listed company in this industry, continues to leverage its technological capabilities and industry experience to strengthen its market position.

2. Opportunities and Threats Opportunities

The Company operates in a niche but rapidly growing industry with multiple growth drivers:

• Rising demand for employee background verification across industries.

• Increasing focus on risk management and compliance by corporates.

• Growth in digital hiring and remote workforce, requiring robust verification processes.

• Expansion of services such as vendor verification, KYC verification, and loan verification.

• Increasing adoption of AI-based automation and analytics to enhance operational efficiency

The Company has also introduced loan verification services for banks, which is expected to contribute significantly to revenue growth in the coming years.

Threats

Despite strong growth prospects, the industry faces certain challenges:

• Increasing competition from new technology-driven verification service providers.

• Data privacy and regulatory compliance requirements.

• Dependence on external databases and information sources for verification processes

• Cybersecurity risks due to increasing digitalization.

• Fluctuations in hiring activity across industries due to economic cycles.

The Company continues to address these challenges by strengthening its technological infrastructure and maintaining robust compliance systems.

3. Segment-wise or Product-wise Performance

The Company primarily operates in the background screening and verification services segment, which includes:

• Employee Background Verification

• Vendor and Supplier Verification

• KYC Verification Services

• Loan Verification Services for Banks

• Due Diligence and Risk Screening Services

During the financial year under review, the Company focused on expanding its service offerings and on boarding new clients across various sectors including information technology, banking, and financial services.

The launch of loan verification services for banks represents a strategic expansion into the financial services verification segment and is expected to contribute significantly to future growth.

4. Overview of Financial Performance

During the financial year ended 31^st March 2024, the performance of the Company was as follows: Key Financial Highlights:

The Company maintained revenue stability while significantly improving profitability through operational efficiencies and technology-driven automation of processes.

The improved financial performance reflects the Companys continued focus on cost optimization, productivity improvements, and enhanced service delivery.

5. Outlook

The outlook for the background verification industry remains positive due to the increasing importance of risk mitigation and compliance across industries.

Key growth drivers for the Company include:

• Rising adoption of digital verification solutions.

• Expansion into banking and financial sector verification services.

• Leveraging AI and automation technologies to scale operations.

• Increasing demand for global verification services.

The Company intends to continue investing in technology, automation, and service diversification to enhance operational efficiency and strengthen its competitive advantage.

6. Risks and Concerns

The Company has identified various risks that could impact its operations and financial performance:

• Operational Risk: Dependence on external information sources for verification processes.

• Data Security Risk: Protection of sensitive client and employee data.

• Regulatory Risk: Changes in data protection and privacy regulations.

• Competition Risk: Increasing competition from domestic and international service providers.

• Economic Risk: Slowdown in hiring activities impacting demand for verification services.

The Company has implemented appropriate risk management frameworks and internal controls to mitigate these risks.

7. Internal Control Systems and their Adequacy

The Company has established adequate internal financial control systems commensurate with the size and nature of its operations.

Internal controls ensure:

• Accuracy and reliability of financial reporting

• Compliance with applicable laws and regulations

• Safeguarding of assets

• Prevention and detection of fraud

8. Discussion on Financial Performance with Respect to Operational Performance

The financial performance of the Company during FY 2023-24 reflects:

• Stable revenue generation from core verification services.

• Improved profit margins due to operational efficiencies.

• Increased adoption of technology and automation tools to enhance productivity.

• Expansion of service offerings including loan verification services.

These initiatives have enabled the Company to improve profitability despite relatively stable revenue growth.

9. Human Resources

Human capital continues to be a key strength of the Company. The Company focuses on building a skilled workforce with expertise in verification processes, risk management, and technology-enabled solutions.

The Company promotes a culture of:

• Continuous learning and professional development

• Ethical business practices

• Employee engagement and performance excellence

Industrial relations remained cordial throughout the financial year.

10. Key Financial Ratios

Pursuant to the requirements of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the details of significant changes (i.e., change of 25% or more as compared to the immediately previous financial year) in key financial ratios are explained below:

1. Debtors Turnover - The Debtors Turnover Ratio decreased from 1.30 in FY 2022-23 to 0.79 in FY 2023-24. The decline is mainly attributable to an increase in trade receivables and relatively lower revenue realization during the year, resulting in a slower collection cycle.

2. Interest Coverage Ratio - The Interest Coverage Ratio changed from 0.36 in FY 2022-23 to (0.42) in FY 2023-24. This decrease is primarily due to lower earnings before interest and tax during the year and higher finance costs, which resulted in reduced ability to cover interest obligations.

3. Current Ratio - The Current Ratio increased from 1.90 in F.Y. 2022-23 to 2.09 in F.Y. 2023-24. The increase is mainly due to improvement in current assets and better management of short-term liabilities during the year, resulting in a stronger liquidity position of the Company.

4. Debt-Equity Ratio - The Debt-Equity Ratio decreased from 1.06 in FY 2022-23 to 0.85 in FY 2023-24. The reduction is primarily attributable to repayment/reduction of borrowings and improvement in the Companys net worth, leading to a lower dependence on external debt.

5. Net Profit Margin (%) - The Net Profit Margin decreased from 0.16 in FY 2022-23 to (0.09) in FY 2023-24. The change is mainly due to loss incurred during the year, arising from increased operating expenses and finance costs as compared to the previous financial year.

6. Return on Net Worth - Return on Net Worth declined from 0.30 in FY 2022-23 to (0.11) in FY 2023-24. The decrease is attributable to the reduction in net profit during the financial year, which impacted the overall return generated on shareholders funds.

The changes in the above financial ratios are mainly attributable to variations in the operational performance and financial position of the Company during the financial year. The Board of Directors is continuously reviewing the business operations and financial performance of the Company and is taking necessary and appropriate steps to improve operational efficiency, revenue generation, and overall financial performance. The Directors are making their best efforts to strengthen the Companys business operations and improve its financial position in the coming financial years in compliance with the applicable provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

11. Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, and expectations may constitute forward-looking statements within the meaning of applicable laws and regulations.

Actual results may differ materially from those expressed or implied due to various factors including economic conditions, regulatory developments, competitive environment, and other risks beyond the Companys control.