Slone Infosystems Ltd Management Discussions

PRIMARY BUSINESS OF THE COMPANY

In the year 1999, Mr. Rajesh Srichand Khanna, started business of IT Hardware solutions, under his Sole Proprietorship M/s SAM Computers. During the year 2022, Mr. Rajesh Srichand Khanna, our Managing Director and Promoter, decided to give a corporate structure to his venture and accordingly Slone Infosystems Private Limited was incorporated on December 29, 2022, as a Private Limited Company with the object to convert the entire business and operations of M/s SAM Computersinto Private Limited Company .

Subsequently our Company acquired the business of ‘M/s Sam Computers a sole proprietorship of Mr. Rajesh Srichand Khanna, one of the Promoters of our Company, as a going concern, in terms of the Slump Sale Agreement dated March 01, 2023. Thereafter, pursuant to a special resolution passed by the Shareholders at their Extraordinary General Meeting held on November 09, 2023, our Company was converted from a Private Limited Company to Public Limited Company and consequently, the name of our Company was changed to "Slone Infosystems Limited" and a Fresh Certificate of Incorporation consequent to Conversion was issued on December 12, 2023 by the Registrar of Companies, Mumbai. Further the Company has issued shares pursuant to Initial Public Offer (IPO) and listed on EMERGE platform of National Stock Exchange of India Limited on May 10^th, 2024.

We are an IT hardware solutions Company, engaged in selling and renting of IT Equipment, and in providing IT Service Solutions in India. We deal in selling and renting of IT equipment like laptops, desktops, servers, work stations and also provide IT solution services like managing cloud servers, servicing of IT equipment to the corporates.

We provide custom made solutions to our clients for their IT requirements. We procure IT equipment for our clients based on the requirement of the client and then either sell or rent the IT equipment to our clients based on their requirement. We provide flexibility and advantage to acquire the requisite equipment that our client needs to maximize their productivity without compromising their IT budget.

In addition, we also sell the used IT equipments to clients as per their requirements

Our Company is an IT equipment and service providing company, engaged in providing end to end IT equipments on a rental and returnable basis in India. We provide laptops, desktops, printers, servers and other peripherals like CCTV cameras, projectors, storage devices etc. on rental basis mainly to small, medium and large corporate. Based on the clients IT requirements, we offer them tailor-made rental schemes that suit their requirements. By providing the IT rental services to our customers, we provide them with the flexibility and advantage to acquire the requisite equipments that they need to maximize their productivity without compromising their IT budget. In addition, we also sell the used IT equipments to clients as per their requirements.

INDUSTRY IN WHICH OUR COMPANY OPERATES

EXECUTIVE SUMMARY

Electronics hardware industry is the worlds largest and fastest growing industry and is increasingly applications in all sectors of the economy. The domestic production of electronic items has increased from Rs. 3,17,331 crores (USD 49 billion) in 2016-17 to Rs. 6,40,810 crores (USD 87.1 billion) in 2021-22, growing at a Compound Annual Growth Rate (CAGR) of 15%. Indias electronics production is expected to reach USD 300 Billion by 2026. Production Linked Incentive schemes for Phones, IT Hardware and Electronic Components have been successful in attracting global champions while providing a fillip to domestic companies and making them national champion companies with global aspirations. India Semiconductor Mission has been launched to enable Indias emergence as a global hub for electronics manufacturing and design.

India is recognised as a global hub for IT services and has emerged as the worlds 3rd largest start-up ecosystem, having 100 + unicorns. Emerging technologies like 5G, Internet of Things, Advance Data Analytics, Artificial Intelligence, Cloud computing, Augmented and Virtual Reality, 3D printing, robotics and blockchain etc. will redefine the future of technology led transformation. Several Centres of Excellence have been setup to promote innovation in these areas. Efforts are also on to enable Indian IT professional attain world class skills in these technologies through a Future Skills Programme.

GROWTH OF ELECTRONICS SECTOR

Indian electronic manufacturing industry has undergone major transformation in the last couple of years with the host of initiatives and reforms. Government has taken several initiatives to promote electronics manufacturing and as a result, the electronic manufacturing is on high growth trajectory (domestic production of electronic items has increased from Rs. 3,17,331 crores (USD 49 billion) in 2016-17 to Rs. 6,40,810 crores (USD 87.1 billion) in 2021-22, growing at a Compound Annual Growth Rate (CAGR) of 15%). The key drivers of growth are large domestic market, and availability of skilled talent and low-cost labour.

The Governments "Make in India" programme, launched in 2014, was designed to make India as the Global design and manufacturing hub by increasing domestic manufacturing and reducing Indias dependence on the services sector, thereby imparting a healthy mix of contribution from all sectors to the Indian Economy. Another flagship initiative, "Digital India", also targets a substantial boost in the domestic manufacturing of electronics and aims at reducing Indias dependence on imports in this important sector

COMPETITIVE STRENGTHS

1. Wide range of o erings with capability to provide customized and integrated IT Solutions

(i) Cost e ective & integrated o erings

(ii) broad range of products including laptops, desktops, printers, servers and other peripherals like CCTV cameras, projectors, storage devices etc on rental basis.

(iii) maintain a large base of IT hardware including desktops, laptops, printers, scanners etc.

(iv)Delivery both off-site and on-site services as part of our service delivery model depending on the nature of the issue and the needs of our customers, which we believe to give us a competitive advantage.

(v) Flexible Tailor-made rental schemes as per Customer requirements to acquire the requisite equipment.

2. Wide presence in domestic Market with diverse base of customers

(i) Serving clients across various industries & sectors including the logistics solutions, BPO, pharmaceuticals, e-commerce, education, IT, insurance, research, media & entertainment, recruitment, VFX & Digital solutions and many more.

3. Experienced management & operational team

(i) Quali ed and experienced management having experience in di erent aspects of IT hardware industry (ii) Right Personnel recruitment and training initiatives help drive employee loyalty, retention and quality assurance

4. Strong relationship with customers

(i) Customize d o erings to customers as per their speci cations & requirements,

(ii) Track record of consistent delivery of quality and cost-e ective services over the years. (iii)Support maximization of productivity without compromising on the IT budget

GROWTH STRATEGIES

1. Continue to expand customer base

(i) Focus on maintaining long standing relationship with existing customers (ii) Focus on the expansion of the customer base

2. Continue to focus on emerging technologies

(i) Regularly track new, latest technologies and market trends in the IT market. (ii) Upgradation of existing equipments to better serve our clients.

3. Optimal Utilisation of Resources

(i) Constantly endeavour to improve technical process to increase service activates

4. Marketing Strategies:

(i) Focus on providing one stop solution for all IT hardware needs (ii) Focus on requirement of Customers (iii) Emphasizing on Services with value addition (iv) Continuous update of Systems and solutions o ered (v) Timely service and support to gain customer con dence.

OPPORTUNITIES AND THREATS

1. OPPORTUNITIES

1. Growth in Remote Work and Hybrid Models

Increased Demand for IT Equipment: With more companies adopting remote and hybrid work setups, there is a growing need for IT equipment such as laptops, monitors, and networking devices. Renting out this equipment offers businesses a flexible solution that adjusts with their changing workforce needs.

Short-Term Projects: Businesses often require additional IT resources for short-term projects or temporary teams. Renting allows them to scale up quickly without the need for long-term investments.

2. Technological Advancements

Latest Technology Access: As new technologies like AI, 5G, and virtual reality (VR) emerge, companies need access to cutting-edge equipment to stay competitive. Offering the latest tech for rent allows businesses to try out new tools without committing to large capital expenses.

Specialized Equipment: Certain industries, such as healthcare, education, or media production, require specialized IT equipment. Providing niche products on a rental basis can cater to these specific needs.

3. Sustainability and Circular Economy

Eco-Friendly Practices: Many businesses are prioritizing sustainability and are looking for ways to reduce their environmental footprint. Renting and trading IT equipment supports the circular economy by extending the life of products and reducing electronic waste.

Refurbishing and Reselling: Trading in and refurbishing used IT equipment for resale can be a profitable avenue. Companies that focus on high-quality refurbishment can attract cost-conscious customers who want reliable, yet affordable, IT solutions.

4. Small and Medium-Sized Business (SMB) Market

Affordable Solutions for SMBs: Small and medium-sized businesses often have limited budgets for IT investments. Renting allows them to access the technology they need without a significant upfront cost, making it easier for them to compete with larger companies.

Flexible Payment Options: Offering flexible payment plans, like monthly subscriptions or lease-to-own options, can make IT equipment more accessible to SMBs.

5. Digital Transformation

Supporting Digital Initiatives: As businesses across all sectors undergo digital transformation, they require modern IT infrastructure. Renting or trading IT equipment allows companies to upgrade their technology in line with their digital strategies.

The IT trading and renting sector is full of opportunities, driven by technological advancements, changing work patterns, and increasing demand for flexible and sustainable solutions. Companies that can identify and capitalize on these opportunities, while continuously adapting to market trends, will likely see significant growth and success.

4. THREATS

Technological Changes: Rapid advancements in technology can quickly make current equipment obsolete.

Supply Chain Issues: Disruptions in the supply chain can affect inventory levels and delivery times.

Economic Instability: Economic downturns can reduce business investment in new equipment.

Market Saturation: High competition and market saturation can drive down prices and reduce profit margins.

Cybersecurity Risks: Threats such as data breaches or hacking can compromise sensitive business information.

Regulatory Changes: New regulations or compliance requirements can impact how the company operates or increases costs.

Counterfeit Products: Risk of trading in counterfeit or substandard equipment can harm reputation and lead to legal issues.

Customer Credit Risk: Issues with customers defaulting on payments can affect cash flow and financial stability.

Mitigating these threats involves diversifying suppliers, staying updated with technological trends, and implementing strong cybersecurity measures

OUTLOOK

The future of IT trading companies looks promising, fueled by the ongoing digital transformation across industries, a growing emphasis on sustainability, and the rise of new technologies like AI and IoT. As businesses seek cost-effective and eco-friendly IT solutions, demand for refurbished and second-hand equipment is expected to increase. Additionally, global expansion into emerging markets offers new growth opportunities.

However, to stay competitive, IT trading companies must address challenges such as rapid technology obsolescence, supply chain complexities, and stricter data security and environmental regulations. Success will depend on their ability to innovate, offer flexible solutions, and maintain strong customer relationships. Companies that can adapt quickly to these trends and challenges are well-positioned for growth in a dynamic and evolving market.

For IT trading and renting companies, the future is bright with several key trends shaping the landscape:

1. Growing Demand for Flexibility: Businesses increasingly prefer renting IT equipment to adapt to changing needs and reduce capital expenses.

2. Sustainability Focus: Theres a rising emphasis on eco-friendly practices, boosting demand for refurbished and recycled IT products.

3. Technological Advancements: The continuous evolution of tech, such as AI and 5G, creates opportunities for companies to offer the latest equipment and services.

4. Global Expansion: Emerging markets present new growth opportunities as businesses worldwide modernize their IT infrastructure.

5. Evolving Customer Expectations: Companies must provide personalized, flexible solutions and excellent customer service to stay competitive.

6. Regulatory Challenges: Adhering to stricter data security and environmental regulations is crucial for maintaining compliance and avoiding penalties.

In summary, IT trading and renting companies that embrace innovation, prioritize sustainability, and adapt to global market trends will be well-positioned for success.

RISKS AND CONCERNS

As an IT rental company, your business faces several risks and concerns that can impact operations, profitability, and reputation. Heres an overview of the major ones:

1. Technology Obsolescence:

Rapid Depreciation:IT equipment tends to lose value quickly as new technology is released.

If a company holds onto inventory for too long, it may become obsolete and harder to sell, leading to potential losses.

Changing Customer Preferences: As new products and innovations hit the market, customer demand can shift rapidly, making it difficult to predict what inventory will be in demand.

2. Market Competition:

Intense Competition: The IT trading market is competitive, with numerous companies vying for customers. This can lead to price wars, which can squeeze profit margins.

New Entrants: The barrier to entry is relatively low in some segments of IT trading, leading to the constant threat of new competitors entering the market.

3. Supply Chain Disruptions:

Supplier Reliability: Dependence on a few key suppliers can be risky if they face production delays, quality issues, or financial problems. This can disrupt your supply chain and delay your ability to fulfill customer orders.

Global Events: Events like natural disasters, political instability, or pandemics can disrupt the global supply chain, making it harder to source IT equipment.

4. Regulatory Risks:

Environmental Regulations: Stricter laws on electronic waste (e-waste) disposal and sustainability could increase operational costs, especially if the company deals with large volumes of outdated equipment.

5. Environmental and Ethical Risks:

E-Waste Disposal: Improper disposal of electronic waste can lead to legal penalties and harm the environment. Companies must ensure they follow proper e-waste disposal protocols.

Ethical Sourcing: There is increasing scrutiny on where and how IT equipment is sourced. Trading in equipment that was manufactured under unethical conditions can lead to reputational damage.

6. Legal and Contractual Risks:

Contract Disputes: Misunderstandings or disagreements with suppliers or customers over contract terms can lead to costly legal disputes.

Intellectual Property: Selling counterfeit or unauthorized IT products can lead to legal action from original manufacturers.

Conclusion

Managing these risks requires careful planning, strong operational controls, and a proactive approach to compliance and customer service. Companies that effectively mitigate these risks can better protect their business and ensure long-term success in the IT trading industry.

Addressing these risks through robust risk management strategies, insurance, and operational best practices is essential for sustaining and growing your business.

INTERNAL FINANCIAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has robust and comprehensive Internal Financial Control system commensurate with the size scale and complexity of its operations. The system encompasses the major processes to ensure reliability of financial reporting, compliance with policies, procedures, laws, and regulations, safeguarding of assets and economical and efficient use of resources. The policies and procedures adopted by the company to ensures the orderly and efficient conduct of its business and adherence to the companys policies, prevention and detection of frauds and errors, accuracy and completeness of the records and the timely preparation of reliable financial information. The Internal Auditors and the Management continuously monitors the efficacy of Internal Financial Control system with the objective of providing to the Audit Committee and the Board of Directors, an effectiveness of the organizations risk management with regard to the Internal Financial Control system. Audit Committee meets regularly to review reports submitted by the internal auditors. The Audit Committee also meet the Companys Statutory Auditors to ascertain their views on the financial statement, including the financial reporting system and compliance to accounting policies and procedures followed by the Company. In addition to the above, the Company has formulated a Vigil Mechanism (Whistle Blower Policy) for its Directors and Employees for reporting genuine concerns about unethical practices and suspected malpractices.

DISCLOSURE OF ACCOUNTING TREATMENT

The financial statements of the company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The company has prepared these financial statements to comply in all material respect with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 2013. The financial statements have been prepared on an accrual basis and under the historical cost convention.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Company has reported total revenue of Rs. 6,106.52 Lakhs for the current year as compared to Rs. 3,077.40 Lakhs in the previous year. The Net Profit for the year under review amounted to Rs. 418.69 Lakhs in the current year as compared to Profit incurred in last year amounting Rs. 74.66 Lakhs.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

We believe that our employees are key contributors to our business success and thus we focus on attracting and retaining the best possible talent. Our Company looks for specific skill-sets, interests and background that would be an asset for its kind of business. As on March 31, 2024, our Company has employed 17 employees at various levels of the Organization which is commensurate with the size, nature and operations of the Company.

DETAILS OF KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFORE

Ratios	As at 31.03.2024		As at 31.03.2023		Variance			Explanation for any change in the ratio by more than 25% as compared to the preceding year.
Interest Coverage Ratio	19.91		3.54		462%			The business has significantly grown in current year. Hence the improvement in current year.
Current ratio	3.11		1.55		101%			The business has significantly grown in current year. Hence the improvement in current year
Debt- equity ratio	0.12		1.30		(91%)			There is a repayment of the debt during current year, Hence improvement in the ratio.
Operating Profit Margin (%)	0.09		0.02		328%			The business has significantly grown in current year. Hence the improvement in current year
Debt service coverage ratio	4.367		0.685		538%			In the current year there is increase in EBITDA, hence the improvement in ratio
Return on equity ratio	54.66%		34.00%		61%			Profit after tax for the current year has improved, hence the change in ratio
Inventory turnover ratio	29.87		387.69		(92%)			It shows rationlization of this ratio post increase in business/turnover
Trade receivables turnover ratio		8.36		6.74		24%	It shows rationlization of this ratio post increase in business/turnover
Trade payables turnover ratio		11.44		6.53		75%	The business has significantly grown in current year. Hence the variance.
Net Capital turnover ratio		4.75		7.84		(39%)	The business has significantly grown in current year. Hence the variance
Net profit ratio		9.17%		2.84%		223%	The business has significantly grown in current year. Hence the variance
Return on capital employed		46.25%		38.69%		20%	The business has significantly grown in current year. Hence the variance
Return on investment		-		-		-

DISCLOSURES

During the year the Company has not entered into any transaction of material nature with its promoters, the Directors or the management, their subsidiaries or relatives etc. that may have potential conflict with the interest of the Company at large.

FORWARD-LOOKING STATEMENT

Certain statements made in the Management Discussion and Analysis Report relating to the Companys objectives, projections, outlook, expectations, estimates, and others may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, whether expressed or implied. Several factors could make a significant difference to our operations. These include climatic and economic conditions affecting demand and supply, government regulations and taxation, any epidemic or pandemic, and natural calamities over which we do not have any direct/indirect control.