Slone Infosystems Ltd Management Discussions

PRIMARY BUSINESS OF THE COMPANY

The journey of Slone Infosystems Limited traces back to the year 1999, when Mr. Rajesh Srichand Khanna, our Managing Director and Promoter, commenced operations under his sole proprietorship, M/s SAM Computers, offering IT hardware solutions. In pursuit of a structured and scalable corporate form, the business was incorporated as Slone Infosystems Private Limited on December 29, 2022. The objective was to transfer the entire operations of M/s SAM Computers into a private limited company structure.

Subsequently, pursuant to a Slump Sale Agreement dated February 1, 2023, our Company acquired the business of M/s SAM Computers as a going concern. Later, by way of a special resolution passed at the Extraordinary General Meeting held on November 9, 2023, the Company was converted into a public limited company. A fresh Certificate of Incorporation in the name of Slone Infosystems Limited was issued by the Registrar of Companies, Mumbai on December 12, 2023.

Following this, the Company successfully launched its Initial Public Offering (IPO) and got listed on the EMERGE platform of the National Stock Exchange of India Limited on May 10, 2024.

We are an IT hardware solutions provider, engaged in the sale and rental of IT equipment and offering a wide range of IT service solutions in India. Our product portfolio includes laptops, desktops, servers, workstations, and related peripherals. In addition, we manage cloud servers and offer on-site/off-site servicing and IT support to corporate clients.

We offer customized, scalable, and cost-effective solutions, enabling clients to procure IT hardware on a sale or rental basis depending on their specific needs. Our rental services are designed to offer maximum operational flexibility without overburdening our clients IT budgets. We also trade in refurbished and used IT equipment to meet various client requirements.

INDUSTRY IN WHICH OUR COMPANY OPERATES

Indias electronics production is expected to reach USD 300 billion by 2026, indicating a significant upward trajectory

Domestic production of electronic goods witnessed a substantial increase from Rs. 3,17,331 crore (USD 49 billion) in 201617 to Rs. 6,40,810 crore (USD 87.1 billion) in 2021-22, growing at a robust Compound Annual Growth Rate (CAGR) of 15%.

Production Linked Incentive (PLI) schemes for Phones, IT Hardware, and Electronic Components have been successful in attracting global players and nurturing domestic companies into national champions with global aspirations.

Production, Imports, and Exports of Electronic Goods

	2016-17	2017-18	2018-19	2019-20	2020-21	2021-22
Production	3,17,331	3,88,306	4,58,006	5,33,550	5,54,461	6,40,810
Imports	2.87.559	3,40,901	4,01,450	3,85,0813	3,99,374	5,09,679
Exports	39,980	41,220	61,908	82,929	81,822	109,797

The growth of Indias electronics manufacturing industry is propelled by a combination of factors including a large domestic market, abundant skilled talent, and cost-effective labor.

The growth of Indias electronics manufacturing industry is propelled by a combination of factors including a large domestic market, abundant skilled talent, and cost-effective labor

Technologies like 5G, Internet of Things (IoT), Advanced Data Analytics, Artificial Intelligence (AI), Cloud Computing, Augmented and Virtual Reality (AR/VR), 3D printing, Robotics, and Blockchain are reshaping the future of technology- led transformation.

Efforts are underway to equip Indian IT professionals with world-class skills in emerging technologies through initiatives like the Future Skills Programme, ensuring they remain competitive in the global arena.

Digital India Seeks to substantially increase domestic manufacturing of electronics and reduce dependency on imports, aligning with the broader goal of fostering digital transformation across the country.

ELECTRONICS HARDWARE INDUSTRY

• EXECUTIVE SUMMARY

The electronics hardware industry is the worlds largest and one of the fastest-growing industries, with applications spanning every major sector. In India, domestic production of electronic items has increased from Rs. 3,17,331 crores) in FY 2016-17 to Rs. 6,40,810 crores in FY 202122, growing at a 15% CAGR. The industry is projected to reach USD 300 billion by 2026.

Flagship initiatives like the Production Linked Incentive (PLI) schemes, the India Semiconductor Mission, and Digital India are shaping the country into a global electronics design and manufacturing hub. Indias emergence as the third-largest startup ecosystem and advancements in AI, cloud computing, 5G, IoT, and blockchain are poised to transform the IT and electronics landscape significantly.

• RESEARCH AND DEVELOPMENT (R&D)

Our Company recognizes the value of innovation and has taken steps to build internal capabilities for:

i. Exploring alternate IT asset financing models

ii. Evaluating new age hardware like thin clients, green desktops, and low-power servers

iii. Identifying client pain points and co-developing solutions with technology partners

Though currently in the early stages, R&D investment will play a critical role in future differentiation and long-term growth.

• GROWTH OF ELECTRONICS SECTOR

The Indian electronics manufacturing sector has been on a strong upward trajectory, driven by:

i. Government support through the Make in India and Digital India initiatives

ii. A large domestic market, skilled workforce, and cost- competitive labor

iii. Increasing demand for localized production, innovation, and reduced import dependency

The sector continues to attract both domestic and international investment and partnerships, setting the stage for sustainable growth.

• COMPETITIVE STRENGTHS

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

(i) Cost effective & integrated offerings

(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) Qualified and experienced management having experience in different 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 offerings to customers as per their specifications & requirements,

(ii) Track record of consistent delivery of quality and cost-effective 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 equipment to better serve our clients.

3. Optimal Utilisation of Resources

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

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 offered

(v) Timely service and support to gain customer confidence.

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 shortterm 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.

2. 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 requires diversification of suppliers, continuous monitoring of technological trends, and implementation of robust 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 ecofriendly 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 ensure the orderly and efficient conduct of its business, adherence to the Companys policies, prevention and detection of frauds and errors, accuracy and completeness of records, and the timely preparation of reliable financial information.

The Internal Auditors and Management continuously monitor the effectiveness of the internal financial control system and the Companys risk management framework and provide relevant observations to the Audit Committee and the Board of Directors.

The Audit Committee meets regularly to review reports submitted by the internal auditors. The Audit Committee also meets the Companys Statutory Auditors to ascertain their views on the financial statements, including the financial reporting system and compliance with the accounting policies and procedures followed by the Company. In addition, the Company has formulated a Vigil Mechanism (Whistle Blower Policy) for its Directors and employees to report genuine concerns regarding 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. 21,101.68 Lakhs for the current year as compared to Rs. 21,064.18 Lakhs in the previous year. The Net Profit for the year under review amounted to Rs. 901.06 Lakhs in the current year as compared to Profit incurred in last year amounting Rs. 740.73 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, 2025, our Company has employed 30 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 31.03.2026	As at 31.03.2025	Variance	Explanation for any change in the ratio by more than 25% as compared to the preceding year.
Interest Coverage Ratio	15.08	29.54	(49%)	There is significant increase in finance costs during the year, hence the variance
Current ratio	1.48	2.76	(46%)	There is a significant increase in Current Assets and Current Liabilities, hence the variance
Debt- equity ratio	0.20	0.10	96%	There is an increase in debt when compared to previous year, hence there is increase in the ratio
Operating Profit Margin (%)	0.05	0.05	4%	The ratio remains the same during current year and previous year, hence there is little variance
Debt service coverage ratio	9.42	14.08	(33%)	Even though there is improvement in EBITA in current year; there is a significant increase in CAPEX in current year, hence the variance.
Return on equity ratio	20.76	28.35	(27%)	During the current year even though there is increase in profit after tax; there is a significant increase in average shareholders equity, hence the variance
Inventory turnover ratio	10.23	16.82	(39%)	During the year there is significant increase in business activity including purchases and closing inventory; hence the variance.
Trade receivables turnover ratio	6.77	15.21	(55%)	During the year there is significant increase in business activity and sales; and hence the increase in debtors and variance
Trade payables turnover ratio	7.49	24.86	(70%)	During the year there is significant increase in business activity including purchases; hence the variance
Net Capital turnover ratio	8.33	6.61	26%	During the year there is significant increase in business activity and hence improvement in the ratio
Net profit ratio	5.00%	4.99%	0%	The ratio remains the same during current year and previous year, hence there is no variance
Return on capital employed	26.63%	27.53%	(3%)	During the current year there is increase in business activity, however there is not much variance between the ratios of the two years
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.