Trust Fintech Ltd Management Discussions

1. Overview

The past fiscal year has been transformative for Trust Fintech Limited (TFL), marked by our successful listing on the NSE Emerge Platform. This milestone has not only enhanced our visibility and credibility but also positioned us for accelerated growth and market expansion. Our dedication to pioneering financial solutions has been central to our achievements, further solidifying our role as a leader in the software and IT services sector.

Founded in 1998, TFL has consistently demonstrated a commitment to innovation and excellence. We offer a comprehensive range of solutions including advanced banking software, ERP implementation, customized software development, SAP Business One (SAP B1) services, and offshore IT services. Our focus on delivering cutting-edge solutions has allowed us to address the dynamic needs of businesses globally, driving our continued success and market leadership.

2. Financial Performance

Financial Review (IN Rs. Lacs)

Particulars	FY 2023-24	FY 2022-23	Change %
Revenue from contracts with customers	3504.38	2254.34	55.45%
Inventory and data costs	364.90	260.54	40.05%
Employee benefits expenses	644.86	1055.48	-38.90%
Other expenses	723.61	359.86	101.08%
EBITDA	1771.01	578.46	206.16%
% EBITDA Margin	51%	26%	96.95%
Depreciation and amortisation expenses	123.35	49.48	149.29%
Finance costs Other income (Excl. Liabilities written back, if any)	1.80	3.78	-52.24%
	23.25	15.85	46.68%
Profit Before Tax and Share of loss of an associate
	1669.11	541.05	208.49%
Share of loss of an associate	0.00	0.00	0.00%
Profit Before Tax (PBT)	1669.11	541.05	208.49%
(Less): Total tax	418.94	138.84	201.74%
(Less): Non-controlling interest
	0.00	0.00	0.00%
Profit After Tax (PAT) net of non-controlling interest	1250.17	402.21	210.82%
% Profit Margin	36%	18%	99.95%
Normalized PAT (net of non-controlling interest)	1250.17	402.21	210.82%
% Normalized PAT Margin	36%	18%	99.95%

2.1 Revenue Growth

This fiscal year, TFL achieved a remarkable 55% increase in revenue, a testament to our ability to capitalize on emerging market trends and customer needs. This growth is primarily driven by several key factors:

? Banking Software: The demand for advanced banking solutions has surged, fuelled by increasing regulatory requirements and a growing need for enhanced digital banking experiences. Our commitment to developing innovative banking software has positioned us as a preferred partner for financial institutions seeking to modernize their operations.

? ERP Implementation: Our success in completing several large-scale ERP projects has significantly boosted our revenue. These projects have not only expanded our footprint in the ERP market but also demonstrated our expertise in delivering complex, high-value solutions.

? Customized Software Development: We have experienced a notable increase in the number of bespoke projects, reflecting our ability to meet diverse client requirements. Our flexibility and expertise in customized software development have strengthened our relationships with both existing and new clients.

? SAP Business One (SAP B1): The growing adoption of SAP B1 among small and medium-sized enterprises has driven higher service revenue. Our focus on providing robust and scalable SAP B1 solutions has helped us capture a larger share of this expanding market.

? Offshore IT Services: The expansion of our offshore service operations has enabled us to offer cost-effective solutions and 24/7 support to a broader international client base. This growth has been instrumental in increasing our overall revenue and enhancing our global presence.

2.2 Profitability

Our net profit has seen an extraordinary increase of 211% this year. This substantial improvement in profitability is attributed to several factors:

? Operational Efficiency: We have made significant strides in enhancing our operational processes, which has led to improved cost management and operational efficiency. Our focus on streamlining operations has resulted in a more favourable cost-to-revenue ratio.

? Higher Margins on Key Projects: By concentrating on high-value projects and premium services, we have achieved increased profit margins. This strategic focus on high-margin opportunities has bolstered our overall profitability.

? Effective Resource Utilization: Optimal use of resources and reduction in overhead costs have further contributed to our improved profitability. We have implemented strategies to maximize resource efficiency and minimize unnecessary expenditures.

2.3 Financial Ratios

? Debtors Turnover Ratio: The ratio improved to 3.44 in 2023-24 from 3.39 in 2022-23, reflecting a 1% increase. This improvement is primarily due to the higher revenue generated from operations in the current fiscal year.

? Current Ratio: The ratio increased to 3.66 from 3.22, marking a 14% rise. This increase is attributed to a growth in current assets, which has enhanced our liquidity position and ability to meet short-term obligations.

? Debt Equity Ratio: The ratio rose to 0.0038 from 0.00, indicating a slight increase in current borrowings. This change reflects our prudent approach to managing debt and equity, maintaining a low level of financial leverage.

? Return on Net Worth: The return on net worth improved to 34% from 21%, representing an 62% increase. This significant rise is due to both an increase in profit and a growth in shareholder funds, underscoring our strong financial performance and value creation for shareholders.

3. Market Position and Strategy

3.1 Market Trends

The software and IT services market is undergoing rapid changes, driven by several key trends:

? Digital Banking Solutions: The demand for advanced digital banking solutions is growing, fuelled by technological advancements and evolving regulatory requirements. Financial institutions are increasingly seeking solutions that offer enhanced functionality and improved customer experiences.

? ERP Systems: The trend towards integrated ERP systems continues to gain momentum as businesses strive to enhance operational efficiency and streamline processes. Companies are investing in ERP solutions to achieve better data integration and decision-making capabilities.

? Custom Software Solutions: The market for customized software solutions remains strong, with businesses seeking tailored solutions to address specific operational needs. This trend highlights the increasing importance of bespoke software development in meeting unique client requirements.

? SAP B1 Adoption: The adoption of SAP B1 among SMEs is on the rise, driven by the need for scalable and flexible ERP solutions. Businesses are recognizing the value of SAP B1 in supporting growth and operational efficiency.

3.2 Strategic Initiatives

To leverage these market trends and drive future growth, TFL has embarked on several strategic initiatives:

? Expansion of Banking Software Portfolio: We are investing in research and development to introduce next-generation banking solutions that incorporate artificial intelligence (AI) and machine learning. These advancements will enable us to offer more sophisticated and intelligent banking solutions.

? ERP Market Penetration: We are enhancing our ERP offerings and expanding our consulting capabilities to capture a larger share of the ERP market. Our strategy includes strengthening our position in key verticals and developing industry-specific solutions.

? Customization Capabilities: We are focusing on strengthening our development team to handle a higher volume of customized projects and reduce turnaround times. Our goal is to enhance our ability to deliver tailored solutions efficiently and effectively.

? SAP B1 Enhancements: We are offering additional value-added services for SAP B1 clients to maximize their return on investment. These enhancements include advanced support services and customizations that align with client business needs.

? Offshore IT Services Growth: We are further developing our offshore capabilities to support increasing international demand. Our focus is on improving service delivery efficiency and providing scalable, cost-effective solutions to global clients.

4. Risk Factors

4.1 Industry Risks

? Technological Changes: The rapid pace of technological advancements presents a risk of obsolescence. To mitigate this risk, we are committed to continuous investment in research and development, ensuring that our solutions remain competitive and relevant.

? Regulatory Changes: Changes in regulations, particularly those affecting the banking and financial sectors, may impact our software solutions and services. We are actively monitoring regulatory developments and adapting our solutions to meet new compliance requirements.

4.2 Operational Risks

? Project Execution: The complexity of bespoke software projects poses a risk of delays or cost overruns. We are implementing robust project management practices and risk mitigation strategies to address these challenges and ensure successful project delivery.

? Talent Acquisition: Attracting and retaining skilled professionals in a competitive job market remains a challenge. We are enhancing our recruitment and retention strategies, including offering competitive compensation packages and professional development opportunities.

4.3 Financial Risks

? Currency Fluctuations: As an offshore service provider, fluctuations in currency exchange rates could impact profitability. We are employing hedging strategies and financial instruments to mitigate the impact of currency volatility on our financial performance.

? Economic Conditions: Economic downturns could affect client budgets, potentially leading to delays in project initiation or completion. We are diversifying our client base and monitoring economic indicators to manage this risk effectively.

5. Future Outlook

Looking ahead, Trust Fintech Limited is well-positioned to capitalize on the growing demand for sophisticated software solutions and IT services. We anticipate continued growth driven by several key factors:

? Increased Adoption of Digital Banking Solutions: We will leverage our expertise to address emerging needs in the banking sector, focusing on developing innovative solutions that enhance digital banking experiences.

? Expansion of ERP Solutions: Our strategy includes strengthening our presence in the ERP market through enhanced offerings and expanded consulting services. We aim to capture a larger market share and support businesses in achieving operational excellence.

? Growing Need for Custom Solutions: We will continue to focus on providing tailored software solutions to meet specific client requirements. Our commitment to customization will help us capitalize on this growing trend and deliver value to our clients.

? SAP B1 Market Growth: We are committed to enhancing our service portfolio to support SAP B1 clients more effectively. Our goal is to help SMEs leverage SAP B1 to drive growth and operational efficiency.

? Global Offshore IT Services: We will further develop our offshore capabilities to support global clients with scalable and cost-effective solutions. Our focus is on improving service delivery and expanding our international presence.

Our strategic initiatives and focus on client needs will continue to drive our success, delivering value to our clients, shareholders, and employees. We remain committed to innovation, operational excellence, and strategic growth, ensuring that we are well- positioned for continued success in the coming years.

6. Internal Financial Control Systems

TFLs internal financial control systems are meticulously designed to uphold the integrity of financial reporting, ensure regulatory compliance, and safeguard company assets, crucial as the company experiences enhanced visibility and rapid growth. The framework is anchored by robust governance and oversight, with the Board of Directors and the Audit Committee providing strategic direction and regular oversight to align financial controls with business objectives and regulatory requirements. An independent internal audit team further supports this by evaluating control effectiveness and reporting directly to the Audit Committee, ensuring transparency and objectivity.

Financial reporting and compliance are managed through strict adherence to established accounting standards and internal policies, guaranteeing accuracy and reliability in financial reporting. The company also maintains a comprehensive compliance framework to meet industry-specific regulations and adjust to any regulatory changes through regular reviews.

Operational controls are implemented to prevent conflicts of interest and mitigate fraud risks. This includes enforcing segregation of duties and requiring proper authorization and documentation for significant financial transactions. Additionally, TFL actively engages in risk management through regular risk assessments to identify and address potential financial risks, complemented by control activities like reconciliations and audits to ensure control effectiveness.

Information systems are secured with robust measures to protect financial data from unauthorized access and breaches, including encryption and access controls, while maintaining data integrity through regular backups and system checks. Continuous staff training and a commitment to ongoing improvement ensure adherence to financial control policies and the ability to address emerging challenges.

The adequacy of these internal controls is evaluated through various mechanisms, including internal audits that assess control effectiveness and compliance, independent external reviews that provide objective assessments, and performance metrics tracking key aspects like reporting timeliness and accuracy. As TFL continues to expand in the financial technology sector, the commitment to maintaining and enhancing these financial controls remains steadfast, supporting the companys strategic objectives and ensuring excellence in financial management.

7. Conclusion

Trust Fintech Limited has demonstrated resilience and adaptability over the past fiscal year, achieving significant growth and profitability despite a challenging economic environment. Our strategic focus on innovation, operational excellence, and market expansion has enabled us to navigate the complexities of the industry successfully. We are confident that our forward-looking strategies and commitment to delivering value will drive our success and strengthen our position as a leading provider of software and IT solutions. As we move forward, we remain dedicated to meeting the evolving needs of our clients, shareholders, and employees, ensuring sustained growth and long-term success.

For and on behalf of the Board of Directors

Trust Fintech Limited

Sd/-

(Hemant Chafale)

Managing Director

DIN: 01590781