undefined share price Management discussions


INDUSTRY STRUCTURE AND DEVELOPMENTS

Telecommunication

Currently, India is the worlds second-largest telecommunications market and has registered strong growth in the past decade and half. As per the latest report, India continued to be the second largest country in terms of internet subscribers, which holds the worlds highest data usage per smartphone, with the availability of affordable smart phones and lower rates of data is expected to drive the growth.

Indian Mobile Industry is expected to create a higher economic value with increase in growth drivers such as Production Linked Incentive schemes for manufacturing of telecom and networking products, growing demand with increasing internet users, make in India policy for Phased Manufacturing Program (PMP) to promote domestic production of mobile handsets and the basic foundation where Optical fiber cables laid over 1,00,000 gram panchayats.

In the years to come, rise in mobile-phone penetration and decline in data costs is expected to add 500 million new internet users in India, creating opportunities for new businesses; especially with Indian Governments ongoing smart city projects, and Internet of everything will play a vital role in developing these cities. Consumers continue to display appetite for mobile data with data-heavy applications in their daily lives and your Company expects this trend to continue. With 5G round the corner where India is expected to be the second largest market for 5G Services in next 5 years assures greater opportunities in this new world, where the future of Telecom industry in India is said to have several opportunities towards creating new revenue streams in the next decade by offering several benefits to consumers.

As mobile network operators spread the reach and look forward to introducing new and faster technologies with extensive deployment of optical fiber in the existing network as well as for residences in coming years to support new broadband services to meet the upcoming bandwidth requirements. Under the Digital India initiative, the Government is aiming to supply internet access throughout the country, connecting rural citizens to bridge the digital gap between cities and villages through fiber optics network, which plays an important and critical role in realizing the dream of Digital India program under which all the sectors such as healthcare, retail, etc will be connected through internet. Mobile devices continue to be embedded in the fabric of society today and are key in driving the momentum such as video streaming, Internet of Things (IoT), and mobile payments.

In these unprecedented times, the strength and reliability of telecom networks are critically important in keeping people connected while they are physically apart. Connectivity is a lifeline for our first responders and healthcare professionals, our educators, and our Governments, being at the epicenter of growth & innovation. With the developments in services such as security and surveillance, Internet of Things, Home automation, traffic management, retail, logistics and grid energy could eventually facilitate optimization of resources, which indicates a better future performance for the operators and there is likelihood of a higher capex. At the moment Indias Telecom sector is under pressure on cash flows as competition remain intense with larger operators contesting to acquire subscribers of the exiting Telcos. However, on a longer term, recovery expected in the sector on the back of a consolidated structure, better pricing power and data usage.

Enterprise

As the traditional office space connectivity being reduced with number of cabling ports per desk and in turn increased number of ports with Digital Ceiling concept of connecting every IP device across the building where wireless and Building IoT devices are adding more connections like never before, with more and more connectivity requirements everywhere in building, campus, venues and Homes.

Whereas in Data Centre portion, your Company do see change in landscape of traditional Enterprise Data Centre moving to Multi-Tenant Data Centres or colocation DC which provides space and networking equipment to connect an organization to service providers at a minimal cost by offering high scalability, flexibility, modularity with stringent service level agreements which is need of the hour.

With Economic activities on upward despite lingering impact of Covid with growth coming from many sectors across the industry, where Government Sector fared better with Infrastructure projects investment & the Office Network especially from IT Consultancy & software industry got affected more and whereas on the other hand Data Centre segment performed better.

With all the technology changes, your company would see an impact in the copper business as we continue to see work from home adoption growing with office expansion going slow. However, Your Company do see continues growth in Fiber Business over copper due to multifold increase in Bandwidth requirements, with denser wireless & deeper fiber deployments across infrastructure projects including Data Centre expansions where the Data Centre market has been having growth faster than expected & stood as a bright spot in an otherwise gloomy year with pandemic. Data Centre projects in India has been mainly from the Colocation service providers.

Added to this, your Company do see inflationary pressure accelerating with steep increase in prices across commodities and raw materials like copper, stainless steel, plastics and many more items; towards which your company has been adjusting prices consistently across certain products and/or product lines.

While our Country is still far from being out of the medical crisis & its impact on different aspects of business, it is clear to us that the way we behave in a crisis is in many ways more reflective of who we are as a Company. Looking ahead, your Company is optimistic of the opportunities of the work your Company is doing for its clients and the approach your Company have put in place with respect to Data Centre business & Broad band connectivity requirements. With massive investments committed both by Government & Private Players towards infrastructure growth would improve the overall business sentiment and investments in next few Quarters. Market are expected to improve driven by investments in Infrastructure projects, Pharma, Healthcare, Education, Banking & Finance, Defense sector, E-commerce, Manufacturing, Digital India and Smart city initiatives where your Company will be able to favorably participate in the areas of its strength within each opportunity as the market evolves.

REVIEW OF OPERATING PERFORMANCE

The financial statements have been prepared in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. The management of the Company accepts responsibility for the integrity and objectivity of these financial statements and the basis for the various estimates and judgments used in preparing the financial statements. Some of the key performance indicators are given below:

(Rs. in Lakhs)

Particulars Year ended March 31, 2023 Year ended March 31, 2022
Revenue from operations 14,291.25 12,071.28
Operating Costs 13,266.62 11,013.91
Profit before Interest, Depreciation and Tax (EBIDT) 1,024.63 1,057.37
Depreciation 20.99 30.85
Profit before Interest and Tax (EBIT) 1,003.64 1,026.52
Other Income (net of finance cost) 101.27 110.29
Profit before Tax (PBT) 1,104.91 1,136.81
Tax Expense 287.42 288.55
Profit for the year 817.49 848.26
Other Comprehensive Income 0.34 3.53
Total Comprehensive Income for the year 817.83 851.79
Total Assets 7,846.05 7,564.72
Earnings per share (Basic EPS in Rupees) 17.77 18.44

Your Company continued to deliver strong operational & financial performance during the financial year 202223 with overall revenue growth of 18% over that of the previous year. Revenue from the IT-Networking (Enterprise network) business grew by 21%, but there was a degrowth in revenue from the Telecommunication business of 26% over that of the previous year. For the full year, the Companys profit before tax stood at Rs.1,104.91 lakhs compared to Rs.1,136.81 lakhs for the previous year. Profit after tax for the financial year was Rs.817.49 lakhs as compared to Rs.848.26 lakhs for the previous year. The growth in revenue was led by both volume as well as product mix. During the quarter ended March 31, 2023, the Company has recorded a provision of Rs. 775.34 lakhs towards outstanding dues from one of its large customers who is undergoing stressful liquidity conditions. The Company is taking necessary steps to recover its dues.

KEY FINANCIAL RATIOS & RETURN ON NETWORTH

As per the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the key financial ratios are given below:

Ratios Year ended March 31,2023 Year ended March 31,2022 Change Percentage Change
Debtors Turnover Ratio (Days) 7.15 6.35 0.80 12.53
Inventory Turnover Ratio (Days) 6.56 8.46 (1.89) (22.39)
Current Ratio (Times) 2.68 2.77 (0.09) (3.01)
Operating Profit Margin (%) 7.79 9.43 (1.64) (17.36)
Net Profit Ratio 0.06 0.07 (0.01) (20.00)
Return on Net worth (%) 21.43 22.66 (1.23) (5.43)

OPPORTUNITIES

Telecommunication

With the new evolving economy, a robust telecommunications infrastructure with higher speeds is a need of the hour for countrys economic progress. Hence, establishing a strong wireless technology ecosystem will become the basic need and enabler to governments vision of Digital India. Transforming India into a knowledge economy requires new infrastructure development to enable pan-India connectivity connecting rural citizens to bridge the digital gap between cities and villages through fiber optics network, which plays a critical role in realizing the dream of Digital India.

Indian Mobile Industry is expected to create a higher economic value with increase in growth drivers such as Production Linked Incentive schemes for manufacturing of telecom and networking products, growing demand with increasing internet users, make in India policy for Phased Manufacturing Program (PMP) to promote domestic production of mobile handsets and the basic foundation where Optical fiber cables laid over 1,00,000 gram panchayats.

Rise in mobile-phone penetration is expected create opportunities for new businesses; especially where Internet of everything will play a vital role in developing the smart cities. With Consumers continue to display appetite for mobile data with data-heavy applications in their daily lives and your Company expect this trend to continue. With 5G round the corner where India is expected to be the second largest market for 5G Services in next 5 years assures greater opportunities in this new world where the future of Telecom industry in India is said to have several opportunities towards creating new revenue streams in the next decade by offering several benefits to consumers. Carriers will continue to focus on providing data and voice services that are high quality, reliable, and affordable to drive the industry pace and growth, which will create more and more localized /Edge based Content delivery networks to support faster response, reduce on latency, quick access to data due with localized cache.

Enterprise

Growth in Data Centre business & broadband connectivity requirements with massive investments committed both by Government & Private Players towards Infrastructure growth would improve the overall business sentiment and investments in next few Years. Market is expected to improve driven by investments in Infrastructure projects, Pharma, Healthcare, Education, Banking & Finance, Defense sector, E-commerce, Manufacturing, Digital India and Smart city initiatives where your Company will be able to favorably participate in the areas of its strength within each opportunity as the market activities picks up.

With Cloud Computing Aiding Businesses (Large and SMBs) either creating on private cloud infrastructure by way of consolidation and migration of existing compute, storage, and networks. In addition, businesses are parallelly looking to subscribe for public or private hosting services. With this, the Multi-Tenant Data Centre or Colo players in India are offering enterprises choice of better and on demand infrastructure, reliability in terms of power and availability of network and faster time to market. The Data Centre market has been having growth faster than expected & stood as a bright spot in an otherwise gloomy year with pandemic. Data Centre projects in India has been mainly from the Colocation service providers.

RISKS AND CONCERNS

With full of uncertainties, it is not something that any of us would claim to predict the lingering impact of global economic scenarios with supply chain disruptions, rising interest rates accompanied with increase in costs of commodities & volatility is a real confrontation with complexity & challenges in front of your Company. At the same time, tremendous Opportunities lies before your Company with growth in Data Centre business & Broadband connectivity requirements which gives great optimism about the future that holds for your company.

The markets your Company serve continue to undergo disruptions where we must adapt to new market realities thoughtfully, to ensure our continued growth and success. Unfortunately, post-pandemic economy has presented new circumstances that demand adaptability and resilience as we respond to stay ahead of the market condition. Your Company would see an impact on the Enterprise Network copper business with an increase in work from home adoption growing with office space expansion requirements coming down / going slow in the short term. However, your Company do see continues growth in Fiber Business over copper due to multifold increase in Bandwidth requirements, with denser wireless & deeper fiber deployments across the upcoming infrastructure projects. Added to this, your Company do see inflationary pressure accelerating with steep increase in prices across commodities and raw materials like copper, stainless steel, plastics and many more items; towards which your company has been adjusting prices consistently across certain products and/or product lines.

With this new normal and challenges, your company is constantly determining what the mid to long term implications of each of the challenges are and how your company should respond strategically. Regardless of all the challenges, your company firmly believe that it will emerge from this, a stronger ADC India Communications than ever before by realigning cost structure and sharpen overall productivity by being a more valuable partner to our clients than ever before. Your company Board and Risk Management Committee has always looked at worst case scenarios of times like these & built a portion of the strong financials by making right decisions which is sustainable and consistent over years.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has adequate internal control systems for various business processes, financial reporting and compliance with applicable laws and regulations. The Internal Auditors M/s Gnanoba & Bhat, Chartered Accountants review the effectiveness of various processes and other operational activities. The summary of the Internal Audit observations is presented to the Audit Committee and the suggestions and guidance of the audit committee are implemented to ensure effective operation of all departments in the company.

With high importance of Data Security in todays digital economy as businesses advance to grow, your Company decided to move the Data storage to Cloud Based from the current practice of manual back up of Data to avoid any risk. With this the IT infrastructure was also strengthened against ransomware and loss of data.

MANUFACTURING OPERATIONS

Your Company continued to look at ways of cost reduction and be cost competitive in this highly volatile & dynamic market, which has yielded better results as expected and expect to continue the same in the years to follow, which will help the Company to favorably participate as the market activities picks up.

Keeping in mind the welfare of the employees safety first at work, various Safety measures including an Emergency Response Plan have been implemented in the factory.

During the year, major focus has been on development of new design of Fiber Cable, armored Fiber Cords, high density panels to meet upcoming customer requirement for different applications and introduced Copper Panels and cable assemblies.

HUMAN RESOURCES

As on March 31, 2023, the company had 22 permanent employees on the rolls of the company. During the year as part of Learning & Development, training was held for the employees looking at each individual peoples development & skill. Training with respect to Sustainability, E waste & Hazardous waste management, Prevention of Electric Short Circuit, Safe operation of Material handling equipment and Fire Fighting were also conducted. The Employee Engagement Committee comprising representatives from the Workmen and the Management conducted several employee related activities during the year. The Company continued to adopt various process and Policies towards health related to ensure safety and welfare of the employees of the Company. The industrial relation throughout the year was harmonious and cordial.

Cautionary Statement:

Statements in this 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 and which the management believes are true to the best of its knowledge at the time of preparation. Actual results might differ materially from those either expressed or implied and hence the Company and the management shall not be held liable for any loss which may arise because of any action taken based on the information contained herein.