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Several new technology solution and service providers have emerged over the years, offering different models to potential clients to utilize their solution and service offerings. This development created several market opportunities for the industry and their associates. The Company has generated revenue of INR 15020.96/- (In Thousands) for the FY 2022-23 & Profit after Tax stood at INR 8483.34/- (In Thousands). It is imperative that affairs of our Company are managed in a fair and transparent manner. This is vital to gain and retain the trust of our stakeholders. There is an expectation of better performance in the coming years as the Company is looking for more business in future.

INDUSTRY OVERVIEW

IT Services

Global economic activity experienced a sharper-than expected slowdown in the fiscal year 2023. With central banks raising interest rates and food and energy prices coming down, global inflation is gradually subsiding. This has resulted in marginal improvement in business and household buying power. The near-term outlook remains highly uncertain with downside risks from the unpredictable course of the geopolitical conflict in Europe, continued impact from tighter monetary policy, inflation and recession fears, pressures in global energy markets reappearing, and financial market volatility. Rapid tightening of fiscal policies has exposed vulnerabilities both among banks and non-bank financial institutions, with fluctuations in financial conditions due to shifts in market sentiment. This may result in slowdown in demand in certain markets and lead to delayed decision making.

Technology spending is forecasted to increase with enterprises investing in value-driven transformation focused on areas like cloud transformation, automation, integration of AI, data analytics and cyber security as their top priorities. The demand for digital transformation and infrastructure modernization will continue to drive growth for the industry with accelerated adoption of digital and emerging technologies, such as next generation AI, augmented reality ("AR"), virtual reality ("VR"), extended reality, web3 and metaverse, 5G and edge, cyber and bio convergence. While emerging technologies will disrupt industries, they will also pose new risks in the areas of data privacy, surveillance, and ownership.

Global IT service providers are equipped to support enterprises across various industries to overcome the current challenges, with a wide range of offerings in software development, digital transformation, IT business solutions and consulting, research and development, technology infrastructure and business process services.

The IT services industry is expected to accelerate and drive decisions in fiscal year 2024 based on investments made by clients in cost optimization, operational excellence, digital transformation, vendor consolidation, productivity improvement, customer experience programs, innovation in products and services, talent management, future of workplace and workforce, and environmental, social, and governance initiatives.

According to the Strategic Review 2023 published by NASSCOM ("NASSCOM Report"), revenue for the Indian IT services sector is expected to witness growth of 8.3% year-on-year in fiscal year 2023, led by IT modernization including application modernization, cloud migration and platformization. Digital revenues are estimated to account for 32%-34% of total

ANNUAL REPORT FY 2022-23

industry revenue, growing at 16% annually in fiscal year 2023. IT services contracts will include a significant digital component, led by digital transformation, cloudification, platform engineering, AI, building software-as-a-service ("SaaS") enabled products and associated consulting services.

According to the NASSCOM Report, next-generation technologies, such as sensor technology, smart robots, autonomous driving, computer vision, deep learning, autonomous analytics, AR/VR, sustainability technology, edge computing, distributed ledger, spacetech and 5G/6G are expected to witness twice the average growth in fiscal year 2023.

The NASSCOM Report estimates that revenue for the engineering services sector will grow 11% year-on-year, reaching $41 billion in fiscal year 2023, led by increasing softwarization of equipment and devices, ad cloudification, next-generation connectivity solutions (e.g. Industrial IoT), autonomous tech, 5G, cloud engineering, EV technology (e.g. electric batteries) and digital engineering (e.g. platform engineering and device-as-a-service).

Enterprises are prioritizing cost takeout and operational excellence initiatives and are bearish on discretionary spends. Significant opportunities exist as clients realign vendor portfolios. Industry verticals such as Banking & Financial services, Hi-tech, and Retail & Consumer are showing signs of caution in their technology spending in response to financial market instabilities, cost pressures, lingering inflation, and weak consumer spending. Telecom clients are expected to prioritize monetizing their 5G investments while verticals such as Healthcare, Utilities, Automotive are expected to be the bright spots and stay resilient.

Focus on ESG parameters will continue to be a driver for differentiation. Clients expect providers to not only meet the global standards on ESG, but also help the client make progress on their ESG goals across key focuses such as climate change, diversity and inclusion, corporate governance, and cyber security.

IT Products

According to the NASSCOM Report, Indias domestic market for hardware is estimated to be

$17.4 billion in fiscal year 2023, compared to $16.6 billion in fiscal year 2022, and overall revenue for the hardware industry is expected to be $17.8 billion in fiscal year 2023, compared to $17 billion in fiscal year 2022. The growth is expected to be driven by computer hardware and peripherals due to remote work, online learning, rise of e-commerce, and government initiatives that increase digital and internet connectivity. The Indian domestic hardware market will continue to grow due to the demand for remote networking infrastructures.

ISRE

The GoI is accelerating digitalization initiatives, with increased IT spending driven by the its Digital India initiative, focused on citizen experience and digital inclusion. According to the NASSCOM Report, the GoI played a prominent role as both adopter and enabler for technology adoption through various GoI initiatives like Make in India and the ease of doing business, and Production Linked Incentive ("PLI") schemes for foreign companies, as well as by reworking legacy labor laws and agricultural policies.

In fiscal year 2023, the GoI and Indian public sector enterprises are expected to spend $9.5 billion on technology with an increased focus on cloud, with the NASSCOM Report indicating an additional investment of $2-3 billion in cloud alone.

ANNUAL REPORT FY 2022-23

New-age technologies have been adopted across various industries, and Indias central and state governments are expected to invest $2-3 billion more in these technologies. The GoI budget for fiscal year 2023, as well as updates to Indias data protection laws, the GoI continues to encourage investment in data centers with the intent to make India a data center hub. Given the consolidation of trends and customer needs in the IT Services segment and ISRE segment, effective as of April 1, 2023, we will be merging the ISRE segment with the IT Services segment.

RISKS AND CONCERNS

There are certain issues which may hamper the growth of the industry, these issues require urgent attention and are as follows:

Regulatory Risk:

Government Regulations though well intended, are creating an environment of over regularization resulting in more time spent in Compliance reporting than business planning. There is always a possibility of unintentional non-compliance.

Credit Risk:

Credit risk is the risk that counter party will not meet its obligations under a financial instruments or customer contract leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) from its financing activities including deposits with banks and investment in quoted and un-quoted equity instruments.

Market Risk:

The Company is exposed to equity price risk from investments in equity securities measured at fair value through profit and loss. The Management monitors the proportion of equity securities in its investment portfolio based on market indices and based on company performance for un-equity instruments. Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Board of Directors. Further, major investments in un-quoted equity instruments are strategic in nature and hence invested for long-term purpose.

Interest rate Risk:

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Companys exposure to the risk of changes in market interest rates relates primarily to its short-term borrowings in nature of working capital loans, which carry floating interest rates. Accordingly, the Companys risk of changes in interest rates relates primarily to the Companys debt obligations with floating interest rates.

Liquidity Risk:

Liquidity is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Companys approach to managing the liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Companys reputation.

ANNUAL REPORT FY 2022-23

Unforeseen /Unavoidable Risk:

There may be certain unforeseen /unavoidable Risk, which may hamper the business operations of the company.

STRATEGIC OVERVIEW

    1. Accelerate growth–Focus and scale;
    2. Strengthen clients and partnerships;
    3. Lead with business solutions;
    4. Building talent at scale;
    5. Operational excellence.
Risk and Impact Mitigation Strategy
Risk: Risk of economic slowdown or recession in key global economies.

Impact: Macroeconomic headwinds viz., muted GDP projections, unrelenting inflation, high interest rates, and instability in the financial systems caused uncertainty which in turn may cause customers to proceed with caution, adversely impact

business sentiments.

Macroeconomic headwinds viz., muted GDP projections, unrelenting inflation, high interest rates, and instability in the financial systems caused uncertainty which in turn may cause customers to proceed with caution, adversely impact business sentiments.
Risk: Revenue Risk - Slackness in demand from existing customers impacting revenue growth.

Impact: Reduction in customers spend or

share of wallet may adversely impact our revenue growth.

To offset the possibility of lower spend, newer offerings and tech solutions, along with clients-focused solutions to either optimize costs or promote customers digital initiatives, are being pursued.
Risk: Price Pressure / Margin Risk

Impact: Customers facing business and cost challenges may potentially negotiate for greater competitive pricing, adding further

pressure on margins.

Cost optimization strategies like cloud deployment, higher automation, offshoring and changing resource profile may need to be adopted, in consultation with the

customer.

Risk: Cyber Security and Privacy Risks - Risk of data theft, deviation to information security requirement and cyber-attacks.

Impact: Unauthorized use or disclosure of employee or company or customer data may lead to either breach of customer contract or fines/penalties from regulators and/or damage companys reputation.

Data protection controls (encryption, data leakage prevention etc.) and Cyber security tools (firewalls, antivirus, etc.) are deployed to prevent cyber-attacks and data exfiltration. User awareness and supplier risk management is rigorously implemented to ensure effective deployment of data security controls. Security controls are continuously monitored and rigorously assessed through Annual Privacy Audit, IT Audits, External Health Check Audits and

Customer Audits.

Risk: Impairment Risk

Impact: Possibility of declining business performance of acquired companies, due to weak economic environment or other strategic or operational factors, leading to impairment.

A dedicated team monitors the business performance of the acquired companies and corrective actions are initiated as required. Synergy benefits of large customer network, competencies, or cost optimization possibilities of TechM are leveraged upon, to

the extent possible.

ANNUAL REPORT FY 2022-23

Risk: Statutory Compliance Risk - Tracking changing compliance requirements across geographies

Impact: Tracking the changing compliance requirements in multiple countries and adhering to the same for multiple entities is a challenge, and non-compliances could hurt our reputation as well as result in penal

action by the concerned authorities

Applicable statutory compliances are tracked through our Global Compliance Management System (GCMS) with a bottoms-up process and dashboarding prior to compliance certification. A refresh of the laws and compliances in the tool is underway to ensure that all requirement in the tool as updated and relevant.
Risk: Technology Risk - Risk of deficiencies in emerging competencies

Impact: Inability to timely adopt and invest in emerging competencies may result in a competitive disadvantage. Further, developing or acquiring new technologies or capabilities and organization-wide adoption has significant cost implications.

Investment in the right technological competencies is key to maintaining our competitive edge. Our strategy of NXT.NOW drives us towards embracing newer technologies that have the potential for being adopted by enterprise at scale. Investment in new-age technological skills, including carefully curated training programs for upskilling the existing

workforce, are underway.

Risk: Delivery Capability / Capacity Risk Impact: The risk of not being able to deliver on time, or within budget or not meeting customer specifications is an inherent project-level risk in our industry. Inability to surmount these challenges could lead to penalties and/or loss of business and loss of reputation. A robust physical and digital infrastructure is maintained to adhere to the highest quality standards. From a program governance perspective, a dedicated ‘Program Office monitors and reports on various parameters of each engagement. Large engagements undergo additional review by ‘Delivery Heads. Additional ‘Steering Committee reviews are undertaken by leadership each month for

critical engagements.

Risk: Legal and Contractual risks

Impact: Legal, litigation and contractual risk arising out of contract execution and matters arising out of IPR, tax, regulations, employment contracts, adverse rulings, mergers, etc.

Contract-level risks are managed by our in- house legal team who thoroughly review each contract to ensure appropriate contractual liabilities are assumed and necessary approvals are obtained as per the defined authority matrix. A contract management system has been deployed to digitize the contract lifecycle and effectively manage the authoring, obligation management and risk management aspects of contracting. Additional oversight at the executive and board level is exercised through discussion on high-risk contracts at the Risk Management Committee meeting. The legal team provides necessary support on matters relating to compliance, local in- country laws, taxation, etc. and seeks external counsel wherever required. We also have a robust mechanism for appropriately

dealing with litigations.

ANNUAL REPORT FY 2022-23

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has appropriate systems for Internal Control. The systems are improved and modified continuously to meet with changes in business conditions, statutory and accounting requirements. The Companys internal control systems and procedures commensurate with the size and nature of its operations. These systems are designed to ensure that all the assets of the Company are safeguarded and protected against any loss and that all the transactions are properly authorized recorded and reported. High accuracy in recording and providing reliable financial & operational support is ensured through stringent procedures.

The Audit Committee of Board of Directors reviews the internal audit report, efficiency and effectiveness of internal control systems and suggests the solution to improve and strengthen. The Internal control system during the year and no material weakness in design or operation was observed.

FUTURE OUTLOOK

The Company is confident and aims to focus on operational excellence and to tide over the current difficult period and capitalize on the future opportunities, however, the same goes in line with global and Indian economy scenario. The Company is confident and aims to focus on operational excellence and to tide over the current difficult period and capitalize on the future opportunities, however, the same goes in line with global and Indian economy scenario.

CAUTIONARY STATEMENT

The statements in this Management Discussion and Analysis Report could differ materially from those expressed or implied. Though the statement and views expressed in the above said report are on the basis of best judgment but the actual future results might differ from whatever is stated in the report. The Company takes no responsibility for any consequence of decisions made based on such statements and holds no obligation to update these in future. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates.

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