Valiant Communications Ltd Management Discussions.

Overview

The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013 and the Indian Accounting Standards (Ind AS) issued by the Ministry of Corporate Affairs (MCA) vide notification dated 16 February 2015. The management accepts responsibility for the integrity and objectivity of these financial statements. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner the form and substance of transaction, and reasonably present the Companys state-of-affairsand profits of the year.

Industrial Structure and Development

The business of the Company belongs to the industry of providing communications equipment and solutions to Utilities including Power Sector, Oil and Gas, Water and integrated providers. Communication solutions are also provided to Railways / Metro Rail, Airport Communications, Corporate Networks, Mobile / Cellular Communication Networks. These sectors are substantially dominated by large Multi-National Corporations (MNCs). Communication technology has positively changed the way we work, live and play. Modern and ever- changing network infrastructure provides the fundamentals for people to communicate. 24/7 Internet connectivity and highspeed data communication has become a mandatory part of modern life. We cannot think of a day without Internet connectivity, either at work or at play.

That said, the introduction of modern technologies also throws up some challenges. These include billions of dollars worth of legacy communication equipment that is already installed in the network, which has to be up-dated to inter-operate with modern communication hardware. This legacy equipment will not be discarded or removed from service since substantial investments were made in this equipment also. This legacy equipment also needs to be integrated with the new and latest technologies. The opportunity to do this is considerably large.

The other challenge modern networks are throwing up are challenges of network and cyber security. Lack of domain knowledge and know-how are exposing networks to serious financial fraud, data and ID theft and compromising and exposing utility networks, corporate networks and even governments to crippling shutdown of essential services, across countries.

The changes in technology are complex, but offer significant growth potential.

The following key trends in the communications industry are being observed and emerging and therefore the product development is being based on thesetrends:

1. To capitalize on opportunities across sectors and technologies, media andtelecommunications;

2. Explosion of connected (always-on) devices;

3. Rapid smartphone adoption which is driving growth in mobile advertising, new combinations of fixed, mobile and TV services;

4. Growing focus on strategic services based on IP, Ethernet, VPN and managed services capabilities;

5. Large-scale 4G and fiber rollouts and the advent of 5G will lead to sharp rises in capex in fixed and mobile; and

6. Focus on Network and cyber security.

BusinessOperation

The Company, while being mainly focused on the export market; has seriously and with reasonable success been able to start offering its products and solution in India due to the various initiatives taken by the Government of India, under the leadership of our Honble Prime Minister, such as "Make in India", "Digital India" and "PMA Policy", the Indian business scenario is now looking more vibrant and promising. All the initiatives taken by the Government of India are helping the Company (being indigenous manufacturer of communications equipment) to capitalize its position in India.

Various products of the Company have now been approved by some of the major corporations such as PGCIL (Power Grid) and most State Electricity Boards (SEBs) etc., which shall provide a distinct advantage to the Company over some MNCs.

The growth of the Company related to the power sector is closely associated with the pace of Optical Fiber Cable (OFC) deployment. It can be reasonably estimated based on number of power sub-stations, wherein the Company has met the deployment Qualifying Requirement (QR) up to 765KV power sub-station level, one of the highest functional power substation level of the country.

On the export front, the Company is experiencing a pick-up in export demand from developing EU countries, South East Asia andtheMiddleEast.

With expectations of significant opportunities expected to materialize in near term, across various utility sectors, each of these opportunities have potential to make a significant positive impact on the financials of the Company.

Opportunities

One of the technologies that Valiant is focussed on is providing Network Security products and solutions to its customers. We have added to our range of Encryption & Firewall Equipment along with Network Protection solutionsfor providing Network/ Path / Equipment (Server/Router) redundancy solutions for network reliability to currently cater to the network security requirements to its international customers and also in the domestic markets.

Valiant continues to add to its range of Frequency, Phase and the Time Synchronization range of products with its GPS / GNSS based Primary Reference Clocks with integrated IEEE-1588v2 PTP Grandmaster, PTP Slave and NTP Time Server for use in various sectors. This is another area of focused growth.

While competing against MNCs, the Company is continuously investing to upgrade its product portfolio and has launched state-of-the-art technology products for across various utility sectors, which are expected to be bear fruit in the coming quarters.

New product development, technological innovations and strength are Valiants assets. With introduction of new products, designs, solutions and applications, Valiant looks forward to growth in sales and profits in the current financial year.

The Company has a focus on new product development, obtaining of existing products in various markets and sectors and building a larger base of distributors and re-sellers through which it can sell its products, worldwide.

Quality Initiatives

Valiant believes in sustained commitment to highest levels of quality, best-in-class product offerings and robust and fair business practices to help the Company to attain its objectives.

The Company has successfully achieved the yardsticks to meet with standards ISO 9001:2015 (Quality Management), ISO 14001:2015 (Environmental Management), and the ISO 10001:2007 (Customer Satisfaction). The substantial part of the Companys product-line of the Company is now C€ certified.

The management believes that all these quality initiatives will further strengthen the Companys product-line in global market.

New Products

The Company has enhanced and upgraded its existing range of the Multiplexers and Teleprotection / Digital Protection Coupler equipment and now also offers a comprehensive range of GPS / GNSS (GNSS refers to a global navigation satellite system (GNSS) which includes Global Positioning System (GPS) and the Russian GLONASS as well as the European Unions Galileo (are termed as GNSS). PTP Grandmaster and Primary Reference Clock products which provide IEEE-1588v2 Synchronization delivering an accuracy of up to 100ns, which is required to synchronize Cellular networks like UMTS, GPRS, 3G/4G/5G and for distributingTime- of-Day (ToD) and Frequency Reference to Power Utilities and Smart Grid applications. It is also suitable for synchronizing Defense Networks, Airports and Aviation Communications, Railway Signaling Networks and Railway Communication as well as Broadcasting Networks.

The Company has introduced a wide range of products based on IEEE 1588v2 [Precision Time Protocol (PTP)] technology that is used to synchronize Time-of-Day (ToD) and Frequency over an IP network. The IEEE 1588v2 [Precision Time Protocol (PTP)] technology is used by Power Utilities and in Smart Grid operations as well as in Oil and Gas networks, etc.

A range of Encryption & Firewall Equipment along with Network Protection solutions proving Network / Path / Equipment (Server/Router) redundancy solutions for network reliability are been introduced and are currently undergoing approvals in domestic and overseas markets.

Similarly, the products suited for Railways, Airport Communication, other utilities including Oil and Gas are being added to the product portfolio for increased business opportunitiesforthe Company.

Your management is confident that all these products and technologies will help to create substantial growth opportunities forthe Company.

Marketing

The Company is focused on expanding its global marketing network and building a larger base of associates / distributors and re-sellers, through which it can sell its products, on a worldwide basis. The Company has its equipment successfully installed in over 110 countries now.

Threats

The telecommunication sector, being a high technologyintensive business is prone to rapid technological obsolescence. To cope with an ever changing dynamic and highly competitive telecom business environment, Valiant has to innovate, evolve rapidly; offer technically advanced and competitively priced products, solutions and applications to the demanding international customers, while competing with some of the best businesses in the telecommunication field, in the world.

Future Prospects

The Company is clearly focused towards the design and development of communication transmission equipment and solutions, for the national and international telecommunication marketplace. With the continuous introduction of new products and technologies, Valiant is focused on marketing, distribution and support of its product range.

The Company is in the process of introducing many new products during the year 2018-2019 for Smart Grid, SCADA and Secure Communications and applications. Some of these products are already being deployed in various networks, worldwide. A series of new products based on advanced Ethernet / IP / high-speed data communication technologies are further being introduced.

Outlook

The Company continues to design, develop and introduce new products and strengthen its marketing network, worldwide. The introduction of new products and technologies are expected to help to increase export sales growth in the current year. The Company has introduced many new products during the past one year and is confident that these new products will help to increase its sales and performance in the current year ending 31 March 2019.

With the focus on developing new solutions for the fast-growing Power Utility and Transportation Sectors such as the Railways and Metro, the company continues to make rapid advancements both in technology upgradation and expanding its marketing footprint so that it can have a higher value share in both of these sectors.

Valiant now offers communication solutions for Power Utilities, Airports, Railways including Dedicated Freight Corridor, Cellular Networks/ Mobile operators and Corporate networks.

These products are already being deployed in various networks, worldwide. A series of new products based on advanced technologies are being introduced in the current financial year. We believe that these new products will help to create growth opportunitiesforthe company.

Segment-wise Performance

During the year 2017-18, the 56.60% (previous year: 50.61%) of operating revenue comes from the India, while the 11.89% (previous year: 17.82%) and 5.08% (previous year: 2.75%) is from the US and European market respectively. The balance 26.43% (previous year: 28.82%) of the sales is contributed from the rest ofthe world.

RiskandConcerns

Risk is an inherent aspect of every business. The communication sector being part of a rapidly changing technology orbit, the level of risk increases due to high technology obsolescence. However, continuous technological innovation, product development, value additions by research and development can minimize this class of business risk. Effective reporting and control mechanisms ensure timely information availability and facilitate proactive risk management.

Since the capital structure ofthe Company consists of only equity share capital without having any loan (neither secured nor unsecured), the degree of financial risk is almost negligible.

The business in Indian environment has long gestation period and inherited execution delays, consequently causes volatility in revenue recognition and profit figures in financial statements.

Further, in view of Industrial trend in India, the Company may face the delay in debtors realization, which may have an adverse impact on cash position of the Company in short-term. Consequently, the Company may face challenges to maintain the working capital requirements in view of upcoming larger opportunities.

The Company may also face challenges to meet the requisite financial criteria of tender based business, for which Company has to rely on other larger business entities, which may have an adverseimpacton margins.

The Board of Directors is responsible for monitoring risk levels on various parameters and their implementation to ensure the de- risking of the business at various levels. Further, the Audit Committee provides the direction on the risk management.

Internal Control System

The Company has an adequate system of internal controls, implemented by the management to achieve efficiency in operations, optimum utilization of resources, effective monitoring of systems and compliance with applicable laws.

A qualified and independent Audit Committee ofthe Board of Directors reviews the internal audit reports and the adequacy of internal controls.

Exchange Rate Fluctuation

The functional currency of your Company is the Indian rupee, whereas most ofthe business receipts are in foreign currencies. The exchange rate between the rupee and foreign currencies have been changing substantially, and your Company faces the risks associated with exchange rate fluctuation and translation effect, wherein the appreciation of the rupee against foreign currencies, adversely impacts its profitability and operating results.

Human Resources

Human resource is most precious asset of your Company and the Company seeks to attract and retain the best talent available. The Company provides an environment, which encourages initiatives, innovative thinking and recognizes and rewards performance. Since the Company operates in state-of-the-art technologies, necessary training and development of its personnel are conducted on a continuous basis. Industrial relations with all employees are cordial. The Directors Report may be referred for any further details.

Shareholders Fund

A statement of Shareholders Fund as on 31 March 2018 along with the comparison with previous two years is given below:

(In Rs. )

Particulars Year ended on 31 March 2018 Year ended on 31 March 2017 Year ended on 31 March 2016
(Audited) (Audited) (Audited)
Equity Paid-up Capital 7,2234,600 7,22,34,600 7,22,34,600
Reserve and Surplus
- P&LA/c(Cr.) 12,84,25,056 11,37,26,397 10,88,09,935
- Security Premium 8,96,76,647 8,96,76,647 8,96,76,647
- Capital Redemption Reserve 1,42,21,400 1,42,21,400 1,42,21,400
- Reserve for equityinstrument(OCI) - - (12,07,281)
Shareholders Fund / Equity 30,45,57,703 28,98,59,044 28,37,35,301
Book Value (per equity share) Rs. 42.16/- Rs. 40.13/- Rs. 39.28/-

Financial and Operational Performance

The Company has posted its all-time high annual revenue (net) figures at Rs. 2264 lac (previous year: Rs. 1756 lac). The total revenue ofthe Company has increased by 29% on annual basis.

The Company has recorded annual EBITDA Profit at Rs. 368 lac Vs. Rs. 256 lac on year on year basis.

The other income is dropped from Rs. 55 lac to Rs. 36 lac on annual basis. The drop is mainly because of fall in income from bank interest on deposits, as the funds are presently being deployed for working capital requirements.

The profit after tax has increased to Rs. 148 lac Vs. Rs. 62 lac on year on year basis.

At consolidated level, the net revenue of the Group has increased by 33% to Rs. 2341 lac from Rs. 1760 lac on annual basis. Whereas, the reported net profit after taxes is Rs. 130 lac as compared to Rs. 61 lac on annual basis.

The Company has maintained its debt-free status throughout the reportingyear.

Cautionary Statement

Statements and Management Discussion and Analysis describing the Companys objectives and expectations may be forward looking, but within the meaning of applicable laws and regulations. Actual results may differ from those expressed in thestatement.