Varanium Cloud Ltd Management Discussions

You should read the following discussion of our financial condition and results of operations together with our restated financial statements included in the Draft Prospectus. You should also read the section entitled "Risk Factors" on page

19, which discusses a number of factors, risks and contingencies that could affect our financial condition and results of operations. The following discussion relates to our Company and, is based on our restated financial statements, which have been prepared in accordance with Ind AS, the Companies Act and the SEBI Regulations. Portions of the following discussion are also based on internally prepared statistical information and on other sources.

Our financial statements have been prepared in accordance with Ind AS, the Companies Act and the ICDR Regulations and restated as described in the report of our auditor dated July 01, 2022 which is included in this Draft Prospectus under "Financial Statements". The Restated Financial Information has been prepared on a basis that differs in certain material respects from generally accepted accounting principles in other jurisdictions, including US GAAP and IFRS. Our financial year ends on March 31 of each year, and all references to a particular financial year are to the twelve-month period ended March 31 of that year.

Business Overview

We are a fast-growing Indian technology company that is focused on providing services surrounding digital audio, video and financial blockchain (for PayFac) based streaming services.

The Company operates in the following key verticals:

Provision of digital audio and video content streaming services to various content owners and telecom operators in India and internationally on a SaaS (Software As A Service) model such as Voice & Video over Internet Protocol solutions (VoIP) in the B2B and B2C segments;

Online payment facilitation services (PayFac);

Provision of low bandwidth digital education content platforms (EdTech) with complete Learning Management Systems (LMS) focused on Tier 2 & rural areas under Edmission brand;

Provision of information technology related services to startups and SMEs to help them transition their business to digital platforms and manage the relevant infrastructure on a IaaS (Infrastructure As A Service) model;

Our Competitive Strengths

1. Transport Technology

2. Low Cost of Delivery

3. Valuable Data Insights

4. Founder-led visionary management team

Our Business Strategy

1. Grow subscriber base across existing and new geographies

2. Expand Product offerings

3. Efficient and differentiated Infrastructure

4. Focus on growth and margin enhancement

Our Major Products

Following is list of our key products:

1. Edmission (phy-gital) Learning Centre

2. JumpTalk (VoIP)

3. Online Payment Facilitation (PayFac) Services

4. Infrastructure as a Service (IaaS) a) Hydra Web Solutions. b) Corporate and Public Wi-fi Mesh services.

5. eCommerce as a Service (EaaS)

Significant Developments Subsequent to the Last Financial Period

In the opinion of the Board of Directors of our Company, since the date of the last financial statements disclosed in this Draft Prospectus, there have not arisen any circumstance that materially or adversely affect or are likely to affect the business or profitability of our Company or the value of its assets or its ability to pay its material liabilities within the next twelve months.

COVID 19 Pandemic:

An outbreak of COVID-19 was notified as a pandemic by the WHO on March 11, 2020. In response to the COVID-19 outbreak, the governments of many countries, including India, have taken preventive or protective actions such as imposing country-wide lockdowns, as well as restrictions on travel and business operations. Since May 2020 many of these measures have been lifted. Due to a government mandated lockdown in India, we had to temporarily shut down our operations from mid-March 2020 to April 2020. We have resumed operations slowly from May 2020. We proactively engaged with our clients to reassure them and to demonstrate our commitment to restart our operations and to build confidence in the safety protocols deployed at our office. As a result, we have since experienced a gradual increase in business.

Key factors affecting the results of operation:

Our Companys future results of operations could be affected potentially by the following factors:

Competition

Our Company faces significant competition from other companies operating in the markets in India as well as overseas in which we operate. Some of these firms have greater resources and/or a more widely known brand than we have, which may give them a competitive advantage. Our ability to grow revenues will depend on demand for our services in preference to those of its competitors.

Growth in the Indian economy

General economic conditions in India have a significant impact on our results of operations. The Indian economy has grown rapidly over the past decade and is expected to continue to grow in the future. We believe growth in the overall economy has driven, and will drive, the underlying demand for our products

Regulatory developments

Our Company is regulated by the Companies Act and some of its activities are subject to supervision and regulation by statutory and regulatory authorities. It is therefore subject to changes in Indian law, as well as to changes in regulation and government policies and accounting principles.

Fluctuations in demand for our services

Supply and demand market conditions are affected by various factors outside our control, including: prevailing local economic, income and demographic conditions; changes in applicable regulatory schemes; and competition from other players.

Other factors

1. Company‘s ability to successfully implement our strategy, our growth and expansion, technological changes;

2. Failure to comply with regulations prescribed by authorities of the jurisdictions in which we operate;

3. Changes in laws and regulations relating to the segments in which we operate;

4. Our ability to attract, retain and manage qualified personnel;

5. Failure to adapt to the changing technology in our industry of operation may adversely affect our business and financial condition;

Discussion on Results of Operation:

The following discussion on results of operations should be read in conjunction with the audited financial results of our Company for the financial years ended March 31, 2022, 2021 and 2020.

OUR SIGNIFICANT ACCOUNTING POLICIES

For Significant accounting policies please refer Significant Accounting Policies, "Annexure IV" beginning under Chapter titled "Auditors Report and Financial Information of our Company" on page 129.

RESULTS OF OUR OPERATION

Our restated financial statements consists of audited financial results of our Company for the financial years ended March 31, 2021, 2020 and 2019 .

Comparison of Financial Years ended March 31, 2022, 2021 and 2020			(Rs in Lakhs)
Particulars	31.03.22	31.03.21	31.03.20
Income
Revenue from Operations	3,535.21	374.93	0.00
Increase/Decrease (%)	842.90%	100.00%	-100.00%
Other Income	0.00	44.58	12.44
Total Income	3,535.21	419.51	12.44
Increase/Decrease (%)	742.70%	3272.27%
Expenditure
Purchase of Stock in Trade	1,038.86	0.00	0.00
Increase/Decrease (%)	100.00%	0.00%	0.00%
% to Total Income	29.39%	0.00%	0.00%
Employee Benefit Expenses	903.82	0.00	0.00
Increase/Decrease (%)	100.00%	0.00%	0.00%
% to Total Income	25.57%	0.00%	0.00%
Other Expenses	387.93	23.54	136.92
Increase/Decrease (%)	1547.96%	-82.81%	2883.01%
% to Total Income	10.97%	5.61%	1100.64%
Total Operating Expenditure	2,330.61	23.54	136.92
Increase/Decrease (%)	9800.64%	-82.81%
% to Total Income	65.93%	5.61%	1100.64%
PBIDT	1,204.60	395.97	-124.48
Increase/Decrease (%)	204.21%	-418.10%
% to Total Income	34.07%	94.39%	-1000.64%
Depreciation	9.66	5.90	8.89
Increase/Decrease (%)	63.73%	-33.63%
% to Total Income	0.27%	1.41%	71.46%
Profit Before Interest and Tax	1,194.94	390.07	-133.37
Increase/Decrease (%)	206.34%	-392.47%	#REF!
% to Total Income	33.80%	92.98%	-1072.11%
Financial Charges	0.44	9.55	16.27
Increase/Decrease (%)	-95.39%	-41.30%
% to Total Income	0.01%	2.28%	130.79%
Profit before Taxation	1,194.50	380.52	-149.64
Increase/Decrease (%)	213.91%	-354.29%	#REF!
% to Total Income	33.79%	90.71%	-1202.89%
Tax Effect	354.31	91.27	-0.74
Increase/Decrease (%)	288.20%	-12433.78%
% to Total Income	10.02%	21.76%	-5.95%
Profit After Tax	840.19	289.25	-148.90
Increase/Decrease (%)	190.47%	-294.26%
% to Total Income	23.77%	68.95%	-1196.95%

Comparison of FY 2022 with FY 2021:

Total Income and Operating Revenue

The Total Income for FY 2022 is 3535.21 lakhs as compared to 419.51 lakhs during FY 2021 registering an increase of 742.70%. The Operating Revenue for FY 2022 is 3535.21 lakhs as compared to 374.93 lakhs during FY 2021 showing increase of 842.90%. The entire revenue is from service activities and increase is contributed due to growth in the VoIP business and contribution from new services viz. PayFac and ITES started during the year.

Other Income

Other Income for the FY 2022 was Nil as compared to 44.58 lakhs during the FY 2021. The Other Income comprising of Interest Income and foreign exchange gains.

Expenditure:

Purchase of Stock in Trade

Purchase of services during FY 2022 was 1038.86 compared to NIL in earlier year showing an increase of 100%. This increase was mainly due to starting of new services demanding purchases to meet with customer requirements. The Purchase of stock in trade was 29.39% of Total Income during FY 2022 as against that of Nil during FY 2021.

Employee Benefit Expenses

Employee Benefit Expenses increased to 903.82 lakhs for the year ended March 31, 2022 as against Nil for FY 2021 showing a increase of 100%. This increase was mainly due to appointment of entire team and increase in salary to employees. Employee Benefit Expenses stood at 25.57% and Nil% of Total income for FY 2022 and FY 2021 respectively.

Other Expenses

Other Expenses increased to 387.93 lakhs for FY 2022 from 23.54 lakhs for FY 2021. The increase was mainly due to increase in Legal and Professional fees, Commission and Brokerage Expenses, Business Promotion and Rent Rates and Taxes expenses. Other Expenses was 10.97% of Total income during FY 2022 as against 5.61% during FY 2021.

Profit before Depreciation, Interest and Tax (PBDIT)

PBDIT increased from 395.97 lakhs for FY 2021 to 1204.60 lakhs for FY 2022, mainly on account of increase in revenue and other reasons as detailed above. During FY 2022, our Company recorded PBDIT margin of 34.07% of the Total income as against 94.39% during FY 2021.

Depreciation

Depreciation on fixed assets was 0.27% of Total income during FY 2022 as compared to 1.41% during FY 2021. The total depreciation during FY 2021 was 5.90 lakhs and during FY 2022 it was 9.66 lakhs.

Financial Charges

Financial Charges comprising of Interest on Loans and other interests, as well as Bank charges. Financial Charges during FY 2021 was 9.55 lakhs and during FY 2022 it was 0.44 lakhs. Financial Charges was 0.01% of Total income during FY 2022 as compared to 2.28% during FY 2021.

Profit after Tax and restatement adjustment (PAT)

PAT increased from 289.25 lakhs for the FY 2021 to 840.19 lakhs in FY 2022. This increase was mainly due to increase in operating income. During FY 2022, our Company recorded PAT margin of 23.77% as against 68.95% for FY 2021.

Comparison of FY 2021 with FY 2020:

Total Income and Operating Revenue

The Total Income for FY 2020 is 12.44 lakhs as compared to 419.51 lakhs during FY 2021 registering an increase of 3272.27% in FY 2021. The Operating Revenue for FY 2020 is Nil as compared to 374.93 lakhs during FY 2021 showing increase of 100%. The entire operating revenue is from service activities and increase is contributed due to starting of VoIP service business during FY 2021.

Other Income

Other Income for the FY 2020 was 12.44 lakhs as compared to 44.58 lakhs during the FY 2021. The Other Income comprising of Interest Income and foreign exchange gains during FY 2021 as against Interest income in FY 2020.

Expenditure:

Purchase of Stock in Trade

There was no Purchase of stock in trade during FY 2020 and FY 2021.

Employee Benefit Expenses

There was no Employee benefits expenses during FY 2020 and FY 2021 s Company was doing outsourcing of services.

Other Expenses

Other Expenses decreased from 136.92 lakhs for FY 2020 to 23.54 lakhs for FY 2021. The decrease was mainly due to decrease in Legal and Professional fees. Other Expenses was 1100.64% of Total income during FY 2020 as against 5.61% during FY 2021.

Profit before Depreciation, Interest and Tax (PBDIT)

PBDIT increased to 395.97 lakhs for FY 2021 from Loss of 124.48 lakhs for FY 2020, mainly on account of write offs and other reasons as detailed above. During FY 2021, our Company recorded PBDIT margin of 94.39% as against loss during FY 2020.

Depreciation

Depreciation on fixed assets was 71.46% of Total income during FY 2020 as compared to 1.41% during FY 2021. The total depreciation during FY 2021 was 5.90 lakhs and during FY 2020 it was 8.89 lakhs.

Financial Charges

Financial Charges comprising of Interest on Loans and other interests, as well as Bank charges. Financial Charges during FY 2021 was 9.55 lakhs and during FY 2020 it was 16.27 lakhs. Financial Charges was 130.79% of Total income during FY 2020 as compared to 2.28% during FY 2021.

Profit after Tax and restatement adjustment (PAT)

PAT increased to 289.25 lakhs for the FY 2021 as against loss of 148.90 lakhs in FY 2020. This increase was mainly due to increase in operating income. During FY 2021, our Company recorded PAT margin of 68.95% as against loss in FY 2020.

CASH FLOW DETAILS:			(Rs in Lakhs)
PARTICULARS	31.03.22	31.03.21	31.03.20
Net cash generated from operation	3117.43	-30.44	-230.63
Net cash (used) in investing activities	-3259.58	30.90	32.90
Net cash generated/(used) in financing activities	144.56	-0.47	197.64
Net Increase / ( Decrease ) in cash and cash equivalents	2.41	-0.01	-0.09
Cash and cash equivalents at the beginning of the year	0.00	0.01	0.10
Cash and cash equivalents at the end of the year	2.41	0.00	0.01

We had a positive cash generation from our operating activities during FY 2022, however during FY 2021 and FY 2020 there was a negative cash generation from operating activities mainly due to huge increase in Trade receivables in FY 2021 and Extra-ordinary write off during FY 2020.

OTHER MATTERS:

Unusual or infrequent events or transactions

To our knowledge there have been no unusual or infrequent events or transactions that have taken place during the last three years except for some write offs of Loans and Advances as detailed in Annexure II.7 of the section titled "Restated Financial Statements beginning on page 129..

Significant economic changes that materially affected or are likely to affect income from continuing operations.

Our business has been subject, and we expect it to continue to be subject, to significant economic changes arising from the trends identified above in ‘Factors Affecting our Results of Operations and the uncertainties described in the section entitled ‘Risk Factors beginning on page 19. To our knowledge, except as we have described in the Draft Prospectus, there are no known factors which we expect to bring about significant economic changes.

Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.

Apart from the risks as disclosed under Section titled "Risk Factors" beginning on page 19, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

1. Future changes in relationship between costs and revenues, in case of events such as future increase in labour or material costs or prices that will cause a material change are known.

Our Companys future costs and revenues will be determined by demand/supply situation, government policies and prices quoted by suppliers and service providers.

2. Extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices.

Increases in revenues are by and large linked to increases in volume of business, better pricing and high margin service mix. There has been introduction of VoIP and PayFac services by the Company during FY 2021 and FY 2022.

3. Total turnover of each major industry segment in which the issuer company operated.

For details of the industry please refer to Chapter titled "Industry Overview" on page 71.

4. Status of any publicly announced new products or business segment.

We have not announced any new products or business segment.

5. The extent to which business is seasonal.

Our Companys business is not seasonal in nature.

6. Any significant dependence on a single or few suppliers or customers.

For the FY ended March 31, 2022 and March 31, 2021, our top ten largest clients accounted for approximately 12.95% and 100% of our revenues from operations respectively.

For the FY ended March 31, 2022 and March 31, 2021, our top ten suppliers for expenses and capital expenditure contributed for approximately 78.30% and 92.50% of our purchases respectively.

7. Competitive conditions.

Competitive conditions are as described under the Chapters titled "Industry Overview" and "Our Business" on pages 71 and 87, respectively.