Vivo Collaboration Solutions Ltd Management Discussions.

The following discussion of our financial condition and results of operations should be read in conjunction with our restated financial statements as of and for the years ended March 31, 2021, 2020 and 2019 prepared in accordance with the Companies Act, 2013 (to the extent notified) and /or Provisions of Companies Act, 1956 w.r.t. the sections which have not yet been replaced by the Companies Act, 2013 through any official notification and Indian GAAP and restated in accordance with the SEBI ICDR Regulations, including the schedules, annexure and notes thereto and the reports thereon, included in "Financial Statements" beginning on page 119 of this Draft Prospectus. Indian GAAP differs in certain material respects from U.S. GAAP and IFRS. We have not attempted to quantify the impact of IFRS or U.S. GAAP on the financial data included in this Draft Prospectus, nor do we provide a reconciliation of our financial statements to those under U.S. GAAP or IFRS. Accordingly, the degree to which the Indian GAAP financial statements included in this Draft Prospectus will provide meaningful information is entirely dependent on the readers level of familiarity with the Companies Act, Indian GAAP and the SEBI ICDR Regulations. This discussion contains forward-looking statements and reflects our current views with respect to future events and financial performance. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors such as those set forth in "Risk Factors" and "Forward-Looking Statements" beginning on pages 19 and 14 respectively, of this Draft Prospectus.

COMPANY OVERVIEW

Our Company was incorporated on January 30, 2012 as a private limited company under the provisions of Companies Act, 1956 with the Registrar of Companies, Delhi in the name and style of Vivo Collaborations Solutions Private Limited. Subsequently, our Company was converted into public limited company pursuant to which the name of our Company was changed to "Vivo Collaborations Solutions Limited" vide shareholders approval on February 18, 2021and fresh certificate of incorporation dated March 11, 2021.

BUSINESS OVERVIEW

We offer comprehensive suite of telephony services, covering every voice-based solution that an enterprise needs. We deliver end-to-end Cloud Telephony solutions for Enterprises. Incorporated with the vision to redefine all voice-centric communication by enabling enterprises to break free from the legacy PSTN-based communication, Vivo takes IP voice applications to a whole new level.

Vivo converged platform is solid, scalable and yet simple — solid as it harnesses the robustness of TDM networks; scalable as it rides a ubiquitous MPLS cloud, and simple because it neatly integrates everything in the background. The platform exquisitely differentiates and stands out among other competing services on account of its top-driven tech DNA, which ensures that even the minutest of development aspects are addressed to perfection.

SIGNIFICANT DEVELOPMENTS SUBSEQUENT TO THE LAST FINANCIAL YEAR

In the opinion of the Board of Directors of our Company, there have not arisen, since the date of the last financial statements disclosed in this Draft Prospectus i.e. March 31, 2019, any significant developments or any circumstance that materially or adversely affect or are likely to affect the profitability of our Company or the value of its assets or its ability to pay its material liabilities within the next twelve months except as follows:

1. Appointment of Mr. Dinesh Kuamr Goelas Non-Executive & Independent Director on August 02, 2021.

2. Appointment of Mr. Raveesh Kanaujia as Non-Executive & Independent Director on August 02, 2021.

3. The Issue has been authorized pursuant to a resolution of our Board dated August 02, 2021 and by Special Resolution passed under Section 62 (1) (c) of the Companies Act, 2013 at an EGM held on August 02, 2021.

SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our business is subjected to various risks and uncertainties, including those discussed in the section titled "Risk Factor" beginning on page 19 of this Draft Prospectus. Our results of operations and financial conditions are affected by numerous factors including the following:

Uncertainty in relation to continuing effect of the COVID-19 pandemic on our business and operations; Failure, defects, delays and other problems involving the technology systems and infrastructure on which we rely for providing our services and solutions to our clients; Our dependence on our key personnel, including our Directors and senior management; Our ability to successfully implement our business strategy and plans; General economic and business conditions in the markets in which we operate and in the local, regional, national and international economies; Changes in political and social conditions in India, the monetary and interest rate policies of India and other countries; Changes in government policies and regulatory actions that apply to or affect our business; Inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices; The performance of the financial markets in India and globally; The occurrence of natural disasters or calamities; Other factors beyond our control; Our ability to manage risks that arise from these factors

DISCUSSION ON RESULT OF OPERATION

The following discussion on results of operations should be read in conjunction with the restated financial results of our Company for years ended March 31, 2021, 2020 and 2019.

OVERVIEW OF REVENUE & EXPENDITURE

Revenues

Our Companys revenue is primarily generated from Sale of services:-

As at March 31
Particulars 2021 2020 2019
Income
Revenue from Operations 1486.66 1001.14 902.30
Increase/Decrease in % 48.50% 10.95% NA
Other Income 2.12 1.43 2.01
Increase/Decrease in % 48.25% (28.86%) NA
Total Revenue 1488.78 1002.57 904.31

The following is the Income mix in terms of value of total income of our Company from Sale of services:-

As at March 31
Particulars 2019 2018 2017
Revenue from Operation
Sale of Services 1486.66 1001.14 902.30
Other operating Income - - -
Total Revenue from Operation 1486.66 1001.14 902.30

The following is the Income mix in terms of percentage of total income of our Company from Sale of services:-

As at March 31
Particulars 2021 2020 2019
Revenue from Operation
Sale of Services 100.00% 100.00% 100.00%
Other operating Income - - -
Total Revenue from Operation 100.00% 100.00% 100.00%

Other Income

Other operating revenue consists of Interest Income on Fixed deposit and on Income tax refund.

As at March 31
Particulars 2021 2020 2019
Interest Income:
-On Fixed deposit 0.69 0.60 0.56
-On income tax refund 1.43 0.83 1.45
Total Other Income 2.12 1.43 2.01

The following is the other income mix in terms of percentage of other income of our Company for other incomes:

As at March 31
Particulars 2021 2020 2019
Interest Income:
-On Fixed deposit 32.55% 41.96% 27.86%
-On income tax refund 67.45% 58.04% 72.14%
Total Other Income 100.00% 100.00% 100.00%

 

Main Components of our Revenues

Income

Our total income comprises of revenue from operations and other income.

Revenue from Operations

Revenue from Operations includes income from sales of services. Our revenue from operations as a percentage of total income was 99.86%, 99.86% and 99.78% in fiscals 2021, 2020 and 2019 respectively.

Other Income

Our other income includes Interest Income on fixed deposit and on income tax refund. Other income, as a percentage of total income was 0.14 %, 0.14% and 0.22 % in fiscals 2021, 2020 and 2019 respectively.

Expenditure

Our total expenditure primarily consists of

(i) Purchase of services

(ii) Employee Benefit Expenses

(iii) Finance Cost

(iv) Depreciation and Amortization and

(v) Other Expenses.

The following table sets forth our expenditure in Rupees and as a percentage of our total revenue for the periods indicated:

For the Year Ended March 31,
Particulars 2021 2020 2019
EXPENDITURE
Purchase of Services 581.67 592.66 581.18
As a % of Total Revenue 39.07% 59.11% 64.27%
Employee benefit expenses 247.08 221.05 226.53
As a % of Total Revenue 16.60% 22.05% 25.05%
Finance costs 24.95 10.03 6.36
As a % of Total Revenue 1.68% 1.00% 0.70%
Depreciation & Amortization 0.51 1.23 1.85
As a % of Total Revenue 0.03% 0.12% 0.20%
Other expenses 183.02 98.94 82.62
As a % of Total Revenue 12.29% 9.87% 9.14%
Total Expenditure 1037.23 923.91 898.54

Main Components of our Expenditure

Purchase of services

Purchase of services accounted for 39.07%, 59.11% and 64.27% of our total revenue for the financial year ended on March 31, 2021, 2020 and 2019 respectively. The major purchases committed of Communication charges, Internet & Software expenses, Monthly subscription charges and professional charges.

 

Employee Benefit Expenses

Expenses in relation to employees remuneration and benefits include salary and wages, contribution to Provident and other funds, Provision for gratuity, leave encashment and staff welfare expenses. Employee benefit expenses accounted for 16.60%, 22.05% and 25.05% of our total revenue for the financial year ended as on March 31, 2021, 2020 and 2019 respectively.

 

Finance Cost

Finance Cost primarily consists of interest on borrowings, Bank charges and currency exchange fluctuation. Our finance costs accounted for 1.68%, 1.00% and 0.70% of our total revenue for the financial year ended as on March 31, 2021, 2020 and 2019 respectively.

 

Depreciation & Amortization

Depreciation primarily consists of depreciation on the tangible assets of our Company which primarily includes Computers and Office Equipment and Amortization is on intangible assets of our company which primarily includes Software. It is provided using the written down value method as per the useful lives of assets estimated by the management or at the rates as per the useful life prescribed under Schedule II of the Companies Act, 2013.Our depreciation and amortization expense accounted for 0.03%, 0.12% and 0.20% of our total revenue for the financial year ended as on March 31, 2021, 2020 and 2019 respectively.

 

Other Expenses

Other expenses primarily include Advertisement/ Business Promotion Expenses, Audit Fees, Business Support Expense, Commission Expenses, Computer Repair & Accessories, Conveyance Expenses, Indirect Taxes& interest Paid, Misc Expense, Printing and Stationery, Website Expensesetc. Other expenses accounted for 12.29%, 9.87%, and 9.14% of our total revenue for the financial year ended as on March 31, 2021, 2020 and 2019 respectively.

Statement of profits and losses

The following table sets forth, for the fiscal years indicated, certain items derived from our Companys audited restated financial statements, in each case stated in absolute terms and as a percentage of total sales and/or total revenue.

For The Year Ended March 31,
Particulars 2021 2020 2019
INCOME
Revenue from Operations
Revenue 1486.66 1001.14 902.30
Increase/Decrease in % 48.50 10.95 NA
Other Income 2.12 1.43 2.01
Increase/Decrease in % 48.25 -28.86 NA
Total Revenue 1488.78 1002.57 904.31
EXPENDITURE
Cost of Raw Material Consumed - - -
As a % of Total Revenue 0.00% 0.00% 0.00%
Changes in Inventories - - -
As a % of Total Revenue
Purchase of Stock in Trade 581.67 592.66 581.18
As a % of Total Revenue 39.07% 59.11% 64.27%
Employee benefit expenses 247.08 221.05 226.53
As a % of Total Revenue 16.60% 22.05% 25.05%
Finance costs 24.95 10.03 6.36
As a % of Total Revenue 1.68% 1.00% 0.70%
Depreciation and Amortization 0.51 1.23 1.85
As a % of Total Revenue 0.03% 0.12% 0.20%
Other expenses 183.02 98.94 82.62
As a % of Total Revenue 12.29% 9.87% 9.14%
Total Expenditure 1037.23 923.91 898.54
As a % of Total Revenue 69.67% 92.15% 99.36%
Profit Before Exceptional & Extraordinary items and tax 451.55 78.66 5.77
As a % of Total Revenue 30.33% 7.85% 0.64%
Exceptional Items - - -
As a % of Total Revenue 0.00% 0.00% 0.00%
Extraordinary Items - - -
As a % of Total Revenue 0.00% 0.00% 0.00%
Profit before tax 451.55 78.66 5.77
PBT Margin 30.33% 7.85% 0.64%
Tax expense :
(i) Current tax 132.43 20.35 1.37
(iI) Deferred Tax Liability/(Assets) 0.32 0.25 0.19
Total 132.75 20.60 1.56
As a % of Total Revenue 8.92% 2.05% 0.17%
Profit for the year 318.80 58.06 4.21
PAT Margin 21.41% 5.79% 0.47%
Cash Profit 319.31 59.29 6.06
Cash Profit Margin 21.45% 5.91% 0.67%

 

Provision for Tax

Income taxes are accounted for in accordance with Accounting Standard – 22 on "Accounting for Taxes on Income" ("AS-22"), prescribed under the Companies (Accounting Standards) Rules, 2006. Our Company provides for current tax as well as deferred tax, as applicable.

Provision for current taxes is made at the current tax rates after taking into consideration the benefits available to our Company under the provisions of the Income Tax Act, 1961.

Deferred tax arises from the timing differences between book profits and taxable profits that originate in one period and are capable of reversal in one or more subsequent periods and is measured using the tax rates and laws applicable as of the date of the financial statements. Our Company provides for deferred tax asset / liability on such timing differences subject to prudent considerations in respect of deferred tax assets.

The following table presents the details of our Companys trade receivables:

As at March 31
Particulars 2021 2020 2019
Unsecured and Considered Good
Outstanding for a period not exceeding 6 months 135.34 226.89 78.63
As a % of total Trade receivables 95.84% 86.95% 94.20%
Outstanding for a period exceeding 6 months 5.88 34.06 4.84
As a % of total Trade receivables 4.16% 13.05% 5.80%
Less: Provision for doubtful debts - - -
Total Trade receivables 141.22 260.95 83.47
Avg. Trade receivables 201.09 172.21 77.85
Trade receivables Turnover Ratio 10.53 3.84 10.81
Average Collection Period ( in days) 34.67 95.14 33.77

FISCAL YEAR ENDED MARCH 31, 2021 COMPARED WITH THE FISCAL YEAR ENDED MARCH 31, 2020 Income

Total revenue increased by Rs.486.21 Lakhs and 48.50% from Rs. 1002.57 Lakhs in the fiscal year ended March 31, 2020 to Rs. 1488.78 Lakhs in the fiscal year ended March 31, 2021. The revenue has increased due to cloud telephony service.

Expenditure

Total Expenditure increased by Rs. 113.32 Lakhs and 12.27%, from Rs. 923.91 Lakhs in the fiscal year ended March 31, 2020 to Rs. 1037.23 Lakhs in the fiscal year ended March 31, 2021. Overall expenditure has increased mainly due to business support expenses & commission expenses.

Purchase of Services

The Purchase of services decreased by Rs.10.99 Lakhs and 1.85% from Rs. 592.66 Lakhs in the fiscal year ended March 31, 2020 to Rs. 581.67 Lakhs in the fiscal year ended March 31, 2021. The Purchases decreased due decrease in internet and software expenses.

Employee Benefit Expenses

Employee Benefit Expenses in terms of value and percentage increased by Rs. 26.03 Lakhs and 11.78% from Rs. 221.05 Lakhs in the fiscal year ended March 31, 2020 to Rs. 247.08 Lakhs in the fiscal year ended March 31, 2021. Employees cost has increased due to increase in salaries & wages, accommodate of staff of merged companies, contribution to provident & other funds and provision for gratuity.

Finance Costs

Finance Costs increased by Rs. 14.92 Lakhs and 148.75% from Rs. 10.03 Lakhs in the fiscal year ended March 31, 2020 to Rs. 24.95 Lakhs in the fiscal year ended March 31, 2021. Finance Costs has increased mainly due to increase in Interest on borrowings, Bank Charges and other borrowing charges.

Depreciation and Amortization

Depreciation and Amortization in terms of value decreased by Rs.0.72 Lakhs and 58.54% from Rs. 1.23 Lakhs in the fiscal year ended March 31, 2020 to Rs. 0.51 Lakhs in the fiscal year ended March 31, 2021. Decrease in minimal.

Other Expenses

Other Expenses in terms of value and percentage increased by Rs. 84.08 Lakhs and 84.98% from Rs. 98.94 Lakhs in the fiscal year ended March 31, 2020 to Rs. 183.02 Lakhs in the fiscal year ended March 31, 2021. Other Expenses have increased mainly due to increase in Commission Expenses, Business support expenses, Filing Fees, Preliminary expenses written off, Trade mark expenses.

Profit/Loss before exceptional & extraordinary items and Tax

Profit before exceptional & extraordinary items and Tax has increased by Rs. 372.89 Lakhs and 474.05% from Rs. 78.66 Lakhs in the fiscal year ended March 31, 2020 to Rs. 451.55 Lakhs in the fiscal year ended March 31, 2021. Profit before exceptional & extraordinary items and Tax has increased due to increase in revenue & Margins.

Net Profit after Tax and Extraordinary items

Net Profit has increased by Rs. 260.74 Lakhs and 449.09% from profit of Rs. 58.06 Lakhs in the fiscal year ended March 31, 2020 to profit of Rs. 318.80 Lakhs in the fiscal year ended March 31, 2021. Net Profit has increased due to increase sale of service.

FISCAL YEAR ENDED MARCH 31, 2020 COMPARED WITH THE FISCAL YEAR ENDED MARCH 31, 2019

Income

Total revenue increased by Rs. 98.26 Lakhs and 10.87%, from Rs. 904.31 Lakhs in the fiscal year ended March 31, 2019 to Rs. 1002.57 Lakhs in the fiscal year ended March 31, 2020. The revenue has marginally increased due to increase in sales in comparison to the last financial year.

Expenditure

Total Expenditure increased by Rs. 25.37 Lakhs, and 2.82%, from Rs. 898.54 Lakhs in the fiscal year ended March 31, 2019 to Rs. 923.91 Lakhs in the fiscal year ended March 31, 2020. Overall expenditure has increased mainly due to Purchase in services.

Purchase of Services

The Purchase of Stock in services increased by Rs.11.48 Lakhs and 1.98% from Rs. 581.18 Lakhs in the fiscal year ended March 31, 2019 to Rs. 592.66 Lakhs in the fiscal year ended March 31, 2020. The Purchases increased in line with increase in Sales.

Employee Benefit Expenses

Employee benefit expenses decreased by Rs. 5.48 Lakhs and 2.42% from Rs. 226.53 Lakhs in the fiscal year ended March 31, 2019 to Rs. 221.05 Lakhs in the fiscal year ended March 31, 2020. Employees cost has decreased due to decrease in number of personnel.

Finance Costs

Finance Costs increased by Rs. 3.67 Lakhs and 57.70% from Rs. 6.36 Lakhs in the fiscal year ended March 31, 2019 to Rs. 10.03 Lakhs in the fiscal year ended March 31, 2020. Finance Costs has increased mainly due to increase in Interest on borrowings and other borrowing costs.

Depreciation and Amortization

Depreciation and Amortization in terms of value and percentage decreased by Rs. 0.62 Lakhs and 33.51% from Rs. 1.85 Lakhs in the fiscal year ended March 31, 2019 to Rs. 1.23 Lakhs in the fiscal year ended March 31, 2020. Decrease in Depreciation is due to lower charge as per the WDV Method.

Other Expenses

Other Expenses increased by Rs. 16.32 Lakhs and 19.75% from Rs. 82.62 Lakhs in the fiscal year ended March 31, 2019 to Rs.98.94 Lakhs in the fiscal year ended March 31, 2020. Other Expenses have increased mainly due to increase inAdvertisement/ Business Promotion Expenses, Audit Fees, Commission Expenses, Interest on late Payment of TDS.

Profit/Loss before exceptional & extraordinary items and Tax

Profit before exceptional & extraordinary items and Tax has increased by Rs. 72.89 Lakhs and 1263.26% from Rs. 5.77 Lakhs in the fiscal year ended March 31, 2019 to Rs.78.66 Lakhs in the fiscal year ended March 31, 2020. Profit before exceptional & extraordinary items and Tax has increased due to increase in overall margins Net Profit after Tax and Extraordinary items

Net Profit has increased by Rs. 53.85 Lakhs and 1279.10% from profit of Rs. 4.21 Lakhs in the fiscal year ended March 31, 2019 to profit of Rs. 58.06 Lakhs in the fiscal year ended March 31, 2020. Net Profit has increased due to increase in sale of services.

CASH FLOWS

Particulars Year ended March 31,
2021 2020 2019
Net Cash from Operating Activities 373.13 (9.67) 148.89
Net Cash from Investing Activities (0.77) 1.43 0.63
Net Cash from Financial Activities (372.49) (58.56) (75.79)

Cash Flows from Operating Activities

Net cash generated from operating activities in financial year 2021 was positive Rs. 373.13 lakhs as compared to Rs 451.54 of PBT for the same period. This difference is primarily on account of better and timely realization of receivables, and paying the current liabilities. Net cash generated from operating activities in financial year 2020 was negative of Rs.9.67 lakhs as compared to Rs 78.66 lakhs of PBT for the same period. This difference is primarily on account of working capital blocked in receivables which was a bit nullified by the credit period from the payable. Net cash generated from operating activities in financial year 2019 was negative of Rs.148.89 lakhs as compared to Rs 5.77 of PBT for the same period. This difference is primarily on account of increase in cash flows from payables.

Cash Flows from Investment Activities

In financial year 2021, the Net Cash Invested in Investing Activities was negative Rs.0.77 lakhs. This was mainly on account of Preliminary Expenses of Rs 2.89 lakhs incurred in the same period In financial year 2020, the Net Cash Invested in Investing Activities was Rs 1.43 lakhs. This was mainly on account of Interest received of Rs1.43 lakhs in the same period.

In financial year 2019, the Net Cash Invested in Investing Activities was Rs 0.63 lakhs. This was mainly on account of Interest received of Rs2.01 lakh which was bit offset by purchase of fixed assets of Rs 1.38 lakhs in the same period.

Cash Flows from Financing Activities

In financial year 2021, the Net Cash from Financing Activities was negative to the extent of Rs.372.49 lakhs. This was mainly on account of increase in short term loans and advances to the extent of Rs 446.44 lakhs and inflows arrived due to issue of right shares Rs 73.95 lakhs. In financial year 2020, the Net Cash from Financing Activities was negative to the extent of Rs.58.86 lakhs. This was mainly on account of increase in short term loans and advances to the extent of Rs57.86 lakhs. In financial year 2020, the Net Cash from Financing Activities was negative to the extent of Rs.75.79 lakhs. This was mainly on account of increase in short term loans and advances to the extent of Rs75.79 lakhs.

OTHER MATTERS

1. Unusual or infrequent events or transactions.

Except as described in this Draft Prospectus, during the periods under review there have been no transactions or events, which in our best judgment, would be considered unusual or infrequent.

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

Other than as described in the section titled "Risk Factors" beginning on page 19 of this Draft Prospectus respectively, to our knowledge there are no known significant economic changes that materially affected or are likely to affect income from continuing operations.

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

Other than as described in the section titled "Risk Factors beginning on page 19 of this Draft Prospectus respectively to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.

4. Future relationship between Costs and Income.

Our Companys future costs and revenues will be determined by economic activity & government policies and consumer preferences.

5. The extent to which material decreases in net revenue are due to decrease in sale of our products.

Increase in revenues is by and large linked to increase in volume of business activities carried out by the Company.

6. Total turnover of each major industry segment in which the issuer company operates.

The Company is operating in IT and especially in ITeS. Relevant industry data, as available, has been included in the chapter titled "Our Industry" beginning on page 64 of this Draft Prospectus.

7. Status of any publicly announced new products or business segments.

Our Company has not announced any new products or segment, other than through this Draft Prospectus.

8. The extent to which the business is seasonal.

Our Company business is not seasonal in nature.

9. Any significant dependence on a single or few clients.

Our business is significantly dependent on few customers. Top 5 customers contributed 96.51 % of our total sales for the year ended March 31, 2021.

10. Competitive Conditions.

We face competition from few local service providers. We have, over a period of time, developed certain competitive strengths which have been discussed in section titled "Our Business" on page 73 of this Draft Prospectus.