Web Element Solutions Ltd Management Discussions.

GLOBAL OVERVIEW

The fiscal year 2019-20 has been a challenging one for the global economy due to several macro-economic factors including the demand challenges across several industries, the US-China trade war, Brexit uncertainty and more recently the outbreak of the COVID-19 pandemic. This has significantly impacted the Global growth outlook. As per International Monetary Funds (IMF) World Economic Outlook of April 2020, the global economy grew by 2.9% in 2019 and is expected to shrink sharply to (-)3.0% in 2020 (a downward revision to 3.3% growth forecast prior to COVID-19 hit). In the best-case scenario, as per IMF, the global economy is projected to grow at 5.8% in CY2021 which is a partial recovery with an assumption that pandemic fades in the second half of FY2020, as the restrictions imposed to contain pandemic are lifted across markets thus allowing normal businesses to resume. The United States economy grew at 2.3% in 2019 and is now estimated to shrink at (-)5.9% in 2020 and the United Kingdom is projected to contract at (-)6.5% in 2020 from a growth of 1.4% in 2019. The Euro area grew at 1.2% in 2019 and is predicted to contract to (-)7.5% in 2020. Given the level of uncertainty in the current environment, actual outcomes could easily be well outside of this range, either on the upside or the downside.

INDUSTRY OVERVIEW:

Web Element Solutions Ltd. is an emerging leader in providing end to end web solutions and custom software development and is based out of Mumbai also. Our range of servicing capabilities is wide spread and includes Business process enhancement services to augment existing business processes effectively, Customize web application services to drive customer centric solutions, App development to deliver efficient app solutions, Enterprise mail hosting services for enabling targeted messages for the customers.

Web Element believes in adapting fast to the ever changing technological landscape to continue delighting customers with solutions backed by the latest tools and technologies. We strive to keep our development team experienced on the most relevant technology so that our solutions are future-ready.

We continue to see the trend of global businesses turning to offshore technology service providers to meet their needs and to increase their efficiency through differentiated solutions. Over the past two decades, India has risen to become leading destination for global sourcing of IT, ITes, and research and development activities.

The world has learnt its lessons from recession and is actively taking steps to sustain Indias advantage and make Indias IT industry more resilient to global economic conditions. This optimism is being reflected in all parts of the world. The cloud as a delivery model is also here to stay, and Indian IT service providers will need to adapt themselves in this new world order. From a growth perspective, the future is still bright and has been impacted by the after effects of recession, witnessed by everyone. The US and Europe remain the biggest markets for outsourcing software related activities. Majority of the works from this market is being outsourced to destinations in the Asia Pacific region and East Europe.

In the national level, IT service is the fastest growing segment in the Indian domestic market, growing year- to-year, driven by increasing focus by service providers. A significant proportion of all Indian businesses fall under the small and medium enterprise segment. So, a broad-based, sustainable growth in the Indian economy can emerge only if the countrys SMEs record a healthy growth as they attempt to improve productivity, adopt best practices and bring innovative products to market.

Outlook for the Indian information technology (IT) sector is cautiously positive in 2019 as challenges remain amidst prospects of greater IT spending with global and US economies improving, industry body

Nasscom said. On the industry working towards more digital influence, and subsequent revenues, Nasscom has been consistently saying that there are only three things India needs to focus on, "skilling, skilling and skilling."

BUSINESS OUTLOOK

Digital Transformation has been on the agenda of organisations for years. It is now a crucial time for leaders to plan for and implement it across industries. Amongst various organisations, there is a widespread recognition that the role of digital technology is shifting - from driving marginal efficiency to being a catalyst of innovation and disruption. A recent study shows that approximately 85% of key decision makers feel they have only 2 years to get to grips with Digital Transformation. True Digital Transformation will require de-layering of decision making and work processes. Assets have to be digitalised andenhanced so depreciation is better managed. Capex must give way to Opex more than before.

Digital Transformation of business processes will offer improved efficiencies, more cost-effective ways to use technology, better customer engagement, and can even offer employees better working conditions. Change is never easy and Digital Transformation brings with it both risk and reward. Managing those risks will be a part of the Digital Transformation process as much as bringing on-board new technologies themselves.

India is identified by the world as good place for commencing the new business considering availability of manpower at low cost and other available resources in India. Further, Indian Government opens the market for FDI and FII for developing the infrastructures facilities in India. The future of the Indian Software Industry looks very positive and we expect excellent opportunities in this field.

Our Company has, in the past, majorly catered to the organizations in the Manufacturing and Trading in SME sector. The development services provided to these companies were web / cloud based office automation systems, inventory systems, CRM, Order processing systems, payroll management systems, export documentation management, billing & accounting modules etc. We have provided cloud computing and enterprise email services.

RISKS, CONCERNS & OPPORTUNITIES

Challenges

There is bound to be disruption and uncertainty in business due to COVID-19 pandemic. The economic slowdown caused by COVID-19 is expected to delay planned initiatives which will adversely impact our business. While businesses continue to explore alternate methods of functioning, the key will be to adapt and rethink quickly. While a few sectors like Travel & Hospitality have shown sluggish growth, the overall economic activity has dropped in many markets. However, forward looking businesses are seizing this opportunity to affect the change that they have been contemplating. We are helping such organisations in their Digital Transformation journey, thus enabling a new line of business opportunity.

Business disruption, whether caused by the COVID-19 pandemic or more general societal, economic, political and environmental pressures, often determines the need to adjust course. Digital Transformation introduces a continuous cycle of change that affects organisations, processes, people and culture. Many leaders today, realise that digital transformation requires a more fundamental transformation, with the whole organisation participating. Digital business is introducing continuous and disruptive changes that go beyond project implementations.

Market Size/Opportunity

The global enterprise application market size is estimated to be worth USD 259.51 Billion by 2022, according to a study by Grand View Research, Inc., registering a 7.8% CAGR during the forecast period. Increasing need among organisations for single data access point is anticipated to drive industry growth over the forecast period. Impact of COVID-19 on projects - Some projects may become significantly more urgent, with more critical business needs requiring faster delivery-or they may become less important to the business and therefore potentially abandoned. Given that remote working will become the norm, focus is on adapting an agile implementation methodology to ensure quicker project go-lives. As economic recovery progresses, enterprises operating with pared down workforces are likely to increase outsourcing to build scale in operations to meet rising demand. Spending on growth and transformation initiatives is also expected to start picking up from that point on.

Key Financial Ratios:

The key financial ratios for Financials are as per the below table:

Particulars 2019-20 2018-19
Interest Coverage Ratio 11.06 16.57
Debt Equity Ratio (%) 2.15 2.79
Operation Profit Margin Ratio (%) 6.65 12.75
Net Profit Margin ratio(%) 4.63 1.53
Return on Networth 1.03 0.03

Formulae used for computation of key financial ratios:

Particulars Formulae
Interest Coverage Ratio PBT/Finance Cost
Debt Equity Ratio (%) Debt/Equity
Operation Profit Margin Ratio (%) PBIT/ Net Sales
Net Profit Margin ratio(%) PAT/ Net Sales
Return on Networth PAT/ Avg. of Total Equity

SCARCITY OF HUMAN CAPITAL

This is an inherent problem with this industry. The skill required here has to be combination of creativity and synergizing of technology to bring the best results. There are very few training centers providing training which cater to the needs of the Industry. Also there is a lack of any organized channel of education and awareness as relating to the potential of this industry.

TECHNOLOGY OBSOLESCE

The methods and software used in this field are dynamically changing and the advent of new technology, techniques and upgrades seem to be very fast. It poses a continuing challenge to the players in this Industry to adapt to newer technologies and also for the personnel to get trained and use these effectively.

HUMAN RESOURCES AND RELATIONS

The Company makes efforts to ensure that employees are provided with a congenial work atmosphere. Facilities are equipped with state of-the-art hardware, software and communication equipment apart from periodic recreational facilities to motivate the team. Continuously improving the quality of people through training in skill development as well as personality development. Management places great emphasis on continuously improving the work environment and ambience to nurture innovation and creativity.

CERTIFICATE OF NON-DISQUALIFICATION OF DIRECTORS

(pursuant to Regulation 34(3) and Schedule V Para C clause (10)(i) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015)

To, The Member,

M/s WEB ELEMENT SOLUTIONS LIMITED Mumbai

I have examined the relevant registers, records, forms, returns and disclosures received from the Directors of WEB ELEMENT SOLUTIONS LIMITED having CIN L72200MH2008PLC182320 and having registered office at 301 Corporate Arena Off Aarey Piramal X Road Behind Mahindra Gardens Goregaon West Mumbai - 400062. (hereinafter referred to as ‘the Company), produced before me by the Company for the purpose of issuing this Certificate, in accordance with Regulation 34(3) read with Schedule V Para-C Sub clause 10(i) of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

In my opinion and to the best of my information and according to the verifications (including Directors Identification Number (DIN) status at the portal www.mca.gov.in), BSE as considered necessary and explanations furnished to me by the Company & its officers, I hereby certify that none of the Directors on the Board of the Company as stated below for the Financial Year ending on 31st March, 2020 have been debarred or disqualified from being appointed or continuing as Directors of companies by the Securities and Exchange Board of India, Ministry of Corporate Affairs or any such other Statutory Authority.

NAME OF DIRECTORS DIN Date of Appointment
1 SUNIL SATYANARAYAN SHARMA 01568825 02/09/2014
2 KIRANKUMAR NAVINCHANDRA SHUKLA 01568997 02/09/2014
3 YADVENDER SINGH KANWAR 02150704 16/05/2008
4 SHAILESH BECHARBHAI PATEL 02150718 16/05/2008
6 NAYAN JASWANTKUMAR SHAH 06857389 31/03/2014
7 SHRENA SHAH KALPESH 07176766 05/05/2015

I further hereby inform that, ensuring the eligibility for the appointment /continuity of Director on the Board is the responsibility of the Company. My responsibility is to issue this certificate based on verification of documents and information available in the public domain. This certificate is neither an assurance as to the future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company.