WEP Solutions Ltd Management Discussions.

Investors are cautioned that this discussion contains statements that involve risks and uncertainties. Statements in this report on Management discussion and analysis relating to the Companys objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable security laws or regulations. These statements are based upon certain assumptions and expectations of future events. Actual results could however differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and domestic demand supply conditions, selling prices, raw material costs and availability, changes in government regulations and tax structure, general economic developments in India and abroad, factors such as litigation, industrial relations and other unforeseen events. The Company assumes no responsibility in respect of forward looking statements made herein which may undergo changes in future on the basis of subsequent developments, information or events.

1. Overview

During 2018-19 India continued to remain the fastest growing major economy despite a slight moderation in its GDP growth from 7.2% in 2017-28 to 6.8% in FY 2018-19. The slowdown in the world economy and emerging markets and developing economies in 2018 followed the escalation of trade wars, tighter credit policies across major economies. The Indian economy growth experienced moderation mainly on account of lower growth in Agriculture and allied activities and due to decline in growth of government final consumption.

Consumer sentiments remained suppressed for a major part of the year. Impact was felt significantly in urban consumers on account of inadequate income/job growth. In addition to this the credit growth was severely affected in the second half of the financial year with the NBFC sector under stress from defaults by a few large players in the sector. Indian banking sector has been dealing already with stressed twin balance sheet problem, which refers to stressed, corporate and bank balance sheets. The increase in NPAs of banks led to stress thereby curtailing credit growth.

The Indian Rupee depreciated by 7.8% vis-a-vis US Dollar. During 2018-19, Indian rupee traded with a depreciating trend against USD and touched Rs.74.4 in Oct 2018 before recovering to Rs.69.2 per USD at end March 2019.


FY 2019-20 is likely to start on a weak note. There is concern across industry segments with severe moderation in growth for major industry sectors. The slowdown in automobile industry, uncertainty in Airline sector, continued stress on NBFC and weak monsoon does not give high confidence for FY 19-20. On the other hand, the historic mandate in general elections, policy rate cuts by Reserve bank of India to alleviate the tight credit conditions give hope of a revival. The government estimates that the GDP will grow at 7% in FY 19-20. The revival of consumption in both private and public space is crucial for the economy to be back on track in this phase of global economic slowdown.

2. Business & Industry Overview

WeP is a unique organization wherein on one side it has a set of marquee enterprise customers and on the other side it has the customers at the lowest end of the retail pyramid who are looking for an automation solution for their business. The Managed Printing Solutions and Digital Services focus on both Large enterprises and MSMEs.

Managed Printing Solutions

The Indian office printing sector is undergoing a transformational change. Corporates no longer want a printing partner but a total printing solution expert for their offices.

Companies are focused on achieving cost reductions in every element of their expenses by focusing on driving efficiency of process. There is also a conscious effort in the last few years by the corporates to "reduce" printing and opt for digitizing processes. WeP MPS helps enterprises to optimize their print infrastructure and with the latest technological tools also help them to reduce wastage thereby reducing printing. Over the last few years there is an increased adoption of MPS services by corporates, both large and small, given the significant benefits it offers. The trend is far more encouraging in public sector enterprises which is one of the largest printing segment but have adopted MPS very late. With the growing digitization push overall office printing might not grow significantly but the penetration of MPS services, which is estimated to be around 20% currently in India, provides enough scope for growth and expansion.

Digital Services

While the MPS business is focusing on providing seamless and efficient printing solution, the Digital services business is focused on providing digital solutions to the customers. With the enterprises opting for digitization of many routine processes the demand for a "total" digital solution provider for an enterprise is bound to grow multifold. The space provides enough scope for an Digital Services provider right from the digitization of records, record management, Process workflow automation, integration of processes, payment solutions, compliance management solution, tax fling etc. The list of opportunities is endless and there is an urgent need for a comprehensive digital solutions provider. WeP Digital has begun its journey on this path to be the one stop and go-to digital solutions provider for any enterprise irrespective of its size, industry or environment it operates.

Retail Solutions

The traditional retail business model in India has been the local kirana and general store, small restaurants, bakery etc. With the advent of the multi chain super stores and e-commerce, one tends to believe that this traditional retail model may not survive for long. However, this is not true. With 90% of the Indian retail market being unorganized it is virtually impossible to replace the footprint of this business model. The reach, cost effectiveness and the direct touch factor makes this model immortal. It is however, essential that these stores / outlets adopt the new age technology to keep them relevant in this space. There is an enormous transformation taking place in these places. On one side these stores are modernizing themselves, using technology to drive efficiencies and tactics of modern retail and on the other side these stores are sweetly poised to be center of e-commerce and digital payments revolution by virtue of them being hubs of demand, supply chain and transactions. WePs endeavor has been to become a partner of these unorganized players by digitizing their supply chain, billing, payments through its retail products and services. The adoption of technology is fast changing their landscape and they no longer remain a mere spectator in this journey of retail growth in India. The digitization and technology transformation will see this sector generating significant growth opportunities and thereby generate more employment in the coming years.

3. Financial Performance


Your company has three revenues streams; Managed Printing Solutions (MPS) Service business, Digital Services business and the Manufacturing, Design and Distribution of Computer Peripherals business (Printers business).

The MPS business logged a growth of 6% again in its services revenue. The revenues grew from Rs. 409Mn in FY 18 to Rs. 438Mn in FY 19. Revenues in the Printers business declined during this year due to drop in the Dot Matrix Printers revenue. The revenues dipped to Rs. 276mn in FY 19 from Rs. 376Mn in FY 18. The Printers business has the Retail Billing Printers and the traditional Dot Matrix printer business. The journey of transforming from the traditional dot matrix business is complete with this line contributing only 15% of the total company revenues in FY 2018-19.

The company started a new segment of Digital Services during second half of FY 2016-17. Revenue for FY 2018-19 was Rs. 32Mn as against Rs. 12Mn in FY 18. Though the revenues from Digital business were not in line with expectations, WeP Digital has grown steadily and currently serves more than 100 customers. The business is focused on providing GST services and Document management solutions enterprise customers. A major portion of the business is operated through the wholly owned subsidiary WeP Digital Services Limited. The GST business was impacted due to continued relaxations in the tax regime and frequent changes due to which the customers have postponed their decision to opt for a technology-based compliance solution.

Operating Profit

During the year the Consolidated Earnings before Interest, Depreciation and Tax (EBITDA) of the company marginally improved from Rs. 88Mn in FY 18 to Rs. 89Mn in FY 19. The EBIT declined from Rs. (8.3)Mn in FY 18 to Rs. (21.5) Mn in FY 19. While the Digital business reduced its losses from Rs. 62Mn in FY 18 to Rs. 43Mn in FY 19, both MPS and Printers business profitability also reduced during FY 19.

During the year, the company has invested Rs. 89Mn in asset deployment for MPS business in addition to the Rs. 240Mn invested in the previous two years. This has resulted in an increase in Depreciation of Rs. 13Mn alone. In addition to this, the investments made in FY 18 for developing resources and technical capability for providing solution centric printing services continued during the FY 19 also, and the investments in the new initiative of Cloud printing also impacted the profitability. In addition to this, the company provided a sum of Rs. 6Mn against receivables from a large customer in the airline industry which has been declared bankrupt in Q4 FY 19. This resulted in a drop in EBIT of this business from Rs. 38Mn in FY 18 to Rs. 22Mn in FY 19.

The Printers business profitability got impacted due to drop in revenues. As explained earlier, during the year, the revenues from traditional dot matrix business were reduced further which has resulted in a drop in profitability. The cost structure alignment done to bring it in line with the revenue drop ensured that the business remained breakeven during the FY 19 as compared to a EBIT of Rs. 15Mn in FY 18.

The company is confident that the investments made will result in much improved performance in the coming years.

Net Working Capital

The MPS operations are working capital intensive as it has to maintain supplies of spare parts and consumables across India for meeting customer service commitments. Further, since the customers are usually large corporates, public sector banks etc, there are receivables for the products supplied and services rendered. The company has made conscious efforts to reduce the capital deployment in the printers business. The overall working capital cycle increased from 73 days in FY 18 to 106 days in FY 19. While the receivables days remained constant at 61 days, there was an increase in year end inventory for devices which increased the inventory days from 115 days in FY 18 to 151 days in FY 19. The Net Operating Cash flows in FY 19 were Rs. 63.6Mn as against Rs. 65.9Mn in FY 18.


Particulars FY 2018-19 FY 2017-18
Debtors Turnover Ratio 5.93 6.09
Inventory Turnover Ratio (on Cost of Goods sold) 3.05 3.42
Interest Coverage Ratio (2.21) (1.10)
Current Ratio 1.23 1.04
Debt Equity Ratio 0.21 0.18
Operating Margin Ratio -2.8% -1.0%
Net Profit Margin Ratio -4.1% -1.8%
Return on New Worth -7.2% -3.5%


a) Interest Coverge ratio has reduced due to increased loss during the year

b) The Profit related ratios viz, Operating Margin, Net Profit Margin and Return on Networth were deteriorated due to increase in loss during the year

c) The Current Ratio improved on account of reduction in current liabilities and infusion of long term funds

4. Internal Control Systems and their adequacy

The Company has in place adequate internal control systems commensurate with its size and nature of its operations. The IFC framework devised by the company have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, safeguarding Companys assets, promoting operational efficiencies and ensuring compliance with various statutory provisions.

The company has appointed M/s. Gnanoba & Bhat, Chartered Accountants to oversee and carry out the internal audit of its activities. The Audit Committee reviews the adequacy of internal control systems, audit findings and suggestions. The Companys statutory auditors regularly interacts with the Audit Committee to share their findings and the status of further improvement actions under implementation.

5. Human resource development / Industrial relations

WePs people centric focus providing an open work environment and fostering continuous learning, improvement and development helped its employees to facilitate delivery of excellence for its customers. WeP believes that success of any company lies in making the customers happy and satisfied. The human resources strategy enabled the company to attract, integrate, develop and retain the best talent required for driving the business growth. The company has created a Performance driven environment with all employees having identified Key result areas directly aligned with the business results.

Talent Transformation and Leadership development have been the key focus areas over the last few years. Company believes in nurturing internal talent to leadership positions and provides an environment of adequate training, cross functional team assignments to aid them.

WeP continued its focus on fresh campus hires and has developed an exhaustive internal training module involving mentoring programmes, live case studies, on field training modules in addition to class room training. Quarterly Reward & Recognitions for best performers and Annual Recognition awards are given in order to promote a culture of competition and performance driven by WeP Values.


We appreciate the market realities, stiff competition faced by your company mostly from the unorganized and local service providers. And your Board acknowledges the following major SWOT analysis more specific to your company.


1. Large base on Enterprise Customers using the Managed Printing Solutions and services.

2. Comprehensive Digital Services Provider with variety of Digital Solutions like GST Services, Document Management Solutions etc

3. Ability to develop customized printing and billing solutions for various applications both on device and non-device based platforms.

4. Scalable infrastructure with pan India presence, wide geographical reach and strong operational expertise.

5. Long standing relationships with Customers and Technology partners.


1. Dependency on products manufactured by other OEMs for providing solutions in MPS business.

2. Inability to develop in-house technical expertise quickly to move up the value chain in MPS business.

3. Inability to retain key resources and attract talent due to lack of substantial revenue growth.


1. Cross selling of Digital services in large base of Enterprise Customers of MPS.

2. Uniquely positioned to provide one stop source of Digital Services.

3. Changes in regulatory and economic environment fuelling the need for printing and document management solutions.

4. Increasing number of customers looking for expert partners to manage their non-core needs vis a vis their core business.


1. Customer concentration in MPS business. Any impact due to these customers can adversely impact the company.

2. Constant regulatory changes in the GST landscape can impact the potential of the Digital business.

3. Assets under deployment in MPS business are reaching their cycle of replacement, thereby creating a pressure on the Investment plans of the company.

4. Significant revenues of the company are from the Banking, Financial Service and Insurance(BFSI) Segments. Any direct or indirect impact on the BFSI industry can impact the revenues of the company.

5. As the company is largely dependent on imports for its supply of printers, consumables and spares, rupee depreciation impacts the margin of the company significantly.

Risk Management Process

The company has an established sound risk management process which is overseen by the Risk Management Committee of the Board through a structured framework. Strategic, Operational and Business risks are identified and appropriate mitigating action plans are put in place by the company. They are reviewed periodically.

The following risks are identified as key risks by the company. The mitigating steps taken to counter them are also outlined below.

Revenue Concentration

The company has concentration of revenue coming in from industry segments like Banking, Financial services and Insurance. Further, a few customers also contribute to a fair share of the revenue for the company. Such concentration exposes the company to a risk inherent in that segment or for a particular customer.


We have adopted prudent norms based on which we monitor and prevent undesirable concentration in geography, industry or customer. The quest for diversified activities within the existing realm of overall management after due consideration of the advantages and disadvantages of each activity in consistent with company policy of increasing business volumes with minimum exposure to undue risks. Concentration of revenue from any particular segment of the industry is sought to be minimized over the long term by careful extension into other activities, particularly in areas the company has some basic advantage such as availability of land, technical or manpower resources.

Inventory Obsolescence Risk

The company needs to maintain printers for a period of more than 48 months. These models are constantly upgraded by the principal suppliers. However the company needs to maintain adequate stocks of spares and toners at all its customer locations in order to meet the customer requirements. These spares may or may not be used. This leads to a risk of us maintaining obsolete stocks. At times we are required to maintain inventory for demo equipments, replacement for repairs and normal distribution stocks. Your company faces the risk of obsolescence in the event of not being able to sell or deploy the above stocks.


Your company is conscious of these risks and tracks and monitors its inventory at regular intervals to minimize obsolescence. Your company continuously monitors the stock levels of such items and ensures they are within the reasonable limits.

Industry Risk

Your company is facing stiff competition from other players who are both organized large brand owners and unorganized local players. This competition forces the company to cut down its margins and reduce price for its products and services for both the existing customers and new potential customers.


Your company has put in a focused approach towards monitoring all such competitive activities. Your company reviews its customer relationship strategy periodically and keeps providing innovative and new solutions. Your company is also focusing on moving up the value chain at the customer by providing Document Management solutions. Your company believes in providing value to the customers and has put in a dedicated team to manage the existing and new customers.

Foreign Exchange Risks:

A good amount of import of stock is done in order to meet the consumables, spares and printer requirement. The time involved from the date of order, receipt of the stock from the vendor, supply to the customer has remained in the range of 30 to 45 days. Further, the credit period from the vendor is an average period of 45 to 60 days. This time lag is potential enough to affect the profitability of company due to fluctuation in the currency exchange rate.


Company has a defined policy for managing its foreign exchange exposure. The management reviews the hedging policy on a quarterly basis and takes appropriate decision from time to time in order to minimize the impact of such volatility.

System Risks

These risks relate broadly to System capability, System reliability, Data integrity risks, coordinating and interfacing risks.


IT department maintains repairs and upgrades the systems on a continuous basis with personnel who are trained in software and hardware. Password protection is provided at different levels to ensure data integrity. Licensed software is being used in the systems. The Company ensures "Data Security", by having access control / restrictions.