Economic overview
Global Economy1
The global economy demonstrated resilience, despite facing numerous headwinds in the recent years. According to the International Monetary Fund (IMF), global growth is expected to hold steady at 3.2% in CY2024 and maintain this rate during CY2025. There is a favourable outlook for global trade momentum, which is anticipated to accelerate in CY2024. The management of supply-side issues and the implementation of restrictive monetary policies have significantly contributed to reducing inflation in most economies of the world. Global headline inflation is anticipated to decrease to 5.9% in CY2024 and further to 4.5% in CY2025, owing to weak labour markets and low core inflation, supported by stringent monetary policies.
The future outlook appears optimistic, owing to the resilience of advanced economies as well as emerging economies such as India. Anticipated easing of inflationary pressures and the implementation of more accommodative monetary policies by Central banks have contributed to this outlook. Robust domestic demand is propelling the economic expansion in Europe and Asia. Moreover, the global economy stands to benefit from the adoption of advanced technologies such as Generative AI (GenAI), which could provide both structural support and cyclical momentum to the global economy.
United States
The United States is expected to see an increase in GDP growth rate from 2.5% in CY2023 to 2.7% in CY2024 and then drop to 1.9% in CY2025.
This slowdown is influenced by the effects of monetary policy tightening, gradual fiscal tightening and softening labour markets, impacting aggregate demand.
Europe
The Europe region is projected to recover from a low GDP growth rate of 0.4% in CY2023 to 0.8% in CY2024 and 1.5% in CY2025, owing to increased household consumption, facilitated by recovery from energy prices, decline in inflation and increase in real income. Inflation is anticipated to subside faster than expected, reflecting favourable global supply developments.
South Africa
The South African economy is expected to face pressure in CY2024, owing to supply-side constraints in the electricity and logistics sectors. However, South Africas GDP growth is expected to increase from 0.6% in CY2023 to 0.9% in CY2024 and 1.2% in CY2025, attributed to the management of supply issues and recovery from earlier weather shocks.
Indian Economy
The Indian economy has showcased improvement amidst global volatility. Strong domestic demand is expected to sustain growth, facilitating real GDP surge of 8.2% in FY2023-2024. An increase in investments in public sector and a robust banking sector has facilitated gradual economic expansion over the years. Industries and services sectors have been key contributors for supply-side growth in the first half of FY2023-2024. Rising credit demand and decreasing inflation have further contributed to the positive outlook.
In this economic landscape, the Information Technology (IT) sector plays a crucial role, fostering innovation, efficiency gains and technological advancements. With its growth trajectory mirroring the Indian economy, the IT sector has facilitated growth, competitiveness and efficiency across industries. With prudent policies and a thriving IT sector, the economy is poised for a future brimming with opportunities.
Industry overview
Global Information Technology industry
The technology market is expected to witness rapid growth, fuelled by enterprise investments in software and IT services in the coming years. Global IT spending is anticipated to reach $5 trillion in CY2024, marking a 6.8% increase from CY2023.6 IT services are projected to experience significant growth, becoming the largest segment of IT spending for the first time, with an expected 8.7% increase to $1.5 trillion in CY2024.7 This growth can be attributed to enterprises investing in projects aimed at enhancing organisational efficiency and optimisation. The global AI market has the potential to reach $320-380 billion by 2027, with GenAI expected to contribute approximately one-third of this value.8 Enterprises focusing on investing in software and IT services, including artificial intelligence, cloud computing and cybersecurity technologies, will propel the growth of the tech market.
A substantial increase in enterprises investing in AI/ML capabilities is expected in the coming years. A significant focus on data & analytics across various industries such as technology, banking and healthcare is gaining momentum. The HR/CRM solutions are increasing in demand, especially in Europe within the technology, banking and healthcare sectors. The upcoming years are expected to be transformative for generative AI, with technology companies experimenting to discover applications that enhance efficiency and productivity.
In CY2023, 70% of enterprises worldwide allocated 20% or more of their technology budget to digital initiatives, marking a significant increase from 57% in CY2022. This surge was particularly notable in the energy and utilities, high-tech and retail sectors. Along with that outsourcing has expanded, with a greater portion of budgets directed towards digital initiatives and a preference for longer-term contracts.
Generative AI or Gen AI, emerged as a leading technology, capturing the spending allocation of approximately 70% of worldwide enterprises, led by energy, hi-tech and discrete manufacturing sectors. Projections suggest that investment in Gen AI will continue to draw more investments in CY2024.12
Top Gen AI spending sectors in CY202313
Indias Information Technology industry
Indias technology industry has been demonstrating resilience amidst uncertainties, underscoring its adaptability and inherent strength. The increase in the number of large tech deals, stable net profit margins, lower attrition rates, higher utilisation and enhanced market trust, have enabled the industry to grow steadily.
India has emerged as one of the worlds fastest-growing Fintech markets, with the Fintech market opportunity expected to reach USD 2.1 trillion by 2030.14 A substantial AI talent pool and generous AI investments will propel the AI market in India to grow at a compound annual growth rate (CAGR) of approximately 25-35% until 2027.15
India remains a preferred destination for tech investment, maintaining its position as one of the fastest-growing major economies for the third consecutive year. A substantial investment in foundational areas such as cloud computing, IT modernisation, digital customer experience and digital engineering projects, will significantly contribute to the growth of Information Technology industry in India. Additionally, GenAI remains a key focus area in the industrys growth trajectory.
Company overview
Zensar Technologies Limited is one of the leading technology solutions companies, renowned for its prowess in delivering innovative digital solutions through its expertise in experience design, data engineering and advanced analytics. Zensar enables its clients to thrive and succeed in a dynamic environment by conceptualising, building and managing digital products. With its headquarters in Pune, India, the Company operates as a part of the RPG Group, catering to over 145 global clients.
Following are the key services being offered:
Experience services | Advanced engineering services | Data engineering and analytics | Application
services |
Foundation services |
Experience design | AI engineering buddy | Accelerated generative AI | Oracle services | Digital infrastructure |
Experience engineering | Cloud strategy and operating model | Data engineering | Salesforce services | Digital workplace |
Brand, content and creative | Digital engineering | AI and ML | SAP services | Digital experience |
management | ||||
Cloud transformation | Automation | Application | Digital operations | |
and operations | management | |||
Visualisation and analytics | Quality | Digital security | ||
Google gen AI | engineering | ZenSOC platform | ||
Responsible AI for gen AI |
Operational overview
Despite the uncertainties in target markets, in US $ terms, Zensars Europe region saw a constant currency growth of 8.9% YoY, Africa grew by 14.7% and US reported a decline of 6.9%.
Enterprise Risk Manangement Introduction
To safeguard the organizations strategic objectives and operational endeavours, Zensar has established a robust Enterprise Risk Management (ERM) program through which risks are assessed and managed at various levels in the organization with a top-down and bottom-up approach covering the enterprise, business units, geographies and functions. The ERM program covers compliance with applicable government and regulatory requirements, and potential risk areas in various economic, social, and industrial environments that Zensar operates in. The ERM framework encompasses the risks that the organization is facing under different categories, such as strategic, operational/ cybersecurity, financial, compliance/regulatory, and ESG/ climate risks, with each of these categories having internal/ external dimensions. Systematic and proactive identification of risks and mitigations thereof enable effective and timely decision-making.
Key Components of ERM Framework
The Company has adopted an integrated ERM Framework that is being implemented across the organization by the Chief Risk Officer and ERM team.
Approach & Methodology
Risk governance processes include identification, prioritization, monitoring and reporting of risks identified at the various levels of organization, business units, functions, and geographies. The risk governance model is regularly updated based on our interactions with internal and external sources, including experts in the risk advisory domain, to ensure that the model aligns with the achievement of strategic objectives of the organization.
Risk Assessment
The risk score is calculated based on the probability and impact. Using a combination of risk impact from insignificant to catastrophic, and risk probability ranging from rare to almost certain, a risk score is deduced which helps to identify if the risk rating is low, medium, or high. The risk scores are then used to arrive at a risk prioritization matrix, which guides the allocation of time and resources towards risk mitigation.
Risk governance
A multi-level governance structure has been established by the Enterprise Risk Management (ERM) team, which ensures monitoring, reporting and mitigation of risks. The ERM program is headed by the Chief Risk Officer (CRO), who ensures that the function executes its primary responsibilities of formulation and deployment of risk management policies and procedures. In terms of reporting, the function provides quarterly updates to the Risk Management Council and periodic updates to the Board Risk Management Committee on risks which impact key business objectives, with an insight into their mitigations. Also, ad-hoc updates may be provided in case of any emerging risks and change in internal/external factors influencing risk assessment.
Enterprise Level Risk Register
The ERM function has defined and implemented a detailed Risk Register with risks defined at Organizational, Business Unit, Functional and Regional levels, which enables risk- based decision making and reviews by various stakeholders in the risk management process.
Risk Categories
Strategic: Risks arising out of strategy formulation and successful execution of these strategies are covered in this category. For example, risks associated with the choice of the target markets, the Companys market offerings and business models. Details of the Companys strategy are described in other sections of the annual report.
Operational / Cybersecurity: Risks arising out of internal and external factors affecting policies, procedures, people, and systems, thereby impacting service delivery. These also include potential risks arising out of breach of Companys network and possible impact on its operations, including risks of cyberattacks and data privacy breaches.
Compliance / Regulatory: Risks arising from potential litigations, violations of laws, regulations, and major regulatory/geopolitical changes. Also includes Reputational Risks, which are likely to affect brand or reputation.
Financial: Risks related to financial liquidity, currency fluctuation and capital management.
ESG / Climate: Risks related to business impact due to mismatch in approach versus implementation of sustainability initiatives linked to climate changes, alignment with stakeholders, and regulatory reporting compliances. The risks due to natural calamities- extreme climate events / human made disasters are also being reviewed and monitored.
Risk identification and mitigation
During the year, the focus was on strengthening ERM framework across the organization and institutionalising ERM as one of the key business review mechanisms for key risks. Listed below are some of the key risks, anticipated impact, and mitigations:
Special Note- Emerging Risks
As per World Economic Forums 2024 Global Risks Report, major emerging risks for IT industry are:
a. Global economic slowdown
b. Misinformation and disinformation
c. Cybersecurity threats
d. Extreme weather events / conflicts resulting in involuntary migrations & instability
e. Negative consequences of AI
We, at Zensar, are cognizant of these risks and importance of service continuity for our customers. While we continue to assess and ensure financial and cyber security controls arising from ongoing negative developments in economic and cybersecurity areas, to counter the risk of misinformation and disinformation, we acknowledge the growing requirement of strategic and comprehensive approach with robust verification process, awareness trainings and effective communication & collaboration.
Extreme weather events having impact on continuity of services and wellbeing of employees is one of the priorities for stability of business and we have robust Business Continuity process in place to address the impact of adverse situations. We believe in integrated thinking for sustainable business management and building resilience and promoting inclusivity.
Zensar being a technology company, some of these risks also bring inherent opportunities like helping customers with effective cybersecurity solutions, green technologies, controlled and monitored AI/ ML implementations and collaborative collective goals to fight climate change impact.
Financial Performance Revenue
Revenue for the year ended March 31, 2024, is as under:
By Segments
INR Million | ||
SEGMENT | FY2023-24 | FY2022-23 |
Digital and Application Services | 40,019 | 39,445 |
Digital Foundation Services | 9,000 | 9,037 |
Total | 49,019 | 48,482 |
By Geography | INR Million | |
Geography | FY2023-24 | FY2022-23 |
United States of America | 32,939 | 34,273 |
Europe | 10,138 | 8,718 |
Rest of the World | 5,942 | 5,491 |
Total | 49,019 | 48,482 |
Other Income
Other Income comprises of dividend from mutual fund investments, interest on bank deposits, profit on sale of investments, net gain on financial assets mandatorily measured at fair value, interest on security deposit, net foreign exchange gain and loss on share buyback liability, etc. Other income during the current year was INR 1,588 million as against INR 1,028 million in the previous year.
Share Capital
During the year, the Company has allotted total 167,833 equity shares fully paid up of INR 2 each. Out of these, no equity shares were allotted under "2002 Employees Stock Option Scheme", 16,900 numbers of equity shares were allotted under "2006 Employees Stock Option Scheme" and 150,933 numbers of equity shares were allotted under "Employee Performance Award Unit Plan, 2016".
Reserve and Surplus
The Companys Reserves and Surplus as on March 31, 2024, were INR 34,067 million as against INR 28,531 million in 2022-23.
The Companys Other Reserves as on March 31, 2024, were INR 1,099 million as against INR 778 million in 2022-23.
Fixed Assets
During the year there is an addition of INR 91 million in Gross Block of Tangible Fixed Assets and addition of INR 0.1 million in Gross Block of Intangible Assets.
Return on Capital Employed*
The return on capital employed (ROCE) for the year 2023- 24 is 25.4% and for the year 2022-23 it was 15.0%
Debtors
The position of outstanding debtors was:
INR Million
Particulars | As at March 31, 2024 | As at March 31, 2023 |
Considered Good | 7,320 | 7,298 |
Credit Impaired | 234 | 233 |
Allowances for Credit loss | (234) | (233) |
Total receivables | 7,320 | 7,298 |
Cash and Bank Balances
The Cash and Bank Balances represent the Companys balances in banks in India and overseas. The Company also retains funds in the Exchange Earners Foreign Currency (EEFC) account in India, which is mainly used to meet the remittance requirements of the Companys branches and for travel purposes. As on March 31, 2024, Cash and Bank balances (Including overseas without unpaid dividend) stands at INR 4,432 million.
Other Current Assets
Other Current Assets of INR 1,347 million (Previous year: INR 1,238 million) consist mainly of unbilled revenue, prepaid expenses, advances to suppliers and statutory receivables as on March 31, 2024.
Other Current Financial Assets
The Other Current Financial Assets comprise unbilled revenue, foreign exchange forward contracts and security deposits amounting to INR 3,527 million (Previous Year: INR 2,859 million) as on March 31, 2024.
Other Current Liabilities
Other Current liabilities amounting to INR 1,691 million (Previous year : INR 1,828 million) consists of unearned
revenue and payment due towards provident fund, pension fund and statutory taxes.
Tax Expense
The Companys income-tax expense is INR 2,108 million (Previous year : INR 1,165 million).
Contingent Liabilities
Contingent Liabilities have been disclosed in Note 31 in the "Consolidated Financial Statement - Notes to the Accounts".
Accounting principles consistently used in the preparation of financial statements are also consistently applied to record income and expenditure in individual segments.
KEY RATIOS
Particulars | FY2023-24 | FY2022-23 | Reason for deviation (if more than 25%) |
Revenue | 49,019 | 48,482 | |
EBITDA | 8,717 | 5,522 | |
Operating Profit Margin | 17.8% | 11.4% | Decline in operating cost |
Net Profit Margin | 13.6% | 6.8% | Decline in operating cost and increase in other income |
Return on Net Worth | 18.7% | 11.0% | Increase in net profit |
EPS (Basic) | 29.4 | 14.5 | |
EPS (Diluted) | 29.1 | 14.4 | |
Debtor Turnover Ratio | 6.7 | 6.4 | |
Interest Coverage Ratio | 43.0 | 16.9 | Increase in profit and decline in finance cost |
Current Ratio | 3.0 | 2.7 | |
Debt Equity Ratio | 0.0 | 0.0 |
Human Resources (HR)
HR digitalisation
We have invested heavily in building best in class offerings to upskill and cross-skill our dynamic workforce. We continue to look at all HR touchpoints to make an impact on the "key moments" of employees journey in Zensar. This includes enhancing the experience of applicants and new joiners, through periodic listening initiatives to gather the pulse of the workforce. Utilizing the insights throughout associates journey, we brought many digital initiatives related to onboarding (gamification), learning & development (nudges and recommendations), performance management (having wellness goals and discussions), compensation (focusing on performance, inclusion and top talent), inter-country movement (fully automated immigration process) & workforce planning (intelligent dashboards) to enhance the associate experience. The process simplifications of workflows and related analytical layers ensure minimal chances of error & dependable reports for relevant stakeholders. These digital initiatives enable us to provide fantastic user experience to ouremployees, thus resulting in the assimilation of our employees into our vision and ecosystem and making huge contributions to the organizations journey to become the best.
Happiness Journey
Zensar prioritizes fostering a happy and engaged work environment. A diverse Happiness Global Council is constituted annually to prioritize areas of improvement from the survey, assess existing programs, policies, and plan for initiatives to improve further. Based on the feedback received from last years survey, three key tenets are gaining particular focus: "I am growing," "I live a purposeful and balanced life," and "I feel valued." Local and regional councils spearhead ideation and execution of initiatives aligned with these focus areas. Happiness Council along with various teams implemented engaging initiatives like ChatGPT conquest to experiment with ChatGPT and transform ideas, single sign-on launched for accessing all Apps in Zensar, setting up of policy clinic, wellness survey to improvise offerings like Enhancement of the Associate Assistance Program, celebrations like International Mens Day, Parents day etc.
Diversity, Equity & Inclusion
Zensar fosters a culture of equal opportunity and actively champions a diverse workforce. We are a proud signatory to the UN Global Compact and its Women Empowerment Principles, demonstrating our commitment to sustainability and gender equality. Our Global DEI Council and dedicated Center of Excellence spearhead these initiatives, resulting in significant progress. These achievements include 30% gender diversity across the organization, maintaining a near-perfect gender pay parity ratio, and implementing non-discriminatory practices in performance evaluations, promotions, and talent identification. Additionally, we offer targeted programs like "Enliven" to support women re-entering the workforce and comprehensive healthcare benefits encompassing maternity leave, pregnancy care, and same-sex partner medical insurance.
Furthermore, Zensar prioritizes the well-being of its women employees through curated wellness programs, mentoring initiatives (Womentoring), and opportunities for external representation. We actively promote success stories of women leaders and provide accessible infrastructure and software features for employees with disabilities. Zensar
maintains a dedicated grievance redressal forums to cater to diverse workgroups. Zensar ensures balanced participation of employees in organizational forums and committees. This unwavering commitment to diversity and inclusion empowers all individuals to thrive and contribute to our collective success.
Cautionary Statement
This document contains statements about expected future events and the financial and operating results of Zensar Technologies Limited that are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is a significant risk that the assumptions, predictions, and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results, and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications, and risk factors referred to, inter-alia, in the managements discussion and analysis report hereunder.
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