Allied Digital Services Ltd Management Discussions

Management Discussion and Analysis Report

GLOBAL ECONOMY AND IT INDUSTRY

The global economy experienced a challenging year in 2023, grappling with persistent inflationary pressures, geopolitical tensions, and supply chain disruptions. According to the International Monetary Funds World Economic Outlook Update (January 2024), global growth decelerated to 2.7% in 2023, down from 3.4% in the previous year. Developed economies, such as the United States and the Eurozone, faced a moderation in growth as central banks aggressively raised interest rates to combat inflation. However, the global economy is expected to regain momentum in 2024, with the IMF projecting growth of 3.1%. This recovery is underpinned by the gradual easing of inflationary pressures, the resilience of labour markets, and the continued adaptation of businesses to the post-pandemic landscape.

The global IT industry, closely intertwined with the broader economic landscape, demonstrated remarkable resilience in 2023. According to Gartners Worldwide IT Spending Forecast (Q1 2024), global IT spending grew by 3.2% in 2023, reaching $4.6 trillion. This growth was driven by the sustained demand for digital transformation initiatives, cloud computing services, and cybersecurity solutions.

As businesses continue to prioritise digital initiatives and leverage emerging technologies such as artificial intelligence, the Internet of Things, and data analytics, the global IT industry is poised for sustained growth in the coming years. Gartner forecasts global IT spending to grow by 5.1% in 2024, reaching $4.8 trillion.

However, the industrys ability to navigate economic uncertainties, adapt to evolving customer needs, and foster innovation will be crucial in shaping its future trajectory. Key challenges include talent shortages, supply chain disruptions, and the need for robust cybersecurity measures to protect against ever-evolving cyber threats.

INDIAN ECONOMY AND IT INDUSTRY

The Indian economy demonstrated resilience in 2023, emerging as one of the fastest- growing major economies globally. According to the International Monetary Funds World Economic Outlook Update (January 2024), Indias GDP growth rate stood at 6.8% in 2023, outpacing major economies like the United States and China.

This growth was driven by robust domestic demand, government initiatives to boost manufacturing, and a strong services sector. The Indian IT industry, a significant contributor to the countrys economic growth, witnessed a remarkable performance in 2023. According to NASSCOMs Strategic Review 2024, the Indian IT industrys revenue grew by 7.8% in 2023, reaching $245 billion. This growth was fueled by the increasing demand for digital transformation services, cloud computing, and emerging technologies such as artificial intelligence and data analytics.

The industrys export revenue, which accounts for a significant portion of its overall revenue, grew by 9.2% in 2023, reaching $181 billion. This growth was driven by the continued demand for Indian IT services from global markets, particularly in the areas of digital transformation, cloud computing, and cybersecurity. The Indian IT industrys domestic revenue also witnessed a strong growth of 5.6% in 2023, reaching $64 billion. This growth was driven by the increasing adoption of digital technologies by Indian businesses across various sectors, including banking, financial services, retail, and manufacturing.

Looking ahead, the Indian IT industry is expected to maintain its growth trajectory in 2024. NASSCOM forecasts the industrys revenue to grow by 7.5% in 2024, reaching $263 billion. This growth is expected to be driven by the continued demand for digital transformation services, cloud computing, and emerging technologies, as well as the industrys focus on upskilling and reskilling its workforce to meet the evolving market demands.

However, the industry faces challenges such as talent shortages, increasing competition from global players, and the need to adapt to rapidly changing technologies. Additionally, the industrys ability to navigate global economic uncertainties and geopolitical tensions will be crucial in shaping its future growth trajectory.

COMPANY OVERVIEW

Allied Digital Services Ltd. (hereafter referred to as "our Company" or "ADSL"), headquartered in Mumbai and established in 1984, began its journey by supporting mainframe computers in the pre-personal computer era. Our Company was among the first IT companies in India to specialise in Infrastructure Management Services (IMS) as a third-party support provider, developing an annuity business model through multi-year contracts. Today, ADSL has evolved into a global leader in IT consulting and services, offering ‘Managed Services and ‘Systems Integration for infrastructure technology services across more than 70 countries. Our service portfolio includes ‘Digital Workspace Services, ‘Digital Enterprise Infrastructure Transformative Solutions, ‘Cyber Security, ‘Cloud Services and Support, and multilingual and multichannel service desks.

This year, ADSL experienced modest consolidated overall growth in revenues year-on-year, characterised by two distinct growth narratives. Domestically, we achieved phenomenal growth exceeding 30%, driven by the governments continued focus on digitalisation, which has created numerous opportunities in both the public and private sectors. Conversely, the US economys slower trend posed growth challenges, influenced by factors such as inflation, global conflicts, and rising debts. As we step into the current financial year, we do so with strong confidence, risk resilience, and a broader global business development approach to revenue growth.

TECHNOLOGY TRENDS

Artificial Intelligence (Al) and Data Analytics	As Al adoption gains momentum, ADSL is driving new offerings in conversational and generative Al to deliver next-generation IT services and solutions. Al- as-a-Service is garnering more attention, powered by next- generation cloud computing services. Data lakes are being deployed in most large companies, facilitating extensive data analytics and driving machine learning for predictive analytics, enabling real-time decision-making.
Cybersecurity	The growth in cybersecurity continues unabated, driven by rising concerns over IT and OT security. Regulatory IT compliance has become imperative across almost all industries, with new laws on digital identity, transactions, and privacy being implemented. Emphasis on identity and access management, secure access service edge, endpoint detection and response, zero trust, and threat management enables businesses to operate securely in a deployed environment.
Cloud Enablement	Cloud enablement is consistently growing globally. Data analytics, Al technologies, Salesforce, and low-code/no-code platforms are major adopters of SaaS offerings. Multi-cloud presence has become the de facto standard for large and medium enterprises worldwide. In India, cloud adoption for Infrastructure- as-a-Service (laaS) and Software-as-a-Service (SaaS) is also experiencing significant growth, with continued investment in data centres. Both the private sector and hyperscalers are gaining traction in various government and semi-government projects.
Operational Technology COT) Security and Industry 4.0	OT security and Industry 4.0-based loT solutions, along with data lakes, are gaining focus, particularly in the manufacturing and power utilities sectors. In the coming years, we anticipate a surge in demand for these related technologies.

GLOBAL EXPANSION AND STRATEGIC FOCUS

ADSL has accomplished significant global expansion, delivering high-quality services.

This year, our focus is on exploring business growth in Europe and the Middle East. We have opened a new office in the UAE and have already acquired a large customer, positioning us well for growth in the Middle East.

With an experienced global workforce of over 3,000 professionals and robust local support functions, we implement comprehensive governance frameworks and maintain a highly ethical approach, focusing on creating sustained shareholder value. Our client base comprises well-known companies, and we offer our technology services to multiple large global customers with relationships spanning multiple years.

BUSINESS HIGHLIGHTS

Managed IT Services

In India, our enterprise business has experienced significant growth with the addition of new customer logos at the start of the last financial year. Despite the competitive landscape exerting pressure on margins in IT outsourcing deals, we have successfully delivered prestigious large enterprise projects seamlessly. Our ability to manage costs effectively is attributed to hiring fresh talent and providing comprehensive training, as well as maintaining low attrition rates.

Key Wins:

A prominent FMCG customer has outsourced its IT infrastructure services to us, encompassing both end-user and enterprise data centre services.

A leading insurance company has contracted Allied Digital to manage its enterprise data centre services.

A major retail group in South India has engaged ADSL to manage infrastructure for its data centre, over 700 retail outlets, and corporate offices.

The demand for managed IT services continues to grow, with transformation opportunities in cloud and cybersecurity. Data-driven solutions such as data lakes, analytics, and conversational Al have become key areas of interest. We have launched major business campaigns in conversational Al, cloud migrations, and cybersecurity. Our pipeline remains strong, and we are investing in expanding our enterprise sales avenues in India, anticipating robust growth.

Our US operations faced a slowdown due to local economic conditions and macroeconomic factors, leading to delayed decision-making.

Despite customer pressure for further discounts due to internal cost-cutting initiatives, we have retained customers by devising new cost-effective resourcing models while ensuring high-quality services and governance. Our flexible service models, including the introduction of "Integrated End User Services," have positioned us as a strong competitor, driving new customer growth.

This year, we plan to enhance our marketing efforts through direct campaigns and networking. We are establishing new global partnerships and rolling out new service models with cost-effective pricing that enhance overall end-user customer experience, data-centred solutions, and Al-driven services. Expansion into Europe and the Middle East has become imperative. We are actively pursuing opportunities in verticals such as healthcare and education in India.

In recent years, we have expanded our presence across key geographies, including Japan, Brazil, China, and Mexico. This strategic expansion provides good coverage for our US clients as a nearshore service, mitigating inflation challenges in the US. It enables us to find suitable talent easily, provide good time coverage to our North American clients, and control delivery costs.

From a technology practice perspective, we have continued our roadmap across six service areas:

• Cloud migration projects and cloud engineering

• Enterprise-managed IT services

• Digital transformation -

Al and automation projects

• Smart city operations

• Cybersecurity services and solutions Digital workplace services and solutions

Master Systems Integration (MSI) - Smart City Solutions

The scope of ADSLs Smart City Solutions business includes designing, developing, and deploying digital solutions, as well as providing end-to-end IT infrastructure services, enterprise applications, and integrated solutions. Our entry into the smart city solutions market began with the Pune Pimpri-Chinchwad City Surveillance Project, aimed at preventing crime, enhancing law and order, analysing traffic violations, and investigating incidents through a 24x7 video surveillance and security command centre. This project included the construction of an infrastructure framework and its operation and maintenance, which was successfully accomplished and subsequently expanded.

With the success of several smart city projects, including Lucknow, Amritsar, Jalandhar, Sultanpur, and Solapur, which are either in the final phase or nearing completion, our Company has secured several new orders. In FY24, we had an exceptional period for smart/safe city business, winning the following orders:

The Ayodhya Smart City project, which involves building an integrated command and control centre for the city, integrating several CCTV solutions deployed across the city.

The Taloja MIDC (Maharashtra Industrial Development Corporation) industrial area safe city project.

• A "Driver Fatigue Management" solution, which alerts truck drivers and control rooms for signs of fatigue and abnormal driving patterns, implemented at several large companies in India. With these achievements, our Company now has 14 smart/safe city initiatives in various phases of implementation, making us a leading MSI in India and highlighting our expanding presence in this space. Additionally, our Company is gaining traction in MSI services in the United States, expanding on its successful MSI operations in India. This service offers loT smart solutions to State, Local, and Education (SLED) clients, enabling them to leverage technology to enhance operational efficiencies.

In FY24, approximately 17% of our Companys revenue was generated through smart city projects acquired from the government.

"Digital Desk" - Formerly ADiTaaS

"Digital Desk", an Al-Ops based ITSM/ESM no-code/ low-code software platform, has over 15 years of experience, employs 75 people, and serves 100+ customers. ADSL has entered into strategic relationships with seven global brands that use "Digital Desk" as their technology platform. "Digital Desk" is a PinkVerify Certified cloud-native DevOps- based platform.

This year, we have taken the platform to version 6.0, achieving new heights. We have enhanced the security architecture, including data privacy and regulatory compliance, ensuring customer confidence. We have extended high availability of "Digital Desk" in the cloud with enhanced disaster recovery planning and DevOps capabilities. It is with great pride that we report the "Digital Desk" platform, serving several global customers, had no breakdown complaints.

On top of "Digital Desk", we have designed a cloud- based "Digital Bot" platform. This multi-cloud framework supports extensive end-user interfaces using conversational and generative Al leveraged on various digital channels, taking end-user experience to new levels.

FINANCIAL HIGHLIGHTS

	(In Rs. Lakhs)
	Standalone			Consolidated
	2023- 24	2022- 23	Y-o-Y Change	2023- 24	2022- 23	Y-o-Y Change
Revenue	28,665	21,029	36%	68,706	66,007	4%
EBIDTA	4,298	2,028	112%	8,338	8,830	-6%
PBT	3,075	1,320*	133%	6,297	7,296*	-13%
PAT	2,220	931*	138%	4,584	5,373*	-14%

Before losses from discontinued operations

Revenue

During the period under review, our Company successfully renewed most existing contracts and secured several high-volume contracts for Smart/ Safe city projects. This sustained our performance momentum, resulting in a revenue of Rs. 68,706 lakhs in FY24, marking a 4% year-over-year increase. Notably, on a standalone basis, the Company achieved a significant growth of 36%.

EBITDA

On a standalone basis, the Company experienced robust EBITDA growth of 112% compared to the previous year. However, the consolidated EBITDA margin experienced a slight decrease due to challenges in overseas markets.

Profitability

The Company recorded remarkable profitability growth in its standalone performance. However, consolidated profitability was compressed due to challenges in overseas markets. Despite these challenges, the Company maintained a strong focus on cost optimization and operational efficiency, which contributed to the improved standalone performance.

Working Capital Management There were overall improvements in debtors and inventory turnover ratios due to better working capital management. The Companys debtor days reduced to 81 days from 84 days in the previous year, reflecting improved collection efficiency.

Return on Equity (ROE)

On a standalone basis, the ROE was considerably higher compared to the previous year, driven by improved profitability. However, there was a slight dip in ROE at the consolidated level due to the aforementioned challenges in overseas markets.

	Standalone		Consolidated
	2023- 24	2022- 23	2023- 24	2022- 23
Debtors Turnover (times)	3.50	2.00	4.31	3.68
I nventory Turnover (times)	6.32	5.22	15.15	16.35
Interest Coverage Ratio (times)	7.48	8.17	13.50	20.36
Current Ratio (times)	2.14	2.55	3.60	3.53
Debt Equity Ratio (times)	0.12	0.11	0.12	0.10
Operating Profit Margin (%)	15%	10%	12%	13%
Net Profit Margin (%)	8%	4%*	7%	8%*
Return on Equity (%)	5%	2%*	8%	10%*

Before losses from discontinue i operations

Interest Coverage Ratio

The interest coverage ratio experienced a slight reduction due to additional short-term borrowings for project funding. Despite this, the Company maintained a healthy interest coverage ratio, ensuring its ability to meet interest obligations comfortably.

Current Ratio

The overall current ratio was maintained at the same level as the previous year, despite additional borrowings during the period. This stability reflects the Companys effective management of short-term liabilities and assets.

Debt-Equity Ratio

The debt-equity ratio remained at a healthy and stable level during the previous year, indicating the Companys prudent approach to leveraging and maintaining financial stability.

Profit Margins

On a standalone basis, both operating and net profit margins improved considerably during the previous year, primarily due to increased operational efficiency and cost optimization. However, on a consolidated basis, profitability margins were slightly compressed due to challenges in overseas markets.

KEY DRIVERS OF GROWTH

Increased Sales and Marketing	Our Company has significantly expanded its sales efforts and will continue to do so in the coming year to generate more opportunities.
	The marketing team is leveraging advanced digital marketing capabilities to enhance visibility and brand awareness. Various research tools are deployed to gain deeper insights into customers and competition, enabling us to tailor our strategies effectively.
Strategic Global Partnerships	ADSL is continuously augmenting its partnerships with major global players, which has expanded our competencies and ability to offer comprehensive technology services. These collaborations enable us to leverage offshore talent and global expertise, access new markets, and tap into a wider customer base, driving growth. It is through these partnerships that we have recently secured several large deals with global giants. Our Company remains focused on continually expanding partnerships to unlock new growth opportunities.
Geographic Expansion	Our Company is actively expanding into new geographies, opening up fresh opportunities for business growth. By achieving world-class global benchmarks and recognition in service governance, we plan to continue expanding our partner-driven model globally to further propel our business with large contracts. By diversifying our presence across different regions, we can capitalise on emerging markets and cater to the specific needs of customers worldwide. While we are actively building a strong presence in the United States and have expanded our footprint to Mexico, Canada, and other nations, we are giving extra attention to the European and Middle Eastern markets.

Innovation

As a pioneer in technology adoption, innovation is ingrained in our Companys fabric. Our leadership has successfully implemented a design-thinking and innovation-focused business model, setting the foundation for generating innovative solutions to meet the evolving needs of customers. Our "Digital Desk," a low-code/no-code platform, is consistently upgraded with new features and technologies. The "Digital Bot" software, an add-on to this platform, leverages conversational and generative Al. Additionally, we are evolving new business models in our various practice areas to stay ahead of the competition.

Our Company has matured service governance, which has been effective in delivering high-quality technology services to clients. We ensure this by adhering to best practices and maturity models, establishing a Centre of Excellence, and maintaining a diverse workforce with a vast array of skills. We have further enhanced our workforce, ensuring that we have the right talent and expertise to drive growth and deliver exceptional results.

Our matured service governance strengthens our competitive edge, enhances our reputation with clients, and opens long-term opportunities.

ADSL has evolved into a mature IT Roadmap services company specialising in offering a comprehensive range of technology services, including the design, development, and deployment of digital solutions. Supported by leadership with a future- focused mindset, our Company has undertaken rigorous introspection and analysed future opportunities to set a clear roadmap for the next 3-5 years.

This strategic planning allows us to align our goals, investments, and resources accordingly, ensuring a systematic approach to achieving growth targets and maintaining a competitive edge in the industry.

HUMAN RESOURCES

Our Companys human resource (HR) practices have been instrumental in facilitating global expansion and operational excellence. The HR division has consistently demonstrated its strength in efficient resource management and the rapid scaling of both existing and new initiatives. By fostering constant communication and providing enhanced support to personnel worldwide, our HR department has been pivotal in maintaining organisational cohesion and effectiveness.

A significant milestone this year was our recognition as a "Great Place to Work", underscoring our commitment to employee-centric practices whilst maintaining a steadfast focus on customer service. This certification aligns us with leading global organisations in terms of workplace quality. Additionally, we commemorated our 40^th anniversary with a global celebration, recognising the long-standing contributions of employees who have served for 10,15, 20, 25, 30, and 35 years.

Our HR department has successfully implemented smart global and domestic talent acquisition models, directly contributing to operational cost optimisation.

To enhance our internal competencies and support expansion into advanced technology areas, we have deployed various strategies, including:

1. Comprehensive training and development programmes

2. Cross-functional teams and collaboration initiatives

3. Internal mobility and career development opportunities

4. Cultivation of a continuous learning and innovation culture

The global HR team has excelled in recruiting for new leadership roles and significantly scaling our hiring capabilities. A key initiative this year is the investment in a state-of-the-art training and competency-based skill management platform. This system will facilitate seamless skill upgrades for existing employees, streamline new hiring processes, and provide management with valuable insights through skill analytics across the organisation.

Our Company is committed to fostering a positive work environment and ensuring employee satisfaction through various engagement initiatives. These include regular feedback mechanisms, wellness programmes, team-building activities, and career growth opportunities. We offer competitive compensation packages complemented by attractive benefits such as health insurance, retirement plans, paid time off, flexible work arrangements, and career advancement prospects.

To promote holistic well-being, employees have access to wellness programmes, counselling services, stress management initiatives, and Employee Assistance Programmes (EAPs). Diversity, equality, and inclusiveness are core values at our Company. We cultivate a work culture where all employees feel valued, respected, and included, emphasising fair and unbiased selection processes and promotions. Our global offices prioritise hiring local leadership and talent from diverse backgrounds, ethnicities, and genders. Our US office, in particular, exemplifies this commitment with its vibrant mix of diverse diasporas.

These sustained efforts have resulted in attrition rates below the industry average, ensuring stability, enhanced team dynamics, and smoother project execution. This low attrition fosters a positive company culture, high employee morale, increased productivity, and improved job satisfaction, ultimately contributing to our Companys growth and competitiveness. Throughout the year, we conducted 208 induction training sessions, allocating 468 hours to employee development.

GOVERNMENT INITIATIVES

The Government of India has been a pivotal enabler of our technology adoption through revolutionary initiatives in digital infrastructure, digital payments, cybersecurity, the start-up ecosystem, and the Make in India programme. These initiatives have unleashed massive opportunities, and our Company has actively undertaken innovative efforts to seize these opportunities while aligning with the governments vision for a digitally empowered and secure nation.

Digital Infrastructure

In response to the pandemic and the rise of emerging technologies, the government has proactively focused on creating a digital India and implementing smart cities to empower citizens and enhance efficiency in public service delivery. Leveraging our technological capabilities, our Company has actively participated in smart city tenders. With a track record of completing seven such projects and executing another five, we have successfully established ourselves as a Master Systems Integrator (MSI), capable of undertaking end-to-end project responsibilities. Our Company remains focused on participating in all MSI projects in India and has leveraged this expertise to enter the US market as an MSI.

Digital Payments

The government aims to drive digital payments and enhance financial inclusion through initiatives like the Unified Payments Interface (UPI). ADSL actively contributes to financial inclusion with the launch of our innovative platform, ‘FinoAllied. This platform empowers small and medium banks to digitise their services and extend them to rural populations, both within India and globally. FinoAllied has the potential to expand into various industries, including insurance, enabling seamless transactions through conversational bots.

Cybersecurity

Both the government and our Company recognise the importance of cybersecurity in safeguarding data. The government has announced plans to construct a cyber-lab for the ‘Online Capacity Building Programme on Crime Investigation, Cyber Law and Digital Forensics to bolster cybersecurity capabilities. At ADSL, we are at the forefront of cybersecurity efforts, developing programmes specifically designed to enhance security measures for banks and corporations. Our AIM 360 initiative focuses on providing comprehensive cybersecurity solutions to protect critical data assets. Additionally, we have acquired extensive knowledge in numerous facets of cybersecurity, utilising advanced industry tools and platforms, including OT security, which has aided us in acquiring exceptional projects.

Start-up Support:

Start-ups are key to driving the nations growth in the digital era. The government recognises this and has been dedicated to supporting start-ups and fostering innovation with favourable policies, incentives, and funding. According to a Ministry of Electronics & IT report titled ‘Indias Trillion-Dollar Digital Opportunity,

India will require 60-65 million jobs necessitating digital capabilities by 2025-2026. ADSL actively promotes and supports start-ups by assisting in the development and implementation of their innovative ideas. Additionally, ADSL collaborates with select non-profit organisations to drive their technology-enabled initiatives, further supporting the start-up ecosystem.

Make in India

ADSL aligns with the governments Make in India initiative, which aims to promote local manufacturing, encourage investment, and integrate India into the global supply chain. ADSL supports this initiative by empowering domestic companies with digital competencies. Our comprehensive service management platform, "Digital Desk", has been driving significant value for customers by providing integrated services. This solution has been implemented by several domestic companies, yielding exceptional outcomes.

THE ESG INITIATIVE HIGHLIGHTS

Environmental, Social, and Governance (ESG) practices are integral to our Companys commitment to supporting environmental and social causes while ensuring robust corporate governance. ESG encompasses the measurement and reporting of our Companys activities aimed at enhancing the environment, engaging in social work, and adhering to ethical corporate governance practices.

ADSL has adopted equitable governance and plays an active role in public-facing technology initiatives such as smart cities. Our Company has been documenting these activities and intends to formalise and report them in accordance with the global ESG metrics framework. By incorporating sustainability into our governance and core values, we aim to drive top-line growth, attract talent, reduce costs, and foster consumer confidence. Organisations with exemplary ESG practices receive higher reputation scores and face reduced risks.

The Government of India has been a key enabler of our technology adoption through initiatives around digital infrastructure, digital payments, cybersecurity, the start-up ecosystem, and the Make in India programme. These initiatives have unleashed massive opportunities, and our Company has actively undertaken innovative efforts to seize these opportunities while aligning with the governments vision for a digitally empowered and secure nation. Our commitment to ethical corporate governance is unwavering. We have integrated fair governance as a core value and play an active role in public-facing technology projects such as smart cities. This commitment enhances investors confidence in our Companys long-term sustainability planning and helps identify unforeseen risks.

ENVIRONMENTAL

Combating climate change	ADSL is undertaking various tree plantation activities.
Reducing Carbon Emissions	ADSL has implemented several energy-saving measures on premises including maximising natural lighting and ventilation, using energy-efficient systems (for lighting, office equipment, appliances) and sensitising employees. Our Company also proactively monitors resource usage, including electricity bills, and actively managing supply chain risks associated with various electronic goods from OEMs. Further, car-pooling and work from home is also supported.
Preserving Biodiversity, Improving Air and Water Quality, Combating Deforestation, or Responsibly Managing its Waste	Our Company also engaged various NGO agencies to drive effective e-waste management practices. Further, our Company has been actively implementing cloud migration projects, enabling efficient, cost-effective, and energy-saving utilisation of technology for our clients, helping them optimise operations and reduce environmental impact.
Responsibly using Resources and its Supply Chain	Globally, ADSL has adopted usage of filtered water and actively discourages the use of plastic bottles. Our Company also proactively monitors supply chain risks relating to electronic goods with OEMs.

SOCIAL

Nurturing people and workplace	ADSL has comprehensive H R policies and has made them available online. Additionally,the HR department provides frequent updates to employees regarding the ongoing pandemic. Our Company also conducts training, health, safety and wellbeing, engagement and rewards and recognition programmes. ADSL firmly believes in the concept of "Employee nurturing as an everyday role of a manager.
Community involvement	ADSL made donations to support social initiatives around promoting health and well-being of the vulnerable communities and eradicating hunger, poverty and malnutrition. Ourteam also participated in the 3-day blood donation drive organised at Andheri SEEPZ-SEZ office, Mumbai. To create livelihood opportunities, our Company undertook efforts around promoting education and skill development for children, women, elderly and the differently-abled to. Our US team provided volunteering service to Los Angeles, USA Regional Food Bankfor supporting theirCommoditySupplemental Food Program (CSFP). Our innovative product ‘FinoAllied aligns with the digital India initiative, contributing to significant financial inclusion efforts. It empowers small and medium banks to digitise their services and extend them to rural populations, both within India and globally. As a leading MSI for smart city projects, our Company continuously assumes a prominent role in enabling technology forthe betterment of society at large. We prioritise citizen safety, citizen centric services, water and waste management, transportation, and overall urban security, by constantly improving the quality of life for urban populations.
Human Rights and labour standards	ADSL is complying with all statutory regulations and labour laws.
Gender, disability parity initiatives	ADSL is committed to gender neutrality and provides equal opportunities and support for individuals with disabilities.
Employee engagement	Our Company promotes equal opportunity and diversity. We are continuously upholding a strong "Core Value Pyramid" with Ethics and Integrity placed at the top and firmly believe in the importance of "walking the talk" Furthermore, we are regularly publishing newsletters to keep our employees well-informed.
Data Protection and privacy	ADSL is driving extensive cybersecurity practices for clients and is maintaining similar practices internally. This includes ongoing compliance with standards such as ISO 27001, ISO 20000, and SOC 2. Additionally, our Company has established a "Centre of Excellence" to lead by example in driving cybersecurity initiatives. Our Company has been undertaking regular campaigns fo cused on data protection, privacy, and raising awareness about cybersecurity.

GOVERNANCE

	ADSL is maintaining a range of internal controls that encompass
	• Whistle blower policy
Internal controls	• Employee grievance and support services online and offline
	• Open door policy
	• Mandatory onboarding procedures to communicate policies, code of conduct and "Core Value Pyramid"
	• Continuous communication during leadership town hall sessions
Policies, Principles, and Procedures Governing Leadership, Board Composition, Executive Compensation, Audit Committee Structure and Shareholder Rights	Our Company, as a publicly listed entity, is actively adhering to and implementing all the essential statutory and regulatory compliances required.

RISKS, CONCERNS AND THREATS

Volatile Global Outlook

ADSL is exposed to various financial risks due to its significant global presence, including interest rate fluctuations, currency volatility, credit risk, and regulatory challenges. The United States market, in particular, has faced headwinds from rising inflation and geopolitical tensions, exacerbating workforce shortages and attrition issues. These factors have contributed to recessionary pressures. However, our Human Resources department has been proactive in mitigating the impact of these challenges on business growth.

Our Companys robust risk management framework, underpinned by regular internal audits, ensures quarterly risk evaluations by the management. Global macroeconomic risks stemming from geopolitical issues, climate change, and post-pandemic economic shifts pose challenges to our operations. We have implemented proactive measures to de-risk our supply chain, enhancing our ability to navigate these uncertainties effectively.

Technology Trends

The technology landscape is characterised by constant innovation and imminent change. Industry 4.0 and Web 3.0 represent the next wave of technological advancements, and we are committed to leveraging these developments to provide our customers with innovative technology services. This necessitates a proactive adoption strategy for emerging technologies and the promotion of innovative solutions, thereby increasing our potential to capitalise on new business opportunities.

ADSL is dedicated to ongoing training and skill development programmes to maintain our knowledge base. We have explicitly defined six business-related technology practices with a three- year roadmap, focusing on new opportunities. Our commitment to research and development remains steadfast, as we continue to invest in creating new technology service areas across all geographies.

Cybersecurity remains a paramount concern for managed service providers and the industry at large. In response to the execution of significant new business contracts, we have increased the limits of our cybersecurity insurance.

We believe in harnessing technologies such as artificial intelligence and blockchain to benefit enterprises, enhancing the social and environmental sustainability of our customers organisations.

COMPLIANCE RISK	Given our Companys global operations, adherence to diverse legal and regulatory requirements is crucial. Noncompliance with laws and regulations in any jurisdiction could expose our Company to legal and financial penalties, potentially damaging our brand image. To mitigate this risk, we have identified key stakeholders across sales and business units, as well as corporate functions, to ensure continuous compliance with all applicable laws. Relevant departments monitor and amend applicable regulations as necessary. Additionally, we have engaged third-party agencies to support standard compliance in certain countries and mitigate local statutory risks.
	From an operational standpoint, we ensure that our compliances, such as ISO, CMMI, and PinkVERIFY certifications, remain active and functional each year. In the previous year, we introduced new Environmental, Social, and Governance (ESG) metrics to aid in the holistic development of our Company.
DELIVERY RISK	In a highly competitive market, there is a constant risk of customer attrition or incurring penalties if standard core services are not delivered to the highest standards. Customers expect continuous value enhancement from service providers. In India, businesses face persistent pressure to not only surpass Key Performance Indicators (KPIs) but also to offer discounts due to the pandemic and provide free project delivery as value additions. To address these challenges, we have implemented a two-pronged approach:
	1. Shift-left automation: We have automated routine tasks, developing analytical dashboards for customers and partners. Approximately 300 distinct daily tasks have been digitalised and automated.
	2. Pricing strategy: For new customers, we factor in increased operational costs in our pricing. In response to inflationary pressures, we have also approached existing global and Indian customers for price increases to maintain profitability.
	Payment delays remain a persistent global challenge. However, our finance team has successfully managed this risk through rigorous follow-ups on receivables, maintaining cash flow without incurring additional finance costs.
CONTRACT MANAGEMENT	Misaligned expectations among project participants can sometimes arise from misunderstandings about the scope of work. To mitigate this risk, we have standardised certain contracts and are continuously working to improve contract administration. We strive to gain deeper insights into customer environments to reduce the risk of service failure at desired levels. Our contracts team is continually refining new and existing contracts in light of the current business climate.
EMPLOYEE- RELATED RISK	As a service-centric, talent- driven organisation, attracting and retaining the finest talent with specialised skills is paramount to our success. We strive to balance the right levels of expertise in the right places at the right time to enhance our differentiation and competitiveness.
	In India, our attrition rate has decreased over the past year. However, new challenges have emerged in the United States, where inflation rates are higher than in recent years. Our Company mitigates these risks through cross-training and diligent collaboration with internal and external recruiters. In Europe, changes in immigration laws have led to attrition issues, but we have developed constant vigilance in our delivery operations to ensure customer deliverables are never affected.

ADSLS ACTIVE ROLE IN GLOBAL ESG INITIATIVES

ADSL continues to make significant strides in various sustainability aspects, demonstrating our commitment to Environmental, Social, and Governance (ESG) principles. Our ongoing efforts in this domain not only align with global sustainability goals but also contribute to our long-term business resilience and stakeholder value creation.

Environmental Stewardship

Our Company has maintained a steadfast focus on environmental conservation and resource efficiency. Notable achievements in this area include:

1. Energy Conservation: Through targeted initiatives, we have achieved approximately 20% year-on-year reduction in energy consumption. This significant improvement underscores our commitment to minimising our carbon footprint and promoting sustainable operations.

2. Water Management:

We have implemented measures to optimise water consumption across our facilities, recognising the critical importance of water conservation in todays resource-constrained world.

3. Waste Management: Our Company has adopted efficient waste management practices, focusing on reduction, reuse, and responsible disposal methods to minimise environmental impact.

4. Ecosystem Preservation:

ADSL has actively engaged in tree planting initiatives, contributing to the preservation and restoration of natural ecosystems. This effort aligns with global goals for biodiversity conservation and climate change mitigation.

Governance and Ethical Practices

ADSL maintains rigorous governance standards and ethical business practices, ensuring transparency, accountability, and responsible corporate behaviour. Our governance framework is designed to align with global best practices and regulatory requirements.

Technological Innovation for Societal Benefit

Beyond environmental initiatives, ADSL remains committed to leveraging our technological expertise for broader societal benefits:

1. Financial Inclusion: We continue to develop and deploy technologies that promote financial inclusion, enabling access to financial services for underserved segments of society.

2. Sustainable Resource Utilisation:

Our innovative solutions are designed to promote the sustainable and responsible use of resources across various sectors, contributing to overall resource efficiency.

INTERNAL CONTROL SYSTEMS

Robust internal controls enable the prompt identification and correction of operational irregularities while providing an accurate summary of the organisations position.

These controls ensure that transactions are authorised, recorded, and reported accurately, and that assets are protected against unauthorised use or disposition.

Our Company has placed significant emphasis on enhancing internal control systems across all departments, including Finance, Sales, Legal, and Human Resources. Timely actions are taken when necessary to safeguard our Companys long-term viability and growth potential.

In finance, a formal system of internal audits manages internal checks and balances. We have appointed M/s. Satya Prakash Natani & Co., Chartered Accountants, Mumbai, as our Internal Auditors to conduct regular internal audits.

On the sales front, there is a greater emphasis on customer credit checks, profitability, and sales closures. We have enhanced alert communication, automation, and customer system health checks on the delivery and operations sides. Our Companys quality management system is ISO-certified and updated regularly, significantly increasing overall delivery quality and reducing customer concerns.

We have updated our contract management software in the United States and plan to implement the same in India. This software will enable us to reduce business risk and enhance compliance by incorporating contract management best practices. In FY22, we launched a significant initiative to achieve CMMI Level 3 compliance, with certification expected by the end of the year.

By maintaining a comprehensive approach to risk management and internal controls, Allied Digital is well- positioned to navigate the challenges of a dynamic global business environment while capitalising on emerging opportunities for growth and innovation.

Disclosure of Accounting Treatment

The Financial Statements of our Company have been prepared in strict accordance with the procedures and processes outlined in the applicable Indian Accounting Standards (Ind AS). During the financial year under review, there was no alternative treatment adopted in the preparation of the Financial Statements.

BUSINESS OUTLOOK

Our Companys innovative and proactive nature has enabled us to diversify and establish a strong vertical with substantial opportunities across the globe, originating from a developing nation like India. By refining our operational models to account for global inflationary risks, we anticipate continued business expansion. Our strategic plan has yielded remarkable results, and we have continued to enhance our service governance to new heights. To further propel business growth, we have signed partnerships with several large global companies, which will generate new business flows in the coming times.

Looking ahead, we anticipate rapid expansion in the fields of Artificial Intelligence (Al) and automation, which are progressively becoming mainstream industries. Our significant future investments will focus on Al, Robotic Process Automation (RPA), Cybersecurity, and specific start-up incubation areas. As we continue to invest in innovation that directly contributes to our business development, we foresee a rise in data science and Al initiatives in the coming year.

Our Company has been actively delivering on its order books, and the growth outlook for the pipeline appears positive. Multiple smart city project implementations are currently underway and are nearing completion. We are also expanding our cybersecurity and cloud business, as well as our Integrated Solutions business (including smart cities) in the United States. This expansion will generate new opportunities and allow us to explore further business with our existing partners and clients.

We anticipate that new geographies and initiatives will contribute to ADSLs steady expansion. In the near future, ADSL will invest resources in building new strategic business partnerships in Europe and other global regions. Our new ESG initiative will play a crucial role in enhancing our Companys brand and global business context, as well as gaining the trust of our current and potential customers.

FY24 will also record numerous initiatives in progress and revenues committed for the next few years. ADSLs brand value continues to rise, and our accomplishments are gaining more attention in digital media each year. We remain committed to leveraging our strengths, capturing new opportunities, and delivering sustainable value to our stakeholders.