Cressanda Solns. Management Discussions

GLOBAL ECONOMY OVERVIEW

The global economy remains in a precarious state amid the prolonged effects of the pandemic, the Russian Federations invasion of Ukraine, and the sharp tightening of monetary policy to contain high inflation. Over three years after the coronavirus provoked the deepest global recession since World War II, the world economy continues to be unstable, hence it will be necessary to make substantial progress on global ambitions to eliminate extreme poverty, counter climate change, and replenish human capital. Emerging Market and Developing Economies (EMDEs) today are struggling just to manage the wherewithal to create jobs and deliver essential services to their most vulnerable citizens.

After growing 3.1% last year, the global economy is set to slow substantially in 2023, to 2.1%, amid continued monetary policy tightening to prevent high inflation, before a tepid recovery in 2024, to 2.4%. Tight global financial conditions and depressed external demand are expected to weigh on growth across EMDEs.

Global economic growth (real GDP growth in %)

(Source: https://www.imf.org/-/media/Images/IMF/Publications/WEO/2023/ April/English/growth-projections.ashx?h=2160&w=3841&la=en)

Infiation is high but expected to gradually decrease due to weaker demand and lower commodity prices. Global financial conditions have tightened due to interest rate hikes and recent instability, leading to unrealized losses for banks. Further, authorities have implemented emergency measures to restore market confidence and limit the impact on the broader financial system. However, unexpected persistence in inflation or commodity price shocks could lead to greater monetary tightening and the risk of another financial crisis.

The global economy is also vulnerable to the impacts of climate change, with more frequent extreme weather events causing significant economic damage. These events could lead to failed harvests, damaged infrastructure, disruptions to activity, and weakened fiscal positions for governments. Additionally, trade restrictions and growing geopolitical tensions may further harm long-term growth by reducing technological diffusion, efficiency of resource allocation, and market diversification.

Overall, the global economy is facing challenges from high inflation, financial instability, climate change, and geopolitical tensions. These factors have contributed to a rough state of the global economy, characterized by severe economic shocks and policy misjudgments.

(Source: A World Bank Group Flagship Report)

INDIAN ECONOMY OVERVIEW

In a world ravaged by multifaceted uncertainties, India emerged as a beacon of hope, registering a strong GDP growth of ~7.0% in FY23. While India has not been completely immune to global volatility, strong private consumption and increased capital creation sustained the economic momentum.

Indias economic growth

(Source: https://www2.deloitte.com/us/en/insights/economy/asia-paci_c/ india-economic-outlook.html)

While the Central Banks brought down spiralling inflation through gradual monetary tightening, it cast a shadow on industrial activity which dropped considerably. The drop was well cushioned as the agriculture and services sectors reported strong growth in FY23.

Indias overall exports (including merchandise and services) defied the global turmoil by registering a handsome growth of 13.84% to a record US$770.18 billion in 2022-23. Imports on the other hand also scaled by 17.38% to US$ 892.18 billion.

The Government revenue continued to scale new heights underpinned by strong GST revenue. Gross tax collections grew 10.4% in 2022-23, but this was lower than the nominal GDP growth of 16.1%, resulting in the gross tax-to-GDP ratio falling marginally to 11.3% from 11.5% the previous year. This was mainly on account of lower excise duty collections following the cuts on fuel last year.

The Budget 2023 is characterised as growth-oriented, progressive, and prudent, with a specific focus on stability and sustainable development. The Budget introduces various policy measures aimed at generating demand for a variety of chemicals, including construction chemicals, emission control catalysts, thermoplastic polyurethane materials TPUs, bio-pesticides, and more.

Additionally, changes in the Basic Customs Duty (BCD) rates for goods such as crude glycerin, denatured ethyl alcohol, acid-grade fluorspar, and specified chemicals for the manufacture of pre-calcined Ferrite Powder are expected to provide impetus to increase domestic manufacturing of these products, aligning with the Make in India initiative.

As Indias domestic demand remained steady amidst a global slowdown, import growth in FY23 was estimated at 16.5% to US$714 billion as against US$613 billion in FY22. Indias merchandise exports were up 6% to US$447 billion in FY23. Indias total exports (merchandise and services) in FY23 grew 14% to a record of US$775 billion in FY23 and is expected to touch US$900 billion in FY24. Till Q3 FY23, Indias current account deficit, a crucial indicator of the countrys balance of payments position, decreased to US$18.2 billion, or 2.2% of GDP. (Source: Ministry of Trade & Commerce)

The Reserve Bank of India started tightening its policy stance during the spring of 2022 to limit the damage caused by foreign capital outflows, a weakening currency, and inflation risks. Higher financing costs slightly dented buoyant economic activity, while over-leveraging in the corporate sector may become a factor of financial instability.

Low labour productivity is affecting the competitiveness of "Made in India" goods and their participation in global value chains. Employment and wage estimates suggest improving labour market conditions in rural areas, while export-oriented service firms report increasing difficulties filling vacancies. Creating good jobs is the most promising pathway to reduce poverty, which is particularly high in the female population. Increasing investment in education and vocational training, and updating labour laws, would help to achieve this objective.

There are green shoots of economic revival, marked by an increase in rural growth during the last quarter, and an appreciable decline in consumer price index inflation to less than 5% in April 2023. India is expected to grow around 6-6.5% (as per various sources) in FY2024, catalysed in no small measure by the governments 35% capital expenditure growth. The growth could also be driven by broad-based credit expansion, better capacity utilisation, and improving trade deficit. (Source: IMF Data)

Hence, broad-based credit growth, improving capacity utilisation, governments thrust on capital spending and infrastructure should bolster investment activity. Accordingly, manufacturing, services, and infrastructure sector firms are optimistic about their business outlook. The downside risks are protracted geopolitical tensions, tightening global financial conditions, and slowing external demand.

GLOBAL IT ENABLED SERVICES INDUSTRY

The global IT industry witnessed strong growth in the recent years, one of the few industries which witnessed steady growth during the pandemic period. The technology industry has not just weathered the pandemic-driven disruptions of the past few years; it has flourished. The crisis thrust many organizations into the future, accelerating digital transformation and changing work models dramatically. But in 2023, the tech industry witnessed a slowdown in growth as economies continue to grapple with issues around supply chains, workforce, and innovation - now exacerbated by considerable macroeconomic and global uncertainties.

Despite continued global economic turbulence, the global IT spending is projected to grow to $4.6 trillion in 2023, an increase of 5.5% from 2022. Amongst the different sub-segments within the IT and IT enabled services industry, the software development segment is expected to see double-digit growth in 2023 and beyond as enterprises prioritize spending to capture competitive advantages through increased productivity, automation and other software-driven transformation initiatives. Conversely, the devices segment is expected to witness a decline of nearly 5% in 2023, as consumers defer device purchases due to declining purchasing power and a lack of incentive to buy.

Some of the key trends shape the global IT industry in 2023 and beyond Leading through macroeconomic uncertainty: Beleaguered by softening consumer spending, lower product demand, and falling market capitalizations, tech companies C-suites are feeling the urgency to increase margins and grow revenues. Beyond workforce adjustments, approaches may include making business processes more efficient, relying more heavily on intelligent automation, modernizing legacy architectures, and considering strategic mergers and acquisitions (M&A).

Navigating global uncertainties: As technology companies confront heightened global challenges they should work to mitigate risks and build more resilient systems. Leaders should think strategically about their choices of partners, where theyre located, and where and how production takes place.

Transforming other industries through technology: On a hunt for new revenue opportunities, the tech sector is extending its reach into other industries, using digital advancements to support innovation and transformation. Tech companies are also seeking to improve efficiency and spur innovation in other areas that are ripe for transformation, including real estate, manufacturing, and retail.

Adapting to new regulations: Climate change and social impacts are having an increasing effect on the operations of tech companies. At the same time, governments and shareholders around the world are pushing companies to increase transparency around environmental footprints and tax payments. New and proposed regulations are expected to require updates to business management software tools, enabling companies to achieve real-time visibility and to grant authorities access to data.

Key focus areas for the Global IT industry in 2023 and beyond Cloud computing: Cloud computing is becoming increasingly popular as organizations look to reduce their IT costs and improve their agility. IT enables services providers are offering a wide range of cloud-based services, including infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS).

Internet of Things (IoT): The IoT is connecting billions of devices to the internet, generating a massive amount of data. IT enables services providers are helping organizations to collect, store, and analyze this data to gain insights into their operations.

Cybersecurity: Cybersecurity is a growing concern for organizations of all sizes. IT enables services providers are offering a range of cybersecurity services, such as threat intelligence, vulnerability management, and incident response.

Managed services: Managed services are a type of IT services that are delivered and managed by a third-party provider. This can help organizations to reduce their IT costs and improve their operational efficiency.

Artificial intelligence (AI): AI is being used in a variety of IT enables services, such as chatbots, predictive analytics, and machine learning. This is helping organizations to automate tasks, improve decision-making, and gain insights into their operations.

Outlook

Digital services will continue to drive the global IT industry in the 2024. Companies must holistically assess their weakness and strengthen their digital and governance capabilities. Modernizing legacy IT, adopting state-of-the-art software engineering practices, and shifting some processes to cloud may help organizations streamline operations, reduce costs, and improve compliance with new regulations. All these factors are expected to drive the growth of the Global IT industry in 2024 and beyond, but the pace of growth may slow down.

However, as 2023 dawns, the technology industry is expected to witness some struggle with uneven demand, right-sizing and right-skilling of its workforce, and uncertainty on a global scale.

INDIAN IT AND BPM INDUSTRY

Exerting a significant influence on the nations GDP and overall well-being, the IT & BPM sector has risen to prominence as a crucial driver of Indias economy. During FY22, the IT sector played a pivotal role, contributing 7.4% to Indias GDP, with projections suggesting it will escalate to 10% by 2025. According to the National Association of Software and Service Companies (Nasscom), the Indian IT industry achieved substantial growth, with revenue reaching US$ 227 billion in FY22, reflecting a notable 15.5% year-on-year increase.

The Indian IT and BPM industry is expected to grow at 8.4% in FY23, reaching a revenue of $245 billion. According to the industry experts, this growth is likely to be driven by the increasing adoption of cloud computing, the growth of the Internet of Things (IoT), and the need for organizations to improve their cybersecurity posture.

Export revenue from IT industry (in US$ billion)

(Source: https://www.ibef.org/industry/indian-it-and-ites-industry-analysis-presentation#) [E: expected]

The US, which continues to be a mainstay market, grew at 10.4% and APAC at 10.1%. However, the industry experienced slower growth in Europe at 7.3%. The growth came from core sectors: BFSI, manufacturing, and telecom/ hitech, and ER&D, IT services, BPM and products among business segments.

Today, the Indian IT industry employees nearly 5.4 million people and in FY23 it added 2.9 lakh new jobs.

Key government initiatives for the Indian IT industry

In the Union Budget 2023-24, the allocation for IT and telecom sector stood at _97,579.05 crore (US$ 11.8 billion).

The government has introduced the STP Scheme, which is a 100% export-oriented scheme for the development and export of computer software, including export of professional services using communication links or physical media.

Cabinet approved PLI Scheme – 2.0 for IT Hardware with a budgetary outlay _17,000 crore (US$ 2.06 billion).

The Indian government has announced a plan to build a cyber-lab for the ‘Online Capacity Building Programme on Crime Investigation, Cyber Law and Digital Forensics to strengthen cyber security capabilities.

Outlook

According to Nasscom, the growth of the IT sector decelerated to 8.4% in the fiscal year 2023, a significant drop from the over 15% growth seen in the previous fiscal year. ICRAs projections indicate that the revenue growth will likely maintain a subdued stance, hovering around mid-single digits in USD terms throughout FY2024. Alongside this, India is poised to witness an upswing in the adoption of cloud technologies, a surge in technology-fueled business innovations, a heightened focus on enhancing employee experiences, and a determined effort to leverage technology as a strategic asset for maintaining competitiveness in the market.

The convergence of these various factors is anticipated to be the driving force behind the expansion of the Indian IT and BPM industry in 2023 and beyond.

COMPANY OVERVIEW

Established in 1983, Cressanda Solutions Limited, an India-based company, has positioned itself as a dynamic player in the realm of Information Technology (IT), Digital Media, and IT-enabled services. Being publicly listed on BSE, our commitment to innovation and growth has led us to embark on a transformative journey. This journey is driven by our aspiration to not only expand our technological prowess but also to align our capabilities with the demands of substantial institutional opportunities.

These endeavors hold the promise of generating not only sustained financial prosperity for the company but also fostering a profound positive impact on society at large. Our approach is anchored in the belief that the services we provide can catalyze positive change while also yielding enduring profitability.

To ensure the successful realization of our ambitious projects, the new incarnation of Cressanda has forged strategic partnerships with best-in-class collaborators and has strategically onboarded exceptional talents boasting profound domain expertise. An exemplar of this strategic approach is our acquisition of Lucida Technologies, which ampli_es our capabilities. Moreover, a testament to our dedication is our pursuit of a significant institutional concierge opportunity, aimed at elevating the overall customer experience.

Core to the fabric of Cressanda is an unwavering commitment to fostering a lasting positive impact, embracing inclusivity, and upholding unwavering integrity. Our mission is clear: to elevate user experiences through the fusion of Technology and Innovation. This mission finds expression in our two focal pillars: Technology nXT and Infra nXT. By collaborating with industry leaders, we are nurturing a global network of diverse entities and individuals, each contributing unique expertise and experiences to our collective journey.

Grow and strengthen network advantage

Deliver operational and organisational efficiencies

Disciplined allocation of capital and improved cash flow generation

Innovate offerings through focused R&D

Build a talented workforce

FINANCE REVIEW

Relevant Disclosure is already provided in Note No: 30 of the Standalone Financial Statements. You are requested to please refer to the same.

RISK MANAGEMENT

A thorough risk-management framework allows us to pre-emptively monitor risks emanating from the internal and external environment. As a result, we have been able to consistently create value for all our stakeholders, despite industry cycles and economic headwinds.

Our risk management process

Identification and assessment approach	Prevention and control strategy	Monitoring	Reviewing and reporting on the risk
Forecasting and calculating the probability of occurrence, magnitude, category and rating of the risk.	Devising plan of actions to prevent risk, temper its strength and reduce its aftermaths.	Gauging the potency of controls, reacting to the revelations and continuously honing the method.	Overseeing the process at regular intervals (at least annually).

Our risk mitigation plan

The Board takes the following steps as a part of its risk management and mitigation plan: Defines the roles and responsibilities of the Risk Management Committee Participates in major decisions affecting the organizations risk profile Integrates risk-management reporting with the Boards overall reporting framework

The Company functions under a well-defined organization structure. Flow of information is well defined to avoid any conflict or communication gap between two or more departments. Second-level positions are created in each department to continue the work without any interruption in case of nonavailability of functional heads. Proper policies are followed in relation to maintenance of inventories of raw materials, consumables, key spares and tools to ensure their availability for planned production programmes. Effective steps are being taken to reduce the cost of production on a continuing basis, taking various changing scenarios in the market.

HUMAN RESOURCE

Our businesss core asset is our intellectual capital, and the satisfaction of our employees greatly influences our success. CSL believes that our people are the driving force behind the company, and our prosperity hinges on their growth. We are dedicated to fostering personal development in a secure and inviting environment, while valuing diversity and individual contributions. Our ability to identify, onboard, and retain talent has fueled our expansion. Human capital plays a pivotal role in shaping our Companys future and ensuring smooth operations. Through training sessions, we empower our workforce to reach their full potential. Our transparent communication structure encourages employees to share their views with management. These efforts enhance recruitment and retention of top talent, nurturing a committed and satisfied human capital base. Effective HR initiatives and people management practices have been implemented, and CSLs workforce has exceeded [] employees as of March 31, 2023.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has established Internal Financial Controls tailored to its operations size, scale, and complexity. The Board of Directors ensures their adequacy and effectiveness. These controls aim to ensure accurate financial and operational information, legal compliance, asset protection, proper transaction authorization, and policy adherence. The Companys internal financial control framework aligns with the Companies Act, 2013, and suits its size and operations. Standard Operating Procedures guide functions, overseen by business heads for compliance.

The Internal Audit function is defined, reporting directly to the Audit Committees Chairman for objectivity. Annually, the team creates an approved audit plan based on business risk. The Audit Committee monitors its compliance, effectiveness, and sufficiency in evaluating internal control systems, operating and accounting procedures, and policies. Corrective actions are taken based on Internal Audit reports to enhance controls.

CAUTIONARY STATEMENT

The MDA section contains forward-looking statements concerning the Companys future prospects. These statements entail various known and unknown risks and uncertainties that could significantly impact actual results. Additionally, the Company faces unforeseen and ever-evolving risks in its operating environment. The reports assumptions rely on both internal and external information, forming the basis for specific facts and figures. However, it is crucial to acknowledge that these assumptions may change over time, leading to corresponding adjustments in the estimates. These forward-looking statements represent the Companys current intentions, beliefs, or expectations and are applicable as of their original date. Please note that the Company is under no obligation to revise or update these forward-looking statements, regardless of any new information, future events, or changing circumstances.