Sigma Solve Ltd Management Discussions

INDUSTRY OVERVIEW

Global economic activity experienced a sharper-than expected slowdown in the fiscal year 2023. With central banks raising interest rates and food and energy prices coming down, global inflation is gradually subsiding. This has resulted in marginal improvement in business and household buying power.

The near-term outlook remains highly uncertain with downside risks from the unpredictable course of the geopolitical conflict in Europe, continued impact from tighter monetary policy, inflation and recession fears, pressures in global energy markets reappearing, and financial market volatility. Rapid tightening of fiscal policies has exposed vulnerabilities both among banks and non-bank financial institutions, with fluctuations in financial conditions due to shifts in market sentiment. This may result in slowdown in demand in certain markets and lead to delayed decision making.

According to the Strategic Review 2023 published by NASSCOM ("NASSCOM Report"), revenue for the Indian IT services? sector is expected to witness growth of 8.3% year-on-year in fiscal year 2023, led by IT modernization including application modernization, cloud migration and platformization. Digital revenues are estimated to account for 32%-34% of total industry revenue, growing at 16% annually in fiscal year 2023. IT services contracts will include a significant digital component, led by digital transformation, cloudification, platform engineering, AI, building software-as-a-service ("SaaS") enabled products and associated consulting services.

COMPANY OVERVIEW

Our Company was incorporated by Our Promoter Mr. Prakash Parikh as "Sigma Solve It Tech Private

Limited" at Ahmedabad on April 29, 2010, under the provisions of the Companies Act, 1956 vide

Certificate of Incorporation issued by the Assistant Registrar of Companies, Gujarat, Dadra and Nagar

Haveli. Later on, the name of our Company was changed to "Presha Software Private Limited" and

Certificate of Incorporation pursuant to change of name was issued by the Assistant Registrar of Companies, Registrar of Companies, Ahmedabad on February 18, 2017. Again the name of our Company changed to "Sigma Solve Private Limited" and Certificate of Incorporation pursuant to change of name was issued by the Registrar of Companies, RoC Ahmedabad on March 7, 2019. Consequent up on the conversion of our Company from Private Limited Company to Public Limited Company, the name of our

Company was changed to "Sigma Solve Limited" and fresh Certificate of Incorporation consequent up on the conversion from Private Limited Company to Public Limited Company was issued by the Registrar of Companies, RoC Ahmedabad on June 17, 2019. Further, shares of our company got listed and traded pursuant to Initial Public Offering on SME Platform of NSE Limited with effect from October 19, 2020 and the Company has after the closure of financial year on June 09, 2023 get migrated to main board of NSE and Directly got listed on BSE main board. Also Company ranks among top 2000 listed entities based on market capitalization at 31^St March, 2023 on NSE. Company Identification number of our Company is L72200GJ2010PLC060478.

To accelerate the business opportunities and increase the foreign IT rich client base, Sigma invested in the Sigma Solve Inc., a Florida (USA) based IT Company originally floated as LLC jointly owned by Mr. Biren Zaverchand and Mr. Prerak Parikh, who are relatives of our promoters. Since incorporation, our company and Sigma Solve Inc. jointly makes efforts to acquire the business opportunities and execute the work respectively. In the year 2019 Sigma invested and acquired 51.04% stake of Sigma Solve Inc. and made it its Subsidiary Company and during the year under review the said stake was increased by 8.77% and which resulted into Sigma?s total holding of approximately 60% in Sigma Solve Inc.

Our company "Sigma" and "Sigma Solve Inc."(Subsidiary Company) having their offices at Florida (USA), Atlanta (Home Office), Australia (Home Office) jointly makes efforts for new business acquisitions. The operation of our company is controlled from our registered office situated at Ahmedabad, (Gujarat) India. Our company?s 100% of the revenue is from export of services, and in order to provide hassle free payment facilities to our clients, we channelize our payment through "Sigma Solve Inc.". Our Company do not have any identified customers being almost 100% of sales are booked by Sigma Solve Inc., and subsequently, our company "Sigma" is charging on monthly basis to Sigma Solve Inc. for providing the execution facilities on per man hour basis in conjunction with efficiency level achieved on monthly basis. Moreover, our company "Sigma" also occasionally serves directly to clients.

Our Company "Sigma" and "Sigma Solve Inc. are jointly offering enterprise software development. We offer turnkey consultancy services to our customers in their business domain. We also in association with group entity "Sigma Solve" provide services related to Web & E-commerce Development, Real Time Application development, Business Intelligence Analytics, CRM Development, Digital Marketing, UI & UX Design, Automation Testing and Quality Assurance.

Our Promoters are first generation promoters and their experience in Information technology Industry has been instrumental in determining the vision and growth strategies for our Company "Sigma". We have a dynamic team that empowers us to provide a unique blend of outsourcing experience to our clients.

Sigma endeavours to bring together creativity and knowledge with positive business strategy to furnish the requirements of diverse clients with an inclusive range of our services which are comprehensive and cost effective. Our Company delivers services across all stages of the product life-cycle, which enables us to work with a wide-range of customers and allows us to develop, enhance and deploy our customers? software products.

We have been successful in augmenting our portfolio of solutions over time for computers, laptops and mobile software solutions. We take regular feedback from our user base which enables us to understand the needs of our users better and helps us to innovate and design improved solutions. Our sales and marketing activities benefit from word-of-mouth recommendations from our user network to create a viral marketing effect, which is amplified by the speed, ease of use and quality of our solutions, and allows us to gain new customers at a low acquisition cost.

OUR COMPTETITVE STRENGTHS

User Experience Design

Human machine interaction and its design has been a key challenge ever since machines were born. With a comprehensive understanding of how humans interact with computer applications, Sigma provides its clients user experience design services for the mobile and web. Creating a beautiful, yet extremely functional design is a key strength of the Sigma team.

Customer Focus

The company is able to understand its customers? complex requirements and translate them into customized solutions on a sustainable basis. Business analysts with extensive software development experience help in understanding our clients? business needs. This approach helps us in creating a sticky customer base.

Unique work culture

We believe that our team is a critical asset for the business. Once the team is empowered to deliver with not only the right tools but also the most inspiring work culture, it will automatically deliver the best to its clients. We make extensive efforts to create a flexible operating and employee friendly environment.

OUR STRATERGIES

The primary elements of our growth strategies are set forth below.

Expand our Current Business Relationships

Our Company do not have any identified customers being almost 100% of sales is booked by Sigma Solve

Inc., and subsequently, our company "Sigma" is charging on monthly basis to Sigma Solve Inc. for providing the execution facilities on per man hour basis in conjunction with efficiency level achieved on monthly basis. Our goal is to build long-term sustainable business relationships with our customers in association with Sigma Solve Inc. to generate more revenues. We plan to continue in association with Sigma Solve Inc. to expand the scope and range of services provided to customers by continuing to build our expertise in major industries and extending our capabilities into new and emerging technologies. In addition, we and Sigma Solve Inc. jointly intend to continue to develop better solutions and new products for industry sectors which are significantly untapped. We will also seek to support a greater portion of the full product development life-cycle of customers by offering targeted services for each phase of the software product life cycle. We and Sigma Solve Inc. jointly also plans to assist customers as they deploy their products to end-users through consulting and professional services that we jointly offer offsite.

Invest in infrastructure and technology

Our Company believes in making investments for achieving higher levels of excellence in its services and implement dynamic and diverse specifications of our customers. We have invested significantly in equipping our technical team with requisite infrastructure and technology. We want to continue to work towards the up gradation and modernization of our infrastructure and technology.

Optimal Utilization of Resources

Our Company constantly endeavours to improve our technical process, and will increase service activities to optimize the utilization of resources. We have invested significant resources, and intend to further invest in our activities to develop customized systems and processes to ensure effective management control. We analyse our existing policies for our technical and designing process which enables us to identify the areas of bottlenecks and correct the same. This helps us in improving efficiency and putting resources to optimal use.

Expand our Capabilities for Smartphones/ Mobiles Devices

The proliferation of smartphone/ mobile devices has created a diverse computing environment for users. We have in the past, explored and continue to explore opportunities on our own to provide application and software to the user efficient performance of their tasks in computers, laptops and mobiles.

FINANCIAL PERFORMANCE

The Company has considered the possible effects that may result from the pandemic relating to Covid-19, Russia Ukraine, Inflation, and increase in interest rates in the preparation of its financial statements, including the recoverability of carrying amounts of financial and non-financial assets. In developing the assumptions relating to possible future uncertainties in the global economic conditions because of this pandemic, the Company has, at the date of approval of its financial statements, used internal and external sources of information Including credit reports and related information and economic Covid-19, Russia Ukraine, Inflation, and increase in interest rates on the Company?s financial statements may differ from that estimated as at the date of approval of its financial statements.

Standalone Performance

The following table gives an overview of the standalone financial results of the company:

(Amount in Lakhs)

Particulars	FY 2023	FY 2022
	Revenue	%of Revenue	% Growth	Revenue	% of Revenue
Revenue from operations	1775.68	100	64.75	1077.82	100
Earnings before interest, tax,
depreciation and amortization	244.2	13.75	139.76	101.85	9.45
(EBITDA) (before other income)
Profit Before Tax (PBT)	276.22	15.55	79.18	154.16	14.30
Profit after tax attributable to	190.66	10.74	55.90	122.30	11.35
shareholders of the company
Earnings per share (in Rs.)	1.86	--	-37.37	2.97	--

Consolidated Performance

Our Company Sigma Solve Limited has a foreign subsidiary named Sigma Solve Inc. having registered office at Florida, USA. The Company hold 59.81% stakes in the said subsidiary.

The following table gives an overview of the standalone financial results of the company:

(Amount in Lakhs)

Particulars	FY 2023	FY 2022
	Revenue	%of Revenue	% Growth	Revenue	% of Revenue
Revenue from operations	5544.64	100	34.93	4109.23	100
Earnings before interest, tax,
depreciation and amortization	2238.53	40.37	49.11	1501.28	36.53
(EBITDA) (before other income)
Profit Before Tax (PBT)	2343.43	42.26	45.24	1613.47	39.26
Profit after tax attributable to	990.25	17.86	10.51	896.05	21.80
shareholders of the company
Earnings per share (in Rs.)	9.64	--	55.78	21.80	--

KEY FINANCIAL RATIOS

Ratios	FY 2022-23	FY 2021-22	%Change	Remarks
				A High Ratio is an
Trade Receivable Ratios	1.105	1.094	0.97	indication of the Corporate?s efficient
				Collection of
				Debts.
Interest Coverage Ratio	282.85	460.70	38.60	The High Ratio indicated better repayment capacity of the Corporate
Current Ratio	2.154	3.626	-40.58	The High Ratio is an indication that the Corporate is having More
				Assets against
				Liabilities
Debt Equity Ratio	4.07	0	100	A Lower Ratio is an Indication of Lower Debt
EBITDA(%)	16.63	15.03	-5.37	Financing A Higher % is an indication of better performance of
Net Profit Margin (%)	10.74	11.35	-5.37	Corporate at Operational Level A Higher % is an indication of better performance of
Return on Net worth/Return on Equity(%)	4.17	3.03	37.36	Corporate at Net Income Level A Higher % is an Indication of better Return on Investment done by the Investors in the Corporate

SOURCES OF FUNDS

Equity Share Capital

We have one class of shares-equity shares of par value Rs.10/-. During the year the changes in the Authorised and Paid Up share capital mainly due to issue of Bonus Shares by the Company. The Authorised share capital was raised from Rs. 450 Lakhs to Rs.1050 Lakhs and Paid Up share capital was raised from Rs.411.10 Lakhs to Rs. 1027.75 Lakhs.

Reserves and Surplus

1. Securities Premium

On a standalone and consolidated basis, the balance as at March 31, 2023 amounted to Nil , which is after adjusting the capitalization of amount out of Securities Premium account by issuing Bonus Shares.

2. Surplus

On a Standalone basis, the balance in surplus account under reserve and surplus as at March 31, 2023 after adjusting the amount paid as interim dividend for the F Y 2022-23 and capitalization of reserved by allotment of Bonus shares is 200.77 lakhs.

Whereas on Consolidated basis, the balance in surplus account under reserve and surplus as at March 31, 2023 was Rs.2073.13 Lakhs.

3. Capital Reserve

On a consolidated basis, the balance as at March 31, 2023 amounted to Rs.316.67Lakhs

OUTLOOK

With export thrust of the present government along with political stability the outlook of the Industry as a whole seems to be positive and your company is well placed to tap this opportunity going forward.

HUMAN RESOURCES

Human resource plays an essential role in developing a companys strategy as well as handling the employee centered activities of an organization. aims to attract, develop, motivate and retain diverse talent, that is critical for its continued success. The company?s talent management strategy seeks to maximize the potential of every employee by creating a purpose-driven, inclusive, stimulating, and rewarding work environment, delivering outstanding employee experience, while fueling business growth.

In F.Y. 2022-23, Sigma made the highest ever net addition of 56 employees taking total employee base to 252 employees (including over permanent and on call software professionals/technicians). Our man power is a prudent mix of the experienced and youth which gives us the dual advantage of stability and growth. Our work processes and skilled resources together with our strong management team have enabled us to successfully implement our growth plans.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has set up a proper and adequate and sound internal control system to safeguard the Group?s assets and to enhance shareholders? investment, as well as reviewing its adequacy and effectiveness of the said system. The duty of reviewing the adequacy and effectiveness of the internal control system has been assigned to the Audit Committee ("AC"), to seek assurance on the adequacy and effectiveness of the internal control system through reports it receives from independent reviews conducted by the Internal Auditor. The Company constantly reviews its processes and the systems with an aim to remain competitive and address the changing regulatory and business environment. The

Control Systems provide a reasonable assurance of recording the transactions of its operations in all material aspects and of providing protection against misuse or loss of Company?s assets. The external auditors as well as the internal auditors periodically review the internal control systems, policies and procedures for their adequacy, effectiveness and continuous operation for addressing risk management and mitigation strategies.

RISKS AND CONCERNS

Like any other corporate, the company is exposed to interest rate risk, currency fluctuations, credit risk and regulatory risks. Currency movement can have significant impact on the operations of the Company. Further, growth of global trade tensions and changes in tax structure will impact the operations of the Company. The company conducts a periodic internal audit that ensures risk management process is in place.

CAUTIONARY STATEMENT

Certain statements under ‘Management Discussion & Analysis? describing the Company?s objectives, projections, expectations may be forward looking statements within the applicable securities laws and regulations. Although the expectations are based on reasonable assumptions, the actual results could differ materially from those expressed or implied, since the Company?s operations are influenced by external and internal factors beyond the Company?s control. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, basis any subsequent developments, information or events.