Subex Ltd Management Discussions

Subex Limited ("Subex" or "the Company") has its Equity Shares listed on the National Stock Exchange of India Limited ("NSE") and the BSE Limited ("BSE").

The management of Subex is committed to transparency and disclosure. In keeping with that commitment, we are pleased to disclose hereunder information about the Company, its business, operations, outlook, risks and financial condition. The financial statements of the Company have been prepared in compliance with the requirements of the Companies Act, 2013 and the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (including amendments thereto). The management of Subex accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, in order that the financial statements reflect the form and substance of transactions in a true and fair manner, and reasonably present the state of affairs and profits/ losses for the year under review.

In addition to the historical information contained herein, the following discussion may include forward looking statements which involve risks and uncertainties, including but not limited to the risks inherent in the Companys growth strategy, dependency on certain clients, dependency on availability of qualified technical personnel and other factors discussed in this report.

COMPANY OVERVIEW

Subex is a telecom AI solutions company enabling Communications Service Providers (CSP) across the globe to create connected experiences for their customers. Founded in 1994, Subex has spent over 25 years helping CSPs maximize their revenues and profitability. With a legacy of having served the market through its world-class solutions for business optimization and analytics, Subex is now leading the way by leveraging AI to create connected experiences in the business ecosystems of its customers. Through their HyperSense line of offerings, Subex empowers communications service providers and enterprise customers to make faster, better decisions by leveraging AI across the data value chain. Subex leverages its award-winning product portfolio in areas such as Business Assurance and Fraud Management to help CSPs reduce risk, combat fraud, and thereby ensure profitability. Subex also offers scalable Managed Services and Business Consulting services. Subex has more than 300 installations across 90+ countries.

More information on (a) an overview of the telecom industry (b) our products (c) opportunities and challenges and (d) our revenue model is discussed below.

Key Trends Shaping the Future of Telecommunications 5G: The Catalyst for Telco Transformation

5Gs rapid global expansion is revolutionizing the telecommunications industry, extending far beyond faster speeds. For telcos, 5G is a strategic imperative, opening new revenuestreams,particularlyintheB2Bsector.Itenablesmassive IoT deployments and ultra-reliable low-latency communication, positioning telcos as key partners in the digital transformation of industries like manufacturing, logistics, and healthcare. 5G is also driving the development of edge computing, enabling real-time applications and value-added services like cloud gaming and augmented reality. For consumers, 5G enhances mobile experiences and enables personalized, context-aware services. 5G is not merely a trend; its a paradigm shift, transforming how telcos operate, innovate, and serve customers, ushering in a more connected, intelligent, and personalized future.

The Rising Threat of Fraud in the Digitalization Era

The increasing digitalization of the telecommunications industry, while enabling innovation and growth, also presents a significant challenge in the form of evolving fraud threats. As telcos embrace digital technologies to enhance customer experiences and streamline operations, they also open up new avenues for malicious actors to exploit.

The expanding digital landscape, including the proliferation of mobile devices, online transactions, and interconnected networks, creates a complex and ever-changing attack surface. Hackers are constantly developing new techniques to bypass security measures, steal sensitive information, and perpetrate financial fraud.

As telecom companies continue to adopt digital technologies and expand their online presence, they must remain vigilant in addressing these emerging fraud risks to safeguard their infrastructure, customer data, and financial assets.

Telcos Pivot Towards Enterprise Solutions

Telecommunications companies are strategically pivoting towards enterprise solutions, expanding their offerings beyond traditional connectivity services. This shift is driven by a dual purpose: to diversify revenue streams and to address the increasing demand for digital transformation across various industries.

Telcos are now providing businesses with a comprehensive suite of services, including cloud-based solutions, Internet of Things (IoT) applications, and robust, secure networks. By forging strategic partnerships with enterprises, telecom companies are positioning themselves as indispensable enablers of the digital economy, playing a pivotal role in shaping the future of business operations and innovation.

Cloud Transformation: Redefining the Telco Landscape

The telecommunications sector is experiencing a significant shift towards cloud transformation, particularly in core areas like network operations and billing systems. This transition is reshaping telcos into agile, resilient, and cost-efficient organizations, leveraging software and AI.

Industry forecasts predict that by 2025, almost a third of major telcos will depend on hyperscale cloud providers for their infrastructure. This shift not only optimizes operational efficiency but also fuels innovation, enabling telcos to swiftly deploy new services, scale resources on demand, and respond to market changes effectively. Cloud-based solutions are also fosteringthedevelopmentofadvancedvirtualassistants,hyper-personalized customer experiences, and predictive analytics. This transformation is propelling the telecommunications industry towards a more customer-centric, data-driven, and adaptable future.

Generative AI: The New Frontier in Telecommunications

The telecom industry is witnessing a transformative trend with the integration of generative AI. Beyond automating tasks, generative AI is reshaping the way telcos operate and innovate. Its enabling the creation of personalized marketing campaigns, generating realistic simulations for network optimization, and even automating customer service interactions with natural language processing.

This trend is enhancing operational efficiency, improving customer experiences, and unlocking new revenue streams. The adoption of generative AI in telecom is projected to grow exponentially, with the market expected to reach billions of dollars in the coming years. As telcos continue to explore the vast potential of this technology, we can expect even more innovative applications to emerge, further revolutionizing the industry.

OUR PORTFOLIO

Subexs portfolio is a comprehensive suite of AI-powered solutions designed to empower Communications Service Providers (CSPs) and enterprise customers in the telecommunications industry. Leveraging our award-winning expertise in Business Assurance and Fraud Management, Subex has integrated AI through our HyperSense platform to deliver cutting-edge solutions. These solutions help CSPs combat fraud, mitigate risks, and optimize their business operations, ultimately enhancing profitability. With a focus on creating connected experiences and leveraging AI across the data value chain, Subex enables its customers to make faster, better decisions, stay ahead of the curve, and thrive in the dynamic telecom landscape.

HyperSense

HyperSense is Subexs cutting-edge AI-first line of offerings, revolutionizing the way businesses harness the power of artificial intelligence. With HyperSense Subex has ingeniously crafted a suite of AI-driven solutions that cater to the evolving needs of organizations. These offerings not only demonstrate Subexs commitment to staying at the forefront of technological innovation but also serve as a testament to our dedication to empowering businesses with intelligent, data-driven decisions. HyperSense based solutions (listed further in this section) are poised to drive enhanced operational efficiencies, predictive insights, and proactive risk management, making them indispensable asset for any enterprise seeking to thrive in the era of AI transformation.

Business Assurance

HyperSense Business Assurance, a product of over 25 years of industry experience, is the telecom industrys most comprehensive AI/ML-powered solution. It empowers CSPs to proactively mitigate revenue leakages, assess business impacts in near real-time, and navigate dynamic risk landscapes. By enabling collaboration and knowledge management, HyperSense enhances risk mitigation and decision-making. Additionally, it provides AI-driven predictive and prescriptive business insights for CXOs across various verticals, solidifying its position as a trusted solution among CSPs.

Fraud Management

Built on 30 years of domain expertise, the HyperSense Fraud Management system is the only AI-first fraud management system for telcos enabling them to effectively combat fraud and security risks by leveraging AI in every step of the fraud management process. With a state-of-the-art AI engine at the core, it helps risk professionals increase business-coverage, accuracy, and precision and enables them to use AI in a sustained manner. With Subexs comprehensive fraud management system, operators can detect more than 350 types of fraud in all telecom environments.

Enterprise Asset Management

Subexs Enterprise Asset Management provides CSPs with the necessary framework and controls to make the best use of their assets, thereby helping manage network Capex efficiently and maximizing asset ROI. The solution ties the assets financial parameters to its current utilization and location, creates a 360-degree view of the asset, generates accurate reports for audits, and calculates the return on assets. Also, it simplifies field audits, provides near real-time capacity views, recommendations to optimize network utilization and optimizes P2R (Plan-to-retire) and cash-to-cash cycle for assets and improves overall operational efficiency.

Partner Ecosystem Management

A platform to manage all aspects of the digital and traditional partnerships that will allow CSPs to accelerate their digital services portfolio expansion.

• Partner Lifecycle Management

Subex Partner Lifecycle Management allows CSPs to significantly reduce time to market for new services and enhance existing services by quickly onboarding new partners to the ecosystem. The solution optimizes OPEX through workflow-based onboarding process interfaces with configurable KPIs to allow quick partner onboarding. CSPs can assess partner health by scoring them on different parameters and monitor their performance to ensure a value-driven partner ecosystem. The partner portal empowers partners with complete business visibility through access to dashboards and reports and make informed decisions.

• Digital Services Billing

Subex offers a domain agnostic digital services billing solution that can bill and settle any event irrespective of the source and cater to Data, Content, IoT, M2M, and Utility billing requirements. Utilize configurable modeling capabilities that allow the creation of new revenue streams through configurations, thus allowing quicker settlements and bill roll outs.

• Wholesale Billing and Routing

Get a holistic view of your entire range of partner relationships, covering services such as voice, SMS, and data- manage roaming, routing, content settlements, as well as MVNO and other B2B relationships with our wholesale billing solution. We drive efficiencies into your businesses via process automation to gain operational insight to support critical decision-making activities and enable you to achieve a competitive advantage. It covers Interconnect Billing & Settlement, Reconciliation and Dispute Management, OBR, Route Optimization, Contract Lifecycle Management.

• Enterprise Billing

Subex offers a next-gen end-to-end enterprise billing system that provides unmatched rating and billing capabilities for CSPs. Its a converged billing platform that covers partner onboarding, subscription management, service agnostic rating, and billing to financial reporting.

Roaming Settlements

Subex Roaming solution offers a 360-degree view of the roaming services and revenue management to improve profitability. It reduces the fraud possibility by removing the likelihood of paying high-cost traffic cost or lose inbound roaming revenue by supporting NRTRDE (Near Real-Time Roaming Data Exchange) and HUR (High Usage Report). Enhance customer experience and reduce churn by offering personalized services using customer information.

Sectrio

Sectrio is a leading industrial cybersecurity division specializing in the protection of industrial control systems and networks. It offers comprehensive end-to-end security solutions for OT/ ICS and IIOT environments, including managed security services and cyber threat intelligence. Sectrio provides best-in-class vulnerability management, threat detection and remediation capabilities backed by one of the largest cyber threat intelligence gathering facilities in the world operational in over 85 cities across the world.

IDcentral (Identity Analytics)

IDcentral, a division of Subex, is at the forefront of the digital inclusion movement. We are making it exceptionally easy for any company to integrate and manage individual onboarding processes. Our collaboration extends across diverse sectors such as telecommunications, banking, financial services, insurance, gaming, hospitality, etc. Our mission is clear: to revolutionize customer onboarding by reducing operational costs, decreasing fraud, and significantly enhancing the user experience. This is accomplished through our innovative suite of over 100+ APIs, designed for high efficiency and seamless integration.

IDcentral is not just facilitating a smoother onboarding experience; we are redefining it, ensuring it meets the exacting demands of todays digital economy. Through our innovative technologies and commitment to excellence, IDcentral represents a quantum leap forward in the digital transformation journey, empowering businesses worldwide to stay ahead in a rapidly evolving marketplace.

Consulting & Advisory Services

With over 25 years of telecom experience and a proven track record of successful strategy implementation, Subex is the ideal consulting and assessment partner for global telecom operators. Our expertise extends from strategy definition to execution, utilizing tools compliant with renowned industry standards like TM Forum and CFCA. These services include benchmarking and enhancing Business Assurance processes, identifying and addressing gaps in RAFM processes and technology, proactive risk management in revenue streams, optimizing business processes, ensuring smooth system transitions, assessing profitability across the service and product portfolio, and formalizing control measures for accurate revenue reporting.

Managed Services

Subex Managed Services drive outcome and protect revenues by enhancing customer experience, optimizing cost, quality, time-to-market, and capabilities. Leveraging robust technology, we offer flexible engagement models tailored to service providers specific needs, delivering both strategic and tactical value, improving operational efficiency, service agility, and profitability. Service providers can choose from various options based on scope, BSS/OSS domains, and on-site support requirements.

Key Announcements in FY24

Tier-1 APAC Operator Embraces AI-based Fraud Management and Business Assurance Solutions Through Partnership with Subex

Subex won a deal with a leading telecom operator in Southeast Asia. This deal involved the deployment of Subexs state-of-the-art Business Assurance and Fraud Management solutions on HyperSense. The operator aimed to be a future-fit, leading telecom tech company at the forefront of digitalization in the region, and the partnership with Subex helped move them closer to that vision. By leveraging the advanced features of Subexs AI-based solutions, the operator significantly enhanced its assurance capabilities, catered to a wider spectrum of risks, and enhanced its operational maturity.

HyperSense Fraud Management now available on Google Cloud

Subex announced the general availability of its Fraud Management solution on Google Cloud. This collaboration combined Subexs extensive fraud management expertise with the unparalleled scalability, reliability, security, advanced analytics, and robust partner ecosystem offered by Google Cloud. This joint venture improved fraud prevention in the telecommunications industry.

Telcos seeking a comprehensive and advanced cloud platform could leverage Subex Fraud Management on Google Cloud to significantly enhance their fraud detection and prevention capabilities. With Google Clouds scalability, fraud management systems handled ever-increasing volumes of data and transactions, adapted to dynamic fraud patterns, and seamlessly scaled resources as needed.

REVENUE MODEL

Our revenue generally comes from four streams: (1) licensing; (2) professional services related to installations and configuration activity; (3) annual support contracts; and (4) managed services. We generally license our software products on per subscriber or per transaction basis. This means that when our customers experience growth, we can also expect to benefit from that growth. Typically, there are significant professional services revenues associated with each new software installation as well as with upgrades.

Our annual support contracts are generally priced as a function of the total license fees paid by the customer. Thus, our annual support contracts would also tend to experience growth when our customers experience growth. Importantly, annual support contract revenue tends to be recurring revenue.

Finally, we have been experiencing increasing success with managed service revenue. Like annual support contracts, managed services provides a relatively predictable recurring revenue stream. At the same time, our managed service offering provides us with an opportunity to maintain a continuous touch point with the customer so we can better understand their needs and we have opportunity to educate them on our offerings and skills.

RISKS AND CONCERNS

As our valued investor, we are certain you understand our business environment, prevailing economic conditions, geopolitical circumstances, and other specific risks that may affect our future business decisions and financial performance. It is not possible to detail out every risk since we operate in a very competitive and rapidly changing global environment. In the fiscal year 2023-24, we continued to navigate through evolving risk landscapes. The year posed significant challenges akin to the global COVID-19 pandemic, which brought about unprecedented levels of uncertainty and ambiguity for businesses worldwide. Furthermore, echoes of the Ukraine-Russia conflict in 2022 reverberated through our operations, contributing to declined economic activity, disruptions in supply chains, and heightened levels of risk and uncertainty. These dynamic forces underscore the importance of our adaptive strategies and resilience in addressing emerging risks and ensuring sustained business performance. There could still be dramatic changes in the business however due to lack of precedents, we are unable to provide specific details on how this could impact Subexs business. We are providing some information on several risks which we are aware of and they are stated herein: (a) reduction in consumer and business purchasing; (b) consolidation of our customer base; (c) dependence on communications, service providers as our major customers; (d) security; (e) improper disclosure of personal data could result in liability and harm to our reputation; (f) technology changes and obsolescence may impact our business; (g) recruiting and retention of personnel is challenging; (h) adequately protecting our intellectual property may not be possible; (i) allegations of infringement of third-party intellectual property poses risks; (j) variability of our quarterly operating results makes comparisons difficult; (k) non-compliance with statutory obligations may result in fines and penalties; (l) non-compliance with environmental regulations may lead to fines and penalties; (m) foreign exchange fluctuations may lead to variability in our revenue; (n) SEZ related taxation benefits may be uncertain; (o) failure to fulfill contractual obligation may lead to claims; and (p) debt obligations. Below, we will discuss each of these risks in some more detail. There are, of course, additional risks faced by us, which are not specified here.

Reduction in Consumer and Business Purchasing

We depend on our customers – primarily large communication service providers ("CSPs"). If our primary customers face reduced revenue, we will also face reduced revenue. CSPs primary customers are consumers and businesses. Of course, reductions in spending by consumers or businesses will reduce revenue of CSPs and this will result in decreased spending by the CSPs which means reduced revenue for us.

Additionally, any conflicts has a significant impact on businesses around the world. The conflict may result in a slowdown of global economic activity and has disrupted trade flows and made it difficult for businesses to operate in the affected regions. This may lead to decreased revenue and profitability.

Consolidation in our customer base

CSPs have gone through considerable consolidation. The consolidation, or merger, of one CSP with another can have at several impacts on us. First, it will simply reduce the overall size of the market; each consolidation effectively reduces the number of potential customers for our products. Secondly, it can and does happen that one of our existing customers can undergo a consolidation. In that event, the other party to the consolidation may already have competing products and the combined company may choose to continue with the use of the competing product rather than use our products/services. Of course, it can also happen that the two companies, when combined, choose to use our products which may have a positive impact on our revenue. Another possibility is that two existing customer merge. The consolidation of two customers will have an adverse effect on our revenue as the combined company attempts to reduce their consolidated spending. Finally, larger customers simply have more negotiating power leading to reduced prices for our products. The Company strives to have a deep penetration within the accounts that it serves so as to provide an edge over competitors and be a preferred choice during such consolidations.

Dependence on the Communications Service Providers as our major customers

We mentioned above our customers are primarily CSPs. We are fully dependent on CSPs as our major customer base. As a result, we are fully susceptible to any downturns or negative changes in the CSP industry.

Security

You must be well aware that security threats are prevalent everywhere today. This is, perhaps, especially true in the technology industry where we participate. The security vulnerabilities take many forms. Hackers may attempt to compromise computer systems and networks. Fraudsters may attempt to steal the identity of our personnel to gain access to our computer systems, networks and even banking systems. Terror activity could have an adverse impact on our business. We may fail to adequately design our products leaving our customers exposed to hacking and other network vulnerabilities. Perhaps this concern – of failure to adequately design our products leading to exposure of our customers information is one of the largest concerns. If one of our customers faced a security breach allegedly as a result of use of our products, it would cause significant reputational risk to us and may lead to claims against us.

We devote significant resources to mitigate security threats including threats to our internal IT systems, with respect to our products and with respect to physical security of our buildings. But there cannot be any guarantee that these efforts will avoid security breaches.

Improper disclosure of personal data could result in liability and harm our reputation

You are probably aware of the global trend towards more sensitivity regarding improper disclosure of personal data. This global trend has a number of impacts on us. There are additional laws and regulations in many jurisdictions. This not only leads to increased administrative costs of compliance and increased difficulties in doing business but violations of these laws and regulations involve higher and higher fines and penalties. At the same time, we are storing and processing increasingly large amounts of personal data which leads to increased potential exposure.

We take what we consider to be appropriate steps to provide for the security and protection of all data including personal data. But, despite these efforts, it is possible our practices may not prevent the improper disclosure of personal data. Improper disclosure of this information could harm our reputation, lead to legal exposure, lead to claims against us by customers including claims for indemnification or subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue.

It is important to note that our potential liability for customer financial damages associated with losses of personal data is generally not limited by limitation of liability provisions in customer contracts.

In addition to risks related to improper disclosure of personal data, new laws and regulations are being implemented. One significant new regulation is the European General Data Protection Regulation ("GDPR") which went into full effect in May 2018. Compliance efforts related to these laws and regulations is significant and could be a distraction from other activities. Further, even without any actual improper disclosure of personal data, non-compliance could result in large fines. Still further, customer focus on these laws and regulations could delay or jeopardize sales and installations of Subex products.

Technology changes and obsolescence may impact our business

We experience rapid technological changes which could make our technology and services obsolete, less marketable or less competitive. These changes result in our need to continually improve the features, functionality, reliability and capability of our products which poses development challenges and expenses. We may not be able to adapt to these changes successfully or in a cost-effective way which may adversely affect our ability to compete and retain customers or market share.

While the rapid technological changes require us to change our products, launching new products is also a key element of our growth. An inability to bring new products with high demand to the market in a timely manner will reduce our growth and profitability.

We make strong efforts to put in place processes and methodologies to address these issues and to turn it into a strategic advantage by being in the forefront of technological evolution. For example, regular skill upgradation programs and training sessions that include attending global conferences and employing specialized consultants etc. are undertaken.

Recruiting and Retention of Personnel is challenging

Subexs talent acquisition strategy is to hire candidates with the right competencies required by the business at the right time, a judicious mix of lateral hires and fresh graduates. We are an equal opportunity employer and focus on meritocracy at all stages of hiring, strictly based on role-mapping career architecture.

We have a robust process to source and select the best talent, both for entry-level roles as well as lateral hires, leveraging multiple social media platforms and events, channel partners, referral campaigns, campus placements, and internal job postings. We were successfully able to hire close to 348 Subexians under 100% TAT for vanilla, niche and strategic positions.

Our recruiters had been efficient in the hiring process and have been able to close on the requirements with minimal external/ vendor support and quickly adapted to the hybrid workplace environment and executed virtual and in-person hiring processes while facilitating quick closure. The steps have been taken below to improve the quality of hire:

• Training & upskilling the recruitment team

• Streamline recruitment process

• POFU (Post offer follow up)

• Focused strategy on campus hirings from premier institute.

Adequately Protecting Our Intellectual Property may not be possible

We operate in a global environment; protecting our proprietary technology in the many different jurisdictions we operate in, which is challenging. We depend on a combination of technical innovations, as well as copyrights and trade secrets for protection of our technology. We also maintain patent and trademark protection, as and where applicable and required. However, some jurisdictions have limited laws protecting technologies and other jurisdictions, even if they have laws protecting technology related innovations, are curtailed by limited or difficult enforcement systems. Even in jurisdictions which are equipped with adequate laws and enforcement systems, detection of infringement of our rights may be difficult and even if detected, engaging in litigation to enforce our rights would be expensive.

Departure of our personnel, especially to a competitor, is a particular risk to our technology and intellectual property rights. We generally require all employees and advisors to sign agreements which require that our information be maintained as confidential during and after their employment/engagement. These agreements also assign or otherwise vest rights in the intellectual property developed by these employees and advisors to the company. Even so, these agreements may not effectively prevent disclosure of our information or effectively assign rights to us. Further, detection of violation of these agreements may be difficult and it may be difficult to enforce these agreements even when such violations are detected. Any exposure of our information by former employees or any failure to adequately have rights assigned to us, may have a material adverse effect on our business, financial condition, the results of our operations and our reputation.

Allegations of Infringement of Third- Party Intellectual Property poses Risks

We may face claims by third parties that our products infringe their intellectual property rights. Whether or not we ultimately prevail in any intellectual property dispute, defending the dispute may be expensive, it may distract our management and other key personnel and its outcome is uncertain. Further, if any of our products are found to infringe the intellectual property rights of others, or if we settle a claim in an adverse manner, it may restrict or prohibit further development, manufacture, and sale of our products. A loss or adverse settlement may require us to pay substantial sums of money in terms of damages. We may also be forced to seek licenses to continue to use the product that contains the specific intellectual property. These licenses may not be available on commercially acceptable terms or may not be available at all.

Furthermore, we are required to indemnify our customers against third-party claims of infringement of intellectual property arising out of our customers use of our products and services. Typically, our liability for such indemnification is not limited by limitation of liability provisions in our customer contracts.

Further, we are often in possession of proprietary information of our customers. This information may be wrongly used or disclosed or may be misappropriated by employees of the Company or others. This would result in a breach of our contractual obligations to our customers any such breach may subject us to a significant claim (s) from the customer for damages and may also significantly damage our reputation. We have a consistent protocol of requiring NDAs before disclosure of our trade secrets/confidential information to third parties. Employees sign confidentiality terms as a part of their employment agreement.

Historically, we have not received any allegation of infringement of third-party intellectual property against our products nor our services. However, especially since we invest in and introduce new product lines, allegations of infringement of third-party intellectual property rights, against us or our customers with respect to our products or services, or any allegation of breach of our confidentiality obligations to our customers could arise and this could have a materially adverse impact on our business, financial condition the results of our operations and our reputation.

Variability of Our Quarterly Operating Results Makes Comparisons Difficult

Our quarterly operating results have varied in the past due to reasons like seasonal pattern of hardware and software capital spending by customers, information technology, investment trends, achievement of milestones in the execution of projects, hiring of additional staff and timing and integration of acquired businesses. Hence, the past operating results and period to period comparisons may not indicate future performance. Our management is attempting to mitigate this risk through expansion of our client base geographically, increasing annuity revenue through managed services.

Non-compliance with statutory obligations may result in fines and penalties

We face certain statutory obligations. Some of these obligations arise from the fact that we have registered with Special Economic Zone for software development activities and have availed Customs Duties and Goods and Service Tax exemptions. The non-fulfillment of export obligations or other non-compliance with statutory obligations may result in penalties as stipulated by the Government and this may have an impact on future profitability. The Company has team of in-house attorneys and engages outside counsel/consultants on a need basis. An ongoing monitoring mechanism has been established with respect to applicable laws.

Certifications and compliance

Subex is certified for both Information Security and Quality Management System Periodic reviews and internal audits are carried out based on a defined program. These audits cover the Delivery and Corporate functions based on the scope of certification for management systems which is currently defined as per the requirements of ISO 27001:2013, GDPR and ISO 9001:2015. A system is in place to identify and manage process changes methodically. There is people involvement across organization in the activities of process development, implementation and reviews, there by achieving continual improvement. A centralized repository is in place to cover all policies, processes and controls, which is easily accessible to all employees to ensure strict process adherence.

Non-compliance with Environmental Regulations may lead to fines and Penalties

Software development, being generally a pollution free industry, means we are not subject to significant environmental regulations. Nonetheless, non-compliance with applicable environment regulations may lead to significant fines and penalties. We do adhere to the guidelines for disposing of E-wastes as stipulated by the E-Waste (Management and Handling) Rules. Asset related to IT i.e Laptop, servers etc. are disposed to Authorized E-waste Vendor only.

Foreign Exchange Fluctuations May Lead to Variability in Our Revenue

We have substantial exposure to foreign exchange related risks on account of revenue from export of software and outstanding liabilities. There is a natural hedge to the extent of expense incurred in the same currency. Despite this, particularly given the volatility in the foreign exchange market, there could be significant variations. Our management is attempting to mitigate this risk through hedging by obtaining forward contracts against its revenue and receivables.

Failure to Fulfill Contractual Obligation May Lead to Claims

We enter into contracts with our customers in the ordinary course of business, under which we are obligated to perform and act according to the contractual terms enumerated under them. Any failure to fulfill these contractual obligations may expose us to financial, reputational and other risks.

We are confident we have taken sufficient measures to assure it meets the contractual obligations under the customer contract. Nonetheless, there cannot be any assurance that a customer will not allege a breach by us of our obligations.

Debt Obligation

The Company did not have any debt obligation as on March 31, 2024.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

In accordance with the provision of Section 134(5)(e) of the Companies Act, 2013, and as per the provisions of the SEBI (LODR), Regulations, 2015, the Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. Such Internal Financial Controls were found to be adequate for a Company of this size. The controls are largely operating effectively since there has not been identification of any material weakness in the Company. The Directors have in the Directors Responsibility Statement under paragraph (e) confirmed the same to this effect. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and timely preparations, reliable financial information. The Company has adopted accounting policies which are in line with Indian Accounting Standards ("Ind AS").

Pursuant to the provisions of the Section 134(5)(f) of the Act, the Company during the year devised proper systems and continued to ensure compliance with the provisions of all applicable laws. Any matter that required attention was immediately dealt with. The compliance system was largely found to be adequate and operating effectively. The Directors have in the Directors Responsibility Statement under paragraph (f) confirmed the same to this effect.

The Internal Auditors monitor and evaluate the effectiveness and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of Internal Auditors, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

Subex is certified for ISO 9001:2015 (Quality Management System) and ISO 27001:2013 (Information Security Management System). Internal audits are conducted periodically for projects and support functions to adhere to these international standards. These audits are conducted across Bengaluru, UK and US locations to ensure processes are followed to provide a better customer experience. Summary of the audits are shared across organization to help understand strengths and weaknesses in the system. People involvement in organization process initiatives is one that approaches towards achieving better compliance, standardizing activities to consistently achieve better customer satisfaction.

Subex conducts security awareness programs and improve the existing business continuity controls. Additionally, we continued to identify and involve relevant stakeholders to review and align the processes to Subexs Business objectives.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

(Rs. in Lakhs)

Financial Highlights/Year Ending 31st March	2023-24		2022-23
	Consolidated	Standalone	Consolidated	Standalone
Revenue from operations	30,972	26,901	27,869	27,352
Total Income	31,645	27,052	28,685	27,594
Earnings Before Interest, Exceptional Items & Taxes (EBIT)	(3,125)	(3,906)	(4,464)	(4,552)
Profit/(Loss) before Exceptional items & tax	(2,715)	(5,004)	(3,906)	(7,699)
Exceptional Items	14,795	14,795	-	-
Profit/(Loss) before tax	(17,510)	(19,799)	(3,906)	(7,699)
Tax expenses	1,663	1,526	1,215	(823)
Profit/ (Loss) after tax	(19,173)	(21,325)	(5,121)	(6,876)
Other comprehensive income	14	(1)	620	19
Equity dividend %	Nil	Nil	Nil	Nil
Share Capital	28,100	28,100	28,100	28,100
Reserves & Surplus	5,251	(6,712)	24,084	14,287
Net worth	33,351	21,388	52,184	42,387
Gross Property, Plant & equipment, right-of-use asset and other intangible assets	9,002	11,170	8,524	10,790
Net Property, Plant & equipment, right-of-use asset and other intangible assets	3,171	3,149	4,136	4,057
Total Assets	52,972	34,661	70,362	60,568

 

Key Financial Ratios (Consolidated)	2024		2023	Change
Return on Capital Employed (RoCE) %	(13.25%)		(15.94%)	(17%)
Return on Net Worth (RoNW)%	(44.83%)		(9.44%)	375%
Basic EPS (Rs/Share)	(3.47)		(0.93)	273%
Debtors turnover (Days)	113		123	(8%)
Inventory turnover (Days)			NA
Interest coverage ratio	(65.97)		(13.43)	391%
Current ratio	2.39		3.05	(22%)
Debt equity ratio	0.08		0.06	32%
Operating Profit Margin (%)	(5.06%)		(11%)	(54%)
Net Profit Margin (%) or sector-specific equivalent ratios, as applicable	(61.90%)		(18.38%)	237%
details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof		The return on net worth has decreased mainly due to loss in the current year.

Key Financial Ratios (Standalone) 2024 2023 Change

Return on Capital Employed (RoCE) % (20.88%) (17.20%) 21% Return on Net Worth (RoNW)% (66.88%) (15.06%) 344% Basic EPS (Rs/Share) (3.86) (1.25) 209% Debtors turnover (Days) 125 111 12% Inventory turnover (Days) Not Applicable Interest coverage ratio (83.28) (23.73) 251% Current ratio 0.94 1.11 (16%) Debt equity ratio 0.12 0.07 69% Operating Profit Margin (%) (13%) (24%) (44%) Net Profit Margin (%) or sector-specific equivalent (79.27%) (25.14%) 215% details of any change in Return on Net Worth as compared to the immediately The return on net worth has decreased mainly due to loss in previous financial year along with a detailed explanation thereof the current year.

COMMENTARY ON FINANCIAL STATEMENTS Share Capital

As on March 31, 2024, the issued, subscribed and paid-up share capital of the Company was Rs. 281,00,14,675 (Rupees Two hundred and eighty-one crores, fourteen thousand, six hundred and seventy-five only) divided into 56,20,02,935 (Fifty six crores, twenty lakhs, two thousand nine hundred and thirty five only) equity shares of Rs. 5 (Rupees five only) each. The Company has not allotted equity shares in FY 2023-24.

Reserves and Surplus Securities premium

On standalone and consolidated basis, the balance of security premium as on March 31, 2023, amounted to Rs. 16,584 lakhs. During the year 2023-24, Rs. 73 lakhs has been transferred to securities premium on exercise of share options by employees. As on March 31, 2024, the balance of security premium was

Rs. 16,657 lakhs.

Retained Earnings

On a standalone basis, as on March 31, 2023, there was deficit balance in retained earnings amounting Rs. 6,722 lakhs. As on March 31, 2024, the deficit balance has increased to Rs. 28,048 Lakhs.

On a consolidated basis, as on March 31, 2023, there was surplus in retained earnings amounting Rs. 16,573 lakhs. As on March 31, 2024, there is deficit balance of Rs. 2,647 Lakhs.

Exchange differences on translating the financial statements of a foreign operation

During the year 2022-23, the balance of Foreign Currency Translation Reserve of Rs. (10,722) Lakhs has been included in the Reserves and Surplus to bring it in line with Schedule III of the Act.

During the year 2023-24, the balance of Foreign Currency Translation Reserve of Rs. (10,661) Lakhs has been included in the Reserves and Surplus to bring it in line with Schedule III of the Act.

Total equity attributable to equity holders of the company

On a standalone basis, the total equity attributable to equity holders of the Company has decreased to Rs. 21,388 lakhs as on March 31, 2024 from Rs. 42,387 lakhs as on March 31, 2023. On a consolidated basis, the total equity attributable to equity holders of the Company has decreased to Rs. 33,351 lakhs as on March 31, 2024 from Rs. 52,184 lakhs as on March 31, 2023. The movement was primarily on account of loss during the year.

Employee Stock Options Plan

Under the Subex Employees Stock Option Scheme-2018 Company has granted 12,00,000 options during the year ended March 31, 2024 as compared to NIL options during March 31, 2023. The net amount carried in respect of stock options outstanding on March 31, 2024 amounts to Rs. 343 Lakhs (Previous year: Rs. 444 Lakhs).

Property, plant, equipment, right-of-use asset and other intangible assets

During the year, the Company added Rs. 601 Lakhs on consolidated basis and Rs. 480 Lakhs on standalone basis, to its gross block. The Company disposed-off certain assets no longer required. Also, the Company has classified land use-rights related net block to right- of-use assets on account of adoption of Ind AS 116 – Leases. As on March 31, 2024, the balance in right-of-use asset stands at Rs. 2,524 Lakhs on consolidated basis and Rs. 2,266 lakhs on standalone basis. Refer note 29 of consolidated financial statement and note 28 of standalone financial statement for further details.

Further, during the year, based on the valuation assessment carried out by an external expert in respect of carrying value of intangibles and considering the significant investment required to keep the pace with the transformation in telecom sectors, the management made an impairment provision of Rs. 29 Lakhs towards intangibles in the standalone financial statement. The same is disclosed as an exceptional item in the financial results for the year ended March 31, 2024.

The Companys net block of property, plant and equipment, right-of- use asset and other intangible assets was Rs. 3,171 Lakhs (Previous year Rs. 4,136 Lakhs) on consolidated basis and Rs. 3,149 lakhs (Previous year Rs. 4,057 lakhs) on standalone basis.

Goodwill

During the year, based on the valuation assessment carried out by an external expert in respect of carrying value of goodwill and considering the significant investment required to keep the pace with the transformation in telecom sectors, the management made an impairment provision of Rs. 14,795 lakhs towards such goodwill. The same is disclosed as an exceptional item in the financial results for the year ended March 31, 2024. The carrying value of goodwill post aforesaid impairment is dependent on the achievement of valuation assumptions as considered by the management which the management believes reasonably reflects the future growth and profitability of the Group.

On a consolidated basis, carrying value of goodwill as on March 31, 2024 stood at Rs. 19,614 lakhs (Previous year Rs. 34,409 lakhs).

Investments

During the year, based on the valuation assessment carried out by an external expert in respect of carrying value of investments in subsidiaries and considering the significant investment required to keep the pace with the transformation in telecom sectors, the management made an impairment provision of Rs. 14,766 Lakhs towards investments in subsidiaries (Subex Assurance LLP Rs. 13,830 lakhs and Subex Americas Inc

Rs. 936 lakhs). The same is disclosed as an exceptional item in the financial results for the year ended March 31, 2024. The carrying value of investments in subsidiaries post aforesaid impairment is dependent on the achievement of valuation assumptions as considered by the management which the management believes reasonably reflects the future growth and profitability of the Company.

Further, during the year 2023-24, the Company withdrew Rs. 2,300 lakhs from its investment in Subex Assurance LLP.

On a standalone basis, the total investment value as on March 31, 2024 and as on March 31, 2023 stood at Rs. 17,616 Lakhs and Rs. 34,555 Lakhs respectively.

Trade Receivables

The major customers of the Company are the telecom and cellular operators overseas and in India. The receivables are spread over a large customer base. There is no significant concentration of credit risk on a single customer.

All the debtors are generally considered good and realizable and necessary provision has been made for debts considered to be bad and doubtful. The level of sundry debtors is normal and is in tune with business trends requirements.

The management believes that the overall composition and condition of trade receivables is satisfactory post assessment of doubtful receivables. As on March 31, 2024, on a standalone basis trade receivable amounted to Rs. 7,501 lakhs (previous year;

Rs. 10,883 lakhs) net of provision for doubtful debts of Rs. 5,013 lakhs (previous year; Rs. 4,705 lakhs).

On a consolidated basis trade receivable amounted to Rs. 10,155 lakhs (previous year Rs. 9,037 lakhs) net of provision for doubtful debts of Rs. 4,604 lakhs (previous year Rs. 3,897 lakhs).

Cash and Cash Equivalents

On a standalone basis, balance in current, EEFC and deposit accounts stood at Rs. 1,072 lakhs as on March 31, 2024, as compared to Rs. 2,448 lakhs as on March 31, 2023.

On a consolidated basis, balance in current, EEFC and deposit accounts stood at Rs. 6,776 lakhs as on March 31, 2024 as compared to Rs. 5,238 lakhs as on March 31, 2023.

Borrowings

On a consolidated basis, short-term borrowings as on March 31, 2024 was Nil (Previous year Nil).

Income

The Company is engaged in the business of software products and related services, which are monitored as a single segment by the Chief Operating Decision Maker, accordingly these are considered to constitute one segment and hence the Company has not made any additional segment disclosures.

Geographically, the Company earns income from export of software products and related services to USA, EMEA & Asia Pacific region.

Other Income

Other income consists of income derived by the Company from interest on deposits from banks, refund of research and development expense.

Expenditure

The employee benefits expenses increased to Rs. 20,900 lakhs compared to previous year at Rs. 20,069 lakhs on consolidated basis. The increase on consolidated basis was mainly due to increase in sales commission offset by decrease in salaries & wages due to reduction in Head count.

Operating Profits

During the year, on consolidated basis, the Company earned an Operating Profit/(loss) before interest, depreciation, tax, amortization and exceptional items of Rs. (1,566) Lakhs being 5% of total revenue as against Rs. (3,065) Lakhs at 11% total revenue during the previous year. This is majorly due to increase in revenue in the current year.

On a standalone basis, the Company earned Operating profit / (loss) before Interest, depreciation, tax and exceptional items of

Rs. (2,556) Lakhs (excluding other income and share of profit/loss from LLPs) being 9.5% of revenue from operations as against

Rs. (3,365) Lakhs at 12.3% during the previous year. Decrease in loss is majorly on account of decrease in expenses during the year.

Interest

During the year ended March 31,2024, company recognized interest expense totaling to Rs. 263 Lakhs (Previous year: Rs. 258 Lakhs) on a consolidated basis and Rs. 237 lakhs (Previous year:

Rs. 230 Lakhs) on a standalone basis.

For the year ended March 31, 2024, expenditure includes interest on Lease liability recognized as per Ind AS 116, Leases amounting Rs. 241 Lakhs (Previous year Rs. 220 lakhs) and

Rs. 226 Lakhs (Previous year Rs. 199 lakhs) on a consolidated and standalone basis respectively.

Depreciation

During the year ended March 31, 2024, depreciation expense amounted to Rs. 1,559 Lakhs (Previous year: Rs. 1399 Lakhs) on consolidated basis and Rs. 1,350 Lakhs (Previous year:

Rs. 1,187 Lakhs) on standalone basis.

For the year ended March 31, 2024, depreciation and amortization include depreciation on right of use asset recognized as per Ind AS 116- Leases, amounting Rs. 1,006 Lakhs (Previous year

Rs. 830 lakhs) and Rs. 825 Lakhs (Previous year Rs. 661 lakhs) on a consolidated and standalone basis respectively.

Tax Expense

For the year ended March 31, 2024, there was a tax expense of Rs. 1,526 lakhs (Previous year: tax reversal of Rs. 823 lakhs) on a standalone basis.

During the year ended March 31, 2024, tax expense include deferred tax charge of Rs. 1,147 lakhs and provision for foreign WHT of Rs. 379 lakhs.

On a consolidated basis, tax expense was Rs. 1,663 lakhs (previous year; Rs. 1,215 lakhs). Tax expense for the year March 31, 2024 includes tax charge of Rs. 75 lakhs (Previous year Rs. 89 lakhs), deferred tax charge of Rs. 836 lakhs (Previous year deferred tax credit Rs. 534 lakhs) and provision on Foreign tax credit of Rs. 752 lakhs (Previous year Rs. 1,660 lakhs).

Net Profit

On consolidated basis, the net loss of the Company amounted to Rs. 19,173 Lakhs as against a net loss of Rs. 5,121 Lakhs during the previous year. Total Comprehensive loss for the year is Rs. 19,159 Lakhs as compared to loss of Rs. 4,501 Lakhs during previous year. On standalone basis, the net loss of the Company amounted to

Rs. 21,325 lakhs as against net loss of Rs. 6,876 Lakhs during the previous year. Total Comprehensive loss for the year is Rs. 21,326 Lakhs as compared to total comprehensive loss of Rs. 6,857 Lakhs during previous year.

Earnings per Share

Basic Earnings per share computed based on number of common stock outstanding, as on the Balance Sheet date is Rs. (3.47) per share (Previous year: Rs. (0.93) per share) on a consolidated basis and loss of Rs. (3.86) per share [Previous year: Rs. (1.25) per share] on a standalone basis.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED Subexians

"In FY24, we experienced a period of stabilization thereby embracing a hybrid work model. We aimed to empower all Subexians to work efficiently and productively throughout the year.

Our primary goal was to enrich the Subexian journey across various stages, including recruitment, onboarding, performance management, learning and development, and offboarding. As an organization, we take pride in ensuring a positive and meaningful experience for every Subexian.

With our workforce dispersed globally, our main office hubs are located in Bengaluru, London, Denver, Dubai, and Singapore. As of March 31, 2024, we employed 828 full-time Subexians worldwide.

Human Resources operations are centralized at our corporate headquarters in Bengaluru, supported by regional HR teams aligned with our global HR strategy. This function plays a crucial role in driving talent development initiatives, supporting the companys growth trajectory.

Our current HR policies remain in place, including hybrid working model, loans, sabbaticals, certifications, and team outings, all designed with the employees well-being in mind. Recognizing the prevalence of remote work as the new norm, we continue to adapt to evolving work trends."

The Subex Handbook

As we grow, it is imperative that we document the vast amount of information about Subex as an organization, and the work we do. Addressing this need, we frequently update the Subex Handbook, a ready reckoner for everything one needs to know about Subex, and this continues to be updated.

This Subex Handbook is a living repository with up-to-date information.

Key hires for the year

In the past twelve months, weve strategically recruited several seasoned executives from the industry to drive our growth strategy and propel Subex to new heights. At the helm, Nisha Dutt has assumed the role of CEO, leading our organizational direction. Additionally, Harsha R Angeri has come on board as VP Corporate Strategy & Head AI Business and Girish Bhat as Global Head of Sales. This realignment at the top reflects our commitment to fortifying our leadership team and positioning Subex for continued success.

Recruitment

The recruitment team demonstrated adaptability by conducting both virtual and in-person interviews to accommodate the hybrid work environment. To enhance the rigor and effectiveness of our recruitment efforts, we implemented measures aimed at quantifying the impact on workforce growth and quality.

We continued to leverage established processes such as utilizing social media platforms and participating in industry events to stay abreast of industry trends. Achieving a 100% Turnaround Time (TAT) in hiring key global talent last year underscored our commitment to meeting growth objectives promptly.

Furthermore, we successfully executed our campus recruitment and internship programs, recognizing the importance of bringing fresh perspectives and innovative thinking into Subex. These initiatives ensure that we continue to evolve and thrive in a dynamic business landscape.

Subexian Onboarding

Subex onboarding process remains highly regarded and valued, characterized by its robustness and comprehensiveness aimed at delivering an exceptional day-one experience. Emphasizing efficiency, all paperwork is completed online before the joining date, significantly reducing the time required for new joiners to settle into Subex.

Our onboarding efforts extend beyond the initial day, with quantifiable processes in place to guide new joiners through their 30-60-90 training plan. Regular polls and interventions are conducted to gauge employee engagement and ensure alignment with organizational goals. Following structured training sessions, new joiners receive on-the-job training to reinforce and apply the knowledge and skills acquired during their initial training period. This holistic approach ensures that new employees are well-equipped to contribute effectively to Subex from the outset.

Performance Management

Throughout this year, our emphasis remained on fostering and nurturing high performance to cultivate a culture of meritocracy. Collaborating closely with business leaders, the HR Business Partnering team spearheaded various high performance initiatives aimed at recognizing and rewarding exceptional performers. These programs involved offering enhanced roles and incentive benefits to individuals who consistently demonstrated outstanding performance. By championing meritocracy, we aim to not only motivate our employees but also drive sustained organizational success through the cultivation of top talent.

Learning & Growth

Learning and development remains an ongoing endeavor aimed at aligning the skills of our workforce with the strategic objectives of the business. To ensure a unified and comprehensive learning experience for all Subexians, we have endeavored to consolidate all learning initiatives under one platform.

Building upon the successful programs and initiatives from the previous year, such as the skill/competency matrix, we have further refined our approach to learning by implementing a more focused and curated curriculum. This includes a combination of external and internal training sessions tailored to specific groups and segments within Subex.

One notable initiative is the Mentorship and Management Development Program, which received active engagement from the leadership team at Subex. By providing targeted learning opportunities, we aim to empower our employees with the skills and knowledge necessary to excel in their roles and drive organizational success.

Rewards & Recognition

Reward and recognition are integral components of fostering a positive and motivated work environment. They serve as powerful tools for managers and leaders to acknowledge and appreciate the hard work and accomplishments of their employees. At Subex, we have recently revitalized our rewards and recognition program, incorporating additional features to streamline and enhance the process, thereby fostering a culture of appreciation and acknowledgment.

While implementing a recognition program incurs costs, the benefits are substantial. Some advantages include:

• Encourages the repetition of desired behaviors, aligning individuals with organizational goals.

• Enhances employee job satisfaction.

• Promotes team spirit and camaraderie.

• Improves retention rates: Employees who feel valued and recognized are more likely to remain with the organization.

• Reduces turnover rates, serving as a retention tool.

• Bolsters the employer brand, showcasing the organization as an attractive place to work.

• Complements HR processes, aiding in meeting learning and development goals.

In addition to ongoing initiatives we have introduced Subexian profiling platforms through our internal communications channels. These platforms celebrate and communicate the contributions of Subexians across the organization, further reinforcing our culture of recognition and appreciation.

Compensation

Employee retention is significantly influenced by compensation, and at Subex, we deeply understand its importance. We are dedicated to the growth and advancement of our employees and remain committed to investing in their well-being through a comprehensive approach.

When it comes to compensation, we take a holistic view at Subex, offering a balanced combination of fixed salary, variable salary, benefits, health and disability insurance, and employee assistance programs. Our aim is to ensure that our compensation packages are competitive and aligned with industry standards. To achieve this, we continually monitor industry trends and benchmarks, striving to maintain a fair and balanced compensation structure. Our process involves conducting thorough job matching, data validation, and quality audits to determine the appropriate salary bands for Subexians. By adopting this meticulous approach, we aim to provide our employees with compensation packages that reflect their skills, contributions, and market value.