It gives me great pleasure to connect with you at the completion of a landmark year foryour Company having completed 30 successful years in business. As we reflect on ourjourney so far we recognize that while we have come a long way there are certain thingsthat remain unchanged - staying true to our values and to our purpose of partnering Indiain its quest to be a technology-empowered nation.
As passionate as when we first started the completion of thirty years while it adds acelebratory spirit to the business it also serves as the perfect opportunity to reaffirmour commitment to work for the long-term growth of the Company. Investing in our peopletransforming the customer experience enhancing our capabilities and of coursestrengthening our network we will be here for all our stakeholders in the future as weare today.
Indian economy has been the fastest growing large economy of the world since a coupleof years and is projected to remain so at least in the near future. This is the biggestmacro factor to the growing market potential for digital technologies in India. Consumerdemand for digital technologies is going to be primarily driven by the need to access theinternet. According to IAMAI-IMRB report the number of internet users in the country isexpected to go up from 432 million in December 2016 to more than 450 million by June 2017.urban India at 60% penetration is starting to get saturated but rural India offers asignificant opportunity with only 17% Internet penetration. India is an extremelyvalue-conscious market and as a result one can see that the smartphones have disruptedPC market for the consumers and Cloud Computing is similarly disrupting the enterprisemarket. 77 per cent of urban and 92 per cent of rural users use mobile as the primarydevice for accessing the internet and not the PC. However with increasing disposableincomes growing broadband penetration Digital India initiative new tech developmentsand restrictive form factor of smartphones the market for PC and peripherals willcontinue to have a steady growth over the long term. ICT infrastructure spends in theenterprise market are also projected to grow. Gartner's forecast for 2017 projects agrowth of 8.8% in IT spends in India on Data Center Systems Software and Devices.Smartphone shipments are expected to grow by 15% in 2017 recovering from the impact ofdemonetization in 2016. With growth increasingly coming from the rural markets the C andD category cities which are a core strength of Compuage will help it reap maximum benefitfrom future growth.
In FY2016-17 the overall IT hardware and packaged software market recovered from thesluggish growth in the previous year. As per the NASSCOM estimates the revenue growth forthe IT Hardware segment picked up from ~2% in FY2015-16 to 5.4% in FY2016-17 and that forthe packaged software went up from 4.5% to 10.4%. In contrast the volumes of PC mobilephone and tablets showed a decline in 2016. PC shipments dropped by 15.2% mobile phoneshipments by 3.4% and tablets by 3.1% as per IDC. Subdued consumer demand during thefirst half and demonetization played an important role. The silver lining in this darkcloud was the continued growth of smartphone shipments (5.3%) in 2016 and the increasingAverage Selling Price (ASP) of smartphones. In this market context Compuage has onceagain managed to beat the industry growth by delivering a Y-o-Y increase of 32.58% inoperating revenue from the Indian market in FY2016-17. In line with the market trends thebiggest growth driver for Compuage has been Enterprise Business. We are currently sellingSoftware Networking and Security products through System Integrators to this segment.Mobility segment currently contributes 15% of the overall business much less than peershence it will also be a key growth driver in the near future. We continued to expand ourmarket penetration and now have a reach in nearly 800 cities with more than 10000partners. Demonetization had a small impact overall with sales marginally hit in theNovember 2016 to January 2017 period. It also manifested for a limited period in the formof higher inventories slower collections and dip in profitability from higher discounts.On an annual basis though the EBITDA and PBT grew at 24.5% and 24.3% respectively overthe previous year a much faster pace than the overall top line growth of 14.3%. This is atestament to our benchmark setting pioneering practices and people productivity.
In FY2016-17 we signed up 14 new product lines which will reflect in our financialperformance in the coming years. Going forward we will continue to add more and moreproducts to enhance the positive network externalities. We have made adequate investmentsin technology infrastructure to support a much larger scale of business without additionalcapital expenditure. In line with this strategy we entered into an agreement with'Apple' in April 2017 to distribute their products in the Northern and Eastern regionsof the country. The benefits for the same shall start accruing from FY2017- 18 onwards.Our integrity and reputation form the strong foundation on which we have built ourposition as one of the top 5 companies in the technology distribution space. Last 30 yearshave been great but now we want to make the next 3 years even bigger for Compuage. Wehave the passion the people and a unique purpose to be the Distribution Highway forDigital India to make it happen.
With warm regards
Atul H. Mehta
Chairman & Managing Director