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Saksoft Ltd.

BSE: 590051 Sector: IT
NSE: SAKSOFT ISIN Code: INE667G01023
BSE 00:00 | 03 Feb 143.85 0.85
(0.59%)
OPEN

145.15

HIGH

147.25

LOW

140.75

NSE 00:00 | 03 Feb 143.90 0.90
(0.63%)
OPEN

145.00

HIGH

147.25

LOW

140.75

OPEN 145.15
PREVIOUS CLOSE 143.00
VOLUME 153614
52-Week high 155.50
52-Week low 68.25
P/E 46.70
Mkt Cap.(Rs cr) 1,520
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 145.15
CLOSE 143.00
VOLUME 153614
52-Week high 155.50
52-Week low 68.25
P/E 46.70
Mkt Cap.(Rs cr) 1,520
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Saksoft Ltd. (SAKSOFT) - Chairman Speech

Company chairman speech

We are looking at the prospect of generating 20% top-line growthyear-on- year from this point onwards

ADITYA KRISHNA

Chairman & Managing Director

During the year under review your company Saksoft Limited grew fasteron a larger revenue base. We reported a 24.5 per cent increase in revenues compared to7.5% per cent in the previous year and a 13.9% revenue CAGR in the five years ending FY 21-22.

This growth was accompanied by an increase in EBITDA margins by 22.7per cent indicating that the growth was not at the cost of our competitiveness.

This performance represents a decisive break from that of the earlieryears in general and that of the 2020-21 pandemic year in particular when there was noclarity in the initial stages on how the sector would pan out.

This improvement was no flash in the pan; it was not the result of abrief arbitrage window; it was not on account of a windfall in projects or currencymovements.

This improvement was the result of a tectonic shift in the sectoralundercurrent that we expect will endure. Following the first guarter of FY 2020-21 whenmuch of the world came to a standstill on account of the pandemic the global economic hasbeen on a recovery path marked by different choices being made by the technology officersin large and mid- sized corporations the world over.

The principal 'different choice' that one is referring to is themovement of businesses towards cloud and digitalisation. The pandemic's lasting legacy tothe world of convenience (and hence technology) will be an introduction to the prospect ofan employee not just working from home but an employee working from anywhere without theprospect of lower productivity. This reality is empowering a number of companies torethink the way they need to engage with their most valuable resource (talent) and themost visible manifestation of that is a reinvestment in their cloud infrastructure thatmakes distributed working a seamless reality.

By 2025 we expect that there could be over 100 zettabytes of datastored in cloud (a zettabyte is a Billion terabytes or a trillion gigabytes). In threeyears the total global data storage could exceed 200 zettabytes of data half stored incloud as compared with only 25 percent of all the computing data stored this way in 2015.(Source : https://www.jchs.harvard.edu)

These 'Nothing stops' and 'Get going' perspectives resulted in analmost recovery in the IT services sector the world over. Instead of a conventionalunderstanding that customers would go slow on their fresh technology spending whilepreferring to wait and watch there was now an urgency within the sector: Customers werebeginning to recognise that the pandemic would only accelerate the changes that had beenlatent within the system and that the world would move faster towards digitalisation. Thisrecognition did not merely extend from FY 20-21 into FY 21 -22; it deepened whentransitioning from one year to another and the result is that we now have the makings of amulti-year sectorial shift likely to be sustained by considerably larger customerspending.

By 2025 we expect that there could be over 100 zettabytes of datastored in cloud (a zettabyte is a Billion terabytes or a trillion gigabytes). In threeyears the total global data storage could exceed 200 zettabytes of data

A survey of U.K. business leaders (a market where Saksoft is present)found that 70% companies expect their IT spends to grow this year with 69% planning tolaunch new digital projects tools or initiatives and 65% intending to invest in a newfield of technology including artificial intelligence (Al) the Internet of Things (loT)big data and cybersecurity. Some 64% businesses are planning to invest in cloud this yearwhile similar numbers are looking to enhance their customers' digital experience 68%while 67% intend to purchase new collaboration tools for their employees. Almost 49% ofthose surveyed said that Covid-19 had exposed weaknesses within their IT infrastructurewith a similar number 48% having eliminated software that since the onset of the pandemicwas no longer fit for purpose (Source: https:// www.forbes.com).

There is another factor at play.

There is a wider recognition that technology is not a cost centre; itis a competitiveness driver. Over the last decade some of the most successful companiesacross sectors have also been the most prudent technology spenders. The result is thattechnology spending is now being appraised in terms of percentage growth in projectedrevenues and basis point growth in projected margins. The correlation is beingincreasingly visible: spend more technology dollars and enhance business sustainability.

What makes this reality compelling is that technology is becomingincreasingly central to the personality of companies. There is a greater realisation thatmost businesses (irrespective of the verticals they belong to) are inevitably transforminginto technology businesses. They are deploying cutting-edge technologies in comprehendingtheir markets extracting data leading to informed decision making providing services onsmartphones connecting and delighting consumers and making it easier to receive digitalmoney. Nowhere is this more visible than in the automotive sector where what once used tobe a mechanical product is now turning electronic to the extent that some of the largesttechnology services providers are extending their businesses to the automotive sector withhuman-less products. The dis-intermediation of conventional services and the correspondingdigital intermediation is possibly the big theme that has emerged across the last decadeand likely to remain the most transformative theme going ahead.

How is this transforming our world at Saksoft one might be prompted toask.

One we are seeing a widening of volumes within most clientslengthening our project pipeline.

Two the cycle time between order enguiry and confirmation hasdeclined; CXOs are being increasingly empowered to take decisions without this beingrouted through other managerial seniors; discussions between clients and service providerslike us have graduated beyond 'what' and 'how' to 'when'. The customer world is playingcatch-up.

These realities provide me with the optimism that the days ofsingle-digit percentage revenue growth for mid- sized technology companies like ours areover. We are looking at the prospect of generating 20% top-line growth year-on-year fromthis point without even factoring the impact of any price increases.

There is only one threat on the horizon that could potentially poop theparty. This threat in two words: Talent crunch'.

The customer end is growing faster than the capacity of the industry tofind talent. There is a bigger premium on the need to attract and retain competent talentthan possibly at any time I have seen in my professional experience.

If the mismatch could be attributed only to the sharp downstream growthand the inability of the engineering institutions to generate a corresponding number ofyoung professionals it would have been understandable. The challenge runs deeper.

The challenge is being aggravated by an ongoing youth ferment thatneeds to be understood in the first place to relook the way we perceive not just thisbusiness but possibly every business.

In the past youth realities remained consistent across decades - theneed to get a job settle down spend less than income build assets enhance jobexperience (within the same company) and graduate in the hierarchy.

This predictable reality does not exist any longer. The youth of todayseek to be professionally mobile; they move across companies job descriptions and citieswith greater ease than their predecessors; in fact they do so with the express desire toaccess a range of superior job experiences instead of remaining loyal to a uni-dimensionalcalling.

The youth of today is a higher spender seeks debt to financeaspirations has a lower patience threshold with everything in life and is less insecureabout moving from one job to another.

While this may sound like a rich source of additional business forconsumption-based sectors it enhances the insecurity of the talent officer inservice-driven knowledge- centric companies. The 'FT word has become possibly the mostcritical in companies like ours with a greater focus on recruitment retraining andretention. There is no doubt in my mind that if we retain people better we will trainbetter for a wider complement of digital skills grow faster and enhance shareholder valueguicker.

So how is Saksoft responding to this challenge we have been asked.

One we are looking at the possibility of commissioning softwaredevelopment centres outside India focusing on countries sharing India's demographicscultural orientation language time zone and analytic orientation. The time has come tobroad-base our sourcing risk - from a time when only our customers were multi-national toa point where even our talent is drawn from different international geographies like LatinAmerica and Eastern Europe. As an extension we will continue to improve our offshorerevenue percentage by 100 to 200 basis points year-on-year strengthening margins.

Two we will continue to deepen the values with which we havegrown enhancing respect for the individual building a workplace culture where employeesseek to return ('Want to work at Saksoft') and create a reputation that we enhance skillsand take careers ahead.

We intend to remain focused on select industry verticals like fintechtransportation logistics and e-commerce retail which are expected to grow attractively.By the virtue of the network effect we expect that +80% revenue growth to come fromexisting accounts or related references and the rest through new logos.

Three we are looking at an area that has been long overlooked -women took a sabbatical on account of delivering and raising children and now seek to getback to the professional mainstream.

Four we are appraising the benefits of work from anywhere (WFA)with the objective to create a distributed workforce across different cities and towns.

Even as attrition continued to be a worry not just for our company butacross the sector we performed reasonably well in this regard during the last financialyear. In our 1554-people company we retained most of our senior and middle managementincluding freelancers or contractors protecting strategic insights valuable customerrelationships and growth-driving competencies.

Saksoft is attractively placed to sustain this growth momentum.

The company offers a bouguet of digital transformation services thatare witnessing a significant demand across select industry verticals. The pandemic hasemerged as a gamechanger as customers earlier reluctant to adopt digitalisation are nowbeing engaged remotely with their vendors and offices more intensively than before.

Besides changing human behavior has opened opportunities for serviceproviders like us to strengthen their digitalised front-face consumer engagement coupledwith robust digitalised backend architecture.

In the past we grew using a String of Pearls approach strategyexecuted through timely and complementary acguisitions that widened our services. Thisstrategy will be sustained.

We intend to deepen our relevance as a caring and committed employerduring the current financial year doing so with the conviction that the better we recruitand retain (in the process remaining a Great Place To Work company) the more sustainablewill be our growth.

We intend to remain focused on select industry verticals like fintechtransportation logistics and e-commerce retail which are expected to grow attractively.By the virtue of the network effect we expect that +80% revenue growth to come fromexisting accounts or related references and the rest through new logos.

We will continue to invest in digital assets and frameworks (UNITESTAQK and SAQAMA) that empower customers to go to market faster and digitally with theirproducts.

We will continue to seek complementary inorganic growth backed by oursuccessful track record of having integrated six acguisitions.

The result of these initiatives is likely to generate at least 20% CAGRin revenues graduating us to a USD 100 Million revenue company by 2025.

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