To the Members,
Your Directors present to you the Twelfth Annual Report together with the AuditedStatement of Accounts for the year ended 31st March 2011.
1. Standalone Financial Results:
| ||Rs. in Millions, except per share |
|Particulars ||2010-11 ||2009-10 |
|Total Income ||268.54 ||331.52 |
|Total Expenditure ||341.71 ||282.13 |
|Operating Profit (EBITDA) ||(73.17) ||49.39 |
|Interest ||0.99 ||15.81 |
|Depreciation ||10.40 ||14.70 |
|Profit Before Tax ||(84.56) ||18.88 |
|Provision for Tax ||(0.01) ||5.71 |
|Deferred Tax ||(27.30) ||1.63 |
|Profit after tax ||(57.25) ||11.54 |
|Basic Earnings per share ||(1.48) ||0.30 |
Consolidated Financial Results:
| ||Rs. in Millions, except per share |
|Particulars ||2010-11 ||2009-10 |
|Total Income ||1,233.19 ||1,381.22 |
|Total Expenditure ||1,130.21 ||1,247.16 |
|Operating Profit (EBITDA) ||102.98 ||134.06 |
|Interest ||17.75 ||24.71 |
|Depreciation ||17.84 ||23.86 |
|Exceptional items ||34.08 ||- |
|Profit Before Tax ||33.31 ||85.49 |
|Provision for Tax ||36.28 ||18.87 |
|Deferred Tax ||(33.91) ||4.83 |
|Profit after tax ||30.94 ||61.79 |
|Prior period items ||- ||(14.87) |
|Net Profit ||30.94 ||76.66 |
|Basic Earnings per share ||0.80 ||1.99 |
2. Changes to Share Capital
During the year under review, there has been no change in the companys capitalstructure and the authorized share capital of the company stands at Rs. 350 Million.
In view of requirement of funds for various business expansion activities in future,the directors do not recommend dividend for the financial year 2010-11. The company paidan interim dividend of Rs. 0.25 per share on equity share value of Rs. 5/- each during theyear 2009-10.
There has been no transfer of funds to Reserves during 2010-11.
Result of Operations and Revenue
Total income in Financial Year 2010-11 on a standalone basis is Rs. 268.54 Million(2009-10 Rs. 331.52 Million) and on a consolidated basis it is Rs. 1233.19 Million(2009-10 Rs. 1381.22 Million).
Operating loss on a standalone basis stands at Rs. 73.17 Million (2009-10 operatingprofit Rs. 49.39 Million). Operating profit on a consolidated basis is Rs. 102.98 Million(2009-10 Rs. 134.06 Million). Loss for the financial year 2010-11 on standalone basis isRs. 57.25 Million (2009-10 profit after tax Rs. 11.54 Million). Profit after tax for theyear 2010-11 on a consolidated basis is Rs. 30.94 Million (2009-10 Rs. 61.79 Million).
During the year under review your company increased its client-base globally. Yourcompany continues to grow towards becoming the Industry leader in transportation,logistics and supply chain, leveraging the excellence in technology, domain and processesand continue to get more than 70% of revenues from existing customers. The company hasincurred capital expenditure of Rs. 14.57 Million (2009-10 Rs. 0.2 Million) forinfrastructure and facilities. The company has incurred Rs. 79.17 million on R&Dexpenses for the year 2010-11 as against Rs. 80.59 million during the year 2009-10.
We were also able to close many deals in India and internationally during the yearunder review. India is now emerging as a potential market which your company intends toexploit in the years to come. To capitalize on the opportunities that are opening up inthe domestic market, we are investing in new marketing initiatives, strengtheningtechnology capability and expanding our research division.
During the year under review, your company successfully signed 22 contracts whichinclude two large orders. The orders we bagged constitute various products in differentregions and at different price levels. Your company has initiated, designed and focused onIT services and solutions for the existing customer base as well as for the global market.This enables your company to build the volumes and also client size significantly. Our ITservices and solutions primarily include infrastructure management services, applicationservices including production support and business process outsourcing. We met with ourfirst success in Europe with one of our existing large clients and thereafter we were ableto secure more orders in IT services and solutions segment.
Your company has launched"SaaS " (Software as a Service) under the brandLogiSaaS- a powerful, dynamic, scalable and flexible tool for the shipper and thelogistics providers. We have built a state of the art delivery platform for the LogiSaaSoffering. The success of our products lies in the fact that we were able to sign 2contracts in the year under review and we have a strong sales pipeline for the year ahead.
We have been appraised as CMMI Level 5 during December last year. This appraisalcovered product development implementation and development activities. One of the uniqueoffering of Four-Soft is the global customs compliance solutions. We are developing 4Se-Customs to cater to the need of the US market on the next generation technology whichseamlessly integrates with other ERP applications. We obtained the certification from theUS Customs and Border Protection (USCBP) in the month of July 2011 which will widen ourselling capabilities in the North American market.
Investing in the Research and Development activities and technology has enabled yourcompany to move forward and implement innovative ideas into successful fruition. In linewith it we are moving towards mobile applications which enable our customers to use ourproducts / applications on hand held devices.
We have completed all our customer implementations with 100% success rate in the past30 months. Your company continues to invest in global sales and marketing to widen thepresence across the globe. The benefit of this investment will be visible during the nextyear as well as for the years to come.
Your company continues to generate cash from operations and has been able to manage itsworking capital requirements. Your company has cash equivalents of Rs. 12.34 million as on31st March 2011 and Rs. 143.05 Million as at 31st March 2011 on aconsolidated basis.
Four Soft Ltd has three direct subsidiaries; Four Soft B.V, The Netherlands, Four SoftSingapore Pte Ltd, Four Soft Malaysia Sdn Bhd, and the following seven step-downsubsidiaries Four Soft Netherlands B.V, Four Soft Nordic A/s, Denmark, Four Soft UK Ltd,Four Soft USA Inc., Four Soft Japan KK, Four Soft (HK) Limited, and Four Soft AustraliaPty Ltd.
The entire share of Four Soft Ltd in its direct subsidiary Four Soft Nordic A/s,Denmark was transferred to another subsidiary - Four Soft B.V. during the year 2010-11.The summary of the key financials of all the key Subsidiaries is mentioned below:
Four Soft B.V. The Netherlands
Four Soft B.V. is the largest subsidiary in terms of group revenue as this entity hasstep down subsidiaries in United States, United Kingdom, The Netherlands and Denmark.
Four Soft USA Inc.
During the year 2010-11, Four Soft USA Inc has made a net profit of USD 0.1 million(2009-10 Profit of USD 0.01million) on revenue of USD 5.8 million (2009-10 USD 4.4million).
The US subsidiary has been consistently performing well as they have secured few goodorders in the year under review, which helped us to carry a reasonable amount of orderbook to the next financial year. There are two large on-going implementations for ourflagship products. We are developing web-centric customs products for US market and are inthe process of US Customs certification. This will enable your company to make substantialinroads into the US markets.
Four Soft UK Ltd and Four Soft Netherlands B.V.
During the year 2010-11, Four Soft UK Ltd has made a net Profit after tax of GBP 0.11million (2009-10 profit of GBP 0.11 million) on revenue of GBP 2.60 million (2009-10 GBP3.84million).
During the year 2010-11, Four Soft Netherlands B.V. has made a net Loss of Euro 0.03million (2009-10 Loss of Euro 0.87 million) on revenue of Euro 4.2 million (2009-10 Euro4.5 million).
The subsidiaries in Europe continue to perform in a similar manner as the previousyear. Since the economic scenario has not improved, the growth has been minimal. However,we were able to offer our new IT services to few of our existing customers in this marketto maintain the revenues and profits. We have consolidated the European operations underone Management structure with the transfer of Four Soft Nordic A/s to Four Soft B.V. Thiswill help cross selling, consolidating the individual strength of subsidiaries in a moresynergized manner. We expect Europe market to recover in the next few years. There arepositive tractions from our existing customers to expand the usage of our products toother geographies as well.
We are also undertaking certain facility consolidations in Europe to bring in cost andmanagement efficiency.
Four Soft Nordic A/s, Denmark.
In January 2007, we acquired Transaxiom Holding A/s (renamed to Four Soft Nordic A/s)to enter into the Scandinavian region which has huge potential in the transportationlogistics and the shippers/manufacturer SCM segments. Four Soft Nordic A/s had a revenueof $ 9 million and the management of the company were well experienced in the technodomain functions of supply chain. Four Soft Nordic A/s has rich products specifically inthe road freight which has over 70 customers with substantial number of users in theScandinavian region. Four Soft Nordics subsidiary in Australia was transferred toour Singapore subsidiary. The business/revenue model has been highly profitable andcontinues to be a high margin business with additional support from India TechnologyCentre. In the year under review, the company has secured further orders from existinglarge customers to extend their usage to Asian counterparts as well. Your company isfocusing on the shipper SCM market and have appointed experienced sales personnel todevelop the shipper SCM business. The company expects to cross sell, support and leveragethe large European customer base and also to sell ePrdoucts in logistics as well asshipper SCM.
Four Soft Singapore Pte Ltd
The Company generated revenues of SG$ 0.76 Million, with gross profit of SG$ 0.16million and a net profit of SG$ 0.20 Million during the year 2010-11.
Our business in Far East has remained at the same level, primarily due to themacro-economic developments. However we anticipate good traction in Japanese markets. Wehave secured a fairly large order from a Japanese electronics company for our 4S e-Logproduct.
We are optimistic on our prospects in Japan based on our current sales pipeline.
Four Soft Malaysia Sdn Bhd
The company did not generate revenues and made a net loss of RM 0.02 Million during thefinancial year 2010-11. Four Soft Malaysia Sdn Bhd is presently a non-operating entity.
The Ministry of Corporate Affairs has granted general exemption under section 212(8) ofthe Companies Act, 1956 exempting companies from attaching copies of the Balance Sheet,Profit and Loss Account, Reports of the Board of Directors and Auditors of Subsidiaries asspecified under Section 212 (1) of the Companies Act, 1956 subject to publication ofcertain summarized financial information of the subsidiaries in the Annual Report.Accordingly these documents related to subsidiaries are not attached to the Balance Sheetand the summarized financial information related to subsidiaries is included in the AnnualReport. Full annual report including financial information of the subsidiaries will beavailable upon request by any member interested in obtaining the same. All the documentsrelated to subsidiaries are kept in the head office of the company for inspection by anyinterested shareholder.
Presently, your company offers solutions in the areas of freight forwarding industry,3PLs and service providers, customs brokerage, contract and warehousing logistics, and forliners, NVOCCS and agencies. Products in freight forwarding industry include 4S eTrans, 4SVisilog iLogistics, Shipper Logistics, and 4S eTrans SME and that for contract and 3PLwarehousing providers include 4S eLog. In addition, 4S iShipping targets the linersmarket, 4S eCustoms targets the customs brokers and shippers and 4S Visilog Plus whichrepresents the 4S shipper logistics industry targets the shippers and manufacturers fortheir logistic needs. Your company also offers IT- services including consulting, softwaredevelopment and system integration and implementation in the domain of logistics relatedIT.
With an increase in new projects and the sales pipeline, the company focused a lot onrecruitment during the year 2010-11. In the year under review, a net of 161 people wereadded to the organization breaking the trend of negative manpower growth in the previoustwo years. The majority of the hiring was for software engineers followed by functionalconsultants across various levels from freshers from campuses to Chief TechnicalOfficer - which has resulted in the company gearing up for the challenges of new productdelivery by having optimum manpower. A concentrated effort in recruitment was also takento make the staff-mix more diversified and reduce gender imbalance. Focus has also beenextensively on internal training and competency building, with measures such as quarterlyand on-the-job assessments post training introduced to capture the value addition of eachresource. With a clear goal of constantly benchmarking and improving the internal HRpractices with the best in the industry, triggered through organizational initiatives suchas CMMI Level 5 appraisal, your company has been proactively pursuing its strategicobjective of being a worldwide leader in logistics and supply chain management solutionsthrough the quality and competency of its people.
The basic competency model for identifying and managing organizational talent hasalready been laid down through the Talent Management Program (TMP). It encompassesaddressing the employee value proposition based on which career management (planning andprogression) is done to ensure that each valuable resource is properly motivated andengaged in their work leading to higher quality of output and reducing the risk ofattrition. By completely atomizing various HR processes, focus was given to value addedactivities such as improving employee relations and inter and intra-team communications.Performance based variable pay systems has also resulted in advocating the culture ofmeritocracy and ensuring that high performers are properly recognized and are compensatedaccordingly. Some of the major initiatives that are already implemented and under variousstages of implementation are as follows:
Talent Management Program (TMP)
TMP was introduced in the previous year and has been used as the roadmap for developingand retaining all top-performers identified through the formal performance evaluationprocess. This program is now considered as the basis for succession planning throughcareer management of the participants to ensure they take up positions of higherresponsibility and authority by developing their leadership skills, knowledge andabilities for their current and planned future work. TMP is aimed at addressing allaspects of work related issues that an employee considers important, ranging from careerplanning and progression, job enrichment, compensation and benefits, work-life balance,improving knowledge and higher education. All participants are encouraged to map theirpersonal goals with that of their respective department and decide on a plan, throughconsultation of the TMP committee comprising of senior managers, and come up with a careerplan that creates a win-win situation for them as professionals and the organization.
Rewards and Recognition (R&R)
The company understands the highly motivating factor of having a good Rewards andRecognition program. Hence for identifying and rewarding exemplary performance ofindividuals and teams, the company has introduced various awards, which includes bothnon-monetary (certificates, memento) and monetary (cash, gift coupons) awards. Individualawards such as Gold, Platinum and Diamond are given based on quarterly performance reviewat various levels. To reward completion of special tasks or milestone, spot awards havealso been introduced. Annual awards like Employee/Team of the Year are based onconsistently good performance of individual and team over the entire year. Specialrewards, such as recognizing 5 and 10 years of service, have also been continuing for sometime now.
Process Automation (eStart)
The HR Information System eStart (e-Strategic Talent Administration, Recruitment andTraining), which was designed and developed internally, was introduced in the previousfinancial year. Various HR modules ranging from employee records, leave management,compensation and benefits, recruitment, training, employee satisfaction surveys andperformance appraisal etc. were developed keeping in mind the unique HR workflow of theorganization. Further modules which will be available during the course of the year areTravel Management, Project Management (people allocation) and Region / Country specificmodules.
Your companys quality system is built on three pillars: ISO 9000, CMMI and LeanManagement. We have built our process definitions, standards, tools and documents so thatthe system is in conformance with all the three frameworks. We not only undertakeextensive customer satisfaction surveys but also conduct internal audits to maintain andverify high levels of compliance.
CMMI LEVEL 5 CERTIFICATION
As you are aware we had initiated CMMI Level 5 implementation in 2009-10 and achievedcertification in November 2010. The Standard CMMI Appraisal Method for Process Improvement(SCAMPI) Class A appraisal was conducted at Four Softs GlobalDevelopment Centre in Hyderabad. This appraisal covered product / project development,implementation and maintenance activities. The appraisal was conducted by QualityAssurance Institute India Ltd, SEI Partner. Four Soft Ltd. started its quality journeywith the certification of ISO 9001 in 2004 to CMMI Level 3 in 2009 and now CMMI level 5 in2010. CMMI Level 5 enables us to continually improve product quality, productivity,predictability and reduce cycle time. This continuous improvement model of CMMI is one ofthe most prestigious certifications and is a testimony of the organizational focus onprocess improvements.
We initiated Lean Management in the year 2009 and we are reaping benefits of the samein all identified value streams. Measures that validate the success of this program arereduced amounts of rework in the company, faster implementation cycle for standardimplementations and increased automation levels in various functions. Lean is implementedin projects and functions focusing on reducing non value activities and increasing valueto customer. Process and templates are reviewed applying lean principles and non valueprocess steps are removed. This has simplified process implementation for practitioners.
PCMM LEVEL 3 CERTIFICATION
To continue the quality journey, the organization is aiming at PCMM Level 3certification to complement CMMI implementation in the organization.
As a good governance initiative, your company continues to improvise on complying andproviding additional disclosures apart from complying with the recommended SEBI guidelineson Corporate Governance. A Report on corporate governance along with the certificate froma Company Secretary-in-Practice confirming compliance of conditions of corporategovernance as stipulated under Clause 49 of the Listing Agreements with the stockexchanges form part of the Annual Report.
The company has well framed policies such as the Whistle blower Policy, Fraud DetectionPolicy and the Code of Conduct for senior officers and executives in the company. Thecompany has internal controls and documented procedures and continues to ensure compliancewith the said policies.
CORPORATE SOCIAL RESPONSIBILITY
As a concerned corporate citizen, Four Soft believes in sharing and contributing to theglobal development. We at Four Soft not only just deliver products but also believe insharing health and happiness with the under-privileged sections of the society.
Your company has recognized the underutilized potential of the educated and skilledpeople in rural areas by new dimension of promoting IT Education in rural schools. Yourcompany has enabled the economically disadvantaged rural school children to gain accessand develop IT skills from a young age. Your company has tied up with certain NGOs forworking towards bridging this gap between millions of educated but unemployed orunder-employed youth and shortage of skilled, trained and talented manpower in mostsectors including retail, infrastructure, IT and pharmaceutical sector and create awin-win situation for the industry as well as to people of the country who needappropriate employment. As a part of this effort, your company in co-ordination with NGOshas taken up the project on a massive scale to provide IT education in schools. Thisprogram will fill the gap to the benefit of the IT Industry as well as economicallydisadvantaged rural children.
As part of Corporate Social Responsibility initiatives, your company had invitedSAMPURNA Holistic, a Hyderabad based NGO working with underprivileged children, to thecorporate office. Four Soft had organized an outing with the children to Botanical Garden- an amusement Park in outskirts of Hyderabad City followed by lunch at corporate officepremise. Staff members at corporate office actively participated in the event by donatinggroceries, stationeries and education tools, food and toys.
Consistent with Four Softs approach to social responsibility, the company is"Going Green." The FS green policy has two primary goals: (a) to lessen theCompanys impact on the environment and (b) to become a standard-bearer in thelogistics industry in promoting responsible stewardship toward the environment and itsnatural resources. Four Soft has built and maintained over the years a firm culture thatprizes excellence not only in the logistics business, but also in discharging thecompanys responsibility to the communities in which our staff live and work. Ourgreen policy is consistent with the 4S commitment to good corporate citizenship and bestmanagement practices.
Prof. Janat Shah and Mrs. Soujanya Reddy were appointed as Additional Directors by theBoard of Directors in their meetings held on 12.11.2010 and 09.08.2011 respectively. Asper the provisions of the Section 260 of the Companies Act, 1956 both the directors shallhold office up to this Annual General Meeting. The directors are eligible forreappointment as Director of the Company. The Company has received a Notice along withrequisite fee from two members under Section 257 of the Companies Act, 1956 proposing thecandidature of Prof. Janat Shah and Mrs.Soujanya Reddy as Directors of the Company.
As per Article 88 of the Articles of Association Mr. Mohan Krishna Reddy and Mr. JorgenWinther Nielsen, Directors are retiring by rotation at this meeting and being eligible,offer themselves for re-appointment.
Pursuant to the provisions of Clause 49 of the Listing Agreement, brief profiles of theabove directors are provided in the notice to the Annual General Meeting.
The Board of directors of your company recommends their appointment / re-appointment.
M/s. Walker, Chandiok & Co, Chartered Accountants hold office until the conclusionof the forthcoming Annual General Meeting and have confirmed their eligibility andwillingness to accept the office of the Auditors, if reappointed.
The Board of Directors recommends the appointment of M/s. Walker, Chandiok & Co, asthe Statutory Auditors of the company for the year 2011-12.
A Report of the Auditors on the financials of the company is appended to this AnnualReport. There are no qualifications in the Report.
The observations made by the auditors in the audit report are self explanatory.
DISCLOSURE AS PER LISTING AGREEMENT Clause 32:
The cash flow statement in accordance with the Accounting Standard on cash flowstatement (AS-3) issued by ICAI is appended to this Annual Report.
Your Companys shares are listed on the Bombay Stock Exchange Limited, Mumbai(Stock Code: 532521) and National Stock Exchange of India Limited, Mumbai (Stock Code:FOURSOFT). The Annual Listing Fees for the year 2011-12 has been paid.
Directors Responsibility Statement as required under Section 217 (2AA) of theCompanies Act, 1956
Your Directors confirm that
in the preparation of the annual accounts, the applicable accountingstandards had been followed along with proper explanation relating to material departures.
the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit or loss of the Company for that period.
the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act, 1956for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities.
the directors had prepared the annual accounts on a going concern basis.
The financial statements have been audited by Walker, Chandiok & Co, CharteredAccountants - the statutory auditors.
EMPLOYEE WELFARE TRUST
The company has established Four Soft Limited Employees Welfare Trust ("TheTrust") to administer the ESOP Scheme and as at 31st March, 2011 had issued 1,170,200equity shares of Rs. 5 each, including 217,200 equity shares issued pursuant to issue ofbonus shares in 2003. Pursuant to the ESOP Scheme 2003 the trust has granted equity sharesat an exercise price of Rs. 5 each to the eligible employees, which are subject toprogressive vesting (1 year after date of issue of options) over a period of three yearsfrom the date of grant. As of 31st March, 2011 the total shares held by theTrust is 289,327(previous year 348,325). Mode of settlement of these stock options isequity.
Details of the equity shares issued under ESOP, as also the disclosures in compliancewith clause 12 of the SEBI (Employees Stock Options Scheme and Employees Stock PurchaseScheme) Guidelines, 1999, are set out in Annexure II to this report.
Your company has not accepted any fixed deposits and, as such, no amount of principalor interest was outstanding as of the balance sheet date.
Particulars of employees as required under the provisions of Section 217 (2A) of theCompanies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, asamended, is attached to this Report
Conservation of energy, research and development, technology absorption, foreignearnings and outgo:
The particulars as prescribed under Subsection (1)(e) of Section 217 of the CompaniesAct 1956 read with the Companies (Disclosure of particulars in the report of the Board ofDirectors) Rules, 1988, are set out in the Annexure- I included in this report.
Your directors take this opportunity to convey their appreciation for the support andco-operation received during the year under review, from all the Government authorities,shareholders, other stakeholders, clients, vendors, partners, bankers and other businessassociates. Your directors wish to place on record their deep sense of appreciation forthe dedicated and sincere services rendered by the Employees at all levels.
| ||For and on behalf of the Board of Directors |
| ||Sd/- |
|Place: Hyderabad ||Palem Srikanth Reddy |
|Date: 9th August, 2011 ||Chairman & Managing Director |
Annexure- I to the Directors Report
Particulars pursuant to Companies (Disclosure of Particulars in the report of the Boardof Directors) Rules, 1988
1. Conservation of energy
Your Company takes adequate measures to reduce energy consumption by using efficientcomputer terminals and by using latest technology. The impact of these efforts hasenhanced energy efficiency. As the facility is located in Cyber Towers, Air-conditioners,hydro-pneumatic pumps used are highly energy efficient. Since the energy cost forms a verysmall part of total expenses, the financial impact of these measures is not material andmeasured
2. Research and Development
Your company has always played a pioneering role in technology adaptation. Our missionin the area of technology moves forward in three stages. Firstly, we constantly monitortrends in the technology world. The second step is that we determine the businessscenarios where the new technologies can be applied in our domain and then evaluate thebusiness benefits. Once lab prototypes and tests confirm the justification, we perform thesystem design to implement the technologies into our product suite directly or make themavailable as plugins or integration layers. This is last step is a collaborative exercisebetween R&D and product development functions.
a) Ongoing focus
Four Soft Ltd., as an Enterprise solutions provider, has always had technology prowesson most advanced technology tools and trained personnel for R&D activities on itspayroll. As an inherent aspect of product development, the company continues evaluatingnew technologies and methodologies for implementing them for immediate as well as futurebenefits to customers.
Realizing the need of providing analytics to senior management of our clients, weevaluated various technologies and products and have entered into an OEM agreement withQlikTech to use its product - QlikView as a business intelligence layer over the Four Softsuite. We are happy to inform that this product, named as 4S InfoTips, has beenimplemented at customer locations during this year.
Similarly as part of the FFIFA alliance, we identified the need of a carbon-emissioncalculator that will be useful to all clients. This product has been tentatively namedeMission. Combining a variety of Web2.0 technologies like AJAX and Google Maps API alongwith web services and our in-house 4S model-driven development framework, we have alreadybuilt a prototype and have demonstrated it to clients. Further development will happen inthe next financial year.
b) Interoperability solutions - Specific R&D activities
Mobile application: Mobile version of our 4S products (Visilog, eTrans, eLog, andeRating) has been successfully developed, that enable mobile user to track and trace theirshipment, sales booking, check inventory status of a particular good in warehouse, quoteadd/view, barcode scanning and signature capturing as a proof of delivery etc.
Mobile versions of our 4S products are compatible to all the latest mobile platformslike like Android, Balackberry, iPhone etc.
4S FW Studio: It is an in-house developed tool based on 4S FW2.0 to enhance todevelopers productivity, reusability of work done by functional consultants. Itautomates the generation of HTML prototype also which reduce lots of the functionalconsultant time in comparison to produce the same by other tools.
Integration architecture is determined on a case-by-case basis for every clientdepending on the integration problem that needs to be addressed. Here we apply industrybest practices to arrive at the optimum integration solution by mixing and matchingdifferent platforms, protocols, formats, hardware etc.
Our product 4S eConnect has been successfully developed as a domain-specific ESB layerthat offers reliable multi-format message transformation and routing. 4S eConnect is anin-house developed technology offering. The evolution of 4S eConnect marks the capabilityof our company not just as a functional product provider but also as a technology solutionprovider. This year, this tool has been successfully implemented as the integration layerat clients like Flyjac, MIDL, Mondial, LEI, Alba-Delta etc. PKI (public key encryption)integration has been provided in eConnect to support messages encryption. Going forward,we will be conducting studies on third-party ESBs that we will partner with to providewith additional features like adapters to legacy systems. This combination will serve aseConnect plus.
c) Investment and Benefits derived as a result of R&D
Our investments in Research and Development (R&D) have been continuous andconsistent. Your company spent Rs. 79.17 million in current year (Rs. 80.59 millionprevious year), which includes amount spent on product enhancement through adopting newtechnology methods and other activities mentioned in the previous paragraphs.
The companys R&D activity continuously provides technical innovation,improves the product technical quality and streamlines the process flow. It ensures ourproducts are best of breed in the domain and provide the correct technology solutions tobusiness problems. One of the benefits of using object-oriented technologies is theability to reuse software. Software reuse reduces development time and the code to bewritten, and increases application maintainability and quality. As part of R&D, wecontinuously evaluate reliable open source options that can be part of the platform onwhich our products are developed and deployed. The resulting cost benefits are passed onto our customers.
Our R&D function evaluates external tools or supports building internal tools thathelp perform important critical tasks in important projects. We started using OCS/GPLI, anopen source tool to verify the software inventory at all global locations.
d) Future plan of action
Rule engine: Evaluation of rule engine (in-house vs external tools) and implement as abusiness rule system which enables company policies and other operational decisions to bedefined, tested, executed and maintained separately from application code.
Kernel architecture: We are working on laying out our next generation technical productarchitecture that will enable easier customization.
As part of quality assurance, we always had a mix of manual and automation testing. Wehave strengthened our test automation team this year and have made plans for a significantincrease in the level of testing that will be executed on testing tools.
Training and R&D go hand-in-hand. We build competence across all layers of thecompany and in particular for new entrants. During the last quarter of this year, we haverecruited bright minds from campuses of reputed institutes like NITs, JNTU, Symbiosis etc.They will be joining in batches and their training will happen in the first two quartersof next year, in which they will be provided with the best facilities, faculty and toolsso that we build a new set of technology and product champions.
We will stay ahead as leaders in the technology area and this has always been a corevalue of your company since its inception. The Technology function is focusing itsresearch this year on various aspects of social computing, mobile computing, and cloudcomputing in order to expand the reach and availability of technology in innovative andcost-effective ways. We have to keep pace with the business drivers and the technologydevelopments in such a way that we have scalable solutions for customers in the emergingeconomies to the developed countries.
Business environment is dynamic and ever changing. Your company can help the customersto be in forefront in terms of technology adoption and process improvements so that theywill be more efficient and cope up with the challenges in future.
3. Foreign exchange earnings and outgo
a) Activities relating to exports, initiatives taken to increase exports, developmentof new export markets for products and services, and export plans.
Your company has derived 76 % of its revenues from exports and markets its softwareproduct and services overseas through business partners and subsidiaries.
b) Foreign exchange earned and used for the year ended 31st March 2011
| || ||(Rs. in Millions) |
| ||2011 ||2010 |
|Gross Earnings ||251.57 ||247.18 |
|Outflow (including capital Goods and imported software) ||13.71 ||11.88 |
|Net Foreign Exchange Earnings ||237.86 ||235.30 |
|NFE/Gross Earnings % ||95% ||95% |
STATEMENT SHOWING LIST OF EMPLOYEES REQUIRED TO BE ATTACHED TO THE DIRECTORSREPORT AS PER SECTION 217(2A) OF THE COMPANIES ACT, 1956.
|Name of employee ||Designation ||Remuneration (Rs.) ||Nature of employment ||Nature of duties of employment ||Qualification & experience ||Date of commence- ment of work ||Age ||Last employment ||% of shareholding in the company |
|Rajshekhar Roy ||Chief Executive Officer ||3,819,037 p.a ||On Rolls ||In charge of global project management and operations. ||BE, MBA. 22 years of experience ||08.10.2007 ||47yrs ||CHR Global Pvt. Ltd. ||0.15% |
| ||For and on behalf of the Board of Directors |
| ||Sd/- |
|Place: Hyderabad ||Palem Srikanth Reddy |
|Date: 9th August, 2011 ||Chairman & Managing Director |
ANNEXURE II TO THE DIRECTORS REPORT
Disclosure pursuant to provisions of SEBI (ESOP and ESPS) Guidelines 1999 is givenbelow:
|Sl No Description ||ESOP Scheme |
|1 No. of shares available under ESOP Scheme || |
|a. Originally allotted ||953,000 |
|b. Consequent to Bonus Issue and Split of shares ||217,200 |
|c. Total ||1,170,200 |
|2 No. of Options granted ||Refer Note1 |
|3 Pricing Formula || |
| ||ESOP 2003 Scheme - Price of Rs. 5/- per share |
| ||ESOP 2009 Scheme - Price of Rs. 10/- per share |
|4 Options vested as on 31st March 2011 ||289,448 |
|5 Options exercised during the year ||63,998 |
|6 Options lapsed during the year ||22,851 |
|7 Total no. of options in force as on 31st March 2011 ||83,676 |
|8 Variations of terms of Options ||Refer Note 2 |
|9 Money realized by exercise of options ||Rs. 319,990 |
|10 Grant details to members of senior management team || |
|11 Employees holding 5% or more of total options granted during the year ||NIL |
|12 Identified employees, who were granted options during the financial year exceeding 1% of issued capital ||NIL |
|13 Diluted EPS as per Accounting Standard 20 ||(1.48) |
|14 i. Method of calculation of employee compensation cost ||The company has calculated the employee compensation cost using the intrinsic value of the stock options. |
|ii. Difference between the employee compensation cost so computed at (i) above and the employee compensation cost that shall have been recognized if it had used the fair value of the options : ||Rs. 850,621 |
|iii The impact of this difference on profits and on EPS of the company: || |
|PAT as reported: ||Rs. (57,252,473) |
|Less: Additional employees compensation cost based on Fair value ||Rs. 850,621 |
|Adjusted PAT ||Rs. (58,103,094) |
|Adjusted EPS || |
|Basic ||Rs. (1.50) |
|Diluted ||Rs. (1.50) |
|15. Weighted average exercise price and fair value of stock options granted: ||N.A |
|16. Description of the method and significant assumptions used during the year to estimate the fair value of the Options, including the following weighted average information ||The Black Scholes option pricing model was developed for estimating fair value of traded options that have no vesting restrictions and are fully transferable. Since options pricing models require use of substantive assumptions, changes therein can materially affect fair value of options. The option pricing model does not necessarily provide a reliable measure of fair value of Options. |
|17. The main assumptions used in the Black Scholes option pricing model during the year were as follows: ||2011 ||2010 |
|Risk free interest rate : ||8.0% to 8.25% ||8.0% |
|Expected life of options from the date of grant : ||1 to 4 Years ||1 to 4 Years |
|Expected volatility : ||0.47 to 0.57 ||0.47 to 0.60 |
|Expected dividend yield ||Nil ||Nil |
Note 1: No. of Options granted during 2010-11
Under ESOP 2003 Scheme :
No options were granted to employees during the year 2010-11.
Under ESOP 2009 Scheme:
No options were granted to employees during the year 2010-11. However, for the purposeof preparation of Financial Statements, the Guidance Note issued by ICAI onAccounting for Employees Share Based Payments, we have disclosed stock optionslikely to arise till 31st March 2013 (end of the said scheme).
Note 2 : Variations of terms of Options
Variation in ESOP 2003 Scheme:
In the Annual General Meeting held on 29.09.2008, the shareholders approved thefollowing variations to ESOP Scheme:
a. There is no lock-in period after allotment of Employee Stock Option shares toemployees account.
b. One-third of total grants offered to be vested on to employee on each completed yearof service from the date of granting of option. In other words:
33.33% of the total shares granted can be exercised by each employee on or aftercompletion of 1st year from the date of grant.
33.33% of the total shares granted can be exercised by each employee on or aftercompletion of 2nd year from the date of grant.
33.33% of the total shares granted can be exercised by each employee on or aftercompletion of 3rd year from the date of grant.
FOUR SOFT LTD - EMPLOYEE SHARE PURCHASE SCHEME (ESPS) 2009
As per the Four Soft Employee Share Purchase Scheme 2009, 1948,000 equity shares @ Rs.20/- per share are planned to be issued to the employees based on the criteria set forthin the said Scheme.
In the year 2010-11, the company has not allotted any shares to employees based on FourSoft Employee Share Purchase Scheme 2009.