DirectorTo
The Members,
Your Directors are pleased to present before you the TWENTIETH ANNUAL REPORT togetherwith Audited Annual Accounts of the Company for the financial year ended 31stMarch, 2011.
Financial Performance
As a globally integrated unit, Onward operates through its Indian subsidiary, (OnwardeServices Limited (OeSL)) and global subsidiaries in North America (Onward Technologies,Inc. (OTI) & Germany (Onward Technologies GmbH) and with global branch offices in UK(Onward Technologies Ltd., UK) & UAE (Onward Technologies Ltd., UAE).
The summarized consolidated results of the Company are as under:
| | (Rs. in Lacs) |
| For the year ended | For the year ended |
| 31.3.2011 | 31.3.2010 |
| Sales and Other Income (Net) | 10,433.42 | 8,551.00 |
| Profit before Finance Cost and Depreciation | 1,169.83 | 404.10 |
| Finance Cost | 243.17 | 271.31 |
| Depreciation | 461.00 | 541.57 |
| Operating Profit / (Loss) before Prior Period expenses | 465.66 | (408.78) |
| Prior Period Expenses | 23.15 | 10.63 |
| Profit / (Loss) Before Tax | 442.51 | (419.41) |
| Provision for Taxation | | |
| - Current | 19.05 | 12.71 |
| - Deferred tax Expenses / (Benefits) | (76.41) | (156.91) |
| - Wealth Tax | 0.25 | |
| Profit / (Loss) after Tax | 499.62 | (275.20) |
Transfer to Reserves
During the year, the Company has not transferred any amount to reserves.
Dividend
The overall performance of the Company has been satisfactory. The Company seestremendous growth prospects and to capitalise on the opportunities the management has notrecommended any dividend for the current financial year.
Operations
The Company has two major lines of focussed areas:
1) Mechanical Engineering Design Services (EDS)
2) IT Consulting Services (ITS)
EDS Operations are part of Onward Technologies in India & ITS operations are runthrough its wholly owned subsidiary, Onward eServices Ltd. (OeSL). Both these businesslines are supported through global subsidiaries in North America (Onward Technologies,Inc. (OTI) & Germany (Onward Technologies GmbH) and with global branch offices in UK(Onward Technologies Ltd., UK) & UAE (Onward Technologies Ltd., UAE).
The financial year 2010-2011 started in the midst of market revival, with a healthynote for engineering services business.
Global automotive industry, Indian auto industry, Off-highway equipment industry andGeneral engineering industry all showed healthy growth. The Company’s productengineering and Manufacturing engineering services capabilities saw good demandeverywhere.
The Company believes its value proposition of offering low-cost innovation drivenengineering services has started yielding good results. It is further confident theinvestments made in medium term will benefit the Company in long term.
The Company continued it’s investment in high-end technology tools such as RobCADthe robotic plant automation and simulation tool, CATIAv5, Unigraphics, Pro/ENGINEER,AutoCAD along with High End computing machines.
Your Company has grown at a rapid pace during the last year and after consolidating itsposition, is now ready to take the next quantum jump. Its global delivery business modelof offering blended onsite, near shore, offshore and domestic services has helped toincrease its manpower base substantially. The Engineering Services Business has grown 20%in this year as compared to last year.
During the year, your Company has invested substantially in creating world classinfrastructure.
Onward’s belief on Business Model and the unique value proposition of low costinnovation driven mechanical engineering services are proven to be healthier and stronger.
Human Resource Initiatives:
Given the nature of the Company’s business, it was indeed a need to align thetalented work force with the predefined cultural frame work and enrichment of variousinitiatives per the following: The Centre of Excellences (CoE) at Onward has been anexciting forum not only from the business development perspective, but also to employeesas well to our customers. It is mandatory from the stage of joining the organization totake part actively in one or more CoEs. Through CoEs, Onward has been enriched with poolof engineers with various world recognized global certifications in addition to Onwardcertifications in the areas of Value Engineering, Quality,
Castings, Sheet metal, Plastics, Engine, BIW, Security, Project Management. Weinaugurated and made operational the Thermal Chamber a testing facility as a part of ColdStorage Equipment performance testing related activities, thus helping in enriching ourofferings to customers just not the design and verification, but also prototype andvalidated for SoP (Start of Production) enabled. The value creation has resulted in largeemployee satisfaction in realizing their dreams as engineers. Further this is helping inenhancing the competencies, capabilities, business development, and time to market,scalability, and certifications.
Innovation: During this year, Onward has been recognized and received appreciationson various innovations and corresponding contributions given to customers. Many of theseinnovations have been led towards Patent Disclosure effort. The ideas and the projectsresulted into POC building from the team, with an impressive display of products, and haveproven to be top amongst innovations. Entire team is promoting Innovation as community ofpractice at Onward in whatever we do.
Training: Training at Onward has been the key enabler during the year’s growthespecially in preparing the engineers to understand Onward ways of doing right first time,customer oriented to match with change in expectations and get ready to be deployed withrespective customer projects and programmes. There have been continuous efforts andvarious initiatives in talent development with an investment on highly specialized RoboticPlant automation simulation software RobCAD, CAD software: Catia, Unigraphics, KBTD; CAEsoftware: StarCCM, Abaqus, Hypermesh, Ansys, Ansa, Matlab with high end computingmachines. Formation of technology training centre as Onward finishing school is the keyenabler.
Project Management & Quality Processes Initiatives: As a part of strengtheningand enhance programme management and to be business oriented; the Business Managers andProject Managers were given training on Finance for Non-finance Managers, Customerrelationship Management, a framework aligning with Disciplined approach with Quality andCustomer expectations management. There have been continuous and periodical reviewprocesses with metrics in enriching the overall customer management. Prestigious clientelevisited during the year, assessed and appreciated the overall policies, process frame workand adherence throughout the organization on ISO: 9001-2008 and ISO: 27001. The seniormanagement commitment towards configuring and enriching the processes towards the changingbusiness models has been well appreciated.
Employee Appreciation & Cultural Activities: Employee appreciations andcultural activities at Onward have taken a great positioning during the year. In additionto time to time pat-on-back, various recognitions at All Hands meet, Onward FoundationDay, quarterly project reviews/closures, customer visits/reviews, get-together and picnicsfor successful project delivery celebrations.
Most of the recommendations and recognitions have been from customers, as a delightfeature during the year. Additionally, ESOPs have been offered to key performers duringthe year. Moreover, spot rewards are presented around the year for significant achievementor accomplishments talent references, customer wicked problems. Further there were quitehappy moments and cultural activities celebrating festivals, playing outdoor games likeCricket, Badminton, Swimming and indoor games caroms, chess, etc.
Compensation and Benefits: The compensation structure post-recession driving theoverall mindset towards performance oriented in ensuring business growth, operationalexcellence and employee growth. The key feature during the year is that Company offeredESOPs to key performers. Additionally, maintaining the retrial, medical and otherbenefits,company car schemes which are at par with the industry. The key feature and thebenefit each employee enjoys at Onward is the wide variety of opportunities vertical,horizontal and lateral while aligning in individual change in aspirations. The managementhas invested in strengthening and providing global careers, Innovation based solutionprogrammes, entrepreneurial business management.
Employee Connect & Relations: Staying connected with employees is a passion atOnward. There are various efforts in order to encourage their involvement in variousinitiatives and decisions. Employees at Onward enjoy this status and voluntarily comeforward in enriching the employee satisfaction. We have a process where every employeegets opportunity to participate in any given area could be cultural, business, socialevents, Knowledge Portals, operational, employee referrals, customer referrals, etc. Thishas been possible due to quarterly mentor-mentee review process with cross functionalassessment, feedback exchange and realigns the aspirations and development road map. Fromthis, Onward capitalizes in building leaders in Business, Technology, Application,Function and Process for scale and sustain business growth.
Subsidiaries
The subsidiaries of your Company are as follows:
Onward eServices Ltd.
During the financial year the business operations of the Company has been satisfactoryand encouraging, maintained the steady revenue growth. During the year the Company hasinvested heavily on Manpower recruitments and trainings to align it with the businessrequirement which has helped the Company to increase its capabilties.
The Company has successfully scaled up its operations and made a positive progress interms of revenue growth by grabbing large size orders to be executed in the Financial Year2011-12.
Onward Technologies GmbH
The German & European region has been a very important & critical market forOnward business model. The Company today works with several large prominent companiesacross Europe which is all scaling up their global operations & investments inR&D.
The Management of the Company has taken the necessary decisions & investmentbudgets to scale up the operations and provide a dedicated focus to this region. TheCompany has recently appointed a dedicated Management/ Sales & Execution Teams,starting from April 2011 for the Europe region.
The Company expects the overall percentage of revenues from Germany & Europe regiongrowing substantially year on year for the next few years.
Onward Technologies, Inc.
North America continues to be the most important region for the Company globally. TheCompany continues to invest in this region & is focused on building a strong team andinfrastructure to continue the momentum & leverage the past investments.
During the year, the Company’s revenue grew by 29% and has recorded a quantumgrowth of 56% in profitability after tax for the Financial Year ended 31stMarch 2011.
Over the next 12 months, the Management Team plans to scale up its operations in NorthAmerica by strengthening the Management/ Sales/ Execution teams for both its line ofbusiness.
Shantmurli Holdings Pvt. Ltd.
During the year under review, the Company did not undertake any substantial activities.
As per Section 212 of the Companies Act, 1956, the Company is required to attach theDirectors‘ Report, Balance Sheet, and Profit & Loss Account of its subsidiaries.The Ministry of Corporate Affairs, Government of India vide its circular no. 2/2011 datedFebruary 8, 2011 has provided an exemption to companies from complying with Section 212,provided such companies publish the Audited consolidatedfinancialstatements in the AnnualReport. Accordingly, the Annual Report 2010 2011 contain the summary of financialstatements of our Company’s subsidiaries duly audited respective statutory auditors.Relevent information for each subsidiary has been disclosed in the consolidated balancesheet. Refer Notes on the Consolidated Balance Sheet and Profit and Loss Account (Noteno.19).
We hereby undertake that annual accounts of subsidiary companies and the relateddetailed information shall be made available to shareholders of holding and subsidiarycompanies seeking such information at any point of time. The Annual
Accounts of subsidiary companies shall kept for inspection by any shareholders in theregistered office of the Holding Company and of the subsidiary companies. We shall furnishthe hard copies of details of accounts of subsidiaries to any shareholder on demand withina reasonable period of time.
Share Capital
During the year the Share Capital of the Company was increased from Rs. 132,728,700 toRs. 133,200,700 by allotment of 47,200 new shares issued under ESOP Scheme. At present thepaid-up capital is Rs.133,200,700 divided into 13,320,070 Equity Shares of Rs.10 each.
Fixed Deposits
During the year under review, the Company had not invited or accepted any deposits fromthe Public.
Employee Stock Option Scheme
Your Company had implemented Employee Stock Option Scheme 2009 for the benefit ofEmployees of the Company and its subsidiaries. The aforesaid scheme was approved by theMembers of the Company at the Annual General Meeting held on 31st August, 2009 and thescheme is monitored under the guidance of the members of Compensation Committee of theBoard of Directors. The rational of implementation of new scheme was to attract, motivateand retain talented personnel with the Organisation for long time. The total number ofwarrants approved under the scheme for employees of the Company, independent directors andemployees of its subsidiaries are 875,000 with option to convert into 3,500,000 equityshares. The subsidiaries include Onward eServices Ltd., India, Onward Technologies, Inc.USA and Onward Technologies GmbH in Germany.
The Disclosures required to be made under SEBI (Employees Stock Option Scheme andEmployees Stock Purchase Scheme) Guidelines 1999, is given as Annexure to this reportincluding details on the grant, vesting, exercise, and lapsed options under the aforesaidESOP schemes.
An independent Director has been granted 2,500 options under the ESOP Scheme, 2009.
Auditors
M/s. Kirtane & Pandit, Chartered Accountants, Pune, Auditors of the Company, holdoffice until the conclusion of the ensuing Annual General Meeting. The Company hasreceived a letter from them to the effect that their re-appointment, if made, would bewithin the prescribed limits under Section 224(1-B) of the Companies Act, 1956.
The Auditor’s observations are self explanatory and need not be further commentedin this report.
Director’s Responsibility Statement
Pursuant to the requirements under Section 217 (2AA) of the Companies Act, 1956, withrespect to Directors’
Responsibility Statement, it is hereby confirmed that:
(a) in the preparation of the annual accounts for the financial year ended 31st March2011, the applicable accounting standards have been followed and that no materialdepartures have been made from the same, save to the extent, referred to in theAuditor’s Report;
(b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at 31st March 2011 and of the profitor loss of the Company for the year ended 31st March 2011;
(c) the Directors have taken proper and sufficientcare for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.
(d) the Directors have prepared the annual accounts for the financial year ended 31stMarch 2011 on a going concern basis.
Listing Information
The equity shares of the Company are listed on The Stock Exchange, Mumbai, and NationalStock Exchange of India Limited. The Company has initiated process of voluntary delistingof its equity shares from Ahmedabad Stock Exchange; however, the delisting approval fromthe exchange is awaited.
Corporate Governance
The Company has taken appropriate steps and measures to comply with all the applicableprovisions of the revised Clause 49 on Corporate Governance and Section 292A of theCompanies Act, 1956. A detailed report on Corporate
Governance along with a certificate of Statutory Auditors of the Company is attachedherewith as report.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo:
(i) Conservation of Energy:
The Company utilizes electricity for operation of computers and initiates all effortsto minimize the consumption. At all levels conservation of energy is stressed upon.Company also takes possible measures to reduce the consumption by deploying automation.
(ii) Technology Absorption: Research and Development
The IT and ITES Industry are subject to high rate of technological obsolesce. TheCompany is continuing its efforts to develop new software products with an eye to expandthe levels of automation in the industries its customers operate. The constant R&Defforts have delivered new versions and features for the existing products in all thesegments it works.
a) Specific Areas for R & D
The Company believes that technological obsolescence is a practical reality. It investsand encourages continuous innovation. Its R&D is always focused to provide uniquebenefits to our customers and other stakeholders by working both proactively (self-drivenresearch) and reactively (customer-driven research).
b) Benefits derived as a result of R&D effort
R & D activities taken up by the Company helps it to remain competitive.
c) Future Plans
Expansion of current activities by adding more R&D related activities inManufacturing and other Iinformation Technology applications, which have potential forcommercial applications.
(iii) Foreign Exchange Earnings and Outgo: (Standalone, India Operations)
| 2010 - 11 | 2009 - 10 |
| Foreign Exchange earnings | Rs. 2,284.19 Lac | Rs.1,954.98 Lac |
| Foreign Exchange outgo | Rs. 308.70 Lac | Rs. 371.62 Lac |
Employee Particulars
The particulars of employees as required to be disclosed in accordance with theprovisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies(Particulars of Employees) Rules, 1975, as amended, form part of this Directors’Report. However, as per the Provisions of Section 219 (1) (b) (iv) of the Companies Act,1956, the Report and the Accounts are being sent to all Members of the Company excludingthe aforesaid information. Any Members interested in obtaining such particulars may writeto the Company at its registered address.
Directors
Mr. Pradip Dubhashi and Mr. Harish Mehta shall retire by rotation and being eligibleoffer themselves for re-appointment. It was proposed to change the tenure ofre-appointment of Mr. Harish Mehta as the Chairman and Managing Director of the Companyfor a period of 5 years w.e.f. April 1, 2011 on revised terms and conditions as mentionedin the Notice of this Annual General Meeting.
Audit Committee
The present Audit Committee of the Board comprises of Mr. Pradip Dubhashi, Mr. ArunMeghani and Dr. Atul Wad. Mr. Pradip Dubhashi is the Chairman of the Committee.
Acknowledgements
Your Directors hereby put on record their sincere gratitude towards the continuedassistance and co-operation extended to the Company by its Customers, Stakeholders,Suppliers, Banks, Financial Institutions and various Government authorities towards thegrowth of the Company.
Your Directors also place on record their deep sense of appreciation for the dedicatedservices rendered by the employees of the Company.
| For and on behalf of the Board of Directors |
| Place: Mumbai | Harish Mehta |
| Date: May 16, 2011 | Chairman & Managing Director |
Disclosure required under SEBI (Employee Stock Option Plan) Guidelines, 1999
Annexure "A"
| Sr. No. | Description | ESOP 2009 | |
| | 2010 - 11 | 2009 - 10 |
| 1 | Total number of options under the Plan | 875,000 | 875,000 |
| 2 | Options granted during the year | 201,500 | 77,000 |
| 3 | Pricing formula | Rs.10 | Rs.10 |
| 4 | Options vested (as of March 31) | 19,250 | 0 |
| 5 | Options exercised during the year | 9,500 | 0 |
| 6 | Total number of shares arising as a result of exercise of Option (as of March 31) | 38,000 | 0 |
| 7 | Options lapsed | 28,950 | 0 |
| 8 | Variation of terms of options | vesting period shall commence on the expiry of one year from the date of grant of the options to the employees and could extend up to a period of four years from the said expiry of one year from the date of grant of options | Nil |
| 9 | Money realized by exercise of options during the year | 380,000 | 0 |
| 10 | Total number of options in force at the end of the year | 240,050 | 77,000 |
| 11 | Employee wise details of options granted to a) Senior Management during the year: | | |
| Mr. M.V.S.S. Narayanacharyulu | 25,000 | |
| Mr. Sudheendra Gumaste | 25,000 | |
| Mr. Sudhir Badamikar | 10,000 | |
| b) Employees holding 5% or more of the total number of options granted during the year | N.A. | N.A. |
| c) Identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued Capital (excluding outstanding warrants and conversions) of the Company at the time of grant | N.A. | N.A. |
| 12 | Diluted Earnings Per Share pursuant to issue of Shares on exercise of option calculated in accordance with International Accounting Standard (IAS) 33. (Rs.) | 2.66 | (2.73) |
Auditors’ Report on Employees’ Stock Option Scheme
We have examined the books of account and other relevant records of ONWARD TECHNOLOGIESLIMITED and based on the information and explanation given to us, certify that in ouropinion, the Company has implemented the Employees Stock Option Scheme in accordance withSEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999and the resolutions of the Company in the Annual General Meeting held on 31stAugust, 2009.
For Kirtane & Pandit
Chartered Accountants
(Firm Reg. No. 105215W)
Parag P. Pansare
Partner
Membership No.: 117309
Mumbai, May 16, 2011