MANAGEMENT DISCUSSION AND ANALYSIS
A. INDUSTRY STRUCTURE AND DEVELOPMENTS
Changing economic and business conditions, rapid technological innovation,
proliferation of the Internet, and globalization are creating an increasingly competitive
market environment that is driving corporations to transform the manner in which they
The role of technology has evolved from supporting corporations to transforming them
The ability to design, develop, implement and maintain advanced technology platforms and
solutions to address business and client needs has become a competitive advantage and a
priority for corporations worldwide.
There is an increasing need for highly skilled technology professionals in the markets
in which we operate At the same time, corporations are reluctant to expand their internal
IT departments and increase costs. These factors have increased corporations' reliance on
their outsourced technology service providers and are expected to continue to drive future
growth for outsourced technology services.
Increasing trend towards offshore technology services Outsourcing the development,
management and ongoing maintenance of technology platforms and solutions has become
increasingly important. Companies are increasingly turning to offshore technology service
providers to meet their need for high quality, cost competitive technology solutions.
B. OPPORTUNITIES, THREATS
According to a fact sheet published by NASSCOM in February 2009, broad-based growth
across all the segments of IT services, BPO, Software products and engineering services,
is reinforcing India's leadership as the key sourcing location for a wide range of
technology related services
According to NASSCOM Strategic Review Report 2009, IDC forecasts a cumulative annual
growth rate (CAGR) of over 6 21% in worldwide IT services and IT enabled services
(IT-ITeS) spending and a CAGR of over 18.79% in offshore IT spending, for the period
2007-12. The combined market for Indian IT-ITeS exports in fiscal 2009 was nearly $60
There are several key factors contributing to the growth of IT and IT-enabled services
(ITeS) in India and by Indian companies
• India has a large and highly skilled English-speaking resource pool. According
to NASSCOM Strategic Review 2009 large and growing pool of skilled professionals has been
a key driver of the rapid growth in the Indian IT-ITeS sector and that India accounts for
over 28% of the total suitable talent pool available across all the potential global
• Outsourcing of IT and ITeS requirements to India offers significant cost
advantages in terms of accessing highly skilled talent at lower cost The NASSCOM Strategic
Review 2009 indicates that companies experience cost savings of around 60-70% by
outsourcing to India as compared to their source locations and suggests that cost
advantage is sustainable over the long-term.
• India-based companies have proven their ability to deliver high quality
services. According to NASSCOM Strategic Review Report 2009, India based companies have
earned more quality certifications than any other country.
India is also a leading destination for IT enabled services. According to NASSCOM
Strategic Review Report 2009, the worldwide BPO market is expected to touch $181 billion
by 2012, representing a compounded annual growth rate, or CAGR, of 11.9%.
C. RISKS AND CONCERNS
The risks and uncertainties include, but are not limited to, risks and uncertainties
regarding fluctuations in earnings and exchange rates, the company's ability to manage
growth, intense competition in IT services including those factors which may affect our
cost advantage, wage increases in India, increased training and resource cost, our ability
to attract and retain highly, skilled professionals, increasing customer expectation, time
and cost overruns on fixed price contracts, client concentration, restrictions on
immigration, our ability to manage our international marketing & sales operations,
reduced demand for technology in our key focus areas, disruptions in telecommunication
networks, liability for damages on our service contracts & product warranty, the
success of the companies in which the Company has made strategic investments, withdrawal
of governmental fiscal incentives, political instability, legal restrictions on acquiring
companies outside India, and unauthorized use of our and our customers' intellectual
property, the latter when in our possession as well as general economic conditions
affecting our industry.
Due to the continued uncertainty and global economic conditions, companies continue to
seek to outsource IT spending to offshore IT service providers as also to reduce costs by
outsourcing their business processes to offshore service providers with a proven track
record. Management believes that this has contributed to continued growth in the Group's
revenues. Looking ahead into 2008-09, the Group expects to continue to grow in
consolidated revenues and profits inspite of the economic crisis and recession around the
E. SEGMENT-WISE PERFORMANCE
As of March 31, 2009 our reportable segments, were Software Development & Services
(comprising of IT and IT enabled services) and Product / Hardware Sales & Services.
Out of the total turnover, the Software Development & Services segment generated a
revenue of Rs.430.88 lakhs (previous year Rs 387.97 lakhs) and the Product Sales
&Services segment contributed to the tune of Rs. 376.08 lakhs (previous year Rs.332.27
lakhs). This is in tune with the consistent focus of the management, wherein it is laying
more thrust on IT enabled services, which is the niche area of the Company.
F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The internal control systems adopted by the Company are adequate and appropriate to its
operations. The system has been designed to ensure that assets and interest of the Company
are protected and dependability of accounting data and its accuracy are ensured with
proper checks and balances.
The Company has internal audit to examine and evaluate the adequacy and effectiveness
of Internal Control System. The internal audit ensures that the systems designed and
implemented, provides adequate internal control commensurate with the size and operations
of the Company.
The Audit Committee of the Company consisting of non-executive independent directors
periodically reviews and commends the quarterly, half yearly and annual financial
statements of the Company. A detailed note on the functioning of the audit committee forms
part of the chapter on Corporate Governance in this Annual Report.
G. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.
1. Authorized Share Capital
The Company has an authorised share capital of Rs. 800 lakhs comprising 80 lakh equity
shares of Rs. 10/- each as of March 31, 2009.
2. Paid up Share Capital
The Company has a paid-up capital of Rs.703.80 lakhs comprising 70.38 lakhs equity
shares of Rs. 10/- each as of March 31, 2009.
3. Secured Loan
During the Financial Year 2008-2009, the secured loans of the company decreased from
Rs.22,63,330 to Rs. 16,56,943 primarily due to loans repayments.
4. Fixed Assets
During the year, the Company has invested Rs. 171.47 lakhs on Fixed Assets (Softwares,
Computers & Peripherals and Office equipment)
Inventories of the company comprises of computers and spares of IT Products. During the
financial year, Inventories of the company stood at Rs. 4.28 lakhs as compared to Rs.2.93
lakhs for the previous financial year.
6. Sundry Debtors
Sundry Debtors for the current year stood at Rs. 194.08 lakhs as against Rs. 154.74
lakhs for the previous year.
7. Cash and Bank balances
During the financial year, Cash and Bank balances decreased and stood at Rs.62.52 lakhs
as against Rs. 100.81 lakhs for the previous financial year.
During the Financial year 2008-2009, the total income stood at Rs.826.39 lakhs as
compared to Rs.726.54 lakhs for the previous financial year 2007-2008, and exhibited a
growth rate of 13.74%.Out of the above income, Rs.430.88 lakhs relates to Software
Development & Services (Previous Year 387.97 lakhs),showing a growth rate of 11.06%
and Rs. 375.98 lakhs relate to Product/Hardware sales & services (previous year Rs.
332.27lakhs) showing a growth rate of 13.15%.
H. HUMAN RESOURCES
People are considered to be the key resource for the success of the organization in the
long run. The Company is committed to provide a favorable work environment to its
employees along with balanced compensation package. In this pursuit the Company provides
series of training & development programs on various subjects to retain talent and to
facilitate empowerment amongst employees
The Company also keeps an eye on the attrition levels and draws up appropriate plans to
ensure the employees at all levels find an environment that encourages performance and
transparency in performance appraisal. No. of employees as of March 31, 2009:126.