etl infrastructure finance ltd Management discussions

ESKAY TELECOM LIMITED ANNUAL REPORT 2006-2007 MANAGEMENT DISCUSSION AND ANALYSIS REPORT World Economic Climate indicator remained at a high level in the recent past and is clearly above its long-term average. The global expansion was broad based in the first halt of 2006. with GDP crossing the 5 percent mark. thus indicating the emergence of a new phase. one :hat is more diversified with most regions meeting or exceeding expectations. Growth was particularly strong in the United States in the first quarter but declined due to an abrupt slow down in housing markets and rising fuel costs. Business sentiment in Asia was at an all time high with India and China continuing to contribute to the global growth momentum. Indian Economy - Overview Indias economy is on the fulcrum of an ever increasing growth curve. With positive indicators such as stable 8-9 percent annual growth. rising foreign exchange reserves of close to USS 180 million. a booming capital market with the popular Sensex index almost touching the magical 15,000 mark and the Government estimating FDI flow of USS 12 billion in this fiscal. it is easy to understand why India is a leading destination for foreign investments. Indian Economy witnessed vigorous growth during 2006-07 for the fourth year in succession. The advance estimates of Gross Domestic Product (GDP) for 2006-07 released Central Statistical Organisation (CSO) on February 7, 2007 places GDP growth in the current year at 9.2 percent. The revised estimate GDP growth released by CSO in May 2007 shows the economy grew an unprecedented 9.4% in 2006-07 arguably the highest to date in independent India. The acceleration in growth during 2006-07 was drawn by the continued momentum in the services and the manufacturing sector recording double digit growth. The manufacturing sector grew by 12.1 percent during April- February 2006-07 whereas service sector continued to be the key driver of economic activity for the first three quarters but there was a decline in the last quarter. Buoyed by the robust performance of the manufacturing sector, the countrys industrial production maintained double digit growth at 11% as recorded in February 2007. The overall macroeconomic fundamentals are robust, particularly with tangible progress towards fiscal consolidation and a strong balance of payments position. With an upsurge in investment. outlook is distinctly upbeat. Global Scenario of Real Estate Sector Although global private equity firms are currently capturing media headlines and industry publications, there are other factors just as significant that are driving changes in the global real estate capital market. Global mergers and cross border transactions of real estate companies have become the norm of the day. In Asia. the Chinese and Indian markets will perhaps be most exciting regions over the next several years. The increased flow of institutional funding into the sector will ensure that real estate value will continue to rise. Capital Market Scenario The primary capital market remained upbeat during 2006-07. The aggregate resource mobilisation in the market especially through Initial Public Offer (IPO) and Private Placements was much higher than the previous year. As many as 85 initial public offerings (IPOs) mobilised Rs.24.993 crores during 2006-07, 5% more than in the previous financial year, as investors responded excitedly to the equal issues,The mobilisation during 2006-07 could have been higher but for the two secondary market crashes. which forced a temporary shelving of IPOs. In the secondary markets the uptrend continued in 2006-07 after the first dull half. ln flows of Foreign Direct Investment (FDI) into India have increased significantly during the current financial year. Also. India has emerged as the most favored private equity destination attracting USS 1,239.22 million worth investments during the year. Equity Markets witnessed major swings during 2006-07. The BSE Sensex increased from 11,280 at end of March 2006 to the peak of 12,612 on May 10. 2006 after which it declined to an intra-year trough of 8,929 on June 14. 2006, whereas Nifty was at 3,419 on March 30, 2006 and reached an intra- year trough of 2,633 on June 14, 2006 after which it touched to an intra- year high of 4,224 on February 7, 2007. The market rebounded in subsequent months on institutional buying support, robust macro-economic fundamental, high corporate profitability and other global factors such as continuation of relatively soft interest rates and fall in crude oil prices in international markets. The Sensex rallied with intermittent corrections to reach a high of 14,652 on February 8, 2007 but subsequently moderated to 13,072 by end of March 2007. Internal Control System The Company has installed an adequate system of internal controls in all spheres of its activity. This is to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposition and that the transactions are authorised, recorded and reported diligently. The internal control is supplemented by an effective internal audit being carried. out by an external firm of Chartered Accountants. The management regularly reviews the findings of these internal auditors and takes appropriate steps to implement the suggestions and observations made by them. Outlook Global economic growth is expected to moderate to 4.9% in 2007-2008 after scaling 5.4% in 2006 as stated by IMF in its latest World Economic Outlook. Emerging markets and developing countries are expected to continue to grow strongly. albeit at a somewhat slower pace than in 2006. Indian economy will grow at a relatively sluggish 7.8% pace in 2008 as stated by IMF and WEO in their reports. In line with developments in the major markets. emerging equity, markets it Asia have continued to recover from the May-June sell-off. The markets which suffered the largest losses have more than recouped earlier losses. Financial and Operational Performance. Please refer Directors Report on the performance review. DISCLAIMER The information and opinion expressed in this section of the Annual Report may contain certain statements. which the management believes are true to the best of its knowledge at the time of its preparation. The Company and the Management shall not be held liable for any loss. which may arise as a result of any action taken on the basis of the information contained herein. On behalf of the Board of Directors Place: Kolkata (Dilip Kumar Agrawal) Dated: 30th June, 2007 Managing Director