MANAGEMENT DISCUSSION AND ANALYSIS
Industry overview and Glodyne Businesses
In todays world, change is truly a constant. This is probably true of all facets of
human and business life. In the Glodyne world, we are reminded of this everyday, every
hour. All of our markets and businesses are undergoing constant change- throwing new
challenges, opening up new opportunities.
IT is a big enabler of change. This is true for businesses, government, and rapidly,
even consumer markets. On one hand, innovation continues to drive the frontier and push
boundaries of what is possible. On the other, even conservative customers like government,
banking and education are beginning to integrate these new technology offerings and
enhance the experience of their beneiciaries. At Glodyne, we recognize the business
opportunity behind the changing environment which is really in helping our clients better
serve their beneiciaries using IT strategically and cost effectively. Much of the
direction of work at Glodyne is driven with these guiding principles. Building IT platform
based solutions allows us to meet these seemingly diverse objective. The markets Glodyne
addresses are particularly dynamic-E-governance, inancial inclusion, education,
Infrastructure managed services. Here is a synopsis of each of the businesses and an
analysis of the market context under which we operate.
Financial Inclusion
Market Environment: The Reserve Bank of India (RBI) wants to include every Indian to
the countrys banking and inancial system. Reserve Bank of Indias vision for 2020 is to
open nearly 600 million new customers accounts and service them through a variety of
channels. The government provides full support to this program because lack of inancial
inclusion results in lost growth opportunities, inadequate utilization of resources,
exclusion of people from mainstream society and loss of control on cash from government
programs
RBI provided clear mandate to banks to expand their base to the inancially excluded
sections of the society and provided them explicit targets in year 2011-12. Banks and
their Business Correspondents, in turn made aggressive efforts to provide banking
touch-points at each of the 72,721 uncovered villages with a population above 2,000 by the
end of this fiscal. These efforts under the "Swabhimaan Campaign" were to be
extended to habitations with population of more than 1,000 in north eastern and hilly
states.
Glodyne View: In Glodynes view, the implementation challenges in achieving true state
of inancial inclusion are signiicant. The biggest challenge banks and service provides are
facing has been high levels of inactivity in the accounts. Estimates suggest more than 81%
of accounts opened with the intent of delivering wholesome inancial services have not been
active. The remaining 19% accounts have been active on account of government payments
under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), , Indira
Awaas Yojana and other programmes. Glodynes focus has been on the latter 19% of the
accounts. In a path breaking move, Glodyne is now working towards a much broader inancial
inclusion program by collaborating with the Maharashtra government and several banks to
make wage payment through the banking channel as a part of the Mahashramm project. Dialog
is underway several other states to achieve similar outcomes. Having dabbled in
accomplishing inancial inclusion through not-for-proit or social motivations, many in the
industry now understand that sustainability and commercial viability need to go together.
We believe that despite unprecedented efforts to augment access to inancial services
meaningfully, the full potential is yet to be realised. We are currently working with
banks, regulators and governments at various levels in this nascent and fragile sector to
take inancial inclusion to the next level.
E Governance
Market Environment: E-Governance in India has evolved from computerization of
Government Departments to initiatives that encapsulate the iner points of Governance, such
as citizen centricity, service orientation and transparency. Lessons from previous
e-Governance initiatives have played an important role in shaping the progressive
e-Governance strategy of the country. This approach has the potential of enabling huge
savings in costs through sharing of core and support infrastructure, enabling
interoperability through standards, and of presenting a seamless view of Government to
citizens. The National e-Governance Plan (NeGP), takes a view of e-Governance initiatives
across the country.
The National E-Governance plan created by the Government of India in 2006 outlines 27
Mission Mode Programs driven by Central and state governments, with some programs
involving joint execution by the central and state governments
Glodyne View: In our view, the progression towards higher impact e governance is
evident. The intent exists and plans are drawn up. However, we remain selective and
cautious on this sector because of the execution challenges in an undertaking of this
massive a scale. Some examples of the challenges we see are:
1. Achieving cross talk and synergies between the 27 mission mode programs
2. Proper understanding of the citizen lifecycle at the ield level
3. Envisaging major process reform, not just minor reengineering in systems and
procedures.
4. Keeping pace with trends even as technological projects are executed such as mobile,
grid and cloud technologies
We selectively focus on projects to maximize shareholder value in the immediate term
and strategically position us for recurring revenue streams over longer term
Our work in E-shakti project has won a large number of awards as a model E governance
project by several independent agencies. To execute this project, Glodyne put together a
complex set of technologies and processes. This resulted in MNREGS projects across various
villages getting managed and tracked using a sophisticated system of biometric
authentication, smart cards, hand held devices and automated payment to the beneiciaries
using linkages with inancial inclusion. Governments are getting excited about the
potential of such an automation since it can go much beyond managing one program to
creating a platform to signiicantly enhance the citizen services governance in general eg
healthcare, direct subsidy transfer, education etc.
Glodyne also bagged a long term contract with the Government of Maharashtra to
transform labor management in the state. This program, called Mahashramm, brings together
technology, process re-engineering and banking channels for the labor force in the state
of Maharashtra and allows the government a much greater visibility and transparency in
their ability to enforce labor laws for the greater good of the public.
Infrastructure Managed Services
Market Environment: Global IMS Industry has a long legacy but a few years back, this
Industry took a revolutionary turn for our country. Towards a cost reduction pursuit,
global organizations started looking for low-cost, high-quality alternatives, and they
sought global delivery models to achieve these goals. What began as a set of initial
experiments has today become a tried and tested approach to managing costs. As per a
recent Report by NASSCOm-McKinsey titled Remote Infrastructure Management Services:
Igniting Indias leadership (2008), globally, the RIM industry is expected to achieve a
penetration of 25 to 27 per cent by 2013, a US$20 billion to US$21 billion increase over
the revenues of about US$6 billion to US$7 billion today. The Report goes on to state that
with Global CIOs continued comfort with India as "primary" offshore
destination, the country will capture greater than 50 per cent of the world market i.e.,
US$13 billion to US$15 billion in revenue by 2013, which would create 325,000 to 375,000
jobs.
Recent surveys of over 140 CIOs by McKinsey & Company suggest that, as customer
environments mature, they are more likely to adopt Remote Infrastructure Management. While
18 per cent of CIOs surveyed have offshored some part of infrastructure management, an
additional 7 per cent plan to offshore in the next three years while a further 15 per cent
plan to offshore, though without a specific timeline. Drivers for this are fairly
straightforward- the classic benefit versus costs story : CIOs experience a reduction of
almost 25 per cent in their IT infrastructure budget. They are also getting better
service, quality and, sometimes significant transformational value from their Indian
Remote Infrastructure Management partners.
Glodyne View: For India to realize the full potential of the RIM opportunity, companies
must, in an organized way address several success factors including standardizing delivery
models to achieve process sophistication and maturity, enhance operational excellence to
match global peers by investing in tools, methodologies, efficient processes and enhance
sales and marketing capabilities. Decision One provided a unique opportunity to Glodyne to
access and participate in the global market. In the past year, Glodyne successfully
integrated the Decision One organization in the global organization structure. This
allowed us to create a global delivery structure and invest in the aforementioned success
factors across all our delivery channels : onsite and offshore
The US market continues to rapidly evolve. The industry is seeing consolidation and
mature pricing mechanisms. These trends are being observed across the centralized and
decentralized computing environments. Cost efficient platforms, marketing savvy and
continuous innovation remain key to success in this environment. These have remained
primary areas strategic areas for Glodyne and we are already seeing fruits of clear
strategic focus in terms of client retention, new client acquisitions and rising
profitability from the operations
Other sectors: Amongst other sectors, Glodyne continues to invest in Education
sector- a USD 43BB market, growing at 13% annually. Our focus in the education space has
been to
a) continue to penetrate in new and diverse sets of schools and colleges
b) Strengthen our base within existing customer sets with additional content based
offerings
This approach has proven to be highly rewarding. We expect this trend to continue in
the coming years
Review of financial and operating performance
During the financial year ending March 2012, the Company revenues grew by 63.07% to Rs.
161247.06 Lakhs and profit after tax by 78.31% to 25704.84 Lakhs. Over the last 3 years we
have grown our revenues at the CAGR of 50.10%.
1. Authorized share capital: The Company has an authorized share capital of Rs.
5910 Lakhs comprising Rs. 900 Lakhs equity shares of Rs.6/- each and 85 Lakhs preference
shares of Rs. 6/- each as of March 31, 2012.
2. Paid up share capital: The Company has a paid-up capital of Rs. 2699.59 Lakhs as
on 31st March 2012. During the year the company has allotted 10 Lakhs equity shares of Rs.
6/- each as preferential shares and further the company has also allotted 167930 equity
shares of Rs. 6/- each on exercise of ESOP by employees.
3. Equity shares: The Company has instituted various Employee Stock Option Plans
(ESOP). These options vest over a specified period subject to employee fulfilling certain
conditions. Upon vesting the employees are eligible to apply and secure allotment of the
Companys equity shares at a price determined on the date of the grant of options. During
the year eligible employees were allotted on exercise of the options under various
Employee Stock Option Plans instituted by the Company.
4. Reserves and Surplus: The Reserves and Surplus stood at Rs. 78862.79 Lakhs,
increase in Reserves and Surplus due to plough back of maximum profits and increase in
securities premium by Rs. 4,358.21 Lakhs.
5. Secured Loan: Secured Loans have increased by Rs. 16743.78 Lakhs primarily due
to ECB Loan for Capital Expenditure and increase in working capital facilities from banks
to meet growing business needs.
6. Fixed Assets: Additions to fixed assets is primarily on account of Capital
Expenditure incurred for various E-governence/Financial inclusion projects, further
company has invested Rs. 21917.30 Lakhs mainly in technology assets.
BUSINESS ANALYSIS
Glodyne is primarily in the business of technology infrastructure management services,
focused on optimizing the operational expense of our clients, a core expense they cant do
away with unlike other capex intensive initiatives which could go slow in case of a
slowdown.
> Geographical Presence: In 2011-2012, the company has presence in India and
United States of America. The company is headquartered in Mumbai, India with sales and
support presence across India and US. The North America operations are headquartered at
Philadelphia which ensures support and sales across N. America.
> Sector presence: The company services across ten sectors Government/PSU,
IT/ITES, BFSI, Manufacturing, Retail, Media, Telecom, Education, Travel and Healthcare
across India and North America.
> Mergers and acquisition: In the year 2011 - 2012, the company initiated the
acquisition of Comat Technologies. Comat is a specialist e-governance management services
company, which has implemented strong solutions in the Food and Civil Supplies and UID
implementation across states in the Country.
Through the acquisition the company has been able to enhance its project implementation
expertise as it provides a strong back ward integration strategy for the Company.
> Awards and Recognition: During the year under review, your Company was awarded
with the following Awards:
• Best Under a Billion 2011 award for the year by Forbes Asia
• Outstanding Entrepreneurship Award awarded to Mr. Annand Sarnaaik at the The
Asia Pacific Entrepreneurship Awards 2011
• E-Shakti project of Glodyne was adjudged as the winner at EDGE awards at
INTEROP 2011.
• E-Shakti was declared as the best ICT initiative in the Country at the PC
Quest 2011 Awards
• Glodyne was chosen as the best "Best Government to Citizen Initiative"
Company at the E-World Awards 2011
• Glodyne Education Managed Services was announced as the winner at "World
Education Award 2011"
• Glodyne received Asias Best Employer Brand Award 2011 under the categories of
Best Employer Brand -Talent Management and in the Continuous Innovation at HR Strategy
• Ranked as one of the top performing mid sized companies by Inc India
• Winner at the Deloitte Technology Fast 500 AsiaPac Program 2011 and Deloitte
Technology Fast 50 India Program 2011
> Geographic Mix: For the year, about 64% of the Glodyne revenues were from the
domestic market. The balance 36% of revenues comes from the North America where the
company has presence through its subsidiaries.
Opportunities and risks
Opportunities
1. Our India businesses stand at an important juncture where we have gained adequate
foothold on some of the most crucial sectors of the Indian economy. Owing to the market
growth, these sectors: Education, E-governance are termed as sunrise sectors of the
economy. Our success depends on our ability to expand our scale of operations to execute
on our customer contracts and promises
2. Our US business has significant growth potential both from a revenue and
profitability standpoint. The long standing presence of the Decision One entity provides
us with strong credibility and access to important customer base in US and North American
markets. Our success depends on our ability to leverage our scale in US to global markets,
expand our service offerings and continuously invest in optimizing our delivery platform
3. Overall, the global Glodyne corporation is in a strong position to capitalize on the
opportunities created by market trends and acquisitions. To prepare for such
opportunities, the corporation will invest significantly in making its processes and
capabilities robust in each of the focus areas. Examples of such investments include:
a. Refinement of our global planning and performance management processes and systems
that will provide detailed view on financial and operational metrics in the organization
b. Enhancement of our global incentive and long term pay management system to extend
the performance pay platform to the global organization for better executive and
organizational alignment to corporate objectives
c. Launch of leadership development and people development initiatives to develop
pipeline of leaders in the organization
Risks
In an economically uncertain global environment, several risks can arise. Also, large
scale project execution can result in operational risks. Glodyne is well aware of these
risks and several others that a complex business like ours can face. We have taken several
steps to address these risks
1. Strategic and competitive risks: Significant shifts in industry trends,
consolidations and changes in customer preferences can result in strategic risks. Some
aspects of our business especially the IMS tends to be highly competitive. Changes in the
competitive posture including service offerings, price points and relationships can result
in business risks. These risks are mitigated by way of customer level analysis, planning
and risk adjustments in the forecasting process
2. Operational and Execution Risks: Our success in meeting our revenue guidance has a
high degree of dependency on our ability to execute against large scale customer
contracts. Any large scale implementation effort with complex interdependencies can have
operational risks associated with it. These risks are very well recognized within the
Glodyne environment and a significant amount of effort is expended in business and
operational planning for each project. Each project has its own financial and operational
metrics that are planned, linked to performance measures in form of explicit targets and
reviewed on a weekly basis. Projects roll up into Revenue Business Units, headed by a
seasoned executive. The Revenue Business Units are supported by Shared Services Units that
carry deep areas of expertise on subjects like IT, Software, procurement, vendor
management etc. The company employs a large number of six sigma black belts and process
experts to ensure our processes are built and managed by strong, capable people.
3. Security Risks: Glodyne teams often work in remote places and handle sensitive data
collection and management work. The security vulnerabilities in such situations can be
physical or information related. Our IT Shared Services Unit oversees the security aspects
of our projects to ensure that the physical access to our premises is tightly controlled
using the same biometric authentication that we provide as a service to our clients on
several of our projects; the information security is managed using a series of very
stringent guidelines and toolsets that govern the usage of data. To address any disasters,
a business continuity plan is drawn up and executed by the IT SSU based on the
requirements of each project.
4. Macroeconomic/Policy risks: Our business is affected by the global macro economic
environment and has a degree of dependency on public policies especially in the Indian
context. These global risks manifest themselves in the growth expectations of our North
American business at a strategic level and, the foreign exchange fluctuations that can
occur from time to time at a tactical level. Our forecasting and risk mitigation processes
these uncertainties into account by risk adjusting the forecasts and by hedging against
the fluctuations.
The risks arising out of the public policy changes or political realignment pertain to
the domestic market. While some degree of risk is inherent when doing signiicant volumes
of e-governance business, a large portion of the risk is mitigated by appropriate
selection of the programs. Glodyne participates in relatively few of the government
mandated mission mode programs that have lesser political risks than others, owing to
their maturity and impact on a large portion of the population.
5. Foreign Exchange: The company has part of its business coming from the US geography.
Huge fluctuations in the currency exchange rate could affect the companys onsite
business.
The company has a defined policy for managing its foreign exchange exposure. The
company tracks the foreign exchange markets closely and takes appropriate hedging
decisions from time to time. With the remote delivery which mainly addresses the export
market, the company also has a natural hedge to a limited extent.
Outlook: The management is focused to build the company into a leader in the global
technology IMS market. With the IMS industry opening up huge opportunity for Indian
companies, Glodyne is focused on capitalizing on the same by providing high quality
services to global clients through a robust onsite- remote delivery model. The company
would continue to grow its client base and client share with special focus on the
DecisionOne clients as they have an appetite for IMS off shoring and for geographic
de-risking. The company has built a strong execution base in the Indian market and it
envisions huge market creating opportunities in India in the Government, Banking and
Education sectors. The education managed services, e-governance managed services, inancial
inclusion services, and onsite- remote IMS services will be key growth driver for the
company in the future. Keeping in view the potentials of the projects in hand, credentials
in the domestic market and the companys expertise in the focused area, the outlook
remains to be positive.
The acquisition of DecisionOne enabled Glodyne to add fortune 100 client base, long
entrenched relationships, and a business where there were huge opportunities to work on
cost optimization and revenue expansion plans. The various integration plans were prepared
but the implementation of the same was delayed by 15 months due to unavailability of
Working Capital at DecisionOne. During this entire period Glodyne India supported the US
operations and with the planned Capex and Opex for projects in India, it created a
temporary difficult situation for the Company. The team has been working relentlessly to
bridge the gap and is conident of getting through the current situation in the near
future. The Company has now re-calibrated its plans and is on course to achieve what was
planned for the geography.
INTERNAL CONTROLS AND ITS ADEQUACY: Glodyne places a huge emphasis on fostering a
culture of teamwork and intends to allow people within the company to realize human
potential. The company has built a unique work environment that brings together talent
from multiple backgrounds and skills sets to work together and feel a sense of belonging
to the team. The success of this can be judged from the low level of attrition that the
company has been able to maintain and the stability in its senior and middle management
teams.
The company had identiied the key risks and control process to mitigate the same. The
company has been partnering with various clients for implementing large projects in the
country. To ensure support the growth and expanded services, the internal organization
re-alignment program which was initiated last year would provide long term beneits. In
addition, the leadership alignment program LEAP which is focused on identiication and
grooming of future Glodyne leaders is been regularly conducted.The company is continuously
upgrading its internal control systems by measuring state of controls at various
locations. Controls in the management system have been strengthened with help of review
conducted by the formation of corporate audit team. The team ensures regular reviewing of
inancial and risk management policies, signiicant audit indings, the adequacy of internal
controls and compliance with the accounting standards.
The Company also started a key employee support program to facilitate them with
work-life balance. There are counselors who support the ones who need any kind of support
through online, over telephone or one-one medium. For the female team members there were
special scheme launched like leadership development, support group for expecting mothers,
generating health awareness, etc. Also, Glodyne Care Foundations flagship program Nanhe
Kadam, which is a unique employee engagement program in the area of childrens education
and health has spread across three states now, an is growing stronger day by day.
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