k r m international ltd Management discussions

KRM INTERNATIONAL LIMITED ANNUAL REPORT 2005-2006 MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL AND OPERATIONAL PERFORMANCE The business continued to face pressure in 2005-06, both on top line and profitability as in the previous year. In spite of our sincere efforts to reduce the burn rate did not yield any material returns. The Gross receipts during the year were Rs. 871.76 lakhs (Previous Year Rs. 1240.51 lakhs) as against a total expenditure of Rs. 905.86 (Previous Year Rs. 1479.41 lakhs) resulting in loss of Rs. 340.26 Lakhs (Previous Year Rs. 221.87 lakhs) before Tax. The market situation during the year was not encouraging and continued to remain sluggish, which is the major factor for the huge losses during the year; During the year, the company has implemented re-structuring entailing disposal of surplus assets and clearance of dues to institutions/banks. Company has already settled with IDBI & UCO Bank under OTS scheme approved by them. Similarly, Company is in advance stage of negotiations with other institution/bank and hope to settle their accounts on or before 31.3.2007. QUALITY MANAGEMENT The Company has conscientiously monitored and managed its existing qualities in the process of developmental works related to software segment. However, as the business during the year was not quite substantial in terms of quantity or price, no major expenditure has been incurred by your Company in the direction of quality management. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY Your Company has a proper and adequate system of internal control to ensure that the financial and other records are reliable, the assets and properties are safeguarded and protected against loss from unauthorized use or disposition and that transactions are authorized, recorded and reported correctly. Efficiency, effectiveness, accuracy and reliability are the key drivers. All purchases and expenses are guided by formal approval mechanism. Also, dual control, segregation and access restrictions of all these items are given high importance. The internal control system is supplemented by extensive programme of internal audits, review by management and documented policies, guidelines and procedures. The internal control is designed to ensure that the financial and other records are reliable for preparing financial statements and other data and for maintaining accountability of assets. All purchases and expenses are guided by formal approval mechanisms. Officials are designated for approval upto specified limits to have automatic and efficient cost control process. Your Company also has an Audit Committee. The Audit Committee reviews adequacy of internal control systems and the Internal Audit Reports and compliance thereof. The Committee reviews the internal control system and conduct of internal audits during the year. INTERNAL AUDIT SYSTEM As regards paragraph 7, in respect of absence of Internal Audit System, your Directors wish to state that there are necessary internal control procedures prevailing within the Company as already covered elsewhere in this Report, and further, considering the volume and nature of transactions carried out, your Directors feel that the present systems and procedures are self-sufficient for exercising proper controls. CAUTIONARY STATEMENT The statements made above describing the Companys projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied.