powersoft global solutions ltd Directors report

POWERSOFT GLOBAL SOLUTIONS LIMITED ANNUAL REPORT 2009-2010 DIRECTORS REPORT Dear Shareholders, Your Directors take pleasure in presenting the Seventeenth Annual Report together with the Audited Accounts of your Company for the Financial Period ended March 31, 2010. FINANCIAL RESULTS Your Companys operating performance for the period ended March 31, 2010 as compared to the previous financial period ended December 31, 2008, is summarized below. The current financial period as well as previous financial period is of fifteen months. Particulars Powersoft Global Solutions Powersoft Global Limited-Group (Consolidated) Solutions Limited (Standalone) 2009-10 2007-08 2009-10 2007-08 Operating Income 4479.63 2359.94 1432.52 1974.55 Total Expenditure 3698.38 1740.80 1148.07 1437.74 Profit Before Depreciation 781.25 619.14 284.45 536.81 Less: Depreciation 220.51 130.77 155.04 120.08 Profit Before Tax 560.74 488.37 129.41 416.73 Less: Provision for Income Tax including Deferred Tax Liability 113.17 162.56 40.19 132.08 Profit After Tax 447.57 325.81 89.22 284.65 Surplus Carried to Balance Sheet 447.57 325.81 89.22 284.65 Management Discussion & analysis: Industry Development: The fiscal year 2009-10 can be described as a year of economic turbulence. The mortgage and financial crisis took over the global economy, followed by unemployment, declining GDP and a weakened demand environment. The global IT industry was also affected adversely by this turmoil. Keeping this in mind, the Indian global sourcing industry is expected to reach $ 175 bn in revenues by 2020. This will imply a slightly lower CAGR of 13% and a decline in Indias share of global market from 51% to 40% in 2020. The India share decline may be reduced if substantial efforts are made to reform education, enhance capacity, improve the business environment, and reduce risks. The clients are looking to their Indian IT service providers, not only to reduce costs, but also to partner with them in these difficult times. Looking beyond labor cost arbitrage benefits, they are seeking transformative offerings with a stronger business case. The vendors are also making focused investments in capability building across domains, processes, and technologies to deliver enhanced value propositions to their customers. The Indian IT industry as whole is looking to diversify beyond its key offerings and markets, and has been defining new business and pricing models in order to ensure continued growth in revenues and net profitability. At the same time, we are witnessing rapidly changing. customer demands and expectations. Customers are also maintaining a cautious approach while spending money on their IT requirements which has resulted in drastically reduced technology related spending Our Business Your company operates in the following key disciplines: The companys RFID division delivers solutions that match real-time supply and demand to minimize waste and loss of productivity and maximize safety and security across the global supply chain. Our breakthrough wireless technology assures delivery of goods and services at the right time, right amount, right place, right cost and right quality. Our GIS division works with customers across the geospatial technology lifecycle. We help customers use geospatial technology to improve the way they do business. This division provide consulting, system design and solution architecting, application development, system implementation and integration to a global list of clients. For instance, we design, develop and integrate applications that enable utilities and telcos to optimize their network planning and provisioning, increase operational efficiency and enhance customer service quality. Our Engineering Services division represents more than four decades of knowledge, expertise and project management Skills. The broad range of experiences and knowledge we have provides us with an opportunity to help our customers transform their businesses - and all of these at cost effective prices. Our capabilities include: Computer Aided Design, Product Design, Conceptual design, component design, assembly design, Interference checks and tolerance analysis for components and assemblies, and 3D Modeling. Operations Review Considering the turbulent business situation, your Company has achieved stellar growth for the financial year ended March 31, 2010. Total revenues of the Company grew to Rs. 4479.63 lakhs for 15 months period ended March 31, 2010 as compared to Rs. 2359.94 lakhs for 15 months period ended December 31, 2008, a growth of 90%. Total net profit of the Company grew to Rs. 447.58 lakhs for 15 months period ended March 31, 2010 as compared to Rs. 325.81 lakhs for 15 months period ended December 31, 2008, a growth of 37%. In summary, all areas of the company recorded above average growth. All this has been due to our resolve to face the unfavorable business conditions with a strong business strategy and sharp focus on profitability, ensuring us such high growth rates. This past year, we have remained focused on retaining existing customers, increasing average revenue per engagement, reducing operational costs, and increasing client profitability. By improving internal business processes, investing in extensive training for our people, and investing in systems infrastructure, we have managed to reduce per employee cost as well as significantly increased average employee productivity. Your Company at the same time remained cautious with its capital expenditures to ensure optimum balance of profitability and liquidity. Subsidiary Companies The Consolidated Results includes Powersoft Global Solutions Limited and its Subsidiaries RFID Global Solutions Private Limited, PGSL Holdings Private Limited, Exclusive Luxury Group (India) Private Limited & Youngstars Media Private Limited. The accounts of the said subsidiary companies have not been attached with this Annual Report. As per the provisions of Section 212 of the Companies Act, 1956 (hereinafter referred to as the Act), your Company is required to attach the Directors Report, Balance Sheet, Profit and Loss Account and other information of the subsidiaries to its Balance sheet. Your Directors believe that the audited consolidated accounts present a full and fair picture of the state of affairs and financial conditions of the Company and its subsidiaries, as is done globally. Your Company had applied for an approval under Section 212(8) of the Companies Act, 1956 from the Department of Company Affairs, Ministry of Finance seeking exemption from attaching the Accounts of subsidiary companies with the Annual Report of Powersoft Global Solutions Limited and to provide the accounts in the same manner as certified by overseas auditors where the subsidiary is situated. The statement as required under Section 212 has been prepared on the assumption that the Company would receive the approval and the same is given as part of the consolidated accounts in the report. The consolidated financial statements of the subsidiaries duly audited are presented along with the accounts of your Company. The annual accounts of subsidiary companies are kept at the Companys registered office and also at the respective registered office of the subsidiaries for inspection and shall be made available to the members seeking such information. Technology and Quality Focus In todays world, technology is witnessing rapid change. Since our customers expect us to lead them through such change, we proactively & continuously invest in developing technology building blocks and solution frameworks which add value to our customers business. Your Company uses a multi-pronged strategy for developing technology assets and to promote highest quality focus. These technology initiatives are based on the trends that seen in the different markets. These efforts help us in two ways; gaining our customers trust & confidence; and attracting & retaining key talent who see us as a more exciting place to work in. Growth Strategy Your Companys strength revolves around our ability to understand the requirements of its clients and to continuously build the competencies and capabilities to provide integrated solutions unique to client specific needs and industry demands. Your Companys unique capabilities augmented by a clear understanding of industry trends and deep knowledge of global business models allows it to leverage strong partnerships,technology innovations and talent to deliver excellence through global delivery models. Recognizing the need for scale and capacity in competing for large contracts against larger players, your Company is making substantial investments in expanding its base of people and world class infrastructure facilities. Future Outlook The role of technology has evolved from support to transformation for global companies. The ability to design, develop, implement and maintain business and technology solutions, addressing the business and customer needs has become a competitive advantage and a priority. On the other hand, the prevalence of multiple technology platforms and a greater emphasis on network, data and information security and redundancy have increased the complexity and cost of IT systems, resulting in greater technological risks. Besides strengthening the existing core competencies of growth of your Company in the past, the Company expects to focus its energy on further growing its execution competency in new capabilities like new technology based delivery models, green energy technology, risk management systems etc. This is expected to result in scaling up customer access, improved margins and a wider global reach. Human Resource Development Your Company has been built on the foundations of people being the key drivers to growth of the organization. People are at the core of its Vision, which espouses mutual positive regard, career building and providing opportunities for learning, thinking, innovation and growth. The Company offers an environment where all-round development is as much of a goal as realization of career ambitions. During FY10, the Company continued to focus on improving people productivity through training and development of its people. Research and Development Our clients today face the challenge of reducing business costs with technology-based interventions. To assist in identifying and addressing this gap, the Company has developed several frameworks as part of its R&D initiatives this year. These frameworks address the gap by focusing on business KPIs to enhance business performance and places emphasis on business costs rather than IT costs. The primary business benefit has enhanced the business performance through improved KPIs. The direct benefits to our customers include quicker time to market, reduced cost, increased quality and increased efficiency of customer business processes. Our solutions like business aligned RFID solutions will result in enhanced business performance through improved KPIs, visibility, discovered landscape, stability, cost reduction and structured business future planning. Dividend: Considering the need for conservation of resources for expansion and the need for maintaining liquidity, your Directors do not recommend any dividend for the period under consideration. Transfer To Reserves The Company has not transferred any amount to Reserves for the year under review. However credit balance of Profit & Loss Account is transferred to Balance Sheet under the Head Reserves & Surplus. Share Capital The Company has increased its Authorised Share Capital from Rs. 16,00,00,000/- (Rupees Sixteen Crores Only) divided into 1,60,00,000 (One Crore Sixty Lacs) Equity Shares of Rs. 10/- each to Rs. 25,00,00,000/- (Rupees Twenty - Five Crores Only) divided into 2,50,00,000 (Two Crore Fifty Lacs) Equity Shares of Rs. 10/- each pursuant to the Special Resolution passed through Postal Ballot under Section 192A of the Companies Act, 1956 read with the Companies (Passing of Resolution by Postal Ballot) Rules, 2001. The paid up capital of the Company has increased from Rs. 11,90,12,990/- to Rs. 22,58,37,990/- after the year end but before this Report. The said increase in paid up share capital was due to conversation of 57 lacs warrants and 49,82,500 warrants allotted on preferential basis into equivalent number of equity shares on 21st May 2010 and 4th June 2010 respectively. The Company has applied for the listing permission of the said shares to Bombay Stock Exchange Limited and same is under process. Extension Of Financial Year: The Company has extended its Financial Year by three months. Hence the current Financial year is for fifteen months from January 1, 2009 to March 31, 2010. Also the Company has received extension of a period of three months u/s 166 of the Companies Act, to hold the ensuing Annual General Meeting from the Registrar of Companies, Karnataka. Directors: Dr. Y. Lingaraju and Mr. Prithviraj K. K. retire by rotation and being eligible offer themselves for reappointment. Mr. Manish Poddar, Mr. P. Rajkumar and Mr. U. Sampath Kumar are continuing directors on the Board of the Company. Auditors: Messers H C Gulecha & Co., Chartered Accountants, Mumbai, hold office until the conclusion of the forthcoming Annual General Meeting and have confirmed their eligibility and willingness to accept the office of the Auditors, if reappointed. Information On Auditors Observations: Regarding clause (vi) of Auditors Report, as per Managements policy, the company pays Gratuity liability to the Employees as and when the liability arises. Regarding clause (vii) of Auditors Report, Note 14 of Schedule M is self explanatory. Regarding clause (vii) of Annexure to Auditors Report, we have formal internal audit system and efforts are on to improve the system. Audit Committee: The present Audit Committee of the Board comprises of Mr. Prithviraj K. K., Dr. Y. Lingaraju and Mr. P. Rajkumar. Mr. Prithviraj K. K. is the Chairman of the Committee. DISCLOSURE UNDER SECTION 217(1) (e) OF THE COMPANIES ACT, 1956: I. Conservation Of Energy: The information required in connection with conservation of energy, under section 217(1) (e) of the Companies Act, 1956 read with Companies(Disclosure of Particulars in the Report of the Board of Directors) Rules, the Directors furnish herein below the required additional information: (a) Conservation of Energy - Our operations are not energy intensive. Adequate measures have been taken to conserve energy. (b) There were no additional investments and proposals if any, being implemented for reduction of consumption of energy as the nature of you Companys operations entails a very low level of energy consumption. (c) Impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods - N.A. (d) Total energy consumption and energy consumption per unit of production - N.A. FORM A: FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY A. Power and fuel consumption : NIL B. Consumption per unit of production : NIL Ii. Technology Absorption Every effort is made by the Company to update the technological skills of its technical staff in order to ensure that they possess adequate skills to enable them to service the Companys clients. FORM B: FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION ETC., Research & Development (R&D): Your Company is predominantly a service provider and therefore has not set up a formal R&D unit. However, it has developed software tools and products in its existing delivery setup. The Company has not undertaken any R&D activity in any specific area during the year under review, and hence no cost has been incurred towards the same. However, the Company believes technology is strategic to its growth and has invested heavily in hosted platforms, automation, capture, presentation and analytics. Technology Absorption, Adaptation and Innovation: Your Company has not imported any technology during the year under review other than purchase of software. Iii. Foreign Exchange Earnings And Outgo The details of foreign exchange earnings and outgo are mentioned in Notes Nos. 2 & 3 of sub-schedule 2 contained in the Notes to Accounts (Shedule M) forming part of the Balance Sheet and Profit and Loss Account for the financial period ended March 31, 2010. CORPORATE GOVERNANCE: A Report on Corporate Governance together with a certificate from the Auditors of the Company forms part of the Annual Report. Culture: Your Company believes that each of its employees has potential to perform. Our work culture devolves around developing leadership qualities among the employees. It is the key to superior performance. Your Company constantly attempts improving interpersonal relationship with its staff on an ongoing basis and involving them in the growth of the organization. We follows distributed leadership model wherein every employee gets an opportunity to lead and learn. Training & Development: Powersoft constantly provides learning opportunities for the personal and professional development of its employees. The company strongly believes that such an approach will provide a mutually-beneficial winwin growth opportunity for the company and its employees. Training needs are identified based on the current level of knowledge and skills, vis-a-vis skill requirements projected by the business or team development needs. The Learning & Development team maintains the individual development record of all employees, who can track this information on the corporate intranet. Particulars Of Employees: There was no employee drawing remuneration falling within the limits prescribed under Section 217(2A) of the Companies Act, 1956, and hence furnishing information under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 does not applicable. Acceptance Of Fixed Deposits: The Company has not accepted any fixed deposits during the year. Directors Responsibility Statement: As required under Section 217(2AA) of the Companies Act, 1956, it is hereby stated that: 1. In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; 2. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give true and fair view of the state of affairs of your Company at the end of the financial year and of the profit or loss of the Company for that period; 3. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities; and 4. The Directors have prepared the annual accounts on a going concern basis. Acknowledgements The Directors thank the Companys customers, suppliers, bankers, financial institutions, Central and State Government and shareholders for their consistent support to the Company. The Directors also sincerely acknowledge the significant contribution made by all the employees for their dedicated services to the Company. By Order of the Board of Directors Manish Poddar Chairman & CEO Place : Bangalore Date : 14.08.2010