Today's Top Gainer
Note:Top Gainer - Nifty 50 More
A. Indian Economy and industry overview
The Indian economy has been going through a slow growth trajectory as there has been a liquidity crunch in the financial sector and a slowdown in investment growth. With the Government of Indias initiative on Make- in- India, the country has witnessed many global corporations showing interests in the electronics manufacturing sector especially in the Defense and Consumer electronics domain. The potential for Electronics manufacturing continues to be high in India. The VFX and animation industry has grown significantly over the years, not only supporting the growing Indian M & E sector but has also developed as an outsourcing industry for global markets.
The Company has been reorganizing its business portfolio after of our merger with the parent company. The company decided to focus on Electronic Manufacturing services (Engineering services division) as the core business and Real Estate related business as another focused area for growth. As regard to the Animation Division, the company decided to focus merely on exploitation of its existing products (IPs).
Engineering service division
The company embarked on developing a business around Electronics Manufacturing Services (EMS) in line with the GOIs Make in India initiative. We created capabilities in manufacturing of professional electronics products for OEMs. We have successfully launched our operations during the year. However the slowdown in sourcing job works has our operations. Efforts are being made to vigorously to follow opportunities.
In the meantime company has also decided to reenter IT /ITES space with new range of services as the non compete agreement entered with Accel Frontline Limited (presently known as Inspirisys Solutions) came to an end on 22nd July 2019.There will be two business units for the IT, namely Accel IT services and Accel Academy. The division now will be known as IT and Engineering services Division.
Real Estate Development
Since the Company is holding real estate as freehold land and buildings and also leased land from Kerala
Infrastructure Development Corporation (KINFRA), the Company had decided to embark on real estate related services as an area of focus so as to unlock the value of such assets.
The Company during the year got necessary approvals to construct an area of 1,50,000 Sq Ft of IT space on the lease hold land provided to us by KINFRA, in their SEZ, which shall be let out on rent to IT/ITES companies. We have obtained co-developer status along with KINFRA which will enable us to let out the premises to software export units. Barring unforeseen circumstances, this will result in positive cash flows in the next 18 -24 months.
Animation services division
The Company has been having its Animation division for almost 10 years and has been handicapped in pursuing its growth due to non availability of funds. In the meantime, the Company has set up a subsidiary company by name Accel Media Ventures to pursue Visual Effects (VFX) business for the movie industry that also include certain animation work. Our animation division currently holds right for certain IPs, which can be exploited in the near term. However, it is being explored whether the animation assets can be transferred to Accel Media Ventures and the company can focus on its IT and Engineering Services and Real Estate businesses for future growth.
Strategic Business Initiatives
The Company is always on the lookout for new business opportunities and with a stronger balance sheet after the merger and monetization of one of its real estates, the company may enter in to new business avenues during the current year to ensure steady income stream for the Company.
B. Future Outlook
With domestic industry likely to grow after the current slowdown, the company is going to focus on IT, Electronics and Real Estate. The turnover and profitability can go up slowly and but surely in the next 2-3 years. As the Companys core competency being IT the management is confident of turning around the fortunes of the Company.
C. Opportunities, Risks and threats.
Indian IT/ITES industry is continuing to grow at a healthy rate of 10-15% per annum; there is need for more space especially in Tier 2 cities like
Thiruvanathpuram. The company has started constructing its IT SEZ building and hopeful of fully exploiting the opportunity in Thiruvananthapuram. Companys ambitious expansion plans include IT and Electronics manufacturing and real estate and hence the company has solicited term loans from financial institutions. There could be certain risks involved with the business plans involving borrowed funds. However, considering that our debt /equity will be at comfortable levels, the risks are mitigated.
There are new and upcoming projects of similar nature at different location can be a threat to the Company. However, we are planning for these expansions in phases and as such projects of these types will continue to survive and 3 ourish.
D. Internal Control Systems and their adequacy
One of the key requirements of the Companies Act, 2013 is that companies should have adequate Internal Financial Controls (IFC) and that such controls should operate effectively. Internal Financial Controls means the policies and procedures adopted by the company for ensuring orderly and efficient conduct of its business, including adherence to companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information.
Your Company has adequate systems and processes to assess and ensure that not only does adequate control exists, it also provides various input to the management for timely corrections. The process involves scoping and planning to identify and map significant accounts and processes based on materiality. Thereafter risk is identified and their associated controls are mapped, else remediation is implemented. These controls are tested to assess operating effectiveness.
The auditor performs independent verification of controls. The Auditors Report is required to comment on whether the Company has adequate IFC system in place and such controls are operating effectively. Your Companys Internal Control System is robust and well established and being followed for many years with periodic improvements. It includes documented rules and guidelines for conducting business. The environment and controls are periodically monitored through procedures/ processes set by the management, covering critical and important areas. These controls are periodically reviewed and updated to reflect the changes in the business and environment.
E. Human resource management
As on 31 March 2019, the Company has employee strength of only 11 to carry on its present downsized level of activities and is expected to grow slowly. We have an established employee recruitment and retention policy, which involves identifying right talents through recruitment and training programme as well as lateral recruitment and providing them with appropriate training and induction. We ensure that all our employees receive technical and managerial inputs regularly through various training and induction.
F. Key Financial Ratios
|Debtors Turnover Ratio||00.06||00.03|
|Inventory Turnover Ratio||09.26||18.26|
|Operating Profit Margin||-116.39||875.31|
|Net Profit Margin||-131.92||454.85|
|Return on Net Worth||-02.10||17.66|
G. Forward-Looking statements
Statements in the Management Discussion and Analysis describing the Companys objective, projections estimates and expectations may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas market in which the company operates, change in Government regulations, tax laws, interest costs, other statutes and other incidental factors. Thus the company should and need not be held responsible, if the future turns out to be something quite different. The Discussion and Analysis should be pursued subject to this management disclaimer.