Agnite Education Ltd Management Discussions

AGNITE EDUCATION LIMITED ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS Overview: The Indian education market has witnessed a series of developments and changes in the last few years, which resulted in a significant increase in market size of the education industry compared to previous years. The present Indian education industry is in its development stage. With increasing per capita income, national economic growth and enhanced technology it has become necessary to develop the structure of the Indian education sector. Private players have taken several initiatives for development of education infrastructure and quality. The emergence of new segments like e-learning and V-SAT training is slowly shifting the education market towards new heights. Indian education market consists of two segments formal and non-formal education system. K-12 segment has shown tremendous increase in terms of market growth and revenue from past years and is expected to grow at same pace. Private professional institutes are expanding with a strong growth rate which has opened the doors for foreign universities. There is tremendous opportunity in the test preparation market in India. Indias e-learning Industry The growing IT industry in India is driving IT education and training market as well as enhanced teaching techniques. Increase in GDP and per capita Income has raised the enrollment ratio in education sector. Growth in service sector revenues and collaborations with foreign universities have also driven the sectors growth. Nasscom has pegged the growth rate of major players in the field to be the rate of 25% annually. With this growth rate, we can expect top players expand their e-learning business and this will open up greater opportunities for skilled workforce in India. The e-learning outsourcing business in India is likely to grow at a rate of 15 per cent annually for the next three years to touch 603 million dollars by the end of 2012, a study says. According to a study by business intelligence and research provider Value Notes, the e-learning outsourcing industry will suffer the impact of the global economic recession for the next 6-8 quarters but growth is likely to pick up after that. While, the economic recession will impact the growth in the industry for the next 6-8 quarters, the market will recoup and grow much faster until 2012, the study said. Further, the market size of Indian e-learning outsourcing business will touch the 603 million dollars level by the end of calendar year 2012, it said. Last year, the revenues from the e-learning off shoring industry in the country stood at approximately 341 million dollars. Opportunities and Threats - Can engage subject matter experts within the company who then can use e- learning as a blended solution - Increase volumes of those receiving training - E-learning content development - E-learning being seen as not cost effective Future Outlook : The greatest challenge faced by the players in the industry is the acceptance of the concept of e-learning amongst the people as they do not understand the value of the software for learning purposes. Still founders and heads of most elearning companies in India are confident about the growth and the huge profits that lie in the coming years. E-learning has many processes that can be outsourced. By the end of 2012, it is estimated that the Indian e-learning offshore industry will touch $603 million! At present, the industry employs more than 11,000 people and is estimated to stand at around $316 million in revenues. Of course, in the education and training market, to be a part of the e-learning industry is working in a growing field. Even though the sector is facing its share of challenges, with emerging technologies and awareness, this year around, it will surely become a stronger one. In short, e-learning market has a bright and promising future ahead! I. Analysis of Profit and Loss Account : Turnover & other Income The company has reported a turnover of Rs.47.87 Crores for the period 18 months ended 30th September, 2011 compared to Rs.409.86 Crores for the previous year ended 31st March, 2010. The company has turned itself into a education company and during the year company had concentrated on development of e-Learning contents for general education relating to CBSE, All state boards , ICSE etc. The company has developed over 300 courses relating to skill development. The Company has suspended selling its old software products during the current period. Expenditure 1. Purchase of Software The purchase of Software during the period stood at Rs.39 Crores compared to Rs. 318.52 Crores in the previous year. The company follows a conservative policy of writing off the expenses incurred in the same year itself on purchase of software. 2. Administrative Expenses The Administrative expenses for the period stood at Rs.6.62 Crores compared to Rs.25.03 Crores in the previous year. a. Personnel Cost The personnel cost of the period stood at Rs.3.53 crores, compared to Rs.6.08 Crores in the previous year. b. Travelling and Conveyance The travelling expenses during the period stood at Rs.0.29 Crores, compared to Rs.0.40 Crores in the previous period. c. Miscellaneous Expenses Miscellaneous expenses for the period stood at Rs.0.50 Crores as against Rs.1.05 Crores in the previous year. d. Difference in Exchange The gain on account of Exchange fluctuation during the period stood at Rs.0.97 Crores as against loss of Rs.7.66 Crores during the previous year. This is due to increase in value of USD against Indian Rupees as compared to previous year. e. Service Charges There was payment of 0.47 Crore for Service Charges for the period (which has been classified under Professional & Consultancy Charges) as against Rs. 0.63 Crores in the previous year. f. Others The following major expenses have been incurred during the period 18 months ended against in the previous years. 1. Interest & other Finance charges The outgo on account of interest expenses for the period stood at Rs.0.08 Crores as against Rs. 54.09 Crores in the previous year. The company has not provided any interest & other finance charges during the period as its accounts have become NPA. 2. Selling & Distribution Expenses The Selling and Distribution expenses for the period stood at Rs.0.66 Crores as against Rs.2.04 Crores during the previous year. 3. Depreciation The depreciation for the period 18 months ended stood Rs.1.57 Crores as against Rs.2.11 Crores. 4. Profit / (Loss) before tax Profit / (Loss) before tax for the period stood at Rs.(1.07) Crores as against profit of Rs.2.63 Crores during the previous period. 5. Provision for tax Provision for tax during the period is Nil. 6. Profit / (Loss) after Tax The Profit / (Loss) after tax for the period 18 months ended stood at Rs.(1.39) Crores as against profit of Rs.2.23 Crores during the previous year. II. Analysis of Balance Sheet: I. Share Capital A) The Authorised Share Capital of the Company stood at Rs. 150 for the period ended as compared to the same in the previous year. Paid up capital of the Company stood at Rs.39.33 Crores for the period 18 months ended 30th September 2011 as compared to the same in the previous year. II. Reserves & Surplus The Increase during the period 18 months ended under Reserves & Surplus is mainly due to increase in Foreign Currency Translation Reserve on account, which is on account of strengthening of USD against Indian rupee. III. Secured Loans The overall Secured Loans for the period stood at Rs.390.54 Crores as compared to Rs.392.51 Crores in the previous years. IV. Unsecured Loans The outstanding unsecured loans at the end of the period was at Rs.273.15 Crores as against Rs.270.86 Crores during the previous year. V. Fixed Assets The Addition to Fixed Assets during the period 18 months ended stood at Rs.0.59 Crores as compared to Rs.0.09 crores in the previous year. VI. Investments The Investments at the end of the period 18 months ended stood at Rs.125.09 Crores as compared to the same in the previous year. VII. Sundry Debtors Sundry debtors stood at Rs.1670.97 crores for the period 18 months ended 30st September 2011 as against Rs.1699.84 crores in the previous year. VIII. Cash and Bank Balances The Cash and Bank Balances at the end of the period stood at Rs.3.85 Crores as against Rs.5.77 Crores in the previous year. IX. Loans and Advances Loans and Advances during the period stood at Rs.265.15 Crores as against Rs.246.49 Crores in the previous year. X. Current Liabilities and Provisions a. Sundry Creditors The outstanding sundry creditors as at 30/09/2011 stood at Rs.743.77 Crores as against Rs.756.34 Crores in the previous year. b. Unclaimed dividend The unclaimed dividend during the period 18 months ended is at Rs.0.24 Crores as compared to Rs.0.24 Crores in the previous year. c. Provisions The provisions for the period 18 months ended stood at Rs.48.01 Crores compared to Rs.44.91 Crores in the previous year. The increase is due to increase in provisions for gratuity. III. VERTICAL - WISE CONTRIBUTION During the period, the company has transformed itself into an Educational company which can provide online educations at a global scale. The company has contents in e-Learning ranging from general education to skill courses to professional educational programmes, supported by visually catching media. The medias facilitate easy understanding by the students on subjects which are difficult to understand in normal course. The marketing of these products are expected to commence in April 2012 and company expects an improved performance in the coming financial years. The Company has provided only services in education during the period.