Agnite Education Ltd Directors Report

AGNITE EDUCATION LIMITED ANNUAL REPORT 2010-2011 DIRECTORS REPORT To The Members Agnite Education Limited. Chennai 600042. Your Directors have pleasure in presenting the Twentieth Annual Report of the Company along with the Audited Statement of accounts for the period ended 30th September 2011. The Report also includes Management Discussion and Analysis in accordance with the guidelines on Corporate Governance. (Rs. in Cr) Particulars Period ended Year ended 30th September 2011 31st March 2010 Income from operations 47.87 409.86 Other income 2.31 0.20 Total Revenue 50.18 410.06 Total expenditure before Interest & Depreciation 49.60 351.23 Operating profit / Loss PBIDT 0.58 58.83 Interest 0.08 54.09 Depreciation / Amortization 1.57 2.11 Profit before tax (1.07) 2.63 Provision for tax 0.32 0.40 Profit after tax (PAT) (1.39) 2.23 Surplus brought forward 487.08 484.85 Balance carried to Balance sheet 482.05 487.08 During the year, your Company has transformed itself into a Company devoted to provide online education at a global scale. To offer better education globally through a series of on-line solutions and provide the best possible education and training, the Company had decided to change its name from Teledata Informatics Ltd to Agnite Education Limited. Lines of Business: Educational Solutions: Agnite Education Limited has developed solutions and services by partnering with key institutions and has positioned itself to offer subject matter expertise in key areas. The solutions offered by Agnite are as below: * Tuition Edge - Tuition Edge offers holistic education in the field of High School Studies, Preparatory Studies, Professional Studies and General Studies. * Skill Set - Through Skill Set, Agnite focuses to offer skill development programme by focusing on Trade Skills, Office Skills and Soft Skills. * Distance Learning for Educational Institutions Products Agnite offers a varied range of products and software solutions for educational/ training institutions. MonitorSIS - is a highly customizable product capable of providing high - quality and cost effective solutions specific to the schools needs. WebEIM - is a complete solution to the Enterprise Resource Planning (ERP) requirements for educational institutions. WebEIM brings students, staffs, parents, educational administrators and financial managers together using standard browser based access. Directors Responsibility Statement: In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956, your Directors confirm that: * in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; * they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period; * they had 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 the company and for preventing and detecting fraud and other irregularities, and * they had prepared the annual accounts on a going concern basis. Corporate Governance The disclosure requirements on corporate governance prescribed under clause 49 of the listing agreement is annexed herewith as part of the report. Directors Gp.Capt. K. Balasubramanian IAF (Retd), Director is retiring by rotation and has conveyed his acceptance to continue as a Director of the company. Mr. M.S. Ramakrishnan has resigned from the position of Director of the Company with effect from 01st October 2010. Financial Year The Company has received approval from the Registrar of Companies, Chennai vide their letter dated 22nd July 2011 for the purpose of extension of financial accounting year from 01st March 2010 to 30th September 2011. Consecutively, the extension for conducting the Annual General Meeting was granted by the Registrar of Companies, Chennai for 3 months i.e. upto 30th March 2012 vide their letter dated 22nd July 2011. CEO Certification The Managing Director has submitted a Certificate to the Board Meeting regarding the Financial Statements and other matters as required and Clause 49 (V) of the Listing Agreement. Fixed Deposits Your Company has not accepted fixed deposits and as such, no amount of principal or interest was outstanding as at the Balance Sheet date. Particulars of Employees None of the employees of the company are falling under the information to be furnished as per section 217 (2A) of the Companies Act 1956. Auditors M/s N.R. Krishnamoorthy and Company Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept Office as Statutory Auditors if re-appointed. Subsidiaries The financial statements of the subsidiaries of your Company are drawn up in accordance with the applicable Accounting Standards and forms part of the Consolidated Financial Statements in the Annual report. Your Company believes that the consolidated accounts present a full and fair view of state of affairs and financial conditions. The financial information relating to the subsidiary companies are not appended to this report. As per Section 212 of the Companies Act, 1956, we are required to attach the Directors Report, Balance Sheet and Profit and Loss Account of our subsidiaries. The Ministry of Corporate Affairs, Government of India vide its circular no. 2/2011 dated February 8, 2011 has provided an exemption to companies from complying with section 212, provided such companies publish the audited consolidated financial statements in the Annual Report. Accordingly, the Annual Report 2010-11 does not contain the financial statements of our subsidiaries. The audited annual accounts and related information of our subsidiaries, where applicable, will be made available upon request. These documents will also be available for inspection during the business hours at our registered office in Chennai, India. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo The particulars prescribed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are set out separately, which forms a part of this report. Acknowledgements Your directors extend their gratitude to customers, alliance partners and employees for their continued valuable support. The unrelenting contribution made by our employees to ensure customer care deserves a special acknowledgement. Your directors place on record their appreciation for the excellent continued co-operation from Bankers, vendors and various Government and Non-Government Agencies including SEBI, Stock Exchanges, Registrar of Companies, STPI, RBI & others and look forward to their continued support in the future. For and on behalf of the Board of Directors Sd/- Sd/- K. Padmanabhan N. Sakthivel Managing Director Director Place : Chennai Date : 16.03.2012 ADDENDUM TO DIRECTORS REPORT Directors Comments on the Qualifications made by Auditors in their report on financial statements of the Company 1. a. We draw attention to Note No.22 of Schedule Q on booking of revenue on sale of products of marketing agents. The quantification and evaluation of amounts for products lying unsold cannot be determined DC- The Company has agreement with marketing agents in various countries through whom products are sold. As there has been no sales return in past years, the revenue is normally recognized by the Company on sale of products to marketing companies and this policy is being followed by the company consistently over past years which are in tune with the agreement entered into by the Company with respective parties b. We are unable to comment on the ultimate realisability of investments amounting to Rs.110.33 crores in Rainforest Trading Limited and amount advanced to Baytech Inc BVI to the tune of Rs.186.13 crores, in the absence of audited financial statements for the last five years of their ultimate subsidiary ESys Technologies Pte Limited which is the substance of the said investments/advances as referred to in Note No.19 of Schedule-Q DC - The Board of directors are of the opinion that the investments amounting to Rs.110.33 crores in Rainforest Trading Limited and amount advanced to Baytech Inc BVI of Rs.186.13 crores are realizable and necessary legal proceedings have been initiated against parties concerned for recovery of the dues. 2. In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt by with this report have been prepared in all material respects in compliance with the applicable Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956 except for non- compliance in respect of the reinstatement of debtors, creditors and advances in accordance with Accounting Standard 11 - Effects of Changes in Foreign Exchange Rates (Revised) DC -The Company will be taking steps to comply with the provisions of Accounting Standard 11 - Effects of Changes in Foreign Exchange Rates (Revised) 3. In our opinion and according to the information and explanations given to us and having regard to the explanation that purchases of certain items of contents and consumables for projects are for the Companys specialized requirements for which suitable alternate sources are not available to obtain comparable quotations, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of contents through approval by the technical committee, fixed assets and with regard to the provision of services. In our opinion and according to the information and explanations given to us , we have not observed any continuing failure to correct major weaknesses in internal controls except incase of the sale of goods and services wherein the Company does not keep the details of the end users of the software licenses sold through the agents. DC- The Company has marketing agreement with marketing agents in various countries through whom products are sold and hence the onus of keeping details of end users of software licenses lie on the above marketing agents. The revenue is normally recognized by the Company on sale of products to marketing agencies and this policy is being followed by the Company consistently over past years which are in tune with the agreement entered into by the Company with respective parties. 4. According to the information and explanations given to us, the Company is not regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees state insurance, income tax, sales tax, wealth tax, service tax and other statutory dues applicable to it. As explained to us, the Company did not have any dues on account of customs duty and excise duty. Further, since the Central Government has till date not prescribed the amount of Cess payable under section 441A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at September 30th, 2011 for a period of more than six months from the date of becoming payable other than: a. Provident fund previous year amounting Rs. 0.29 Crores DC- The company is arranging to pay the same on priority basis. 5. Based on our audit procedures and according to the information and explanations given to us, the Company has continuously defaulted in repayment of dues to banks and the advances received by the Company from the State Bank of India to the tune of Rs. 314.99 crores and from other banks to the tune of Rs. 87.58 crores as on the Balance Sheet Date have been classified as Non-Performing Assets (NPAs) by the Banks. DC- The Company is taking steps to repay the amount to the bank and is confident of repaying the dues to the bank. 6. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. All securities and other investments have been held by the Company in its own name except in case of investments in certain foreign companies where shares are held by its directors/nominees as referred to in Note No.19(a) of Schedule Q of notes to accounts wherein the share certificate for the investments are not in possession of the Company. DC- The Company is taking effective steps to recover the investments made by the company. Directors Comments on the Qualifications made by Auditors in their report on Consolidated financial statements of the Company 1. We report that subsidiaries as disclosed in Note No 4 (b) of Schedule Q have been consolidated on the basis of unaudited financial statements which reflect total assets (net) of Rs. 5.39 Crores as at 30th September, 2011, total revenues of Rs. 7.42 Crores and aggregate Profit of Rs. 0.45 Crores for the period ended on that date. The financial statements of the above said subsidiaries have been certified by the management and have been furnished to us and in our opinion in so far as it relates to the amounts included in respect of the subsidiaries are based solely on certified unaudited financial statements. We have relied on management certifications for elimination of inter-company transactions of the group in the absence of any confirmation from the directors/auditors of group companies. DC - The Board of Directors of the Company felt that as financial year of subsidiaries are not in coincidence with the financials of the parent company, the parent company is not in a position of giving consolidated audited financial statement and such accounting treatment are in agreement with provisions of the Companies Act, 1956. 2. We report that the Group has not consolidated the results of a subsidiary company i.e. PT Teledata Energy Services, Indonesia and Insoft System Pte Ltd, Singapore in accordance with AS 21 on Consolidated Financial Statements(Refer Note No. 2(h) of Schedule Q) in the absence of any financials to this effect .We also report that the Group has not consolidated the results of the subsidiary companies i.e., Baytech Inc. BVI and Rainforest Trading Ltd (SPV) in accordance with AS 21 on Consolidated Financial Statements(Refer Note No. 2(h) of Schedule Q) due to the ongoing legal proceedings against Vikas Goel , The Managing Director of eSys Technologies Pte Ltd and eSys Technologies Pte Ltd, Singapore which is a wholly owned subsidiary of Rainforest Trading Ltd (SPV) . Effectively the profit and loss account and balance sheet is understated to the extent of financials of these subsidiaries. DC- The Board of Directors are of the opinion that financials of PT Teledata Energy Services Ltd., Indonesia is being reconciled and of the opinion, that it will not materially affect the financials of the company on a consolidated basis. In the case of Baytech Inc and Rainforest Trading Pvt Ltd, Company has initiated legal proceedings for breach of terms of Share Purchase Agreement which includes non submission of Audited financials. 3. We draw attention to Note No. 18 of Schedule Q on booking of revenue on sale of products to marketing agents by the Parent Company and legal action against debtors, wherever necessary DC- The Company has agreement with marketing agents in various countries through whom the products are sold. The company has initiated legal action against debtors wherever necessary to recover the dues to the company. 4. We are unable to comment on the ultimate realisability of investments amounting to Rs..110.33 crores made by the Parent Company in Rainforest Trading Limited and amount advanced to Baytech Inc BVI to the tune of Rs.186.13 crores in the absence of audited financials for the last five years of their ultimate subsidiary Esys Technologies Pte limited which is the substance of the said investment/advances as referred to in Note No. 15(a) of Schedule Q. DC - The Board of directors are of the opinion that the investment amounting to Rs.110.33 crores in Rainforest Trading Limited and amount advanced to Baytech Inc BVI of Rs. 186.13 crores are realizable and necessary legal proceedings have been initiated against parties concerned for recovery of the dues 5. The Group has not complied in respect of the reinstatement of debtors, creditors and advances in accordance with Accounting Standard 11 - Effects of Changes in Foreign Exchange Rates (Revised). DC -The Companies shall be taking steps to comply with the provisions of Accounting Standard 11 - Effects of Changes in Foreign Exchange Rates (Revised) ANNEXURE TO DIRECTORS REPORT A) Conservation of Energy: The operations of your Company are not energy intensive. The Company has, however, taken adequate measures to conserve energy consumption by using efficient computer terminals and building management systems. The impact of these efforts has enhanced energy efficiency. As energy cost forms a very small part of total expenses, the financial impact of these measures is not material and not measured. B) Technology Absorption, Adaptation and Innovation: The Companys business demands constant absorption of and adaptation to changing technologies to stay competitive in the rapidly changing world. C) Foreign Exchange Earnings and Outgo: Your Company is making continuous efforts to explore new foreign markets and increase its share in the market for export of software. The details of foreign exchange earned and the outgo is as under: (Rs. In Cr) Particulars 30th September 2011 31st March 2010 Foreign exchange earnings 44.10 400.99 Foreign exchange outgo 38.96 318.50 Earnings in Foreign currency 71.80 86.99 on receipt basis Expenditure in foreign currency 33.12 56.55 For and on behalf of the Board of Directors Sd/- Sd/- K. Padmanabhan N. Sakthivel Managing Director Director Place : Chennai Date : 16.03.2012 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.