APARA ENTERPRISE SOLUTIONS PRIVATE LIMITED
ANNUAL REPORT 2005-2006
MANAGEMENT DISCUSSION AND ANALYSIS
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
The financial statements have been prepared in compliance with the
requirements of the Companies Act, 1956, and the Generally Accepted
Accounting Principles (GAAP) in India. The management of Apara accept
responsibility for the integrity and objectivity of these financial
statements, as well as for various estimates and judgments used therein. In
addition to the historical information contained herein, the following
discussion includes forward looking statements which involve risks and
uncertainties, including, but not limited to, risks inherent in the
Companys growth strategy, dependence on certain clients, dependence on
availability of qualified technical and other factors discussed in this
Commentary on the financial statements
1.1 Share Capital
1.1.1 The Company has at present, only two classes of shares namely Equity
Shares of Rs. 10 each and preferences shares of Rs. 100 lakhs.
1.1.2 There are no calls in arrears.
1.1.3 During the year, the entire Redeemable Optionally Convertible
Cumulative Preference Share Capital of the Company issued to a party
recorded in the register maintained under section 301 of the Companies Act,
1956, were converted into equity shares at a premium.
1.1.4 The paid-up capital of the Company as on 31-03-06 is as follows;
Particulars Rs. lakhs
26,76,094 Equity Shares of Rs. 10/- each fully paid 267.60
(Prev. Year 21,13,000 Equity Shares of Rs. 10/- each
fully paid. Of the above 17,30,000 equity shares of
Rs. 10/- were allotted as fully paid bonus shares)
During the year 593,515 7.5% ROCCPS were converted
to 562,794 equity Shares of Rs. 10 each at a premium
of Rs. 95.46 per share.
1.2 Reserves & Surplus
1.2.1. Share Premium
The Company has received share premium of Rs. 992.21 lakhs being the
premium received at the rate Rs. 216.35 per share on 2,10,300 Equity Shares
of Rs. 10 each fully paid-up, issued during FY 2002-03 and premium received
@ 95.46 per shares on 562,794 equity shares issued on conversion of 7.5%
1.2.2 Profit and Loss
Given below are details of the appropriations out of Profit and Loss
Particulars Rs. Lakhs Rs. Lakhs
Opening Balance 95.03
Capital redemption reserve 131.34
Less : Loss during the year 2005-06 98.71 32.63
Balance carried forward 127.66
1.3 Secured Loans
1.3.1. Working Capital Facilities
Name of the bank Facility Amount
State Bank of India Cash Credit Rs. 700 lacs
LC Rs. 500 lacs
BG Rs. 650 lacs
(LC and BG are
UTI Bank Limited Cash Credit Rs. 320 lacs
LC Rs. 180 lacs
Term Loan Rs. 500 lacs
(Cash Credit and LC
Standard Chartered Bank LC Rs. 700 lacs
The facilities are secured by charge on block of assets and current assets
of the Company.
1.3.3 The facilities referred to above are further secured by the personal
guarantee and immovable properties of two directors.
1.4 Fixed Assets
1.4.1. During the year, the Company added Rs. 145.93 lakhs to its gross
1.4.2. The Capital expenditure for 2006-07 is estimated at Rs. 500 lakhs.
The Company proposed to meet this expenditure through a combination of
internal accruals, borrowings and capital induction as may be appropriate
at the time of incurring this capital expenditure.
The Company has invested in a subsidiary Company viz., Apara BVBA, Belgium.
1.6.1. Loose Tools and Consumables:
All Components and consumables purchased during the year are charged to
consumption on purchase.
1.6.2. Closing Stock and Finished Goods:
Closing stock is as per the inventories prepared, valued and certified by
the Managing Director and are valued at cost of realisable value whichever
is lower, after providing for obsolescence and other anticipated losses.
Hitherto, the Company had adopted the policy of charging off all stock of
service spares to revenue in the year of purchase. From the current year,
the Company has valued the stock of such spares held at 75% of the original
cost and included the same in the inventories.
1.7. Sundry Debtors
1.7.1 The Companys customer base is spread over various verticals such as
Financial, Banking Communications, Internet, Entertainment Infotech etc.,
1.7.2 All the debtors are generally considered good and realizable and
necessary provision has been made for debts considered to be bad and
doubtful. The level of sundry debtors is normal and is in tune with
1.7.3 Sundry Debtors as a percentage of total revenue is 75.38% as against
59.77% in the previous year.
1.7.4 The age profile is as given below;
Period in days March 31, 2005 March 31, 2006
Value % Value %
Less than 30 days 881.59 30.66 1714.30 37.34
30 to 90 days 452.86 15.75 305.60 6.65
90 - 180 days 57.52 2.00 192.07 4.18
More than 180 days 1483.18 51.59 2378.68 51.82
Total 2875.05 100.00 4590.65 100.00
1.7.5 The management believes that the overall composition and condition of
sundry debtors is satisfactory.
1.8 Cash and Bank Balances
1.8.1. The bank balances includes both rupee accounts and foreign currency
accoutns. Fixed deposits of Rs. 256.63 (Prev. Year 279.90 lakhs) are given
as security towards the issue of bank guarantee and letters of credit and
Rs. 10 lakhs towards cash collateral security.
1.9 Loans and Advances
1.9.1 Advances recoverable in cash, kind or value to be received, are
primarily towards prepayments for value to be received. Advance income tax
represents payments made towards tax liability pending assessment and
1.9.2 Dues from a Subsidiary Company Amsal Infotech Pvt. Ltd. Rs.
33,17,644/- has been written off during the year.
1.9.3 Deposits represent Earnest Money Deposits, electricity deposit,
telephone deposits and advances of like nature. The Company has taken on
lease several buildings for operations and facilities in various cities and
also for housing its staff.
1.10 Current Liabilities
Sundry Creditors for capital goods represent amount payable to vendors for
supply of capital assets and to financiers for supply of capital assets on
Hire purchase basis. Sundry creditors for supplies represent amount payable
to vendors for supply of goods. Sundry creditors for expenditure include
creditors for operational expenses, accrued salaries and benefits and
advances received from clients for delivery of future sales.
Provisions represent Income Tax and leave encashment payable by the
Company. The provision would be set off upon receipt of assessment order by
the from the Income Tax Department and payment of the leave encashment
amount to the employees.
1.12 Preliminary Expenses
There are no preliminary Expenses to be written off as on 31-03-2006.
2. Financial Instruments
2.1 Letters of Credit
2.1.1 The Company has various letters of Credit outstanding, issued to
different vendors, amounting to - Rs. 1431.28 lakhs and Rs. 454.68 lakhs
for the year ended 2006 and 2005 respectively.
2.2.1. The Company has issued counter guarantees to its bankers for
guarantees issued by them for various statutory purposes Rs. 664.52 lacs
(Prev. year Rs. 600.79)
3. Profit and Loss Account
3.1.1 The Company provides consultancy, implementation and integration of
storage solutions and content products to various customers spread over
industry verticals such as Financial, Banking, healthcare, Communications,
Internet, Entertainment Infotech etc., Post implementation the Company
provides, maintenance and up-gradation services for the equipment supplied.
The Company has contracts with various principals such as Network
Appliances, Hitachi Data Systems, Veritas, Juiper, Peribit, ISS Internet
Security, RSA Security, NetScreen, etc for providing services and supply of
equipment. The segment wise break up of income is given below;
Rs. in lakhs
Particulars 2005-06 2004-05
Value % Value %
Sale and integration of
Equipment and solutions 4337.02 71.22 3290.50 68.41
Annual maintenance contract
and hire charges 335.81 5.51 484.70 10.08
Commission 678.25 11.13 668.10 13.89
Training Charges 715.75 11.75 340.22 7.07
Other Income 22.84 0.37 26.45 0.55
Total Income 6089.67 100.00 4809.97 100.00
3.1.2 Geographically, the Company provides services predominantly to
customers based in India only. However during the year the Company has
ventured into other newer markets in Asia.
3.2 Non Operating Income
3.2.1 Non-operating income consists of income derived by the Company from
exchange fluctuation, dividend income, interest on deposit with Bank, Bad
Debts written back and sundry Balances written off and written back.
The cost of goods and services sold increased to 64.95% of the total income
of the year from 61.45% in the previous year.
3.4 Interest & Bank Charges
The Company incurred an expenditure of Rs. 269.22 lakhs as against Rs.
261.16 lakhs during the previous year.
The provision for depreciation for the year increased to Rs. 73.07 lakhs as
compared to Rs. 63.87 lakhs, on account of additions of Rs. 145.93 lakhs to
its gross block during the financial year.
3.6 Provision of Tax
The Company has provided Rs. 32,00,000 for its Income tax liability for the
3.7 Net Profit
The net loss of the Company amounted to Rs. 23.62 lakhs as against profit
of Rs. 107.85 lakhs during the previous year (Profit after tax and before
write off of investments)
3.8 Foreign exchange difference
An amount of Rs. 12.95 lakhs has been considered as expenses during the
current year, on account of foreign exchange differences arising due to
timing differences between accrual of income / expense and receipt /
payment of the same.
4.1 The Company has operating leases for office buildings and housing for
staff. Rental expenses for operating leases for the year ended 2006 and
2005 are Rs. 58.16 lakhs and Rs. 41.69 lakhs. These are cancelable leases.
4.2 The Company has taken assets on operating lease.
Future minimum lease payments
(Rs. in lakhs)
Future minimum lease payments
- Not later than one year 6.24
- Later than one year and not later than 5 years 12.64
- Later that five years 0.00
5. Key Financials and Ratio Analysis
Rs. in lakhs except the key indicators
Financial Highlights 2006 2005 2004 2003 2002 2001
/ Year ending
Total Income 5411.41 4145.84 7264.45 3836.99 2555.95 3105.62
Export sales 678.25 664.14 254.16 418.11 493.04 16.34
Profits (EBDIT) 401.35 400.00 197.40 248.37 395.40 428.26
Amortisation 90.74 63.88 62.55 53.52 49.36 24.05
Financial Costs 269.23 261.16 315.55 68.36 27.08 23.08
Profit before tax 41.38 75.36 -180.70 126.48 318.96 381.15
Profit after tax -23.62 110.63 -180.99 73.17 220.96 255.15
Equity Dividend % - - - - -
Share Capital 267.61 804.85 673.51 211.33 190.30 17.30
Reserves & Surplus 1119.87 684.12 628.51 843.28 410.00 362.08
Net Worth 1387.48 1488.97 1302.01 1054.61 600.33 379.38
Gross Fixed Assets 861.44 762.58 698.89 669.07 587.67 522.91
Net Fixed Assets 522.06 479.29 476.10 506.48 477.25 460.19
Total Assets 3096.41 2943.98 3701.76 1640.57 745.75 1318.05
Earning per share -ve 5.23 -ve 3.46 11.61 14.74
Cash Earning per share 2.37 8.26 -ve 5.99 14.20 16.14
Book value per share 51.85 70.46 61.61 49.90 31.55 21.93
Debt (incl. working
capital) Equity ratio 1.20 0.95 1.78 0.48 0.24 0.05
EBDIT / Sales - % 6.59 8.32 2.74 6.47 15.47 13.79
Net Profit Margin - % -ve 2.3 -ve 1.91 8.64 8.22
Return on year
end Net Worth % -ve 7.43 -ve 6.93 36.80 67.25
M S SIDHU SHIVARAM MALAVALLI P. PHANEENDRA
Managing Director Director Company Secretary
PLACE : BANGALORE
DATE : 04.07.2006
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