CTIL Ltd Management Discussions.
GLOBAL ECONOMY VIS--VIS INDIAN ECONOMY:
Till the recent past, Global economics majorly developed, underdeveloped and developing economies have witnessed longest recessionary cycles triggered by outburst of M/s. Lehaman Bros., the oldest company in US and few other bitter events in US and other economies. However, the strategies adopted by Governments and Central Banks of advanced economies such as US, UK Germany, France etc., have helped Global Economy for revival and gradual strengthening.
During the year 2013 developed economies have got shy of relief with gradual strengthening of their economies while developing Nations picked-up growth momemtum, however, key emerging markets such as Brazil, China, and India continued to witness demand slowdown during the year 2013.
As per IMFs WEO, the Global GDP in the year 2013 has marginally, moderated to 3.0% from 3.2% in 2012.
The year 2013-14 has been a challenging year for the Indian economy in general and the Indian Industry in particular which has been suffered badly due to a host of macro-economic variants such as high inflation, high interest rates, sluggish economic conditions and depressed demand resulting in low GDP. As per provisional estimates of Central Statistics Office (CSO), the Indian Economy is expected have grown at 4.7% during the financial year 2013-14. Government estimates GDP growth rate at 504% to 509% for the year 2014-15.
CTIL operates majorly in geographies like US, UK, Singapore, Hong Kong and Middle East countries. Economy of these countries started growing strongly leaving goods scope for the sizable investments and spending software sector. The company therefore hopes for the good growth of business from these markets.
Looking way forward, the growth and developed economies expected strengthen considerably during the year 2014-15, which translates into higher corporate investments and spending on all the sectors and software sector too.
CTIL Limited has a sustainable business model with focus on e-governance e-learning ITES services and solutions and software development for select sector. During the year 2013-14, there was more than 50% decline in revenues on standalone basis from the previous year 2012-13. This was mainly due to severance of ties with the Comp-u-Learn Middle East FZC, a Dubai based subsidiary, which resulted into a loss of business and resources in the middle east countries. Further, the severance of business association with Astus Technologies INC, USA, US based subsidiary, contributed to decline revenues and resultant paltry net profits for the financial year 2013-14.
However the operation of the company in other geography was not affected though there had been significant decline in net profit during the year 2013-14 comparatively previous year 2012-13. Mainly there are two reasons for declining net profits: firstly, declining revenues as explained herein before and secondly, excessive operational overheads on account of sharp increase in cost of inputs in-relation to fixed price contracts completing of which was inevitable for retaining customers and image in the market.
However, as the business verticals of the company are so strong and resourceful that the company plans to shift focus in order to strike balanced business leverages for business growth and Financial leverages for financial growth in the years to come. Thus key focus will be on improvement in performance in present areas and geographies, while tapping new business prompt new business verticals such as Insurance sector, Ports, Railways, Pharmaceuticals etc,.
Added to the above, company plans to install cost control measures wherever necessary in operational areas where by profit margins could be improved.
BUSINESS OUTLOOK AND PROSPECTS: .
A shift in companies focus from developed geography to under developed, developing and emerging markets.
Continue the drive on outsourcing business which augments multiplication of revenues during the year 2014-15.
Key focus on cost and operational efficiencies so as to improve the performance and profit margins as well.
The company will continue to focus on major growth drivers in order to add multiples to the revenues which translate into business growth.
To ensure business growth through additional measures such as value added services and solutions, higher efficiency and productivity etc,.
STRATEGIC BUSINES GROWTH:
1. The company plans strategic business growth through foray into new business segments like solutions for Insurance sector, Railways, Ports, Defense and Pharmaceuticals.
2. The Company had entered into a Memorandum of Understanding with ECG Technology LLC, USA ("ECG") for acquiring 100% interest in ECG, a leading engineering technical and design consulting company with significant US presence. This acquisition would pave way to your Company to get access to ECGs investment portfolio in Castleton Paper Boards LLC ("CPB) in which ECG holds 30% interest. CPB, a manufacturer of high end liner board paper used in container packaging, has been granted permits and lease rights for the development, construction and operation of a new modern paper mill in Rensselaer County, New York. USA. Considering the growing demand for this high end liner paper boards in container packaging, the Board is of opinion that acquisition of ECG shall give your Company an opportunity to be part of a growing business/markets in USA and accrual of incremental revenues and profits that are rolled up from ECGs operations. This is also in concurrence with your Companys endeavors in de-risking the present businesses by exploring growth opportunities in other business areas. While, this acquisition entails a capital commitment of USD 71 million over a period of time, your Company is hopeful of meeting the same by raising fresh capital and by adopting a more focused approach in entire transaction.
3. E-based real estate market place:
Real Estate is one of key growth drivers of India and is being considered as an attractive destination for considerable investments. The real estate sector in India has come a long way by becoming one of the fastest growing markets in the world. It is not only successfully attracting domestic real estate developers, but foreign investors as well. The growth of the industry is attributed mainly to a large population base, rising income level, and rapid urbanization. The real estate sector has transformed from being unorganized to a dynamic and organized sector over the past decade. As this sector started aligning with organized market place, the usage of technology by both developers and end customers has become imperative in order to facilitate the transaction flows.
The service offering in real estate market place like transaction facilitation, niche market consultancy and data repository services give rise to huge opportunity. The e-based interaction among various players in real estate market place entails new entrants as the market is expected to grow at a CAGR of 50-100% in the coming years, mainly on the back of increased focus on this medium of communication by buyers as well as developers. This model also helps decision-making faster for buyers.
Your Company, backed by its considerable presence in ITES and E-based market place technologies, is looking for more business synergies in e-based real estate market place with particular focus on Group booking transactions. Your Company is in the process of launching a vibrant portal in order to provide a repository of services to developers, buyers and other market intermediaries. We expect these synergies will facilitate a greater enhancement in services basket of your Company and translate into considerable value addition to Companys future growth. Your company is planning to promote a subsidiary company to undertake this business.
4. The Company is planning to setup a wholly owned subsidiary company in USA and in republic of Singapore for acquiring companies available overseas which will have synergies with the business of the company.
Though there had been declining in revenues in profits in the 2013-14 with the shift in business focus from developed geographies to under developed and developing, other growth strategies explain herein before, company expects better performance, operational efficiency and sizable growth during the year 2014-15. Presently focused areas on e-governance, e-learning, software development and solution for manufacturing sector etc,. Company plans to lay thrust on e-base real estate space, software development, solutions, services for Insurance, Engineering, Ports, Railways, Defense, Agriculture and Pharmaceutical sectors. Further continuing the drive on online education, a major growth driver of the company. Online education at CTIL developed and built upon the principle of using advanced technology and enhanced delivery methods to make classes accessible and easy to use. Students can navigate lessons and explore various modules with the click of a mouse, and communicate with fellow students and faculty via email and message boards. User-friendly online classroom environment makes learning interactive and enjoyable. Classes, academic resources, and support services are all easily accessible. CTIL offers a full range of support services, including technical support available by phone, email, and live chat. Students will find it as a commitment to providing them with opportunities to succeed.
OPPORTUNITIES AND THREATS:
Presented below is managements assessment of some key potential opportunities and threats associated with its business. The management intends to leverage such opportunities in an effective manner to optimize business advantages and is also focused to create effective mitigation strategies for all potential threats that could impact the business operations. A intense to leverage business development and growth with effective risk management policy and mitigation measures that the company has lay down in its risk management policy.
The company, on a continuous basis, scans the market for scalable opportunities and has over the past twelve months identified some key areas of growth opportunities. These opportunities are in the areas of Health Care and Insurance BPO Services, e-governance, e-learning. The company is making concerted efforts and investments to move up the value chain in its chosen markets and acquiring new competencies and services. It includes strengthening of domain knowledge, hiring highly talented sales and marketing managers, restructuring of businesses, project management and investments in new geographies. The company is experiencing significant traction from its existing customers and is receiving several enquiries from potential customers in its chosen markets. The company continues to strengthen and build relationships with its current and prospective customers as well as its global delivery model to ensure a low total cost of ownership for the customer.
Following are some of the major risks, which the management believes form a part of the companys business and the company seriously engaged itself to mitigate them.
Financial Risks - foreign currency rate fluctuations
Business Portfolio Risks - includes vertical domain concentration, service concentration, client Concentrations and geographical concentration.
Legal and Statutory Risks -includes contractual liabilities & statutory compliances
Competition Risks - New competitors may enter the markets in which the company operates
The company has created risk management team to study the risks involved / associated with the business and furnished to the management detailed analysis of various risks and mitigation of the same.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
Your company has in place adequate system of internal control commensurate with its size and nature of its operations to ensure that all assets are safeguarded and protected against loss from un-authorised use or disposition and that transactions are authorized, recorded and reported correctly, Management continuously reviews the Internal Control systems and procedures to ensure orderly and efficient conduct of business.
HUMAN RESOURCES DEVELOPMENT:
The company continues to benchmark and build its HR practices to help attract, retain and develop requisite talent to support its growth. HRs ability to support business strategy with its human capital strategy is an important determinant to the companys future business performance. The company has put in place robust recruitment processes and helped scale critical engagements in a very short span of time. The principle feature of the companys HR strength is its multipronged talent acquisition and retention strategy. These include talent acquisition and building the verticals with varied domain specialists, leadership development initiatives and successful implementation of comprehensive employee engagement plan which engages the body, mind and soul of the employees. HR plays a key strategic role to support the organization and its various ecosystems in achieving various goals and targets set by deploying best practices and measures.
CODE OF CONDUCT AND ETHICS FOR DIRECTORS AND SENIOR MANGEMENT:
The Company has laid down a code of conduct for all Board members and senior management personnel of the company. The code has been circulated to all the members of the Board and Senior Management and the compliance of the same has been affirmed by them.
|Place: Hyderabad||For and on behalf of the Board of Directors|
|Date: 02.09.2014||for CTIL LIMITED|
|(Formerly Known as Comp-u-learn Tech India Limited)|
|P V V Satyanarayana||P. Obul Reddy|
EXECUTIVE DIRECTOR CERTIFICATION:
A certificate from the Executive Director, relating to the Financial Statements of the company, is annexed to this report.
The Board of Directors
(Formerly known as Comp-u-Learn Tech India Limited)
I, the undersigned, in my capacity as the Executive Director of CTIL Limited ("The Company") to the best of our knowledge and belief certify that:
a. I have reviewed Financial Statements and the cash flow statement for the year ended 31st March, 2014 and that to the best of our knowledge and belief:
ii. these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading:
iii. these statements together present a true and fair view of the companys affairs and are in compliance with existing accounting standards, applicable laws and Regulations.
b. There are, to the best of our knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or voilative of the companys code of conduct.
c. I accept responsibility for establishing and maintaining internal controls for financial reporting and that I have evaluated the effectiveness of internal control systems of the company pertaining to financial reporting and I have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any of which they are aware and the steps they have taken or propose to take to rectify these deficiencies.
d. I have indicated to the auditors and the Audit Committee that there are no 1.Significant changes in internal control over financial reporting during the year.
2.Significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and
3.Instances of significant fraud of which they have become aware and the involvement therein, if any, of the management or an employee having a significant role in the companys internal control system over financial reporting.
e. I affirm that I have not denied any personnel, access to the audit committee of the Company (in respect of matters involving alleged misconduct) and we have provided protection to whistleblowers from unfair termination and other unfair or prejudicial employment practices.
f. I further declare that all Board members and senior managerial personnel have affirmed compliance with the code of conduct for the current year.
For CTIL Limited
(formerly known as Comp-u-learn Tech India Limited)
(P. Obul Reddy)
AUDITORS CERTIFICATE ON CORPORATE GOVERNANCE
The Members of
Formerly known as
Comp-U-Learn Tech India Limited,
We have examined the compliance of conditions of corporate governance by CTIL Limited for the year ended on 31st March 2014, as stipulated in clause 49 of the Listing Agreement of the said company with Stock Exchange.
The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to a review of the procedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of the corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the company.
In our opinion and to the best of our information and according to the explanations given to us, subject to:
i. Our reliance upon the certificate received by the company from its Registrar for the number of complaints received from the shareholders and the number of complaints resolved during the financial year and that there are no share transfers pending as at the year end as stated under serial number 5 under Committees of Board of the Companys report on the Corporate Governance;
ii. Our having relied on the representation of the management that there was no transaction of material nature with the management of their relatives that may have potential conflict with the interest of the company at large, as stipulated under Disclosure of the companys report on corporate governance:
We certify that the company has complied with the conditions of Corporate Governance as stipulated in the above-mentioned Listing Agreement.
We further state that such compliance is neither an assurance as to the viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.
|Place: Hyderabad||For BALAJI VISWANATH & CO|
|Date: 2nd September2014||CHARTERED ACCOUNTANTS|
|(B. Balaji Viswanath)|