Dhanus Technologies Ltd Directors Report

Your Directors are pleased to present the 18^th Annual Report together with the statement of audited accounts of the Company for the financial year ended on December 31, 2011.

Financial Highlights

The following table summarizes the financial highlights of your Company, on a standalone basis, for the financial year under review:

Particulars	Year ended 31st December, 2011	Year ended 31st December, 2010
	(12 months)	(18 months)
Total Income	53,65,07,714	119,29,85,522
Profit Before Interest, Depreciation and Taxes	7,26,35,079	39,83,74,913
Less: (a) Interest	1,87,82,500	4,30,58,343
(b) Depreciation	17,71,48,232	37,01,00,290
Profit/(Loss) Before Tax	(12,32,95,653)	(1,47,83,720)
Less: Provision for - (a) Provision for Current Tax	10,72,000	1,21,90,000
(b) Deferred Tax	(1,03,70,322)	(1,68,84,584)
Profit/(Loss) After Tax	(11,39,97,331)	(1,00,89,136)

Note: The figures for the current year are for a period of 12 months as against 18 months in the previous period and hence, are not comparable.

Financial Review

The turnover of the Company for the financial year ended 31^st December, 2011, reported a decrease of 55.03% from Rs. 11929.85 lakhs in the previous year to Rs. 5365.08 lakhs in the year under review.

The Company has reported a Profit before interest, depreciation and tax of Rs. 726.35 lakhs and after providing Rs. 187.83 lakhs towards interest, Rs. 1771.48 lakhs towards depreciation and adjusting Rs. 92.98 lakhs towards tax, the net loss amounts to Rs. 1139.97 lakhs.

Business Review

During the current financial year ended December 31, 2011, the businesses across all verticals met with a substantial setback on account of factors both external and beyond the control of the management and internal relating to issues such as marketing structure and reach, product pricing etc. Dhanus has, over the past two years, been trying to make efforts to reverse the downslide in business by attempting to restructure its businesses and salvage the Companys business clientele and marketing reach.

Telecom

With the Company facing a recession throughout the year under review, and on account of growing financial instability and economic downturn across various parts of the globe, more significantly in Europe, and making an impact in India, the tourism industry suffered substantially thus adversely influencing the overseas travels of Indians. The Companys telecom services were thus impacted as Indians traveling abroad happen to be the exclusive target customer segment in this vertical. V-tel continues to contribute a major share to the Companys top line. The Company continues to make efforts to arrest this negative trend by reviewing and drawing new plans both on the product and marketing front.

Telematics

The Companys telematics vertical brand Fleetrac showed a significant negative growth on account of recession in the transportation and automobile sector. The Company is having a relook at the Companys marketing strategies, client reach, pricing policies and strategies. Your Company plans to revisit its business model in this segment and review its financial viability and thereafter decide on its renewed launch.

IT/ITES

The marginal reversal in the recessionary conditions in the US did not do much in terms of reviving the fortunes of the outsourcing business of your Company. Morover, the anti-sourcing sentiments prevailing in the US also added to lack of fresh business from the US. This has affected the Companys main customer segment, and the anti-outsourcing sentiments prevailing in the US on account of large scale unemployment continued to impact this segment of Companys business this year too. The BPO business had sustained a negative growth in its business and the Company succumbed to pricing and margin pressures.

Trading Activities

The Company had forayed into a new business segment viz., Trading Activity in November 2010. The Company primarily was engaged in the trading of computer products, accessories and peripheral items. The Company started this business in the first week of November, 2010 and did robust business in this segment initially, although with nominal margin levels. However, the Company continued this business till June 2011 anticipating increased volume of business and also upward scalability in the profit margins. The Company however realized that it was not to happen and it was essentially a low-margin with not much of perceptible scalability and therefore decided to suspend this activity in the second quarter of the financial year under review till a comprehensive review of this segment of business and its viability is analyzed.

Current strategy:

The Companys primary aim is to be a global communications company, utilizing emerging technologies to provide convergent communication services. The business model of the Company revolves around its core competence i.e., Telecom & Networking.

The Company proposes to review its entire gamut of existing businesses, marketing structure and strategy and adopt a pragmatic approach in analyzing its ability to achieve a dedicated revival plan in each of these businesses.

The Companys business opportunities are undoubtedly high in various parts of the world wherever there is a perceptible presence of Indian diaspora.

Management Discussion and Analysis

A detailed report on Management Discussion & Analysis for the financial year ended December 31, 2011 as stipulated under Clause 49 of the listing agreement with the Stock Exchanges in India is provided as a separate chapter in this Annual Report.

Issue of Convertible Warrants

As mentioned in our earlier Report for the financial year 2009-10, your Company made firm financial arrangements to take advantage of business opportunities that may arise in future, as the Company believes that it needs to have an inorganic-growth approach till a self-sustaining financial strength is reached.

The Company therefore issued 15,00,00,000 Convertible Equity Warrants to select group of investors/allottees on February 21, 2011. Thereafter, on receipt of full consideration, your Company converted 8,32,68,333 Warrants into Equity Shares of equivalent amount on March 31, 2011 and the balance 6,67,31,667 Warrants into Equity Shares of equivalent amount on July 9, 2011.

Bonus Shares

Your Company decided to capitalize its existing reserves by issuing Bonus Shares to its Equity Shareholders in the ratio of 12:5 (i.e., 12 equity shares for every 5 equity shares held as on the Record Date). Your Company, after receiving the requisite approvals from the Stock Exchanges, successfully made the allotment of 40,30,62,312 Bonus Shares.

Public Deposits

Your Company has not accepted any public deposits.

Directors

In compliance with the provisions of the Companies Act, 1956 and in accordance with the Companys Articles of Association, Shri. G. Rathan Kumar and Shri. A.D. Sudhindra, Directors, retire by rotation at this Annual General Meeting scheduled on September 25, 2012 and, being eligible, offer themselves for re-appointment.

It needs to be mentioned here that the Company had seven Directors at the end of financial year 2009-10. However, one of the independent Directors expired consequent to which the strength of the Board reduced to six at the end of the financial year ended 31^st December, 2011. Amongst the remaining six, the resignation of two independent Directors was accepted by the Board in its meeting on 18^th March, 2012. In the same meeting, three Additional Directors were appointed bringing the strength of the Board to seven. The Additional Directors would come up for confirmation as Directors in the ensuing Annual General Meeting.

During the year and the intervening period post the closure of the financial year and the date of this Report, the following developments in the Board took place:

Shri. Darshan Suryakant Shah, Non-Executive and Independent Director of the Company resigned on February 24, 2012 and ceased to be a Director. His resignation was accepted by the Board in its meeting held on March 18, 2012.

Shri. R. Radhakrishna, Non-Executive and Independent Director of the Company resigned on August 9, 2011 and ceased to be a Director. His resignation was accepted by the Board in its meeting held on March 18, 2012.

Consequent to the untimely demise of Shri. S. Manoharan, Non-Executive & Independent Director, his name was removed from the Board in its meeting on May 14, 2011.

During the period between the end of the financial year 2011 and the date of this Report, Shri. Kumar Raichand Madan, Shri. U. Parthasarathy and Shri. S. Sriram were appointed as Additional Directors w.e.f March 18, 2012. They will hold office till the conclusion of the ensuing Annual General Meeting of the Company. The Board welcomes Shri. Kumar Raichand Madan, Shri. U. Parthsarathy and Shri. S. Sriram on board and looks forward to their active participation on various deliberations.

The Board appreciates the contributions made by Shri. Darshan Suryakant Shah, Shri. R. Radhakrishna and Shri. S. Manoharan during their tenure as Directors of the Company.

The Board of Directors inform the members that all the directors of your Company have confirmed that, in terms of Section 274(1)(g) of the Companies Act, 1956, they are not disqualified to act as directors of your Company.

Directors Responsibility Statement

Pursuant to the requirements of sub-section 2AA of Section 217 of the Companies (Amendment) Act 2001, the Directors confirm that:

(i) In preparation of the annual accounts, the applicable accounting standards have been followed and proper explanations have been provided for material departures, wherever applicable.

(ii) The Directors have 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 as at 31^st December, 2011 and the loss of the Company for the financial year ended 31^st December, 2011.

(iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companys Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) The Directors have prepared the annual accounts on a going concern basis.

Auditors

M/s. P.C. Acharya & Co., Chartered Accountants, the Statutory Auditors, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment. The Audit Committee and your Board recommend their reappointment as Auditors of the Company for a further period of one year and to fix their remuneration. They have furnished to the Company a certificate of their eligibility for appointment as auditors, pursuant to section 224 (1B) of the Companies Act, 1956.

The Board of Directors shall subsequent to their appointment determine the terms and conditions of their appointment, scope of work, and allocation of responsibilities such as statutory audit, internal audit, taxation, tax audit etc and to accordingly fix their remuneration.

Auditors Report

With regard to the qualifications and emphasis of matter contained in the Auditors Report of Dhanus Technologies Limited, our explanations are given below:

i. Note (b) and (c) of the 4^th para of the Auditors Report - Note 1.2 (a) and (b) of Schedule 1 & 2 - Notes to Accounts to the financial statements

The Company has four business verticals and has a large number of debtors and creditors as its business across various service verticals is of retail nature. Also, the Companys services and products have a wide geographical reach as well. Consequently, the reconciliation and control accounts of receivables and payables are not fully complete, although substantially covered. The Company however believes that non-reconciliation in such accounts will not have any serious and perceptible impact on the revenues and expenses recognized.

ii. Note (d) of the 4^th para of the Auditors Report

The Company has maintained a proper system of accounts. The Company confirms that the purported deviation from Accounting Standards prescribed under AS-6, AS-9, AS-10, AS-22 and AS-28 will in no way have any material adverse impact on the Profit & Loss Account and also the Asset Liability position of the Company. The Company shall however make extra efforts to bring the systems in line with the accounting Standards expected of the Company.

iii. Note (e) & (f) of the 4^th para of the Auditors Report

The Company agrees that reconciliation of Trade Receivables and Payables is yet to be fully completed. However, the Company firmly believes that non-reconciliation and control accounts of receivables and payables will not have any serious and perceptible impact on the revenues and expenses recognized as substantial and critical reconciliations have not provided any adverse indication or cause for concern.

iv. Note (g) of the 4^th para of the Auditors Report

The inability to quantify the value of current assets including debtors, loans and advances from a mark to market perspective will not have any material impact on the asset liability position of the Company. The Companys fixed assets being very large in number as it primarily comprises of high-value routers, switches, servers, computing systems, integrators etc., the Company is in the process of completing the physical verification of its fixed assets. The Company certifies that it fully owns the title to the assets and the cost of purchase and depreciation levied on them is accurate and in terms of generally accepted accounting principles. Kindly refer to Note 1.1 on Fixed Assets and corresponding write up on depreciation on assets.

v. Note (h) of the 4^th para of the Auditors Report

The Board agrees with the statement that the investment in M/s Borusan Telekom, Turkey is possibly irrecoverable. The Company however proposes to attempt recovering the initial advance given towards share purchase, although the Company agrees that the attempt may be an exercise in futility and accordingly appropriate steps in this regard would be followed to write off the investment after all possible efforts towards recovery are completely exhausted.

The Company disagrees with the view that the amount advanced to M/s Sreeven Infocom Limited is irrecoverable. Sreeven Infocom is a healthy company and the Company is in talks with the management of Sreeven Infocom to recover the amount advanced earlier.

Since the qualifications made by the Auditors in the Report on the Consolidated financial statements is similar to the ones made in the Standalone financial statements, the above explanations apply equally to those as well.

Audit Committee

The Audit Committee consists of three members namely Shri. G. Rathan Kumar, Justice (Retd.) Shri. S. Kalyanam and Shri. U. Parthasarathy, all of whom are independent. Shri. G. Rathan Kumar is the Chairman of the Audit Committee. All members of the Audit Committee possess sufficient knowledge and experience in the field of Finance and Accounts.

Subsidiary Companies

Dhanus Global Medicare Limited, India and Dhanus Technologies Inc., USA continues to be wholly owned subsidiaries of your company. The statement under section 212 of the Companies Act, 1956 along with a statement of additional information of subsidiaries is attached herewith.

Listing

The Equity Shares continue to be listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). Both these exchanges have nation-wide terminals and therefore, shareholders/investors are not facing any difficulty in trading the shares of the Company from any part of the country. The Company has paid the annual listing fee for the year 2012-13 to the BSE and NSE and the annual custodial fee to National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo.

Information as required 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, is annexed as an Annexure to this Report.

Particulars of Employees

In terms of the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975 as amended, there was no employee during the year drawing remuneration more than the stipulated amount in the said rules.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed compliance report on Corporate Governance systems and practices together with a certificate from the statutory auditors confirming compliance with the conditions of corporate governance stipulated in the said clause is annexed to this report.

The Board laid down a "Code of Conduct" for all Board members and senior management of the Company and the "Code of Conduct" has been posted on the website of the Company, www.dhanus.net.

Acknowledgements

Your Directors take this opportunity to place on record their sincere appreciation for the continued support and confidence reposed by the clients, business associates and the shareholders. The Directors also convey their appreciation to the employees at all levels for their enormous personal efforts as well as collective contribution.

	For and on behalf of the Board of Directors
Place: Chennai	Capt. D.S. Srinivasan	A.D. Sudhindra
Dated: August 18, 2012	Managing Director	Director

ANNEXURE TO THE DIRECTORS REPORT

Information 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, and forming part of Directors Report as under:

A. Conservation of Energy

The Operations of your Company are not energy-intensive. Adequate measures have however been taken to reduce energy consumption by using energy efficient computer terminals and by the purchase of energy efficient equipment incorporating the latest technology. As energy forms a very small part of the total cost, the impact on cost is negligible.

B. Technology Absorption

Your Company is constantly making efforts towards adoption, innovation and absorption of the latest technology. The Company continues to carry out Research and Development activities to enhance its capability and customer service. Your Company hopes that this thrust will bring in new and better products and upgrade the existing products.

Your Company will continue to invest in and adopt the best processes and methodologies suited to its line of business and long term business strategy. The company will continue to leverage on new technologies and also on the expertise available.

C. Foreign Exchange Earnings and Outgo:

The details of Foreign Exchange Earnings and Outgo are given below:

	Year ended 31.12.2011	Year ended 31.12.2010
a) Foreign Exchange Earnings	Nil	Nil
b) Foreign Exchange Outgo	Nil	Nil

D. Details under section 217(2A) of the Companies Act, 1956 for the year ended 31^st December, 2011

There was no Director or Key Managerial personnel drawing remuneration that would make them eligible for being mentioned under section 217(2A) of the Companies Act, 1956.

	For and on behalf of the Board of Directors
Place: Chennai	Capt. D.S. Srinivasan	A.D. Sudhindra
Dated: August 18, 2012	Managing Director	Director
Registered Office:
New No. 20/Old No. 6, First Floor
Sengunthar Street
Shenoy Nagar
Chennai - 600 030
Tamil Nadu, India

Statement in Pursuance of Section 212(3) of the Companies Act, 1956

Sl. No.	Name of the Subsidiary Company	Dhanus Global Medicare Ltd.	Dhanus Technologies Inc., USA
1.	Financial Year of the Subsidiary Company	30.06.2011	31.12.2011
2.	Holding Companys interest in the Companys Accounts	Rs. 2,81,34,500/-(28,13,450 Equity Shares of Rs.10/-each) 100%	Rs.9,54,73,560/-(22,64,90,000 shares of US$ 0.01 each)100%
3.	Net Aggregate amount of the Losses not dealt with in the Holding Companys Accounts a) For the subsidiarys financial year ended as stated above b) For the previous financial year of the Subsidiary company.	NIL	NIL
4.	Net Aggregate amount of the Losses dealt with in the Holding Companys Accounts.
	a) For the subsidiarys financial year ended as stated above	NIL	NIL
	b) For the previous financial year of the Subsidiary company.

 

Capt. D.S. Srinivasan	A.D. Sudhindra	R. Ramnath
Managing Director	Director	President (Corporate Affairs), CFO & Company Secretary
Place: Chennai
Date: August 18, 2012

Statement in Pursuance of Section 212(5) of the Companies Act, 1956

Statement of material changes which has occurred in respect of the following in the case of the subsidiary between the end of the financial year and that of the holding company in respect thereof.

Sl. No.	Particulars	Dhanus Global Medicare Ltd.	Dhanus Technologies Inc.
a.	Fixed Assets of the Subsidiary	Nil	Nil
b.	Investments in subsidiary	Nil	Nil
c.	Money lent by the subsidiary	Nil	Nil
d.	Money borrowed by the subsidiary for any purpose other than that of meeting current liabilities	Nil	Nil

For consolidation of the accounts of Dhanus Technologies Limited, the foreign subsidiary transactions are translate converted into Indian Rupees at Rs. 53.065 per US$ i.e., the exchange rate as on 31^st December 2011.

Capt. D.S. Srinivasan	A.D. Sudhindra	R. Ramnath
Managing Director	Director	CFO & Company Secretary
Place: Chennai
Date: August 18, 2012