Enso Secutrack Ltd Management Discussions

ENSO SECUTRACK LIMITED ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY OVERVIEW: Retail space is witnessing tremendous growth potential world over. The hyper growth of Retail chains has thrown up many opportunities for the players in Retail Automation market. The tremendous growth pattern in the Retail segment will see a quantum jump in the opportunities for Automation which will require innovative product induction for ever growing market needs and will also generate expansion of customer support network across the geographical canvass of the country. In Banking Automation Sector, the multifold increase in customer base for banks will see the introduction of many different innovative products. The automation needs of banks are bringing newer fields of opportunities for companies. The Banking Automation is set to witness a substantial growth by way of introduction of self service terminals, which will be deployed at transaction points, which draw large volumes of customers. The ever jumping, cost graph, for these financial institutions is pushing them to deploy unmanned terminals for various non-interactive operations. This trend will be ushering in a new window of opportunities for companies involved in providing Banking Automation Solutions. Cash still remains the most traded commodity and has substantial role to play in requiring more automation support gadgets and the growth in Cash Handling Devices is not ruled out. Security & Surveillance presents vast opportunity not only in Retail and Banking but various other fields. For example, in Banking and Retail, most vulnerable areas are the transaction points, which need to be controlled and managed with speed and security. Ever increasing population and Terror threats have made Security , a must. COMPANY OVERVIEW: The Company is an ISO 9001-2000 certified public limited Company engaged in the marketing, manufacture and assembly of automated solutions products for Banks and Retail Applications at large. These range from simple electronic cash registers; note counting, fake note detector, strapping and bundling machines to fully integrated front & back office, Point of Sales Systems, Closed Circuit Television Systems, security and IP based surveillance systems etc. ESL has supplying its products to customers ranging from Banks to Corporate/Individuals. It has strong Channel Partner. ESL is the Member of International Security Industry Organization (ISIO) and keeps it abreast of the Latest Technology Electronic Security Solutions. ESL was the FIRST to bring State-of-the-Art Technology Samsung Brand Electronic Cash Registers to launch Indigenous Point of Sale, CASHTRON brand terminals to obtain RBI approved Technology Transfer for CASHTRON brand Currency Counting Machines. The Company has developed a track record for the completion of several projects up to the satisfaction of the esteemed customers. The company, already an established leader in supply of its equipment to Banking and Retail Industry looked out to venture into varied segments of business which had synergy with its already established class of business. However inspite of the difficult business scenario, the company successfully implemented various projects last year i.e. Vadodara City Surveillance System, IOCL Noida, DPW Container Terminal - Kochi, Jammu Railway, KRS Dam and VMS Bangalore. In addition to the company successfully completed the following projects: * MMTC Buildings CCTV * Cochin International Airport Ltd. * Goa Prisons-SADA Jail Surveillance * ATM Site Security & Surveillance for Dena Bank * ATM Site CCTV for Tata-IOB Bank Further, the following projects are under completion: HPCL LPG Bottling Plant Gujarat ATM Site CCTV for Tata-HDFC Bank ATM Site CCTV for Tata-UCO Bank These projects included whole range of products and services from concept to completion. The Banking segment remains the comprises prime customer base and with services network after revival is proving to be a strong point in favor of company, thus enabling the company to reclaim its top position as the most preferred vender by its customer in Banking Sector. The company looks at this segment of business as a quick growth driver which should provide the company a bigger platform in the sector. To extend its domain further in Banking Segment, the company has tied up with Talaris, UK to market their latest super Fake Note Detections machines model Ntegra, to cater to huge Cash Deposit counters in India in Banking and Retail heavy cash collection segment. Its experience through already executed projects will help it garner bigger share of market going forward. ESLs customer are major scheduled and private Banks pan India, SBI, ICICI, IOB, HDFC, Axis Bank, IDBI Bank, UBI, PNB, BOM, UCO, Dena Bank, Syndicate Bank, Karnataka Bank, SBT, SBBJ, CESC Kolkata, Reliance Energy, Vadodara Police, IOCL, Karnataka Police, Tata -TCBIL, DP World, Bangalore Police, etc. To recover from the loss making situation, the Company has been taking several measures. It is trying to reach out to the new customer base coupled with taking cost control measures. The Company has been able to reduce the losses to some extent iii the subsequent periods. The Company is now more watchful when it comes to the new initiatives and has the strategy in place to capture the new business segments with the available resources. ESL is now very hopeful to have fair levels of growth in future. BUSINESS STRATEGY: Be One Stop System Integrator from Concept to Completion who blends the right mix of Price, Technology and Awareness break conventional moulds and pioneer new technologies and their applications in hereto unexplored domains open up new vistas of business, generate revenues with better yields and expand the market without encouraging too much competition look beyond conventional and geographical boundaries. Step in as one and only high end integrator of state of the art technology for security solutions through in-house R&D, Collaborations or technology absorption Follow pro-active technological evolution and add state of the art products expand the presence across the Country. Target more canters with requisite professionals, particularly in B & C Class Cities with focus on Customer Satisfaction and path breaking products and services. KEY STRENGTHS OF THE COMPANY: * An Integrated Hardware & Solutions Company. * More than 15 years in existence. * Wide Network of over 65 Branches & Service Centers spread across India for effective Service Support. * More than 250 qualified Technical Personnel for efficient After-Sales Support. * In-House R&D Division manned by experienced Hardware & Software Engineers. * Over 100,000 installations of our products ranging from Corporate to Individuals. * ISO 9001-2000 Company - Latest Technology in Retail and Banking Automation. * Member of International Security Industry Organization- Latest Technology Electronic Security Solutions. * First to bring State-of-the-Art Technology Samsung Brand Electronic Cash Registers. * First to launch Indigenous Point of Sale terminals. * First to bring-in RBI approved Technology Transfer for Currency Counting Machines. COMPANYS PRODUCTS AND SERVICES: 1. RETAIL AUTOMATION PRODUCTS: * Electronic Cash Registers * Point of Sale Terminals * Digital Video Recorders and Close Circuit Televisions * Remote Digital Surveillances * Printers and Other Peripherals 2. BANK AUTOMATION PRODUCTS: * Currency Handling Devices * Digital Video Recorders and Close Circuit Televisions * Dynamic Queuing Systems * Talaris Counterfeit Detection and Note Sorters. 3. ELECTRONIC SURVEILLANCE SOLUTIONS: * CCTV - Digital Video Recorders * IP based Remote Surveillance Solutions * Security Alert Messaging System QUALITY AND TECHNOLOGY: QUALITY ASSURANCE: The Company enhances customer satisfaction by Continued Improvement of the process or activities, adhering to the Quality Management System with proactive Approach, Team Work and Optimum Involvement of all Cadres in Design, Development, Manufacture, Sales and Services. The Company is an ISO 9001 accredited Company. TECHNOLOGY STRENGTHS: The Company is an organization which keeps abreast of the latest technology. Its quest to stay ahead in the technology trends, it promotes various tie-ups with technology giants which finally gives it the technology edge. Companys three main strengths in terms of technology can be encapsulated as: * Availability of Latest State-of-Art Technology for all its products. * Strong Software Team to develop in-house Customized Software Solutions for Major Corporates and Individual Customers. * Well equipped R&D and Software Development Centre at Hyderabad with well experienced, skilled Team in Assembly Languages, Embedded Software etc. THREATS: * Competition from unorganized sectors of the market. * Adverse fluctuation in exchange rates which may affect the profitability/ Sales. * Government policies may effect the performance of the Company. * Intense Price war due to undercutting practices and increase in the number of small players at the entry level, in all its products. RISK MANAGEMENT FRAMEWORK: The Company has a Risk management framework in place, which comprises the identification of potential risk areas, evaluation of intensity, mitigation plans and procedures for the risk management and policies formulated both at the enterprise and at the operating level. The framework seeks to facilitate building a common understanding of the exposure to the various risks and uncertainties at an early stage, for timely response and their effective mitigation. INTERNAL CONTROL: The company has adequate internal control procedures commensurate with the size and nature of its business. These business control procedures ensure efficient use and protection of the resources and also compliance with the policies, procedures and statutory requirements. The internal control systems provide for well documented guidelines, authorization and approval procedures. The Company also carries out internal audit through an external agency. The prime objective of such audit is to test the adequacy and effectiveness of all internal controls laid down by the management and to suggest improvements. HUMAN RESOURCES: The good performance of the Company requires a disciplined, focused work culture and demands an on going effort to sustain an engaged workforce. To sustain in this challenging environment, the management values its human resources as one of its most valuable assets and actuate their talent by providing opportunities to develop themselves. The management believes that business cannot grow without utilizing the potential of its human resources. The management is committed to provide a conducive working environment to its employees, fully utilizing their potential and enhancing their skills through cross-functional exposure, training and development, sharing of information and experiences. The management believes in maintaining cordial and harmonious relations with its employees. The company works with a key Responsibility Area based review and recognition strategy that aligns efforts, while rewarding results. (Rs. In Lacs) S. PRODUCT VALUE % TOTAL No. 1) Retail Automation Products 117.95 5.82 2) Banking Automation Products 1289.99 63.63 3) Service Income 619.36 30.55 INTERNAL CONTROL SYSTEM AND ADEQUACY: Adequate and effective internal control systems are in place. These controls are periodically reviewed and discussed for correction/ implementation. PERFORMANCE ANALYSIS OF THE COMPANY: Discussion on Financial with respect to operational performance: (Rs. In Lacs) S. NO. PARTICULARS 2010-11 2009-10 REMARKS 1) Sales and Service 2027.29 2163.61 Downturn in the business Income all over the world effected the Company in a significant manner. Companys customers had cut down their buying, canceled order or they looked for alternative cheap products resulting in the reduction of revenues from sales and services. 2) Gross Margins 43.81% 32.57% Gross Margins of the company have improved consequent by reducing the material cost 3) Operating Margins 1.82% (8.30%) Admin & remuneration expediter has reduced resulting in improving Operating Margin 4) PAT/Net Sales (4.95 %) (27.96%) Operating Profit have been eroded by the finance costs which constitutes 5.04% of revenues from sales and service. The Company is hope full of coping this burden during the Coming financial year by increasing operational efficiency at each level of operations. MATERIAL DEVELOPMENT IN HUMAN RESOURCE/INDUSTRIAL RELATIONS, INCLUDING NUMBER OF PEOPLE EMPLOYED: S. NO. LOCATION/DEPARTMENT ENDING OF THE YR. BEGINNING OF THE YR. 1) Corp Office 36 40 2) Logistics 11 14 3) Branches 220 249 TOTAL 247 303