Enso Secutrack Ltd Directors Report

ENSO SECUTRACK LIMITED ANNUAL REPORT 2010-2011 DIRECTORS REPORT Your Directors take pleasure in presenting their 20th Annual Report and Audited Accounts for the Financial Year 2010-11. 1. FINANCIAL HIGHLIGHTS: (Rs. in Lacs) PARTICULARS 2010-11 2009-10 Income 2042.98 2180.70 Operating Profit (101.19) (607.33) Profit after tax (101.19) (609.68) 2. OVER VIEW OF PERFORMANCE DURING THE YEAR 2010-2011: The Company could achieve a turnover of Rs. 20.43 Crores during 12 months ending 30 September, 2011 with net loss of Rs. 1.01 Crores when compared to turnover and net loss of Rs.21.81 Crores and Rs. 6.10 Crores respectively during the 12 months ended 30th September, 2010. 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 in 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. 3. DIVIDENDS: The Board has not recommended any dividend for the year 2010-11, as the company has made loss during the financial year under review. 4. PUBLIC DEPOSITS: Your Company has not accepted any deposits from the public during the year. 5. DIRECTORS: Mr. Hanuman Mai Tater & Mr. Pradeep Chauhan Directors of the company, retire by rotation at the forthcoming Annual General Meeting and being eligible to be re-appointed, offer themselves for re-appointment. Mr. Amit Datta Amiya Majumdar has resigned as director from the company. The Board acknowledges its appreciation for the services rendered by him during his tenure. 6. DIRECTORS RESPONSIBILITY STATEMENT: Your Directors report that:- i. In the preparation of the Annual Accounts, the relevant and applicable accounting standards have been followed along with proper explanation relating to material discrepancies if any. ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent in order that the financial statements reflect a true and fair view of the state of the affairs of the Company at the end of the financial year and of the loss of the company for the year. iii. The Directors have taken proper and sufficient care for adequate internal control and maintenance of accounting records in accordance with the provisions of the companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. iv. The Annual accounts have been prepared on a going concern basis. 7. REPORT ON CORPORATE GOVERNANCE: Report of Corporate Governance pursuant to Clause 49 of the Listing Agreement entered into with the Stock Exchanges, is given as a separate statement in the Annual Report. A certificate from Puttaparthi Jagannatham & Co., company secretary, relating to compliance with the requirements of Corporate Governance is also given separately in this report. 8. MANAGEMENT DISCUSSIONS AND ANALYSIS: The Management Discussion and Analysis Report, which gives a detailed account of operations of your Company and the market in which it operates, including initiative taken by the Company to expand its business and in areas such as human resources, and risk management, forms a part of this Annual Report. 9. AUDIT COMMITTEE: Audit Committee has been reconstituted with the following members: 1) Mr. Kanhaiya Lai Bothra 2) Mr. Rabi Paul 3) Mr. Pradeep Chauhan 10. AUDITORS: M/s R Kabra & Co., Chartered Accountants retire at the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for re- appointment. The Company has received a certificate from the Auditors to the effect that their appointment, if made will be in accordance with the provisions of Section 224(1B) of the Companies Act, 1956. 11. AUDITORS OBSERVATIONS: Your Directors noted for future guidance the observations of Auditors, in the Auditors Report. Qualifications & Response to Auditors Report: Para IV, Note no. 1. regarding contingent liabilities: The same will be taken into account when it gets crystallize. Note no.2, Sales Tax Deferment: The Company was facing sevier financial crises as such could not pay the sales tax deferment amount. The Company is willing to pay the same very shortly. Para IV, Note No.3 (a), (b) and (d): During the previous year 2008-09, the Company has issued Foreign Currency Convertible Bonds (FCCBs) amounting to USD 12 millions in the month of May 2008. Accordingly sum incurred in connection with the issue of said FCCBs has been adjusted against the Securities Premium Account in terms of Section 78 of the Indian Companies Act, 1956. It may be noted that the Accounting Standards, were intended to be in conformity with the provisions of applicable laws. However, if a particular accounting standard is found to be not in conformity with such law, the provisions of the said law will prevail and the financial statements shall be prepared in conformity with such law. Para VI. Note No. 3(c), 4,5 and 6: Management is of the opinion that the said investment in the subsidiary M/s Enso Global Securities Ltd. requires no provisioning for diminution. With regards to treatment of amount invested in the said subsidiary as Share Application Money, the same shall be treated as Investment on finalization of the books of the subsidiary when the subsidiary treats the same as its Capital. Due to operational reasons delay has taken place in finalizing the accounts of the subsidiary. Now, with all the details available, the existing team is in the process to compile the accounts. Further, the accounts of the subsidiary shall be finalized as per the regulations prevailing in Mauritius, where the subsidiary is incorporated. Note 7(a)(b)(c)(d)(e) & (f): It may be noted that the Company despite its best efforts, due to cash crunch as explained above, was not regular in payment of statutory dues. The Company is trying to take all possible steps to pay undisputed outstanding statutory dues. Note No. 9: The company is covered under group gratuity scheme of LIC and the necessary payments in this regard have been paid to LIC. Employees Benefits are accounted for as and when paid. Please note that during the year no instance of dispute has arisen in the Company. The Board now proposes to implement the AS-15and take necessary independent advisory services for determination of necessary facts and figures. Note No. 11: It may be noted that management is taking necessary steps to realize the amount due from debtors & hence no provision was made for doubtful debts during the year. Note No. 16: It may be noted that, the individual balances of Sundry Debits and Credits are confirmed in some cases. Most of the customers of the Company are Banks, Govt. Departments / Undertakings, and similar organizations and Company has not faced any problems so far in recovering any of the dues from such customers. 12. REPLY TO AUDITOR OBSERVATION ON CORPORATE GOVERNANCE POINT WISE: The transactional value is minimal and not substantively material in nature, however, the Accounts of the subsidiary company are being obtained. 13. INDUSTRIAL RELATIONS / HUMAN RESOURCES: The Board desires to place on record its appreciation for the support and co-operation that the company received from suppliers, from retailers, from banks and others, associated with the Company. The Company has always looked upon them as partners in its progress and has happily shared with them the rewards of growth. It will be the Companys endeavor to build and nurture strong links with trade based on mutual respect and co*operation with each other. The Directors wish to place on record their appreciation to employees at all levels, for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enable the company to remain at the forefront of the industry, despite increased competition from several existing and new players. 14. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: The information required under Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the report of the Board of Directors) Rules, 1988 with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is appended hereto and forms part of this Report under Annexure 1. 15. PARTICULARS OF EMPLOYEES: During the year under review, none of the employees were in receipt of remuneration in excess of the limits prescribed under the Section 217 (2 A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975. 16. ACKNOWLEDGMENTS: The Directors would like to thank employees, shareholders, customers, dealers, suppliers, bankers and all other business associates for the continuous support given by them. For and on behalf of the Board Place: Hyderabad Mr. Pradeep Chauhan Mr. Hanuman Mal Tater Date : 14/11/2011 Whole Time Director Director ANNEXURE TO THE DIRECTORS REPORT: ANNEXURE - 1 DISCLOSURE OF PARTICULARS IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO AS PER SECTION 217(1) (e) OF THE COMPANIES ACT, 1956AND THE RULES MADE THEREIN AND FORMING PART OF THE DIRECTORS REPORT FOR THE YEAR ENDED 30th SEPTEMBER, 2011. (A) CONSERVATION OF ENERGY: The operations of Company are not energy intensive. However energy conservation is priority area for the Company & Company is taking various measures to make optimum use of the energy. Various training programs were also conducted across the organization to increase the awareness for reduction in energy consumption. (B) 1. TECHNOLOGY ABSORPTION & RESEARCH AND DEVELOPMENT: Technology absorption of your Companys products is on a continuous basis, based on the R&D efforts of your Company. Your Company makes special efforts to identify customer needs processes, etc. for developing innovative products and market the same. New technologically advanced products such as Touch Screen POSS, CPDT, Touch Screen Kiosks for the Rural Banking Sector, IVS, RS Kiosk Terminals, etc. are being offered to the ever dynamic markets. (B) 2. IMPACT OF MEASURES TAKEN: The above measures have helped the Company in offering state-of-art technologically advanced products for transaction automation, which mainly happen in the Retail and Banking Sectors. Your Company has been able to judge the pulse of the market and been able to react very quickly by offering products, which are way ahead of its competitors. This has placed your Company in a pole point position. (C) FOREIGN EXCHANGE EARNINGS/OUTGOINGS: Earnings in foreign currency : - Nil - Expenditure in foreign Currency : 185.21 Lacs (Purchase of raw materials, goods, spares, Foreign travel, R&D etc.) For and on behalf of the Board Place: Hyderabad Mr. Pradeep Chauhan Mr. Hanuman Mal Tater Date : 14/11/2011 Whole Time Director Director The details pertaining to Mr. Pradeep Chauhan & Mr. Hanuman Mai Tater required to be provided pursuant to the requirements of Clause 49 of the listing agreement Annexure - A 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