Helios & Matheson Information Technology Ltd Directors Report.

DIRECTORS

To the members of the company your directors have great pleasure in presenting the annual report together with audited statement of accounts for the year ended September 30, 2013.

(consolidated) (standalone)
financial highlights 2012-13 2011-12 2012-13 2011-12
in Rs in Rs in Rs in Rs
net revenue from operations 658,53,48,871 452,05,81,457 448,95,05,679 308,39,19,980
less expenditure 510,97,28,244 351,72,78,952 331,32,81,507 232,52,57,512
operating profit (pbidt) 147,56,20,628 100,33,02,505 117,62,24,172 75,86,62,468
interest 28,54,39,350 20,51,99,592 27,14,32,642 18,38,28,194
profit before depreciation & tax (pbt) 119,01,81,278 79,81,02,913 90,47,91,530 57,48,34,274
depreciation 50,34,74,226 42,34,87,038 34,95,87,981 29,79,43,411
profit before tax 68,67,07,052 37,46,15,875 55,52,03,549 27,68,90,863
provision for taxation 15,89,29,966 6,74,85,866 13,98,74,629 5,53,15,987
profit after tax 52,77,77,086 30,71,30,009 41,53,28,920 22,15,74,876
provision for deferred tax 2,09,84,814 1,30,14,433 1,84,69,264 1,12,54,813
profit after deferred tax 50,67,92,272 29,41,15,576 39,68,59,656 21,03,20,063
balance brought forward 61,07,67,157 51,66,76,293 23,17,06,088 22,14,10,737
profit available for appropriation 111,75,59,429 81,07,91,869 62,85,65,744 43,17,30,800
appropriation
dividend paid 1,22,90,705
proposed dividend 13,20,61,645 4,30,42,192 13,20,61,645 4,30,42,192
dividend distribution tax 2,14,23,700 69,82,520 2,14,23,700 69,82,520
general reserve 15,00,00,000 15,00,00,000 15,00,00,000 15,00,00,000
balance carried forward in p&l a/c 80,17,83,378 61,07,67,157 32,50,80,399 23,17,06,088

Results of operation :

Consolidated

Income for the year ended September 30 2013 was Rs. 658.53 crore as compared to Rs. 452.06 crore for the previous year. net profit after tax was Rs. 50.68 crore vis-a-vis Rs. 29.41crore for fy 2011-12. earnings per share was Rs. 19.19 compared to Rs. 12.30 for the previous year.

Standalone

Income for the year ended September 30 2013 was Rs. 448.95 crore as compared to Rs. 308.39 crore for the previous year. net profit after tax was Rs. 39.68 crore vis-a-vis Rs. 21.03 crore for fy 2011-12. earnings per share was Rs. 15.03 compared to Rs. 8.80 for the previous year.

Share capital

The paid up share capital of the company as on September 30 2013 stood at Rs. 26.41 cr and the reserves and surplus Rs. 235 cr (206.18 cr in the previous year) and on consolidated level reserves and surplus Rs. 312.00 cr as against Rs. 268.29 cr in the previous year. the companys shares are listed on the national stock exchange (nse), bombay stock exchange (bse), and madras stock exchange (mse). the company has paid the annual listing fees to all the stock exchanges and there are no arrears.

Allotment of equity shares against exercise of option on convertible warrants

In terms of the approval given by the shareholders of the company at the annual general meeting held on 29.03.2012, and upon receipt of requisite statutory approvals, the board of directors of the company allotted a total of 25 lakh fully paid up equity shares of Rs.10 each in 2 equal instalments on 15.02.2013 and 07.06.2013, to g muralikrishna and v ramachandran, two of the promoters of the company, on preferential basis. the company does not have any convertible warrant outstanding as on date.

Dividend

Your directors are pleased to recommend an increased dividend of Rs. 5.00 per share on an enhanced paid up capital of Rs. 26,41,23,290. total dividend pay-out including dividend distribution tax is Rs. 15.35 cr.

Business and prospects

while the business focus continues to be on banking and financial services and insurance, healthcare and technology verticals, the company has taken the initiative to launch services in new horizontals such as big data and analytics, cloud services and mobile technology solutions.

according to IDC these new generation offerings are estimated to drive 90% of the growth in the IT space between 2013 and 2020. it is expected to have a potential to generate revenues in excess of a trillion dollars during this decade.

our company has set up a center of excellence for rolling out solutions on the mobile platform. we have launched our predictive analytics practice in May this year when the company had the privilege of ringing the nasdaq closing bell commemorating 15 years of listing of our US subsidiary on the nasdaq.

these bold initiatives not only present a humungous opportunity but also establish your company in the forefront of cutting edge technologies.

the company has long-standing relationships with large multinational corporations. focus on a few large clients has helped the company to strengthen the relationship and gain increased traction from existing clients.

the company works with eight of the top 20 global banks in the bfsi space. these clients include universal banks, investment banks, capital market institutions, insurance companies etc.

in the healthcare vertical the company caters to healthcare providers, healthcare payers and life sciences companies.

all these client organizations offer huge potential for the new age service offerings launched by the company.

knowledge services is yet another business segment that is non linear. the company made significant progress offering technology training to various corporates in India and overseas. social sector has been added to the basket this year. the company is associated with nasscom as an accredited training partner for skill development in the IT and ITES sectors. this initiative is an integral part of a national mission for up-gradation of skills. the national mission has an objective to cover 500 million persons under this program by 2022.

Subsidiary companies and consolidated financial statements

with the gradual easing of the global slowdown and with the US economy looking up, all the subsidiaries have performed satisfactorily during the year.

as per section 212 of the companies act 1956, the company is required to attach directors report, balance sheet and profit and loss account of the subsidiaries. the ministry of corporate affairs, government of India, vide its general circular no: 2/2011 dated 08.02.2011, has provided exemption to companies from complying with section 212, provided the board approves the proposal and such companies publish the audited consolidated financial statements in the annual report. accordingly, the annual report for 2012-13 does not contain the financial statements of the subsidiaries. the audited annual accounts and related information of the subsidiaries, where applicable, will be made available upon request. these documents will also be available for inspection during business hours at the registered office of the company at chennai.

Particulars of employees

as required by the provisions of section 217 (2a) of the companies act, 1956, read with companies (particulars of employees) rules, 1975, as amended, the names and other particulars of the employees are set out in annexure to the directors report. however, as per the provisions of the section 219(1) (b) (iv) of the companies act, 1956, the report of the directors is being sent to all the shareholders of the company excluding the aforesaid information. any shareholder of the company interested in obtaining such information may write to the secretary at the corporate office of the company.

vmoksha - arbitration status

as reported already, your company signed a definitive share purchase agreement (spa) to acquire 100% equity in three vmoksha entities based at bangalore, singapore and USA in the month of may 2005. however, the sellers tried to renege the spa and hence your company initiated arbitration proceedings.

arbitration proceedings were presided by honble justice mr.k.venkataswami, judge, supreme court (retd) as the sole arbitrator. arbitration proceedings were conducted over a period of two years spread over 34 sittings. the first sitting was held on 28.10.2006 and thirty fourth sitting was held on 28.06.2008 and 5 volumes of 1370 pages of documents were submitted before the arbitrator. the honble arbitrator posted the matter for pronouncement of award on 20.09.2008. at the request of the advocates of the respondents the award date was rescheduled to 29.09.2008. unfortunately, honble justice mr.k.venkataswami passed away on 26.09.2008 just 3 days before the revised pronouncement date.

as the company wanted to settle the issue in a legally valid manner, the company decided to continue the arbitration proceedings. hence, the company has filed a petition before the honble high court of madras seeking its directions for appointment of a new arbitrator for speedy disposal of the arbitration proceedings [ref o.p.no.336 of 2009]. the petition is pending before the honble high court for disposal.

based on its present knowledge of facts and as per legal opinion obtained, the current legal proceedings, in the opinion of your management, will not have a material adverse effect on the results / operations of helios and matheson.

Directors responsibility statement

pursuant to the requirement under section 217 (2aa) of the companies act, 1956, with respect to directors responsibility statement, it is hereby confirmed that:

in the preparation of the annual accounts for the financial year ended September 30 2013 the applicable accounting standards have been followed along with proper explanation relating to material departures.

the directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for the year under review.

the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with provisions of the companies act, 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

the directors have prepared the accounts for the financial year ended September 30 2013 on a "going concern" basis.

Directors

s.k patil retires by rotation at this annual general meeting and is eligible for election. suresh kumar r was appointed as additional director of the company at the board meeting held on 29.10.2013 and holds office upto the date of the ensuing annual general meeting. notice has been received from a member of the company proposing the candidature of suresh kumar r as a director of the company at the ensuing annual general meeting. necessary resolutions for approval of shareholders are proposed in the notice of the ensuing annual general meeting for the reappointment of s.k patil and appointment of suresh kumar r as directors of the company.

Conservation of energy, research & development, technology absorption, foreign exchange earnings and outgo

the provisions of subsection (1) (e) of section 217 of the companies act, 1956, read with companies (disclosure of particulars in the report of board of directors) rules, 1988, are set out in the annexure to this report.

Auditors

m/s.venkatesh & co., chartered accountants, chennai, retire at the ensuing annual general meeting and are eligible for reappointment. a certificate under section 224 (1-b) of the companies act, 1956, has been received from them.

Acknowledgement

your directors thank the clients, vendors, investors, financial institutions and bankers for their continued support for the companys growth. your directors place on record their appreciation of the contribution made by the employees at all levels, who, through their competence, hard work, solidarity, cooperation and support, have enabled the company to achieve rapid growth.

your directors thank the government of India, particularly the department of electronics, software technology parks- chennai and bangalore, department of commerce (mepz special economic zone) chennai, ministry of information technology, ministry of commerce, the reserve bank of india, the department of telecommunications, the state governments, and other government agencies for their support during the year and look forward to their continued support in the future.

for and on behalf of the board
place: chennai
muralikrishna g.
date : 29.11.2013
chairman & managing director

Annexure to directors report

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. your company constantly evaluates new technologies and invests in them to make its infrastructure more energy efficient. these measures have enhanced energy efficiency. as energy forms a very small part of the total cost, the impact on cost is not material.

Research & development

research & development of new services, designs, frameworks, and methodologies continue to be important to your company. this allows your company to reuse designs across projects, and thereby increase quality, productivity and profitability.

Technology absorption and innovation

provision of state of art communication facilities to all the software development centers and total technology solutions to its clients contribute to technology absorption and innovation.

Foreign exchange

the details of foreign exchange earnings and outgoes are given in notes 28 & 29.

for and on behalf of the board
place: chennai muralikrishna g.
date : 29.11.2013 chairman & managing director

Details of directors retiring by rotation and eligible for reappointment/appointed at the annual general meeting.

Name of the director sk patil suresh kumar r
date of birth 29.12.1961 05.01.1959
date of appointment 23.01.2007 29.10.2013
expertise in specific functional area s k patil has over 20 years of experience in IT. as an expert in setting up large e governance projects, his focus is to drive the benefits of information and communication technologies to governments and businesses in both emerging and established markets. patil holds an engineering degree and an mba from iim, ahmedabad. suresh kumar r is an advocate of 30 years standing, enrolled with the bar council of tamil nadu. suresh kumar r, is a dual degree holder in law and business administration and an alumnus of the prestigious lawrence school, lovedale. his areas of expertise include finance, corporate law, mergers and acquisitions, international contracts, arbitration, etc. suresh kumar r brings rich and varied experience to the board.
directorship held in other companies (excluding private & foreign companies one none
committee positions held in other companies none none
no. of shares held nil nil