indus networks ltd Directors report

INDUS NETWORKS LIMITED ANNUAL REPORT 2009-2010 DIRECTORS REPORT Dear Members, Your Directors have pleasure in presenting you the Thirteenth Annual Report of your Company together with the Audited Accounts for the year ended 31st March, 2010 comprising of 12 months from 01.04.2009 to 31.03.2010. Companys Performance: Your Directors hereby report that the Company has achieved a turnover of Rs.9099.75 akhs upto 31.03.2010 consisting of twelve (12) months, as against the turnover of Rs. 4032.48 lakhs during the previous financial year ended 31.03.2009 consisting of twelve (12) months. The highlights of the financial results are as follows:- (Rs. in lacs) Particulars 2009-2010 2008-2009 From 01/04/2009 From 01/04/2008 To 31/03/2010 To 31/03/2009 (12 Months) (12 Months) Total Income 9099.75 4032.48 Total Expenditure other than Interest 9065.92 4212.42 Interest 11.86 23.47 Total Expenses 9077.78 4235.89 Profit/(loss) Before tax 21.96 -203.40 Provision for tax - Current Year Liability 3.75 17.75 - Deferred Tax Liability 16.69 -86.89 - Fringe Benefit Tax - 1.61 Profit/(loss) After tax 1.51 135.88 Amount brought forward 27.00 405.95 Balance carried forward 271.59 270.07 Review of Operations: Growth in Revenue and Profit During the year under review, your company recorded a total income of Rs. 9099.75 lakhs, compared to Rs. 4032.48 lakhs in the previous financial year, which represents a 3.84% growth. The Company incurred a net Profit Rs1.51 akhs as compared to the net loss of Rs. 135.88 lakhs in the previous year. Reserves and Surplus: (Rs.in Lakhs) Particulars 2009-10 2008-09 Reserves and Surplus 911.47 909.96 Fixed Deposits: The Company has not accepted any fixed deposits and the provisions of Section 58A of the Companies Act, 1956 are not applicable. Personnel: Information in accordance with Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, is not applicable since none of the employees are receiving the remuneration as mentioned in the said section. Directors: Shri T.Srinivasa Rao retires by rotation at the ensuing Annual General Meeting and, being eligible, offer himself for re-appointment. Brief profile of the retiring Director, including areas of his expertise and other details, is explained in the Notice convening the ensuing Annual General Meeting. Listing of Companys Securities: Your Companys shares are currently listed on Bombay Stock Exchange Limited. Dematerialization of Shares: Your Companys shares have been made available for dematerialization through the National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Directors Responsibility Statement: Your Directors state:- a. that in the preparation of the annual accounts for the year ended 31 st March, 2010 applicable accounting standards have been followed alongwith proper explanation relating to material departures. b. that they had selected such accounting policies and applied them consistently and made judgements and estimates that are 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 or loss of the Company for that period. c. that they had taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities. d. that they had prepared the annual accounts for the year ended 31st March, 2010 on a going concern basis. Auditors: The Companys Auditors M/s Kumar & Giri, Chartered Accountants, Hyderabad, who retire at the ensuing Annual General Meeting of your Company, being eligible offers themselves for reappointment. Your Board of Directors recommended the appointment of M/s Kumar & Giri, Chartered Accountants, Hyderabad, as Statutory Auditors of your Company. Your approval for such appointment is solicited. Subsidiaries: During the year under review, the Company has closed its wholly owned subsidiary named M/s INL Software Trading Private Limited under Section 560 of the Companies Act, 1956 , since the Company has not carried on any business activity during the period from the date of its Incorporation. As at the date of Balance Sheet, the Company has no subsidiaries.. Corporate Governance: A report on Corporate Governance along with Auditors certificate on compliance with the conditions of Corporate Governance as stipulated in Clause 49 of the listing agreement, is provided elsewhere in the Annual Report. Management Discussion and Analysis Report: Management Discussion and Analysis Report is provided elsewhere in the Annual Report. Conservation of Energy, Research and Development, Technology Absorption, Foreign Exchange Earnings and Outgo: Information pursuant to 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 is not furnished since the operations of the Company are not energy intensive. However, the Company has endeavoured to conserve energy consumption wherever feasible. Technology absorption, Adaptation and Innovation: The Companys business demands continuous efforts and adaptation to changing technologies to stay competitive in the rapidly changing world. Significant efforts have been made by your Company towards constantly absorbing, adapting and deploying new technologies. These are expected to give substantial benefits in the future. Foreign Exchange Earnings and Outgo: Particulars 2009-2010 2008-2009 Travelling expenses Nil Nil Foreign Exchange Earnings - Rs.66,81,236 Foreign Exchange Outgo Rs.280465081 Rs.197793593 Explanation to Auditors Report: The Company is regular in payment of statutory dues with the concerned authorities except filing of Income Tax Returns for the Assessment years beginning from 2001 -02 to Assessment year 2010-11. Your Directors have taken note of the situation and efforts are being made to see that Income Tax returns for the above years will be filed at the earliest. Acknowledgements: The Board of Directors of the Company acknowledges its sincere appreciation to the Government, Bankers, Financial Institutions, and others for their kind support. On behalf of the Company, the Board of Directors thanks the Employees for their valuable efforts and the Shareholders for their continuing faith in the Company. BY ORDER OF THE BOARD PLACE: HYDERABAD K. SUDHIR P.M. MADAN MOHAN DATE : 30.08.2010 MANAGING DIRECTOR DIRECTOR MANAGEMENT DISCUSSION AND ANALYSIS 1. Indian IT 2009-10 Industry Outlook: The year 2009-2010 was been very challenging for the entire Indian it services industry. With customer it spending staying mostly flat or showing a decline, the focus among client organizations was on driving efficiencies into their existing it systems, and pursue projects that higher levels of guaranteed return on investments and quicker payback. According to NASSCOM, the IT industry growth rate for financial year 2009- 10 has been estimated at 5.5 percent. However, for the next financial year, 2010-11, NASSCOM has given healthier projections for it services exports to grow between at 13 percent to 15 percent. They have forecasted the Indian market to grow between 15 percent to 17 percent. Customers perception of outsourcing has undergone a distinct and perceptible change.. They are increasingly looking at outsourcing as a tool to meet their ever changing and dynamic business environment. It budgets are subject to high levels of scrutiny to ensure alignment to their overall business strategy. Customers are seeking partners with mature processes, financial stability and a demonstrated track record in not only delivering cost savings but also those who show sustained and continuous improvements in productivity. 2. Opportunities and Threats: In every challenge lies an opportunity. Todays enterprises are looking for solutions that can help them reduce their operational cost and derive maximum value from their it spend. According to industry analysts like forrester, enterprises are looking for help making the move from a time & material model of engagement to a managed services model which not only help in driving down costs but also ensures that the projects are more outcome oriented. The industry has been talking about this changed business, engagement and pricing models for some time now. However, they are fast becoming a reality. Further, enterprises are prioritizing at projects that involve application consolidation / rationalization and those which are collaborative and high impact solutions that enhance productivity. In the customer segment of software product companies who outsource their product development to offshore outsourcing companies, there has been a growing preference for engagement models that align their costs with activity levels (output). We have seen an increased level of activity among product companies that are relatively new to off shoring - driven by the need to compete in a challenging economy. The financial upheaval that hit the developed markets last year threw up a risk which the industry was not really exposed to earlier i.e. customer sustainability. Constantly changing business priorities, mergers, acquisitions and consolidations of companies require it service providers to be quick and deliver according changing situations. Companies which are slow to react will get negatively impacted by risks on account of failed projects, unhappy customers and in extreme cases customer delinquencies. Further, with costs of delivery from near shore locations closing up with that offshore, emergence of these centers coupled with protectionist steps taken by developed economies faced with the recession could threaten the growth prospects of this sector. 3. Business Outlook: The Company during the year 2009-2010 has achieved a turnover of Rs. 9099.75 lakhs. During the current year, the Company is expected to achieve better results with an increased growth rate in comparison to previous year. 4. Internal Controls and their adequacy: The Company has suitable internal control systems and processes in place for the smooth conduct of its businesses. The Company maintains a system of internal controls designed to provide reasonable assurance regarding the Effectiveness and efficiency of operations and for safeguarding the assets of the Company and for ensuring appropriate recording and reporting of financial information for ensuring reliability of financial controls and for ensuring compliance of applicable laws and regulations. 5. Discussion on Financial Performance with respect to Operational Performance: A. Financial Conditions: Share capital:- The authorized share capital of the company as at 31st March 2010 is Rs.2500 lakhs divided into 250 lakhs Equity shares of face value of Rs.10/- each. The Share Capital of the Company consists of only Equity Shares. As on March 31, 2010, the issued, subscribed and paid up capital of the Company stands at Rs. 650 lakhs consisting of 65,00,000 Equity Shares of Rs.10/- each fully paid-up. Reserves & Surplus: The Reserves and Surplus of the Company as an 31st March 2010 stands at Rs.911.47 lakhs. Loan funds: In Rs Lakhs Particulars 2009-10 2008-09 Secured Loan Nil 28.98 Unsecured Loan 5464.37 3268.90 Total 5464.37 3297.88 Fixed assets: Gross Block of Fixed Assets stood at Rs. 1726.31 lakhs and the net block stood at Rs. 873.83 lakhs as at 31st March 2010 compared to Rs. 2646.547 lakhs and Rs. 659.321 lakhs as at 31st March 2009 respectively. Investments: Investments as at 31st March, 2010, amounted to Rs. 1145.00 lakhs as against Rs. 0.99 lakhs as at 31st March, 2009. Current Assets: Sundry debtors Increased from Rs. 2760.57 lakhs as on March 31, 2009 to Rs.7030.98 lakhs as on March 31, 2010 Cash and Bank Balances Decreased from Rs. 30.34 lakhs to Rs2.42 lakhs. Current liabilities and provisions: Current liabilities and provisions have increased from Rs. 10538.06 lakhs as on March 31, 2009 to Rs. 6185.23 lakhs as on March 31, 2010. B. Results of operations Income: Income from operations for the year was Rs. 9099.75 lakhs against Rs.4032.48 lakhs recorded in the previous year which represents a growth rate in income of 3.84%. Expenditure: The manpower cost for the year was Rs. 39.54 lakhs as against Rs. 72.26 in the previous year. Selling and administrative expenses for the year was Rs.263.54 lakhs, as compared to Rs 196.98 lakhs incurred in the previous year. The finance expenses increased from Rs. 9.11 lakhs in the previous year to Rs. 23.46 lakhs for the year ended March 31, 2010. The company provided Rs. 852.48 lakhs for depreciation compared to Rs.1987.21 lakhs that was provided in the previous year. The company has made a provision for current tax of Rs.3.75 lakhs and fringe benefit tax of Rs.Nil lakhs for the year ended March 31, 2010. Other Income: Other income earned was Rs. 9.66 lakhs against Rs. 0.006 lakhs earned in the previous year. Net Profit: During the year the Company incurred a Net Profit of Rs 1.51 lakhs as against net loss Rs. 135.88 lakhs recorded in the previous year. Liquidity: The liquidity of the company was comfortable throughout the year 6. Segment wise performance and Geographical Information: The Company provides IT Services globally across various industry and geographical segments. The industry wise, the geographical wise customers risks will differ. Due to stiff competition prevailing in the market, there is marginal revenue growth in manufacturing and other industrial categories while the trend is not so in software and IT enabled services. In terms of geographical segments, revenue growth on export front has shown stable growth although the domestic revenues have considerably fallen compared to previous year. A detailed segment wise profitability statement is presented elsewhere in the report. In view of the emerging competitive trends, despite the spurt in demand for IT products and services, the margins are falling, requiring the company to cut down operating costs and adapt improvements in the range of services to sustain and thrive in the market. 7. Human Resources Development: Your directors are happy to report that the industrial relations have been extremely cordial at all levels throughout the year and your Company continues to develop industry leading HR practices and has conducted a number of initiatives for recruiting, training and retention of high quality manpower resources.