ORG Informatics Ltd Directors Report

ORG INFORMATICS LIMITED ANNUAL REPORT 2010-2011 DIRECTORS REPORT To The Members, Your Directors submits the Annual Report of the Company along with the Audited Statement of Accounts for the financial year ended on 31.3.2011. 1. Financial Results: The Financial Results of the Company on Consolidated basis are summarized hereunder: Particulars 2010-11 2009-10 TRs. TRs. Income 1,657,929 2,130,764 Expenditure 1,545,787 1,935,962 Gross Profit 112,142 194,802 Interest and Fixed Financial Charges 41,718 166,294 Depreciation & Amortization 115,019 120,908 Tax 10,132 38,160 Prior Period Adjustments - - Net Profit (54,727) (130,560) 2. Dividends: Based on the Companys performance and considering the losses incurred by the Company in the previous financial years, your Directors do not recommend payment of dividend for this financial year. 3. Transfer to Reserves: Considering the performance of the Company in the year under review, the Board of Directors do recommend the amount of TRs. 634 for transfer to Bond Redemption reserve as required under section 117C of the Companies Act, 1956 read with General Circular No. 9/2000 dated 18.2000, However the Board do not recommend any amount to transfer to General Reserve. 4. Companys Performance: There is marginal improvement in the Companys performance during the year under review on standalone basis from the stage as reported in the Directors Report dated 18th August, 2011 and Directors Report dated 03rd September, 2011 for the financial year ended on 31st March, 2009 and financial Year ended on 31st March, 2010 respectively. The company has achieved consolidated revenue of TRs.1,657,929 and incurred losses of TRs.54,727 against revenue of TRs. 2,130,764 and incurred Losses of TRs.130,560 during the previous year. The caused delay in finalization of Annual accounts for the year under review is substantially due to the delay in finalization of financial statements of the company for the financial years 2008-09 and 2009-10 (due to the reasons mentioned in the report for said period) which were completed on 3rd September, 2011 only. The Board is now concentrating on completion of the delayed large System Integration projects to maintain business continuum, to develop customer confidence and to generate new System Integration and services business. We are now able to achieve major project milestones and expect to close the ongoing projects very soon so that old pending receivable may be collected and cash flow situation may eased. New business acquisition is a challenge given the cash flow situation which led to foregoing some new business in the recent past. The Company is parallelly pursuing restructuring of Bank liabilities and amicable settlement with vendors. 5. Subsidiaries: The company has four Wholly Owned Subsidiary Companies namely, Belgium Satellite Services S.A. (Belgium), Unified Technologies Pvt. Ltd., ORG Telecom Ltd., ORG Singapore Pte. Ltd. a) The Belgium Satellite Services, S.A. (BSS) has achieved the revenue of EURO 20.09 million equivalent to INR 127.27 Cr. and incurred marginal operational loss of EURO 0.02 million equivalent to INR 0.16 Cr. The company is performing well and will achieve new benchmarks in the time to come. b) Unified Technologies Pvt. Ltd. (TECHUNIFIED) the revenue generated by the company during the year under review is Rs.21.91 Lakhs and incurred losses of Rs.29.19 Lakhs. As reported earlier the Management is focusing on reorganizing the companys operations around its product portfolio and also diversifying into IT enabled services. c) ORG Telecom Ltd. (OTL): OTL is now our follow on subsidiary company as it become the subsidiary of BSS with effect from the financial year under review. The company has generated revenue of Rs. 104.35 Lakhs and incurred losses of Rs. 258.94 Lakhs. However as reported earlier BSS is now focusing on satellite services business opportunity in India through OTL as Special purpose vehicle. d) ORG Singapore Pte. Ltd. (ORG Singapore): There are no business operations during the financial year under review in the company. However your company is trying to explore the new business opportunity for this subsidiary like offshore IT enabled services etc. 6. Employees Stock Options Scheme (ESOS): Pursuant to permission granted by the shareholders of the Company to issue Shares under ESOS to its employees, your Board of Directors has formed an ESOS Committee, with its current members consisting of Mr. B.V. Suryakumar, Mr. R.L. Dube and Mr. Ketan K. Adhvaryu, Directors of the Company. Pursuant to the ESOS Scheme framed by the Company in accordance with the approval obtained from shareholders vide resolution dated August 30, 2003, the Company has got in-principle approval for issuance of 1176000 equity shares from the Stock Exchange, Mumbai. These shares could be issued by the ESOS Committee from time to time in accordance with the Scheme and SEBI Guidelines. The said ESOS Scheme was extended to the employees of Subsidiary Company i.e. ORG Telecom Ltd. also vide Special Resolution passed by the shareholders of the Company in their Annual General Meeting held on 30.8.2005. Following disclosures are being made in respect of the present ESOS Schemes and Options allotted pursuant thereto as per the requirement of Clause 12.1 of the SEBI (ESOS & ESPS) Guidelines, 1999: as may be thinks fit by the ESOS Committee. ESOS-II (2005) (I) Optional Granted 2,93,000 to be vested over a period of 4 years equally at the rate of 25% each year (II) Pricing Formula Par value of the share which is Rs. 10/- or Average of Weekly High and Low of the closing price of the share quoted on the National Stock Exchange of India Limited or Bombay Stock Exchange Limited where number of trading quantity of shares are higher during the period of last two months or as may be thinks fit by the ESOS Committee. (III) Total Options Vested 2,38,475 (IV) Total Option Exercised 82,275 (V) Total No. of Shares 82,275 as a result of exercise of Options. (VI) Total Option 20,250 carried to next year (VII) Total Options 1,90,475 Lapsed (VIII) Variation of terms N.A. except of Options inclusion of Subsidiary of employees of the Company (ORG Telecom Limited) and revision in Pricing Formula. (IX) Money realized by Rs.41,13,750/- exercise of Options (X) Total number of 11,76,000 Options approved by Stock Exchanges under the Scheme. (XI) Employee wise Details of Options : (a) Granted to Senior 2,04,000 Management (b) No. of Employees 16 Receiving 5% or more of Options out of the total Option granted in that year. ESOS-III* (2006)** (I) Optional Granted 4,46,000 to be vested over a period of 4 years equally at the rate of 25% each year (II) Pricing Formula Par value of the share which is Rs. 10/- or Average of Weekly High and Low of the closing price of the share quoted on the National Stock Exchange of India Limited or Bombay Stock Exchange Limited where number of trading quantity of shares are higher during the period of last two months or as may be thinks fit by the ESOS Committee. (III) Total Options Vested 2,79,250 (IV) Total Option Exercised 50,625 (V) Total No. of Shares 50,625 as a result of exercise of Options. (VI) Total Option 45,000 carried to next year (VII) Total Options 3,50,375 Lapsed (VIII) Variation of terms N.A. except inclusion of Options of employees of Subsidiary of the Company (ORG Telecom Limited) and revision in Pricing Formula. (IX) Money realized by Rs.31,38,750/- exercise of Options (X) Total number of 11,76,000 Options approved by Stock Exchanges under the Scheme. (XI) Employee wise Details of Options: (a) Granted to Senior 4,46,000 Management (b) No. of Employees 13 Receiving 5% or more of Options out of the total Option granted in that year. * Now, the 4 years vesting of Options under this trenches have been completed. * During the year under report, no option was exercised by any of the employees out of their carried forward Options. 7. Directors: Mr. Manoj Gupta, Managing Director of the company, who was appointed on 18th August, 2009 has resigned on 19th August, 2010 and then Board has appointed Mr. BV Surya kumar as Managing Director initially for a period of one (1) year with effect from August 19th, 2010 and re-appointed now for another two (2) years, subject to approval of shareholders and Statutory Authorities. The brief of changes in the non executive Directors of the Company during the period from 1.4.2010 to till date are as given below: Sr. Name of Directors Designation Date of Date of Remarks No. Appoint Resignation ment /Change of Designation 1. Mr. Kalyan Director 06.11.2009 21.06.2010 Resignation Mazumder 2. Brig. Jagjit Singh Director 18.08.2009 01.08.2010 Resignation Ahuja 3. Mr. Kartikeya Director 22.01.2007 11.04.2011 Resignation V. Sarabhai 4. Mr. Sushil Kumar Chaturvedi CEO & WTD 18.08.2009 12.05.2011 Resignation 5. Mr. B.V. Managing 19.08.2010 Continuing Surya kumar Director 6. Mr. R.L. Dube Director 06.07.2007 Continuing 7. Ms. Binu Mehta Director 19.08.2010 Continuing 8. Mr. Anmol Krishan Additional 12.05.2011 30.9.2011 Ceased Sekhri Director 9. Mr. Ompal Singh Additional 12.05.2011 30.9.2011 Ceased Chadha Director 10. Mr. Ketan K. Director 03.08.2011 Continuing Adhvaryu Note: Mr. Sushil Kumar Chatruvedi continues as Chief Executive Officer of the Company. Mrs. Binu Mehta and Mr. R.L. Dube retire by rotation and being eligible offer themselves for re-appointment has been re-appointed in the thirty fifth Annual General Meeting, 2011 held on 30th September, 2011. 8. Auditors and Auditors Report: The Sorab S. Engineer & Co., Chartered Accountants, who are the Statutory Auditors of the company, retires on the conclusion of Annual General Meeting, 2011 and are re-appointed as Statutory Auditors of the company till the conclusion of next Annual General Meeting. The attached Auditors Report to the members of the company for the period under review is self explanatory except Clauses referred herein below with clarifications/ comments of the board on the same for the consideration of the members. Clauses of Auditors Report: Clause-4: With respect to the contingent liabilities not provided for, the Board is of the view that all the items report are not required to make any provisions as the same are either subjudic, project milestone achieved or appeal preferred etc. as the case may be. Regarding cash crunch problem and redressal of the same kindly refer Point-4 of this Report above. Clause-5 (i): The provision of Rs. 161,700 made for fall in value of Investment in Unified Technologies Pvt. Ltd. was because this Software Development Company has suffered severely during the economic meltdown. Majority of employees had left the company. The Management is now focusing on reorganizing the companys operations around its product portfolio and also diversifying into IT enabled services. Clause-5(ii): Kindly refer Note No7, of the Notes to Accounts, schedule-22 of the balance Sheet for clarification on the reported item. Clause-5(iii): The Board is of the view that considering the business relationship with the such sundry debtors, the same is recoverable, may be with some reasonable deductions, which can not be ascertained at this stage. Clause-5(iv): The balance confirmation for Banks account in Afghanistan, where company was handing project during the year 2004-05 could not be obtained. Clause-5(v): The Company has taken all appropriate action to recover/adjust the reported amount from vendors, business associate companies. Clause-5(vi): The Board is of the view, that there is possibility of set off of carry forward CENVAT in future but this may be carry forward to the extent permitted by the provision of relevant Act. Kindly refer Note 10(a) of the Notes to Accounts, Schedule-22 of the Balance Sheet. Clause-5(vii): The High Court of MP has passed the Order, quashing the decision of MPSEDC to encash Tender Security submitted by the company. However the Court has given an opportunity to MPSEDC to issue a show cause Notice to the company before refund of such tender security and such show cause notice has been served to the company which has been replied by the company within the time provided. The Management is hopeful to recover said amount of TRs.25000 from MPSEDC. Clause-5(viii): Kindly refer Note No. 9, of the Notes to Accounts, schedule-22 of the balance Sheet for clarification on the reported item. Clause-5(ix): During the year under review, with the approval of shareholders, subject to approval of Statutory Authorities, the company has appointed Mr. BV Suryakumar as New Managing Director after resignation of Mr. Manoj Gupta as Managing Director on 19th August, 2010. The required statutory approval will be taken on removal of procedural constraints faced by the company with the Ministry of Corporate Affairs (online filing with MCA21). For further clarification kindly refer Note No20. Clause-5(x): The Management of the company in consultation with the Board and Audit committee are of the view that no provisions be made for the items reported there .Wherever appropriate they have been disclosed in the Contingent liabilities. Kindly refer relevant Note in the Notes to accounts for further clarification. Clause-6(iv) Kindly refer Note-7, 9 and 10 of the Notes to accounts, Schedule-22 of the Balance Sheet for clarification on the reported Items. Clauses of Annexure of Auditors Report: Clause-1&2: Considering the nature of business of the company, its not possible to physically verify the Inventories, Stock spare etc. at clients site. Clause-3(b): Interest free loan is given to its wholly owned subsidiary companies only. The company is negotiating with suppliers to waive off the Interest and commission claim made by them. Clause-4 & 7: The Board of Directors has noted the observation of the Auditors that the internal audit & control was not commensurate with the size and nature of the Companys business. The Board submitted that due to severe cash crunch in the company it could not done during last financial years and assures the members that immediate step will be taken to ensure that the internal audit & control will be commensurate with the business operation of the Company. 9. General: Particulars as required under Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in Report of Board of Directors) Rules, 1988 is appended herewith and forms part of this report. There were No employees who withdrawn the remuneration, during the financial year under review, exceeding the limits specified under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended from time to time. 10. Directors Responsibility Statement: Your Directors confirm that: i) In preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (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 at the end of the financial year and of the profit or loss of the company for that period; (iii) The directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities; (iv) The directors have prepared the annual accounts on a going concern basis. 11. Corporate Governance: The Report on Corporate Governance as required under Clause 49 of the Listing Agreement is given as an Annexure-II to this Report. A Certificate from Practicing Company Secretaries regarding compliance of applicable conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is also attached to this report. 12. Acknowledgments: The Board records its appreciation of the support which the Company has received from its bankers, customers, government organizations, overseas strategic alliance partners, staff and employees. The Board also appreciates the confidence reposed by the shareholders in the Company and its management. For and on behalf of the Board of Directors B.V. Surya kumar Binu Mehta Managing Director Director Place : Vadobara Date : October 5, 2011. Annexure To The Directors Report Particulars pursuant to Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988: CONSERVATION OF ENERGY: Although the Computer Services Industry as such is not an energy intensive industry, effort are being made continuously by the Company for the conservation of energy through improved operational methods and other means. Form of Disclosure of Particulars with respect to Absorption of Technology, Research & Development (R & D). FORM B: 1. Research & Development : Not Applicable 2. Foreign Exchange earnings/ : Rs. (TRs.) Outgoing Foreign Exchange Inflow : 28,357 Foreign Exchange Outflow : 21,655 Annexure-I: Management Discussion and Analysis Report: Introduction: ORG is currently engaged in the business of Telecom/IT Systems Integration, Managed Services, Satellite Communications, Software Services including AMC/FMS Services in IT and Telecom sector. The Company has been able to maintain its position as a major player in System Integration business in Government Domain with dominant market share for turnkey projects and make forays in satellite domain and content delivery. Major System Integration Projects have progressed to customers satisfaction resulting in Repeat business and extension of AMC and FMS contracts. While the impact of Global recession has been profound on domestic front, however ORG was insulated to some extent due to lower dependence on export business. However the company had to face severe cash crunch resulting in cash flow issues putting a strain on acquisition of new business. But ORG due to its resilience and dedicated staff managed to survive the crisis and focused on completing the ongoing contracts. Business Vertical REVIEW: Telecom/IT Systems Integration & Services: Industry structure and Developments: Indian economy was not insulated from the ramifications of Global meltdown, however Telecom vertical has been showing sustained growth and there is increased awareness that Telecom/IT are growth engines to boost productivity and competitiveness in the Industry. Government has realized rightfully and taken initiatives for using Technology to empower citizens through E- Governance, which has resulted in increased Telecom /IT spending by Corporate and Government sector alike. Governments E- Governance program has laid increased emphasis on the turnkey solution requirements, which has resulted in increased deployment of computing infrastructure and networks. A significant trend was increase in Data centers, Connectivity, and the last mile solutions. These have been historically the skill sets of ORG. Thankfully these initiatives of Government and Corporate sector together have opened up tremendous opportunities for System Integrators and Service provides. Opportunities and Threats: The initiatives taken by Government and Corporate sector and renewed emphasis on expanding IT/Telecom infrastructure to rural areas provide ideal target market for the company, which is historically established in the above space. The renewed emphasis and consolidation among its client base provides company an exciting opportunity to be able to expand its business and target higher profitability. Outlook: The Company had embarked on consolidating its position by focusing on acquiring in house skill sets ,solutions and service provision during the year which has resulted in acceptance of company as a one stop solution provided which is evident from the repeat business the company is able to attract and win. The new opportunities have promised a larger market share for the company. Risks and Concerns: Telecom/IT sector in ndia has multiple players both domestic and international operating in the market. There are continued competitive pressures on margins and sales. Additionally, cash flow remains a major constraint as ORGs ability to secure and execute large project profitably. Telecom: Industry Structure and Developments: Telecom sector in Indian Subcontinent, CIS, Africa and South East Asia continue to be under tremendous growth stage. With the Government initiative and Corporate emphasis has fuelled technological advances and newer service offerings there is a renewed growth in the systems requirement for servicing the growth. The main impetus is from the subscriber growth being witnessed in these markets which is driving the growth for equipments and services. Opportunity & Threats: Increasing public and private investment for satellite services in broad casting services (TV, Mobile Earth, Fixed Earth solution), Teleport Services (Carrier SCPC etc.) and SATCOM (Telecom conversion). Belgium Satellite Services SA (BSS) being among the top satellite service provides worldwide will be able to exploit these opportunities. Outlook: The Company has major projects under execution phase and is pitching for diversification in private sector with emphasis on scaling services business. Telecom segment and Services offering have shown tremendous growth and is on path to much higher numbers. Risk and Concerns: Increase in opportunities in Telecom/IT segment has attracted global solution provides and increased number of domestic players which has resulted in increase competition and lower margins. Additionally, cash flow remains a major constraint as ORGs ability to secure and execute large project profitably. Satellite Services: Industry Structure and Developments: Satellite services industry cover broadcast teleport services, SATCOM (Telecom conversions) and satellite teleport services. Satellite services market to reach amount USD14.8 billion by 2019 and more than 1200 satellites are expected to be lunched in next 10 years. With proliferation of HD and Digital TV the Broadcasting services as an area is looking up Europes industry is well placed to exploit these opportunities with numerous world cast broadcasters. Opportunity & Threats: Increasing public and private investment for satellite services in broad casting services (TV, Mobile Earth, Fixed Earth solution), Teleport Services (Carrier SCPC etc. ) and SATCOM (Telecom conversion). Belgium Satellite Services SA (BSS) being among the top satellite service provides worldwide will be able to exploit the opportunities. Outlook: The Company has plan for expansion and strengthen the penetration to increase the subscriber base within the Belgium and PAN Europe. The company has robust business plan to concentrate on customer satisfaction, explore business opportunities in Africa, strengthen tie with Asian Channels and market share maximization. BSS expects significant business growth with sustain profit margins. Risk and Concerns: The major concern for the company is completion on band with pricing and advancement in Technologies. Hence the Company is planning to concentrate on quality of services at competitive pricing. Software Services: Industry Structure and Developments: Software development and services has been and remains the key driving force in deploying IT services. It has gained impetus from the initiative taken by the Government for rolling out E-Governance solutions and Corporate initiative of increasing efficiency and productivity in business. The BFSI segment is gaining impetus with more and more financial solutions using IT domain to provide services to ever expanding customer base both in Urban and Rural India. Immense opportunities are opening up in Global markets by way of out soused software development. Opportunity & Threats: The Software services business of the company has being carried out through its wholly owned subsidiary Tech Unified, Which is a new venture for the company and started its operation in the third quarter of the fiscal year ended March, 2008. The company is making its strategy to grab the opportunities available within the Middle East and domestic markets focusing in BFSI segment. Outlook: The Company has plans for diversifying and building BPO business and providing managed services for software solutions. We envisage seeing some significant revenue growth and increasing in profit margin through this segment of business, as it compliments the Services business of ORG in Telecom/IT domain. The jobs which were outsource earlier can now be undertaken in house thereby providing one stop solution. Risk and Concerns: According to Industry reports new players are emerging in this segment both domestic and Global. There is increased pitch of developed countries not to outsource to ensure in house jobs is basically the risk and concern for the Companies business under the segment.