Pentasoft Technologies Ltd merged Directors Report

PENTASOFT TECHNOLOGIES LIMITED ANNUAL REPORT 2007-2008 DIRECTORS REPORT Dear Members,Your Directors take pleasure in presenting the Thirteenth Annual Report together with the Audited Accounts for the year ended 31st March 2008. 1. Financial Highlights (Parent Company) (Rs. in Crores) Details 2007-08 2006-07 Total Income 8.84 11.81 Profit before Interest, Depreciation and Tax 1,97 2.66 Interest and finance charges - - Depreciation 1.28 1.64 Profit Before Tax 0.68 1.02 Provision For Tax - - Deferred Tax (Liability)/ Asset 0.04 0.62 Profit after Tax 0.72 0.40 Reserve and surplus 48.34 86.64 2. Business Performance The total income for the financial year ended 31st March 2008 is Rs.8.84 Crores as compared to Rs. 11.81 Crores for the previous year. The net profit stood at Rs. 0.73 Crores compared to Rs. 0.40 Crores previous year. Compared to the last year, there has been reduction In turnover due to recognition of revenue on net billing basis. However, the Profit After Tax has been higher due to cost saving measures adopted by the company. During the year, the company has sold its property at Hyderabad and the proceeds settle the loan availed from the Kotak Mahindra Bank partly. The Company is negotiating with Axis Bank for settlement of facilities availed on one time settlement basis. During the year the Company has transferred a sum of Rs.39.22 Crores from the Accumulated Profits to Contingency Reserve Account. The same has written off Rs.37.15 crores of capital work in progress against contingency reserve due to obsolescence of the software developed. Your company is a 1000,6 EOU under STPI scheme valid till 2010. 3. Dividend Your Directors do not recommend any dividend for the financial year 2007-08 to conserve cash resources for settlement of its liabilities. 4. Subsidiary During the year your Companys wholly owned subsidiary M/s Esoftcom (Mauritius) Limited has done moderate business of Rs 6.27 Crores compared to last years turnover of Rs 12.54 Crores. 5. Fixed Deposits Your company has not accepted or invited any fixed deposits from the public. 6. Contingent Liabilities (Income Tax) The liability on account of Income Tax from Ay: 2001-02 WAY: 2005-06 amount of Rs. 110.20 crores. The company has gone on appeal in these cases. For the AY: 2003-04 the company has got relief to the tune of Rs. 14.47 crores and the liability becomes Nil. On similar lines the company anticipates to win the appeals and liability will be reduced to that extent. 7. Management Discussions and Analysis Report Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented a separate section forming part of the Annual Report. Industry Overview Indias information technology and IT-enabled services industry will be more than double in size by 2012, led by a fast-expanding domestic market, according to Market Research Report of IDC, India. The industrys revenues, including those from export markets, will reach Rs. 5.3 trillion in 2012, from Rs.2.46 trillion last year, said the report by market research from IDC India, Two trillion rupees of that will be from domestic market, which is growing at an average annual rate of 18.4 percent, outpacing overall industry growth of 16.5 percent, the report reveals. Indias expanding economy, growing annually by nearly nine percent, is spurring domestic IT spending as companies upgrade technologies to stay competitive. Last year, Indias overall IT and IT-enabled services industry logged 22.4 percent growth in revenue to Rs.2.46 trillion, of which the domestic market contributed Rs. 900 billion, according to IDC India, In 2008, the market researcher expects the overall industry to grow 20 percent, with the Indian market expanding 22.4 percent, maintaining its growth rate last year. The revenue from US geography is 60%, from Europe constituted 30% and Rest of the world including Asia Pacific and others is 10%. During the year, the Company has started its outbound BPO Service in tele- marketing of on-line education, mortgages and Resorts Holiday packages. The Company has extended its strength in Multimedia by imparting classroom training. The Company has tied up with certain colleges for providing training in Languages of Japanese, French and German. The Company has extended its Franchisee operations in different part of South India. The Company has executed some of Annual Maintenance of software through its subsidiary Esoft com (Mauritius) Limited. 8. Directors The Directors of the Company Mr. R Balaji, Mr. Joseph Jerome and Mrs. Sumathi Sridharan, who retire by rotation and being eligible, offer themselves for re-appointment. The Committees held by the directors and number of meeting attended by them are furnished in the Corporate Governance Report 9. 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. a) That in the preparation of the annual accounts for the financial year ended 31st March 2008, the applicable accounting standards had been followed along with proper explanation relating to material departures. b) That the directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable 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 and loss account of the company for the year under review. c) That the directors had taken proper and sufficient care for the maintainable of adequate 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. d) That the directors had prepared the accounts for the financial year ended 31st March 2008 on a going concern basis. 10. Auditors M/s. Sudhindran & Co., Chartered Accountants, Chennai, the Auditors of the Company, holds office up to the conclusion of the ensuing Annual General Meeting. The Company has received letters from them to the effect that their appointments if made would be within the prescribed limits under section 224(1B) of the Companies Act 1956 and that they are not disqualified for such appointment within the meaning of Section 226 of the Companies Act 1956. 11. Auditors Report The Auditors have stated that the accounts have been prepared in compliance with the Accounting Standards issued by ICAI referred to in section 211(3C) of the Companies Act, 1956 to the extent applicable. 12. Disclosure as per Section 217(2A) of Companies Act 1956 read with the Companies (Disclosure of particulars of employees) Rules, 1975 as amended from time to time. There were no employees in the company drawing more than Rs. 2 Lakhs per month or Rs. 24 Lakhs per annum during the financial year ended 31st March 2008. 13. Human Resources The company maintained all its industrial relations cordially. The company has a very good team of personnel. The company has always been focused on the improvement of the quality of its human capital, good training and development programmes to achieve this. The information pursuant to the companies (Particulars of Employees) Rules, 1975 as amended, may be treated as Nil. 14. Conservation Of Energy, Technology Absorption 8s Foreign Exchange Earning The company is constantly involved in energy conservation activities. Timers installed for air conditioners to switch off automatically and #he method worked well in reducing the energy consumption in a notable amount and the company is likely to continue the same in the following year also. 15. Foreign Exchange Earnings and Outgo (Rs.) 2007-2008 2006-2007 Foreign Exchange Earnings 73,805,002 86,270,318 Foreign Exchange outflow 49,760,183 83,712,215 16. Internal Control Systems and their adequacy a) Internal Audit and Inspection Your company has a comprehensive and well-documented system of Internal Inspection and Audit to serve as a check on internal control systems. The scope and coverage of the audit is reviewed from time to time to make it more focused and effective. The management has formulated policies for approval of control of expenditure. b) Compliance The company has utmost commitment of compliance with the internal control and internal audit to ensure timely adherence to the submissions of various returns and data/ information as and when required by the statutory authorities. The company has an internal audit department, which conducts the audit to verify and administer suitable internal control system and adherence of the same. c) Vigilance The Audit Committee reviews the report of Internal Audit periodically and expresses the ways and means to overcome the lapses pointed out in the report. 17. Acknowledgement The Directors wish to place on record their sincere thanks to the employees at all levels for their continued contribution to the performance of the company. The Board also wishes place on record its appreciation for the cooperation and support received from customers, shareholders, suppliers, government departments and banks.