Rolta India Management Discussions


Company Overview

Rolta India Limited (referred to also as "Rolta" or "The Company" in this section) is an Indian Information Technology ("IT") company with its corporate headquarter in Mumbai. In addition to its headquarter, the Company operates through subsidiaries in US, Middle East, UK and in India.

Future Outlook

The Company made an announcement on the Stock Exchanges at Bombay Stock Exchange and National Stock Exchange on May 11, 2019 announcing an investment of L 5,500 crore by a reputed high tech international group "The Streamcast Group". Further in conjunction to this, the Company executed Definitive Restructuring Services Agreement (RSA) with Streamcast Group on August 06,2019 under the terms of which, Streamcast Group will assist Rolta in repayment and restructuring its liabilities (including providing financial assistance) commencing with immediate effect. Due to the world wide pandemic of CoVid-19, certain statutory approvals of Investor are pending in Europe. Once they get statutory approval, they will make this investment in the Company as above.

Digital Transformation has emerged as a driver of sweeping change in the world around us. It is the integration of digital technology into all areas of a business resulting in fundamental changes of how businesses operate and how they deliver value to customers. This digital revolution is being fueled by technologies such as the Cloud, Mobility, Enterprise/Cyber Security, Internet of Things (IoT) and Big Data Analytics, amongst others.

Rolta with its rare combination of deep Geospatial and Engineering expertise combined with its IT process and differentiated IP based software packages has established an enviable track record to help its customers on their Digital Transformation in each of the areas it serves i.e. Defence & Securities, Geospatial Solutions & Big Data Analytics

Internal Control System and their adequacy

The internal control systems adopted by the Company are adequate and appropriate to its operations. The system has been designed to ensure that assets and interest of the Company are protected and dependability of accounting data and its accuracy are ensured with proper checks and balances. The Company has internal audit conducted by an independent firm of Chartered Accountants to examine and evaluate the adequacy and effectiveness of Internal Control System. The internal audit ensures that the systems designed and implemented, provides adequate internal control commensurate with the size and operations of the Company.

The Audit Committee of the Board, periodically apprised of internal audit finding. The Audit Committee of the Company chaired by an Independent Director and consisting of other Non-Executive Independent Directors and Whole Time Director periodically reviews the quarterly, half yearly and annual financial statements of the Company. A detailed note on the functioning of the Audit Committee forms part of the chapter on Corporate Governance in this Annual Report. Statutory Auditors also presents their important observation to the Audit Committee of the Board.

The Company has an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were effective operating as at March 31, 2021. The statutory auditors reviewed all such internal financial controls and have submitted their report under section 143 (3) of the Companies Act, 2013.

Revenues

The Companys revenues are generated principally from IT- based Solution & Services. Revenue from sale of IT solutions and services is recognized in accordance with the sales contract and when significant risks and rewards in respect of ownership are transferred to the customers. Revenue from customer- related long-term contracts is recognised by reference to the percentage of completion of the contract at the balance sheet date. Companys long term contracts specify a fixed price for the sale of license and installation of software solutions & services and the related revenue is determined using the percentage of completion method. The percentage of completion is based on efforts expended as a proportion to total estimated efforts on the contract. If the contract is considered profitable, it is valued at cost plus attributable profits by reference to the percentage of completion. Any expected loss on individual contracts is recognised immediately as an expense in the Statement of Profit & Loss. Unbilled revenues included in other financial assets represent cost and earnings in excess of billings as at the Balance Sheet date. Income from maintenance contract is recognized proportionately over the period of the contract.

For the year ended March 31, 2021 and March 31, 2020, consolidated revenues amounted to L 943.74 crore and 1,492.67 crore, respectively. This represented a decline of 36.78% for the year ended March 31,2021, as compared to the year ended March 31,2020.

Revenues by Business Segment

The table below gives the consolidated revenue analysis by business segment for the periods indicated:

(Rs. in Crore)

Segment wise Revenue Financial Year Ended March 31, 2021 Financial Year Ended March 31, 2020
Enterprise Geospatial and Engineering Solutions (EGES) 222.94 404.09
System Integration & Enterprise IT Solutions (EITS) 720.11 1,088.58
Total 943.05 1,492.67
Segment wise Profit [EBIDTA]
Enterprise Geospatial and Engineering Solutions (EGES) 122.42 135.26
System Integration & Enterprise IT Solutions (EITS) (180.91) (216.50)
Total (58.49) (81.24)

For the year ended March 31,2021 and March 31,2020, consolidated revenues from Enterprise Geospatial and Engineering Solutions amounted to .222.94 crore and .404.09 crore, respectively. This represented a decline of 44.83% for year ended March 31, 2021, as compared to the year ended March 31, 2020. The consolidated revenues from System Integration & Enterprise IT Solutions amounted to 720.11 crore and 1,088.58 crore respectively for these two periods. This represented a decline of 33.85% for the year ended March 31, 2021, as compared to the year ended March 31,2020.

Other Income

Other income comprises of dividend income, interest income and other miscellaneous income. For the year ended March 31, 2021 and year ended March 31,2020, other income amounted to 333.86 crore and 10.98 crore respectively.

Expenses

The Companys expenditure principally consists of cost of materials and technical sub-contractors, employee costs, administrative and selling expenses as well as financial and depreciation charges. For the year ended March 31, 2021 and for the year ended March 31, 2020, consolidated expenses amounted to 2,089.31 crore and 2639.30 crore. This represent a decline of 21 % for the year ended March 31,2021, as compared to the year ended March 31,2020.

The table below shows the principal components of the Companys costs for the periods indicated:

(Rs. in Crore)

Financial Year Ended March 31, 2021 Financial Year Ended March 31, 2020
Cost of Materials & Technical Sub-contractors 666.28 1,005.32
Employee benefits expense 270.49 429.21
Other Expenses 65.46 139.38
Depreciation and Amortisation 125.04 247.67
Finance Cost 957.31 773.56
Exchange Difference 4.72 44.16
Total 2,089.31 2,639.30

Cost of Materials & Technical Sub-contractors

Cost of Materials & Technical Sub-contractors principally comprise of packaged software, software toolkits, hardware, peripherals, parts/spares and cost of third party subcontracting of services needed to execute the contracts & projects awarded to the Company.

In the year ended March 31,2021 and for the year ended March 31,2020, material and technical Sub-contractors amounted to 666.28 crore and 1,005.32 crore. This represented a decrease of 33.7% in the year ended March 31, 2021, as compared to the year ended March 31, 2020. The decrease in material and subcontracting cost was primarily attributable to lower Revenue.

Employee Benefits Expense

Employee benefits expenses comprise salaries, wages, bonuses, provident fund contributions and welfare expenses. Employee benefit expenses decreased in the year ended March 31,2021 to .270.49 crore from .429.21 crore in the year ended March 31, 2020. This represented a decrease of 36.97% for the year ended March 31, 2021, as compared to the year ended March 31, 2020. The decrease in employee benefit expenses was attributable to rationalization & streamlining of the Companys human resources at its offices in India and internationally.

Other Expenses

Other expenses include electricity expenses, repairs and maintenance, sales promotion expenses, legal and other miscellaneous expenses. In the year ended March 31,2021 and for the year ended March 31, 2020, other expenses amounted to L65.46 crore and L139.38 crore respectively. This represented a decrease of 53.03% for the year ended March 31, 2021, as compared to the year ended March 31, 2020. The decrease in other expenses was attributable to rationalization and streamlining of the staff strength as well as control on other expenses at its office in India and internationally through focused efforts.

Depredation and Amortisation

Depredation and amortisation is applied to the Companys property, plant and equipment at the rates set out in the notes to the financial statements. The principal depreciation costs relate to the Companys computer systems and, the Companys buildings.

Depredation and amortisation expenses for the year ended March 31, 2021 and for the year ended March 31, 2020 were Rs. 125.04 crore and Rs. 247.67 crore. This represented a decrease of 49.50% for the year ended March 31,2021, as compared to the year ended March 31,2020.

Finance Cost

Finance cost reflects the interest payable by the Company on its borrowings. Interest cost for the year ended March 31, 2021 and for the year ended March 31,2020 wasRs. 957.31 croreand Rs.773.56 crore respectively. This represented a increase of 23.75% for the year ended March 31,2021 as compared to the year ended March 31,2020.

Profit before tax and exceptional item

The loss before tax in the year ended March 31, 2021 was Rs. 811.71 crore as against loss of Rs. 1,135.65 crore for the year ended March 31, 2020. The reason for the same are lower expenses on material etc.

Tax expenses

The Company has recognized net Deferred Tax Asset of Rs. 404.50 Crore. The Deferred Tax Asset has arisen on account of business loss of Rs. 3,264.26 Crore. The Management is of the opinion that the Company will be able to be utilize the Deferred Tax Asset of Rs.404.50 Crore against taxable profit from future years.

Loss aftertax

Loss after tax in the year ended March 31,2021 was L3,264.26 crore as against loss ofRs. 914.91 crore in the year ended March 31,2020.

Property, Plant and Equipment and Intangible Assets (Fixed Assets)

The Companys net fixed assets for the year ended March 31, 2021 amounted to Rs. 1,610.86 crore towards buildings, computer systems, /intangibles including software, other equipments, furniture etc. and the same were Rs. 5112.41 crore for financial year 2019-20.

Other Financial Assets

(Rs. in Crore)

2021 2020
Non-current 18.26 23.98
Current 312.27 359.41
Total 330.53 383.39

Other Financial Assets were Rs.330.53 crore as on March 31, 2021 as against Rs.383.39 crore in March 31,2020.

Trade Receivable

The Companys Trade Receivables as at March 31, 2021 and March 31, 2020 were Rs.367.55 crore and L311.il crore respectively. The Companys projects in the domestic and overseas markets are spread over a period of a year to three years with payments linked to individual milestones and /or completion of each project.

Other Assets

(Rs. in Crore)

2021 2020
Non-current 0.33 1.11
Current 31.92 37.23
Total 32.25 38.34

Other assets as on March 31, 2021 were Rs.32.25 crore as against L38.34 crore as on March 31,2020. These other assets extended during normal course of business and are considered necessary to carry out normal business operation.

Share Capital

As at March 31,2021, the Companys authorised share capital was Rs.2,500,000,000 (two and half billion rupees), comprising 250,000,000 (two hundred fifty million) equity shares of Rs.10 each, of which 165891355 equity shares of Rs.10 each, amounting to Rs. 165.89 crore were issued and fully-paid. The Company did not have any preference shares on its books as on March 31, 2021 nor had issued any share warrants except for stock options granted to employees under the Companys Employee Stock Option Plan (in line with the guidelines issued by SEBI). The details as required by SEBI Regulations in regard to grant of options are given in Annexure to the Directors Report. No stock options were issued during the current year. Outstanding stock options as on March 31, 2021 based on options issued in previous year were 8,12,500 options.

Other Equity

Other Equity as on March 31, 2021 was Rs. (6,979.36) crore as compared to Rs. (2,790.94) crore as on March 31, 2020. Other Equity include Fair Valuation Reserves of Rs.204.66 crore, General Reserve of Rs. 385.66 crore, Capital Reserve of Rs. 169.15 crore, Balance in share option account outstanding of Rs.2.24 crore and Rs.(7,163.54) crore was retained in the Statement of Profit and Loss.

Borrowings

The Company has secured borrowings in its books amounting to Rs.5,007.37 crore and unsecured total borrowings of Rs.3,279.84 crore amounting to total borrowings of Rs. 8,287.21 crore compared to last years total borrowings of Rs. 8070.17 crore.

Trade Payables

Trade Payables were Rs.324.86 crore as on March 31, 2021 as againstRs. 348.80 crore in March 31,2020.

Other Financial Liabilities

The Companys other Financial Liabilities as at March 31, 2021 amounted to Rs. 1,789.52 crore as compared to Rs. 1,348.83 crore as at March 31,2020.

Other Current Liabilities

The Companys other Current Liabilities as at March 31,2021 amounted to L222.61 crore as compared to Rs.304.39 crore as atMarch30,2020.

Provisions (current and non-current)

Provisions are made towards warranty, employee benefits schemes and proposed dividend. The details are as follows.

(Rs in Crore)

2021 2020 1
Long Term Provision 6.24 11.39
Short Term Provision 2.90 2.35
Total 9.14 13.74

Cash Flow

The following table sets out the Companys consolidated and summarized cash flows for each of the periods indicated:

(Rs in Crore)

2021 2020
Cash inflow/(outflow) from operating Activities (296.11) 541.97
Cash inflow/(outflow) from investment activities (7.37) (32.20)
Cash inflow/(outflow) from Financing (297.22) (495.76)
Cash and cash equivalents at the end of year 21.83 30.31

Forward Looking Statement

In the Companys report we have disclosed forward looking information so that investors can better understand the Companys future prospects and make informed investment decisions. This Annual Report and other written and oral statements that we make from time to time contain such forward looking statements that set out anticipated results based on managements plans and assumptions. We have tried wherever possible to identify such statements by using words such as anticipate, estimate, expects, projects, intends, plans, believes, and words and terms of similar substance in connection with any discussion of future operating or financial performance. We cannot guarantee that any forward looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements. We undertake no obligation to publicly update any forward- looking statements, whether as a result of new information, future events or otherwise.