Taksheel Solutions Ltd Directors Report

TAKSHEEL SOLUTIONS LIMITED ANNUAL REPORT 2011-2012 DIRECTORS REPORT To The Members, Your Directors have pleasure in presenting the THIRTEENTH ANNUAL REPORT on the business and operations of the Company together with the Audited Accounts for the year ended 31st March 2012.The Revenues of the Company was Rs.172.14 Crores during the year under review. FINANCIAL PERFORMANCE A summary of the financial performance of your Company for the Financial year ended March 31, 2012 is as under: Sr. Particulars 2011-12 2010-11 No. 1. Revenue from operations 17214.51 14726.37 2. Expenses 15488.00 11763.03 3. EBIDTA 1726.51 2963.34 4. Depreciation & Amortization 7.31 6.95 5. Finance Charges 309.58 80.57 6. Other Income 255.07 (134.22) 7. Profit from ordinary activities Before Tax 1664.69 2741.60 8. Provision for Tax 330.98 - 9. Profit After Tax 1333.71 2741.60 REVIEW OF OPERATIONS The Revenue of our Company in the Financial Year 2011-12 was Rs. 17214.51 Lacs as compared to Rs. 14726.37 Lacs in the Financial Year 2010-11. On an annualized basis, there has been increase of 16.89 % in the Financial Year 2011-12. The PBT of our company has decreased from Rs. 2741.60 Lacs in the FY 2010- 11 to Rs. 1664.69 Lacs in the FY 2011-12. The Profit before Tax as percentage of Sales has decreased to 9.67% as compared to 18.62% in previous year. During the financial year 2011-12, the company has experienced a stable growth in top line with decrease in margins due to increasing costs because of depreciation of rupee vis-a-vis US dollar, increased competition and other global macro economic variables influencing global markets scenario. A detailed discussion on the results of the operations and the financial position is included in the Management Discussion and Analysis Report section placed at Annexure - II. UTILIZATION OF FUNDS THROUGH IPO/FUTURE PLANS The Company has raised funds from the public through IPO in the year under review . The Company had issued Prospectus dated 10th October,2011 for raising funds through the Initial Public Offer(IPO)/Issue of equity shares. Accordingly, the Company had made the IPO through 100% Book building route and raised Rs. 8250 Lacs by issuing 55,00,000 Equity Shares of Rs.10 each of the Company for cash at a price of Rs. 150 per Equity share(including Securities Premium of Rs. 140 per Equity share).The total proceeds of IPO were planned with certain objects ,as more particularly stated and described under section titled Objects of the Issue on Page 36 of the Prospectus, as were considered appropriate and necessary by the management at that point of time and as detailed hereunder:- S. Particulars Planned as per Utilization upto Balance pending No. Prospectus 31 March,2012 Utilisation Variations 1. Setting up a new SEZ development center at Hyderabad 914.83 - 914.83 2. Setting up a new SEZ development center at Warangal 865.64 - 865.64 3. Acquisition and other strategic initiatives 2,200.00 - 2,200.00 4. Financing Incremental working capital 1,280.00 1,032.73 247.27 5. General Corporate Purpose 2,411.18 3,956.00 (1,544.82) 6. Public Issue Expenses 578.35 406.28 172.07 7. Investments (ICDs and Fixed Deposits) - 2,800.00 (2,800.00) 8. Balance with Banks - 54.99 (54.99) Total 8,250.00 8,250.00 The company has utilized Rs. 2300.00 lakhs of investments as above for acquisition of GRC business of Rs. 2400.00laks in May 2012. There are deviations in utilization of funds as explained as above due to shift in focus and other prudent financial considerations. The equity shares of the Company got listed and admitted to dealings on the Bombay Stock Exchange Ltd and National Stock Exchange Ltd with effect from 19(th) October,2011. The issued, subscribed and paid up equity share capital of your company as on March 31, 2012 stood at Rs. 218,521,070/- comprising of 21,852,107 equity shares of Rs. 10/- each. The Company already has presence in India and US. We propose to expand our operations in Asia-Pacific markets and Middle Eastern countries. SEBIs AD INTERIM ORDER dated 28th December, 2011 SEBI issued an ad interim ex-parte order dated 28(th) December 2011. Your company filed a response to the SEBI order vide its letter dated 4(th) Jan,2012. Subsequently, the Company has filed its detailed reply on12th September, 2012. The matter is pending. STRATEGIC ACQUISITIONS AND DEVELOPMENTS We have acquired GRC (Governing,Risk and Compliance) business in May 2012 as it supplements and supports existing business of Wealth Management Solutions and provides synergestic advantages through seamless integration. We will continue to explore opportunities for acquisitions or joint ventures or alliances that leverage on the existing service offerings, cater to new client relationships or give us a presence in complementary markets. WARANGAL DEVELOPMENT CENTER Company has operationalised a development center at Warangal, a tier II city.The company could provide employment to nearly 100 people. Further, expansion of facilities at the center are on the anvil. DIVIDEND Your Directors recommend no dividend for the year under consideration. In order to conserve the capital base to meet the increased business operations of the company and to conserve cash outgo, the Board recommends that it would be in the best interests of the Shareholders of the Company that the distributable/disposable profits of the Company for the year be retained/ ploughed back into business for huge expansion plans. EMPLOYEE STOCK OPTION SCHEME Pursuant to the provisions of Guideline 12 of the Securities and Exchange Board of India( Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999, as amended, the details of stock options under IBSS Techno Park Pvt Ltd ESOS ,2006 are as under: equity shares of face value Rs.10/- each Approved options - 8,00,000 Options granted - 3,20,000 Options lapsed - 2,70,000 Options exercised - Nil. Total Number of options in force - 50,000 CORPORATE GOVERNANCE Your Company is committed to good corporate governance practices.The Companys philosophy on Corporate Governance is included under the Annexure I to this Report as per clause 49 of the Listing Agreement. MANAGEMENT DISCUSSION AND ANALYSIS OUTLOOK AND NEW INITIATIVES Management Discussion and Analysis as stipulated in Clause 49 of the Listing Agreement is included under Annexure II to this Report. DIRECTORS RESPONSIBILITY STATEMENT In terms of provisions of Section 217(2AA) of the Companies Act, 1956 as amended your Directors confirm that: 1. In the preparation of the annual accounts, the applicable accounting standards have been followed ; 2. They have, in the selection of the Accounting Policies, consulted the Statutory and Internal Auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent so as to give true and fair view of the state of affairs for the Company at the end of the profit and Loss of the Company for that period; 3. They have taken proper and sufficient care to the best of their knowledge and ability for the maintenance 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; 4. They have prepared the annual accounts on a going concern basis. REPLY TO AUDITORS OBSERVATIONS PURSUANT TO SEC 217(3) OF THE COMPANIES ACT,1956 The Board has duly reviewed the qualifications by auditor in its Auditors Report vide clause 3 and annexure to the auditors report vide clause XX pertaining to Note No. 34(a),(b),(c) and (d) of notes to financial statements as below: 3 a) Relating to Utilization of IPO Proceeds: * The company has raised an amount of Rs. 82,50,00,000/- through Initial Public Offer (IPO) which was subscribed by the public between 29-09-2011 to 04-10-2011. On the receipts of such IPO proceeds, company was under an obligation to utilize the proceeds as per the prospectus filed before SEBI. The SEBI had carried out an Investigation on the issue of utilization of IPO proceeds. During the course of investigation, the SEBI has come to a prima facie conclusion that the proceeds of the IPO were utilized for the objects other than the objects mentioned in the Prospectus. * b) SEBI Order relating to Operative Instructions : * Vide Order No. WTM/PS/IVD/ID8/43/Dec/2011 dated 28th December, 2011, SEBI has directed the company and directors in the following ways: * (i) The Company is prohibited from raising any further capital, in any manner whatsoever, till further directions. * (ii) The Company and its directors are prohibited from buying, selling or dealing in securities in any manner whatsoever, till further directions. * c) SEBI Order relating to Calling back of IPO funds: * Vide Order No. WTM/PS/IVD/ID8/43/Dec/2011 dated 28th December, 2011, SEBI has directed the company in the following ways: * a) To call back the ICD placed with Silverpoint Infratech Limited amounting to Rs. 23 Crores and place the proceeds in an interest bearing escrow bank account opened with a scheduled commercial bank, till further directions. 3 b) Proceeds of IPO invested by the company in the India bulls Mutual Fund-Liquid Fund; amounting to Rs. 5 Crores; shall also be redeemed and transferred to the said escrow account, till further directions. * c) In addition, the Company shall deposit the proceeds of IPO still remaining with it; as on the date of this Order; in the said escrow account, till further directions. The confirmation for the same should be given to stock exchanges where the company is listed; within 7days from the date of this Order. * d) SEBI Vide Order No. WTM/PS/IVD/ID8/43/Dec/2011 dated 28th December, 2011 has made certain observations on matters relating to disclosures etc. The company has filed its reply to SEBI Order No. WTM/PS/IVD/ID8/43/Dec/2011 dated 28th December, 2011 on 04th January 2012 by stating its stand to the SEBI Order. Subsequently, the company has filed its detailed reply on 12th September, 2012 by submitting its clarifications/explanations to the SEBI order. The matter is pending and the company is expecting a favourable outcome in the matter. FIXED DEPOSITS During the period under review, your Company has not accepted any Deposits within the meaning of Section 58A of the Companies Act, 1956, and the rules framed thereunder. DIRECTORS During the year under review Mr. N V Ramana, Mr.Vijay Kumar Devarakonda and Mr.Pramod Chada resigned as directors w.e.f. February 13, 2012. The Company places on record its appreciation for the excellent services rendered by the directors during their tenure. Mr. Narender Sirumalla and Mr.Ravi Kumar Bijjala were appointed as additional directors w.e.f from 13(th) February,2012 and they were regularized in Extra ordinary General Meeting held on 21st March 2012. In accordance with the provisions of Section 256 of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Ramaswamy Kuchana, director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible, offer himself for re-appointment. STATUTORY AUDITORS P.Murali & Co., Chartered Accountants, the retiring Statutory Auditors of your Company expressed their willingness to continue as Statutory Auditors, if re-appointed at the ensuing Annual General Meeting to hold the office until the conclusion of the next Annual General Meeting. The Company has received from the Statutory Auditors a certificate to this effect that their appointment if made, would be within the prescribed limit under Section 224 (1B) of the Companies Act, 1956. PARTICULARS OF EMPLOYEES No employees are covered under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules 1975. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUT GO The Information required under Section 217 (1)(e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the Report of Board of Directors)Rules, 1988 regarding conservation of Energy, technology absorption and foreign Exchange earnings and outgo is set out in Annexure III annexed hereto and forms part of this Report. ACKNOWLEDGEMENTS Your Directors wish to express their gratitude for the continuous support and assistance received from investors, Customers, Vendors, bankers, all Statutory, Regulatory and Government authorities during the year. Your Directors further place on record their appreciation for the significant contribution made by the employees at all levels and of their competence, perseverance, and hard work that have enabled the Company to cross new milestones on a continual basis. For and on behalf of the Board Sd/- Date : 12.11.2012 Pavan Kumar Kuchana Place: Hyderabad Chairman & Managing Director ANNEXURE-II MANAGEMENT DISCUSSION AND ANALYSIS REPORT The Management of Taksheel Solutions Limited presents the analysis of performance of the Company for the year 2011-12 and its outlook for the future. Business overview, Development and Opportunities Outlook The changing demand outlook, customer conversations and requirements acted as a driver to build in greater efficiencies and flexibility within the service delivery and the business models - one which is here to stay 2012 was also instrumental for more ways than one for the industry. While the industry displayed tenacity and resilience, it also commenced its journey to achieve its aspirations in view of the altered landscape. It commenced working on its agenda to diversify beyond core offerings and markets through new business and pricing models, specialises to provide end-to-end service offerings with deeper penetration across verticals transform the process delivery through re-engineering and enabling technology, innovate through research and development and drive inclusive growth in India by developing targeted solutions for the domestic market. All these measures, along with Indias game changing value proposition have helped India widen its leadership position in the global sourcing market. The advent of 2012 has signalled the revival of outsourcing within core markets, along with the emerging markets increasingly adopting outsourcing for enhanced competitiveness. Key demand indicators in the last two quarters such as increased deal flow, volume growth, stable pricing, and faster decision making has made the industry post good results. Though full recovery is expected in another two quarters, development of new growth levers, improved efficiency and changing demand outlook signifies early signs of recovery. Business Strategy TSL seek to further enhance our position as a leading provider of integrated IT Solutions and Services, to achieve this goal we seek to: Focus on Wealth Management Solutions (WMS) Your Company will continue to strongly focus on our main strength WMS, as it is one of the growing and evolving segments. We are adopting proactive target marketing for gaining market share in the Wealth Management Solutions market. Our solutions help WMS providers distribute investment products, provide advice and enhance their services. The solution is scalable and addresses all compliance requirements. It delivers customized and adaptive solutions for service providers having clients from the mass affluent to the High Net worth and covers the full spectrum of investment processes of Brokerages, Banks, Insurance Firms and other Wealth Management providers. Our solutions address account/data aggregation, online collaboration and workflow-based functionalities. Focus on Telecom products & Solutions. Your Company is majorly focused on providing customized solution in the area of Enterprise IP-Telephony, Unified Messaging System, Carrier Grade Solutions for wholesale retail clients over VOIP, VOIP Integrated Wireless solutions, IVRS, Voice Loggers, Video Conferencing, Network Monitoring & Management, Data Security Solutions. Our products range covers Analog, Digital & GSM PCI telephony Interface cards, Multi-functional IP Phones (Basic Executive and Advanced), Analog and GSM Channel banks. We are one stop shop providing complete range of telecom products required from SOHO office to Mid-Range and Large corporates. Growing our business through expand service offerings like BPO, KPO After concentrating on our core business activities for the last 11 years we are planning to expand our business through providing captive BPO and KPO offerings in Financial Services and Telecom areas. We have received requests from our existing and satisfied customers to provide this service. We expect these to materialize in the near future. Governance,Risk and Compliance business: The company has acquired Governance,Risk and Compliance in May2012. As part of GRC, Taksheel helps the client to design & implement: * Corporate governance structures and processes * Risk management systems aligned to strategic priorities * Business Assurance processes geared to provide independent and objective assurance on key business risks * processes and internal control systems that are suitable to address emerging business challenges * Framework to foster compliance with legal and regulatory requirements. * Framework for contract authoring & management Geographical expansion TSL is in the process of expanding our operations and we have recently started our operations from Warangal Development Center. We already have our presence in India and New Jersey. We propose to expand our operations in Asia-Pacific markets and Middle Eastern countries. Inorganic Growth TSL will continue to explore opportunities for acquisitions or joint ventures or alliances that leverage on the existing service offerings, cater to new client relationships or give us a presence in complementary markets. We will pursue strategic acquisitions and other inorganic initiatives that will strengthen our competitive position as well as drive profitable revenue growth. Invest in Our People and Culture As a people-based business, we continue to invest in the development of our professionals and to provide them with entrepreneurial opportunities and career development and advancement. Our technology, business consulting and project management councils ensure that each client team learns best practices being developed across our company and our recognition program rewards teams for implementing those practices. We believe these results in a team of motivated professionals armed with the ability to deliver high- quality and high-value services for our clients. INORGANIC GROWTH The Company is consciously following a strategy of organic and inorganic growth. Since inception we have made the following Acquisitions: Year of Name of Acquired Nature of Business Acquis- Company ition 2005 We have acquired 100% Wealth Management & IT Solutions to Equity in IBSS Inc Financial services Industry. 2007 We have acquired Data Warehousing & Business Intelligence business segments. businesses. 2009 We have acquired the Telecom Software Products Telecom Software Products 2012 We have acquired the Governance, Risk and compliance services GRC business Service Offerings Our business activities can be classified into three major segments: 1) Wealth Management Solutions (WMS); 2) Telecom & Managed services; and 3) Information Technology Services (IT). 4) Governance, Risk and Compliance services(GRC). I) Wealth Management Solutions (WMS) Your Company offers solutions to Banks, Asset and Investment Managers, Brokerage Houses, Insurance, Hedge Funds, Trusts and Family Offices .Our complete range of IT Services and solutions addresses the needs of both technology and business requirements to help organizations towards business improvement. WMS is provided through a Service Oriented Architecture (SOA) which enables us to deploy a customized version of its solutions to help the clients manage their customers assets, increase their sales, improve their service and generally lower their operating costs, by processing the transactions faster, reducing the scope for human errors and the need for entering data at multiple points. In a competitive market, providers of Wealth Management Services are forming their IT strategies to help build differentiating factors in their services/products in order to gain and retain customers and their assets. The right IT resources can help Wealth Management Firms to: * Improve client service from reporting to call centers; * Attract and retain top advisor and/or customer service talent; * Reduce operational and administrative inefficiencies; * Generate added revenue by rapidly developing and deploying new value- adding products and services; * Achieve real competitive advantage. Taksheel brings together domain knowledge, technological capabilities and its global delivery model to offer the best results and returns on IT investments of its clients. Taksheels Wealth Management Solutions (WMS) are cost effective. They create competitive edge to the client company by enabling efficient and effective service delivery/management. Technology architectures do not easily accommodate integration without the aid of middleware solutions. Indeed, unless a financial institution has the resources and funds to front the integration issue in-house, our company has to depend on outside vendors in the marketplace who can tackle the integration issue. Thus, a key issue Financial Services Providers face during technology deployments is integrating disparate applications and systems. While it is complicated enough to introduce new systems in a technology environment, making sure these connect to each other efficiently is another task for technology departments. Wealth Management front-office activities such as Portfolio monitoring and trading rely on the ability to connect to back-end Portfolio Management, Accounting, and Compliance processes. In addition, institutions wish to capture vital client data and documents which may be generated through front-office activities and ensure they get captured in the back office. Without these types of connections, an institution cannot hope to deliver superior service. Our Wealth Management Solutions provide ease of integration between Portfolio Management/Financial planning systems, Account aggregation vendors, Market data providers, and CRM systems. In addition, we have expertise in deploying, managing, maintaining and integrating front office and middle/back office services to an end-to-end solution, unifying all business processes and adding a broad range of features and functionalities. 2. Telecom & Managed services Taksheel developed technology which is unique, versatile and state of art products made us integrated Telecom and IT services provider. As IT & Telecom integrated technology partner we offer our service on pay for use by providing our products and services on hosted basis. Revenue sharing as model for aggregator business platform and other SaaS model products and services. Growing demand getting down capex, as technology driven company we had focused in offering products & services as pocket suitable solution in SaaS model. 3. Governance,Risk and Compliance (GRC)business: The company has acquired Governance,Risk and Compliance in May2012. Taksheel provides GRC software solutions along with domain expertise which provides integrated approach (internal audit, compliance programs like SOX, enterprise risk management (ERM), operational risk and incident management, etc.) helps Banking & Financial institutions, manage all aspects of Governance, Risk, Compliance and Audit programs in a far more superior manner. The integrated GRC process approach deploys a single system which administers multiple GRC initiatives & increases compliance effectiveness in a cost effective environment. Additionally, it provides a coordinated and cross-organizational approach to risk management. As a result, GRC initiatives are not only aligned centrally with corporate governance and reporting but are distributed to lines of business for execution and accountability. Competitive Strengths Your Company believe that the following are our principal competitive strengths, which differentiates us from other IT solutions providers: * Wide Range of Wealth Management Solutions * Advantage of Early Entry * Unique, Versatile and State of the art Telecom products * Depth of experience and knowledge in targeted industry segments * Ability to Manage and Establish Enduring Relationship with Large Clients * Qualified Professionals and Strong Management Team Threats The industry risks suck as pruning of IT budgets, fluctuations of Rupee vis-a-vis dollar, adverse changes in tax structures also are faced by the company.Other risks are client concentration, geographical concentration of clients, competetition in industry etc., These risks are monitored constantly and derisking measures are initiated appropriately. Core Competencies: The Company is specialized and developed products in IP multimedia subsystem(IMS), Telecom Signalling Integrated Standard Digital Network (ISDN), Channel Associated Signalling (CAS), Signalling System 7(SS7), Short Message Service Centre (SMSCs), Least Cost Routing system (LCR), Optimal Routing Solutions (ORS), Voice Mail Servers (VMS) and other Value Added Services (VAS) content delivery platforms. Our product portfolio covers enterprise IP-Telephony, Unified Communication System, Carrier Grade solutions, Wireless VOIP solutions, IVRS, Voice Loggers, Video Conferencing, NMS and other IT Solutions. With products and services offered by us, we had secured business from various sectors CGISS, Healthcare, Defence, Domestic and Multinational enterprise and government organisations.Governance,Risk and Compliance(GRC) is an added strength to the overall portfolio. COMPANY PERFORMANCE Table:1 Financial figures of the Company for the last five years (Amount in Rs. lacs) PARTICULARS FOR THE YEAR ENDED MARCH 31 2008 2009 2010 2011 2012 Income Software & Consultancy Services 3171.68 3319.53 4950.15 14726.37 17214.51 Other Income 31.29 223.50 0.00 -134.22 255.07 Total Income 3202.97 3543.03 4950.15 14592.15 17469.58 Total Expenditure 1617.50 3299.89 4141.14 11850.55 15804.89 Profit Before Tax (PBT) 1585.47 243.14 809.01 2741.60 1664.69 Profit After Tax (PAT) 1403.21 240.42 809.01 2741.60 1333.71