valuemart info technologies ltd Management discussions

FOR THE YEAR ENDED MARCH 31, 2013

INDUSTRY ANALYSIS

The IT and the ITeS sectors have emerged as the anchors of the Indian Technology sector on account of high growth in terms of revenue and employment generation, and multiplicity of services ranging from core services like BPO, KPO and LPO to E-Commerce, E-Governance and IT enabled services covering banking, finance and insurance sectors, multimedia and medical transcription services. Skilled manpower, high quality services, low costs, high productivity, coupled with conducive regulatory policies by the Government has placed India on the global platform.

However, the high growth potential in the sector as a whole, has also adversely affected the small and mid-size companies. Some challenges faced by these companies include competition from large companies and other low cost countries, high attrition rates, and higher costs of acquiring new clients and retention of existing clients.

The year under review has also seen a number of big and mid-sized IT-BPO companies foray into rural areas mainly due to the availability of hugely untapped talent at lower costs and an overall lower operations costs. Reduced rates of attrition in rural areas and ample support of the respective State Governments have been added advantages in this segment.

BUSINESS TRENDS

India as an emerging market offers a large pool of IT savvy resources. It is estimated that the Indian IT / ITeS industry will double its Domestic revenues in the next financial year, which constitutes almost 39% of total revenue. The IT / ITeS Exports revenue constitutes the remaining 61% of revenue share. The IT / ITeS sector in India is highly localized and clustered in some major cities, however, due to infrastructure limits and scarcity of land in these cities, the sector is gradually expanding to Tier II and Tier III cities. Access to high quality education in semi-urban and rural areas has further created a growing pool of resources in the industry. The employee base is also expected by over 10 times in the following years.

BUSINESS PROSPECTS

Valuemart continues to focus on select segments across the IT and BPO industry and offers specialized and customized solutions to address the specific needs of its clients. The Company is targeting the enterprise solution space to address the mid to large size enterprise market. It offers contemporary Business Process Management (BPM) based solutions and frameworks. Valuemart has further consolidated its position and has added several new clients in this space.

Keeping in tune with the trends in the IT BPO sectors, Valuemart has also forayed into the Tier II and Tier III cities due to availability of skilled labour at lower costs. Reduced operational costs, lower attrition rates and lower cost of acquiring and retaining new clients are the other benefits offered by these areas. The Company’s edge in quality and cost benefits have further enhanced its ability to bid for high value projects and move up the value chain.

Turnover has reduced by over 18% from Rs. 2,313.48 Lakhs in the previous year to Rs. 1,889.00 Lakhs in the current year under review. Other Income during the year was Rs. 4.98 Lakhs. There is a reduction in the Expenditure incurred by the Company by 16% to Rs. 1500.91 Lakhs in the current year as compared with Rs. 1869.42 Lakhs in the previous year. Depreciation has marginally increased by 0.8% to Rs. 300.27 Lakhs as compared with Rs. 297.86 Lakhs in the previous year.

On account of a decline in revenues in the current year, the Net Profits before Tax has reduced by almost 51% to Rs. 71.94 Lakhs as against a profit of Rs. 145.44 Lakhs in the previous year. However, The Net Profits after Tax have increased by 15% to Rs. 35.41 Lakhs from Rs. 30.68 Lakhs in the previous year.

INTERNAL CONTROL SYSTEMS

The Company has in place an internal control system, which is being upgraded on a continuous basis. The Company has appointed an Internal Auditor. The Audit Committee of the Board of Directors meets regularly to review the internal control systems, ensure compliance of statutory and regulatory requirements, discuss with the Auditors and the Management regarding issues raised in the Audit Report and all financial matters to reinforce the impact of Internal controls in the Company.

RECEIVABLES, LOANS AND ADVANCES

The Management has reviewed the outstanding balances and in the opinion of the Management, the amounts are likely to be realized at the book value in the normal course of business. In respect of foreign exchange receivables, the Management has initiated discussion with the parties to settle the outstandings.

SETTLEMENT OF OUTSTANDING STATUTORY LIABILITIES