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Directors Report of Edserv Softsystems Ltd.

Mar 31, 2011

Dear Members,

The Directors have pleasure in presenting their report for the year ended 31st March 2011 together with the Balance Sheet as at 31st March 2011 and the Profit and Loss account for the year ended on that date.

Performance Review

Your company's performance has been significant this year on revenues as well as on reach and spread in its market space. Your company has grown spectacularly in revenues on Academics, Test Preps, Skill development training, Employment and Careers, and knowledge sharing on the move. Your company has been broadly carrying out business in the four business streams viz., Online retail learning and careers solutions (LAMPSGLOW), in-campus schools and college support [V1DHYADHANA), Skill development training on employability (EDSEED), knowledge sharing solutions on the move (HUMTHUM). This year, your company has signed up with Gujarat Government on Skill Development Centers (SUCs), with 1L&FS education for moving their e-learning contents for K thru 12 into its online portal, with Sreeram Coaching Point (SCP) for CA courses online, among several other such relationships for growth. Your company has sustained margins of business, thanks to the well researched technology-led business model that seamlessly services students and job seekers online with affordable rates using Broadband and easy-to- reach internet enabled devices. Your company has launched a path-breaking solution for humanity to share their knowledge and information on the move using their low-cost smartphones. This product called HUMTHUM has already gained significant acceptance with over 100,000 users downloading its apps from mobile phones. Your company has signed up with SAMSUNG and BLACKBERRY to move learning and career solutions in Mobile phones to reach the unreached in breadth and width of the country.

During the year, your company increased its reach into Schools through Vidhyadhana. Your company has also spread its wings across India with Dealers and Distributors selling the online learning and career solutions through instant and seamless mobile based transfers of credits on payment.

Going forward, your company has plans to multifold its reach to service with a target of 1 Crore user base in the next 1 year with a worldwide reach as target. This is achievable considering the fact that your

Financial Highlights (Rs.)in lakhs

Audited consolidated Audited consolidated

Particulars financial statement for financial statement for the year ended the year ended March 31st 2011 March 31st 2010

Total Income 10777.29 5268.30

Total Expenditure 5285.36 2886.69

Profit Before Tax 5491.93 2381.61

Less: Provision for Income Tax 1121.56 436.55

Add( )/Less(-) Provision for Defered Tax 201.36 143.05

Profit After Tax 4169.01 1802.01

Less: Provision for Dividend & Dividend Distribution Tax 554.72 421.39

Balance of Profit Carried to Balance Sheet 3614.29 1380.62

Company's solutions are now in Mobile phones, Tablets, DTH technologies apart from Laptop and Desktop connecting Internet. Moreover, the Content-on-Lease (CoL) model, another path-breaking solution from your company has ensured that world-class contents and solutions from third-party content owners are portable and usable to the community at large without having to spend time, money, and effort in every such content.

Overall, the year has been a landmark year for the company having grown in revenues, technology, reach and spread, collaborating world-class brands to bring out the learning and career solutions to the needy instantly and seamlessly.

Dividend

Your Directors are pleased to recommend a final dividend of 30% (Rs. 3/- per Equity share ofRs. 10/-) for the year ended 31.03.2011. After approval by the shareholders at the ensuing Annual General Meeting, the dividend will paid in line with the applicable regulation.

Fixed Deposit

During the year under review, the Company has not accepted any Fixed Deposit from the public.

Capital Issues During the Year (upto the date of this report)

1-Allotment of equity shares 2987804 Equity Shares on Qualified Institutional Placement:

During the year the company has allotted 2987804 Equity Shares at a price ofRs. 205/- Per share ie., Rs.10/- each, at a premium ofRs. 195 aggregating to an extent of Rs. 61,24,99,820 to Qualified Institutional Buyers.

2. Issue of 336235 equity shares on preferential basis to Non-Promoters:

During the year the company has issued 3,36,235 Equity Shares at a price ofRs.. 214/- per share i.e. Rs. 10/- each at a premium ofRs. 204/- aggregating to an extent ofRs. 7,19,54,290 to the non- promoters of the company.

3. Issue of 11,68,224 Equity Warrants to non-promoters:

During the year the company has issued 11,68,224 Equity warrants at a price ofRs. 214 per warrant i.e.,10/- each at a premium of 204/- per warrant aggregating to an extent ofRs. 25,00,00,000 on Preferential Basis to Non-Promoters.

4. Issue of equity shares 19930 Equity Shares and 467290 Equity Warrants on preferential basis to Non Promoters:

During the year the company had issued 19930 Equity Shares of 7 10/- each, and 467290 Fully Convertible Equity warrants of 710/- each for cash at a price ofRs. 214/- per warrant/share i.e. 7 10/- each at a premium of 7 204/- aggregating to an extent of 7 10,42,65,080 on preferential allotment basis to the Non-Promoters of the Company

5. Issue of 155763 equity shares to non-promoter by conversion of fully convertible warrants:

During the year the company had issued 1,55,763 shares of face value 7 10/- each for cash at a price of 7 214/- per share i.e. 7 10/- each at a premium ofRs. 204/-aggregatingto 7 3,33,33,282/- on preferential basis to a non-promoter

6. Issued 16,00,000 GDRs underlying 80,00,000 Equity Shares at an Offer Price of USD 14.93 PerGDR(lNR132.49Pershare).

During the year the company had issued 16,00,000 GDRs underlying 80,00,000 Equity Shares at an Offer Price of USD 14.93 per GDR (INR 132.49 per share] aggregating to 7 1,05,99,10,560/- to THE BANK OF NEWYORKMELLONDR

Subsidiary Company

Vidhyadhana Education P Ltd., is a wholly owned subsidiary company incorporated in the year 2009. The company works with schools in 3 different business models viz., Online ERP services, Hitech School Solutions, Investment based end-to-end infrastructure support solutions, Vidhyadhana has increased its presence this year into a number of schools compared to lastyear.

A statement in respect of details of subsidiary company viz Vidhyadhana Eduction Private Limited pursuant to Section 212 of the Companies Act, 1956 is attached herewith to this report

As per Section 212 of the Companies Act, 1956, we are required to attach the Directors' report, Balancesheet and Profit & Loss account of our subsidiaries. The Ministry of Corporate Affairs, Government of India vide its circular no. 2/2011 dated February 8,2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statements in the Annual Report. Accordingly, the Annual Report 2010-11 does not contain the financial statements of our subsidiaries. The audited annual accounts and related information of our subsidiaries, where applicable, will be made available upon request. These documents will also be available for inspection during business hours at our registered office in Chennai, India. The same will also be published on our website

Directors

Mr.S.Arvind, Director of the company retire at the ensuing Annual General Meetingof the company pursuant to the provisions of Section 255 of the Companies Act, 1956 and he being eligible, seekre-appointment.

Auditors

The Statutory Auditors, M/s. Raj and Ravi, Chartered Accountants, retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment for the current financial year. The auditors have expressed their willingness to continue in office if re-appointed. Your Board recommends their re-appointment.

Particulars as required under Section 217(1)(E) of the Companies Act, 1956

A) Conservation of Energy

Though the company has not carried on any manufacturing activities, it had taken steps to conserve energy in its office/godown use, consequent to which energy consumption has been minimized. No additional Proposals/Investments was made to conserve energy. Since the company has not carried on any industrial activities, disclosures regarding impact of measures on cost of production of goods, total energy consumption, etc. Are not applicable.

B) Technology Absorption

The company has not adopted/intend to adopt any technology for its business and hence no reporting is required to be furnished under the heading,

C) Foreign Exchange Earnings & Outgo

- Foreign Exchange earnings : 731,16,02,000/-

- Foreign Exchange outgo : 718,11,833/-

Particulars of Employees Pursuant to Section 217(2A) of the Companies Act, 1956

As required under the provisions section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employee are set out in the Annexure to this report.

Directors' Responsibility Statement The Directors confirm that

a)In the preparation of the annual accounts, the applicable accounting standards have been followed

b> Appropriate accounting policies have been selected and applied consistently and judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as on 31st March, 2011 and of the profit of the company for the year ended 31st March, 2011

c)Proper and sufficient care have been taken 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.

d) The annual accounts have been prepared on a going concern basis.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Corporate Governance Report and Auditor' certificate regarding compliance of the same are made part of this Annual Report and the Employees.

Acknowledgements

The Directors acknowledge with gratitude and wish to place on record their appreciation for the valuable support and kind co-operation extended to the company by the Company's Bankers, Financial Institutions, Government Authorities, Shareholders,

For and on behalf of the Board of Directors

Date: 30.08.2011 S.Giridharan

Place: Chennai Chairman & CEO






Mar 31, 2010

The Directors take great pleasure in presenting their report for the year ended 31st March 2010 together with the Balance Sheet as at 31st March 2010 and the Profit and Loss account for the year ended on that date.

Financial Highlights

Audited financial Audited financial statement for the statement for the year ended March year ended March 31st 2010 3ist 2009

TOTAL INCOME 52,68,29,900 8,58,26,129

TOTAL EXPENDITURE 28,86,69,555 3,82,00,397

Profit Before Tax 23,81,60,345 47625.732

Less: Provision for Income Tax - Current 4,36,55,262 58,83,850

Less: Provision for Fringe Benefit Tax 0 40.674

Add (+) / Less (-) Provision for Deferred Tax 1,43,05,491 47,89,190

Profit After Tax 18,01,99,592 3,69,12,018

Less: Provision for Dividend & Dividend Distribution Tax 4,21,39,259 1,40,46,420

Balance of Profit Carried to Balance Sheet 13,80,60,333 2,28,65,598



Dividend

Your Directors are pleased to recommend a final dividend of 30% (Rs..3/- per share) for the current period. The total amount of dividend is Rs.3,60,18,000/- after approval by the shareholders at the ensuing Annual General Meeting, the dividend will be paid in line with the applicable regulation.

Fixed Deposit

During the year under review, the Company has not accepted any Fixed Deposit from the public.

Capital Issues During The Year - Increase in Share Capital, Issue of Convertible Warrants to promoters, Issue of Qualified Institutions Placements.

INCREASE IN AUTHORIZED CAPITAL

During the year the company has increased its authorized share capital from Rs14,00,00,000/- (Rupees Fourteen Crores) to Rs 25,00,00,000/- (Rupees Twenty Five Crores) by creating additional equity capital of Rs11,00,00,000/- (Rupees Eleven Crores) divided into 1,10,00,000 (One Crore and Ten Lakhs) Equity shares ofRs10/- (Rupees Ten) each ranking for dividend and in all other respects pari passu with the existing equity shares in the company vide ordinary resolution passed by the shareholders in the Extraordinary

General Meeting held on 25th day of March 2010.

ISSUE OF EQUITY SHARES TO PROMOTERS BY ISSUE OF FULLY CONVERTIBLE WARRANTS

During the year the company had issued 2,27,273 fully Convertible Warrants of face value of Rs10/- each with a premium ofRs78/- aggregating to Rs2,00,00,024/- to the promoters Mr. S. Giridharan and Mrs. G. Gita. As on the date of this report the same has been converted into equity shares with effect from 14.06.2010.

ISSUE OF EQUITY SHARES THROUGH QUALIFIED INSTITUTIONS PLACEMENTS

During the year your company decided to issue Qualified Institutions Placements upto Rs130 Crore via equity shares to be subscribed by QIBs. The company is proposing to utilize the funds so raised for making substantial investments over the next few years for expanding its business into Schools, Online tuition services segment and also proposes to upgrade its Learning Management System to include Institutions Management Systems, Content Development, Infrastructure for Higher Education and Career Placement segments and also for expanding its presence Pan India through more representative offices and partner centers and the subsequent promotion campaign exercise for Pan India roll out.

Subsidiary Company

Your directors are pleased to inform you that we have incorporated a wholly owned subsidiary on 30th December 2009 in the name of "Vidhyadhana Education Private limited", the Academy of Excellence for Industry Demand Aligned Education, to enhance the quality of learning among students so as to find and map their interest and natural background to an appropriate career stream at their young age. Vidhyadhana encompasses fun-filled learning for primary education, improving the academic performance of students from primary to higher secondary, imparting the students with career orientation apart from improving the teachers training skills and the overall quality of schools with better infrastructure and management. Leading Educationalists shall govern the Academy to monitor and improve the said objectives of the academy. A school partnering with Vidhyadhana shall be directly managed by the Academy with the teachers and management on the rolls of the Academy. The school owner continues to own the school and gets an opportunity to also work for the school. A statement in respect of details of subsidiary company viz Vidhyadhana Education Private Limited pursuant to Section 212 of the Companies Act, 1956 is attached herewith to this report.

The directors of the company are Mr. S. Giridharan, Mrs. G. Gita and Mr. T. S. Ravichandran.

Performance Review

Your company has performed well during the year in Education and Placement in both online and offline framework. Your company derived its revenues primarily from three lines of businesses during this year: Vocational skills training under DGE&T, Partner branding and licensing, and Online learning and placement services.

Your company during the year launched LAMPSGLOW.com, which provides services of e-learning, online tutoring, test preparations, and career engagements online anywhere, anytime. Your company became an authorized Vocational Training Provider (VTP) to the RDAT. During the year, your company also launched the Vidhyadhana School segment of business as a new stream of revenue, acquired K-12 content, school ERP application as well as online tuition servicing entities. Your company entered into pre-school business, online tutoring business, and in also IIT-JEE and AIEEE entrance exam support.

Your companys partner centers sell all the companys products and services such as the Vocational Skills, product licenses, and web based services through their reach and spread in their respective regions and locations. Your company further engaged widespread Dealer and Distributor network to sell the LAMPSGLOW.com products apart from online methods. A user of

LAMPSGLOW.com can pay up for pre-paid usage in offline mode too, through a unique login-id based framework interfacing automatically with the HQ backbone called LAMPS engine.

Directors

Mr. T. S. Ravichandran, Director of the company, retires at the ensuing Annual General Meeting of the company pursuant to the provisions of Section 255 of the Companies Act, 1956 and he being eligible, seeks re-appointment. The Brief Profile of the aforesaid Director is given hereunder.

Mr. T. S. Ravichandran, (49 years), is an Independent Non- Executive Director of Edserv Softsystems Limited and is a Practicing Chartered Accountant. He has completed his Bachelors (Science) Degree from Vivekananda College, Chennai and completed all the three professions viz,. Chartered Accountant, Company Secretary and Cost and Works Accountant, and has also completed his Systems Audit C.I.S.A exams from ISACA, Illinois, United States of America.

Auditors

The Statutory Auditors, M/s. Raj and Ravi, Chartered Accountants, retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment for the current financial year. The auditors have expressed their willingness to continue in office if re-appointed. Your Board recommends their re-appointment.

Particulars as required under section 217(i)(e) of the companies Act, 1956

A) CONSERVATION OF ENERGY

Though the company has not carried on any manufacturing activities, it had taken steps to conserve energy in its office/godown, consequent to which energy consumption has been minimized. No additional Proposals/Investments was made to conserve energy. Since the company has not carried on any industrial activities, disclosures regarding impact of measures on cost of production of goods, total energy consumption, etc. are not applicable.

B) TECHNOLOGY ABSORPTION

The company has not adopted/intend to adopt any technology for its business and hence no reporting is required to be furnished under the heading.

C) FOREIGN EXCHANGE EARNED & USED

Since the company has not carried on any export during the financial year under review, the disclosure requirement relating to exports, initiatives taken to increase exports: development of new export markets for products and services and export plans is not applicable to the company.

Foreign Exchange earned during the year: Rs Nil (PY Rs Nil)

Particulars of Employees Pursuant to Section 217(2A) of the Companies Act, 1956:

As required under the provisions section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employee are set out in the Annexure to this report.

Directors Responsibility Statement

The Directors confirm that

a) In the preparation of the annual accounts, the applicable accounting standards have been followed

b) Appropriate accounting policies have been selected and applied consistently and judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as on 31st March, 2010 and of the profit of the company for the year ended 31st March, 2010

c) Proper and sufficient care have been taken 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.

d) The annual accounts have been prepared on a going concern basis.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Corporate Governance Report and Auditor certificate regarding compliance of the same are made part of this Annual Report.

Acknowledgments

The Directors acknowledge with gratitude and wish to place on record their appreciation for the valuable support and kind co-operation extended to the company by the Companys Bankers, Financial Institutions, Government Authorities, Shareholders, and the Employees.

For and on behalf of the Board of Directors

Date: 30.08.2010 S.Giridharan

Place: Chennai Chairman & CEO

 
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