REPORT OF THE BOARD OF DIRECTORS
The Members of
Cranes Software International Limited
Your Directors are pleased to present this Twenty-ninth Annual Report together with theaudited accounts of the Company and its below-noted Subsidiary Companies for the yearended March 31 2014.
1. Systat Software Inc. USA
2. Cranes Software Inc. USA.
3. Engineering Technology Associates Inc. USA (WOS of Cranes Software Inc. USA)incorporating therein Engineering Technology Associates (Shanghai) Inc.
4. Dunn Solutions Group Inc. USA (WOS of Cranes Software Inc. USA) incorporatingtherein Dunn Solutions India Private Limited
5. Systat Software GmbH Germany
6. Cubeware GmbH (WOS of Systat Software GmbH) including its WOS in Austria andSwitzerland
7. Cranes Software International Pte. Ltd. Singapore
8. Tilak Autotech Pvt. Ltd. India
9. Proland Software Pvt. Ltd. India
10. Caravel Info Systems Pvt. Ltd. India
11. Esqube Communication Solutions Pvt. Ltd. India
12. Systat Software Asia Pacific Ltd. India
13. Analytix Systems Pvt. Ltd. India
Also presented are Consolidated Financial Statements for the year ended March 31 2014which incorporate Audited Accounts for the above-noted Subsidiary Companies per relevantregulations.
| ||Standalone ||Consolidated |
|Particulars ||2013-14 ||2012-13 ||2013-14 ||2012-13 |
|Sales and Operating Revenues ||197.3 ||214.9 ||3392.3 ||3099.6 |
|Profit / (Loss) before tax ||(1918.1) ||(2645) ||(2007.7) ||(2758.8) |
|Taxes ||918.4 ||109.3 ||978.0 ||140.1 |
|Profit / (Loss) after tax ||(999.7) ||(2535.7) ||(1029.7) ||(2618.7) |
During the year your Company on a standalone basis achieved a Sales and OperatingRevenue of Rs. 197.3 million down from Rs. 214.9 million. The after tax position was aloss of Rs. 999.7 million on Standalone basis as compared to loss of Rs 2535.7 millionin the previous year. This reduction in loss was primarily due to items classified as'Extraordinary Items' ( largely write back of bank liabilities no longer needed - Rs 685.4million) Exceptional Items' ( largely prior period income items - Rs 11 millioncompared to Rs 0.7 million of previous year) Deferred Tax Asset accrual ( Rs 931 millionas compared to Rs 144.5 million previous year) and other minor variances in expenditure.
On a consolidated basis during the year your Company together with its subsidiariesachieved a Sales and Operating Revenue of Rs. 3392.3 million up from Rs. 3099.6 millionof the previous year.
As outlined in detailed in the Management Discussion and Analysis Annexure Companymanagement has worked earnestly over the past three years to re-build the organizationfrom its years of business downturn and has been successful in maximizing its strengthsand leveraging its inherent capabilities of business transformation. Most recently theCompany has been re-establishing itself in the areas of Business Intelligence Engineering
Services and Vocational Training and we continue to improve operational effectivenessoptimize costs and increase market reach both on a standalone basis and through itssubsidiaries.
Company management has particularly focused on improved customer bandwidth andincreased product and services offerings. We have increased and improved our product rangein the Engineering products and services area liaising with business partners to expandmarket reach and penetrate into new business areas. We plan to re-establish ourrelationships with academia and bring active partnerships from the Corporate sector aswell. At the Varsity division the Company has refocused and realigned its India-centricoperations on training and education and launched new courses relevant to current markettrends which have created a fresh demand. As a result of these initiatives we expect tosee promising results this year from this division.
The Company is also focused on improving its balance sheet position. Active discussionswith secured and unsecured lenders for restructuring / closure of debts have yielded debtclosure agreements with many banks. We also continue to pursue various approaches tosustained operational profitability and reduced debt exposure.
In the absence of distributable profits in the year the Directors have not recommendedany dividend for the year 2013-14 in order to conserve cash.
Subsidiary Companies / Joint Ventures
In terms of Sec 212(1) of the Companies Act 1956 the Directors' Reports Profit andLoss Accounts and Balance Sheets of each of the noted Subsidiary Companies areincorporated in the Consolidated Financial Statements which are presented herein.
In accordance with the Accounting Standard AS-21 on consolidated financial statementsthe Consolidated Financial Statements are attached as part of the Annual Report andAccounts.
This along with the Company's results we believe presents a full view of the state ofaffairs of the Company.
Remarks of Auditors
In the course of auditing the Company Accounts the Statutory auditors have raisedcomments observations and qualifications. Their comments in respect of the Company'sassumption of "Going Concern" along with the responses of the Board to each aregiven below :
| ||Auditors Opinion ||Management Response |
|1. ||Redemption of Foreign currency convertible bond amounting to Rs. 34682.13 lakhs (42 million Euros) to the holders of the bonds have fallen due during April 2011 and is yet to be redeemed as on the date of Balance Sheet. ||While it is accepted that redemption has not taken place there have been transactions the Company is aware of between various Bond Holders who originally subscribed to the issue and others. A large number of the new Bond Holders the Company believes have considerable faith in its business soundness and would like to support the Company in its endeavours to rebuild its business |
|2. ||Legal proceeding under Sec. 138 of the Negotiable Instruments Act have been initiated by various Banks against the Company. These Banks have applied to the Debt Recovery Tribunal / Hon'ble Courts etc. for recovery of dues. These proceeding are in various stages of disposal before the "DRT" and respective Hon'ble Courts. ||The Company is actively defending its position in these cases. It is also in advanced settlement negotiations with both secured & unsecured lenders and while reaching settlements with some expects to reach favourable settlements with others in due course. |
|3. ||In our opinion the securities provided to Banks are not adequate to cover the amounts outstanding to them as on the date of Balance Sheet. || |
|4. ||An Advance of Rs. 23950.68 lakhs is due from a party for an inordinate period and in our opinion recovery of the same is doubtful. However the Company continues to classify such amounts as 'Good'. However no evidence has been given to us to consider those amounts as recoverable as on the date of Balance Sheet. ||During the year considerable sets of actions were concluded on Book Debt Receivables since amounts were larger and needed more focused action. Complete resolution has by and large been possible on this account and adequate provision has been made as auditors itself believe. It is the belief of the Company that Value will be received from the party to whom the advance was paid and referred to by the Auditor; the matter will be dealt with in the current year and until further clarity it is believed that the matter can continue to be classified as Good' |
|5. ||Attention of the members is invited to Note no. 3.11 of the Notes regarding recognition of deferred tax credit on account of unabsorbed losses and allowances aggregating to Rs. 22559.89 lakhs (year ended March 31 2013 Rs. 13249.77 lakhs) This does not satisfy the virtual certainty test for recognition of deferred tax credit as laid down in Accounting Standard 22 ||The Company has in the past year made planned efforts and progress in rebuilding its businesses and moving towards sustained financial growth we remain confident that the Company will have future taxable income to take advantage of the deferred tax credit as a 'recognized' asset. |
|6. ||The Subsidiary Company M/s Systat Software Inc. has out of amounts due to the Company written back a sum of 2.6 Million USD equivalent to Rs 1562.60 lakhs during the year under reference. The Company has created a provision in the Statement of Profit and Loss for a similar amount in the books of the Company. The Company is yet to apply to the Reserve Bank of India seeking its approval for write off of this amount in accordance with the provisions of the Foreign Exchange Management Act 1999 ||Necessary application to the Foreign Exchange Management Authorities is under preparation to close this matter. |
|7. ||Reference is drawn to Note no. 3.34 of the notes regarding the amounts classified under "Fixed Assets" including "Intangible Assets Under Development" amounting to Rs. 35469.53 lakhs. No evidence has been produced before us for testing its impairment and in the absence of the same we are unable to express any opinion on the impairment to such asset. In our opinion such test of impairment as on the date of Balance Sheet is mandatory especially in view of the higher degree of the obsolescence of software which is stated to be under various stages of development though no further developments have been carried out during the recent years. ||We believe that there is no reduction in the value of its IP assets and that the attainable value would be at least equal to the carrying value. During the year under review the management has put its efforts in product planning and is confident of continuing the development of these products and also convinced that such developed products will contribute substantially towards increased revenues. |
| || ||The Company has implemented several measures to improve its business potential as outlined in the Management Discussion and Analysis annexed to this report including debt restructuring and substantial progress towards resumption of normal operations. Hence we are highly confident that the concept of 'Going Concern' continues to apply without doubt. |
| ||In the light of the above the appropriateness of the 'Going Concern' concept based on which the accounts have been prepared is interalia dependent on the Company's ability to infuse requisite funds for meeting its obligations rescheduling of debt and resuming normal operations. || |
|8. ||Further to the above we would like to draw the attention of the members to Note no. 3.28 regarding default of payments to various statutory authorities. ||The Company is in the process of discharging these liabilities and is confident of clearing the entire dues in due course. |
Your Company has not accepted deposits from the public during the current year.
Dr. Peter Ryser and Mr. Richard Holden Gall retire by rotation in the forthcomingAnnual General Meeting. Dr. Peter Ryser and Mr. Richard Holden Gall being eligible offerthemselves for re-appointment.
Conservation of Energy
Even though the operations of your Company are not energy-intensive adequate measureshave been taken to reduce energy consumption by using efficient equipment. Since it is aSoftware Company primarily dealing with scientific and engineering software products andproduct related projects energy cost forms a very small part of total cost and its impacton total cost is not material.
Research & Development Activities
The Management of your Company has been committed to building a strong R&D culturefrom day one and has set clear R&D goals. In order to achieve these goals the Companyhas focused on furthering the efficacies of R&D activities as well as buildingsynergies among multiple-impact technologies. The statement giving information as requiredunder Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules1988 is enclosed to this report.
Foreign Exchange Earnings and Outgo
Foreign exchange earned (FOB) during 2013-14 is Rs. 76.4 million and foreign exchangeoutgoing is Rs. 170.3 million during the year.
Information as per Sec 217(2a) of the Companies Act 1956 read with the Companies(Particulars of employee) Rules1975 and forming part of the Directors Report for the yearended March 31 2014 is not applicable due to the fact that no present employee is gettingsalary above 5 lakhs.
Directors' Responsibility Statement
Pursuant to Section 217(2AA) of the Companies Act 1956 the Directors hereby confirmthat they have:
i. Followed the applicable accounting standards in the preparation of the annualaccounts;
ii. Selected such accounting policies and applied them consistently and made judgmentsand estimates that were reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the financial year and of the loss of theCompany for the year under review;
iii. Taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 1956 for safeguarding theassets of the Company and detecting fraud and other irregularities;
iv. Prepared the accounts for the financial year on a 'going concern' basis.
A detailed report on Corporate Governance & Management Discussion and Analysis areattached.
The Board members and the Senior Management Personnel have affirmed compliance with theCode of Conduct. Declaration of Confirmation by the Managing Director to this effect isannexed hereto.
The auditors of the Company Messrs. S. Janardhan & Associates CharteredAccountants retire at the ensuing Annual General Meeting and are eligible forreappointment. The declaration under Section 224(1)(B) of the Companies Act 1956 has beenreceived from them.
Your Directors wish to place on record their sincere appreciation for the assistanceand co-operation received from Banks Financial Institutions Government CustomersSuppliers Business Partners and Shareholders for the year under review.
Your Directors also wish to place on record their appreciation for the Contributionmade by employees at all levels of the Company whose committed efforts are a reflectionof our results and we look forward to their continued support..
| ||For and on behalf of the Board |
|Bengaluru ||Asif Khader ||Mueed Khader |
|August 30 2014 ||Managing Director ||Director |
Form - B
Information as per section 217(1)(e) of the Companies Act 1956 read with Companies(Disclosure of particulars in the report of the Board of Directors) Rules 1988 andforming part of the Directors' Report for the year ended March 31 2014.
Research & Development Activities and Technology Absorption:
Your Company has over the past few years been through a challenging phase in researchand development. There has been increased demand for analytic and engineering tools andincredible pressure for making these cost effective. We have responded with new uses ofnew-age technology and integrating it into our product lines both in Analytics andEngineering areas and arriving at definitive advanced solutions for our customers. Withsuch focused initiatives your Company has positioned itself really well to meet theincreased market demands from the market in these difficult times and also deliver valuefor your investments.
| ||For and on behalf of the Board |
|Bengaluru ||Asif Khader ||Mueed Khader |
|August 30 2014 ||Managing Director ||Director |