E.STAR INFOTECH LIMITED
ANNUAL REPORT 2006-2007
The Directors of e.star Infotech Limited ('e.star') take pleasure in
presenting the Eighth Annual Report on the operation of the company,
together with the audited accounts for the year ended 31st March 2007.
(Rs. In lacs)
Particulars 31.03.2007 31.03.2006
Total Income 1152.45 1586.72
Profit before Interest,
Depreciation, and Tax (PBDIT) 219.08 330.51
Less: Interest 0.02 0.17
Profit before Depreciation and Tax 219.06 330.34
Less: Depreciation 145.93 141.35
Profit before Tax 73.13 188.99
Less: Provision for Tax/ Fringe Benefit Tax 0.01 0.01
Less: Deferred Tax 0.00 (1.66)
Profit after Tax 73.12 190.64
Profit brought from earlier years 1942.96 1752.32
Profit transferred to Balance Sheet 2016.08 1942.96
Year and period underreview:
During the year under review, the turnover of the company has decreased to
Rs.1152.45 lacs as compared to Rs.1586.72 lacs for the previous year.
Profit before Depreciation and Taxation amounted to Rs.219.08. After
providing for Depreciation and Taxation; the Net Profit stands to Rs.73.13
lacs against Rs.188.99 lacs for the previous year.
With a view to conserve the resources for expansion in Business Process
Outsourcing (BPO) and other Information Technology Enabled Services (ITES)
your Directors have deemed it prudent to plough back the available profits.
Actual Utilization vis-a-vis Projected Utilization of IPO Funds
The IPO Funds have been utilized for the purpose and business for which it
was raised. Variations as regards the actual utilization of IPO Funds
vis-a-vis projected utilization is on account of the changes in business
needs arising due to frequent changes in Domestic and Global Software
Status of the Bonus Shares
Issue of Bonus shares approved by the Shareholders of the Company a the
Annual General Meeting held on 29th November 2002 is subject to approval
from Securities and Exchange Board of India for relaxation under the
provision of Clause 15.1.6 of Chapter XV of SEBI (Disclosure and Investor
Protection) Guidelines, 2000.
Pursuant to Section 217(2AA) of the Companies Act, 1955, the Directors to
the best of their knowledge and belief confirm that:
- The applicable standards have been followed in the preparation of the
- The Directors have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
company as at 31st March 2007 and the profit of the company for the year
ended on that date.
- The Directors have taken appropriate and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the company and for
preventing and detecting fraud and other irregularities; and
- The Directors have prepared the attached Statement of Accounts for the
year ended 31st March 2007 on a going concern basis.
In accordance with the provisions of the Companies Act, 1956 and the
Articles of Association of the company, Mr. Deepak Kotecha director of the
company, shall retire by rotation at the forthcoming Annual General Meeting
and eligible for re-appointment. The Board of Directors recommends his re-
During the year under review, the company had neither accepted nor renewed
any deposit from public within the meaning of Section 58A of the Companies
M/s. Durgesh Kabra & Company the Statutory Auditors of the company retire
at the ensuing Annual General Meeting and are eligible for re-appointment.
The retiring Auditors have furnished a certificate of their eligibility for
re-appointment under section 224(1B) of the Companies Act, 1956 and have
indicated their willingness to continue in the said office.
The observations made by the Auditors in their report read with relevant
notes as given in the Notes on Accounts annexed to the Accounts , are self
explanatory and therefore do not call for any further comments under
section 217 (3) of the Companies Act,1956.
The company has an Audit Committee comprising of Three Non Executive
Directors of the company viz. Mr.Deepak Kotecha, Mr.Bankat Sharma, Mr.
Vijay B.Sheth. The Board of Directors has appointed Mr.Deepak Kotecha as
the Chairman of the Committee.
Conservation of Energy, Research & Development, Technology Absorption,
Foreign Exchange Earnings and Outgo
A) Conservation of Energy and Technology Absorption
Considering the Company's business activities, the Directors have nothing
to state in connection with Conservation of Energy and Technology
B) Foreign Exchange Earnings and Outgo
The details of expenditure and earnings in foreign currency are given in
Note No, 18 of Schedule 15 of Notes to Accounts.
Particulars as per section 217(2A) of the Companies Act, 1956
During the year under report, there was no employee who was in receipt of
remuneration in excess of limits prescribed under the provisions of Section
217(2A) of the Companies Act, 1956 read with the Companies (Particulars of
Employees), Rules, 1975.
Your Company follows the principles of effective corporate governance
practices. The company has taken steps to comply with the requirements of
revised clause 49 of the Listing Agreement with the Stock Exchanges. A
report on Corporate Governance has been appended under separate section
titled 'Corporate Governance Report' and forms a part of the Annual Report.
Certificate from Auditors of the Company M/s.Durgesh Kabra & Co., Chartered
Accountants, confirming compliance of condition of Corporate Governance as
stipulated under the aforesaid Clause 49, is annexed to this report,
As required by clause 49 of the Listing Agreement, a CEO/CFO certificate
has been attached to this report.
The Directors thanks the Company's Customers, Contractors, Vendors,
Bankers, Government and other authorities and the Shareholders for their
consistent support to the company. The Directors also sincerely acknowledge
the significant contribution made by all the employees for their dedicated
services to the company.
By Order of the Board
For e.star Infotech Limited
Place : Navi Mumbai Mahesh Thanvi
Dated : 29th August 2007 Chairman & Managing Director
MANAGEMENT DISCUSSION AND ANALYSIS
The financial statements have been prepared in compliance with the
requirements of the Companies Act, 1956, and Generally Accepted Accounting
Principles (GAAP) in India. The management of e.Star Infotech Limited
accepts responsibility for the integrity and objectivity of these financial
statements, as well as for various estimates and judgments used therein.
The estimates and judgments relating to the financial statements have been
made on prudent and reasonable basis, in order that the financial
statements reflect in a true and fair manner the form and substance of
transactions, and reasonably present the Company's state of affairs and
profits or the year.
Industry Structure, Developments And Outlook
The Indian IT sector has proved to be the country's fastest growing
segment. The software and services industry, a major component of India's
IT sector has showed significant momentum, higher than that of other
industries in he country. India continued to be a compelling investment
destination, as leading companies either set up shop here or beefed up
their existing infrastructure. Outsourcing of IT requirements by leading
global companies to Indian majors has also picked up pace in line with
worldwide trends. Software and services exports continued to remain on top
of the IT industry's revenue table.
Global IT services spending is projected to grow at a compound annual
growth rate of 5.9% to reach US$556 billion by 2009, from an estimated IT
services spending of US$441 billion in 2005 according to International Data
Corporation. The growth of global IT services spending is primarily driven
by following factors and trends
Increased importance of IT to businesses Impact of Internet and other new
technologies on business Managing and upgrading existing systems
Increasing trend towards offshore outsourcing.
India is considered to be the most favored destination for offshore IT
service delivery. The Nasscom-Mc-Kinsey Report of 2002 estimates that
export revenue generated from the software and service industry in India
was approximately US$15.5 billion in 2004 and is expected to reach US$50
billion by 2008 representing a compound annual growth rate of 34%.
Opportunities And Threats
The Company foresees a big market for new software products in identified
The significant threats to the Company's business continues to be the
(a) Competitive pressures: Since the company operates in world markets,
competitive pressures can develop from any corner of the globe. Company has
to be on the lookout for tracking the competition and maintaining its
competitive edge in terms of quality and value proposition.
(b) Talent retention: Company has to ensure that the people working for it
who constitute its major competitive advantage continue to contribute
productively to its business. Company has always maintained excellent work
environment and competitive remuneration packages for this purpose.
(c) Technology obsolescence : The Company has to ensure that it constantly
updates and upgrades it technology so as to be on par with the competitors.
(d) Exchange Rates : As the company uses India as a major source of
manpower, the exchange rate of the Rupee vis-a-vis the US Dollar and other
currencies affect its ability to compete. The Company attempts to minimize
the risk by diversifying the currency in which it invoices the customers
and by taking forward covers where appropriate.
Risk And Concerns
The risks and uncertainties include, but are not united to, risks and
uncertainties regarding fluctuations to earnings and exchange rates, our
ability to manager growth, intense competition in IT sector including those
factors which may affect our cost advantage, wage increases in India, our
ability to attract and retain highly skilled professionals, time and cost
overruns on fixed-price contracts, client concentration, restrictions on
immigration, our ability to manage our international marketing and sales
operations, reduced demand for technology in our key focus areas, damages
on our service contracts & product warranty, the success of the companies
in which the Company has made strategic investments, withdrawal of
governmental fiscal incentives, political instability, legal restrictions
on acquiring companies outside India, and unauthorized use of our and our
customers intellectual property, the latter when in our possession as well
as general and economic conditions affecting our industry.
Internal control systems and their adequacy
e.Star's internal control systems as well as procedures adequately
commensurate with the magnitude of its current business. The operating and
business control procedures have been framed in order that they ensure
efficient use of resources and comply with the procedures and regulatory
requirements. The internal control system is being further strengthened by
laying out well-documented guidelines, approval and authorization
During the year under review, the company has enjoyed cordial professional
relations with employees at all levels.
Forward looking statements
Certain statements as discussed and mentioned under Management Discussion
and Analysis and elsewhere, constitute forward looking statements
articulated as expectations of future business prospects. However, there
are risky and uncertainties with regard to not only general economic
conditions but also to the nature of the Company's business including
foreign currency fluctuations, technological developments etc., which are
out of the Company's control. Hence, these and other crucial factors could
cause the actual results to differ materially from the performance or
achievements discussed or implied by such forward looking statements.