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Sun Infoways Ltd.

BSE: 531707 Sector: Financials
NSE: N.A. ISIN Code: INE236C01018
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Sun Infoways Ltd. (SUNINFOWAYS) - Director Report

Company director report

ANNUAL REPORT 1999-2000 SUN INFOWAYS LIMITED DIRECTORS' REPORT To the Members, Your Directors are pleased to present their report on the business and operations of your company for the year ended 31st March, 2000. OPERATIONS Your Company changed the business focus from auction, consulting and valuation business to a more vibrant and promising field of technology and product development in telecom, wireless and convergence market segment. Your Company during the last fiscal specifically second half of year completely reshaped its business structure and model focusing on Product Development - Wap based, E-Commerce Products, Portals, Internet Banking, Web based Product and Software Developmental Services - Web and Wap Migration Services, Wap based Software Development Services, Data Warehousing, Data Mining, Embedded Java, Mobile Commerce with Research Interests in Wap, GPRS, UMTS, G-3 etc. For this purpose your company has made investment in research and development to promising field of WAP and mobile telephony, developed products in areas like Internet banking and trading, Internet security, WAP based products, besides developing two revolutionary e-com products, setting up and upgrading development centres at Mumbai and Bangalore. During the year your company completed development contracts for overseas clients besides sourcing contract worth 15 million USD from Australia, USA and UK and is in the aggressive marketing for closing the WAP based software development services contracts. Further the company is in the process of completing in the second quarter of current fiscal B2B and B2C shopping portals covering comprehensive length and breadth of e-trading. The last year saw significant development with the induction of highly skilled professionals to develop technology, R8D and product in promising field of convergence, wireless and telecom domain. The application development was initiated only during the last quarter of fiscal 1999-2000, keeping in view the client's apprehensions or Y2K transition phase. Your Company aspires to be a leading player in Wireless Application Protocol technology and it is now planning to branch out to new areas of Bluetooth, 3, GPRS and Edge, which will find greater application in the years to come. Though these technologies are yet to take off in India, they are increasingly used in the developed countries. The Company intends to play a leading role in developing solutions in the segment. The Company is also geared up to put in place the necessary infrastructure. DIVIDEND Your directors are pleased to recommend a dividend of 10% on the paid-up capital of the Company for the fiscal 1999-2000. Considering the performance of your company in first quarter of the current fiscal, your Directors had declared an Interim dividend of 20% on the Equity Capital of the Company in their meeting held on 8th July, 2000 for the fiscal year 2000-2001. PRODUCTS AND SERVICES The following are the products and services segment wherein development happens besides mainstream operations in wireless software development: Data Warehousing Your Company has developed data warehousing application on complete management package for human resources of IT professionals. All future web- sites and corporates will utilize this technology since new generation web- sites are migrating towards database driven sites. Large organisations have huge amounts of information collected over the years. In the world of E.D.I. (Electronic Data Interchange) such data is converted into a database using RDBMS applications such as Oracle or SQL. Data warehousing facilitates maintenance of these huge databases in keeping them up-to-date. It also involves a high level of security related issues concerning database access permissions. E-commerce Solutions Your Company has conducted research on setting up complete E-commerce solutions with provisions for accepting credit cards via payment gateways. Your Company has also conducted research on embedded Java and Cyber mail application projects. Company has recently developed Internet banking product and Internet stock and derivative commodity trading product. Internet Security The Intemet poses a very huge, heterogeneous network with a variety of servers and clients on various platforms connected over Physical, Optical and/or Satellite media. This has created a vast pool of information resource for various Public and Private entities to carry out Monetary and non-Monetary transactions. Security comes into play at every stage in protection and authentication of information. There exists a threat to information, which are prone to being tampered by hackers (people who gain unauthorized access to information and have malicious intent). To counter the ever present and increasing threat, various methods are adopted and your company is working on different models: * Secured Socket Layers (SSL), Secure Electronic Transaction (SET) is used to transmit confidential information over the Internet. * A high level of encryption is adopted for information such as Passwords and Credit Card Information. * Human or manual intervention is minimized. * Fire walls or proxies are used to represent information to end-user and simultaneously keep them far away from actual raw data. WAP (Wireless Application Protocol) WAP is the latest technology for new generation mobile users for accessing Internet application through a mobile handset. This technology is new in the IT industry and has a very vast scope for development project. WAP application can also be designed for E-commerce and complete transaction can be done through the mobile. The wireless application protocol is a new standard in the way the Internet works. It consists of a WAP content, consists of WAP gateway and a Web server that holds the WAP content. The WAP content consists of WAP cards that display contents on the mobile screen. A collection of more than one WAP card is called a deck. There can be more than one deck and each deck could be a collection of WML (Wireless Mark-up Language) and WML scripts. WML is the language for WAP and is created using XML (Extensible Mark-up Languages). There are many more tags that would be created using XML for WML to enhance the capabilities of WAP and further open new vistas for WAD i.e. Wireless Application Development. Your company is one of the players working on wireless technology and has strong R&D, technology development, product development and application development skill. Java Embedded Solutions Java is a very Yersatile programming language. It finds its application in many areas as in applet programming, application programming, server side programming, network programming, etc. Embedded Java programming is another wide area of application of Java. It is wherein your company has operational interest involved in the use of Java for programming of intelligent devices. The Java programs can be embedded into the hardware of these devices making them intelligent. This allows the device to be able to do more what it could if it were just hardware. Programs of Java can be embedded into IC's or micro controllers thus making them Web enabled or responsive to client-server architecture. With this kind of programming we could very soon realize the dream ot appliances like a refrigerator ordering milk and your home being controlled by voice messages through phone. FUTURE OUTLOOK Your company is growing in status as a significant player in telecom, convergence and wireless solutions industry especially in latest technologies like WAP, E-commerce, M-commerce and mobile telephony. Your company is eyeing for the latest technologies in IT sector such as Bluetooth, Edge, GPRS, UMTS and G-3. The Company is in the process of setting up full-fledged subsidiary in Australia, USA, UK and Singapore to provide adequate thrust to its International Marketing efforts. The Company is also in talks with leading US based IT Company to strike a strategic alliance to provide adequate push for launching its products through their distribution network and getting Wap based Software Development orders etc. MARKETING AND EXPORTS Internationally the company is successful in marking its presence in Australia, USA, UK, Middle East and Southeast Asian region. The Company has been able to geographically increase presence by generating clients in wide industry segments, different markets with different operational universe. The export trend in the current financial year is most encouraging with good pending order book position of USD 11 million from US, Australia and other European countries. The combined order booked position of the company in view of acquisition of ZAP Infotech would be USD 40 million. GROWTH MODEL AND PATTERN Your Company in view of expanding its business globally is in the process of acquiring US based Intratech Inc., which will act as the marketing arm for your company in USA markets. During the current year your company had acquired Diginet Technologies, a R&D entity based in Mumbai, in all cash deal worth Rs.6.75 crores. It will help your company in specialising in wireless and telecom solutions market in India. Diginet has a strong R&D capabilities an has recently developed products based on wireless technology specifically in the voice over IP market. Your company has taken over all the tangible and intangible assets including product rights developed by the company. The Company has an impressive list of customers, which includes S. Kumars, Crompton Greaves and Bank of India etc. Your Company during the current year acquired one of India's leading Infotech company - Zap Infotech in a record Rs. 475 Crores (USD 105.5 Million) all stock deal. The deal envisages transfer / alignment of entire business of Zap Infotech, as per Memorandum of Understanding, to your company in all stock deal valued at Rs. 475 crores which the board approved in their meeting held on 16th August, 2000. Now your company would undertake an equity expansion to accommodate the newly inducted shareholders. The Price of share is decided as Rs. 850/- per equity share or the price arrived as per SEBI guidelines, whichever is higher, as decided by the Board in their meeting held on 16th August,2000. The shares would be issued under SEBI Preferential Issue of Shares Guidelines dated 4th August,1994. As a result of the acquisition your company would get access to training centres run by Zap Infotech imparting training in advanced technologies in telecom wireless application all over India, 3 SDC's,1 R&D outpost,2000 strong employees base, & contracts worth $ 29 million etc. The Company has appointed leading international consultant Deloitte & Haskin 8 Sell for Rs. 475 Crore deal structuring and conclusion. The combined entity owing to its new found strengths is likely to achieve a substantial growth both in its top line and bottom lines and will be a significant player in the IT Industry. This move is aimed at synergistic and consolidated operation enabling front end lineage such as M-commerce, VOIP, UMTS applications and back end integration of the state-of-the-art R&D base facilitating telecom solutions leading to convergence. This charts a new path and provides a positive signal towards consolidation in the Infotech industry),. Your Company is in the process of appointing leading international consultants for advising on post acquisition structuring and corporate governance etc. As you are aware, your company is a wireless technology company with significant interest in WAP and effective research base in emerging wireless technologies such as GPRS, G-3, UMTS, EDGE etc. While Zap Infotech is an integrated software service provider with major focus on wireless technology. The strength post acquisition would make your company a significant player in wireless telecom sector solution market. BUSINESS STRATEGY The Company has decided to adopt inorganic growth model by acquiring a wide spectrum of businesses in broad telecom convergence and market segments with eye on technology marketing and R&D companies. To meet all of its client's IT needs, the company strives to offer a comprehensive range of services by continuously evaluating new and emerging technologies. As a full service provider, the company believes that it can increase Its revenues from existing clients as well as by attracting new clients and markets. A key objective of the company's growth strategy is to expand the nature and scope of engagement with existing clients both by increasing the company's understanding of the clients service offered. Establishing broad, long-term relationships potentially increase the volume of its project and by expanding the breadth of service offered. Establishing broad and long- term relationships potentially increase the quality and efficiency of the company's service to a particular client since each project performed for a client increases the company's understanding of the client systems, recruitment and business practices. For the same reason, establishing broad long term relationship with the clients competitors. The company pursues several new client development strategies first, the company offers a broad array of managed software solutions that provide an initial entry into a new client Second, Sun believes that it can leverage the industry specific expertise it has developed in key market segments like wireless, convergence, telecom, e-com and m-com, which will continue to help Sun for design and develop re-usable software tools and processes, which have specific applications to clients in these markets and which can improve the company's efficiency and productivity. STRATEGIC ALLIANCE Your Company has entered into a Strategic Alliance with leading New Zealand based Telecom Company E- Phone Limited for providing support base for Research and Development in Wireless technology like WAP Edge, G-3. Bluetooth, General Telecom Solutions and Services. Your company would generate revenue of 2 million USD during two years contract period with option to renew the contract. Further, your Company would be providing all Research and Facilitation Inputs for E-Phone Ltd. ongoing prOJect in wireless technology besides upgrading its existing set- up to wireless enabled via new emerging technologies. INFRASTRUCTURE Your company currently has two SDC's at Mumbai and Bangalore and is in the process of setting up state-of- the-art RD centre at NOIDA through an investment of USD 1.5 million. In addition, the company plans to invest overseas for setting up similar facilities in Australia and Europe. The company's extensive network infrastructure and experience in CRM application and WAP technology will be a major asset to handle these focused areas. In view of acquisition of Zap Infotech your company would get access to 3 more SDC's in Delhi, Hyderabad & Bangalore. HIVE OFF OF VALUATION BUSINESS Your company was incorporated in 1994 with its primary business of Auction, Consultancy and Valuation. During the course of time your company achieved ISO 9001 certification for its business. It had an impressive clients list which included HLL, CCI, Hindustan Petroleum, Bombay Port Trust, Indian Oil, etc. Your Company made immense progress by absorbing technology in its current business model by setting up auction sites, hiving off its brick and mortar business to a more vibrant internet e-com, m-com, convergence, wireless technology and upgradation in its business model. Your Company has drastically reshaped its revenue model by ensuring that technology based services contribute major chunk of its revenue streams RESEARCH AND DEVELOPMENT With the advent o Internet, the global village has shrunk, particularly in the economic sense. India is in the forefront of this IT revolution and is considered to be the breeding ground for software professionals. The bottom line in all the ventures is technology and technological innovations. Therefore, the important ingredilent in this fast changing world of business revolves around innovation. Companies would survive and flourish only if they resort to research and development. The future can be defined by three processes - the exploding nature of the Internet, the transition from voice to digital and the demand for knowledge and information. Communications is fast approaching incredibly at high speeds in a digital age where all forms of communications merge in a single digital stream with an insatiable demand for information. The high-speed digital future will have a tremendous impact on the world. With digital convergence, we are about to enter the world in which being a citizen of the world will have a real meaning. The irresistible movement of technology and the hard rocks of the old world regulatory structures and governing systems will be rolled over. The sea-change in telecom applications both wired and wireless is fuelled by the growth in the IT industry. Therefore an R&D focus is inevitable in order to emerge as a long term player in this sector. The IT industry in itself is dynamic in nature with rapid technological advances in processing and performance. It has an inherent need for updated technical expertise and a large pool of knowledge, making it skilled manpower intensive. Emphasis has to be laid on R&D in order to ride the crest of the wave in the new age economy on a global platform. Research should not be measured with a feasibility yardstick. Rather, the creative applications that evolve could be assessed for developmental exercise. Your Company's primary focus is integrated software solutions. Efforts in the area of advanced wireless technologies such as GPRS, EDGE, Bluetooth, Convergence etc., are in process in order to investigate them to facilitate mass-market adoption. This would be for diversified wireless terminals, networks, services and applications for the exploration of new business frontiers. Particular emphasis is placed on the integration of such technologies in future generation and broadband fixed radio access and broadband wireless network. Bluetooth, a new-generation technology that enables users to contact a wide range of computing and telecommunication devices without the need to buy, carry or connect cables. It delivers opportunities for rapid, adhoc connections and in the future will provide automatic connections between devices. The most important aspect of General Packet Radio Switching (GPRS) is that it allows data transmission speeds to be over 100 Kbps. This packet-based device supports the world's leading International communications protocols, Internet Protocol and X.15. With the advent of GPRS, the speed would increase to 100 Kbps with EDGE technology enabling the mobile user to surf the net with ease, in addition also provide content in the form of video, audio and data together In simple terms, one can be conducting a face-to-face meeting with one's associates from different parts of the world while driving to play golf. The third generation (3G) wireless technology such as UMTS is scheduled to begin by 2002 and multiplexed voice video data applications with data rates at speeds of 2 Mbpswill enable seamless wireless video conferencing incorporating both circuit and packet switched network. For the RD centre, the company is organizing a work force of about 45 software and telecom professionals to carry out basic and applied research not only for the company but also for alliance partners and commercial application. It is also developing both front and back end capabilities in the, development of various technologies by interacting with telecom operators, manufacturers and end users in wireless technology market. The R&D centre would help the company to stay ahead in the competitive environment of designing and implementing e-commerce, m-commerce and wireless technologies. YEAR 2000 The Year 2000 transition has been smooth for both your company as well as its clients. The financial impact of the transition was insignificant. Your directors are happy to report that the transition was completed smoothly and going forward, see no material financial impact arising from year 2000 issues. INDUSTRY OVERVIEW Worldwide use of wireless telecommunications has grown rapidly as cellular and other emerging wireless communication services have become more widely available and affordable for the mass business and consumer markets. Advances in technology, changes in telecommunications regulations, the allocation and licensing of additional radio spectrum have contributed to this growth worldwide. FIXED DEPOSITS There are no overdue and unclaimed deposits at the end of the year. DIRECTORS Mr. Pravin Sonalkar, director of the company, retire by rotation at the forthcoming Annual General Meeting and being eligible, offer himself for re-appointment. During the year Mr. S.P. Adarkar and Mrs. S.S. Joglekar resigned from the post of directorship. Your directors place on record their appreciation for the valuable services rendered during their tenure as directors of the company. AUDITORS M/s. Nabera and Associates, Chartered Accountants, Auditors of the-Company retire at the forthcoming Annual General Meeting and are eligible for re- appointment. AUDITORS' REPORT The Auditors' Report is self-explanatory and therefore does not require any clarification. PERSONNEL The Management-Employee relations remained very cordial and friendly throughout the year. Your Company has already appointed leading international consultant for working on ESOP Model. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The disclosures to be made pursuant to the provision of subsection (1) (e) of Section 217 of the Companies Act,1956 read with Companies (Disclosures of particulars in the report of Board of Directors) Rules,1988, are set out in the annexure included in this report. PARTICULARS OF EMPLOYEES No particulars of employees are given as required under the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, as no employee has drawn the salary as prescribed in the said Section. ACKNOWLEDGEMENT Your Directors would like to express their gratitude for the co-operation, assistance, support and guidance extended by the Bankers, Central and State Government, Local Authorities and other regulatory authorities. The Board places on record its appreciation for the valuable patronage, co-operation and goodwill received by it from clients, business associates and our most valued shareholders. Your Directors also express their appreciation for the whole-hearted contribution made by the employees and the workers for the successful operations of the Company during the year. For and on behalf of the Board of Directors Place: Mumbai ANIL PUJARI Dated: 1st August. 2000 Managing Director Annexure to the Directors Report information under Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars n the Report of the Board of Directors) Rule, 1988 and forming part of the Directors' Report. 1. Conservation of Energy: The operation of your company does not consume high levels of energy and adequate measures have been taken to conserve energy wherein your company uses latest technology and energy efficient equipment. As energy cost forms a very small part of total cost, the impact on cost is not material. 2. Technology Absorption, Adaptation and Innovation: The Company has not imported any technology at any time during the last year. a) Research & Development : R & D in WAP, G-3, GPRS, Edge and UMTS. b) Benefit derived as a result of R & D action: Technology Development, Product Development and Application Development capabilities enhancement. c) Future plan of action Company plans to strengthen its R & D activity--with more focus on emerging wireless technologies and research on new technologies to become a significant player in the IT industry alongwith acquisition of technology and product companies. d) Expenditure on R & D (Rs. in Lacs) i) Capital 3.50 ii) Recurring 19.00 iii) Total 22.50 iv) Total R& D Expenditure 6% of Turnover 3. Foreign Exchange Earning and Outgo: There is no Foreign Exchange outgo during the year under review. The Foreign Exchange earned during the year is Rs. 359.87 Lacs. For and on behalf of the Board of Directors Place: Mumbai ANIL PUJARI Dated: 31st August. 2000 Managing Director