APTECH LIMITED ANNUAL REPORT 2011-2012 CHAIRMAN'S REPORT Dear Stakeholders, Global and Domestic business environment continues to be challenging. Overcapacity in the formal space, increased competition in the non-formal space and plethora of choices for the youth and the negative sentiments about the economy made the operating environment difficult for Aptech. Political instability, social strife, etc. in a few international regions also had an impact on business performance. It has been three years since the new leadership was put in charge of Aptech to achieve the objectives of 'Leadership, Scalability and Profitability' and to make Aptech a cash rich organisation. We continue to work towards these objectives. I would like to highlight the following: Leadership In spite of the changing Career Education market dynamics and fierce competition, especially in the Animation & Multimedia training segment, our brands Arena Animation and MAAC have consolidated their leadership position in the domestic market in 2011-12. On an aggregate basis, the profitability (at EBITDA level before corporate overheads) of our Animation & Multimedia training brands has increased from 24.7% in 2010-11 to 27.8% in 2011-12. We also continue to retain our leadership in IT Training in International markets such as Vietnam, Russia and Pakistan. In 2011-12, we have grown our International business by 20% over the previous year and now the International business (excluding China) contributes 45% of our total Individual Training (excluding MAAC, excluding China) revenue. Scalability Aptech Assessment & Testing Solutions has been able to achieve scale with a diversified customer portfolio and few prestigious clients. With 21.5% revenue CAGR over the last 3 years, the EBITDA profits have grown at 96.8% every year. This business has achieved leadership position in the Academic Assessment segment within India. The key strategy to achieve 'Scalability' in our International business is to expand our presence in existing geographies and new regions. In 2011-12, we logged a 46% growth in fees from new centre and master franchise sign- ups on the back of sign-up of 35 new centres (against 29 in 2010-11) and 3 new master franchises in our International business. We have also opened our first international centre for MAAC in Vietnam, first Arena centre in Nigeria and first Aptech Aviation centre in Mauritius. Profitability We have divested or shut loss making business, reduced capital employed, reduced overheads and thereby improving profitability and free cash flows. Aptech English has turned profitable at the EBITDA level, while Aptech Aviation's EBITDA losses came down from Rs. 67.12 million to Rs. 15.34 million in 2011-12 on a global basis. Our operating EBITDA went-up by 13%, average Capital employed reduced from Rs. 243.14 million to Rs. 200.94 million over 2011-12 in retail business, a drop of 17% and in non-retail business has dipped by 85% vis-a-vis 2010- 11. Free cash flows from operations in 2011-12 were Rs. 166.40 million. Coupled with the Rs. 503.84 million dividend received from BJB Career Education Co. Ltd. (Chinese entity where we hold 22.4% stake), the focus on profitability and cash flow has resulted in the net cash & cash equivalents (including current investments) on our balance sheet rising from Rs. 0.57 billion as on 31st March 2011 to Rs. 1.03 billion as on 31st March 2012. Going forward, we will continue to focus on the key growth businesses of Animation & Multimedia training, International business and Aptech Testing. We have invested in Retail training through an alliance with TRRAIN Foundation, in Mobile Education through a partnership with Hungama Digital Entertainment and in Poland through minority stake in Syntea SA, to develop more success stories for Aptech. We will keep pursuing our objectives with all the Focus, Dedication, Passion and Courage. Yours sincerely, Rakesh Jhunjhunwala