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Aptech Ltd.

BSE: 532475 Sector: Services
NSE: APTECHT ISIN Code: INE266F01018
BSE 00:00 | 25 Jan 202.20 33.45
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NSE 00:00 | 25 Jan 202.25 33.55
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OPEN 173.00
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VOLUME 545001
52-Week high 202.50
52-Week low 65.55
P/E
Mkt Cap.(Rs cr) 821
Buy Price 202.50
Buy Qty 8403.00
Sell Price 202.45
Sell Qty 99.00
OPEN 173.00
CLOSE 168.75
VOLUME 545001
52-Week high 202.50
52-Week low 65.55
P/E
Mkt Cap.(Rs cr) 821
Buy Price 202.50
Buy Qty 8403.00
Sell Price 202.45
Sell Qty 99.00

Aptech Ltd. (APTECHT) - Director Report

Company director report

THE MEMBERS OF APTECH LIMITED

Your Directors are pleased to present their Twentieth Annual Report on the business andoperations of your Company and the Audited Financial Statement for the year ended March31 2020.

STATE OF AFFAIRS SNAPSHOT OF FINANCIAL RESULTS

The financial results of the Company for the Accounting period ended March 31 2020 arepresented below:

(Rs. In Lakhs)
Particulars Standalone Consolidated
Year ended March 31 2020 Year ended March 31 2019 Year ended March 31 2020 Year ended March 31 2019
Operating Revenue 14158.84 14078.02 21682.32 20855.15
Total Revenue 14571.41 14548.58 22226.14 21271.88
Total Expenditure 14618.46 13849.78 20508.27 19031.50
Net Profit /(loss) before tax (47.05) 698.80 1717.87 2240.38
Profit / (Loss) After Tax 20.81 519.83 1350.61 1822.11
Total Comprehensive Income (145.13) 658.11 1179.40 1942.95

OPERATIONS REVIEW

The Company ended the FY2019-20 with a Revenue from Operations of Rs. 21682 Lakhswhich translates to a growth of 4.0% over the previous financial year. This contrastedwith the YOY decline reported during the last fiscal year. The Company delivered thisgrowth despite a significant business impact from the COVID-19 pandemic in the Q4 of theFY2019-20. The COVID-19 crisis conservatively impacted the top line of the Company by anestimated Rs. 16 crores. This effect percolated to the bottom-line as seen in theFY2019-20 EBIT decline of 27.7% to Rs. 1493 Lakhs from Rs. 2065 Lakhs in FY2018-19. TheProfit Before Tax and the Profit After Tax were Rs. 1718 Lakhs and Rs. 1351 Lakhs in thereported financial year respectively. Also the respective YOY decline was 23.3% and25.9% in FY2019-20. The previous financial year included a writeback of Rs. 306 Lakhsrelated to the non-cash ESOP expenses as against Rs. 507 Lakhs hit in the reported fiscalyear. Excluding this expense head the Profit Before Tax rose by 15% showing theimprovement in operational efficiency effected by the Company. The balance sheet of theCompany continued to be healthy with zero net debt and Cash Cash Equivalents Short-termInvestments & Financial Instruments amounting to Rs. 6604 Lakhs as on March 31 2020.The Company expects to repay the short-term working capital liability of Rs. 2258 Lakhson the balance sheet as the collection from debtors improves post relaxation of lockdown.

Notwithstanding the impact of the closure of all the Educational institutions enforcedby various countries to contain the spread of the Coronavirus in February and March 2020the Retail segment reported a 12.2% jump in its revenues during the reported financialyear. The Institutional division faced a double whammy from the CAA-NRC protests and theCorona virus pandemic. There was a significant impact on its FY2019-20 revenue with a fullyear YOY decline of 13.2% from a 25.5% YOY growth seen on a 9M basis. Retail EBIT swelledby 7.8% to Rs. 5718 Lakhs from Rs. 5303 Lakhs in the previous year which translatesinto an EBIT margin of 36.2%. The Company also continued to cut down on the corporateoverhead expenses reducing its fixed cost base as seen in the reduction of unallocablecosts.

The Retail segment revenue mix for the FY2019-20 was 81:19 in terms of the splitbetween the Domestic and International segments. The movement in the revenue mix from77:23 in FY2018-19 was mainly on account of continued growth in Domestic Retail anddecline in the International Retail revenue but improvement in margin mix because ofexit from low margin businesses. Domestic Retail revenue went up from Rs. 10793 Lakhs inFY2018-19 to Rs. 12885 Lakhs in FY2019-20 a growth of 19.4% owing to the power brandsArena MAAC and Lakm Academy Powered by Aptech. The International Retail divisionrevenue declined by 11.4% on an overall basis but on a like-to-like basis i.e.excluding the low margin business contribution it showed a growth of 3.8% in FY2019-20even when some of its major markets were severely impacted due to COVID-19 pandemic.

The system-wide collection from students for the franchise business in the Retailsegment was Rs. 42504 Lakhs in FY2018-19 and went up to Rs. 46514 Lakhs in FY2019-20translating to a growth of 9.4%. Out of this total the system-wide collection fromstudents for Domestic Retail was Rs. 34704 Lakhs and for International Retail was Rs.11810 Lakhs with a YOY growth of 16% and -6.2% respectively. During FY2019-20 theaverage number of active centers during the year went up by 14 in Domestic Retail and 4 inInternational Retail. The total number of new center sign-ups went up from 194 inFY2018-19 to 211 in FY2019-20 for the Domestic market and down from 28 to 20 for theInternational market.

The Company continued to fortify its Retail segment's positioning as a BrandedLifecycle Learning Platform of choice by concentrating on:

1. Enhancing the student experience multifold through innovation events socialplatforms and focus on delivery excellence.

2. Strengthening the core value proposition of employability by consolidating itsconnection with the industry and bringing more job opportunities for the students inaddition to academic partnerships.

3. Boosting center network capability through proactive support and continuous trainingto franchises and churning the partner mix to inject more aggression and attention.

4. Amplifying the marketing message by significantly increasing the spending andexpanding presence in all media including innovative proprietary platforms and usingcelebrity brand ambassadors.

5. Reinvigorating the workforce by injecting fresh blood and adopting progressiveemployee practices to promote motivation levels.

6. Increasing the Per Student Booking by leveraging the brand power to increase pricingand improving product mix by pushing high-value courses.

The above actions align with the Company's strategic pursuit of "Employment DrivenEnrolment" and the mission to compete with "Unemployability". In some ofits larger international markets the Company adopted similar actions by makingcountry-specific tweaks and initial results were encouraging. The product valueproposition in the International market includes a formal education pathway to aninternational degree at a much lower overall cost through academic articulationpartnerships.

The Assessment & Testing division continued to pursue its strategy of de-riskingthe business portfolio by diversifying away from high-stakes recruitment exams of theCentral and State governments. It included focusing on acquiring a broader base ofcustomers reduce dependence on a few large clients and address the significant marketsegment of OMR sheet based written examinations. The Company continued to cut down on thefixed costs in line with the revenue base. New products and features developed during theyear include Secure Internet Exam Learning Management Solution Internet-based Evaluationthat would help in capturing a larger share of the pie from each customer. The Company andits brands won many prestigious awards and recognitions during the reported financialyear. Lakm Academy Powered by Aptech won the award for the "Best Professional

Beauty Training Institute of the Year" at the ASSOCHAM's 3rd Beauty Wellness andPersonal Care Awards 2020. Aptech was recognized as the "Best TrainingInstitute" by the ABP News National Education Awards 2019. MAAC Aptech MontanaInternational Pre-school and Lakm Academy Powered by Aptech won different recognitionsat the Scoonews Global Education Awards 2019. Aptech Computer Education won the ICT GoldMedal for Highest Turnover in Training from HCMCA Vietnam for the 17th consecutive year.Aptech Montana won the "Best Emerging Franchisor Award (International)" at theFranchise India Awards 2019. Aptech was once again voted as a Great Place to Work(2019-20) by the Great Place To Work Institute survey.

IMPACT OF COVID-19 PANDEMIC AND MITIGATION MEASURES IMPLEMENTED

In the Retail business consequent to the global spread of COVID-19 pandemic all thelearning centers of the Company suspended the classes in most of its major marketsincluding India and international countries in ASEAN Africa and South Asia starting fromvarious dates in February and March 2020 in compliance with the lockdown and health safetymeasures announced by the respective governments. In Vietnam most of the centers haverestarted classes in phases from the second half of May 2020. However in many countriesthe batches are expected to resume only towards the end of H1 FY2020-21 or later. Theclosure of learning centers led to an impact in terms of class conduct fee collectiondelay in conversion of leads to new enrollments and more. The lead conversion for newadmissions was also affected by the deferment of various high-school exams and subsequentdelay in declaring results and shaky job scenario in multiple industries served by theCompany. The economic slump and uncertainty also impacted the network expansion plans ofthe Company.

Due to the pandemic and the subsequent lockdown the educational institutes and thegovernment agencies postponed the conduct of assessments and training programs whichaffected the Institutional segment's business. Fresh recruitment and assessment plans wereput on hold by many Customers or potential Customers and there have also been delays inreleasing payments for completed projects by some Government clients due to a shift inpriorities.

The Company has however initiated various measures to tackle the challenges arisingfrom the current situation:

• Strategically capitalize on the trend for digital training assessment andpayments by adapting our business and opening new market segments.

• Digital Pivot

• Retail: embracing remote delivery online counseling digital marketing andencouraging digital payments.

• Institutional: Software solution developed to address new norms of socialdistancing while conducting exams Evaluation of new digital opportunities like LCMSRemote Proctored Exam and Web-based Evaluation. Recalibration and reconfiguration ofrollout plans for all existing contracts in hand with Digital Pivot as far as possible.

• Re-skilling Faculties and Centre staff for Digital Pivot while working from Home

• Sustained Student engagement with Online initiatives

• Impact assessment on industries that employ our students

The Company has estimated that the financial impact of the pandemic in the Q4 ofFY2019-20 was an operating revenue loss of roughly Rs. 16 crores. It has also impacted thecollection of student fees and institutional payables. The additional expenses related toa capacity loss for social distancing and other health and safety measures will lead to anincrease in the cost of operations. However the assessment of full future financialimpact will be known only once the road ahead is clear. The Company presently continues tohave a net-zero debt situation and has sufficient liquidity to weather the currentheadwinds. The Company has also planned for a reduction of nearly 20% in its fixed costbase in FY20-21 to mitigate the financial impact of the pandemic.

TRANSFER TO RESERVE

There has not been any transfer to the General Reserves during the year under review.

DIVIDEND

An Interim Dividend of Rs. 3.50 per was declared by the Board of Directors at theirmeeting held on 21st May 2019. Further An Interim Dividend of Rs. 4.50 perequity share was paid to the shareholders as approved by the Board of Directors vide itscircular resolution passed on 7th March 2020. The Directors have considered itfinancially prudent to re-invest profits into the business of the Company and therefore donot intend to recommend final dividend.

DIRECTORS

During the year 2019-20 the Directors met four times on 4 times on 21st May2019 22nd July 2019 24th October 2019 and 29th January2020.

Mr. Rakesh Jhunjhunwala (DIN: 00777064) Non Executive Director retires by rotation atthe ensuing Annual General Meeting and is eligible for re-appointment.

Mr. Asit Koticha (DIN: 00034266) Independent Director of the Company has tendered hisResignation from the post of Director of the Company with effect from 15thJune 2020 due to other preoccupations.

All Independent Directors have given declarations that they meet the criteria ofindependence as laid down in Section 149(6) of the Companies Act 2013 and Regulation 16(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. AllIndependent Directors have registered their name in the Independent Directors data bank.

BOARD EVALUATION

Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations& Disclosure Requirements) Regulation 2015 during the year under review the Boardcarried out the annual evaluation of the performance of the Board its Committees and ofindividual Directors including Independent Directors. A structured questionnaire coveringvarious aspects of functioning of the Board Committees and Directors such as adequacy ofthe composition of the Board and its Committees Board culture execution and performanceof specific duties obligation and governance was distributed to each member of the Boardand inputs were received.

EMPLOYEE STOCK OPTIONS

The Members of the Company at its Annual General Meeting held on 27thSeptember 2016 had approved the Aptech Employee Stock Option Scheme 2016 ("theScheme") to create offer and grant upto 4432620 Employee Stock Options to alleligible employees directors (excluding promoter directors) of the Company and employeesof its subsidiaries with a view to attract and retain key talents working with the Companyand its Subsidiary Company (ies) by way of rewarding their performance and motivate themto contribute to the overall corporate growth and profitability. All the plans areadministered by the Nomination & Remuneration Committee of the Board. Disclosures asrequired under the SEBI (Share Based Employee Benefits) Regulations 2014 are available onCompany's Website on:https://www.aptech-worldwide.com/downloads/news-and-notification/DISCLOSUREASREQUIREDUNDERSEBIESOP-1 7.06.2020.pdf

EXTRACT OF ANNUAL RETURN

As per the requirements of Section 92(3) of the Companies Act 2013 and Rules framedthereunder the extract of the annual return for FY 2019-20 is available on Company'swebsite on the link:https://www.aptech-worldwide.com/downloads/news-and-notification/Extractofannualreturn-MGT-9-2019-20.pdf

PARTICULARS OF LOAN GUARANTEE OR INVESTMENTS

Loan guarantees and investments covered under Section 186 of the Companies Act 2013forms part of the notes to the financial statements provided in the Annual Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

In line with the requirements of the Companies Act 2013 and the SEBI (LODR) 2015 theCompany has formulated a Policy on Related Party Transactions and the same is uploaded onthe Company's website: https://www.aptech-worldwide.com/downloads/InvestorPolicy/AptechRPTPolicy2019.pdf

Details of Related Party Transactions are given in AOC-2 as Annexure-IV.

SUBSIDIARIES

As on 31st March 2020 the Company had 6 subsidiaries and 1 joint venture.Pursuant to Rule 5 of the Companies (Accounts) Rules 2014 Form AOC-1 is attachedto the financial statements of the Company. The said Form also highlights performance ofthe said entities and their contribution to the overall performance of the Company duringthe year ended 31st March 2020.

The Board of Directors of Maya Entertainment Limited and Attest Testing ServicesLimited wholly owned subsidiaries of the Company at their respective meetings held onSeptember 11 2019 had approved the Scheme of Amalgamation of Attest Testing ServicesLimited ("the Transferor Company") with Maya Entertainment Limited ("theTransferee Company") with effect from April

1 2019 being the appointed date. The Scheme was approved by the National Company LawTribunal at Mumbai on February 28 2020 which became effective from filing of the NCLTorder with the Registrar of Companies on 5th March 2020. Thereafter the name ofthe Company has been changed from Maya Entertainment Limited to 'MEL Training &Assessments Limited'' w.e.f 14th May 2020. During the year a voluntarywinding up of one of its non-operational step down subsidiary in Mauritius has beenfiled with Mauritian authorities.

NOMINATION AND REMUNERATION POLICY

The Company has formulated and adopted the Nomination and Remuneration Policy inaccordance with the provisions of the Companies Act 2013 read with the Rules madethereunder and the Listing Regulations.

The Nomination and Remuneration Policy can be accessed on the website of the Companyhttps://www.aptech-worldwide.com/downloads/aptech-policy/Remuneration-Policy.pdf

CORPORATE SOCIAL RESPONSIBILITY

The Company has constituted Corporate Social Responsibility Committee in compliancewith the provisions of Section 135 of the Companies Act 2013 read with the Companies(Corporate Social Responsibility Policy) Rules 2014. With a view to enlarge the scope ofCSR activities the Company revised the CSR Policy to enable providing skill developmentto underprivileged children and youth besides the existing activities. The revised policyalso facilitates education by providing financial assistance to the NGOs which are workingin the field of development of children and youth through education. The revised policyhas been uploaded on the website of the Companyhttps://www.aptech-worldwide.com/downloads/policy-on-csr.pdf The Disclosure with respectto CSR activities forming part of this report is given in Annexure-I

DEPOSITS

The Company does not accept any deposits from public.

INSURANCE

The Company has taken insurance cover for its assets to the extent required.

MANAGEMENT DISCUSSION AND ANALYSIS

A separate report on the Management Discussion and Analysis is attached as a part ofthe Annual Report.

CORPORATE GOVERNANCE

Effective corporate governance is necessary to retain the trust of stakeholders and toachieve business success. Corporate governance is about commitment to values and ethicalbusiness conduct. It is about how an organization is managed. It includes its corporateand other structures its culture policies and the manner in which it deals with variousstakeholders. As shareholders across the globe evince keen interest in the practices andperformance of companies corporate governance has emerged at the centre stage of the waythe corporate world functions. Corporate governance is vital to enable companies tocompete globally in a sustained manner and let them flourish and grow.

A separate Report on Corporate Governance is attached and forms part of the AnnualReport. The Auditors' Certificate regarding compliance of the conditions of CorporateGovernance is annexed as "Annexure V"

DIRECTORS' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statement that : (i) inthe presentation of the annual accounts for the year ended March 31 2020 applicableaccounting standards have been followed and that there are no material departures; (ii)they have in the selection of the accounting policies consulted the statutory auditorsand have applied them consistently and made judgments and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs of the Company forthe year ended March 31 2020 and of the profit of the Company for the year ended on thatdate;

(iii) they have taken proper and sufficient care to the best of their knowledge andability for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act. 2013 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities; (iv) the annual accounts havebeen prepared on a going concern basis. (v) internal financial controls followed by theCompany are adequate and were operating effectively (vi) the system to ensure compliancewith the provisions of all applicable laws were adequate and operating effectively

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION RESEARCH & DEVELOPMENT

Conservation of Energy

Adequate measures are taken to conserve energy although the Company's operations arelow energy intensive.

Technology Absorption

Your Company continues to use the latest technologies for improving the productivityand quality of its services.

Research & Development

Technological obsolescence is certain. We encourage continuous innovation and researchand development for measuring future challenges and opportunities.

DETAILS OF REMUNERATION AS REQUIRED UNDER SECTION 197(12) OF THE COMPANIES ACT 2013READ WITH RULES 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIALPERSONNEL) RULES 2014.

The percentage increase in remuneration of each Director Chief Financial Officer andCompany Secretary during the financial year 2019-20 ratio of the remuneration of eachDirector to the median remuneration of the employees of the Company for the financial year2019-20 and the comparison of remuneration of each Key Managerial Personnel (KMP) aregiven in Annexure-III

PARTICULARS OF EMPLOYEES

Particulars of employees as required to be disclosed in terms of Section 134 of theCompanies Act 2013 read with Rule 5 of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 shall be made available to any shareholder on aspecific request made by him in writing before the date of the Annual General Meeting andsuch particulars shall be made available by the company within three days from the date ofreceipt of such request from shareholder. In case the request is received after the AnnualGeneral Meeting such particulars shall be made available to the shareholder within sevendays from the date of receipt of such request.

PREVENTION OF SEXUAL HARASSMENT MECHANISM

During the year under review the Company has not received any complaint from theemployees related to sexual harassment. The Company has in place prevention of sexualharassment policy which is available on the Company's website i.e.www.aptech-worldwide.com

Further your Company has complied with provisions relating to constitution of InternalComplaints Committee under Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.

COST RECORDS AND COST AUDIT

Maintenance of cost records and requirement of cost audit as prescribed under theprovisions of Section 148(1) of the Companies Act 2013 are not applicable for thebusiness activities carried out by the Company.

STATUTORY AUDITORS

As per the provisions of Section 139 of the Companies Act 2013 read with Companies(Audit and Auditors) Rules 2014 as amended from time to time M/s. Bansi S. Mehta &Co (ICAI Firm Registration No. 100991W) were appointed as the Statutory Auditors from theconclusion of the seventeenth Annual General Meeting held on 31st July 2017till conclusion of the Twenty Second Annual General Meeting subject to ratification oftheir appointment at every AGM if required under the law. There are no qualificationsreservations or adverse remarks in their Audit Report.

FRAUD REPORTED BY AUDITOR UNDER SECTION 143(12) OF THE COMPANIES ACT 2013:

There was no instance of fraud reported by the auditor in their report under Section143 (12) of the Companies Act 2013.

SECRETARIAL AUDITOR

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the rulesframed thereunder the Company has appointed M/s. S G & Associates Practicing CompanySecretaries to undertake its Secretarial Audit. Pursuant to regulation 24A of SEBI(Listing Obligations & Disclosure Requirement) Amendment Regulation 2018 Secretarialaudit report of MEL TRAINING & ASSESSMENTS LIMITED is also annexed to Board Reportalong with the Secretarial Audit Report of the Company collectively as "Annexure-II".There are no qualifications reservations or adverse remarks in their Audit Report.

COMPLIANCE WITH SECRETARIAL STANDARDS

The Company has complied with the Secretarial Standards issued by The Institute ofCompany Secretaries of India on Meetings of the Board of Directors and General Meetings.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE:

During the financial year 2019-20 there were no significant or material orders passedby any regulatory body or court or tribunal impacting the going concern status and theCompany's operations in future.

ACKNOWLEDGEMENT

Your Directors wish to acknowledge all their stakeholders and are grateful for theexcellent support received from the shareholders Bankers Financial InstitutionsGovernment authorities esteemed corporate clients customers and other businessassociates. Your Directors recognise and appreciate the hard work and efforts put in byall the employees of the Company and their contribution to the growth of the Company in avery challenging environment.

Annexure to Directors' Report

1 . Report on CSR is given in Annexure- I

2. Secretarial Audit Report is given in Annexure II

3. Details of remuneration is given in Annexure - III

4. Details of related party transaction in Form AOC-2 is given in Annexure IV

5. Auditors' Certificate regarding compliance of the conditions of Corporate Governanceis given in Annexure - V

.