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Coral Hub Ltd.

BSE: 533011 Sector: IT
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Coral Hub Ltd. (CORAL-HUB) - Director Report

Company director report

CORAL HUB LIMITED (FORMERLY KNOWN AS VISHAL INFORMATION TECHNOLOGIES LIMITED) ANNUAL REPORT 2009-2010 DIRECTOR'S REPORT To: The members of Coral Hub Limited (Earlier known as Vishal Information Technologies Limited) Your Board of Directors ('Board') have pleasure in presenting the Sixteenth Annual Report along with the Audited Accounts for the period ended on 30th June, 2010 ('the period under review' 'the period'). FINANCIAL PERFORMANCE: (Amount in Rupees) Consolidated Standalone Particulars 30.06.2010 31.03.2009 30.06.2010 31.03.2009 15 months 12 months 15 months 12 months Total Revenue 99,01,44,690 66,56,53,585 89,11,85,506 61,73,94,267 Total Expenditure 78,45,47,210 47,32,63,773 62,11,46,147 44,09,05,276 PBDT 20,55,97,480 19,23,89,812 27,00,39,363 17,64,88,991 Interest 2,26,89,989 10,67,652 2,14,37,777 8,18,547 Depreciation 2,24,47,122 1,25,03,072 1,37,80,573 99,17,166 Profit before Tax 25,07,34,591 17,88,19,088 23,48,21,013 16,57,53,278 Provision for Income Tax 4,10,90,953 2,05,55,702 3,34,72,582 1,87,79,847 Fringe Benefit Tax 0 4,41,770 0.00 2,72,123 Deferred payment against tax 3,24,322 6,87,983 2,02,135 1,34,273 Profit after Tax 20,93,19,316 15,71,33,633 20,11,46,296 14,65,67,035 Add:- Balance brought forward 52,98,17,276 41,02,78,216 50,86,61,008 39,96,79,984 from previous year Amount available 73,91,36,592 56,74,11,849 70,98,07,304 54,62,47,019 for Appropriation Profit available for appropriation which is appropriated as follows: Proposed Dividend 1,45,18,788 1,95,98,536 1,45,18,788 1,95,98,536 6%(Previous year 12.5%) Preference Share Dividend 0.01% 8,562 8,562 0 0 Amount transferred to General Reserve 2,01,14,630 1,46,56,705 2,01,14,630 1,46,56,704 Corporate Dividend 24,11,389 33,30,771 24,11,389 33,30,771 Tax Profit Carried forward to Balance Sheet 68,96,52,088 52,98,17,276 66,03,31,362 50,86,61,008 EPS 0.85 1.39 0.92 1.41 DIVIDEND: Your Directors are pleased to recommend a final dividend @6% i.e. Rs.0.06 per Equity Share, subject to the approval of Shareholders in the Annual General Meeting. OPERATIONS: During the period under the review, as per the Consolidated Accounts, the Company has achieved Sales income for the period ended 30th June, 2010 Rs.99,01,44,690/- as against Rs.66,56,53,585/-forthe year ended 31st March, 2009 registering a marginal growth of 48.75 %. The Consolidated profit after tax for the current period is Rs.20,93,19,316/- as compared to Rs.15,71,33,633/-for the previous year registering a raise of 33.21%. The profit before Interest, Depreciation and Tax for the current period is Rs.20,55,97,480 as compared to Rs. 19,23,89,812/-for the previous year registering a raise of 6.87%. ACTIVITIES DURING THE PERIOD: Company's digitization activity has been stable through out the period and has added new services in its conversion activity especially in the E Publishing arena. The Company is now converting the data with current readable popular devices like iPad, Kindle & sony readers. More and more publishers are looking at the opportunity to convert their back titles compatible to these devices. The Company finds this as huge opportunity and actively pursuing with its existing clients and also expanded its horizon in marketing to other non-English speaking European publishers. With opening of its subsidiary in UAE, Company is planning to shift the scanning and indexing business to subsidiary as it requires more and more on site support and logistically UAE will be able to support this activity much more easier. The Company has also proposed to diversify its business through its Subsidiary, to start an e commerce platform called Coral Hub Online shopping. This e commerce portal has been floated by the subsidiary of the Company, very recently and caters to only Indian market. It has variety of products and made a soft launch to test the market. The real marketing of this portal would start from the New Year once we have many more products to offer. So far the response to this e commerce platform from Indian public is very encouraging. Company's subsidiary Basiz Fund Accounting services continue to show very high profit margin and have won many more hedge funds accounts. It is expected to cross 5 mn USD turnover very shortly. It is also looking for acquisition abroad to expand its market reach. EXTENSION OF FINANCIAL YEAR: The Company has extended its financial year for a further period of three months, that is the Company's financial year commencing from 1st April, 2009 and ending on 31st March, 2010 be extended upto and inclusive of 30th June, 2010 and that the accounts be prepared for the said financial year comprised of 15 months from 1st April, 2009 to 30,h June, 2010. CHANGE OF NAME AND OBJECTS OF THE COMPANY: The name of the Company has been changed to Coral Hub Limited w.e.f. 9th July, 2010 subsequent to the approval of members obtained through Postal Ballot. Further subsequent to the approval of Shareholders through Postal Ballot the Company has also altered its main objects and the other objects under the Object Clause no. Ill of the Memorandum of Association of the Company. FUTURE PROSPECTS: The Company would like to concentrate more in the arena of xml conversion and typesetting as publishing industry is going in that direction. The Company is planning to revamp its production infrastructure with investment in high performance hardware and will also add its software suites, as this is required in order to face the competition. Since the delivery model of the books is slowly changing from print model to digital model and that too with introduction of multi functional devices the publishers are very keen to step up the availability of their books compatible to these devices. Your company finds this as a major opportunity to exploit and it has geared itself to take these challenges. In order to exploit the growing on line shopping market, your company has diversified into this as major activity , through its Subsidiary and has opened up on line shopping plaza to cater to Indian market. The rationale behind starting this activity is that Indian online shopping market is estimated at Rs.100 billion and it is growing at the rate of 30% every year. Out of 60 million Internet users, about 10% shop online. With broadband & 3G penetration into interiors of India that would increase online shopping. According to Nielsen Report Online Shopping 2010,8 out of 10 Indian in metros shop online and out of this more than a quarter spend 11 % of their monthly purchases in online shopping. Your Company is all set to have a share in this market and can increase the shareholders value, as we would start the brand building exercise from the ensuing New Year. The future prospects of all our subsidiaries are very exciting as they have great plans to expand their activity and market reach. Our subsidiaries in India and UAE are expected to post good results in the coming years. SUBSIDIARY COMPANIES: In the month of November, 2009, the Company has invested in Ambition Clothing Private Limited (Earlier known as Ambition Industries Pvt. Ltd.) situated in MEPZ Special Economic Zone at Chennai, which is dealing in readymade Garments. The Company holds 91% Equity Shares of Ambition Clothing Private Limited . During the period, the Company has also formed a Wholly Owned Subsidiary with the name VITL FZE, at Sharjah Airport International Free Zone (SAIF), UAE to carry on general trading activities. The Company has three Indian subsidiaries namely Coral Hub Publishing Private Limited, (Earlier known as Coral Hub Online Services Pvt. Ltd.) Basiz Fund Service Private Limited, Ambition Clothing Private Limited, (Earlier known as Ambition Industries Pvt. Ltd.) and two foreign subsidiaries namely Digital Content Solutions Limited, United Kingdom and VITL FZE, UAE and three step down subsidiaries, namely Basiz India Fund Services Private Limited, Basiz Fa Services Singapore Pte. Limited, Singapore and Basiz Investment Accounting (UK) Limited, United Kingdom which are subsidiaries of Basiz Fund Service Private Limited. As required under Section 212 of the Companies Act, 1956, the audited statement of accounts along with the Report of the Board of Directors and respective Auditors' Report thereon of all the subsidiary companies for the period ended on respective financial year are annexed and forms part of this Annual Report. DIRECTORS: Mr. D. M. Shirodkar and Mr. Ghanshyam Joshi, Directors of the Company, retire by rotation and being eligible, offers themselves for re-appointment at the ensuing Annual General Meeting (AGM). Pursuant to Clause 49 of the Listing Agreement, the detailed profile of the Directors retiring by rotation is provided in the Notice convening the Annual General Meeting. Mr. G. S. Vishwanathan has resigned from position of Whole Time Director w.e.f. 1st August, 2010 and from directorship of the Company w.e.f. 30th August, 2010. The Board wishes to place record its appreciation for the service provided by him during the tenure as Director as well as Whole Time Director. EMPLOYEE STOCK OPTION SCHEME 2008: In pursuance of shareholders approval obtained on 23rd November, 2007 your Company formulated and implemented an Employee Stock Option Scheme (the ESOS 2008) for grant of Stock Options to all permanent employees and Whole Time Directors of the Company. The Remuneration Committee of the Board of Directors is entrusted with the responsibility of administering the Scheme and in pursuance thereof. The Remuneration Committee had granted Stock Options equivalent to 5,15,450 Equity Shares of Rs. 10/- each on 12th June 2008 to Employees and Whole Time Directors of the Company. Due to Sub- division of Equity Shares, all the employees and Whole Time Directors were entitled for 10 Equity Shares of Re.1/- each on exercise of each Option of the ESOS 2008.Thus Stock Options were increased from 5,15,450 to 51,54,500 Stock Options. Out of 51,54,500 Stock Options, 44,05,800 Stock Options has been exercised at the exercised price of Rs. 5/- each by the employees and Whole Time Directors of the Company in April and May, 2009. During the period under review, 1,88,660 Stock Options have been exercised at the exercised price of Rs. 5/- each by the employees the Company and the Company had allotted 1,88,660 Equity Shares of Re. 1/- each in the Meeting of Board of Directors held on 11th June, 2010 to the employees who have exercised options granted to them. Pursuant to the aforesaid allotment of Shares under ESOS, Paid Up Share Capital of the Company is increased to Rs.24,19,79,795/-. Additional information on ESOS as required by Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999 is as Annexure I and forms part of this Report. The Company's Auditors, M/s. K. P. Joshi & Co., Chartered Accountants, Mumbai have certified that the Scheme has been implemented in accordance with the SEBI Guidelines and the resolution passed by the members at the Extra-Ordinary General Meeting held on 23rd November, 2007. The period between grant of option and vesting is not less than 12 months as per the SEBI guidelines. The vested options can be exercised by the grantee by communicating to the Company in writing to exercise. PUBLIC DEPOSITS: The Company has not accepted any Public Deposits under Section 58Aof the Companies Act, 1956 during the period under review. DIRECTORS' RESPONSIBILITY STATEMENT: Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 with respect to the Directors' Responsibility Statement, it is hereby confirmed: (i) that in the preparation of the annual accounts for the financial period ended 30th June, 2010, the applicable accounting standards had been followed along with proper explanation relating to material departures. (ii) that the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial period and of the profit or loss of the company for the period under review. (iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. (iv) that the Directors had prepared the accounts for the period under review on a 'going concern' basis. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUT GO: The information relating to conservation of energy, technology absorption, foreign exchange earnings and outgo required under Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) rules 1998 are detailed below. Conservation of Energies: The operations of your Company are not energy intensive, therefore impact of energy saving devices are insignificant. Adequate measures have however, been taken to reduce energy consumption by using energy efficient Computer terminals and by the purchase of energy efficient equipment of latest technology. Research & Development (R&D): Your Company continues to make investment in research and development which is crucial to its continued success. Technologies absorption: Your Company continues to use the latest technologies for improving the productivity and quality of its services. Your Company has continued to invest in the latest services and workstations. Foreign Exchange earnings and outgoings: During the period under review, earning in Foreign Exchange is Rs. 88,36,78,263/- (Previous year was Rs. 61,08,57,165/-) and Foreign Exchange Remittance is Rs.22,14,185/-(Previous yearwas Rs. 10,45,325/-). PARTICULARS OF EMPLOYEES: Statement pursuant to sub section 2A of Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 and forming part of this Report is given in Annexure II. AUDITORS: M/s. K.P. Joshi & Co., Chartered Accountants, Mumbai, who are the Statutory Auditors of the Company hold office upto the conclusion of the forthcoming Annual General Meeting. They have expressed their willingness to continue as Statutory Auditors for the financial period 201011 and accordingly, a resolution proposing their appointment is being submitted to the ensuing Annual General Meeting. The members are requested to consider their re- appointment for the current financial period 2010-11 and authorize the Board of Directors to fix their remuneration. CONSOLIDATED FINANCIAL STATEMENTS: As required under Clause 41 of the Listing Agreements with the Stock Exchanges, the Consolidated Financial Statements have been prepared in accordance with the requirements of Accounting Standards 21 Issued by the Institute of Chartered Accountants of India. The audited Consolidated Financial Statements form part of the Annual Report. The consolidated financial statements presented by the Company include the financial information of its subsidiary. The information for each subsidiary company is also in disclosure in a separate annexure with consolidated Balance Sheet. MANAGEMENT DISCUSSION AND ANALYSIS REPORT AND REPORT ON CORPORATE GOVERNANCE: Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, the Management Discussion and Analysis Report, the Report on Corporate Governance and the certificate from the Auditor of the Company regarding compliance of conditions of Corporate Governance are annexed to this Report and forms part of this Annual Report. With a view to strengthening the Corporate Governance framework, the Ministry of Corporate Affairs has incorporated certain provisions in the Companies Bill, 2009. The Ministry has issued a set of voluntary guidelines in the second half of December, 2009 for adoption by the Companies. The Guidelines broadly provide for appointment of directors (including independent directors),guiding principles to remunerate directors, responsibilities of the Board, risk management, the enhanced role of Audit Committee, rotation of audit partners and firms and conduct of secretarial audit. Your Company while already complying by and large with these various requirements has already initiated appropriate action for compliance. ACKNOWLEDGEMENTS: The Directors take the opportunity to thank ail investors, business partners, clients, vendors, bankers and advisors for their continuous support during the period. Your Directors also wish to place on record their appreciation for the dedication with which the employees at all levels performed their duties and for their cooperation and support during the period. By order of the Board of Directors Sd/- Sd/- (G.S. Chandrashekar) (Dilip Parekh) Chairman and Director Whole Time Director PLACE: Mumbai DATE : 28.10.2010 ANNEXURE I TO DIRECTOR REPORT: DISCLOSURES PURSUANT TO THE PROVISION OF SEBI (ESOS AND ESPS) GUIDELINES 1999: Sr. Particulars ESOP 2008 No. 1st April 2009 to 30th June, 2010 Grant I Grand II 1. Details of Meeting Extra Ordinary Meeting held on November 23,2007 2. Option Granted 44,05,800 7,48,700 3. Exercise Price Rs.5/- Rs.5/- 3. Pricing Formula At fair Market Value At fair Market Value 4. Option Vested 44,05,800 2,47,070 5. Option Exercised 44,05,800 1,88,660 6. Total Number of 44,05,800 1,88,660 shares arising as a result of exercise of option 7. Option lapsed* None 58,410 8. Variation of terms of Option None None 9. Money realized Rs. 2,20,29,000 Rs.9,43,300 by exercise of Option** 10. Total Number of None 5,01,620 Option In force 11. Details of Option Mr. G.S. Vishwanathan, Whole Time Director- Granted to Senior 20,00,000 Options granted on 12.06.2008 Management Personnel Mr. Dilip Parekh, Whole Time Director -20,00,000 Options granted on 12.06.2008 12. Any other employee None who receives a grant in any one year of option amounting to 5% or More of option granted during the year 13. Identified Employee Mr. G.S. Vishwanathan, Whole Time Director- who were granted option, 20,00,000 Options during the one year equal to or exceeding Mr. Dilip Parekh, Whole Time Director- 1% of the Issued 20,00,000 Options Capital(Excluding outstanding warrants and conversion) of the company at the time of grant * Lapsed Options include options forfeited and options cancelled/lapsed. ** The Company had allotted the aforesaid Equity Shares of Rs. 1/- under ESOS 2008 at the premium of Rs. 41- each on the above mentioned date. 14. PROFORMA ADJUSTED NET INCOME AND EARNING PER SHARES: Particulars Rs. Net Income as Reported (In Millions) 201.15 ADD. Intrinsic Value Compensation Cost 167.92 Less . Fair Value Compensation Cost (In Millions) 186.42 Adjusted Proforma Net Income (In Millions) 182.65 Basic Earning Per Shares:- As Reported 0.83 Adjusted Proforma 0.79 Diluted Earnings per Shares As Reported 0.92 Adjusted Proforma 0.86 15. ASSUMTIONS USED TO ESTIMATED THE FAIR VALUE OF OPTIONS USING BLACK- SCHOLES OPTION PRICING MODEL: Sr. Particulars Grant I Grant II No. 1. Risk Free Interest Rate 8.75% 8.90% 2. Expected Life 0.00 2.50 3. Expected Volatility 4.00% 4.50% 4. Expected Dividend Yield 0.05% 0.06% 5. Price of the Underlying Shares in Market at the Time of Option Grants 43.00 8.85 16.(i) WEIGHTED-AVERAGE EXERCISE PRICE OF OPTIONS GRANTED DURING THE YEAR: Sr. Particulars Amount No. 1. Exercise Price equals Markets Price N.A. 2. Exercise Price is greater than Market Price N.A. 3. Exercise Price is less than Market Price 3.85 (ii) WEIGHTED-AVERAGED FAIR VALUE OF OPTIONS GRANTED DURING THE YEAR Sr. Particulars Amount No. 1. Exercise Price equals Markets Price N.A. 2. Exercise Price is greater than Market Price N.A. 3. Exercise Price is less than Market Price 4.10 MANAGEMENT DISCUSSION & ANALYSIS REPORT INDUSTRY OVERVIEW: One word which epitomized the world in 2009 is courage, a quality of spirit to pierce the darkness of challenging times and hope amid despair. 2009 ushered turbulence, with countries around the world plunging into the recession. However, prompt action by governments across the world and stimulus packages helped to contain this downfall and make way for revival by the end of 2009. Over the past decade, the Indian IT-BPO sector has become the country's premier growth engine, crossing significant milestones in terms of revenue growth, employment generation and value creation, in addition to becoming the global brand ambassador for India. The changing demand outlook, customer conversations and requirements have acted as a driver to build in greater efficiencies and flexibility within the service delivery and the business models - one which is here to stay. These measures, along with India's game changing value proposition has helped India widen its leadership position in the global sourcing market. The advent of 2010 has signaled the revival of outsourcing within core markets, along with the emerging markets increasingly adopting outsourcing for enhanced competitiveness. Key demand indicators in the last two quarters such as increased deal flow, volume growth, stable pricing, and faster decision making has made the industry post good results. Though full recovery is expected in another two quarters, development of new growth levers, improved efficiency and changing demand outlook signifies early signs of recovery. Indian IT-BPO Performance: The industry is estimated to aggregate revenues of USD 73.1 billion in FY2010, with the IT software and services industry accounting for USD 63.7 billion of revenues. During this period, direct employment is expected to reach nearly 2.3 million, an addition of 90,000 employees, while indirect job creation is estimated at 8.2 million. Asa proportion of national GDP, the sector revenues have grown from 1.2 per cent in FY1998 to an estimated 6.1 per cent in FY2010. Its share of total Indian exports (merchandise plus services) increased from less than 4 percent in FY1998 to almost 26 per cent in FY2010. Exports market: Export revenues are estimated to gross USD 50.1 billion in FY2010, growing by 5.4 per cent over FY2009, and contributing 69 per cent of the total IT-BPO revenues. Software and services exports (including BPO) are expected to account for over 99 per cent of total exports, employing around 1.8 million employees. Geographic focus: The year was characterized by a strong revival in the US, which increased its share to61 percent. Emerging markets of Asia Pacific also contributed significantly to overall growth. Vertical markets: The industry's vertical market mix is well balanced across several mature and emerging sectors. 2009 saw increased adoption of outsourcing from not only our biggest segment i.e., the Banking, Financial Services and Insurance (BFSI), but also new emerging verticals of retail, healthcare and utilities. Service lines: The IT Services segment aggregated export revenues of USD 27.3 billion, accounting for 55 per cent of total exports. Indian IT service offerings have evolved from application development and maintenance, to emerge as full service players providing testing services, infrastructure services, consulting and system integration. Even though growth in BPO was single digit for the first time, it still is the fastest growing segment of the industry and is estimated to reach USD 12.4 billion in FY2010, growing at6 percent. Increased acceptance of platform BPO solutions was the key highlight, as Indian BPO providers increasingly focused on transforming client businesses through a mix of re-engineering skills, technology enablement, and new service delivery methods. Additionally, the engineering design and products development segments that involve IP driven service capabilities command an exports revenue share of 20 per cent, generating total revenues of USD 10 billion in FY2010, growing by 4.2 per cent. Indian IT-BPO Value Proposition: In a globally integrated economy, outsourcing is leading to overall benefits for the source economies, providing significant monetary and employment benefits. The silver lining of the economic downturn is the opportunity for the industry to enhance its overall efficiency. Companies are increasingly looking inwards and focusing on process benchmarking, enhanced utilisation of infrastructure and talent, increasing productivity and greater customer engagement. Coupled with wage moderation and lower attrition, these measures will help industry sustain its margins and invest in future growth. Timely government policies and increased public-private participation have played a key role in developing an enabling business environment for the Indian IT-BPO industry. Establishment of Software Technology Parks of India (STPI) stands out as a seminal policy action, specifically targeted towards encouraging, promoting and boosting the export of software and services from India. The industry demonstrated process quality and expertise in service, a key factor driving India's sustained leadership in global service delivery. Since the inception of the industry in India, players in the country are focusing on quality initiatives, to align themselves with international standards. Over the years the industry has built astounding processes and procedures to offer 'world class IT software and technology related services. Availability of quality talent at cost effective rates, rapidly developing infrastructure, an enabling innovation environment, supportive regulatory policies, and a positive overall business environment are all central pillars of India's value proposition. Low cost of delivery- India offers the lowest cost of delivery as compared to other off shore locations, with Tier-I locations offering savings of 70 per cent over source locations, Tier-ll/lll cities in India offer a still larger benefit. High calibre talent pool- Availability of skilled talent has been India's foremost attraction as a global sourcing country. India's graduate outturn has more than doubled in the past decade, with addition of 3.7 million graduates in FY2010, a scale unmatched by any other country. While some gaps in talent suitability exist, they are being addressed through strong provider-level initiatives and industry-led programmes. Robust process delivery- The industry has been extremely quality focused, with India based centres accounting for the largest number of quality certifications achieved by any country. The industry has also set standards in the establishment and maintenance of best practices in corporate governance, and leads in customer satisfaction. Business environment and infrastructure- Timely government policies and increased public private participation have played a key role in developing an enabling business environment for the Indian IT-BPO sector. India's strong education framework ensured ample supply of technical and non technical talent, while the establishment of Software Technology Parks of India (STPI), and later SEZs provided an enabling ecosystem for the industry to flourish. Infrastructure development has been addressed by both public and private sector, leading to the development of world class facilities in select cities. Growing Indian market- India has become, in purchasing power parity terms, the fourth largest economy in the world. India's economic growth since 1980 has been rapid. Real average household income has roughly doubled since 1985. With rising incomes, household consumption has soared and a new middle class has emerged. It is expected that India will go through a major transformation over the next decade and emerge as the fifth largest consumer market provided it continues its high growth path. Transformational capabilities- The industry has been enhancing its abilities to transform client businesses through increased R&D spend, focus on IP creation, development of new technologies incorporating process and business model innovation and increased domain expertise. Global footprint- Increased focus on global delivery has required the industry to enhance its global footprint, which has in turn helped the industry reach out to new customer segments and offer new services. Over the last two years, there has been a 32 per cent increase in the number of global delivery centres with outreach expanding to 12 new countries. Focus on sustainable growth- Going green has become the motto of the industry as it seeks to develop a business model that is not only competitive but sustainable with minimum ecological impact. THREATS/RISKS & CONCERNS: The cost & wage arbitrage based on the FE factor can change drastically if the $ to Re ratio marches on the current trend. This can affect the profitability of the Company. The anti-outsourcing legislation in the countries like USA & UK can have direct effect on the sales. Workers in industries abroad e.g. British Telecom protested against outsourcing work areas to India. Other ITES destinations such as China, Philippines and South Africa could have maintained an edge on the cost factor. Clients can consider other outsourcing areas geographically other than the BRIC countries. Emerging markets like South Africa, Eastern Europe & South American countries are offering such service. Countries like China, Philippines & South America are also possessing qualified workforce making efforts to overcome the English language barrier which was until now an advantage India was enjoying. IT development concentrated in a few cities like Banglore, Hyderabad, Delhi & Mumbai etc. Future Outlook: The beginning of the new decade heralds the slow, but steady end of the worst recession in the past 60 years. Global GDP, after declining by 1.1 per cent in 2009, is expected to increase by 3.1 percent in 2010, and 4.2 percent in 2011, with developing economies growing thrice as fast as the developed economies. Improving economic conditions signifying return of consumer confidence and renewal of business growth, is expected to drive IT spending going forward. IT services is expected to grow by 2.4 percent in 2010, and 4.2 percent in 2011 as companies coming out of recession harness the need for information technology to create competitive advantage. Organizations now recognize IT's contribution to economic performance extending beyond managing expenditures. They expect IT to play a role in reducing enterprise costs, not merely with cost cutting but by changing business processes, workforce practices and information use. Movement toward SaaS and cloud computing, shared services, and more selective outsourcing will take firmer shape as near-term priorities to address constrained IT budgets. Government IT spending continues to rise across the world, focusing on infrastructure, and security. Other areas of spending include BPM, data management, on demand ERP, virtuaiisation, and efforts to increase and deliver enterprise managed services on IP networks. Business process outsourcing spending in 2010 is expected to be increasingly driven by F&A segment and procurement, followed by HR outsourcing. Providers will increase their focus on developing platform BPO solutions across verticals and services. Even though India has a 51 percent market share of the off-shoring market, there is tremendous headroom for growth as current off shoring market is still a small part of the outsourcing industry. Significant opportunities exist in core vertical and geographic segments of BFSI and US, and emerging geographies and vertical markets such as Asia Pacific, retail, healthcare and government respectively. Development of these new opportunities can triple the current addressable market, and can lead to Indian IT-BPO revenues of USD 225 billion by 2020. The industry also has the potential to transform India by harnessing technology for inclusive growth. However, realisation of this potential will involve mitigation of several challenges that India faces currently. Costs are expected to rise with wage inflation and increased attrition. While India has ample supply of talent, it is largely trainable in nature, not employable. This leads to incremental training costs and increased downtime for the industry, which is challenging keeping in mind quality talent availability in competing countries. Currently, over 90 per cent of total revenues are generated from the seven Tier-I locations, which are nearing peak capacities in terms of infrastructure support. India has to quickly develop other delivery locations to achieve its 2020 vision. There are concerns around security - both physical and data related, in service delivery, which would need to be addressed. Currency fluctuations have also dented India's competitiveness, and steps need to be taken to address India's increased risk perception. A key impact of the recession has been the rise of protectionist sentiments in major markets for the industry. The impending discontinuation of fiscal incentives and frequent changes in fiscal regulations are making the business environment more challenging. Last but not the least, a number of new outsourcing destinations seeking to emulate India's success have emerged, offering multiple fiscal and training incentives, making them cost competitive. Concerted action by all stakeholders around below parameters is required to capture the opportunities and mitigate future risks. In doing so, stakeholders (industry, NASSCOM and the government) will need to act together in an unprecedented manner: Catalysing growth beyond today's core markets: Breaking ground in new markets (verticals, geographies, segments) through reinvented offerings and business models. Establishing India as a trusted global hub for professional services: Building a conducive business environment (improved infrastructure, public services, corporate governance, and security) and a strong global image. Harnessing ICT for inclusive growth: Stimulating inclusion of citizens by enabling technologyled solutions in healthcare, financial services, education and public services, leading to increased connectivity, improved soft infrastructure, and a balanced regional development. Developing a high calibre talent pool: Bridging a crucial talent gap by addressing gaps in tertiary education, at the same time fuelling efforts to upgrade curriculum, faculty and training methodologies. Building a pre-eminent innovation hub in India: Encouraging intellectual property, establishing distinctive capabilities and fuelling entrepreneurship. *Source: NASSCOM There are a handful of competitors that cover the target market segment for Coral Hub group, but there are no companies who have the breadth of service offerings of Coral Hub & its subsidiaries as a combined entity. Most of these are large players such as TCS, HCL etc. There are very limited medium sized competition such as Tricom and TNQ but even these do not cover the entire width of our offerings. The strengths of Coral Hub Limited and Basiz complement each other, and are able co-exist with relative seamless ease. While the internal strengths and market insight from combined business provides fodder to Coral Hub to optimally develop and exploit the right market space, Coral Hub's group's strategy of combining its organic growth, mixing it judiciously with carefully selected target companies for acquisition will propel it for radical global growth moving itself head and shoulders above the existing fragmented competitors and at par with large players within the scope of offering. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The Company has in place adequate system of internal control commensurate with its size and nature of its operations. The Company has budgetary control system to monitor all expenditure against approved budgets on an ongoing basis. The Company's accounting process is based on uniform accounting guidelines that sets out accounting policies and significant processes. The Company has well established policy towards maintaining the highest standard of Management of Quality, Environment, Health/Safety & Data Security norms while maintaining operational integrity. The following are the standard of certification received by the company: 1. Quality Assured Company - ISO 9001:2008 2. Environment Management System - ISO 14001:2004 3. Healths Safety Management System - OHSAS 18001:2007 4. Security Management System - ISO 27001:2005 The Company has an internal audit function which is empowered to examine the adequacy and compliance with policies, plans and statutory requirements. It is also responsible for assessing and improving the effectiveness of Risk management, Control and Governance process. The Company has an Audit Committee, the details of which have been provided in Corporate Governance Report. The Committee considers and takes appropriate action on the recommendation made by the Statutory Auditors and keep the Board of Directors informed of its major observations from time to time. FINANCIAL POSITION: SHARE CAPITAL: As at the end of June 30, 2010, the Company's Issued and Paid -up Share Capital stood at Rs. 241,979,795/- (Previous year ended March 31,2009 Rs. 156,788,290/-). During the period, the Company has allotted 188,660 Equity Shares of Re. 1 /- each to the employees of the Company who have exercised options granted to them under ESOS 2008. RESERVES AND SURPLUS: The reserves and surplus of the Company as at June 30,2010 amounted to Rs.2,593,288,551/-as against Rs. 2,483,722,772/- as at March 31,2009. FIXED ASSETS: During the period under report, the Company has made the following additions to its Fixed Assets: Land & Buildings: Rs. 27,618,070/-, Computers H W & SW: Rs. 14,824,625/- Motor Car :Rs. 2,408,146/-Office Equipments: Rs.71,500/- During the period under report the Company has made the following deletion to its Fixed Assets : Land & Buildings: Rs. 21,800,000/-, LOANS: The Company has credit limits with banks to take care of regular working capital expenses. Since the Company is a net earner in foreign exchange & so it is vulnerable to foreign exchange appreciation/depreciation. The Company does not speculate on foreign currency exchange rates. SALES REVENUE: The Income for the period ended June 30, 2010 was Rs. 891,185,506 /- as compared to Rs. 617,394,267/-for the year ended March 31,2009. FINANCIAL HIGHLIGHTS OPERATING EXPENSES: Operating expenditure for the period ended June 30, 2010 has increased by 36.56 % as compared to the year ended March 31, 2009. The increase in expenditure is primarily on account of increase in the scale of operations. EBIDT: The EBIDT was at 22.40 % for the period ended June 30,2010 as compared to 28.58% for the year ended March 31,2009. PROFIT AFTER TAX: Profit After Tax was 22.57 % of Income for the period ended June 30, 2010 as compared to 23.74% forthe year ended March 31,2009. HUMAN RESOURCES: Development of human resources is the key to progress. In IT industry, good human resources policy ensures a sure success to growth and profitability. We follow open door policy and employees have access to anyone in the senior management team including Chairman and Whole Time Directors to voice their opinions. During the period, the Company had made substantial addition to human resources. The total number of employees as on June 30,2010 was 84 (103 as on March 31,2009) CAUTIONARY STATEMENT: Statements in this 'Management Discussion and Analysis Report' depicting the Company's objectives, expectations or predictions may be forward looking within the meaning of applicable laws and regulations. Actual results may vary materially from those conveyed or connoted. Important factors that could make a difference to the Company's operation include changes in government regulations, rupee appreciation, non availability of working capital, tax regimes, economic developments in India and the countries in which the Company conducts business and other incidental factors. On behalf of the Board Sd/- Date : 28th October 2010 G.S. Chandrashekar Place: Mumbai Chairman & Director