MASCON GLOBAL LIMITED
ANNUAL REPORT 2010-2011
Your Directors are pleased to present their report on the business and
operations of the Company together with the Audited Consolidated and
Standalone Accounts of your Company for the period ended June 30, 2011.
The following tables give the consolidated and standalone financial
performance of the Company for the year 2010-2011 as compared to the
previous financial year.
Rs. in thousands
June 30, 2011 March 31, 2010
(15 months) (12 months)
Revenues 8,009,109 10,208,785
Cost of revenue 6,921,706 8,338,707
Gross margin 1,087,403 1,870,078
Other income 6,802 8,534
Selling, general and administration expenses 5,226,024 1,549,121
Operating profit (PBIDT) (4,131,819) 329,491
Interest & finance charges 641,858 445,431
Exchange Loss/(Gain) (31,674) 384,068
Depreciation & amortization 763,105 309,729
Profit before prior year
adjustment and tax (5,505,109) (809,737)
Prior year adjustments (190,356) 376,736
Provision for tax-Current year 14,850 53,212
- Previous year 5,842 4,293
- Deferred tax - (14,983)
Profit after tax (5,335,445) (1,228,995)
Rs. in thousands
June 30, 2011 March 31, 2010
(15 months) (12 months)
Revenues 759,439 3,553,277
Cost of revenue 559,214 2,780,535
Gross margin 200,225 772,742
Other income 2,311 2,775
Selling, general and administration expenses 4,151,913 793,986
Operating profit (PBIDT) (3,949,377) (18,469)
Interest & finance charges 444,501 358,082
Exchange Loss/(Gain) (35,869) 384,068
Depreciation & amortization 147,818 54,636
Profit before prior year adjustment and tax (4,505,826) (815,255)
Prior year adjustments 187,392 (18,852)
Provision for tax-Current year - 8500
- Deferred tax - (14,984)
Profit after tax (4,693,218) (789,919)
Year in Retrospect
Total Revenues during 2010-2011 (Fifteen months) at Rs.80,091 lakhs
registered an decrease of 22% over the previous year (Twelve months)
revenue of Rs. 102,088 lakhs mainly on account of non-renewal of certain
client contracts and loss of business due to the slow down in the US. The
gross margin during the year was Rs.10,874 lakhs (13.5% of Revenue) as
compared to Rs. 18,700 lakhs (18% of Revenue) in the previous year. The
operating loss during the year increased to Rs. 41,318 lakhs as compared to
Rs.3,294 lakhs during the previous year. The net loss for the year
increased to Rs.53,354 lakhs against a net loss of Rs. 12,289 lakhs during
the previous year.
Total Revenue during 2010-2011 (Fifteen months) at Rs.7, 594 lakhs
registered a decrease of 78% over the previous year (Twelve months) revenue
of Rs.35,533 lakhs, mainly on account slow down in the US resulting in
marginal reduction of business to India. The gross margin during the year
has decreased to Rs. 2,002 lakhs (26% of Revenue) as compared to Rs. 7,727
lakhs (22% of Revenue) in the previous year. The operating loss during the
year increased to Rs. 39,493 lakhs as compared to Rs 18.5 lakhs during the
previous year. The net loss for the year amounted to Rs. 46,932 lakhs as
against a net loss of Rs. 7,899 lakhs during the previous year.
The Board has not recommended any dividend for the year 2010-2011.
No fresh capital has been raised during the financial year 2010-2011
The Company has not made any new acquisition during the financial year
2010-2011 Financial Restructuring with Banks and others
(i) In India
State Bank of India
The Company had availed Term loan and working capital facilities from State
bank of India, Chennai during 2007 and 2009 to meet the overseas
acquisition and to bridge the gap in working capital. Due to the global
economic crisis, the company's revenues have substantially reduced and the
company was unable to service the loan and interest.
The Bank, the company and the Guarantors have entered in to a Joint Memo of
settlement as of December 16, 2011 by which, the company and the guarantors
have agreed to reduce the over all loan outstanding of the bank to the
extent of INR. 67.88 crores and the balance to be settled over a period
ending June 2015, on a structured repayment basis.
The Company has also provided additional collateral in the form of UCC on
15% of the present paid-up capital of the US Subsidiary, namely, M/S.
Versatech Consulting Inc, USA in favour of the bank, as per the terms of
the Joint Memo of Settlement.
The Company and the guarantors have initiated for the sale of the
properties of the guarantors to repay the outstanding to the extent of INR.
67.88 crores of which INR. 41.59 crores has already been paid to reduce the
overall outstanding of the bank. The matter is pending for final orders
before the Debt Recovery Tribunal (DRT) chennai.
The Company and the personal guarantor Mr. K.Chandra are in discussions
with the bank for arriving at an one time settlement in the form of a
SBI Global Factors Limited and L&T Finance Limited
The Company and the personal guarantor Mr. K. Chandra are in discussions
with the above lenders to achieve a schedule for making structured
repayments of the outstanding dues and to settle the legal suits filed by
them against the company and its directors/officers.
Donewell Impex Private Limited
The Company had offered in the Magistrate Court a settlement plan but the
lender has not agreed with the same and the matter is still before the
Court. In the matter of the Winding-up petition filed by them before the
Honorable High Court of New Delhi, the Company has agreed to offer a
payment plan on a monthly basis and the matter is yet to be decided.
In all the restructuring with the banks or other parties, the company is
confident of entering in to a proper arrangement to settle the dues and
(ii) US Subsidiary
MGL Americas Inc, USA, the wholly owned subsidiary established during 2001
had been the pioneer in sourcing the off-shore business contracts for the
India development centers, before the acquired subsidiaries were added to
the profile of the company. During 2009, due to the US Economic melt down,
the bankers to the subsidiary also went through convulsions and arising out
of the same, the working capital and term loan limits were significantly
reduced by them. During 2010-11, the bankers have to resort to liquidation
and as part of the measures taken by the liquidators, the entire limit has
been closed as of this August 2011, resulting in non-availability of
working capital for supporting the operations of the subsidiary. Also, the
bank has adjusted a portion of their term note and over advance by
adjusting the collections from the operations and also by way of exercising
their lien on a portion of the assets of the company.
Human Resource Development
This year has been extremely challenging for the organization from an HR
perspective. In the context of a rather tough year on the business and
operations front and on the backdrop of a resurgent IT Industry has meant
that the Company has faced challenging times both in retention and
attraction of talent. Tactically the HR Function refocused its approach on
getting managers and themselves to work closer with the workforce to be
able to respond to them and to disseminate information quicker as well as
to establish better emotional connect.
The total number of employees as on June 30, 2011 was 1600. The attrition
for our remaining team is at 15%, however this remains comparable to the
current industry benchmarks. The company has lost a number of clients and
the clients have chosen to absorb some of our employees in their new
vendor. MGL envisages major growth from new business areas such as
Healthcare & Life Sciences, Banking, Financial Services, Communications,
Infrastructure Management and Cloud Computing etc. The requirement of
skills for these segments continues to be significantly different than that
of the conventional IT services due to strong domain focus. Continued
efforts are being made to identify suitable resources for these areas as
well as to retool the existing workforce.
The HR function is presently implementing robust long term plans focused on
enhancement of the employer brand both internally and in the external
market place. In view of the deep domain and technology skill sets that the
business model of the Company requires, negotiations on tie-ups with well
known institutions imparting technology education are at an advanced stage
with a view to establishing suitable labs. This will not only harness
innovation within partner educational institutions benefitting everyone
involved but set up an assured well trained supply of workforce for the
At MGL, commitment to continuous improvement of quality practices and
building robust information security practices are an integral part of our
business operation. MGL has achieved a number of significant milestones in
its journey towards operational excellence.
+ Gurgaon Development Center is certified to ISO 9001:2008
+ Bangalore Development Centers are certified to ISO 27001:2005
+ Bangalore Development Centers are certified to ISO14001:2004
+ Bangalore Development center is certified to TL9000
The above certifications are testimony to MGL's unstint commitment to
achieving the highest standards of quality and expertise that the company
brings to its clients globally. The corner stone of these certifications is
the in-house developed Mascon Quality System (MQS) an agile, process
driven, people oriented and customer focused quality management system
which is continuously evolving to cater to the requirements of the
company's varied business offerings.
Certification and Partnerships:
During the year, MGL did not sign any partnership agreements.
Corporate Social Responsibility:
Mascon being a responsible corporate entity has continuously been taking
initiatives to address the societal problems and uplifting the
underprivileged. During the year also 'Mascon Community Service'(MCS)
continued to carry out several activities.
Your Company has six direct subsidiaries as on June 30, 2011, viz. MGL
Americas Inc., USA, Versatech Consulting Inc, USA, Ebusinessware Inc, USA,
Jass & Associates Inc, USA, Mascon Global (Europe) Ltd., UK, and Mascon
International Limited, Mauritius.
MGL Americas Inc. has its own subsidiaries, details of which are given in
the statement pursuant to the provisions of Sec.212 of the Companies Act,
1956. All the direct and step-down subsidiaries are engaged in software
related business only.
Ebusinessware Inc, has its own subsidiaries, details are given in the
statement pursuant to the provisions of sec.212 of the companies Act, 1956.
All the direct and step-down subsidiaries are engaged in software related
MGL Americas Inc., USA
MGL Americas Inc., USA, a 100% subsidiary of the Company achieved total
revenue of Rs.19,658 lakhs and EBITDA of Rs. (5,695) lakhs. The above
results also include the performance of Mascon Global Information,
S.D.E.R.L. DE.C.V. (Mexico), step-down subsidiary of the Company. Mascon
Global GmbH., Germany another step down subsidiary of the Company did not
have any operations during the year and steps are being taken for its
During the year, MGL Americas Inc, USA underwent financial settlement with
its bankers, namely, M/S. Laurus Master Fund to adjust their dues towards
their term loan and working capital funding. Accordingly, certain
outstanding dues to bankers, vendors and employees together with certain
business assets has been contributed to a corporation formed for this
purpose and adjusted against the settlement of the banks outstanding
obligations in the USA. This had an impact on the off-shore business
arrangement with India with one of the development centers as they were
having the business from these clients. The subsidiary company has still
business left out and continuing to improve the same. MGL Americas had also
formed another step-down subsidiary called MGL Telecom Inc. to cater to the
Telecom business and except for certain payroll being operated through this
corporation no other formal business operations are carried out in this
Versatech Consulting Inc., USA
Versatech Consulting Inc., USA, a 100% subsidiary of the Company achieved
total revenue of Rs. 7,355 lakhs and EBITDA of Rs. 259 for the period ended
June 30, 2011.
The business of this company has been combined post merger of the other
operating US Subsidiaires w.e.f. August 30, 2011 and all trade assets and
liabilities are contributed to the new entity w.e.f. August 31, 2011.M/
S.Versatech Consulting Inc, is continuing as the lead subsidiary of the
Ebusinessware Inc., USA
Ebusinessware Inc., USA, a 100% subsidiary of the Company achieved total
revenue of Rs 181.34 lakhs and EBITDA of Rs. 962.15 lakhs. The above
results include the performance of Ebusinessware Singapore Pte Limited,
Singapore and Ebusinessware (India) Private Limited, India.
The total operations of Ebusinessware Inc USA has been merged with M/S.
Versatech Consulting Inc, USA w.e.f August 30, 2011 and the combined assets
and liabilities were contributed to the new entity w.e.f. August 31, 2011.
Post this statutory merger with Versatech Consulting EBW will not exist as
a separate legal entity.
The Existing subsidiaries of EBW in India and in Singapore will be the
subsidiaries of the new corporation post the contribution of all the assets
as part of the above initiative.
Jass and Associates Inc USA
Jass and Associates Inc, USA, a 100% subsidiary of the Company achieved
total revenue of Rs.33,108 lakhs and EBITADA of Rs.812 Lakhs.
The total operations of Jass & Associates Inc USA has been merged with M/S.
Versatech Consulting Inc, USA w.e.f.August 30, 2011 and the combined assets
and liabilities were contributed to the new entity w.e.f August 31, 2011.
Post this statutory merger with Versatech Consulting JASS will not exist as
a separate legal entity.
Consolidation of US Subsidiaries
During August 2011, the company had taken initiative to combine the
business operations of the operating subsidiaries in the US, namely,M/S.
Ebusinessware Inc, USA and M/S. Jass & Associates Inc, USA with M/S.
Versatech Consulting Inc, USA by way of statutory merger of the
corporations. Post the said merger, the combined business assets and
liabilities of M/S. Versatech Consulting Inc, USA, Ebusinessware Inc USA
and Jass & Associates Inc USA were contributed in to a new operating
company. Post consolidation, the company is of the view that the intrinsic
value of the business has increased.
Mascon Global (Europe) Limited., UK
Mascon Global (Europe) Limited, UK, a 100% subsidiary of the Company
achieved total revenue of Rs.278 lakhs. The overall operations suffered due
to the US and Europe Economy slow down. The management is taking all steps
to re-establish certain new business verticals including product support in
the years to come.
Mascon International Limited, Mauritius
Mascon International Limited, Mauritius, a 100 % subsidiary of the Company
is a Special Purpose Vehicle (SPV) for making investments and it is not
engaged in any operations during the year.
Reporting on the Subsidiaries
As per Sec. 212 of the Companies Act, 1956, your Company is required to
attach the Directors Report, Balance Sheet and profit & Loss Account of
these subsidiaries. However, the Ministry of Corporate Affairs (MCA) has
issued their circular exempting the above. A brief summary of these
subsidiaries is given in the Annual Report. The annual accounts of these
subsidiary companies along with related information are available for
inspection during business hours at the registered office of the Company.
Corporate Governance and Management Discussion and Analysis
As required under clause 49 of the Listing Agreement, reports on Corporate
Governance along with Auditors' certificate and Management Discussion and
Analysis are attached as a part of the annual report. Mr. K.Chandra, Chief
Executive Officer and also responsible for the over all finance function
has given a certificate to the Board as per the provisions of clause 49 of
the Listing Agreement.
Mr. Hendrikus Adrianus Alfonsus, Director of the Company, retire by
rotation at the forthcoming Annual General Meeting and being eligible,
offer himself for re-appointment. The Board of Directors has also
recommended his reappointment for consideration of the Shareholders.
Mr. R. Gowrishanker, Director of the Company resigned w.e.f. February 2011.
The Board places on record their appreciation for the long association of
Mr. Gowrishanker and for his valuable contribution made by him during his
tenure as the director of the Company.
Mr. M. Srinivasan Director of the Company resigned w.e.f April 20, 2011.
The Board places on record its appreciation for the valuable contribution
made by him during his tenure as director of the Company.
Directors Responsibility Statement:
Pursuant to Section 217 (2AA) of the Companies Act, 1956, your Directors
confirm that, to the best of their knowledge and belief;
(i) In the preparation of the Annual Accounts for the Financial Year ended
June 30, 2011, the applicable accounting standards have been followed along
with proper explanation relating to material departures, if any;
(ii) They have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company as at June 30, 2011 and its profit for the year ended on that date;
(iii) Proper and sufficient care has been taken 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) The annual accounts have been prepared on a going concern basis.
The existing statutory auditors M/s G. Balu Associates, Chartered
Accountants, shall retire at the conclusion of the ensuing Annual General
Meeting and have indicated that they are not willing to continue in office
as statutory auditors and as per the provisions of sub-section (1B) of
section 224 of the Companies Act, 1956 M/ s. Nisarand kumar Chartered
Accountants have confirmed their willingness to be appointed as statutory
auditors, if appointed.
Pursuant to recommendation of the Audit Committee, the Board of Directors
have approved the appointment of M/s. Nisar and Kumar Chartered
Accountants, as the statutory auditors of the Company for the financial
year 2011-2012, subject to the approval of the shareholders of the company
at the ensuing Annual General Meeting.
In relation to the observations / qualification made by the auditors we
state the following:
* Substantial reduction in turnover and Loss during the period:
The nature of business of the Company is sensitive to the global IT
markets, more specifically the US markets. The Slowdown in the IT Industry,
economic issues in USA and Europe and more specifically due to the
reduction in off-shore business to India from the subsidiaries are the
major reasons for the reduction in turnover. Also, the impact the US
Subsidiary had due to the liquidation of their banker, has affected the
availability of operational funds to the Company.
* Unable to remit the statutory liabilities and clause no. ix of Annexure
to Auditors' report:
The reduced cash inflow due to the substantial reduction of off-shore
business and the collections being impacted on account of the specific
issues relating to the US Subsidiary are the primary cause for the delay /
non remittance of the statutory liabilities by the company. The management
endeavors to avail funds from alternate sources to repay the statutory
* Recovery/Winding-up Proceedings by Banks/Others. As highlighted above ,
severe cash flow issues were faced by the major subsidiary as its banker
went under liquidation, also adjusting the collections against their
limits. This created severe cash strain for operational support. Some of
the major clients of this subsidiary also canceled the off-shore business,
which created further liquidity crunch. Due to continuing default, the
banks/others have proceeded against the company by taking recovery/winding-
up actions which are being represented by the Company. The Company is
hopeful that the financial restructuring efforts will result in dropping
off the winding up initiatives of the banks and others.
* Going concern:
The Company is optimistic of improved performance from offshore business in
the near future due to prospects of recovery in US IT markets. The
company's efforts to improve the revenue stream and restructure the debt
burden, reduction of overall cost should result in adequate operational
cash flows in near future
* Regarding note 3(a) and 10(d):
The interest on FCCBs and contribution towards approved gratuity fund could
not be paid due to the liquidity crunch faced by the company. The company
expects to resolve the same once the restructuring of borrowings with the
banks is completed.
* Regarding note 3(c):
The Company is renegotiating the terms of borrowing and is hopeful of
substantial reduction in the interest amount, thus, no provision has been
* Regarding note 10(c):
The company has rightly recorded the dues towards foreign tax liabilities
on account of failure of debtor to meet the obligation taken over by it.
* Non-confirmation of balance in debtors, creditors, Loans and advances and
Deposits: The company is in the process of obtaining the confirmations from
debtors and other parties.
* No provision has been made in the books for any diminution in value for
the investments made in certain subsidiaries. The Company has not
considered diminution in these investments as it is not of a permanent
nature and the current business and potential for the future for these
subsidiaries is extremely positive.
In the annexure to the Auditors' Report, it has been observed at clause
(ix) that there were delays in the remittances of provident fund and tax
deducted at source in India. This was due to severe liquidity crunch. The
Company is in the process of raising some loans and the same could not be
completed so that these liabilities could be discharged immediately.
However, the management is making all the best efforts to get this
Corporate Social Responsibility:
Mascon being a responsible corporate entity has continuously been taking
initiatives to address the societal problems and uplifting the
underprivileged. During the year also 'Mascon Community Service' (MCS)
continued to carry out several activities.
Particulars of employees
The information required under section 217 (2A) of the Companies Act, 1956,
read with the companies (Disclosure of Particulars in the Report of Board
of Directors) Rules 1988 is given in the Annexure appended hereto and forms
part of this report. In terms of Section 219(1)(b)(iv) of the Companies
Act, 1956, the report and accounts are being sent to all shareholders of
the Company excluding the AfroesaidAnnexure. Any shareholder interested in
obtaining a copy of the said statement may write to the Company Secretary
at the registered office of the Company.
Conservation of energy, technology absorption and foreign exchange earnings
Particulars required under Section 217(1)(e) of the Companies Act, 1956,
read with the Companies (Disclosure of Particulars in the Report of Board
of Directors) Rules, 1988, are set out in the Annexure 'A' to this Report.
The Board of Directors acknowledges the consistent support from the
Company's clients, vendors, bankers, Government agencies, shareholders and
investors. The Directors also place on record their sincere appreciation
for the significant contribution made by the employees at all levels
through their hard work, dedication and commitment.
For and on behalf of the Board of Directors
Place: San Francisco K. Chandra
Dated: March 28, 2012 Chairman
ANNEXURE 'A' TO THE DIRECTORS' REPORT
Particulars pursuant to Companies (Disclosure of particulars in the Report
of Board of Directors) Rules, 1988:
A. Conservation of energy:
The operations of your Company are not energy-intensive. However, adequate
measures have been taken to preserve environment and reduce energy
consumption by using energy efficient computers and equipments. Your
Company uses CFL fittings in the development centers to reduce the power
consumption for lighting. As energy cost forms a very small part of total
cost, the impact on cost is not material.
B. Technology absorption:
a. Research and development:
Your Company continuously invests in Research and Development ensuring a
high level of technical competence.
Research and Development refers to:
i) General Software Development, which includes adoption of new
technologies, process improvement, etc.
ii) Continuous development & innovation in the Software Development Life
Cycle process by adopting latest technologies such as Agile and extreme
iii) Implementation of Project Management Information System (PMIS) tools
to plan and track the project execution across the globe.
iv) Designed and developed a product to manage Competency Development and
Management across the Company.
v) Company has developed a very comprehensive Risk Management tracker for
tracking the project risks.
vi) Company has developed a Home Automation Solution in emerging
technologies like Zigbee, Zwave etc.
vii) Company has developed a demonstrable convergence gateway solution
which is a confluence of legacy and current standards in wireline and
viii) Company has developed a framework for Network Management Systems.
ix) Development of a solution offering in the Plastics Manufacturing arena
with the global leader in the ERP Software.
x) Company has developed a Value Added Service framework for messaging
xi) Company has developed a security solution in emerging technologies like
broadband wireless communication.
xii) Development of frameworks, which helps in rapid development of new
xiii) Verification & validation:
Development of a process for testing, which enables the Company to deliver
high quality product/solutions by optimizing the resources.
MGL Continues to strengthen the R&D work in application development areas
and absorption of new technologies. During 2011-2012, the communication
technology division has continued development of the following solutions:
1 .Convergence Gateway:
MGL Convergence Gateway is a new generation VoIP enabled gateway based on
PICMG 2.16 compliant cPCI COTS hardware. This supports multiple interfaces
and functionalities. It supports SIP user agents. FXS based telephone
endpoints. For trunking it supports SIP, FXO, ISDN-PRI, E&M. It supports
various Class- 5 features and also multi-party conferencing. Some of the
USP's of the solution are:
* Highly customizable hardware (common off the shelf)
* Easy GUI based provisioning and management support
* Highly scalable
* New features can be easily added
* Provides backend billing support
2. MGL NMS Framework:
MGL NMS Framework is a simplified solution for monitoring, configuring and
troubleshooting network devices and elements. The Framework is a
heterogeneous, hierarchal and distributed network management system which
manages the activities, procedures, methods and tools that pertain to the
OAMP (operation, administration, maintenance, and provisioning) of any
Individual network elements (NE) in any network can be managed by NMS
Agent. Multiple agents can be connected to the central NMS Server which
manages the network elements. The NMS solution supports complete FCAPS
(Fault, Configuration, Accounting, Performance, and Security)
Benefits of MGL NMS Framework include
* Hierarchical management of agents and servers
* Management of logical networks
* Easy XML based configurations
* Built-in scheduler
* Topology view, and
* Support for various RDBMS.
3. Home Net-A Home Networking Solution:
Home networking is a new and emerging area. New standards are being
released; new devices are being introduced into the market. Home networking
emergence is necessitated by plenty of electronic gadgets used at home and
the need to exchange data between them seamlessly.
HomeNet is a comprehensive solution being developed to showcase MGL's
expertise in these areas. HomeNet solution consists of off-the-shelf
products integrated to form the home network; applications and services
that can be offered over the home network.
The solution enables:
* Remote monitoring of homes from a desktop connected to internet
* Networking devices within home using different medium (Coaxial cable,
telephone cable, power lines, wireless)
* Media sharing between devices (TV, Mobile phone, computer, etc) within
* Converged voice communication within home
In our continuous commitment towards the society, MGL established an
Environmental Management System based on ISO 14001 standard. Our company is
actively identifying ways to adopt Green measures into all its operations.
MGL's Communication division at Bangalore got re-certified for TL 9000 to
version 5.TL 9000 is a specific Quality System standard promoted by Telecom
industry leaders. MGL is among the only few organizations in India to have
achieved this certification..
MGL is also uniquely certified for TL 9000 'Product category 7.8.2' for its
consulting and staff augmentation business. We became the 4th organization
in the world to have achieved a certification for their consulting and
staff augmentation business.
Our Company continues to achieve a higher degree of methodology
standardization in handling software projects, which have been acclaimed by
various quality auditors. The results will help the Company in leveraging
these learnings into developing better solutions for its clients.
b. Future plan of action:
Your Company is continuously strengthening the R&D work in application
development areas and absorption of new technologies. Your Company
continues to invest in total integration of all its offices for improved
efficiency. During the current financial year, no additional areas or
activities were planned except focusing on the areas already identified by
Teams have been formed to develop ideas and frameworks to help address the
time to market challenges of our customers. An example of such a framework
is the MGL's NMS Framework. This provides a simplified solution for
monitoring, configuring, and troubleshooting network devices and elements.
MGL also has developed a Home Networking solution by integrating various
components (COTS) and developed software glue on them. With this user will
be able to view pictures stored in his/her computer on TV, able to play
various playlist in home computer over the music system, monitor his home
remotely over the internet or mobile phones.
MGL also has developed a Convergence Gateway, which can act like a small
foot print, highly configurable and customizable IPPBX system providing
various class-5 features, using COTS components.
MGL has plans to develop expertise in the following areas:
* Applications for Android based systems
* Voice XML
* Test Automation
IMS (IP Multimedia Subsystem) is an emerging standard in the telecom arena.
The company is developing a suit of products to create Intellectual
property and expertise in IMS area. AVANZAR suite consists of AVANZAR-
Diameter, AVANZAR-DiaSim, AVANZAR-Dia Test, and AVANZAR-Dia LDAP products
that enable TEMs to quickly re-engineer their existing network elements to
make them IMS compliant and develop new IMS Network Elements. MGL
participated in the IMS Plugfest conducted at University of New Hampshire,
USA. At present, we are actively marketing AVANZAR to various customers.
RichSMS is a Value Added Application for mobile users. This has been
jointly developed with our existing customer Roamware. Roamware has more
than 300 telecom operators worldwide as their customers and Roamware is
marketing RichSMS to these customers. MGL owns the intellectual property of
To meet the ever growing and specific needs of the Travel & Hospitality
industry, MGL has developed market intelligence solutions that provide real
time information relevant to hotels, car, airline or total travel package
operators. VerityRM helps hotels, airlines and cruise operators around the
world to obtain competitive rate/ availability information about their
competitors from a wide array of electronic distribution channels. It has
both On-demand and Scheduled reporting components. VerityRank is a powerful
online competitive intelligence tool that will help monitor online presence
with respect to search engine rankings vis-a-vis the competition. It helps
to strategize marketing search action plan to stay ahead of the
competition. ServizConnect helps the hotel and property management
businesses to easily manage their room inventory and price across various
distribution channels. It also has Batch, Price and Detailed Update
c. Expenditure incurred:
No further funds have been spent during the year towards setting up and
executing Center of Excellence.
d. Technology absorption, adaptation and innovation:
Your Company uses the latest technology available for its operations. Your
Company continues to maintain its thrust in modern technology applications.
The Company has completed the implementation of Oracle ERP software at all
its locations across the world except in integrating few of the
subsidiaries of the company.
C. Foreign exchange earnings and outgo:
(Rupees in thousands)
For the year ended
June 30, 2011 March 31, 2010
a. Foreign exchange earnings by export of 652,191 3,487,753
b. Expenditure in foreign currency
Expenses incurred in connection with onsite 20,914 3,202,236
operations at overseas trading office
Overseas allowances, travel and other expenses 5,638 6,143
Capital goods Nil Nil
Investment in WOS Nil 243,143
Advance towards acquisition of shares Nil Nil
For and on behalf of the Board of Directors
Place: San Francisco K. Chandra
Date : March 28, 2012 Chairman
MANAGEMENT DISCUSSION AND ANALYSIS
OPPORTUNITIES & RISKS:
The markets have been very difficult in the US. Together with the impact
suffered by our Wholly owned subsidiary (WOS) due to our working capital
banker in the US, and the continued non-availability of working capital
support has put us in a difficult situation.
The opportunities will expand in the coming months and risk will continue
to be fact that we are unable to raise working capital funding.
In addition, the challenges to settle with our bankers in India is
significant and this has taken substantial attention of the management.
Our focus has been to fix our past backlogs and we believe that we can
continue to grow once these factors are behind us.
Opening up of new market segments:
We are focused on our existing clients and building them and not placing
any efforts with new clients.
The domestic market has low margins and the company is not focusing on this
business Inorganic growth.
The coming years will place unprecedented opportunities but our ability to
restructure our finances will determine our ability to start our growth
The Global financial health remains very fragile and our ability to grow
has been impacted by this serious dislocation.
We continue to face financial risks arising out of our default situation
with the banks.
Business Model Risks:
The business model and opportunities have changed significantly since the
financial meltdown of 2008-09. Our ability to solve our backlogs will
determine the growth we can achieve.
Our talent pool is the best in the industry and they have become absorbed
with some of our longer term issues. While we are making every effort to
retain them the business model needs to change as also our need to insulate
our business and the employees from the potential actions of the banks that
we owe money to.
We do not perceive any security threats at this time M & A.
We have faced this risk due to non payment of some of the earn out
payments. This continues to be a potential risk.
Internal Control & Adequacy:
We have sufficient internal control but continued cash starvation due to
non availability of working capital has made us very lean and very focused
on cutting costs.
We have an Audit Committee, details of which are provided in the Corporate
Governance section elsewhere in this report. The Audit Committee reviews
internal audit reports submitted by internal auditors and also periodically
reevaluates the internal control systems for their adequacy and compliance
with applicable statutes.
Risk Management Committee:
The Company has a Risk Management Committee that is chaired by the CEO.
Members include the business heads, CFO and Company secretary. The Chairman
of the committee apprises the Board at periodic intervals of any risk
assessments and mitigation procedures. The company continues to seek the
help of external consultants and experts to assess the risk structure of
the organization and plans to bring in controls compliant to COBIT and
The Board and audit committee discussed significant business risks
identified by management and any related mitigation plans. Industry and
company specific risks and MGLs' mitigation strategy are covered in the
Corporate Governance section elsewhere in this report.
MGL's financial performance statements have been prepared in accordance
with Indian Generally Accepted Accounting Principles (GAAP) and the
Companies, Act, 1956. The management Discussion and Analysis of the results
given on the basis of the consolidated operations of Mascon Global and all
subsidiary companies. This discussion should be read together with the
detailed financial statements and notes to the accounts.
RESULTS FROM OPERATIONS FOR MGL:
The Financial Year 2010-2011, ended June 30, 2011 is for a period of
fifteen months compared to the Financial Year 2009-2010, ended March 31,
2010 is for a period of twelve months. All comparisons are made on the
The Company recorded operating revenue from overseas and domestic
operations of INR. 8,009 million for the year ended June 30, 2011. This
represents a decrease of 21.55% over operating revenues of INR. 10,209
million for the year ended March 31, 2010. The Company recorded domestic
revenues of INR 107 million in 2011, a increase of 62% over 2010 revenues
of INR. 66 million.
COST OF REVENUE:
The Company recorded cost of revenue of INR. 6,922 million for the year
ended June 30, 2011. Cost of revenues were 86% and 82% of revenues in 2011
and 2010, respectively. The increase in percentage of cost of revenues can
be attributed primarily to the reduction in revenue and increased staff
The Company recorded gross profit of INR 1,087 million for the year ended
June 30, 2011. This represents decrease of 41% over gross profit of
INR.1.870 million for the year ended March 31, 2010. The decrease in gross
margin from 18% in 2010 to 13.5% in 2011 is a direct result of increase in
cost of revenue as explained in the previous paragraph.
SELLING, GENERAL & ADMINISTRATION EXPENSES (SGA):
The Company recorded SGA of INR. 5,226 million (excluding an exchange gain
of INR.31.7 million) for the year ended June 30, 2011. This represents a
increase of 238% over the SGA of INR. 1549 million (excluding an exchange
loss of INR 384 million) for the year ended March 31, 2010. SGA as a
percentage of revenues has increased substantially from 15% to 65%.
PROFIT BEFORE INTEREST,DEPRECIATION, AND TAXES (PBIDT):
The Company recorded loss of INR.4,132 million for the year ended June 30,
2011. The Company recorded profit of INR.329 million for the year ended
March 31, 2010. Excluding the impact of exchange differences, PBIDT as a
percentage of revenues decreased and become negative in 2011.
INTEREST AND OTHER INCOME:
The Company recorded Interest and other Income of INR. 7 million for the
year ended June 30, 2011. This represents a decrease of 22% over Interest
and Other Income of INR 9 million for the year ended March 31, 2010.
INTEREST AND FINANCE CHARGES:
The Company recorded Interest and Finance Charges of INR.642 million for
the year ended June 30, 2011. This represents an increase of 44% over
Interest and Finance Charges of INR.445 million for the year ended March
DEPRECIATION AND AMORTIZATION:
The Company recorded Depreciation and Amortization expenditure of INR. 763
million for the year ended June 30, 2011. This represents an increase of
146% over Depreciation and Amortization expenditure of INR 310 million for
the year ended March 31, 2010. This is primarily due to one time
depreciation recorded in the year ended June 30, 2011.
PROVISION FOR TAXATION:
Income tax expense comprises taxes on income from expenditure in India and
other applicable foreign tax jurisdictions. The Company enjoyed certain
benefits in India from tax incentive policies till the Financial Year 2009-
2010. Income and other taxes payable are determined in accordance with the
provisions of the Income Tax Act, 1961. Tax expenses related to overseas
operations are provided for in accordance with the tax laws of the
applicable countries where work is carried out.
For the Year ended June 30, 2011, the Company has provided an amount of
INR. 15 million towards current tax (INR.53 million the previous year). No
tax provision was written back for previous years, while an additional
provision of INR. 1.7 million has been made for the previous years.
Deferred tax asset was INR Nil for the year ended June 30, 2011 as against
a deferred tax liability of INR 15 million for 2010.
PROFIT AFTER TAX:
As a result of consolidated operations carried out during the year, the
Company recorded a net loss of INR.5,335 million for the year ended June
30, 2011 against a net loss of INR.1,229 million for the year ended March
Financial Position of Mascon Global Limited (Consolidated).
The Share capital of the Company as on June 30, 2011 is given below:
Table : MGL Share capital 2010-2011
(Rupees in Millions)
As on June 30, 2011 As on March 31, 2010
Authorized share capital 7,000 7,000
Issued and paid up capital 3,721 3,721
The Company recorded secured loans of INR 2,541 million as on June 30, 2011
compared to INR. 2,353 million as on March 31, 2010. The Company recorded
unsecured loans of INR. 2,518 million as on June 30, 2011 compared to INR.
2,456 million as on March 31, 2010.
The Company recorded additions to gross block (excluding capital work-in
progress and goodwill) of INR. 14 million for the year ended June 30, 2011,
compared to additions of INR.10 million for the year ended March 31, 2010.
The Company recorded investments of INR 3,489 million as on June 30, 2011,
compared to INR. 4,605 million as on March 31, 2010.
CURRENT ASSETS, LOANS and ADVANCES:
The Company recorded current assets, loans and advances of INR.3,057
million as on June 30, 2011,compared to INR. 5,440 million as on March 31,
2010. Accounts Receivable comprised of INR.1,505 million on June 30, 2011
representing an decrease of 60% over accounts receivable of INR. 3,814
million on March 31, 2010. The Company recorded total cash and bank
balances of INR.199 million on June 30, 2011 representing a decrease of 5%
over cash and bank balances of INR.210 million on March 31, 2010. Loans and
advances comprised of INR. 1,354 million on June 30, 2011 representing a
decrease of 4% over loans and advances of INR.1,416 million on March 31,
The Company recorded provisions for taxation of INR 176 million for the
year ended June 30, 2011, representing a increase of 60% over provisions
due to previous year adjustments for taxation of INR. 442 million for the
year ended March 31, 2010. The Company has created deferred tax asset of
INR.1 million for the year ended June 30, 2011 representing a decrease of
85% over the deferred tax liability of INR.7 million for the year ended
March 31, 2010. These taxes are primarily in the US for the wholly owned