ANNUAL REPORT 2011-2012
Your Directors have pleasure in presenting this 29th Annual Report of your
Company together with the Audited Accounts for the 6 months period ended on
March 31, 2012 (Financial period from October 1, 2011 till March 31, 2012).
Your Company's financial performance during the period under review has
been encouraging and is summarized below:
Particulars Period ended
March 31, 2012 September 30, 2011
(6 months) (18 months)
Income from operations
and other income 976.47 2,423.67
Profit before Finance Cost,
Depreciation & Amortization
Exp. and Taxation 126.51 331.53
Less: Depreciation &
Amortization Expenses 18.75 46.17
Less: Finance Cost 53.30 118.09
Profit before taxation 54.46 167.27
Less: Tax Expense 19.91 62.13
Profit after tax 34.55 105.14
Add: Balance of Statement of
Profit and Loss brought forward 135.37 50.21
Amount available for
appropriations 169.92 155.35
Proposed Dividend - 3.14
Tax on Proposed Dividend - 0.50
Transfer to Debenture
Redemption Reserve 5.17 16.34
Balance carried to
Balance Sheet 164.75 135.37
REVIEW OF OPERATIONS
During the 6 months period under review, the Company's income from
operations including other income stood at Rs. 976.47 Crores as compared to
Rs. 2,423.67 Crores in the previous period (18 months) registering a growth
of about 20.86% on annualised basis. Profit before Finance Cost,
Depreciation & Taxation for 6 months period stood at Rs. 126.51 Crores as
against Rs. 331.53 Crores in the previous period (18 months), thereby
registering a growth of about 14.49% on annualised basis. Profit after tax
declined marginally by 1.43% on annualised basis and stood at Rs. 34.55
Crores for 6 months period as compared to Rs. 105.14 Crores in the previous
period (18 months).
Keeping in mind the capital requirement for future growth of the Company
and to conserve resources for operations of the Company, your Directors do
not recommend any dividend for the period ended on March 31, 2012.
During the period under review, the Company has not accepted/renewed any
deposits from the Public within the meaning of Section 58A and 58AA of the
Companies Act, 1956 and rules made there under.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
A report on Management Discussion and Analysis, as stipulated under Clause
49 of the Listing Agreement is covered under separate section and forming
part of the Annual Report.
During the period under review Mr. Prakash Desai resigned from Directorship
of the Company on November 12, 2011. The Board places on record its
appreciation for his valuable contribution during his tenure as a Director
of the Company.
Mr. Vijay Kumar Chopra was appointed as an Additional Director of the
Company by the Board w.e.f. July 1, 2012 and in terms of the provisions of
the Section 260 of the Companies Act, 1956, he holds office upto the
ensuing Annual General Meeting of the Company.
The Company has received notice under Section 257 of the Companies Act,
1956, proposing his candidature for appointment as Director of the Company,
along with the requisite deposit. The Board recommends his appointment as a
Director of the Company.
In accordance with the provisions of Section 256 of the Companies Act, 1956
and the Articles of Association of the Company, Mr. Adarsh Bagaria, Whole
time Director and Mr. Vijay Kumar Gupta, Director of the Company, retire by
rotation at the ensuing Annual General Meeting and being eligible offer
themselves for re-appointment. Your Board recommends their re-appointment.
Brief resume of the Directors proposed to be appointed/re-appointed as
stipulated under clause 49 of the Listing Agreement entered into with BSE
Limited and National Stock Exchange of India Limited are given in the
Notice convening the 29th Annual General Meeting of the Company.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement under section 217(2AA) of the Companies Act,
1956 with respect to the Directors Responsibility Statement, your directors
* in the preparation of the Annual Accounts for the 6 months period ended
March 31, 2012 the applicable accounting standards have been followed and
there are no material departures from the same;
* the selected accounting policies were applied consistently and the
Directors 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 March 31, 2012 and of the profit of the Company for the period ended on
* proper and sufficient care has been taken for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act,
1956, to safeguard the assets of the Company and to prevent and detect
fraud and other irregularities;
* the annual accounts have been prepared on a going concern basis.
M/s. Khandelwal Jain & Co., Chartered Accountants, Mumbai, the Statutory
Auditors of your Company holds office upto the conclusion of ensuing Annual
General Meeting and are eligible for re-appointment. The Company has
received a letter from them to the effect that their appointment, if made,
would be within the limits prescribed under Section 224(1B) of the
Companies Act, 1956.
Your Directors recommend their re-appointment as Statutory Auditors of the
Company to hold office from the conclusion of the ensuing Annual General
Meeting upto the conclusion of the next Annual General Meeting of the
Company and to audit financial accounts for the financial year ending on
March 31, 2013.
Observations of the Auditors, read together with the relevant Notes to the
Accounts and Accounting Policies, are self-explanatory.
Pursuant to the provisions of Section 233B of the Companies Act, 1956 and
in terms of the Order no. 52/26/CAB-2010 dated May 2, 2011 issued by
Central Government, the Company has appointed M/s Sanjay Gupta &
Associates, Cost Accountants, New Delhi as the Cost Auditors of the Company
for Audit of the cost accounting records maintained by the Company relating
to Electricity Industry for the financial year 2011-12, subject to the
approval of the Central Government.
SUBSIDIARY COMPANIES/JOINT VENTURES AND CONSOLIDATED FINANCIAL STATEMENTS
Spanco BPO Ventures Limited (SBVL), a wholly owned subsidiary and BPO arm
of Spanco Limited catering to global clients spread across four continents
with operations in India, US, Europe and Africa. Spanco's expertise in BPO
is not just restricted to call centre operations but also in building and
managing call centre, data centre infrastructures and manpower outsourcing
Spanco BPO Services Limited, Spanco Respondez BPO Private Limited, Spanco
Holdings INC are subsidiaries of Spanco BPO Ventures Limited (SBVL).
Spanco BPO Ventures Limited (SBVL) has incorporated a joint venture /
subsidiary company namely Spanco BPO Africa Limited in Mauritius with joint
venture partner, Ison Infotel Network Limited, Mauritius with objective to
make further downstream investments in companies across the African
Countries namely Nigeria, Tanzania, Kenya, Uganda, Burkina Faso, Chad,
Niger and Rwanda.
During the period under review, Spanco BPO Africa Limited has made
investments in 8 companies namely Spanco Channel BPO Ltd. (Nigeria), Spanco
RAPS Kenya Ltd. (Kenya), Spanco RAPS Uganda Ltd. (Uganda), Spanco RAPS
Tanzania Ltd. (Tanzania), Spanco RAPS Niger Ltd. (Niger), Spanco RAPS
Burkina Faso SARL (Burkina Faso), Spanco RAPS Tchad SARL (Chad), Spanco
RAPS Rwanda Ltd. (Rwanda) duly incorporated in Africa. The main object of
the companies incorporated in Africa is to carry the business of providing
call centre services, business processing operations, communications,
telecommunications, IT services etc.
A statement containing brief financial details of the Company's
subsidiaries for the period ended March 31, 2012 is included in the Annual
The Ministry of Corporate Affairs vide its General Circular No: 2/2011
dated February 8, 2011 have granted general exemption from attaching the
Balance Sheets of subsidiary companies with the holding company's Balance
Sheet, if the holding company presents in its Annual Report the
Consolidated Financial Statements duly audited by its Statutory Auditors.
The Company is publishing consolidated financial statements in the Annual
Report, hence the Balance Sheets of subsidiary companies are not attached
with the Company's Balance Sheet. Further, the annual accounts of the
subsidiary companies and the related detailed information will be made
available upon request to any member of the Company interested in obtaining
the same during the Annual General Meeting and are also available for
inspection during business hours at the Registered Office of the Company
and that of the respective subsidiary companies. The Consolidated Financial
Statements presented by the Company include Financial Results of its
subsidiary companies and Joint Ventures and are prepared in strict
compliance with applicable Accounting Standards.
Your Company's ratings has been reviewed to CARE C [Single C] by Credit
Analysis and Research Limited (CARE) for Long-term bank facilities and Non-
convertible debentures (NCD) and CARE C/CARE A4 (Single C/A four) by CARE
for Long/Short-term Bank facilities.
On May 10, 2012 the Company had issued and allotted 15,00,000 fully paid
Equity Shares of Rs. 10/- per share at a price of Rs. 155/- per share
(including premium of Rs. 145/- per share) to Mrs. Kavita Puri, Promoter of
the Company upon conversion of even number of warrants issued on
Consequent to this, the paid up share capital of the Company has increased
from Rs. 31,35,00,000 (divided into 3,13,50,000 Equity Shares of Rs. 10/-
per share) to Rs. 32,85,00,000 (divided into 3,28,50,000 Equity Shares of
Rs. 10/- per share).
The Company had issued 20 secured redeemable non - convertible debentures
of Rs. 1,000,000 each amounting to Rs. 2 Crores on a private placement
basis during the year 2008-09 carrying an interest at 11% payable half
yearly and the same are due for redemption in two equal installments on
July 3, 2012 and 2013.
The Company had issued 200 secured redeemable non - convertible debentures
of Rs. 1,000,000 each amounting to Rs. 20 Crores on a private placement
basis during the year 2008-09 carrying an interest at 11.25% payable
monthly and the same are due for redemption in two equal installments on
July 3, 2012 and 2013.
The Company had issued 700 secured redeemable non - convertible debentures
of Rs. 1,000,000 each amounting to Rs. 70 Crores on a private placement
basis during the year 2008-09 carrying an interest at 11.25% payable half
yearly and the same are due for redemption in two equal installments on
July 10, 2012 and 2013.
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND
As per the provisions of Section 205A read with Section 205C of the
Companies Act, 1956, the Company is required to transfer the unpaid
dividend remaining unclaimed and unpaid for a period of 7 years from the
due date to the Investor Education and Protection Fund (IEPF) set up by the
Central Government. The details of amount lying in Unpaid Dividend Accounts
due for transfer to the Investor Education and Protection Fund are given in
the below table. The shareholders whose dividend remained unclaimed for
these financial years are requested to claim it immediately from the
Company. Further, the Shareholders are requested to note that no claim
shall lie against the said fund or the Company in respect of any amount
which remained unclaimed for a period of seven years from the date that
these became first due for payment and no payment shall be made in respect
of any such claim.
The details of Unpaid/Unclaimed Dividend are as follows:
Year Dividend Date of Declaration Due Date for
Rate per transfer to IEPF
2004-05 Rs. 0.50 September 15, 2005 October 15, 2012
2005-06 Rs. 1.80 September 29, 2006 October 29, 2013
2006-07 Rs. 1.80 September 29, 2007 October 29, 2014
2007-08 Rs. 2.00 September 19, 2008 October 19, 2015
2008-09 Rs. 0.50 September 29, 2009 October 29, 2016
2009-10 Rs. 1.00 September 24, 2010 October 24, 2017
2010-11 Rs. 1.00 March 20, 2012 April 19, 2019
CORPORATE GOVERNANCE REPORT
Pursuant to Clause 49 of the Listing Agreement, a detailed report on
Corporate Governance duly certified by M/s. Manish Ghia & Associates,
Practicing Company Secretaries, Mumbai is separately attached to this
The employer employee relations remained cordial throughout the period. The
Board places on record its sincere appreciation for the valuable
contribution made by the employees across all levels of the organization.
In accordance with the provisions of Section 217(2A) read with Companies
(Particulars of Employees) Rules, 1975, the name and other particulars of
employees are to be set out in the Director's Report as an addendum
thereto. However, as per the provisions of Section 219(1)(b)(iv) of the
Companies Act, 1956, the Report and accounts as set out therein are being
sent to all members of the Company excluding the aforesaid information
about the employees. Any member, who is interested in obtaining such
particulars about employees, may write to the Assistant Company Secretary
at the Registered Office.
PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN
EXCHANGE EARNINGS AND OUTGO
(A) CONSERVATION OF ENERGY
The Company's operations are not energy-intensive. However, significant
measures are taken to reduce energy consumption by using energy-efficient
computers and purchasing energy-efficient equipment. During the period, the
Company has taken some measures for optimal utilization of electricity by
stringent control by re-scheduling of working hours of air-conditioning and
lighting during the off working hours. The Company constantly evaluates new
technologies and invests to make its infrastructure more energy-efficient.
Air-conditioners with energy-efficient screw compressors for central air-
conditioning and with split air-conditioning for localized areas are used.
As energy costs comprise a very small part of the total expenses, the
financial impact of these measures is not material.
(B) TECHNOLOGY ABSORPTION, RESEARCH AND DEVELOPMENT
With an object to obtain and deliver the best, your Company successfully
deployed a growing and diverse team of R&D specialists who have expertise
in hardware, networking systems software, database and application
software. This helped the Company to access to the latest technologies and
deploy/absorb these latest technologies wherever feasible, relevant and
appropriate. The Company has not maintained separate record of the
expenditure incurred on R&D.
(C) FOREIGN EXCHANGE EARNINGS & OUTGO
(Rs. in Crores)
Particulars March 31, 2012 September 30, 2011
(6 months) (18 months)
Foreign exchange earned 1.62 3.63
CIF value of imports - 3.53
Expenditure in foreign currency 0.47 2.42
Your Directors wish to express their sincere gratitude to the Union
Government and the Government of various States, as also to all the
Government agencies, banks, financial institutions, customers, vendors and
other related organizations, who, through their continued support and co-
operation, have contributed towards the Company's growth and progress
during the period under review. Your Directors also wish to place on record
their deep sense of appreciation for investors, shareholders and employees
of the Company for their continued support towards conduct and operations
of the Company.
For and on behalf of the Board of Directors
Chairman and Managing Director
Date : August 14, 2012
MANAGEMENT DISCUSSION AND ANALYSIS
A. TECHNOLOGY INFRASTRUCTURE
IA. INDUSTRY STRUCTURE AND DEVELOPMENTS
The Indian Information and Communication Technology (ICT) Industry has
played a critical role in shaping the contours of the modern Indian economy
and transforming its growth trajectory. The IT industry, alone, has played
a pioneering and pivotal role in placing India on the world map as a major
knowledge-based economy. The effective use of ICT services in Government
administration (both state and central) has significantly enhanced existing
efficiencies, driven down communication costs and increased transparency in
the functioning of various departments.
IT has been recognized as the single most important enabler to effectively
modernize India's power sector and also transform its distribution network
using modern technology and also reduce the power transmission and
distribution losses. To make power distribution more efficient, the
government has attempted privatization with the franchise model.
As India progresses, a key concern for the Government is enforcing systems
that streamline inefficiencies in the system which deprives the Government
from valuable revenues at ground level. One of the mega IT infrastructure
initiative addressing this key area of concern and also aiding security
management is the state border check posts.
While the sector's growth trajectory is founded on strong fundamentals and
sustained domestic demand, a significant portion of the sector's earning
flow from the international and overseas market. Hence the IT sector and
particularly the ITeS & BPO sector which are focused purely on
international markets are not immune to the global economic challenging
environments that prevailed in the past 24 months.
CRISIL Research expects the domestic IT services market to grow at a five-
year Compounded Annual Growth Rate (CAGR) of 18% to Rs. 65,000 Crores in
2013-14. The Government is expected to be the largest end-user with a 30%
share; demand for IT services is expected to grow at a CAGR of 23%.
IIA. OPPORTUNITIES AND THREATS
Government Business Unit: Mega eGovernance projects involve designing
solutions for building gigantic e-infrastructure, necessitating large-scale
system integration. The Indian Government plans to spend close to USD 10
billion for rolling out the NeGP, the opportunity for the ICT sector to
radically transform modern governance and take the IT revolution to its
next phase. The scale of the opportunities can be seen from the fact that
the Centre and State will spend anywhere between Rs. 20,000 to Rs. 30,000
Crores over the next five years to roll out government related services.
PSU: The upgradation of legacy systems and overall IT-led modernisation
presents large scale opportunities to the Indian IT sector. IT spending by
India's Public Sector reached an estimated USD 3.1 billion in 2008, and is
further expected to grow phenomenally. The estimated CAGR between 2007 -
2011 was nearly 19%.
Transport/ Integrated Check Posts: For the Indian economy to achieve
accelerated economic growth, infrastructure will play a key role. The
Government has increased the infrastructure allocation from USD 500 billion
in the 11th Five Year plan to USD 1 trillion in the 12th plan (2012-17).
Modernisation of ports, airports, roads and border check posts are key
opportunity areas for the ICT sector as they will drive efficiency, enable
better revenue collections and also provide greater control to monitor
enforcements and adherence of laws.
Banking: The banking sector is at the forefront of adopting technology as
financial inclusion gains momentum wherein efforts are made to ensure
access of appropriate financial products and services needed by weaker
sections and low-income groups at an affordable cost in a fair and
transparent manner. As a step in this direction, Indian banks have geared
up for the second wave of technological enhancement, their spending is
likely to shoot, a little over 50%, to Rs. 10,000 Crores annually.
Healthcare: Healthcare in India is in the midst of a major transition and
technology is making a tremendous impact on the way healthcare is
delivered. One emerging trend in this area is telemedicine. ICT holds the
potential to deliver modern healthcare guidance and facilitate faster
access to urban doctors through focused technology related initiatives such
Aviation: Airport security checks are essential for the safety of both the
passengers and the country. Airport Authority of India (AAI) has taken up
modernisation and upgradation of airports across the country and the market
size for airport security in India is estimated to be USD 6 billion over
the next 5 years. Transport department modernisation is an important
initiative which will help the department add scale and efficiency and
hence drive higher level of transparency in the ecosystem.
2. Power Business Unit
Technology Infrastructure and Services: India is presently positioned as
the 11th largest manufacturer of energy. It is also the worlds' 6th largest
energy user. In spite of its extensive yearly energy output, Indian power
sector is a regular importer of energy because of huge disparity between
production and demand. While some progress has been made at reducing the
Transmission and Distribution (T&D) losses, these losses are still
substantially higher than the global benchmarks. To tackle these
challenges, the Government has proposed Restructured Accelerated Power
Development Reforms Programme (R-APDRP) as a Central Sector Scheme. R-APDRP
is an initiative driven by the centre in collaboration with the state with
a clear focus to bring in actual, demonstrable performance in terms of
sustained energy loss reduction. The size for R-APDRP program is to the
tune of Rs. 50,000 Crores.
Distribution Franchise (DF): The DF model is a PPP initiative that has
emerged as a solution to the problems affecting the power distribution
segment - high technical and commercial losses, poor infrastructure, weak
financial position and lack of customer orientation. The key driver of
franchising for utilities as well as consumers would be the ability of the
DF to source additional power and provide uninterrupted supply in the
franchise area. The DF model has emerged as a means of tying up with
private players to bring on consumer management expertise, invest in
infrastructure (thereby curtailing losses) and share financial benefits of
the improvements with the licensee.
CRISIL Research expects power distribution in 20 circles to be bid out to
the private sector over the next three years. This entails an investment
opportunity of Rs. 140-170 billion. Of those, around six circles are
expected in Maharashtra, six in Uttar Pradesh, three in Madhya Pradesh and
three-four in other states. Shnglu committee constituted by the Central
Government on power sector reforms have recommended 250 Distribution
Franchisees across the country to reduce ATC losses.
Telecom industry in India has undergone a revolution during the past few
years with tremendous growth in the telecom subscriber base. The country's
telecom industry is one of the fastest growing and one of the largest
telecommunication networks in the world. A study by PwC indicates that the
urban tele-density at 154% is far ahead of the rural tele-density of 34%
per cent. While this spells opportunity for the industry, significant
investments will be required in order to further increase reach in the
rural areas. Introduction of 3G will not only lead to introduction of new
Value Added Service (VAS) applications but will also give a boost to
initiate new revenue streams such as m-education, m-governance,
telemedicine and most importantly will become the backbone for the
broadband penetration. There will be significant increase in the number of
persons accessing the internet from their mobile platforms.
Recessionary trends: While the global economic slowdown has arisen in the
developed economies, the contagion is being witnessed in all major
economies of the world. Several countries including India are experiencing
contraction in their GDP. An overall slowdown in the pace of investment
activity, the extremely challenging scenario in the financial markets has a
dominos effect and also impacts other sectors of the world economy. This
along with challenges of high inflation, tight credit policy further posses
challenges for India and the India Inc.
Government Policy: The IT sector has witnessed tremendous boost from the
Government's spending in building of modern IT infrastructure to implement
its e-Governance initiatives. The scale of Government-led IT spending in
the economy is today unmatched. It is the Government's thrust on areas like
CSC, power, telemedicine, transport/integrated check post, Unique
Identification Development Authority of India (UIDAI) - Aadhar, National
Rural Employment Guarantee Act (NREGA) etc has opened large-scale and long
term sustainability for the sector. Hence, any major reverse of policies in
this direction or change in thrust can adversely impact the ICT sector.
Competition: While India is a well-acknowledged software superpower,
traditionally most Indian IT & ITeS companies have concentrated on the
opportunities available overseas. Also, due to the increasing
opportunities, several global players have set up base in the country to
garner a share in the opportunity pie.
IIIA. RISKS AND CONCERNS
Funding: The Company predominantly works in public sector space. Size of
opportunities in this space is significantly large and requires quick
access to funds for faster execution. Also, since Spanco participates in
several tenders; each tender requires either a Bank Guarantee or an EMD.
Spanco has always believed in having a judicious mix of small and medium
term projects where the billing is on a time and material basis and the
turnaround time is fast along with longer-term PPP projects. This ensures
that funding requirements for any of the PPP projects are such as those
that can be managed well. In addition, the Company has funding lines from
banks and financial institutions open and has sufficient funds for
developing ongoing projects. As the Company is building long-term assets
through PPP projects and can showcase future revenue visibility, it is
confident of raising adequate funds for these projects. Further, the
Company has raised Rs. 800 million from Bessemer Venture Partners by way of
subscription of equity shares on preferential basis.
Time and cost overruns: Time and cost overruns in project execution can
impact the Company's revenue projections. Spanco's longstanding presence in
executing enables it to foresee any upcoming hurdles resulting in solving
them ahead of time. Besides, all projects have inbuilt cost and time
related clause in contracts.
Manpower capabilities: As Spanco expands its operations across the country,
enhancing manpower capabilities will be imperative to success. As the
Company scales the growth curve, which is a part of its strategic planning,
special initiatives are undertaken to ensure that adequate manpower
resources, both at the pre-project and post-project levels, are allocated
for each project. Special dedicated teams for each domain already exist.
As our industry moves towards exploring new frontiers, rapid advancement in
technology infrastructure, increasingly competitive Indian organizations,
enhanced focus by the Government and emergence of business models that help
provide IT to new customer segments would be the key drivers for increased
technology adoption in India. Spanco has always delivered beyond
expectations and projects have been delivered as per schedule. The ability
to identify opportunities ahead of time, invest in continuously
strengthening its business foundations and to take the learning's of the
past projects to newer projects has played an invaluable role in tracing
its success story.
By offering relevant futuristic solutions, today Spanco is confident of
heralding a new era of change by empowering the common people of India
through various landmark projects and now also exploring promising new
countries and geographies. With its innovative approach and solid
management practices driven by a stable leadership team, a balanced
services portfolio across all our business lines viz. Government, power,
telecom, transport that aligns to market needs, coupled with a wide
geographic spread and increased efficiencies; Spanco has integrated long
term sustainability into its businesses.
Spanco's entry into the power sector and specially the distribution side
provides the business, long term stability and opportunity that offer
consistent revenues. Spanco has the ability to replicate the success of
diverse projects in one state to multiple states and now aims to take this
domain expertise into a new continent of promise like Africa that holds
immense long term opportunity and growth potential in the future.
Moving forward, Spanco is confident of growing and scaling its business
further by exploring more visible opportunities on the horizon. More
importantly, with deep market understanding, it has initiated several
exciting and dynamic measures which will create important bridges that will
translate into a new era of opportunities. Today, after over a decade of
proven excellence and growth, Spanco, as an entity stands poised for a leap
beyond all its previous benchmarks - a leap of growth and success that
promises to provide its new position of eminence in the world of technology
infrastructure and services.
B. BUSINESS PROCESS OUTSOURCING
IB. INDUSTRY STRUCTURE AND DEVELOPMENTS
The Business Process Outsourcing (BPO) industry in India is considered one
of the most significant growth catalysts for the economy. The Indian ITeS
BPO industry has evolved considerably over the past two decades. Increasing
competition from emerging nations in low-cost service offerings has made
the Indian ITeS BPO industry shift their focus towards improving the value
proposition especially in the established verticals such as BFSI. The
sector has also expanded across several other emerging verticals such as
retail, healthcare and knowledge services. New verticals such as climate
change, mobile applications, healthcare, energy efficiency and sustainable
energy are fast emerging as growth drivers.
As an experienced global outsourcing solutions provider, Spanco has
established a formidable presence in the BPO space spread over three
continents catering to India, US/Europe and African markets. It has
operational centres in: India (Mumbai, Gurgaon, Kolkata, Dehradun,
Coimbatore, Mohali, Hyderabad and Mysore), UK, US, Poland, Africa (Nigeria,
Kenya, Tanzania, Burkino Faso, Chad, Niger, Uganda and Rwanda)
IIB. OPPORTUNITIES AND THREATS
Domestic BPO Business: Having grown manifold in size and matured in terms
of service delivery capability and footprint over the past decade, India is
one of the fastest-growing BPO market in Asia-Pacific. The industry is
expected to build on its existing phase of evolution which would be
characterised by greater breadth and depth of services; process re-
engineering across the value chain; increased delivery of analytics and
knowledge services across platforms and strong domestic market focus.
International BPO Business: The United States and Europe primarily dominate
the global BPO market. The increasing size and scope of the BPO industry is
largely attributed to the growing desire of global businesses to address
primary issues such as shortage of skilled personnel and rising operational
costs. Technological advancements, introduction of sophisticated platforms
and software, and the emergence of newer media are also driving businesses
to opt for services of specialist third-party service providers. Driven by
the need to cut operating costs through outsourcing of non-core processes,
the global market for BPO is forecast to reach USD 280.7 billion by the
year 2017, as estimated in a report by Global Industry Analysts Inc in
African Business: Africa is home to more than one billion people. By 2050,
the population is predicted to rise to two billion, some 22% of global
population. While individual African economies face serious challenges such
as poverty, diseases and high infant mortality, they collectively are now
the world's most rapidly growing economic region. Over the past decade,
political and economic conditions have improved. Significant armed
conflicts have ended, giving way to political stability necessary for
economic growth. Africa has started to get more positive coverage in the
mainstream media. Time magazine recently dubbed Kenya as 'Silicon Savanna'
due to the country's ICT revolution. Around 128 million households, says a
McKinsey report, will have disposable income by 2020, when Africa's
collective GDP will be USD 2.6 trillion.
Recessionary trends: India's economy has been fuelled by the growth in the
technology sector in the past and a slowdown in economic growth also
impacts the IT sector. A large part of the IT sector's growth is dependent
on the 'outsourcing' or 'offshoring' of key business processes and software
development activity (and related services) by large global corporations
and other organisations. This is also seen as a reason for job losses in
developed countries and outsourcing itself is being questioned by global
political power to appease their populations. If this scenario continues to
deteriorate further, it possess a major threat to the industry as a whole.
Competition from other low-cost countries: India has managed to emerge as
the biggest destination for outsourcing, but countries like Philippines,
Brazil, China and Mexico are also eyeing the pie by leveraging their
comfort with the English language. While Philippines is a major threat,
China too seems to be entering this space in a big way but it also has
various disadvantages such as lack of skilled manpower and quality
III B. RISKS AND CONCERNS
Attrition rate: BPO companies suffer from the chronic problem of a high
attrition rate, as a large number of people who enter the industry are
those who intend to work only for a few months, without long term
commitment and career plans. To address the problem the Company has been
incorporating world class HR practices enabling it to attract, train and
retain the best talent in the industry. The Company continuously creates
and maintains a pool of world - class resources by recruiting best talents
from leading colleges and from within the industry, imparting efficient and
effective training and facilities, blending them into productive resources
by creating challenging opportunities on projects.
Data security: With data processing units coming up in large numbers the
need for proper data security and cyber laws continues to remain a key
concern. The Company has invested in the correct technology to build a
secure environment. At the same time, Spanco undertakes adequate security
measures before recruiting employees; invests in training (and monitoring)
to maintain data security and ensures compliance with security policies and
Rising Costs: Pricing pressure, both in the international and domestic
segments, is high, making margins thin, especially in the short and medium
term. Spanco, with its tight operational and cost efficiency aided by
sophisticated MIS systems, is equipped to tide this risk. The Company's
solutions combine domain knowledge, process management and technology to
deliver increased operational efficiency, better customer management and
improved quality through the ability to add significant value to clients in
terms of functional excellence, on time and rapid transition and
transformational benefits over the lifecycle of the engagement.
In the past couple of years, the BPO industry has moved away from
transaction processing towards a driver of business value. Clients want BPO
to help operate their businesses better and to deliver measurable business
outcomes. They also are looking for more industry-specific BPO offerings,
and services are moving from the back office to the mid and front office.
Understanding these trends, going forward the Company aims to further add
new fast moving business verticals and expand its service offerings. The
Company also aims to expand its geographic presence and its foray into the
fast moving African continent has expanded its growth horizons. The
Company's strategy in Africa is based on bringing cost effective, scalable
solutions to build world class contact centres. Spanco is looking at
leveraging local capabilities and expects to partner with companies who
have deep rooted understanding of local geography and customer needs.
Driven by the unexploited potential in the BPO industry in the continent,
Spanco foresees a considerable sum of its profits generating from Africa.
VA AND VB INTERNAL CONTROLS
The Company is equipped with adequate internal control systems for its
business processes which determine the efficiency of its operation
strengths in financial reporting and ensure compliance with applicable laws
and regulations. The internal control systems are supplemented by extensive
audits conducted by internal auditors. These have been designed to provide
reasonable assurance with regard to recording and providing reliable
financial and operational information, complying with applicable statutes,
safeguarding assets from unauthorized use or losses, executing transactions
with proper authorization and ensuring compliance of corporate policies.
Moreover, regular internal audits and checks ensure that responsibilities
are executed effectively across the organisation. The Audit Committee meets
regularly, reviews and verifies the controls in accordance with the Terms
of Reference given by the Board of Directors.
VIA AND VIB HUMAN RESOURCES
The total number of employees in the Company, including subsidiaries as on
March 31, 2012 stands at 15000 (includes employees on roll as well as on
contract). The Company understands that employees are vital and valuable
assets. It believes in creating a favorable work environment which can lead
to innovative ideas. The Company has a scalable recruitment and human
resource process which leads to attraction and retention of highly
qualified and productive individuals in the organization.
VIIA FINANCIALS IN BRIEF
During the period under review, the Authorized Share Capital of the Company
remains unchanged to Rs. 75 Crores divided into 75,000,000 (previous year
75,000,000) Equity Shares of Rs. 10/- each. Also, Paid up capital of the
Company remains unchanged to Rs.31.35 Crores.
Reserves and surplus
The Company's reserves and surplus increased to Rs. 601.39 Crores as at
March 31, 2012 as compared to Rs. 566.84 Crores as at September 30, 2011.
As a result, the Company's net worth increased to Rs. 632.74 Crores as at
March 31, 2012 from Rs. 598.19 Crores as at September 30, 2011. The
increase is mainly on account of the net profits earned during the period.
The Company's secured loans were at Rs. 776.38 Crores as at March 31, 2012
as compared to Rs. 658.60 Crores as at September 30, 2011. The increase is
mainly due to increase in working capital loans from Rs. 530.81 Crores to
Rs. 653.13 Crores on account of growth in the business.
Unsecured loans have decreased to Rs. 68.96 Crores as at March 31, 2012 as
compared to Rs. 116.32 Crores as at September 30, 2011. The decrease is on
account of loan repayments.
Long term provision
The Company's long term provision decreased to Rs. 0.97 Crores as at March
31, 2012 from Rs. 1.26 Crores as at September 30, 2011.
Current liabilities (Other than borrowings)
Current liabilities of the Company decreased to Rs. 686.02 Crores as at
March 31, 2012 from Rs. 700.56 Crores as at September 30, 2011. This was
mainly due to decrease in trade payables.
The gross block decreased to Rs. 201.13 Crores as at March 31, 2012 as
compared to Rs. 227.89 Crores as at September 30, 201 1 due to slump sale
of Power Distribution Franchisee division to its step down subsidiary
The Capital WIP increased to Rs. 207.81 Crores as at March 31, 2012 as
compared to Rs. 147.01 Crores as at September 30, 201 1. This increase is
mainly due to ongoing capital expenditure on various long term asset based
The Company's investments stood at Rs. 78.56 Crores as at March 31, 2012
compared to Rs. 80.84 Crores as at September 30, 2011.
Loans and advances
The Company's loans and advances decreased to Rs. 451.17 Crores as at March
31, 2012 from Rs. 461.49 Crores as at September 30, 2011.
Other non current assets
Other non-current assets have decreased to Rs. 9.32 Crores as at March 31,
2012 from Rs. 10.86 Crores as at September 30, 2011.
The Company's inventory stood at Rs. 481.03 Crores as at March 31, 2012 as
compared to Rs. 391.98 Crores as at September 30, 2011. Increase was mainly
due to the stock in hand for various milestone based projects, where
billing is pending based on the contract terms.
The Trade receivables (including long term) of the Company increased to Rs.
789.96 Crores as at March 31, 2012 from Rs. 764.74 Crores as at September
30, 2011. However, the receivables days have come down from 174 days in
2010-11 to 161 days in the period under review, which is mainly due to
collection efforts made by the Company. The current receivable days
correspond to the nature of the business, the Company operates into.
Other current assets
Other current assets have decreased to Rs. 34.34 Crores as at March 31,
2012 from Rs. 53.10 Crores as at September 30, 2011 on account of reduction
in unbilled revenue.
The total revenue of the Company stood at Rs. 971.41 Crores for six months
ended March 31, 2012 as compared to Rs. 2,411.26 Crores for eighteen months
ended September 30, 2011 thereby registering a growth of 20.86% on
annualized basis. This is mostly due to the increase in revenues from
Government (including PSU), Power, e-Governance verticals.
Personnel cost of the Company stood at Rs. 22.34 Crores for six months
ended March 31, 2012 as compared to Rs. 57.75 Crores for eighteen months
ended September 30, 201 1 thereby registering increase of 16.05% on
annualized basis which is mainly due to manpower cost of DF business
getting clubbed for substantial timeframe during current period as compared
to previous period.
Interest and finance charges
The interest and finance charges of the Company stood at Rs. 53.30 Crores
ended for six months ended March 31, 2012 as compared to Rs. 118.09 Crores
for eighteen months ended September 30, 201 1 thereby registering increase
of 35.41% on annualized basis. This is mainly due to increased borrowings
and overall increase in interest rates.
The depreciation for the year under review was Rs. 18.75 Crores for six
months ended March 31, 2012 as compared to Rs. 46.17 Crores for eighteen
months ended September 30, 2011 thereby registering increase of 21.83% on
annualized basis. This is due to increase in amortization cost for various
BOOT projects getting capitalized towards later part of the previous
The other expenses of the Company stood at Rs. 82.81 Crores for six months
ended March 31, 2012 as compared to Rs. 173.21 Crores for eighteen months
ended September 30, 201 1 thereby registering an increase of 43.43% on
annualized basis. It is mainly due to other expenses pertaining to DF
business getting clubbed for substantial timeframe during current period as
compared to previous period.
Profit before tax
Profit before tax of the Company stood at Rs. 54.46 Crores for six months
ended March 31, 2012 as compared to Rs. 167.27 Crores for eighteen months
ended September 30, 2011. It has declined by 2.33% on annualized basis.
Post tax profit
Profit after tax of the Company stood at Rs. 34.55 Crores for six months
ended March 31, 2012 as compared to Rs. 105.14 Crores for eighteen months
ended September 30, 201 1 registering decline of 1.42% on annualized basis.
In this Annual Report we have disclosed forward looking information to
enable investors to comprehend our prospects and take informed investment
decisions. This report and other statements, written and oral, that we
periodically make, contain forward looking statements that set out
anticipated results based on the management's plans and assumptions. We
have tried wherever possible to identify such statements by using words
such as anticipate, estimate, expects, project, intends, plans, believes
and words of similar substance in connection with any discussion of future
performance. We cannot guarantee that these forward-looking statements will
be realized, although we believe we have been prudent in assumptions. The
achievement of results is subject to risks, uncertainties and even
inaccurate assumptions. Should known or unknown risks or uncertainties
materialize or should underlying assumptions prove inaccurate, actual
results could vary materially from those anticipated, estimated or
projected. Readers should bear this in mind.