Aptech

Dear Shareholders,
 
 As I sit to pen my second statement to fellow shareholders, I cannot
 but dwell on the past year and the years to come. It is a matter of
 great personal satisfaction that the performance of the Indian economy
 has panned out to be one that has even exceeded the expectations of the
 eternal optimist on India - yours truly. I personally believe that this
 performance of the economy is only going to further accelerate. This
 has implications for every Indian and in every field of life whether
 economic, social or political. This economic growth has enhanced and
 opened manifold new opportunities for Aptech.
 
 The biggest challenge facing societies is to provide employment as well
 as to find employable talent. Our conviction of the opportunity in
 skill development and education sector has also been vindicated. For
 instance, according to International Data Corporation (IDC), the Indian
 IT/ITES sector which is now Rs. 198,000 crores (USD 48 billion) is on
 course to reach Rs.458,000 crores (USD 111 billion) by 2011. Indian IT
 sector has, hence, emerged as a large vertical for Aptech to train
 people for.
 
 China as well as Indias population in the working age group of 15-64
 is expected to increase by 58 million and 198 million respectively over
 the next two decades. These additions to the workforce are
 significantly higher than most other populous economies in the world.
 US will add only 20 million and Europes population in 15-64 age group
 will actually fall by 26 million. In fact, according to The Economist1,
 23% of the global workforce addition over the next five years will be
 from India. This opportunity of the need to enhance human skills is
 perhaps unparalleled in human history. This gives us the signal to
 enter new verticals of training and education like Aviation, Networking
 and Hardware, among others.
 
 As I dwell upon the year gone by, I recall the butterflies in my
 stomach while contemplating the challenge of leading Aptech. It has
 been an enlightening and a humbling experience. So far, the journey has
 been a
 
 fulfilling and profitable one. Aptech has been, and continues to be, in
 a transition, or shall I say in an evolution.
 
 The controlling shareholder group has consciously chosen to be focused
 on strategic framework, corporate governance and efficient capital
 allocation rather than running the operations, which has been
 completely mandated to Mr. Pramod Khera, Mr. Krishnan and their team.
 Team Aptech has been empowered and appropriately incentivized towards
 focus, growth and Rol.
 
 We have worked towards having a truly independent Board and making
 Aptech a Board managed Company to the extent that the strategic review
 of business and operations are done by a committee headed by an
 Independent Director.
 
 It is a case of true separation of ownership and management, in letter
 and in spirit, and in many dimensions.
 
 Evolve
 
 During the past year and a half, Aptech has been in transition. Not
 just transition of ownership, but also transition of priorities,
 evolution of business model and strategic thrust, and building of the
 foundations for a scalable and sustainable organization. We have
 corrected the structural underinvestment in brands and people.
 
 Over time, Aptech has evolved from a retail IT education Company into a
 Global Learning Solutions Company in many verticals. This initiative
 will enhance the addressable opportunity, balance business portfolio
 and enable wider and more intensive customer engagement.
 
 In the continued evolution, Aptech has improved processes and systems
 towards implementing an ERP solution. A comprehensive new solution for
 interface with franchisees has been commissioned and will be
 implemented during the year. The effect of this initiative will be far
 reaching over time. Project management systems have been implemented
 for all non-retail engagement with corporates.
 
 Initiative
 
 ACE-SSI network integration
 
 Internship + English language
 
 + Personality Development
 
 Corporate Training + ATTEST integration
 
 Avalon acquisition
 Synergetics acquisition
 
 Faculty certification + Invigilation Quality Control and Validation
 
 Rationale
 
 Brand focus, network productivity, profitability
 
 Enhanced career focus, Employability
 
 Leverage business development, Solutions offering
 
 Non-IT offering, High growth sector
 
 Differentiated offering, Ahead of the technology curve
 
 Improved teaching-learning-testing- certification process
 
 Improved education quality, Enhanced acceptability
 
 Key initiatives for the coming year include among others:
 
 Launch of Networking / Hardware courses Completes the offering matrix
 for the IT sector, High growth opportunity
 
 Arena rollout in new geographies Replicate Arenas success in new
 markets
 
 Metro markets focus Balanced roll-out all over India
 
 Evolution to Global Learning Solutions Leverage skill sets, brand,
 reach
 
 Training Academy and Centre of Excellence Deepen leadership, enhanced
 skill sets for the organization
 
 Empower
 
 RETAIL: Aptech has enhanced its global market presence through new
 centres and new course structures. Greater enrollments, improved
 business mix due to career enrollments, increased PSBs (per student
 bookings), improved per hour yields and above all, greater placements
 are validations of Aptechs strategy and execution. It is also a
 reflection of improved business environment driven by favourable
 megatrends of economic growth and prosperity, demographics, literacy,
 technology and aspirations. Aptech will leverage its pedagogy, content,
 training methodology, network management and quality control skills to
 enhance its leadership in IT and Multimedia education across emerging
 countries. We have forayed into training for Aviation sector (cabin
 crew, ground staff, customer interface) and Hospitality (customer
 interface and customer service) vertical as we see potential for a
 differentiated offering to students aspiring for these fast-growing
 sectors. This initiative too will leverage the Aptech DNA skills
 mentioned above.
 
 NON-RETAIL: Unlike Retail, the Aptech Non-Retail businesses are in the
 process of reaching critical mass. Our business model in respective
 businesses on Learning Services, Corporate Training and Testing, and
 Specialised Training has been validated. While these businesses have
 demonstrated their contribution margins, the bottom line impact will be
 visible once we scale each of them. So far, Aptech has been investing
 in these businesses. This year will be the defining year for these
 businesses to achieve scale and to start contributing to the bottom
 line from next year onwards. These businesses will not just de-risk
 Aptech but also provide new growth opportunities for Aptech. There is a
 large unmet need of corporate customers. Aptech is well-placed to
 service and leverage the Aptech DNA skills for the same. We aspire to
 be amongst the market leaders in each of these business segments.
 
 STRATEGIC: After many years, Aptech will be a net zero debt Company
 this year. Apart from a high free cash flow business profile, Aptech
 has an intrinsically high Rol business model. The business model has
 been re-focused on value accretive businesses and away from value
 destroying businesses. The capital infusion and its operating accruals
 will now be available to tap strategic opportunities and real options.
 We hope Aptech will now be able to consider paying dividends from the
 current year. Business visibility has improved significantly in both
 the Retail and Non-Retail businesses with both reflecting increased
 order books. Seasonality and cyclically concerns have diminished with
 amore evolved and de-risked business model. Among other structural
 changes, attrition rates have fallen, business heads are focused on Rol
 and strong performance incentives are in place.
 
 Grow
 
 For many years now, survival has been a way of life for Aptech. Now
 onwards, we hope Growth will be a way of life. It can be delayed, but
 not denied. The growth enablers are in place. Team Aptech is motivated,
 energized and empowered - for Growth; Growth that is sustainable,
 scalable and profitable.  We are working towards much more than market
 share - towards customers faith, towards shareholders credibility,
 towards Rol, towards profit share, towards new frontiers and towards
 leadership!
 
 The great thing in the world is not so much where we stand, as in what
 direction we are moving. - Oliver Wendell Holmes (American Physician,
 Poet, Writer, Humourist and Professor at Harvard 1809-1894).
 
 I hope that we have put Aptech on the right path. I am confident that
 the results of these efforts will be apparent in the times to come. The
 seeds have been sown; the fruits have to be reaped in time. Lest we
 forget, all we need now is Gods grace.
 
 I must end by thanking my fellow shareholders for their patience during
 the trying times, my fellow Board members for their invaluable advice
 and guidance, Pramod, his team and all Aptechites for their efforts and
 last but not the least, Aptechs customers for their continued support.
 
 Warm regards,
 Rakesh Jhunjhunwala