Aptech
BSE: 532475 | NSE: APTECHT | ISIN: INE266F01018 | Computers - Software - Training
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| Directors Report | Year End : Dec '07 |
The Directors are pleased to present their Eighth Annual Report on the
business and operations of your Company and the Audited Financial
Results for the period ended 31st December, 2007.
FINANCIAL RESULTS
The financial results of the Company for the Accounting year ended 31st
December, 2007 are presented below:
(Rs. In Million)
Year ended 31st December
Aptech Limited
Particulars Standalone
2007 2006
Income From Operations 992.58 812.14
Other Income 2.52 39.20
Total Revenue 995.10 851.34
Training & Education Expenses 338.44 331.00
Payments to and Provision for Employees 223.36 185.72
Administration and Other Expenses 286.32 243.93
Interest and Finance Expenses (Net) 18.76 23.60
Total Expenditure 866.88 784.25
Profit Before Exceptional Items and Depreciation 128.22 67.09
Depreciation and Amortisation 121.91 125.77
Profit Before Exceptional Items and Tax 6.31 (58.68)
Exceptional Items
Provision for Doubtful Advances (Net) 0.89 -
Provision for Diminution In Investment 11.06 -
Provisions/Liabilities no longer required written back 13.82 -
Total Exceptional Items 24.88 0.89
Profit/(Loss) Before Tax 31.19 (59.57)
Provision For Tax - -
Income Tax & Wealth Tax 2.27 2.15
Fringe Benefit Tax 4.35 5.64
Profit/(Loss) After Tax 24.58 (67.36)
Add : Surplus/(Deficit) brought forward from
Previous Year (389.71) (322.35)
Appropriations
Less : Transferred to Share Premium (Refer
Notes - Para B-5 under Schedule 15) 388.90 -
Balance Available For Appropriations (0.81) (389.71)
Surplus/(Deficit) Carried To Balance Sheet 23.77 (389.79)
DIVIDEND
The profits for the current year not being substantial to enable
payment of a dividend, your Directors thought it appropriate to plough
it back into business for enhancing the prospects in the future.
CONSOLIDATED ACCOUNTS
As per the Listing Agreement with the Stock Exchanges, consolidated
financial statements are required to be annexed with the financial
results of the Company. However, owing to the impending restructuring
of Aptech’s holding in the Chinese Joint Venture, consequent to the
Framework agreement, executed on 20th March, 2008, which is yet to be
followed up by the execution of Definitive agreements, the accounts for
the year ended 31st December, 2007 cannot be consolidated, pending
receipt of appropriate financial information.
The process of execution of the Definitive Agreements will take some
more time and as a result, the financials of the Chinese Joint Venture
will be received upon completion of the same. Soon thereafter, we
propose to prepare and dispatch a Supplementary Annual Report to all
members, containing the Consolidated Financials of the Aptech Group for
the year ended 31st December, 2007.
OPERATIONS
For the year 2007, your Company posted impressive System-wide booking
of Rs. 3645.20 million, registering a growth of 62% over the previous
year. This growth was achieved inspite of the decrease in institutional
booking as per the Company’s stated strategy of de- focussing on the
government business.
The share of the International business in the System-wide booking
increased to 19% led by a growth of over 70% in the year 2007. The
domestic Retail business bookings, which includes the brands of Aptech
Computer Education, Arena Multimedia and N-Power also grew at over 77%,
thereby increasing its share in the overall pie to 76%.
The overall growth in the System-wide revenue of Aptech ’s business is
depicted below:
A. RETAIL
In 2007, the Retail segment has shown a good growth. Your Company has
opened up five own centres in India at strategically placed business
locations with a view to propel the business prospects. Your Company
has employed aggressive marketing initiatives which will enable higher
and qualitative growth in the coming years.
1. INTERNATIONAL RETAIL :
The International Retail business of your Company has shown a
remarkable growth in bookings of over 70% in 2007.
With greater emphasis on expansion in the developing markets, 18 new
Aptech Computer Education Centres were opened in 2007 in new and
existing geographies including Ghana, Vietnam, Nigeria, Iran, Jordan
and Syria. Additionally, 9 new Arena Animation centres including
Mongolia, Syria, Jordan & Saudi Arabia were opened during 2007.
Further your Company continued to consolidate its growth in focussed
markets like Vietnam, Iran and Nigeria.
These initiatives will enable your Company to bolster its revenue
growth during the coming years. Further, your Company is on a constant
look out for opportunities in the global arena to accelerate its rate
of growth.
2. DOMESTIC RETAIL :
Your Company continued to be visible in the domestic market operating
through its flagship brand ‘Aptech Computer Education’ (ACE) which
provides IT Education and ‘Arena Animation’, the pronounced and
unparalleled leader in Asia for training in Animation and Multimedia
education.
During 2007, overall domestic bookings from ACE grew over 49%. With
renewed focus and well thought strategies, ACE is slated to scale
heights in the times to come.
Arena Animation is the leader in animation and multimedia education
with the largest market share in the Indian market. It was honoured
with the Franchise Growth Driver of the Year Award at the India
Franchise Awards 2007 which recognized the new initiatives introduced
by this brand which revolutionized the industry and resulted in
increased growth for the franchisees. The domestic bookings from this
brand grew at more than 97% over the last year.
N-Power the Hardware & Networking brand of Aptech was launched in 2007.
With aggressive marketing plans in place, it will be able to gain a
foothold in 2008.
Your Company’s success can be attributed to consistent reinvention to
keep up with the ever changing requirements of the industry, focus on
the course content, execution, placements, internships and innovative
marketing strategies and above all to its commitment to the end
customers.
B. INSTITUTIONAL
TRAINING SOLUTIONS :
Training Solutions which provides IT Training and Soft Skills Training
focusses on selling end-to-end solutions mainly to the Corporate
segment. The verticals targeted include IT, BPO, Auto, Financial and
Retail sectors.
During 2007, your Company had built up its capability in Content and
On-line Testing to meet the competitive challenges in the Corporate
segment. These capabilities will enable your Company to offer complete
learning solutions to its clients.
Going forward, it is proposed to integrate the Training and Testing
solutions in order to offer comprehensive services to clients.
EQUITY INFUSION
In February 2007, M/s. Aptech Investments, the existing Promoters
exercised their option of conversion with respect to 36,00,000
convertible warrants allotted on August 24, 2005, at a price of Rs.
56/- per warrant and the corresponding 36,00,000 equity shares of the
Company of face value Rs. 10/- each were allotted on 22nd February,
2007, upon receipt of corresponding allotment monies.
Further, out of the 47,12,500 Convertible Warrants allotted, in
aggregate, to the Promoter group and the Independent Directors on 1st
October, 2006, at a price of Rs.113/- per warrant, 14,50,000 warrants
were converted by the Promoter Group in March 2007 and corresponding
14,50,000 equity shares of the Company of face value Rs. 10/- each were
allotted, in aggregate, on 30th March, 2007, upon receipt of the
allotment monies from the respective allottees.
A further right of partial conversion was exercised by the Promoter
Group in respect of 6,00,000 warrants, in aggregate, during December
2007 and accordingly upon receipt of entire allotment monies @ Rs.
113/- per share, 6,00,000 equity shares of face value Rs.10/- each were
allotted, against conversion of the respective warrants.
The last tranche of conversion of the outstanding 26,62,500 warrants,
in aggregate, was exercised by the Promoter Group and two Independent
Directors viz., Mr. Vijay Aggarwal and Mr. Ramesh S. Damani, in respect
of 24,00,000, 250,000 and 12,500 warrants respectively by 30th March,
2008.
With this last conversion request, the corresponding balance allotment
monies was received by the Company and thereupon, on 31st March, 2008,
the Directors had approved the allotment of an aggregate of 26,62,500
equity shares of face value Rs.10/- each to the respective allottees in
the Promoter Group and to the aforesaid Independent Directors.
Consequent to the aforementioned preferential allotment, an aggregate
sum of Rs. 73,41,12,500/- was received by your Company towards equity
infusion from the Promoter Group and Independent Directors.
SHARE CAPITAL
With the aforementioned preferential allotment of 83,12,500 equity
shares made, in aggregate, to Promoter Group and Independent Directors
and as a result of exercise of 2,13,885 Options (equivalent to 2,13,885
equity shares) under Employee Stock Option Scheme 2004, the paid up
Share Capital of your Company as on 31st March, 2008 stood at Rs.
46,41,36,170 comprising 4,64,13,617 equity shares of face value Rs.10/-
each.
FINANCIAL RESTRUCTURING
Pursuant to the provisions of Sections 100 to 104 read with Section 78
of the Companies Act, 1956, the sanction of the High Court of
Judicature at Bombay was obtained vide their Order dated 27th April,
2007 for reduction/utilisation of the Securities Premium Account to the
extent of Rs. 38,89,02,555/- for adjusting the debit balance in the
Profit and Loss Account of your Company as at 31st December, 2006.
The said High Court Order and minutes of reduction of Securities
Premium Account was registered by the Registrar of Companies,
Maharashtra and consequently necessary adjustments in the Securities
Premium Account and Profit and Loss Account were carried out on 29th
June, 2007.
For the sake of clarity, it is reiterated that the aforementioned
adjustment/utilisation of the Securities Premium Account is only a book
entry and has no financial implications whatsoever and further the
members are requested to note that the aforesaid restructuring had no
impact whatsoever on the Shareholding pattern and the Capital structure
of the Company.
RESOURCE MOBILISATION
With the infusion of funds from the Promoters, the bank borrowings have
significantly come down leading to a steep reduction in the interest
and finance charges during the year.
EMPLOYEES STOCK OPTION SCHEME (ESOS), 2004
Your Company had formulated Employees Stock Option Scheme in February
2004 (hereinafter “Old Scheme”) for the benefit of the employees of the
Company and its subsidiaries. The said scheme was approved by the
members at the Extra Ordinary General Meeting held on 13th February,
2004 and administered by the Compensation Committee of the Board.
Under the said old scheme, 2,13,885 options were exercised by 28th
February, 2007 at an exercise price of Rs. 32/- per equity share,
against which corresponding 2,13,885 equity shares of face value Rs.
10/- each were allotted to the eligible employees by the Company.
With this final phase of allotment, all options granted under ESOP
Scheme 2004 have been either exercised into corresponding shares by the
employees or have lapsed, as the case may be applicable, and therefore,
there are no options whatsoever outstanding under this Scheme .
In accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 (hereinafter “SEBI
guidelines”), the details in relation to the total options granted,
vested, exercised, lapsed etc. under ESOS, 2004, are given as under:
Description ESOS 2004
Total Number of Options granted 10,36,500
Pricing formula Exercise price of the Options was
computed at 50% of the market price
as on the date of grant of Option
and accordingly, the price per
Option has been fixed at Rs.32/-.
Market price, for the purpose of
calculation of exercise price, was
considered as the six months
average price of the
Company’s share on the actively
traded Stock Exchange, immediately
preceding the date of grant of
Option.
Number of Options vested 10,36,500
Number of Options exercised 6,91,680
Total No. Of Shares arising as a
result of exercise of Options 6,91,680
Number of Options lapsed 3,44,820
Variation of terms of Options N.A.
Money realized by exercise of Options 2,21,33,760
Total Number of Options in force -
Grant to Senior Managerial personnel
under the Scheme 7,11,000
Employees who were granted 5% or more
of the total number of Nil
Options granted during the year
Employees who were granted Options equal
to or exceeding 1% Nil
of the issued capital of the Company at
the time of grant
Diluted Earnings per Share pursuant to
issue of shares on Nil
exercise of Option calculated in accordance
with AS 20
Difference between the employee compensation
cost computed
using the intrinsic value of Stock Options and
the employee
compensation cost that shall have been
recognized had the fair N.A.
value of Options, were used.
Impact of this difference on profits of the
Company Nil
Impact of this difference on EPS of the Company Nil
Weighted average exercise prices ; 32
Weighted average fair values of Options for
options whose 38.6
exercise price either equals or exceeds or is
less than the market price of the share.
Description of the method and significant
assumptions used Binominal Method
during the year to estimate the fair value of
the outstanding
options (which were entirely exercised by
February 13, 2007),
including the following weighted – average
information:
(a) Risk-free interest rate, 5.5.% p.a.
(b) Expected life 1 year
(c) Expected volatility Assumed at 0.358
(d) Expected dividends Ignored
(e) The price of the underlying share in the
market at the time of Option grant. Rs. 62.25
EMPLOYEES STOCK OPTION SCHEME (ESOS), 2006
Pursuant to the approval accorded by the shareholders on 16th
September, 2006, your Company had formulated the Employee Stock Option
Scheme (ESOS), 2006, (hereinafter the “New Scheme”) for the benefit of
the employees of the Company and its subsidiaries and for the
Non-Executive Directors (NEDs) .
The said scheme is administered by the Compensation Committee of the
Board. Under the said new scheme, 11,65,000 stock options comprising
10,65,000 stock options for employees and 1,00,000 stock options for
Non-Executive Directors was granted vide grant letters dated 4th May,
2007 at an exercise price of Rs. 113/- per equity share.
The stock options granted to eligible employees are, inter alia,
performance linked options and have been granted with a vesting
schedule spread over 4 years and accordingly the vesting period extends
uptil 12, 24, 36 and 48 months respectively from the grant date and the
exercise period is one year from the respective vesting date of the
qualified vested options. The entire 1,00,000 stock options granted to
NEDs has a vesting period of 12 months from the grant date and an
exercise period of one year from the respective vesting date.
In accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 (hereinafter “SEBI
guidelines”), the details in relation to the options granted, vested,
exercised, lapsed etc. under ESOS, 2006, as on 31st December, 2007, are
given as under:
Description ESOS 2006
Total Number of Options granted 11,65,000
Options comprising 10,65,000
Options to Employees and
1,00,000 Options to Non
Executive Directors (NEDs)
Pricing formula/Exercise price Rs. 113/-
Number of Options vested Nil
Number of Options exercised Nil
Total No. Of Shares arising as a result
of exercise of Options Nil
Number of Options lapsed 30,000
Variation of terms of Options N.A.
Money realized by exercise of Options Nil
Total Number of Options in force 11,35,000
Grant to Senior Managerial personnel 6,65,000
Grant to Non Executive Directors under
the Scheme 1,00,000
Employees who were granted 5% or more of the
total number of
Mr. Pramod Khera, Managing Director -2,65,000
Options
Options granted during the year
Employees who were granted Options equal to or
exceeding 1% None
of the issued capital of the Company at the
time of grant Diluted Earnings per Share pursuant
to issue of shares on N.A. as the options
exercise of Option calculated in accordance
with AS 20 have not vested.
Difference between the employee compensation
cost computed
using the intrinsic value of Stock Options
and the employee
98177500 - 20123550 = 78053950
compensation cost that shall have been
recognized had the fair
value of Options, were used.
Impact of this difference on profits of
the Company Positive
Impact of this difference on EPS of the Company 1.78
Weighted average exercise prices ; 113
Weighted average fair values of Options for
options whose 130.73
exercise price either equals or exceeds or is
less than the market price of the share.
Description of the method and significant
assumptions used Black Scholes Method
during the year to estimate the fair value of
Options, including
the following weighted – average information:
(a) Risk-free interest rate, 8.11% p.a.
(b) Expected life 3.38 years
(c) Expected volatility 62.15%
(d) Expected dividends and Ignored
(e) The price of the underlying share in
the market at the time of Option grant. Rs. 199.50
ALLIANCE WITH ASIAN INSTITUTE OF COMMUNICATION AND RESEARCH (AICAR)
In October 2007, your Company entered into an alliance with the Asian
Institute of Communication and Research (AICAR) in Neral, Maharashtra
to launch the T3 (Train-The-Trainers) academy in AICAR premises. This
academy is dedicated to creating a world-class residential institute
which offers faculty training and premium post graduate programmes to
graduate students.
It also offers corporates the opportunity to enhance skills in research
and development of management and communication practices of a standard
unparalleled in most other Institutes. It aims to develop and create
world class quality leaders and communicators capable of providing
leadership in all spheres of commerce and service in any part of the
world.
The vision of your Company and AICAR complement each other and it is
expected that with this alliance in place, your Company will focus on
exploring the synergies and new business opportunities that can be
tapped with each other’s contribution.
COMMUNITY SERVICES
Your Company continued with its contribution to Community services
through its various initiatives this year too. Your Company initiated
multimedia training through it’s Animation & Multimedia training arm -
Arena Animation, for the students of Udayan, who are endowed with
creativity and artistic skills. This was besides the Communication &
Personality development programs for the primary level students of
Udayan, which Aptech conducts regularly. Udayan is a home for the
children of the leprosy patients and Rev James Stevens is the
Chairperson of this NGO.
In it’s endeavour to increase the self confidence of the
underprivileged students, Aptech and Hope Kolkata foundation came
together in organizing modules in Communication, Personality
Development and Spoken English for the children associated with this
NGO.
In Cochin, your Company took up the construction & maintenance of 4
City Pre Paid Auto Stands which are manned by physically challenged
people who are identified by local administration. Your Company has
trained them in handling the computer related tasks. The hardware &
Software support is being provided by Aptech’s N-Power students.
Further your Company took the initiative of providing free IT training
to 50 children of Ganapathi Iyer School, Chennai, at it’s Cathedral
Road centre. It has been a constant endeavor of your Company to empower
children of the vulnerable section of the society by organizing IT &
Multimedia and softskills sessions from time to time.
DIRECTORS
In accordance with the Articles of Association of the Company, Mr.
Rakesh Jhunjhunwala, Mr. Utpal Sheth and Mr. Yash Mahajan, Directors of
the Company, retire by rotation at the ensuing Annual General Meeting
and being eligible have offered themselves for re- appointment.
Pursuant to the Central Government approval, vide their letter dated
29th August, 2007 for increase in the number of Directors from 12 to
15, Mr. Walter Saldanha was appointed on the Board of Directors with
effect from 31st October, 2007 as an Additional Director. His
appointment is being put forth at the ensuing Annual General Meeting
for the Member’s approval.
CONSTITUTION OF BOARD COMMITTEES
During 2007, Investment Committee of the Board was constituted and
delegated with the authority to make investments on behalf of the
Company in specified instruments and within the threshold limits
approved by the Board. This Committee comprises Mr. Ramesh Damani as
the Chairman, Mr. Utpal Sheth and Mr. Pramod Khera in their capacity as
the Board representatives and Mr. T. K. Ravishankar and Ms. Subhashree
Iyer as the Company representatives .
CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS
A separate report on the Corporate Governance and Management Discussion
and Analysis is attached as a part of the Annual Report. The Auditors’
Certificate regarding compliance of the conditions of Corporate
Governance is also annexed.
DIRECTORS’ RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors,
based on the representations received from the Operating management,
confirm that:
(i) In the preparation of the annual accounts, the applicable
accounting standards have been followed and that there are no material
departures;
(ii) They have, in the selection of the accounting policies, consulted
the statutory auditors and have 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 at the end of
the financial year and of the profit of the Company for that period;
(iii) They have taken proper and sufficient care, to the best of their
knowledge and ability, 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) They have prepared the annual accounts on a going concern basis.
RE-APPOINTMENT OF STATUTORY AUDITORS
At the forthcoming Annual General Meeting, M/s. Khimji Kunverji & Co.,
Statutory Auditors of the Company, will retire and being eligible, have
offered themselves for re-appointment as the Company’s Auditors. In
terms of the provisions of Section 224(1) of the Companies Act, 1956,
the Company had requested them to furnish a written certificate
regarding their eligibility for re-appointment as the Company’s
Auditors and they have accordingly issued the necessary certificate,
confirming that, their re-appointment, if made, at the ensuing Annual
General Meeting, would be in accordance with the limits specified in
Section 224 (1B) of the Companies Act, 1956.
EXEMPTION UNDER SECTION 212(8) OF THE COMPANIES ACT, 1956
Pursuant to the approval granted by the Ministry of Company Affairs,
Government of India, vide their letter dated 14th March, 2008, in
exercise of the powers conferred on them by Section 212(8) of the
Companies Act, 1956, the Company has been exempted from attachment of
Subsidiary companies’ financial statements as required under Section
212(1) of the Companies Act, 1956, for the financial year ended 31st
December 2007.
We undertake that the annual accounts of the Subsidiary companies and
the related detailed information will be made available to the Holding
and the Subsidiary Company investors who seek such information. Further
the annual accounts of the Subsidiary companies will also be kept open
for inspection by any investor in our Head office and that of the
concerned Subsidiary companies.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
EARNINGS AND OUTGO
The information relating to Conservation of Energy, Technology
Absorption, Foreign Exchange Earnings and Outgo required under Section
217(1)(e) of the Companies (Disclosure of Particulars in the Report of
Board of Directors) Rules, 1988, is annexed to and forms part of this
Report.
PARTICULARS OF EMPLOYEES
Particulars of employees pursuant to Section 217(2A) of the Companies
Act, 1956 read with Companies (Particular of Employees) Rules, 1975, as
amended, forms part of this Report. However, in pursuance of Section
219(1)(b)(iv) of the Companies Act, 1956, this Report is being sent to
all the Members of the Company excluding the aforesaid information and
the said particulars are made available at the Registered Office of the
Company. The Members desirous of obtaining such particulars may write
to the Company Secretary at the Registered Office of the Company.
FIXED DEPOSITS
During the period under review, your Company has not accepted or
invited any deposits from public.
INSURANCE
All the properties of the Company have been adequately insured.
ACKNOWLEDGEMENT
Your Directors wish to express their gratitude to the Members,
Financial Institutions, Bankers, Government authorities, esteemed
Corporate clients and Customers and wish to acknowledge the spirit of
dedication, commitment and co-operation extended by Employees at all
levels.
For and on behalf of the Board of Directors
Rakesh Jhunjhunwala Pramod Khera
Chairman CEO and Managing Director
Place : Mumbai
Date : 31st March, 2008 |
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