Aptech

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