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Educomp Solutions
BSE: 532696 | NSE: EDUCOMP | ISIN: INE216H01027 | Computers - Software - Training
- Directors Report
- Chairman's Speech
- Auditors Report
- Notes To Accounts
- Accounting Policy
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| Directors Report | Year End : Mar '08 |
The behalf of the Board of Directors of your Company, it is my privilege
to present the Fourteenth Annual Report and Audited Statement of
Accounts for the Financial Year ended 31st March, 2008 together with
Auditors Report thereon.
1. Financial results:
The Performance of the Company’s Financial Conditions and Results of
operations are summarized as below:
Particulars Financial Results for
the year as at
March 31, March 31,
2008 2007
Turnover & Other Income 2,769.03 1,121.72
Profit Before Depreciation,
Tax & interest & Misc.
expenditure 1,394.97 557.12
Less: Depreciation 322.95 93.93
Less: Finance charges 41.89 13.29
Less: Miscellaneous
Expenditure 0.20 0.20
Profit before tax 1,029.93 449.70
Provision for Tax
Current tax 167.56 116.93
Deferred Tax 156.00 43.15
Fringe Benefit Tax 5.79 3.11
Profit after Tax before prior
period expenses 700.58 286.51
Profit after Tax & after Prior
Period expenses 700.61 285.84
Appropriations
Proposed Dividend on Equity shares 43.20 33.08
Tax on Dividend 7.34 5.62
Transfer to General Reserve 70.06 21.44
Balance carried to Balance Sheet 1034.58 454.57
Results of operations:
Total revenue increased to Rs. 2,769.03 millions as on March 31, 2008
from Rs. 1,121.72 millions as on March 31, 2007 registering a growth of
146.86%.
The profit before tax and after prior period items increased to Rs.
1,029.96 millions (39.30% of Net Sales) as on March 31, 2008 from Rs.
449.03 millions (42.13 % of Net Sales) as on March 31, 2007.
The profit after tax & prior period items increased to Rs. 700.61
millions (26.73% of Net Sales) as on March 31, 2008 from Rs. 285.84
millions (26.82% of Net Sales) as on March 31, 2007.
Appropriations:
Dividend:
The Director’s have recommended a final dividend of Rs. 2.50 per Equity
Share (25% on par value of Rs. 10/-) for the Financial year ended as on
31st March, 2008, which on approval at the forthcoming Annual General
Meeting, will be paid to all those Equity Shareholders whose names
appear in the Register of Members as on 27th June, 2008.
The total proposed dividend amount shall be Rs. 50.54 millions,
including the dividend tax, for the Financial Year 2007-08 as against
total dividend payout Rs. 40.30 millions for the previous year.
Dividend (including dividend tax) as a percentage of profit after tax &
prior period items is 7.21% as on March 31, 2008 as compared to 14.10%
as on March 31, 2007.
The register of members and share transfer books will remain closed
from 28th June, 2008 to 7th July, 2008, both days inclusive. The Annual
General meeting of the Company will be held on 7th July, 2008.
Transfer to Reserves:
The Company proposes to transfer Rs.70.06 millions (Previous year Rs.
21.44 millions) to the General Reserve out of the amount available for
appropriations. An amount of Rs 1034.58 millions (Previous year Rs.
454.57 millions) has been proposed to be retained in the Profit and
Loss Account.
2. Changes in paid-up share Capital:
During the year, following were the changes in paid-up share capital:
Allotment of 12,40,750 Equity shares of Rs. 10/- each, fully paid-up at
a premium of Rs. 890/- per share on conversion of $ 24.5 million 1%
Foreign Currency Convertible Bonds.
Allotment of 20,710 Equity shares of Rs. 10/- each, fully-paid up at a
premium of Rs. 2939.83/- per share on conversion of $ 1.5 million Zero
coupon Foreign Currency Convertible Bonds.
The paid-up capital after taking the effect of changes as above, stood
at Rs.17,24, 65,640/- as on March 31, 2008 as against Rs.15,98,51,040/-
as on March 31, 2007.
Post 31st March, 2008 & till 2nd June, 2008, Company has allotted
32,020 Equity Shares of Rs. 10/- each , fully paid-up at a premium of
Rs. 115/- per equity share to the eligible employees of the
Company/Subsidiaries pursuant to exercise of Stock Options under ESOP
Scheme 2006. The paid-up capital after taking the effect of changes as
above, stood at Rs.17,27,85,840 as on 2nd June 2008.
Company is proposing to issue GDR upto $ 250 mn for investment in
Educomp Infrastructure Private Limited and Educomp School Management
Limited, for its K-12 initiatives, potential strategic acquisitions/
joint ventures, Capex cost requirement for ICT and Smart Class for FY
2010, Higher Education Initiatives/ vocational studies and other
purposes as per applicable guidelines issued by RBI and Government of
India.
3. Foreign Currency Convertible Bonds
US$ 80 Million Zero Coupon Foreign Currency Convertible Bonds
During the year, the Company issued at par 5-year, Zero Coupon Foreign
Currency Convertible Bonds (FCCB) at an exercise price of Rs. 2949.83
per share aggregating to US $ 80 million (Rs. 3,237.60 million as on
the date of issue) for financing overseas acquisition, capital
expenditure and other expenditure as per RBI regulation. As per terms
and conditions of the Offering Circular issued by the Company for FCCB,
the Bond are convertible by holders of the Bonds (the “Bondholders”)
into fully paid equity shares of the Company with full voting rights
with par value Rs. 10 per share of the Company (the “Shares”) at any
time on or after 4th September, 2007 (or such earlier date as is
notified to the Bondholders by the Company) and prior to the close of
business on 19th July, 2012, unless previously redeemed, converted or
repurchased and cancelled.
The Bonds may be redeemed in cash in whole, but not in part, at their
Early Redemption Amount, at the option of the Company at any time on or
after 25th July, 2009 and on and prior to 19th July, 2012, subject to
satisfaction of certain conditions. These bonds are redeemable at
141.087% of the principal amount on July 26, 2012 unless previously
converted, redeemed or purchased and cancelled.
The Company has incurred an expenditure of Rs. 55.05 millions towards
issue expenses of these bonds. These expenses have been charged to
securities premium account as provided under Section 78 of the
Companies Act, 1956.
Out of the proceeds of the bond issue, Rs. 2207.57 million (equivalent
to US$ 55.04 million) is lying in fixed deposits at March 31, 2008 in
foreign currency with State Bank of India, London.
US$ 25 Million 1% Foreign Currency Convertible Bonds
In 2006, the Company had issued at par 5-year, 1% Foreign Currency
Convertible Bonds (FCCB) aggregating to US $ 25 million (Rs. 1135.25
million as on the date of issue) for financing overseas acquisition,
capital expenditure and other expenditure as per RBI regulation. All
outstanding 1% Foreign Currency Convertible Bonds (FCCB) aggregating to
US $ 24.5 million have been converted into equity shares during the
year leading to the capital base by 1240750 Equity Shares and all the
proceeds out of US$ 25 million bonds have been utilized as on
31.03.2008 as per the terms of the offering of FCCB.
4. Operating Results and Business :
The Company’s performance over the years has shown a consistent and
upward trend. The Profit Before Depreciation, Tax & Interest & Misc.
expenditure (operating profit) increased by Rs. 837.85 million to Rs.
1394.97 million (50.38% of revenues) as on March 31, 2008 from Rs.
557.12 million (49.67% of revenues) as on March 31, 2007.
Segmental Performance :
The gross margins in the Smart Class ™ Segment of the Company for the
year amounted to Rs. 741.24 million or 58.01% of Smart Class ™ revenue
as on March 31, 2008 as compared to Rs. 270.60 Million or 58.09% of
Smart Class ™ revenue as on March 31, 2007.
The gross margins in the Instructional & Computing Technology (ICT)
Segment of the Company for the year amounted to Rs. 272.83 million or
29.23% of ICT revenue as on March 31, 2008 as compared to Rs. 98.12
million or 32.52% of ICT revenue as on March 31, 2007.
The gross margins in the Professional Development segment of the
Company for the year amounted to Rs.156.72 million or 61.15% of
professional development revenue as on March 31, 2008 as compared to
Rs. 105.08 million or 59.91% of professional development revenue as on
March 31, 2007.
The gross margins in Retail and Consulting segment of the Company for
the year amounted to Rs. 86.68 million or 56.43% of Retail and
consulting revenue as on March 31, 2008 as compared to Rs. 58.01
million or 47.24% of Retail and consulting revenue as on March 31,
2007.
Expenditure:
Personnel expenses have increased from 9.37% of our revenue to 12.23%
as on March 31, 2008. This increase is due to employee stock option
compensation cost amounting to Rs.82.72 million (2.99% of total
revenue) charged to Profit and Loss Account.
Administration and other expenses have decreased from 13.84% of our
revenue to 8.60% as on March 31, 2008.
We have benefited due to economies of scale and our net profits after
tax for the year has registered a growth of 145.11%. Our Profit after
tax amounted to Rs. 700.61 million or 25.30% of revenue as on March 31,
2008 as compared to Rs. 285.84 million or 25.48% of revenue as on March
31, 2007.
We enjoy long-term annuity relationships with both private schools as
well as government customers, ranging from three to five years. Our
revenues are predictable and locked in for three to five years on
account of the contractual nature of our business. In the Smart Class ™
segment, we have added 602 new customers taking the total number of
schools to 933 as on March 31, 2008 as compared to 331 as on March 31,
2007.
In our ICT business segment, we have an ongoing partnership with Nine
State Governments and are catering to over 6004 Government schools in
various States as on March 31, 2008.
5. Subsidiaries of the Company:
The Company has seventeen subsidiaries, one associate and two planned
joint ventures (see details below). The subsidiaries focus mainly on
providing services and products directly to the individual consumer as
part of the Company’s Direct initiatives. In Fiscal 2008, Direct
Initiatives contributes 14.09% of the total consolidated revenues of
Educomp. The diagram below sets out the corporate structure of the
Educomp:
The following table provides summary details on the above-mentioned
subsidiaries:
Name and Country of Registered Address
Incorporation
Directly Held
Edumatics Inc. -U.S.A. 1655, Mesa Verde Av.,
Suite 120, Ventura,
CA-93003, U.S.A.
Educomp Learning No. # 6, 80 Feet Road,
Private Limited -India 4th Block Koramangala,
Bangalore 560034, India.
Wheitstone Productions No 71/5, IV, Main Road,
Private Limited -India Gandhinagar, Adyar,
Chennai 600020, India.
Ownership Principal Activities
Interest
100% Flagship vehicle for expansion in
the U.S. market by offering
Smart Class and e-learning
joint development initiatives.
51% Production and content
development arm of the Company
with special emphasis on
production of 2D/ 3D digitized
multimedia content.
51% The main business of WPPL is the
production of periodicals and
children magazines.
Name and Country of Registered Address
Incorporation
Educomp Infrastructure 1211, Padma Tower I,
Private Limited -India Rajendra Place,
New Delhi-110 008, India.
Educomp School 802, Padma Tower I,
Management Limited Rajendra Place,
India New Delhi-110 008, India.
Educomp Professional Plot No. 514, Udyog Vihar
Education Limited - India Phase III, Gurgaon, India.
Educomp Software 1210, Padma Tower I,
Limited - India Rajendra Place,
New Delhi-110008, India.
Educomp Asia Pacific 80 Raffles Place,
Pte. Ltd. - Singapore 26-05 UOB Plaza 1,
Singapore 048624.
ThreeBrix E- services A-5, Gulmohar Park,
Private Limited - India New Delhi-49, India.
AuthorGen Technologies SCO 167-168, Sector 8-C,
Private Limited -India Chandigarh, India.
Indirectly Held
ASKnLearn Pte. Limited 10 Science Park Road,
Singapore #03-13 The Alpha,
Singapore Science Part II,
Singapore 117 684.
Singapore Learning .com 10 Science Park Road,
Pte. Ltd –Singapore #03-13 The Alpha,
Singapore Science Part II,
Singapore 117 684.
Pave Education Pte Ltd 10 Science Park Road,
Singapore #03-13 The Alpha,
Singapore Science Part II,
Singapore 117 684.
Ownership Principal Activities
Interest
69.38% EduInfra is responsible for
constructing and establishing K-12
schools in India.
68.00% Edu Manage provides specialized
IP including curriculum books and
school management services.
100% EPEL was incorporated to run
professional education and higher
education courses.
100% Edu Soft was incorporated to set
up a content development unit at
Parwanoo, Himachal Pradesh to
take advantage of tax benefits
available in that region.
100% It was created as an SPV to
facilitate the leveraged buy-out
transaction of ASKnLearnTM.
76.00% ThreeBrix provides online and
offline tutoring services.
55.05% Acquired in Fiscal 2007 to enable
the Company to leverage and
consolidate its position in online
tutoring by providing it with access
to key technology competence
and student teacher marketplace
models.
100% (by Edu Asia, ASKnLearn was acquired to
which is wholly enable the Company to leverage its
owned by Educomp) multimedia content repository in the
APAC region.
100% (by A one-stop learning portal for parents
ASKn Learn, and students and an e-shop for
which is wholly educational products.
owned by
Edu Asia, which
is wholly owned
by Educomp)
100% (by Pave offers IT courses, multimedia
ASKnLearn ) language enrichment courses and
e-learning services to schools.
Name and Country of Registered Address
Incorporation
Wiz Learn Pte Ltd 10 Science Park Road,
Singapore #03-13 The Alpha,
Singapore Science Part II,
Singapore 117684.
Educomp Infrastructure 1211, Padma Tower I,
Services Private Limited- Rajendra Place,
India New Delhi-110008, India.
Sikhya Solutions LLC.- 9220, Fairbanks, Suite 205,
U.S.A. Raleigh, North Caroline
27613, U.S.A.
Learning.com, U.S.A. 1620 SW Taylor Street,
Suite 100, Portland Oregon
97205, U.S.A.
Ownership Principal Activities
Interest
100% (by Offers programmes to manage and
ASKn Learn) support teaching, learning and
courseware management over the
internet.
100% (by Educomp The Company was incorporated to
Infrastructure, cater specific projects under
which is 69.38% Educomp Infrastructure Private
owned by Educomp) Limited.
100% (by Marketing office of AuthorGen in the
AuthorGen) U.S.
51% (by Educomp Learning.com is a premier provider of
Asia Pacific, which web-delivered curriculum and
is wholly owned by assessment in the U.S. The
Educomp) investment in Learning.com enables
the Company to leverage its
multimedia content repository in the
U.S.
On 27 May, 2008, the Company and Raffles Education Corp, the largest
private education group in the APAC region, announced plans to form two
strategic joint ventures. The first, in India, will be in respect of
higher and professional education initiatives, whilst the second, in
China, will be aimed at expanding the geographical scope of the
Company’s K-12 online initiatives.
6. Particulars required as per Section 212 of the Companies Act, 1956
:
The Company has filed the necessary application for the approval of
Ministry of Corporate Affairs, Government of India dispensing with the
requirements to attach various documents in respect of subsidiary
companies, as set out in sub-section (1) of Section 212 of the
Companies Act, 1956, and approval thereof is expected very shortly.
Accordingly, the Balance Sheet, Profit & Loss Account and other
documents of the subsidiaries of the Company are not being attached
with the Balance Sheet of the Company. A statement containing brief
financial details of the Company’s subsidiaries for the year ended as
on March 31, 2008 is included in the Annual Report. The Company will
make available the audited annual accounts and related information of
the subsidiary companies, where applicable, upon request to any member
of the Company. These documents will also be available for inspection
during business hours at our Registered Office and respective offices
of subsidiaries.
7. Directors:
Board of Directors of Educomp Solutions Limited comprises of
Chairman-cum-Managing Director, Mr. Shantanu Prakash and four
Directors, namely Mr. Shonu Chandra, Mr. Sankalp Srivastava, Mr.
Jagdish Prakash and Mr. Gopal Jain. During the year, Mr. Anjan Dutta
has resigned from the Board of Directors of the Company on 29th
January, 2008.
As per Section 255 and 256 of the Companies Act, 1956 Mr. Shonu Chandra
is liable to retire by rotation and, being eligible, he offers himself
for re-appointment at the ensuing Annual General Meeting. Brief resume
of Mr. Shonu Chandra is provided elsewhere in the annual report as
stipulated under clause 49 of the listing agreement with the Stock
Exchanges.
8. Statutory Disclosures :
None of the Directors of your Company is disqualified as per provision
of Section 274(1)(g) of the Companies Act, 1956. The Directors of the
Company have made necessary disclosures, as required under various
provisions of the Act and Clause 49 of the Listing Agreement.
9. Human Resource Management :
Educomp is an equal opportunity employer with total employee strength
of 3955 as on March 31, 2008 as compared to 1422 as on March 31, 2007.
The attrition rate of the Company stands at 3.03% as on March 31, 2008.
Educomp’s HR policies and processes are aligned to effectively drive
its expanding business and making inroads into emerging opportunities.
The Company has a suitable recruitment and human resource management
process, which enables us to attract and retain high caliber employees.
Company has created incentive driven remuneration policies which act as
an effective retention tool.
10. Directors Responsibility statement:
In pursuance of provisions of Section 217(2AA), we hereby confirm that:
1) That in the preparation of the Annual Accounts for the period ended
as on 31st March 2008, the applicable Accounting Standards have been
followed and no material departure has been identified.
2) Accounting Policies have been consistently applied in a reasonable
and prudent manner so as to give true and fair view of the state of
affairs of the Company for the financial year ending 31st March 2008
and of the Profit and Loss Account for the Financial Year ending as on
31st March, 2008.
3) Proper and sufficient care has been taken for the maintenance of
adequate records in accordance with the applicable provisions of the
Companies Act,1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities.
4) The Annual Accounts have been prepared on the going concern basis.
11. Auditors & Auditors’ Report :
M/s Anupam Bansal & Co., Chartered Accountants, the Statutory Auditors
of the Company, hold office, in accordance with the provisions of the
Companies Act, 1956, until the conclusion of the forthcoming Annual
general Meeting and are eligible for re-appointment.
The Company has received letter from Auditors to the effect that their
appointment, if made, would be in accordance with Section 224 (1B) of
the Companies Act, 1956 and that they are not disqualified for such
reappointment within the meaning of Section 226 of the said act.
The notes on accounts referred to in the auditors’ report are
self-explanatory and therefore don’t call for any further comments by
the Board of Directors.
12. Share Registration activity:
Company has appointed “INTIME SPECTRUM REGISTRY LIMITED” a category-I
Registrar and Share Transfer Agent registered with SEBI to handle the
work related to Share Registry.
13. Consolidated Financial Statements:
As required under the listing agreements with the Stock Exchanges a
consolidated financial statement of the Company and all its
subsidiaries is attached. The consolidated Financial Statements have
been prepared in accordance with Accounting Standard 21 & 23 issued by
the Institute of Chartered Accountants of India and showing the
financial resources, assets, liabilities, income, profits and other
details of the Company and its subsidiaries as a single entity, after
elimination of minority interest.
14. Listing of Shares:
The Equity Shares of your Company have been listed on National Stock
Exchange Limited (NSE) and Bombay Stock Exchange Limited (BSE) with
effect from 13th January, 2006. The Listing fee for the year 2008- 09
has already been paid to BSE and NSE.
15. Quality Initiatives :
Reinforcing its commitments to high standards of quality, Company‘s got
its Quality Management system examined by Assessors of QMS
Certification Services and they have found it to be conforming to the
requirements of ISO 9001:2000 in respect of “Application of ICT”
(Information & Communication Technology related to computer Aided
learning, Training & Computer Literacy Projects in Schools) and awarded
“Certificate of Approval” in this regard which is valid till 16th,
March, 2010.
16. Conservation of energy, technology absorption, adoption and
Innovation, foreign exchange earnings and outgo:
The particulars are prescribed under Section 217(1)(e) of the companies
Act, 1956, read with the Companies (Disclosure of particulars in the
report of Board of Directors) Rules, 1988 are set out in an Annexure A
attached to this report.
17. Ratings:
During the year, the Company received various recognition, which are as
follows:
* ISO 9001:2000 certification in of Application of ICT (Information &
Communication Technology related to computer Aided learning, Training &
computer Literacy Projects in Schools).
* SM1 rating from CRISIL, indicating outstanding credit worthiness.
* P1 rating for commercial paper from CRISIL.
* A (stable) rating for long-term debt (Non Convertible Debentures)
from Fitch Ratings.
* A / stable rating for cash credit facilities from CRISIL.
18. Corporate Governance:
As per clause 49 of the Listing Agreement, a report on Corporate
Governance, together with Management Discussion and Analysis Report and
Certificate from the Company’s Auditors is attached to this report.
Code of Conduct:
As per Clause 49 (I) (D), the Board of the Company has laid down Code
of Conduct for all the Board members of the Company and Senior
Management as well and the same has been posted on website of the
Company. Annual Compliance Report for the year ended 31st March, 2008
has been received from all the Board members and Senior Management of
the Company regarding the compliance of all the provisions of Code of
Conduct. Declaration regarding compliance by Board members and senior
management personnel with the Company’s Code of Conduct is hereby
attached as annexure to this report.
19. Notes to Accounts:
They are self-explanatory and do not require any explanations.
20. Additional Information:
Particulars of employees:
Information as required under Section 217(2A) of the Companies Act,
1956, read with the Companies (Particulars of Employees) Rules, 1975,
as amended, are given, in an Annexure B forming part of this report.
21. Fixed Deposits:
The Company has not accepted any fixed deposits during the year
22. Acknowledgement:
Your Directors record their appreciation of the continuous support,
co-operation the Company has received from its bankers, employees,
customers, vendors, investors, business associates and regulatory
authorities.
For and on Behalf of the
Board of Directors
(Shantanu Prakash)
Date : 2nd June, 2008 CHAIRMAN & MANAGING
Place: New Delhi DIRECTOR
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