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Mascon Global

BSE: 531131|ISIN: INE896A01013|SECTOR: Computers - Software Medium & Small
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Download Annual Report PDF Format 2010
Directors Report Year End : Jun '11    Mar 10
The Directors are pleased to present their report on the business and
 operations of the Company together with the Audited Consolidated and
 Standalone Accounts of your Company for the period ended June 30, 2011.
 
 Financial Results
 
 The following tables give the consolidated and standalone financial
 performance of the Company for the year 2010-2011 as compared to the
 previous financial year.
 
 Consolidated
 
                                                  Rs. in thousands
 
 Year ended                        June 30,2011         March 31,2010
                                   (15 months)          (12 months)
 
 Revenues                            8,009,109           10,208,785
 
 Cost of revenue                     6,921,706            8,338,707
 
 Gross margin                        1,087,403            1,870,078
 
 Other income                            6,802                8,534
 
 Selling, general and a
 dministration expenses              5,226,024            1,549,121
 
 Operating profit (PBIDT)           (4,131,819)             329,491
 
 Interest & finance charges            641,858              445,431
 
 Exchange Loss/(Gain)                  (31,674)             384,068
 
 Depreciation & amortization           763,105              309,729
 
 Profit before prior year adjustment 
 and tax                            (5,505,109)            (809,737)
 
 Prior year adjustments               (190,356)             376,736,
 
 Provision for tax   
 - Current                              14,850               53,212
 
 - Previous year                         5,842                4,293 
 
 _- Deferred tax                             -              (14,983)
 
 Profit after tax                   (5,335,445)          (1,228,995)
 
 Standalone
 
                                                   Rs. in thousands
 
 Year ended                        June 30,2011        March 31,2010
                                    (15 months)          (12 months)
 
 Revenues                               759,439            3,553,277
 
 Cost of revenue                        559,214            2,780,535
 
 Gross margin                           200,225              772,742
 
 Other income                             2,311                2,775
 
 Selling, general and 
 administration expenses              4,151,913              793,986
 
 Operating profit (PBIDT)            (3,949,377)             (18,469)
 
 Interest & finance charges             444,501              358,082
 
 Exchange Loss/(Gain)                   (35,869)             384,068
 
 Depreciation & amortization            147,818               54,636
 
 Profit before prior year 
 adjustment and tax                  (4,505,826)            (815,255)
 
 Prior year adjustments                 187,392              (18,852)
 
 Provision for tax   - Current year          -                  8500
 
 _- Deferred tax                             -               (14,984)
 
 Profit after tax                    (4,693,218)            (789,919)
 
 Year in Retrospect
 
 a.  Consolidated
 
 Total Revenues during 2010-2011 (Fifteen months) at Rs. 80,091 lakhs
 registered an decrease of 22 % over the previous year (Twelve months)
 revenue of Rs. 102,088 lakhs mainly on account of non- renewal of
 certain client contracts and loss of business due to the slow down in
 the US. The gross margin during the year was Rs.10,874 lakhs (13.5 % of
 Revenue) as compared to Rs. 18,700lakhs (18 % of Revenue) in the
 previous year. The operating loss during the year increased to Rs.
 41,318 lakhs as compared to Rs.3,294 lakhs during the previous year.
 The net loss for the year increased to Rs.53,354 lakhs against a net
 loss of Rs. 12,289 lakhs during the previous year.
 
 b.  Standalone
 
 Total Revenue during 2010-2011 (Fifteen months) at Rs.7, 594 lakhs
 registered a decrease of 78 % over the previous year (Twelve months)
 revenue of Rs. 35,533 lakhs, mainly on account slow down in the US
 resulting in marginal reduction of business to India. The gross margin
 during the year has decreased to Rs.2, 002 lakhs ( 26 % of Revenue) as
 compared to Rs. 7,727 lakhs (22 % of Revenue) in the previous year. The
 operating loss during the year increased to Rs. 39,493 lakhs as
 compared to Rs 18.5 lakhs during the previous year.  The net loss for
 the year amounted to Rs. 46,932 lakhs as against a net loss of Rs.
 7,899 lakhs during the previous year.
 
 Dividend
 
 The Board has not recommended any dividend for the year 2010-2011.
 
 Share Capital
 
 No fresh capital has been raised during the financial year 2010-2011
 Acquisitions
 
 The Company has not made any new acquisition during the financial year
 2010-2011 - Financial Restructuring with Banks and others
 
 (i) In India
 
 State Bank of India
 
 The Company had availed Term loan and working capital facilities from
 State bank of India, Chennai during 2007 and 2009 to meet the overseas
 acquisition and to bridge the gap in working capital. Due to the global
 economic crisis, the company''s revenues have substantially reduced and
 the company was unable to service the loan and interest.
 
 The Bank , the company and the Guarantors have entered in to a Joint
 Memo of settlement as of December 16, 2011 by which, the company and
 the guarantors have agreed to reduce the over all loan outstanding of
 the bank to the extent of INR. 67.88 crores and the balance to be
 settled over a period ending June 2015, on a structured repayment
 basis.
 
 The Company has also provided additional collateral in the form of UCC
 on 15 % of the present paid -up capital of the US Subsidiary , namely,
 M/S.Versatech Consulting Inc, USA in favour of the bank, as perthe terms
 of the Joint Memo of Settlement.
 
 The Company and the guarantors have initiated for the sale of the
 properties of the guarantors to repay the outstanding to the extent of
 INR. 67.88 crores of which INR. 41.59 crores has already been paid to
 reduce the overall outstanding of the bank. The matter is pending for
 final orders before the Debt Recovery Tribunal (DRT) chennai.
 
 ICICI Bank
 
 The Company and the personal guarantor Mr. K.Chandra are in discussions
 with the bank for arriving at an one time settlement in the form of a
 structured repayment.
 
 SBI Global Factors Limited and L&T Finance Limited
 
 The Company and the personal guarantor Mr. K. Chandra are in
 discussions with the above lenders to achieve a schedule for making
 structured repayments of the outstanding dues and to settle the legal
 suits filed by them against the company and its directors/officers.
 
 Donewell Impex Private Limited
 
 The Company had offered in the Magistrate Court a settlement plan but
 the lender has not agreed with the same and the matter is still before
 the Court. In the matter of the Winding-up petition filed by them
 before the Honorable High Court of New Delhi, the Company has agreed to
 offer a payment plan on a monthly basis and the matter is yet to be
 decided.
 
 In all the restructuring with the banks or other parties, the company
 is confident of entering in to a proper arrangement to settle the dues
 and disputes.
 
 (ii) US Subsidiary
 
 MGL Americas Inc, USA, the wholly owned subsidiary established during
 2001 had been the pioneer in sourcing the off-shore business contracts
 for the India development centers, before the acquired subsidiaries
 were added to the profile of the company. During 2009, due to the US
 Economic melt down, the bankers to the subsidiary also went through
 convulsions and arising out of the same, the working capital and term
 loan limits were significantly reduced by them. During 2010-11, the
 bankers have to resort to liquidation and as part of the measures taken
 by the liquidators, the entire limit has been closed as of this August
 2011, resulting in non-availability of working capital for supporting
 the operations of the subsidiary. Also, the bank has adjusted a portion
 of their term note and over advance by adjusting the collections from
 the operations and also by way of exercising their lien on a portion of
 the assets of the company.
 
 Human Resource Development
 
 This year has been extremely challenging for the organization from an
 HR perspective. In the context of a rather tough year on the business
 and operations front and on the backdrop of a resurgent IT Industry has
 meant that the Company has faced challenging times both in retention
 and attraction of talent. Tactically the HR Function refocused its
 approach on getting managers and themselves to work closer with the
 workforce to be able to respond to them and to disseminate information
 quicker as well as to establish better emotional connect.
 
 The total number of employees as on June 30, 2011 was 1600. The
 attrition for our remaining team is at 15%, however this remains
 comparable to the current industry benchmarks. The company has lost a
 number of clients and the clients have chosen to absorb some of our
 employees in their new vendor. MGL envisages major growth from new
 business areas such as Healthcare & Life Sciences, Banking, Financial
 Services, Communications, Infrastructure Management and Cloud Computing
 etc. The requirement of skills for these segments continues to be
 significantly different than that of the conventional IT services due
 to strong domain focus. Continued efforts are being made to identify
 suitable resources for these areas as well as to retool the existing
 workforce.
 
 The HR function is presently implementing robust long term plans
 focused on enhancement of the employer brand both internally and in the
 external market place. In view of the deep domain and technology skill
 sets that the business model of the Company requires, negotiations on
 tie-ups with well known institutions imparting technology education are
 at an advanced stage with a view to establishing suitable labs. This
 will not only harness innovation within partner educational
 institutions benefitting everyone involved but set up an assured well
 trained supply of workforce for the future.
 
 Quality Initiatives
 
 At MGL, commitment to continuous improvement of quality practices and
 building robust information security practices are an integral part of
 our business operation. MGL has achieved a number of significant
 milestones in its journey towards operational excellence.
 
 - Gurgaon Development Center is certified to ISO 9001:2008
 
 - Bangalore Development Centers are certified to ISO 27001:2005
 
 - Bangalore Development Centers are certified to IS014001:2004
 
 - Bangalore Development center is certified to TL9000
 
 The above certifications are testimony to MGL''s unstint commitment to
 achieving the highest standards of quality and expertise that the
 company brings to its clients globally. The corner stone of these
 certifications is the in-house developed Mascon Quality System (MQS)
  an agile, process driven, people oriented and customer focused
 quality management system which is continuously evolving to cater to
 the requirements of the company''s varied business offerings.
 
 Certification and Partnerships
 
 During the year, MGL did not sign any partnership agreements Corporate
 Social Responsibility Mascon being a responsible corporate entity has
 continuously been taking initiatives to address the societal problems
 and uplifting the underprivileged. During the year also Mascon
 Community Service(MCS) continued to carry out several activities
 
 Subsidiaries
 
 Your Company has six direct subsidiaries as on June 30, 2011, viz. MGL
 Americas Inc., USA, Versatech Consulting Inc, USA, Ebusinessware Inc,
 USA, Jass & Associates Inc, USA, Mascon Global (Europe) Ltd., UK, and
 Mascon International Limited, Mauritius.
 
 MGL Americas Inc. has its own subsidiaries, details of which are given
 in the statement pursuant to the provisions of Sec.212 of the Companies
 Act, 1956. All the direct and step-down subsidiaries are engaged in
 software related business only.
 
 Ebusinessware Inc, has its own subsidiaries, details are given in the
 statement pursuant to the provisions of sec.212 of the companies Act,
 1956. All the direct and step-down subsidiaries are engaged in software
 related business only.
 
 MGL Americas Inc., USA
 
 MGL Americas Inc., USA, a 100 % subsidiary of the Company achieved
 total revenue of Rs 19,658 lakhs and EBITDA of Rs (5,695) lakhs. The
 above results also include the performance of Mascon Global
 Information, S.DE.R.L.DE.C.V. (Mexico), step-down subsidiary of the
 Company. Mascon Global GmbH., Germany another step down subsidiary of
 the Company did not have any operations during the year and steps are
 being taken for its revival.
 
 During the year, MGL Americas Inc, USA underwent financial settlement
 with its bankers, namely, M/S.  Laurus Master Fund to adjust their dues
 towards their term loan and working capital funding.
 
 Accordingly, certain outstanding dues to bankers, vendors and employees
 together with certain business assets has been contributed to a
 corporation formed for this purpose and adjusted against the settlement
 of the banks outstanding obligations in the USA. This had an impact on
 the off-shore business arrangement with India with one of the
 development centers as they were having the business from these
 clients. The subsidiary company has still business left out and
 continuing to improve the same. MGL Americas had also formed another
 step-down subsidiary called MGL Telecom Inc. to cater to the Telecom
 business and except for certain payroll being operated through this
 corporation no other formal business operations are carried out in this
 subsidiary.
 
 Versatech Consulting Inc., USA
 
 Versatech Consulting Inc., USA, a 100 % subsidiary of the Company
 achieved total revenue of Rs. 7,355 lakhs and EBITDA of Rs. 259 for the
 period ended June 30, 2011.
 
 The business of this company has been combined post merger of the other
 operating US Subsidiaires w.e.f.  August 30, 2011 and all trade assets
 and liabilities are contributed to the new entity w.e.f; August 31,
 2011 .M/S.Versatech Consulting Inc, is continuing as the lead
 subsidiary of the Company.
 
 Ebusinessware Inc., USA
 
 Ebusinessware Inc., USA, a 100 % subsidiary of the Company achieved
 total revenue of Rs 181.34 lakhs and EBITDA of Rs. 962.15 lakhs. The
 above results include the performance of Ebusinessware Singapore Pte
 Limited, Singapore and Ebusinessware (India) Private Limited, India.
 
 The total operations of Ebusinessware Inc USA has been merged with M/S.
 Versatech Consulting Inc, USA w.e.f August 30, 2011 and the combined
 assets and liabilities were contributed to the new entity w.e.f.
 August 31, 2011. Post this statutory merger with Versatech Consulting
 EBWwill not exist as a separate legal entity.
 
 The Existing subsidiaries of EBW in India and in Singapore will be the
 subsidiaries of the new corporation post the contribution of all the
 assets as part of the above initiative.
 
 Jass and Associates Inc USA
 
 Jass and Associates Inc, USA, a 100% subsidiary of the Company achieved
 total revenue of Rs.33,108 lakhs and EBITADAof Rs.812 Lakhs.
 
 The total operations of Jass & Associates Inc USA has been merged with
 M/S. Versatech Consulting Inc,
 
 USA w.e.f.August 30, 2011 and the combined assets and liabilities were
 contributed to the new entity w.e.f August 31, 2011. Post this
 statutory merger with Versatech Consulting JASS will not exist as a
 separate legal entity.
 
 Consolidation of US Subsidiaries
 
 During August 2011, the company had taken initiative to combine the
 business operations of the operating subsidiaries in the US,
 namely,M/S. Ebusinessware Inc, USA and M/S. Jass & Associates Inc, USA
 with M/S.  Versatech Consulting Inc, USA by way of statutory merger of
 the corporations . Post the said merger, the combined business assets
 and liabilities of M/S. Versatech Consulting Inc, USA, Ebusinessware
 Inc USA and Jass & Associates Inc USA were contributed in to a new
 operating company. Post consolidation, the company is of the view that
 the intrinsic value of the business has increased.
 
 Mascon Global (Europe) Limited., UK
 
 Mascon Global (Europe) Limited, UK, a 100 % subsidiary of the Company
 achieved total revenue of Rs.278 lakhs. The overall operations suffered
 due to the US and Europe Economy slow down. The management is taking
 all steps to re-establish certain new business verticals including
 product support in the years to come.
 
 Mascon International Limited, Mauritius
 
 Mascon International Limited, Mauritius, a 100 % subsidiary of the
 Company is a Special Purpose Vehicle (SPV) for making investments and
 it is not engaged in any operations during the year.
 
 Reporting on the Subsidiaries
 
 As per Sec. 212 of the Companies Act, 1956, your Company is required to
 attach the Directors Report, Balance Sheet and profit & Loss Account of
 these subsidiaries. However, the Ministry of Corporate Affairs (MCA)
 has issued their circular exempting the above. . A brief summary of
 these subsidiaries is given in the Annual Report. The annual accounts
 of these subsidiary companies along with related information are
 available for inspection during business hours at the registered office
 of the Company.
 
 Corporate Governance and Management Discussion and Analysis
 
 As required under clause 49 of the Listing Agreement, reports on
 Corporate Governance along with Auditors'' certificate and Management
 Discussion and Analysis are attached as a part of the annual report.
 
 Mr. K.Chandra, Chief Executive Officer and also responsible for the
 over all finance function has given a certificate to the Board as per
 the provisions of clause 49 of the Listing Agreement.
 
 Directors
 
 Reappointment
 
 Mr. Hendrikus Adrianus Alfonsus, Director of the Company, retire by
 rotation at the forthcoming Annual General Meeting and being eligible,
 offer himself for re-appointment. The Board of Directors has also
 recommended his reappointment for consideration of the Shareholders.
 
 Resignation
 
 Mr. R.Gowrishanker, Director ofthe Company resigned w.e.f. February
 2011. The Board places on record their appreciation for the long
 association of Mr. Gowrishanker and for his valuable contribution made
 by him during his tenure as the director ofthe Company.
 
 Mr. M. Srinivasan Director ofthe Company resigned w.e.f April 20, 2011.
 The Board places on record its appreciation for the valuable
 contribution made by him during his tenure as director ofthe Corppany.
 
 Directors Responsibility Statement
 
 Pursuant to Section 217 (2AA) of the Companies Act, 1956, your
 Directors confirm that, to the best of their knowledge and belief;
 
 (i) in the preparation of the Annual Accounts for the Financial Year
 ended June 30, 2011, the applicable accounting standards have been
 followed along with proper explanation relating to material departures,
 if any;
 
 (ii) they have selected such accounting policies and 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 as at June 30, 2011 and its profit for the year ended on
 that date;
 
 (iii) proper and sufficient care has been taken 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) the annual accounts have been prepared on a going concern basis.
 
 Statutory Auditors
 
 The existing statutory auditors M/s G. Balu Associates, Chartered
 Accountants, shall retire at the conclusion of the ensuing Annual
 General Meeting and have indicated that they are not willing to
 continue in office as statutory auditors and as per the provisions of
 sub-section (1B) of section 224 of the Companies Act, 1956 Ml s.
 Nisarand kumar Chartered Accountants have confirmed their willingness
 to be appointed as statutory auditors, if appointed.
 
 Pursuant to recommendation of the Audit Committee, the Board of
 Directors have approved the appointment of M/s. Nisar and Kumar
 Chartered Accountants, as the statutory auditors of the Company for the
 financial year 2011-2012, subject to the approval of the shareholders
 of the company at the ensuing Annual General Meeting.
 
 Auditors'' Report
 
 In relation to the observations / qualification made by the auditors we
 state the following:
 
 - Substantial reduction in turnover and Loss during the period:
 
 The nature of business of the Company is sensitive to the global IT
 markets, more specifically the US markets. The Slowdown in the IT
 Industry, economic issues in USA and Europe and more specifically due
 to the reduction in off-shore business to India from the subsidiaries
 are the major reasons for the reduction in turnover. Also, the impact
 the US Subsidiary had due to the liquidation of their banker, has
 affected the availability of operational funds to the Company.
 
 - Unable to remit the statutory liabilities and clause no. ix of
 Annexure to Auditors'' report:
 
 The reduced cash inflow due to the substantial reduction of off-shore
 business and the collections being impacted on account of the specific
 issues relating to the US Subsidiary are the primary cause for the
 delay / non remittance of the statutory liabilities by the company. The
 management endeavors to avail funds from alternate sources to repay the
 statutory obligations.
 
 - Recovery/Winding-up Proceedings by Banks/Others. As highlighted
 above , severe cash flow issues were faced by the major subsidiary as
 its banker went under liquidation, also adjusting the collections
 against their limits. This created severe cash strain for operational
 support. Some of the major clients of this subsidiary also canceled the
 off-shore business, which created further liquidity crunch. Due to
 continuing default, the banks/others have proceeded against the company
 by taking recovery/winding-up actions which are being represented by
 the Company. The Company is hopeful that the financial restructuring
 efforts will result in dropping off the winding up initiatives of the
 banks and others.
 
 - Going concern: the Company is optimistic of improved performance
 from offshore business in the near future due to prospects of recovery
 in US IT markets. The company''s efforts to improve the revenue stream
 and restructure the debt burden, reduction of overall cost should
 result in adequate operational cash flows in near future
 
 - Regarding note 3(a) and 10(d): the interest on FCCBs and
 contribution towards approved gratuity fund could not be paid due to
 the liquidity crunch faced by the company. The company expects to
 resolve the same once the restructuring of borrowings with the banks is
 completed.
 
 - Regarding note 3(c): the Company is renegotiating the terms of
 borrowing and is hopeful of substantial reduction in the interest
 amount, thus, no provision has been made.
 
 - Regarding note 10(c): the company has rightly recorded the dues
 towards foreign tax liabilities on account of failure of debtor to meet
 the obligation taken over by it.
 
 - Non-confirmation of balance in debtors, creditors, Loans and
 advances and Deposits:
 
 The company is in the process of obtaining the confirmations from
 debtors and their parties.
 
 - No provision has been made in the books for any diminution in value
 for the investments made in certain subsidiaries. The Company has not
 considered diminution in these investments as it is not of a permanent
 nature and the current business and potential for the future for these
 subsidiaries is extremely positive.
 
 In the annexure to the Auditors'' Report, it has been observed at clause
 (ix) that there were delays in the remittances of provident fund and
 tax deducted at source in India. This was due to severe liquidity
 crunch.  The Company is in the process of raising some loans and the
 same could not be completed so that these liabilities could be
 discharged immediately. However, the management is making all the best
 efforts to get this situation regularized.
 
 Corporate Social Responsibility
 
 Mascon being a responsible corporate entity has continuously been
 taking initiatives to address the societal problems and uplifting the
 underprivileged. During the year also Mascon Community Service(MCS)
 continued to carry out several activities
 
 Particulars of employees
 
 The information required under section 217 (2A) of the Companies Act,
 1956, read with the companies( Disclosure of Particulars in the Report
 of Board of Directors) Rules 1988 is given in the Annexure appended
 hereto and forms part of this report. In terms of Section 219(1)(b)(iv)
 of the Companies Act, 1956, the report and accounts are being sent to
 all shareholders of the Company excluding the Afroesaid Annexure.  Any
 shareholder interested in obtaining a copy of the said statement may
 write to the Company Secretary at the registered office of the Company.
 
 Conservation of energy, technology absorption and foreign exchange
 earnings and outgo
 
 Particulars required 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 the Annexure ''A''
 to this Report.
 
 Acknowledgements
 
 The Board of Directors acknowledges the consistent support from the
 Company''s clients, vendors, bankers, Government agencies, shareholders
 and investors. The Directors also place on record their sincere
 appreciation for the significant contribution made by the employees at
 all levels through their hard work, dedication and commitment.
 
                            For and on behalf of the Board of Directors
 
 Place: San Francisco                             K. Chandra
 
 Dated: March 28, 2012                              Chairman
Source : Dion Global Solutions Limited
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