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Sasken Communication Technologies Directors Report, Sasken Comm Reports by Directors
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Sasken Communication Technologies
BSE: 532663|NSE: SASKEN|ISIN: INE231F01020|SECTOR: Computers - Software
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Explore Sasken Comm connections « Mar 10
Directors Report Year End : Mar '11
The Directors have pleasure in presenting the report on the business
 and operations of the Company along with the Abridged Standalone and
 Unabridged Consolidated Audited Accounts for the financial year ended
 March 31, 2011.
 
 Result of Operations (Consolidated) - Extract
 
                                                    Amount in Rs lakhs
 
 Particulars                         Year ended           Year ended
       
                                  March 31, 2011      March 31, 2010
 
 Revenues                               54,637.97         57,419.31
 
 Cost of Revenues                       40,183.93         42,919.14
 
 Gross Profit                           14,454.04         14,500.17
 
 Non-operating Income (net)              1,767.89          2,446.58
 
 Profit before Income Taxes              8,120.78          9,292.23
 
 Income Taxes Expense, net                 792.59          1,740.50
 
 Profit after Tax                        7,328.19          7,551.73 
 
 Appropriation:
 
 Proposed Equity Dividend                1,178.36          1,084.44
 
 Interim Dividend                          690.46            542.22
 
 Dividend Tax 307.49 276.45 (Previous years figures have been regrouped
 wherever necessary to conform to the current years presentation)
 
 Your Companys revenues for the financial year 2010-11 have decreased
 by 4.84% in rupee terms, from Rs57,419.31 lakhs in 2009-10 to Rs54,637.97
 lakhs in 2010-11. When compared to the previous year, Software
 Services, including Network Engineering Services, has gone down by
 11.67% contributing 89.7% to the revenues, while the Software Products
 revenues contributed 10.3%. The net profits decreased from Rs7,551.73
 lakhs in FY 10 to Rs7,328.19 lakhs during the year, registering a
 decline of 2.96%. This has translated to an Earnings Per Share of
 Rs26.89 in 2010-11 vs. Rs27.85 in 2009-10.
 
 Business environment
 
 The global mega trends in the embedded space have a strong bearing on
 the addressable R&D opportunity of your Company. The current
 addressable opportunity for India in embedded systems across the 8
 verticals as assessed by a study carried out by NASSCOM is huge and
 approximately US$ 50 billion. This is expected to grow at a Compounded
 Annualized Growth Rate (CAGR) of 12% till 2015 to reach about US$ 90
 billion. Telecom and consumer electronics will account for more than
 half of this available opportunity by 2015. The verticals in which the
 opportunity is expected to grow the fastest are energy & power,
 aerospace & defense and healthcare. The growth of the addressable
 opportunity in telecom, consumer electronics and automotive is expected
 to be a bit lesser than the overall growth opportunity. These three
 verticals have borne the brunt of the global recession. During the
 recovery phase, the expected revenue growth going forward is on the low
 to moderate side. Telecom, consumer electronics and automotive are also
 relatively well penetrated by Indian service providers and MNC R&D
 centers. Hence, the expected growth in offshoring will be moderate.
 
 Growth opportunities for Sasken
 
 Our growth plans will be achieved by focusing on our existing key
 accounts who are marquee customers with whom we see headroom for
 growth. We have plans to become one of the top 3 vendors for each of
 these accounts thereby becoming entrenched as a strategic partner of
 choice.
 
 With a slew of new offerings that leverage our deep domain competencies
 in all elements of communication value chain we are targeting both
 large companies and niche players. We are uniquely equipped to service
 these companies with offerings such as:
 
 Full Phone Integration
 
 IP led offerings in Multimedia
 
 Offering for the Android market in handsets, tablets and other
 consumer electronic devices taking advantage of the rapid evolution of
 the Android Software Platform.
 
 In addition we are working to define specific offerings for North
 American Wireless carriers like Network Radio Frequency optimization;
 Pre-launch Verification for new technologies and hand offs in mixed
 mode networks etc., where we have limited traction at present.
 
 We have begun our process of expanding our portfolio of offerings to
 address new adjacencies like:
 
 Satellite communication on the back of our success with INMARSAT
 
 Automotive electronics using IP acquired by Sasken Inc. and our
 presence in several leading vendors to Automobile manufacturers for
 back seat entertainment
 
 Consumer Electronics using IP acquired by Sasken Inc. for high end
 Audio and Video codecs
 
 In all these areas we have commercial engagements and will work towards
 scaling them in next two to three years.
 
 As noted in the Annual Report of FY 2010, your Company continued to
 make progress on VyapaarSEWATM which was selected as part of Department
 of Telecommunications - Universal Service Obligation Fund Sanchar
 Shakti Scheme - A pilot initiative in ICT Mobile Value
 
 Added Services for Womens Self Help Groups in rural India. You will be
 happy to note that Sanchar Shakti Scheme along with Saskens
 VyapaarSEWATM pilot project was launched on the March 7, 2011 by
 President of India, H.E. Smt. Pratibha Devisingh Patil.
 
 By successfully executing these plans, Sasken can Consolidate its
 position, leverage its deep domain competencies to Differentiate and
 be able to achieve both Scale and Profitable growth in the near term.
 
 Outlook and plans for the business lines we operate:
 
 Sasken business lines cover the entire value chain of the communication
 market and include adjacent markets where communication is increasingly
 becoming a critical component such as Automotive and Consumer
 Electronics, Healthcare, Enterprise etc.
 
 In the device side of our business, we are buoyed by the proliferation
 of new devices like handsets, tablets, modems and set-top boxes and
 other device types. The growth of the Smartphone market led by Open
 Source software platforms e.g. Android from Google has provided Sasken
 with new vistas for growth. Sasken has taken a lead in providing
 support to Original Equipment Manufacturers (OEMs) and semiconductor
 vendors by timely investments in building Android related competencies
 and by its unique ability to understand the needs of the entire eco
 system involved in building Smartphones and other devices.
 
 In the Automotive and Consumer Electronics adjacencies, Sasken is
 building on the IP acquired from Ingenient and the existing customer
 relations we have. Our services will span video connectivity, device
 drivers, system integration and validation.
 
 In the semiconductor business we are emerging among the top suppliers
 for some of the largest semiconductor vendors, providing them R&D
 services. In this market we are leveraging our traditional strength and
 significant experience in the Semiconductor industry to help global
 leaders and challengers who seek to accelerate the design to tape out
 cycle.
 
 In this business line we have white space opportunities as the wireless
 ecosystem infiltrates other industry segments e.g. Healthcare, Energy,
 Enterprise and Services. We have recently rejuvenated our “Test Lab”
 set up to support the customers of a Tier 1 North American
 semiconductor vendor.
 
 In the equipment vendor side of our business we address requirement
 from Network, Satellite, and Enterprise customers. We are building new
 capabilities and offerings in the area of Data Communications, Long
 Term Evolution, Enterprise Applications and Testing.
 
 We have started seeing traction in the enterprise space where we see
 demand for cloud enabled solutions and the opportunity to bring our
 handset and network software capabilities which will be key
 differentiators.
 
 We have ongoing programs in Long Term Evolution and are seeking
 engagements in “deployment, interoperability testing and system
 conformance”. In the data communication space the explosive growth of
 data traffic especially over wireless networks presents us with
 opportunities in Deep Packet Inspection and technologies to support
 high quality voice over all IP Networks.
 
 Europe has been a key geography for us and in one of the largest
 handset OEMs we are seeing new challenges as they have changed their
 operating system strategy. Despite the shift in their strategy we still
 see new opportunities in S40, Services and Full Phone integration. Work
 on their existing platform for smartphones is likely to continue until
 early next calendar year giving us good time for finding new
 opportunities.  In addition we will address Windows Phone related white
 spaces in this customers ecosystem including HW driver development
 with Semiconductors and other HW IP suppliers and Apps for operators
 and enterprises.
 
 On the Hardware side we will leverage our extensive understanding and
 knowledge of this OEMs ecosystem and capitalize on the delivery centers
 in European Union and China regions. This geographical spread enables a
 cost efficient service mix to service opportunities in RF / Antenna
 design. The combination of our hardware and software knowledge gives us
 a competitive edge.
 
 Sasken key differentiators:
 
 Some of the unique capabilities of Sasken include its abilities to take
 a leadership position in:
 
 Android Software Platform Services
 
 Full Phone (device) Design Services
 
 Intellectual Property (IP) Led Services
 
 Operator Specific Services
 
 We will continue to build on our leadership position in the
 communications markets and take advantage of imminent convergence
 trends in these markets. Key wins in Android, fast emerging as an
 operating system of choice for Smartphones, coupled with our
 traditional strengths in working with Semiconductor Platforms, deep
 domain competencies in both Hardware and Software and Ownership of
 Multimedia IP provide us a good platform to be uniquely positioned in
 the market to emerge as a market leader with these highly bespoke
 offerings.
 
 Dividend
 
 Your Company paid an interim dividend of 25% (Rs2.50 per equity share)
 in November 2010 and the Board recommends a final dividend of 45%
 (Rs4.50 per equity share) thus making the total dividend of 70% (Rs7.00
 per equity share) for the year.
 
 Scheme of Arrangement
 
 Your Company had approached the High Court of Karnataka, Bangalore to
 create a Business Restructuring Reserve (BRR) to be carved out of
 Securities Premium Account in terms of a Scheme under Section 391/394
 of the Companies Act, 1956 whereby the Business Restructuring Expenses
 (as covered under the Scheme) will be adjusted against the said
 Reserve. Pursuant to the Scheme and as approved by the High Court of
 Karnataka, Bangalore vide its order dated March 31, 2010, a sum of
 Rs14,578.08 lakhs, was transferred from the Securities Premium Account
 and credited to BRR Account during the year ended March 31, 2010.
 
 Further, during the year ended March 31, 2010, impairment loss on
 capitalized software amounting to Rs1,519.70 lakhs, which was charged
 to Profit and Loss Account in the previous year as exceptional item,
 being considered as a Restructuring Expense incurred after the
 Appointed Date, i.e. April 1, 2008, was adjusted against the BRR
 Account.
 
 During the year ended March 31, 2011, your Company has evaluated its
 investment in subsidiaries and joint ventures for the purpose of
 determination of potential diminution in value. Based on such
 evaluation and considering the underlying factors including downturn in
 the business of Sasken Finland and the decrease in related activities /
 businesses, your Company has identified and recognized a provision for
 diminution in the value of investments / goodwill in Sasken
 Communication Technologies Oy amounting to Rs13,058.38 lakhs. The
 diminution in value of such investments / goodwill being considered as
 a restructuring expense incurred after the Appointed Date, i.e. April
 1, 2008, has been adjusted against the Business Restructuring Reserve
 Account in accordance with the Scheme.
 
 The impact on the financials had the Scheme not prescribed the
 aforesaid treatment, is more fully detailed in Item No.5 of the Notes
 to Abridged Financial Statements.
 
 Consequent to the aforesaid adjustment, the entire amount in BRR has
 been utilized by the Company during the year ended March 31, 2011.
 
 Buy-back of Shares
 
 In terms of decision of the Board of Directors dated October 21, 2010
 and in accordance with the provisions of the Companies Act, 1956 and
 the Securities and Exchange Board of India (Buy Back of Securities)
 Regulations, 1998, your Company offered to buy-back its equity shares
 of face value of Rs10/- each, up to a maximum amount of Rs3,454 lakhs
 at a maximum price of Rs260/- per share from open market. The Company
 commenced the buy-back on December 02, 2010. As at March 31, 2011 the
 Company has bought back 14,32,633 equity shares at an average price of
 Rs158.22 per share, utilizing a sum of Rs2,266.70 lakhs (excluding
 brokerage and other applicable taxes). The amount paid towards buy-back
 of shares, in excess of the face value, has been appropriated out of
 Securities Premium Account. In terms of the provisions of Section 77A
 of the Companies Act, 1956 and SEBI (Buy-Back of Securities)
 Regulations 1998, as at March 31, 2011 the Company has extinguished
 14,32,633 shares. On account of buy-back of shares, the Company has
 created Capital Redemption Reserve of Rs143.26 lakhs towards the face
 value of 14,32,633 shares of Rs10/- each by way of appropriation
 against General Reserve.
 
 Employees Stock Option Plan (ESOP)
 
 The Companys ESOP continues with the philosophy of sharing wealth with
 its employees and encourages the employees to be partners in the growth
 of the organization.
 
 ESOP 2000 Scheme
 
 No new grants were made under this scheme during the year under review.
 There were 22,614 options outstanding with employees as on March 31,
 2011.
 
 ESOP 2006 Scheme
 
 New grants made under this scheme during the year are detailed in
 Annexure 1. The options outstanding with employees including Directors,
 as on March 31, 2011 were 20,24,175 options. There are 9,250 unissued
 options as on March 31, 2011.
 
 The details required under SEBI (Employee Stock Option Scheme &
 Employee Stock Purchase Scheme), Guidelines 1999, as on March 31, 2011
 are given in Annexure 1 forming part of this Report.
 
 The options that were issued / granted under the said ESOP Plan have a
 vesting period of one year from the date of grant and generally will
 vest over a 3 year period in a phased manner. There have been instances
 where the employees have either resigned even before vesting of options
 or chose not to exercise their options or surrendered their options.
 Consequently, such options have gone unutilized. It is proposed to add
 back such options to the pool of unutilized options so that the same
 can be utilized for re-issue in future. The Board of Directors has on
 June 10, 2011 approved the above proposal and the same forms part of
 the agenda for the forthcoming Annual General Meeting.
 
 ESOP 2011 Scheme
 
 There is a need to create additional lot of stock options. It is
 therefore proposed to create a new Scheme ESOP 2011 with 35,00,000
 stock options. The Board of Directors has on June 10, 2011 approved the
 above proposal and the same forms part of the agenda for the
 forthcoming Annual General Meeting.
 
 Corporate Social Responsibility (CSR)
 
 As a responsible Corporate Citizen, your Company is committed to
 contributing to the society, environment and community. The focus areas
 in which we strive to Make a Difference to Everyone or MaDE and of
 our endeavor are to serve the community, environment, differently abled
 citizens, children, underprivileged and academia. Sasken translates
 this into action by providing financial and non-financial support, as
 well as extending and encouraging volunteer participation in CSR
 initiatives.
 
 For over several years your Company has supported Vathsalya Charitable
 Trust, an NGO, working for the welfare of orphan children. Sasken bears
 all their medical expenses, on monthly basis subject to a pre-fixed
 limit. Besides, we also extend our support to other non-governmental
 voluntary organizations on a case-by-case basis.
 
 On a regular basis, we host Blood Donation Camps and awareness programs
 on AIDS and Cancer.
 
 hPrakruti Community is another unique program that your Company has
 been committed to. The community is a group of 20 people, constituted
 by key stakeholders from the IT, Facilities and Marketing (from a
 communications perspective) who focus on specific environment centric
 activities and how we can become more sustainable. Once a quarter,
 Prakruti holds a review and designs activities, initiatives and other
 effective campaigns. The team is constantly involved in conceiving
 innovative ways in which the organization can move towards becoming
 socially more responsible. We also host the Prakruti Mela, during
 which we invite environment friendly product vendors to our corporate
 facility in Bangalore and organize a fair.
 
 Besides, the team organizes a month long Save The Environment
 campaign, where each week of the month is dedicated to one of the
 following organization wide initiatives: Save water; Save paper; Save
 food; Save power. On employee safety front, Sasken had organized a
 weeklong drive to acquaint Sasians with basic life saving skills. First
 Aid, fire fighting & rescue, and road safety were some of the important
 subjects covered during this campaign.
 
 Awards Received
 
 As an organization, your Company is always striving to be the best in
 its category! We at Sasken cherish all our triumphs, be it internal or
 external, individual victories or those as an entire organization. A
 few of the significant wins in the year that passed are listed below:
 
 Gold Award, LACP Spotlight Awards, 2010: Saskens Annual Report 2010
 won the Gold Award at the League of American Communications
 Professionals in the Global Communications Category.
 
 Mr. Rajiv C. Mody: second position as the most valueable CEO in the
 small companies category, thanks to excellence in performance over the
 past three years (individually leading the organization to great
 performance) and also due to a relatively low compensation of f 1.47
 crore.
 
 Ms. Neeta S. Revankar: She has been chosen as one of the Top 100 CFOs
 in India, instituted by the CFO India Magazine.  Patents
 
 The following table gives details about the various patent applications
 made by your Company, till date
 
                             US    India   Other Countries   Acquired
 
 Applied#                    51     24          9               1
 
 Granted                     30     11          1               1
 
 Granted since last report    4      3          -               -
 
 Abandoned                    6      4*         3               -
 
 Sold                         4      -          -               -
 
 Pending                     15      9          5               -
 
 Includes divisional patents, which were left out till the last
 report.
 
 3 of the 7 patent applications which were in abandoned state last
 year have been revived.
 
 Corporate Governance
 
 Your Company is committed to maintaining the highest standards of
 Corporate Governance. Your Directors adhere to the standards set out by
 the Securities and Exchange Board of Indias (SEBI) Corporate
 Governance practices and accordingly have implemented all the major
 stipulations prescribed. Your Companys Corporate Governance Compliance
 Certificate dated April 27, 2011 in line with Clause 49 of the Stock
 Exchange Listing Agreement is given in Annexure 2 forming part of this
 Report.
 
 Directors Responsibility Statement
 
 As stipulated in Section 217(2AA) of the Companies Act, 1956, your
 Directors subscribe to the Directors Responsibility Statement and
 confirm that:
 
 In the preparation of the annual accounts, the applicable Accounting
 Standards and in relation to the Scheme of Arrangement, the Order of
 the High Court of Karnataka have been followed (Refer Note No. 5 of the
 Abridged Financial Statements / Note No. 4(a) of Notes forming part of
 the Consolidated Accounts for details).
 
 The Directors 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 at the end of the financial year and of the profit or loss
 of the Company for that period.
 
 The Directors have taken proper and sufficient care of the
 maintenance of adequate accounting records in accordance with the
 provisions of the Act for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities.
 
 The Directors have prepared the annual accounts on a going concern
 basis.
 
 Subsidiary Companies
 
 As required under Accounting Standard 21, Consolidated Financial
 Statements incorporate the results of the following subsidiary
 companies, viz. (a) Sasken Network Engineering Limited (b) Sasken
 Network Solutions Inc. USA (c) Sasken Communication Technologies Mexico
 S.A.  de C.V. (d) Sasken Communication Technologies (Shanghai) Co. Ltd.
 (e) Sasken Communication Technologies Oy (f) Sasken Finland Oy (g)
 Sasken Inc. USA and (h) Sasken Japan KK.
 
 In terms of the specific approval granted by the Central Government
 under Section 212(8) of the Companies Act, 1956, and in terms of the
 general permission granted by the Central Government to all companies
 vide General Circular No. 3/2011 dated February 21, 2011, the Audited
 Financial Statements along with the reports of the Board of Directors
 and the Auditors pertaining to the above subsidiaries have not been
 attached to this Report. The Financial Statements of the said
 subsidiaries will be kept for inspection by any investor at the
 registered office of your Company and that of the subsidiary companies.
 Investors who want to have a copy of the above may write to the Company
 Secretary at the registered office.
 
 Directors
 
 Mr. Bansi S. Mehta, Prof. J. Ramachandran and Mr. Bharat V. Patel
 retire by rotation at the ensuing Annual General Meeting and being
 eligible offer themselves for re-appointment. Since two of the three
 members of Governance & Nomination Committee were interested in this
 matter, the Board of Directors has recommended their re-appointment for
 consideration of the Shareholders.
 
 Remuneration payable to Executive Directors is detailed in the notice
 convening the Annual General Meeting for members approval.
 
 Conservation of Energy, Technology Absorption and Foreign Exchange
 Outgo
 
 Annexure 3 forming part of this Report gives information in accordance
 with the provisions of Section 217(1)(e) of the Companies Act, 1956
 read with Companies (Disclosure of Particulars in the Report of Board
 of Directors), Rules 1988 regarding conservation of energy, technology
 absorption and foreign exchange earnings and outgo.
 
 ISO 14001:2004
 
 Sasken is compliant with the Environmental Management System Standard -
 ISO 14001:2004. Sasken is committed to be a responsible member of the
 communities in which it works. This reaffirms your Company as a
 responsible corporate citizen.
 
 ISO / IEC 27001:2005
 
 Sasken adheres to the Information Security Management System - ISO /
 IEC 27001:2005. This is important for assuring our customers of our
 commitment in protecting their IP as well as sensitizing all employees
 about confidentiality, integrity and availability of information.
 
 TL 9000 R5.0 (including ISO 9001:2008)
 
 Sasken is compliant with the telecom industry specific Quality
 Management System Standard - TL 9000 R5.0 which by definition includes
 the ISO 9001:2008 requirements and in addition telecom domain specific
 measurement and documentation requirements.
 
 ISO / IEC 17025:2005
 
 Sasken Test Lab is compliant with the Test Lab specific Quality
 Management System Standard - ISO / IEC 17025:2005. This is important
 for assuring quality and reliability of test lab reports as required by
 our customers to meet Global Communication Forum requirements.
 
 Particulars of Employees
 
 We present abridged accounts under Section 219 of the Companies Act,
 1956. Pursuant to the Rules and Forms read with Section 219 of the
 Companies Act, 1956, the particulars of employees, as required under
 Section 217(2A) of the Companies Act, 1956 read with the Companies
 (Particulars of Employees) Rules, 1975 have not been provided. However,
 these particulars are available for inspection at the Registered Office
 of the Company and upon written request from a shareholder, we will
 arrange to mail these details. It may be noted that such particulars
 will not include details of employees of the Company posted and working
 outside India as per the relevant rules.
 
 Deposits
 
 Your Company has neither accepted nor renewed any deposits during the
 year. As such, no amount of principal and / or interest is outstanding
 as on the Balance Sheet date.
 
 Auditors
 
 M/s. S.R. Batliboi & Co., Auditors of the Company retire at the
 forthcoming Annual General Meeting and have confirmed their eligibility
 for re-appointment.
 
 Acknowledgement
 
 Your Directors place on record their appreciation of co-operation and
 support extended by customers, shareholders, vendors, bankers and all
 governmental and statutory agencies. Your Directors thank the employees
 for their valuable contribution during the year and look forward to
 their continued support.
 
                           For and on behalf of the Board of Directors
 
 Place : Bangalore                                      Rajiv C. Mody
 
 Date : June 10, 2011                    Chairman & Managing Director
 
 
Source : Dion Global Solutions Limited
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