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Digispice Technologies Ltd.

BSE: 517214 | NSE: DIGISPICE |

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Series: BE | ISIN: INE927C01020 | SECTOR: Telecommunications - Equipment

BSE Live

Sep 21, 11:17
47.60 0.25 (0.53%)
Volume
AVERAGE VOLUME
5-Day
45,465
10-Day
30,822
30-Day
25,386
10,714
  • Prev. Close

    47.35

  • Open Price

    47.35

  • Bid Price (Qty.)

    46.25 (500)

  • Offer Price (Qty.)

    47.60 (447)

NSE Live

Sep 21, 11:19
47.00 -0.40 (-0.84%)
Volume
AVERAGE VOLUME
5-Day
158,699
10-Day
132,948
30-Day
119,107
15,274
  • Prev. Close

    47.40

  • Open Price

    45.90

  • Bid Price (Qty.)

    47.00 (24312)

  • Offer Price (Qty.)

    47.35 (50)

Annual Report

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Director’s Report

The Directors have pleasure in presenting the Seventeenth Annual Report on the operations of your Company, together with the audited accounts for the 18 months period ended on 30th June 2005. The Company has extended its financial year by a period of 6 months, to end on 30th June 2005. Hence the figures for the period under review are not strictly comparable with those of the previous year, which was for the period of 12 months. Financial Results (in Rs.Thousand) Particulars Period Year Ended Ended 31.12.2003 30.6.2005 Net Turnover and Other Income 1416967 1041245 Profit before Financial Expenses, Depreciation and Tax 81528 58307 Financial Expenses 25022 22915 Profit after Financial Expenses but before Depreciation and Tax 56499 35392 Depreciation 5468 3576 Profit before Tax 51031 31816 Current Tax 4550 2775 Fringe Benefits Tax 714 - Deferred Tax Charge/(Credit) (1538) 13883 Net Profit 47305 15158 Balance brought forward from previous year 22083 6925 Profit available for appropriation 69388 22083 Proposed final dividend 11196 - Tax on dividend 1570 - Surplus carried to Balance Sheet 56622 22083 The Board of Directors are pleased to state that during the period ended on 30th June 2005 the Company has made best use of the market forces and has taken advantage of the business opportunities that has come its way. During the period (18 months) under review, the net sales of the Company was Rs. 1395 million as against last years (12 months) net sales of Rs. 1031 million. The pretax income has risen from 31.82 million to Rs. 51.03 million. The performance of the Company has been improving steadily and this may be attributed to greater focus on achieving operating efficiencies, cost containment and concentration on products with high margins. Dividend The Directors are pleased to recommend a dividend @ 10% on the paid up equity share capital of the Company for the period ended on 30th June 2005. Change of Name of The Company From Spice Net Limited To Spice Limited During the period under review the Company expanded its business avenues and diversified its activities to include Mobile Handsets business. Since, the name of the Company was not reflecting the business activities being pursued by the Company, it was decided to change the name of the Company from `Spice Net Limited' to `Spice Limited'. The necessary approval regarding the change of name of the Company by way of Special Resolution was accorded by the Shareholders through Postal Ballot effective on 2nd July 2005 and the fresh Certificate of Incorporation consequent upon change of name was issued by the Registrar of Companies, Uttar Pradesh and Uttaranchal on 4th July 2005. Setup of an Industrial Establishment at Baddi, Himachal Pradesh In order to avail of various tax and other benefits being offered by the Himachal Pradesh State Government, the Company has established an industrial undertaking at Baddi, Himachal Pradesh. This will enable the Company to perform more efficiently and thus resulting in an increased competitiveness and raising the returns on deployed capital. Entry into a new Business Segment-Mobile Handset Encouraged by the strong growth and the huge opportunity that exists in the low & mid end segments, Spice Limited has decided to enter into the business of Mobile Handsets and build a strong mobile phone brand with a nationwide sales & distribution network. As the cellular coverage expands to smaller towns the Company will focus on leveraging this opportunity and it will be our strategic intent to grow the mobile phone business and try to achieve a significant market share within the next four years. Industry Structure and Developments * Mobile Handset Division At the end of 2004 cumulative mobile subscriber base stood at 47 million & had overtaken fixed landlines. In the year 2005 mobile subscribers are expected to grow to a cumulative subscriber base of over 80 Million. By 2006 India will have over 115 Million subscribers with a compounded annual growth rate of over 60-70%. Also by 2007, operators will invest in expanding capacity & building networks to take cellular coverage from the existing 1500 towns to over 5000 towns. The Indian wireless market is nearing an inflection point in terms of ramping subscriber growth, as favorable demographics, strong economic growth, and improving availability of lower-end handsets position the country to deliver strong growth over the next several years. India is a key market for handset volume over the next several years. In fact, as per market estimates handset volume in India can approach 10% of global handset sales by the end of 2006. * IT Division The first quarter of the current fiscal began on a buoyant note in the IT Sector as the PC (Desktops & Laptops) crossed 1 million units. In the Institutional segment, it was primarily the Banks, Financial institutions, Insurance Companies, Educational Institutes and ITES Sector which provided the growth momentum whereas in the small & medium enterprises and household segment, the reduced prices coupled with applications for entertainment and education have fuelled the market. Further, the Notebook segment registered a phenomenal growth with sales touching 80,000 units recording 123% Y-o-Y growth and 137% sequential growth. This high growth can be attributed to the steep drop in Notebook prices. The period also witnessed the entry of new players and led to extremely aggressive pricing by manufacturers in a bid to corner market share. Opportunities * Mobile Handset Division On the basis of the current market construct, which comprises mostly of larger towns & urban in nature, over 69% of the mobile phones fall in the low end. Another 19% fall in the mid end segment. It is clearly evident that as the cellular coverage expands into smaller & smaller towns, which will be largely rural in nature, the need for durable entry-level handsets will grow. Such markets will require phones that offer basic voice & SMS capability & not handsets with fancy features. In 2005 itself we are looking at an addressable market of 17.9 Million in the low end & another 4.9 Million in the mid end segments!! * IT Division Since IT Sector is going to be an item of utmost priority on Government agenda, huge opportunities exist in all product categories and industry segments. The Government is committed to increase PC penetration from 1.4% to 6.5% in the next 3 years. The trend of increased PC purchase in households, smaller towns and cities as witnessed last year, continues steadfast. A huge opportunity exist for Spice to sell its branded PCs in the consumer segment. Close liasoning with Intel and Microsoft can also, be leveraged to address e-governance opportunities in select states. With the check truncation system stated to be adopted by Banks for faster clearing of cheques, an opportunity for selling related hardware and software exists since the Company is already positioned well in almost all reputed banks. Threats, Risk and Concern * Mobile Handset Division Intense competition from large Multinational Players having deeper pockets and economies of scale in the mobile business. These companies plan to set up a manufacturing bases in India which could help them offer mobile phones at much lower rates. Rapidly falling chipset prices and the advantage, large players have in introducing such cost benefits may pose a threat for n while. * IT Division Intense competition from MNC and large Domestic Player having economies of scale is a huge threat in the PC business. The entry of Chinese competitor, LENOVO, selling the IBM brand, and leveraging their volumes with high operational efficiency will push the PC prices southwards. New entrants in the domestic circuit are keen on cornering a part of the pie and are offering very aggressive prices. The Company has also decided to enter the Consumer PC Segment through channels in order to build PC volumes and attain the. economies of scale required for competitive prices and international sourcing. The passbook printer still remains a very strategic and critical part of the business plan and the Company still remains fully dependent on its principal, Olivetti for the supply. Product Performance * Mobile Handset The products launched in the Northern and Eastern parts of the Country have been accepted extremely well. These products have been launched and have redefined the value to the customer at the entry level. These mobile phones have been designed and customized specifically for the Indian Market and Customers requirements which include a louder ringtone volume, high memory capacity, speaker phone. Music Player, etc. * IT Division In the systems & solutions business, the Company focussed largely on consolidating and concentrating more on broadbasing the client's profile and developing strategic accounts for long term gains. In the passbook printer business, the Company achieved new heights earning the revenue of over Rs. 54 Crores up from Rs. 35.5 Crores during the previous accounting period. Outlook * Mobile Handset Division Spice Limited will market a full range of mobile phones covering all the segments but will predominantly focus on the entry level Black & White as well as color segments. Key LISP would be affordability without compromising on the reliability & functionality of the phones. Pre embedding local content such as popular Bollywood ring tones, Tru tones, games etc will be a critical differentiating factor incorporated in the phones launched for the Indian market. Customization of phones due to the regional character of the markets we will be focusing on, would provide us competitive positioning. Moreover, we will launch phones in all three-design formats, i.e. bar type, clamshell & slider. * IT Division In the year 2005-06 the IT market is slated to grow in a robust manner since the Government and Industry is committed to increase the PC penetration from 1.4% as of now to 6.5% by 2008. Entry level PC looks set to breach the Rs. 10,000 mark since a number of vendors are already making all out efforts in this direction. The demand for Notebooks will continue unabated and the growth will be steeper than witnessed for Desktops in terms of percentage. PC sales in the first half of current fiscal are expected to touch 2 million units and in the coming quarters sales will be further fuelled through lower PC prices, lower bandwidth rates and impetus for local language software and applications. Listing of Securities The Equity Shares of the Company are presently listed on The Stock Exchange, Mumbai. The Annual Listing Fee for the Year 2004-05 and 2005-06 have been paid to The Stock Exchange, Mumbai. The Equity shares of the Company was delisted from The Calcutta Stock Exchange Association Limited w.e.f. 9th December 2004. Further in accordance with the approval of the shareholders at the 16th Annual General Meeting held on 30th June 2004, the shares of the Company were delisted from The Uttar Pradesh Stock Exchange Association Limited w.e.f 27th August 2004. The delisting will not adversely affect the shareholders of the Company as the equity shares continued to be listed on The Stock Exchange, Mumbai. Subsidiaries During the period, Graphtech India Limited became a subsidiary of the Company. As on 30th June 2005 the Company owned 50.11% stake in its subsidiary viz. Graphtech India Limited. As required under Section 212 of the Companies Act 1956 the Accounts of the Subsidiary is attached. However, now the Company has divested its entire investment in such subsidiary. Fixed Deposits During the period under review, the Company has not accepted any deposit from the public within the meaning of section 58A of the Companies Act, 1956. Consolidated Financial Statements As required by Accounting Standard AS - 21 read with Accounting Standard AS - 23 on Accounting for Investments in Associates, the audited Consolidated Financial Statements of the Company are annexed and form an integral part of this report. Directors Mr. Krishan Lal Chugh, Dr. Surendra A. Dave, Mr. Dilip Modi and Mr Vikram Talwar resigned from the Board w.e.f. 1st January 2005, 7th January 2005, 21st January 2005 and 5th May 2005 respectively. The Board wishes to place on record its sincere appreciation for the guidance and assistance provided by them during their tenure. Mr.Ram Nath Bansal, who retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Mr. Radha Krishna Pandey was appointed as an Additional Director and Chairman on the Board of the Company on 21st January 2005. He holds office tipto the conclusion of this Annual General Meeting and is eligible for appointment as the Director of the Company. The Company has received notice as required under Section 257 of the Companies Act, 1956, alongwith the requisite deposit from the shareholder proposing his candidature for the office of the Director of the Company, not liable to retire by rotation. Directors' Responsibility Statement Pursuant to Section 217 (2AA) of the Companies Act. 1956, the Directors hereby confirm that: (i) in the preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures. (ii) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company for the period ending 30th June 2005 and of the profit or loss of the Company for that period. (iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. (iv) the Directors have prepared the annual accounts on a going concern basis. Auditors M/s. S.R.Batliboi & Co., Chartered Accountants, New Delhi, retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. The Company has received notice from them stating that if appointed, they are within the limits laid down under (1-B) of Section 224 of the Companies Act, 1956. Notes on Accounts With regard to the comments in para (vii) of the annexure referred to in para no. 3 of the Auditors' Report, the Board of Directors hereby explain that the Company is in the process of strengthening the Internal Audit System. All other observations/comments of the Auditors and Notes on Accounts are self explanatory. Internal Control System and their Adequacy The Company has a reasonable control system in place, which is commensurate with the size of the Company and the nature of service activities and this is periodically reviewed for effectiveness. These internal controls are supplemented by internal audit conducted by independent auditors. The internal audit function is empowered to examine the adequacy, relevance and effectiveness of control systems, compliance with policies, plans and statutory requirements. The Company has an Audit Committee, which regularly reviews the findings and recommendations of the internal audit panel and follows up on the implementation through action taken reports. The Company also has a Financial Management Information System in place, which involves preparation of a detailed Annual Business Plan for the Company. This plan is formulated after detailed discussions at various levels and includes borrowing plans as well as capital expenditure plan. The Board and Management regularly review the Performance of the Company against this budget. Human Resource Development The Human Resources initiatives at the Company continued during the period, with a view to develop relevant skills and competencies in its manpower resources. The Company treats human resources as the most important asset. Hence apart from exposing them to an ongoing training programme, the Company also conducts enrichment and multitasking exercises, to groom employees for future senior positions in the Company. The Company's appraisal system has been designed to minimize subjectivity and to clearly chart out tangible Key Result Areas (KRA's). The social security schemes of the Company are comparable to the best in the Industry and we not only cover the employees, but their family too, under different policies. The Company has 249 employees on roll as on 30th June 2005. Corporate Governance A separate report on Corporate Governance forms part of the Annual Report along with the Auditors' Certificate on compliance. Statutory Disclosures The statement containing the necessary information as required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board Directors) Rules, 1988, relating to conservation of energy, technology absorption, foreign exchange earnings and outgo and the statement of employees required under section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, are annexed hereto and forms an integral part of this report. Acknowledgement The Directors would like to take this opportunity to express deep sense of gratitude for the valuable support and cooperation of the Company's Bankers, Government Agencies, Customers, Suppliers, Management Team, work force and would also like to place on record sincere appreciation for the total commitment, dedication and hard work put in by every member of the Spice family. The Directors also deeply acknowledge the continued trust and confidence that the shareholders have placed in the Company. FOR AND ON BEHALF OF THE BOARD OF DIRECTORS Place : Noida (R. K. PANDEY) Date : 31st October 2005 Chairman Note: Statements regarding Management Discussion and Analysis describing the Company's objectives, outlook, estimates, expectation, predictions, belief and management perception may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to Companys' operations include, among others, economic conditions affecting demand/supply and price conditions in domestic and overseas markets in which the Company operates, changes in the Government Regulations, Tax Laws and other statues and incidental factors. Annexure- A to The Directors' Report Statement of particulars under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988. (A) Conservation of Energy The factory operations do not consume high energy. However, adequate steps have been taken to achieve high power factors, by installation of a shunt capacitor on the power line. A high capacity generator is used only when required. (B) Technology Absorption The information that is required to be disclosed under rule 2 of the aforesaid rules, is given hereunder in Form B : FORM B Form of Disclosure of particulars with respect to Absorption, Research and Development (R & D) 1. Specific area in which R&D carried out by the Company No R & D was carried out during the period. 2. Benefits derived as a results of the above R&D Not Applicable 3. Future plan of action To add some more technical skills to provide solutions to customer on hardware. 4. Expenditure on R&D a) Capital Nil b) Recurring Nil c) Total Nil d) Total R&D expenditure as a Nil percentage of total turnover. Technology absorption, adaptation and innovation. 1. Efforts, in brief, made towards technology absorption, adaptation and innovation. We at SPICE, are well aware of latest technology being available in our field of operation. Necessary training is imparted to acquire latest technology to the relevant people. 2. Benefits derived as a results of the above efforts e.g. product improvement, cost reduction, product development, import substitution, etc. We are able to provide latest products available in the international market and maintain higher standard of quality. 3. In case of imported technology (imported during the last five years reckoned from the beginning of the financial year), the following information may be furnished. a) Technology imported : N. A. b) Year of Import : N. A. c) Has technology been fully absorbed : N. A. d) If not fully absorbed, areas : N. A. where this has taken place, reasons therefore and future plan of action (C) Foreign Exchange Earnings and Outgo The Company used Foreign Exchange amounting to Rs. 4645.35 Lacs and earned Foreign Exchange of Rs. 2.3 lacs during the period under review.

Director’s Report