Mairie Bouessay 532903-1

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Dhanus Technologies Ltd.

58888:dhanus  |  IND:Computers - Software  |  ISIN code:INE406H01016  |  SECT:Information Technology

You can view full text of the Director's Report for Dhanus Technologies Ltd.

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The Directors are pleased to present the 18th Annual Report together with the statement of audited accounts of the Company for the financial year ended on December 31, 2011.
Financial Highlights
The following table summarizes the financial highlights of your Company, on a standalone basis, for the financial year under review:
(Amount in Rs.)
Particulars Year ended Year ended 31st December, 2011 31st December, 2010 (12 months) (18 months)
Total Income 53,65,07,714 119,29,85,522
Profit Before Interest, Depreciation and Taxes 7,26,35,079 39,83,74,913
Less: (a) Interest 1,87,82,500 4,30,58,343
(b) Depreciation 17,71,48,232 37,01,00,290
Profit/(Loss) Before Tax (12,32,95,653) (1,47,83,720)
Less: Provision for - (a) Provision for Current Tax 10,72,000 1,21,90,000
(b) Deferred Tax (1,03,70,322) (1,68,84,584)
Profit/(Loss) After Tax (11,39,97,331) (1,00,89,136)
Note: The figures for the current year are for a period of 12 months as against 18 months in the previous period and hence, are not comparable.
Financial Review
The turnover of the Company for the financial year ended 31st December, 2011, reported a decrease of 55.03% from Rs. 11929.85 lakhs in the previous year to Rs. 5365.08 lakhs in the year under review.
The Company has reported a Profit before interest, depreciation and tax of Rs. 726.35 lakhs and after providing Rs. 187.83 lakhs towards interest, Rs. 1771.48 lakhs towards depreciation and adjusting Rs. 92.98 lakhs towards tax, the net loss amounts to Rs. 1139.97 lakhs.
Business Review
During the current financial year ended December 31, 2011, the businesses across all verticals met with a substantial setback on account of factors both external and beyond the control of the management and internal relating to issues such as marketing structure and reach, product pricing etc. Dhanus has, over the past two years, been trying to make efforts to reverse the downslide in business by attempting to restructure its businesses and salvage the Company''s business clientele and marketing reach.
Telecom
With the Company facing a recession throughout the year under review, and on account of growing financial instability and economic downturn across various parts of the globe, more significantly in Europe, and making an impact in India, the tourism industry suffered substantially thus adversely influencing the overseas travels of Indians. The Company''s telecom services were thus impacted as Indians traveling abroad happen to be the exclusive target customer segment in this vertical. V-tel continues to contribute a major share to the Company''s top line. The Company continues to make efforts to arrest this negative trend by reviewing and drawing new plans both on the product and marketing front.
Telematics
The Company''s telematics vertical brand ''Fleetrac'' showed a significant negative growth on account of recession in the transportation and automobile sector. The Company is having a relook at the Company''s marketing strategies, client reach, pricing policies and strategies. Your Company plans to revisit its business model in this segment and review its financial viability and thereafter decide on its renewed launch.
IT/ITES
The marginal reversal in the recessionary conditions in the US did not do much in terms of reviving the fortunes of the outsourcing business of your Company. Morover, the anti-sourcing sentiments prevailing in the US also added to lack of fresh business from the US. This has affected the Company''s main customer segment, and the anti-outsourcing sentiments prevailing in the US on account of large scale unemployment continued to impact this segment of Company''s business this year too. The BPO business had sustained a negative growth in its business and the Company succumbed to pricing and margin pressures.
Trading Activities
The Company had forayed into a new business segment viz., Trading Activity in November 2010. The Company primarily was engaged in the trading of computer products, accessories and peripheral items. The Company started this business in the first week of November, 2010 and did robust business in this segment initially, although with nominal margin levels. However, the Company continued this business till June 2011 anticipating increased volume of business and also upward scalability in the profit margins. The Company however realized that it was not to happen and it was essentially a low-margin with not much of perceptible scalability and therefore decided to suspend this activity in the second quarter of the financial year under review till a comprehensive review of this segment of business and its viability is analyzed.
Current strategy:
The Company''s primary aim is to be a global communications company, utilizing emerging technologies to provide convergent communication services. The business model of the Company revolves around its core competence i.e., Telecom & Networking.
The Company proposes to review its entire gamut of existing businesses, marketing structure and strategy and adopt a pragmatic approach in analyzing its ability to achieve a dedicated revival plan in each of these businesses.
The Company''s business opportunities are undoubtedly high in various parts of the world wherever there is a perceptible presence of Indian diaspora.
Management Discussion and Analysis
A detailed report on Management Discussion & Analysis for the financial year ended December 31, 2011 as stipulated under Clause 49 of the listing agreement with the Stock Exchanges in India is provided as a separate chapter in this Annual Report.
Issue of Convertible Warrants
As mentioned in our earlier Report for the financial year 2009-10, your Company made firm financial arrangements to take advantage of business opportunities that may arise in future, as the Company believes that it needs to have an inorganic- growth approach till a self-sustaining financial strength is reached.
The Company therefore issued 15,00,00,000 Convertible Equity Warrants to select group of investors/allottees on February 21, 2011. Thereafter, on receipt of full consideration, your Company converted 8,32,68,333 Warrants into Equity Shares of equivalent amount on March 31, 2011 and the balance 6,67,31,667 Warrants into Equity Shares of equivalent amount on July 9, 2011.
Bonus Shares
Your Company decided to capitalize its existing reserves by issuing Bonus Shares to its Equity Shareholders in the ratio of 12:5 (i.e., 12 equity shares for every 5 equity shares held as on the Record Date). Your Company, after receiving the requisite approvals from the Stock Exchanges, successfully made the allotment of 40,30,62,312 Bonus Shares.
Public Deposits
Your Company has not accepted any public deposits.
Directors
In compliance with the provisions of the Companies Act, 1956 and in accordance with the Company''s Articles of Association, Shri. G. Rathan Kumar and Shri. A.D. Sudhindra, Directors, retire by rotation at this Annual General Meeting scheduled on September 25, 2012 and, being eligible, offer themselves for re-appointment.
It needs to be mentioned here that the Company had seven Directors at the end of financial year 2009-10. However, one of the independent Directors expired consequent to which the strength of the Board reduced to six at the end of the financial year ended 31st December, 2011. Amongst the remaining six, the resignation of two independent Directors was accepted by the Board in its meeting on 18th March, 2012. In the same meeting, three Additional Directors were appointed bringing the strength of the Board to seven. The Additional Directors would come up for confirmation as Directors in the ensuing Annual General Meeting.
During the year and the intervening period post the closure of the financial year and the date of this Report, the following developments in the Board took place:
Shri. Darshan Suryakant Shah, Non-Executive and Independent Director of the Company resigned on February 24, 2012 and ceased to be a Director. His resignation was accepted by the Board in its meeting held on March 18, 2012.
Shri. R. Radhakrishna, Non-Executive and Independent Director of the Company resigned on August 9, 2011 and ceased to be a Director. His resignation was accepted by the Board in its meeting held on March 18, 2012.
Consequent to the untimely demise of Shri. S. Manoharan, Non-Executive & Independent Director, his name was removed from the Board in its meeting on May 14, 2011.
During the period between the end of the financial year 2011 and the date of this Report, Shri. Kumar Raichand Madan, Shri. U. Parthasarathy and Shri. S. Sriram were appointed as Additional Directors w.e.f March 18, 2012. They will hold office till the conclusion of the ensuing Annual General Meeting of the Company. The Board welcomes Shri. Kumar Raichand Madan, Shri. U. Parthsarathy and Shri. S. Sriram on board and looks forward to their active participation on various deliberations.
The Board appreciates the contributions made by Shri. Darshan Suryakant Shah, Shri. R. Radhakrishna and Shri. S. Manoharan during their tenure as Directors of the Company.
The Board of Directors inform the members that all the directors of your Company have confirmed that, in terms of Section 274(1)(g) of the Companies Act, 1956, they are not disqualified to act as directors of your Company.
Directors Responsibility Statement
Pursuant to the requirements of sub-section 2AA of Section 217 of the Companies (Amendment) Act 2001, the Directors confirm that:
(i) In preparation of the annual accounts, the applicable accounting standards have been followed and proper explanations have been provided for material departures, wherever applicable.
(ii) 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 as at 31st December, 2011 and the loss of the Company for the financial year ended 31st December, 2011.
(iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Company''s Act, 1956, 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. P.C. Acharya & Co., Chartered Accountants, the Statutory Auditors, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment. The Audit Committee and your Board recommend their reappointment as Auditors of the Company for a further period of one year and to fix their remuneration. They have furnished to the Company a certificate of their eligibility for appointment as auditors, pursuant to section 224 (1B) of the Companies Act, 1956.
The Board of Directors shall subsequent to their appointment determine the terms and conditions of their appointment, scope of work, and allocation of responsibilities such as statutory audit, internal audit, taxation, tax audit etc and to accordingly fix their remuneration.
Auditor''s Report
With regard to the qualifications and emphasis of matter contained in the Auditor''s Report of Dhanus Technologies Limited, our explanations are given below:
i. Note (b) and (c) of the 4th para of the Auditor''s Report - Note 1.2 (a) and (b) of Schedule 1 & 2 - Notes to Accounts to the financial statements
The Company has four business verticals and has a large number of debtors and creditors as its business across various service verticals is of retail nature. Also, the Company''s services and products have a wide geographical reach as well. Consequently, the reconciliation and control accounts of receivables and payables are not fully complete, although substantially covered. The Company however believes that non-reconciliation in such accounts will not have any serious and perceptible impact on the revenues and expenses recognized.
ii. Note (d) of the 4th para of the Auditor''s Report
The Company has maintained a proper system of accounts. The Company confirms that the purported deviation from Accounting Standards prescribed under AS-6, AS-9, AS-10, AS-22 and AS-28 will in no way have any material adverse impact on the Profit & Loss Account and also the Asset Liability position of the Company. The Company shall however make extra efforts to bring the systems in line with the accounting Standards expected of the Company.
iii. Note (e) & (f) of the 4th para of the Auditor''s Report
The Company agrees that reconciliation of Trade Receivables and Payables is yet to be fully completed. However, the Company firmly believes that non-reconciliation and control accounts of receivables and payables will not have any serious and perceptible impact on the revenues and expenses recognized as substantial and critical reconciliations have not provided any adverse indication or cause for concern.
iv. Note (g) of the 4th para of the Auditor''s Report
The inability to quantify the value of current assets including debtors, loans and advances from a mark to market perspective will not have any material impact on the asset liability position of the Company. The Company''s fixed assets being very large in number as it primarily comprises of high-value routers, switches, servers, computing systems, integrators etc., the Company is in the process of completing the physical verification of its fixed assets. The Company certifies that it fully owns the title to the assets and the cost of purchase and depreciation levied on them is accurate and in terms of generally accepted accounting principles. Kindly refer to Note 1.1 on Fixed Assets and corresponding write up on depreciation on assets.
v Note (h) of the 4th para of the Auditor''s Report
The Board agrees with the statement that the investment in M/s Borusan Telekom, Turkey is possibly irrecoverable. The Company however proposes to attempt recovering the initial advance given towards share purchase, although the Company agrees that the attempt may be an exercise in futility and accordingly appropriate steps in this regard would be followed to write off the investment after all possible efforts towards recovery are completely exhausted.
The Company disagrees with the view that the amount advanced to M/s Sreeven Infocom Limited is irrecoverable. Sreeven Infocom is a healthy company and the Company is in talks with the management of Sreeven Infocom to recover the amount advanced earlier.
Since the qualifications made by the Auditor''s in the Report on the Consolidated financial statements is similar to the ones made in the Standalone financial statements, the above explanations apply equally to those as well.
Audit Committee
The Audit Committee consists of three members namely Shri. G. Rathan Kumar, Justice (Retd.) Shri. S. Kalyanam and Shri. U. Parthasarathy, all of whom are independent. Shri. G. Rathan Kumar is the Chairman of the Audit Committee. All members of the Audit Committee possess sufficient knowledge and experience in the field of Finance and Accounts.
Subsidiary Companies
Dhanus Global Medicare Limited, India and Dhanus Technologies Inc., USA continues to be wholly owned subsidiaries of your company. The statement under section 212 of the Companies Act, 1956 along with a statement of additional information of subsidiaries is attached herewith.
Listing
The Equity Shares continue to be listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). Both these exchanges have nation-wide terminals and therefore, shareholders/investors are not facing any difficulty in trading the shares of the Company from any part of the country. The Company has paid the annual listing fee for the year 2012-13 to the BSE and NSE and the annual custodial fee to National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo.
Information as 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, is annexed as an Annexure to this Report.
Particulars of Employees
In terms of the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975 as amended, there was no employee during the year drawing remuneration more than the stipulated amount in the said rules.
Corporate Governance
Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed compliance report on Corporate Governance systems and practices together with a certificate from the statutory auditors confirming compliance with the conditions of corporate governance stipulated in the said clause is annexed to this report.
The Board laid down a "Code of Conduct" for all Board members and senior management of the Company and the "Code of Conduct" has been posted on the website of the Company, www.dhanus.net.
Acknowledgements
Your Directors take this opportunity to place on record their sincere appreciation for the continued support and confidence reposed by the clients, business associates and the shareholders. The Directors also convey their appreciation to the employees at all levels for their enormous personal efforts as well as collective contribution.
For and on behalf of the Board of Directors
Place: Chennai Capt. D.S. Srinivasan A.D. Sudhindra
Dated: August 18, 2012 Managing Director Director

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