Annual Report - Edserv Softsystem - 2008-2009

EDSERV SOFTSYSTEMS LIMITED
ANNUAL REPORT 2008-2009
DIRECTOR'S REPORT
Your Directors have pleasure in presenting their report for the year ended
31st March 2009 together with the Balance Sheet as at 31st March 2009 and
the Profit and Loss account for the year ended on that date.
Financial Highlights:
(Rupees)
Audited financial Audited financial
Statement for the Statement for the
year ended March year ended March
31st 2009 31st 2008
TOTAL INCOME 85,826,129 39,533,064
TOTAL EXPENDITURE 38,200,397 9,168,387
Profit Before Tax 47,625,732 30,364,677
Less: Provision for Income Tax:
- Current 5,883,850 3,911,460
Less: Provision for Fringe 40,674 24,333
Benefit Tax
Add (+)/Less (-) Provision for 4,789,190 1,098,536
Deferred Tax
Profit After Tax 36,912,018 25,330,348
Less: Provision for Dividend & 14,046,420 -
Dividend Distribution Tax
Balance of Profit Carried to 22,865,598 25,330,348
Balance Sheet
Dividend:
Your directors are pleased to recommend a maiden dividend of 10% (Re.1/-
per share) for the current period. The total amount of dividend is
Rs.120.06 lakhs. After approval by the shareholders at the ensuing Annual
General Meeting, the dividend will be paid in line with the applicable
regulations.

Fixed Deposits:
During the year under review, the Company has not accepted any Fixed
Deposits from the public.
Capital Issues During The Year - Increase in Share Capital:
Your company had made an (Initial Public Offering) IPO by issuing shares at
a base price of Rs.10/- with a premium of Rs.50/- and received investments
by way of subscription to the Equity from Public to the tune of Rs.23.84
Crores to part fund the project to develop and implement e-learning
solutions that are linked to jobs for all career aspirants. Earlier, you
company issued bonus shares at pre-IPO stage from the free reserves for
promoters and promoter group during the year.
Your Company was also successfully listed in the leading Indian Stock
Exchanges, NSE and BSE.
Performance Review:
Your company has been in the business of partner network based education
integrated with placements in web based e-learning framework giving
suitable careers to fresher and job aspirants during the year under
consideration.
Your company launched partner-based EdCampuses and EdCenters to quickly
spread across the Southern region of India to offer affordable e-learning
based courses of education and assessments during the year. Further,
EdCampuses offered placements in an online framework with live job
positions aggregating to over 10,000 jobs posted by over 50 clients to be
chosen by freshers and unemployed through PCA (Pre-Career Assessments)
screening process during the year of operation.
The EdCenters grew to 130 from a meagre figure of 20 centres at the
beginning of the year. Further, ELMAQ was also part of the EdCenter
training's offering where job oriented IT and Softskills programmes were
offered at affordable pricing to register the Larger section of the masses
which required to learn these skills and get jobs.
Market Segment and its Potential:
The global economic situation witnessed adverse changes during the year of
operation. By the middle of the financial year 2008-09, advanced economies,
with US topping the list, were already nearing recession. Overall growth
in the world output came down from over 4.5 percent in the last few years
to around 3 percent during the year. Emerging markets, which are now much
more linked to the fortunes of the global economy, too, felt the impact.
Even, in this environment, the Indian economy showed tremendous resilience.
Accounting to the latest estimates, India's GDP grew at over 6 percent
during 2008-09. Indian IT industry and in particular the Training industry
went through a consolidation phase shedding the high cost model to an
affordable and significantly lower cost model of service and support to
combat the global slowdown. Training industry in India, in which your
company's business is, went through a make-over in the way business is
done. Placement centric training and industry orientation along with
Softskills training and personality development were the thrust area for
the larger segments of students and unemployed to get attracted and
register for a training programme.
Strategy of Business - The First Mover:
EdServ realised the need for trained and employable resources among IT and
non-IT corporates in large volumes and thus decided to go for an affordable
education model integrated with placements. EdServ launched already various
affordable training programmes in IT and Softskills through its training
brand ELMAQ through partner network. More partners got signed up in the
state of TN where your company has a major stake and popularity. EdServ
started servicing the needs of trained resources by imbibing training on
Softskills, Aptitude skills, placement preparatory skills apart from IT
skills through ELMAQ.
EdServ also realised the need to balance the demand-supply between the
resource and the jobs in the market across various domains and verticals.
While the jobs define the profiles clearly, the resources lacked the
connect especially for the small-to-medium industry where Internet and
sophisticated communications are less accessible. Also clients at lower
tier are unwilling to spend time and money to advertise to shortlist and
recruit the required manpower. Moreover, these clients were only willing to
pay a small amount for a relatively less experienced to fill up the job
positions compared to bigger perks. So this was evolving to a gap between
the job and the resource.
The Academy Industry Divide - EdServ to Bridge:
EdServ then decided to also address the need to bridge the gap between the
academics and industry. Industry is in constant requirement of employable
resources who are freshers but the students who pass out from academia are
unfortunately not readily employable but for the top creamy layer.
Increasing commercialisation and increased number of professional colleges
have led to a huge number of enrolments for Engineering and Technology
courses. Majority of students lack proper orientation on all-round skills
apart from technical skills. Further, most of the students also hold
arrears being not able to clear the exams. Non availability of proper
support or aptitude to learn and pass the subjects on-time led to drop-outs
and disinterests in Engineering or professional stream of education itself.
The Growth Engines of EdServ:
EdServ enhanced the HEADS model of learning integrated with placements and
devised the model so as to fill the ever-widening gap in the demand-supply
as well as in the academics-industry. EdServ built automated learning,
assessment, and placement engines encompassing a system based approach to
quickly fill-up the gap through web based technology to offer direct jobs,
learning linked jobs, and academic support to institutions. E-Learning was
the mainstay in EdServ's strategy in training volumes of fresh resources
out of colleges to get placed in blue chip IT and non-IT companies. ELMAQ
had on-going business relationship with all leading professional colleges
as well as corporate bodies and thus initiated the bridging of the ever
widening gap. So the need for a new generation of education model with
placement deployment as focus emerged. Thus the concept of EdCampus,
EdCademy, and EdCenter evolved with a central software portal managing the
business, learning, assessment, and placement. Separate engines offering
assessments, placements with back-to-back data on the jobs from clients as
well as curriculum and exam pattern of leading Universities became part of
LAMPS, the web based software portal designed by EdServ last year and was
made to be available across all signed up EdCenters and EdCampuses through
registered secured logins.
Directors:
Mr. S. ARVIND, and Dr. ILANGO BALAKRISHNA, Directors of the company, retire
at the Annual General Meeting of the company pursuant to the provisions of
Section 255 of the Companies Act, 1956 and all of them, being eligible,
seek re-appointment. The Brief Profile of the aforesaid Directors is given
hereunder:
Mr. S. ARVIND:
Aged 64 years, is a retired IAS officer with excellent administrative
skills honed by 30 years of work in the Indian Administrative Service,
worked in various capacities in Government of Tamilnadu, India and
Government of India. He has completed his Masters Degree (Public
Administration) in University of Madras.
Dr. ILANGO BALAKRISHNA:
Aged 70 years, is a Former Vice Chancellor, Bharathiar University,
Coimbatore. He has completed his Bachelors Degree in Engineering, M.Sc.,
(Engineering) in University of Madras and Ph.D in Electrical Engineering in
IIT Kanpur. He has received various awards from various organizations in
India and abroad and is a member of various Prestigious Committees
including ISTE, Accreditation committee of NBA, AICTE etc.
Auditors:
The Statutory Auditors, M/s. RAJ AND RAVI, Chartered Accountants, retire at
the conclusion of the ensuing Annual General Meeting and are eligible for
re-appointment for the current financial year. The auditors have expressed
their willingness to continue in office if re-appointed. Your Board
recommends their reappointment.
PARTICULARS AS REQUIRED UNDER SECTION 217(1)(E) OF THE COMPANIES ACT, 1956:
A) CONSERVATION OF ENERGY:
Though the company has not carried on any manufacturing activities, it had
taken steps to conserve energy in its office/ godown use, consequent to
which energy consumption has been minimized. No additional
Proposals/Investments was made to conserve energy. Since the company has
not carried on any industrial activities, disclosures regarding impact of
measures on cost of production of goods, total energy consumption, etc.,
are not applicable.
B) TECHNOLOGY ABSORPTION:
The company has not adopted / intend to adopt any technology for its
business and hence no reporting is required to be furnished under this
heading.
C) FOREIGN EXCHANGE EARNED & USED:
Since the company has not carried on any export during the financial year
under review, the disclosures requirement relating to exports, initiatives
taken to increase exports; development of new export markets for products
and services and export plans is not applicable to the company.
Foreign Exchange earned during the year: Rs.Nil. (PY Rs.Nil)
Foreign Exchange used during the year : Rs.Nil. (PY Rs.Nil)
PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 217 (2A) OF THE COMPANIES ACT,
1956:
As required under the provisions section 217 (2A) of the Companies Act,
1956, read with the companies (Particulars of employees) Rules, 1975, as
amended, the names and other particulars of employees are set out in the
Annexure to this report.
Directors' Responsibility Statement:
The Directors confirm that:
a) In the preparation of the annual accounts, the applicable accounting
standards have been followed;
b) Appropriate accounting policies have been selected and applied
consistently and judgments and estimates made are reasonable and prudent so
as to give a true and fair view of the state of affairs of the Company as
on 31st March, 2009 and of the profit of the Company for the year ended
31st March, 2009;
c) Proper and sufficient care have 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; and
d) The annual accounts have been prepared on a going concern basis.
Corporate Governance:
Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges,
Corporate Governance Report and Auditors' Certificate regarding compliance
of the same are made part of this Annual Report.
Acknowledgments:
The Directors acknowledge with gratitude and wish to place on record their
appreciation for the valuable support and kind co-operation extended to the
Company by the Company's Bankers, Financial Institutions, Government
Authorities, Shareholders, and the Employees.
For and on behalf of the Board of Directors
Place: Chennai S. Giridharan
Date : 18.08.2009 Chairman & CEO
MANAGEMENT DISCUSSION AND ANALYSIS:
i. Industry structure and developments:
The industry that the company is in, is largely Indian Education, and the
labour and employability.
This is broadly classified into Learning and Placement as business streams.
In the learning space, the industry is further classified into Formal
Education and job oriented Vocational Training. Formal education industry
has schools and colleges which are either run by Government or aided by
Government or Privately run. Further, the higher education commonly
referred as college education could be imparted either through regular
class room based college learning or through distance learning streams,
technology-led remote learning streams. Under these streams we have
Engineering / professional education stream as well as Arts / Science /
Commerce stream.
PRIMARY EDUCATION:
There are 1.5 Lakh Govt recognized schools with 22 Crore students in India.
Further, there are 56 Lakh school teachers. This implies that there is one
teacher for every 40 students. There are 24 Lakh teachers covered in
Regular Teacher Training. Gross Enrolment Ratio (GER) is 85% whereas there
is 61% drop-out across schools with 70% in SC/ST prevails as on 2007-08
academic year.
HIGHER EDUCATION:
Indian Higher Education System is the 3rd largest in the world. There are
350 universities including 102 deemed universities. There are 15,500
colleges out of which 5,000 are professional colleges offering Engineering,
Management, and Medical courses with the remaining offering Arts, Science
and other courses. There are 1.2 Crore students in regular degree
programmes and are over 2 Crore students in distance / open programmes.
Present GER is 11% which is much lower compared to GER of schools. Pass
percentage of Professional Education is at 60% on an average.
LABOUR AND EMPLOYMENT:
In Employment or work opportunity space, there are Public Sector and
Private Sectors as two distinct categories of Work Opportunity creators for
fresher and unemployed looking for jobs. Indian unemployment rate may touch
20% in 2020 as per the latest study. Further, there are 44.1Cr work
opportunities or job positions out in the Industry with around 80% filled
up. As per the Employment exchange data available in Ministry of Labour and
Employment, there are 3.91 Cr Job seekers live and another 0.53 Cr Job
seekers register afresh yearly. The unemployment rate is 7.2% which may
increase year-on-year because India's labour force is growing at a rate of
2.5 per cent annually but employment is growing at only 2.3 per cent.
Total number of Employment Exchanges (at the end of Dec, 2008) Includes the
following:
University Employment Information and Guidance Bureaux (UEIGBx) 82
Professional and and Executive Employment Exchanges 15
Special Employment Exchanges for the Physically Handicapped 50
Special Employment Exchanges for Plantation Labour 01
ii. Opportunities and Threats:
Opportunities:
The economy continued to show high growth momentum during 2006-07 and 2007-
08. As per the Quick estimates of National Income for 2006-07 released by
CSO, the Gross Domestic Product (GDP) at factor cost (at constant 1999-2000
prices) grew at 9.6 per cent in 2006-07 compared to 9.4 per cent in 2005-06
and 7.5 per cent in 2004-05. The agriculture and allied industry and
services sectors grew by 3.8 per cent, 11.0 per cent and 11.1 per cent
respectively during 2006-07.
Cess of 1% is imposed to finance Secondary and Higher Education on the
service tax payable for all services, by the Government of India in its
finance budget year-on-year. Education Cess Fund is used to fund the
education as quoted and employability skills enhancement for those who have
not pursued education beyond secondary levels of education.
MES and PPP:
Ministry of Labour & Employment in pursuance to excellence in vocational
training has developed a new strategic framework for skill development
namely MODULAR EMPLOYABLE SKILLS (MES)' framework in close consultation
with industry, State Governments and experts. MES is Minimum Skills Set'
which is sufficient to get an employment in the labour market. These can be
learnt through professional training institutes or through professionals in
formal and non-formal way for one's gainful employment.
The Government of India plans to invite Private Participation to develop
schools. It is proposed to set up at least 6,000 schools during the XI Plan
period, of which at least 2,500 will be through the Private Public
Partnership (PPP) route. Private investment of about Rs.10,000 crore is
expected to flow into setting up these schools. The remaining 3,500 schools
will be built by the Government. While Government shall continue to give
affiliation to the schools created and run by Private institutions, the
schools under PPP route shall be entirely run and managed by Private Sector
under this scheme.
(Lakhs)
Number of Job-seekers on the Live Register as on 31-12-2008:
Men 267.85
Woman 123.27
Total 391.12
Number of Job-seekers placed during 2008:
Men 2.53
Woman 0.62
Total 3.05
Number of Job-seekers registered during 2008:
Men 35.60
Woman 17.56
Total 53.16
ENGINEERING STUDENTS AND COLLEGES:
There is an upsurge in the number of students applying for professional
education, engineering in particular. This is due to the fact that Indians
are preferred in US based software companies for programming and testing.
US entry requires 12+4 years of formal education and the preferred degree
is an Engineering in any discipline yet Computer Science or Electronics &
Communication in particular. This upsurge in interest for engineering
degree has resulted in mushrooming Engineering colleges in Southern India
and also in Maharashtra / Gujarat. The students have the peer pressure and
also pressure from their parents, kith, and kin to take up engineering
stream whether they have the required aptitude / interest or not.
Tamil Nadu and Andra Pradesh top the list with huge set of professional
colleges along with deemed universities. Andra Pradesh has over 550
colleges while Tamil Nadu's share is around 450 colleges.
Over 1 Lakh students are joining to various colleges this year as per cut-
off marks through single window counselling in Tamil Nadu for example.
Students from different backgrounds ranging from State Boards with Medium
of instruction in regional languages like Tamil / Telugu to CBSE get into a
common Engineering curriculum in English. This poses a great challenge to
pass subjects and to score high grades for a larger section of students who
are from State Boards of schooling. The students require help to face their
exams confidently and look forward to completing exam the degree with
better grades to qualify for jobs.
BOTTOM OF THE PYRAMID - THE REAL INDIA:
Government provides education to poor, the bottom of the pyramid, through
schools and colleges. The current system of education has huge gaps in
teaching, research and development, quality of infrastructure, teacher-
student ratios, expenditure to technological aids, performance, management,
metrics, career seedings, industry interactions in schools and in higher
education. This leads to many of the secondary pass-outs and degree pass-
outs lacking the much needed Softskills or personality skills and also the
industry orientation and employability.
Lack of quality teachers and infrastructure at institutions lead to drop-
outs at a higher rate. Masses at large require a match to a right work
opportunity. Over 30% remain self-employed due to lack of right education
which leads to the lower income levels and poorer lifestyles creating the
imbalance in the socio-economic framework of the country.
Threats:
Intellectual Property Thefts, Long delays in Government approvals and
payment delays, Stiff competition on pricing, Overall economic slowdown
resulting in downsizing of workforce by Private Sector are the threats that
would delay the success of the business model or impact the revenues and
profits if not handled swiftly with creative product upgrades and sales
strategies.
iii. Segment-wise or product-wise performance:
The company has engaged only in Education and education linked placements
and there are no other separate reportable segments.
HEADS and LAMPS:
EdServ is India's first 4th generation education company that provides
integrated learning and placement in a technology-led partner network.
EdServ works in HEADS learning architecture using e-learning framework
linked with placements with back-to-back arrangements with clients to
provide job positions online and live. EdServ's web based LAMPS software
portal provides the crucial technology edge to EdServ's delivery though a
secured and centralized access to all benefitting communities through a
network of authorized centers that include EdCenters, in-campus, and
corporate nodes for seamless information exchange.
EdCenter - INTEGRATED LEARNING MODEL:
EdServ's business is web enabled and is run through a secured, partner-
driven center network in Integrated Learning Model (ILM) through its
EdCenter (Education and Deployment Center) brand. EdServ also provides
academic support programmes in-campus as well as off-campus in learning and
assessment through its EdCademy brand. EdCampus, the jobs database engine,
is accessible to all EdCenters and EdCademys as well. EdServ provides
technology-led niche solutions in e-learning and placement seamlessly
integrating all benefitting communities viz., student, industry,
institution, and partner.
Over 10,000 students have registered to do various e-learning courses
ranging from Computer Fundamentals to office automation tools to Object
Oriented Programming using C/C++. Apart from course registrations, students
have also registered for Jobs to check the availability and bid for a job
with a client. Students who choose job positions will have to clear the
Pre-Career Assessments (PCA) online as defined by the selected job before
being eligible for the job.
EdCampus - THE ONLINE PLACEMENT CAMPUS:
EdServ's EdCampus, launched during the year under consideration is an
Online Placement Campus that is partner driven to cater to a large sections
of masses who are unemployed and aspiring to get into an apt job / career.
EdCampus has registered over 250 clients providing the job requirements
with a specific duration of availability of such jobs; such clients also
come back to open up those job positions for an extended period of
availability. Domains that include IT, ITES, Accounts, Finance, HR,
Healthcare, Retail, Marketing, Support, Technical, apart from Manufacturing
have got job requirements in huge numbers totalling over 2,25,000 job
positions live on EdCampus. LAMPS as software portal on web in a secured
and central framework allows access to EdCenters and EdCampuses for
students and unemployed through the partner centers.
EdCampus and EdCenter as products have got a huge acceptance in the market.
Within 6 months of launch of these centers through partner network, over
150 partners have signed up with EdServ to open up EdCenter with EdCampus
access. These partners are spread largely in TN and AP.
POWER PARTNER MODEL:
EdServ's POWER PARTNER model launched recently provides a partner of EdServ
the Multi-Point Earning (MPE) mechanism to become profitable even in the
driest seasons of business. An EdServ Power Partner will be equipped to
provide online learning, assessment and placement to candidates through
technology-led web based automated metrics. The partners will gain revenues
by bringing best fits between candidates and job-opportunities, and further
incentives by using their contacts to punch-in clients requirements, job-
fit detailing, and also partner leads for other locations.
EdServ Power Partner model for franchisees has been suitably built for
today's hard-hit industry situation with low setup-cost, affordability and
earnings-based-sharing as its prime focus. EdServ's approach to Power
Partner model is unique that provides the access, training, skills, &
software to every partner to quickly switch on the business with profits
flowing from the start thanks to the MPE with incentives for both Clients
and Franchisees referrals apart from sharing other revenue gains. The only
requirements from the partners are 300-600 sq. ft. space with internet
connectivity and a couple of computer systems. Power Partners get connected
to EdServ's servers and service the job seekers through EdServ's LAMPS
software engine, getting centralized access to job searches, assessment and
also for skill development.
EdCademy - THE ACADEMIC SUPPORT PROGRAMME:
EdServ has also launched EdCademy, the academic support programme for
Engineering, and Management students. Under this programme, EdServ conducts
Promptive Metrics based Learning (PML) methods to enhance the performance
of students in their semester exams so that their placement prospects
become better as they move to final year campus programmes. EdCademy at the
outset offers three engines of support viz., Learning Engine (LE),
Assessment Engine (AE), and Placement Engine (PE).
EdCademy assures a better student's performance rating in their core degree
subjects and assessment essentials. This is achieved by continuous
assessments that can be forced upon to every student by the concerned HoD
by unlimited access to EdCademy's Learning Engine (LE). Further, before the
semester exam, a student can attempt many model papers of a particular
subject which the student feels tough to pass or score high through the
Assessment Engine (AE) of EdCademy. Final year students can also access for
unlimited job positions through Placement Engine (PE) of EdCademy by which
virtually an e-campus interview can be organized which could land a student
in a job offer much before he / she completes the course. An institution
can sign-up with EdCademy and receive logins for all students studying in a
semester which is a minimum pack. The institution can check for 100%
conformance for the affiliated University curriculum and model questions
before sign-up. Further, the institution can look for a placement
preparatory programme including the Softskills, Personality Development
skills, and other Job orientation skills before a campus interview is
organized. Further, EdServ can touch base with its own clients through the
performance dashboard of all students right through their duration of the
course in the college. The concerned client who has more than a reason to
trust the data about the college's performance and attempt at a campus
interview through the Industry-Education-Collaborating (IEC) method. Thus
an institution can look for an all-round development of its students and
overall performance enhancement to a better ranking through academic
excellence such that the aspiration levels of the management can grow by
leaps and bounds to expand to multiple institutions under the same group
and ultimately aim at university status.
EdCademy OFF-CAMPUS AE:
EdServ also launched off-campus EdCademy AE (Assessment Engine) which works
again by PML (Promptive Metrics based Learning) method but can be accessed
through all EdCenters and also remote student homes. EdCademy off-campus AE
provides the crucial exam support and ensures a student is able to face
exams without fear. EdCademy off-campus helps a student to actually see all
possible answers even of mugging type. A student is then asked to choose
the right answer listed for the corresponding question. Since all answers
look the same, the student is put to curiosity to check the correct answer
by going through all choices before he / she chooses the right one. This
makes a sudent to read the answers more than once and by this way he / she
becomes more familiar to the right answer for a question which is closest
to the actual question of the corresponding exam paper.
Unlike the above explained PML, a normal question bank as a document may
not address all subjects of all semesters evenly. Further, it does not push
a student to write question papers timing it out. Further, it does not
valuate a paper written by you giving you the marks / grades in a
consolidation for a student to verify the competency level to take up
actual exam. It also gives the student and the college a record of their
work with the center attempting various model papers which may help a
student and the institution in various ways.
EdCademy in-campus academic support programme has huge following from
educational institutions and EdServ has signed up with over 10 colleges
with an average of 1,000 students per college till date. Further, EdCademy
has rolled out AE for 260 subjects for the students of Anna University, TN,
to help students face exams without fear and pass the subjects easily.
iv. Outlook:
4th GENERATION EDUCATION LINKED TO CAREERS:
EdServ is world's first 4th generation education company with a vision to
bring a better education ecosystem worldwide. EdServ uses technology to
efficiently synchronize manpower demand and supply in number as well as in
skills. EdServ works from manpower development to deployment integrated
end-to-end in a seamless partner-driven network. EdServ's education is
Skill Matched, Assessment Driven, Industry vetted, Need based, Job linked
model in web based LMS called LAMPS portal, a proprietary engine running in
EdServ's private web network.
EdServ addresses wider domains and scale mapping demand-supply. The company
focuses on employability by seeding skills progressively and focuses on
bridging the Industry-Academics divide.
PRE-CAREER ASSESSMENTS TO CONNECT TO JOBS:
EdServ combines the fastest growing education & placement segments with
first-mover-advantage by offering mandatory job fitment for every aspirant
through Pre-Career Assessments (PCA) as per the jobs that grow online live.
EdServ is a scalable model addressing volumes connecting demand-supply
rapidly using technology with must-learn-disciplined learning using the
partner network.
PLACEMENT CAMPUS AS JOBS DATABASE ENGINE:
EdServ targets 1 million live job positions to be accessed through an
estimated 2,000 Job Booths (Placement Campuses) across the country over the
next 12 months using EdServ's secured private portal called LAMPS with the
help of POWER PARTNER model. Edserv's Job Booths will consist of EdCenters
and EdCampuses that provide a patented online learning and placement model
through direct client connectivity.
BENEFITTING COMMUNITIES CONVERGE ONLINE AND LIVE:
EdServ converges the Client, Institutions, Partner, and a Student as a
community to benefit through instant and seamless interaction exchanging
the requirements in a web enabled connectivity portal.
EdServ has a firm footing on the Academics-Industry bridging act providing
support to Higher Education in both formal education and also in
employability enhancement. Further, EdServ is also in full arrangement with
Clients and corporate who need manpower in trained and ready-to-deploy
forms. EdServ's LAMPS connects student and client in a seamless network and
helps both the students and the clients by providing transparent access to
information on performance and support to improve the throughput.
E-CAMPUS INTERVIEWS:
EdServ's in-road to colleges over a period shall amass the crucial student
performance footprints, thanks to the online Learning and Assessment
engines that the students work with day-to-day to get the crucial exam
support. These footprints become the performance information to showcase at
the time of campus placements to clients. Also this gives a better and more
accurate metrics for corporates to choose freshers from a pool of resources
at large given at their disposal online and live without having to
physically travel to the colleges which are in remote locations.
v. Plans for the Year Ahead - K-12 to Careers:
EdServ's plans to provide education in a holistic approach from K-12 to
careers have been developing with already a strong foundation with its
reach to higher education along with campus placements and online
placements based on skill matched and need based job links. EdServ's 4th
generation education is an end-to-end solution of education integrated with
deployment from K-12 to Careers. This is getting implemented through IDEA
(Industry Demand Alignment) to be launched in a month. Industry Demand
Alignment suggests to get the industry behaviour studied over a period and
mapping it to the resources through a balanced seeding at K12 in a
progressive education system. Technology is majorly used to arrive at the
metrics which are the major inputs to IDEA.
IDEA BASED 4TH GENERATION EDUCATION - 3 PHASED APPROACH:
EdServ works on a top-down approach to implement its next generation
education model in 3 phases viz.,
i. Phase I: Direct Jobs demand-supply match; Academic support in higher
education to enhance employability.
ii. Phase II: Academic Support to K12 to improve and control supply for
demand and to spread and reach.
iii. Phase III: Industry Demand Aligned Academics-Industry bridged
community with career seeded demand-supply match.
IDEA - Phase I:
Phase I of the 4th Generation Education at EdServ is the EdCampus having
Direct Job matches online for a wider range of sectors and domains of jobs.
Resources who have to qualify for jobs need to complete degree and so the
right support system to help them pass degree through EdCademy also becomes
Phase I.
IDEA - Phase II:
Phase II of the 4th Generation Education at EdServ is the IDEA roll-out to
Schools to maintain and control supply at K12. Career seeding based on the
Industry behaviour through already existing set of clients and jobs is done
at this phase. Resource skill development to suit to their aptitude and
flair in order to map themselves to a career that is most apt is done.
IDEA - Phase III:
Phase III of the 4th Generation Education at EdServ is the IDEA roll-out to
integrate Schools to Colleges and careers with Industry Demand aligned and
careers mapped individually to all resources based on their behaviour,
flair, character, and skills.
vi. Risks and concerns:
Ability to attract and retain talented and experienced professionals for
content development and distribution across K-12 to institutions and
careers providing corporate.
The company has decided to adopt ESOP plan to attract highly talented
manpower to be retained; further, variable salary structures have been
already incorporated as MAT (Minimum Achievable Target) to ensure every
targets are kept minimum and achievable and staff are rewarded with
additional variable pay over and above the fixed pay on achieving MAT.
Protecting Intellectual Property Rights, business model, content and data,
revenues, and Copyrights of systems from being pirated and illegally
transferred, used or misused.
The company has moved all its business processes though LAMPS which is an
Academic ERP encompassing the delivery, revenue, support, service, learning
and placement in a central and secured web network; every access is through
restricted logins through only authorized centers; further, LAMPS is
protected from illegal access through multiple level of IP based security
and also firewall systems from being copied as a source or executable as
well as the data being copied or transferred with or without knowledge of
the administration and HQ; further the company has already procured
trademark, Provisional Patent of HEADS and LAMPS idea and also LAMPS
copyright.
Delays in payments from Government / Universities / Institutions:
Payment delays if any are already built into the Product cost by way of
margins in case of delays of payments beyond the stipulated timeframe after
completion of services and support; further, since the business process is
entirely driven by automated technology-led LAMPS software portal, any
inordinate delay in payments from Universities may attract stopping of
services to students who avail all services and support through LAMPS live
and online.
Higher amount of capital investments to manage schools:
To cater to the need for higher capital for investments into the schools
(K-12) as part of the immediate plans, the company shall look at long-term
debt or fresh equity based capital, other means of financing.
Higher amount of capital investments to create contents:
Company shall explore possibilities of acquiring contents at lower costs
basis on such good value based entities that come on the way and then
working on fine tuning and upgrading the features of such acquired contents
to lower the overall cost of developing the contents; further, to meet out
the fresh capital requirement if any, the company plans to raise capital
through equity / debt or other means of financing.
Higher amount of capital investments for branding:
To meet out the requirements of capital for branding exercise on a
continuous basis to expand the partner network and to register aggressively
the students on-board along with institutions on-board, the company plans
to raise capital through issue of warrants / equity / debt or other means
of financing.
Lower margins in the business:
The business model of EdServ is on higher margins because of lower costs of
execution. Further, partners give royalty as a share from their revenues /
collections. Further all contact and servicing centers are franchisee
partner driven and so the company does not suffer any expense for delay in
businesses because of running costs. Margins of partner centers are also
higher due to the fact that the execution is automated and managed by
software systems with least human intervention including the delivery and
deployment using the low cost broadband for delivery.
vii. Internal control systems and their adequacy:
a. The company has an adequate internal control system, commensurate with
the size and nature of its business. The system is supported by documented
policies, guidelines, and procedures to monitor business and operational
performance which are aimed at ensuring business integrity and promoting
operational efficiency.
b. Reports of the internal auditors are regularly reviewed at the Audit
committee meetings. The Audit Committee of the Board reviews the adequacy
and effectiveness of the internal control systems and suggests improvements
for strengthening them.
viii. Discussion on financial performance with respect to operational
performance:
Financial condition:
A summary of our financial position as on 31st March 2009 and 2008 are as
follows:
Rs. in Lacs
2009 % 2008 % Growth
I. Sources of Funds:
Share Capital 1,201.71 34.49 280.92 34.85 327.78
Reserves & Surplus 2,282.16 65.51 435.18 53.99 424.42
Unsecured Zero Coupon Fully - 90.00 11.16 -
Convertible-Debentures
Total 3,483.87 100.00 806.10 100.00 752.20
II. Application of Funds:
Fixed Assets:
Gross Block 690.76 19.83 108.56 13.47 536.29
Less: Depreciation 62.92 1.81 36.73 4.56 71.30
Net Block 627.84 18.02 71.83 8.91 774.06
Capital Work in progress- 655.57 18.82 177.49 22.02 269.36
Product Development
Investments 8.50 0.24 8.50 1.05
Current Assets, Loans &
Advances:
A. Current Assets:
Sundry Debtors 661.01 18.97 323.56 40.14 104.29
Cash and Bank Balances 861.19 24.72 291.99 36.22 194.94
B. Loans & Advances:
Loans & Advances 877.23 25.18 43.92 5.45 1897.34
2,399.43 659.47 81.81 263.84
Less: Current Liabilities & 339.99 9.76 111.49 13.83 204.95
Provisions
Net Current Assets 2,059.44 59.11 547.98 67.98 275.82
Miscellaneous Expenditure
(to the extent not written
off or adjusted):
Preliminary Expenses 0.20 0.01 - -
Share Public Issue Expenses 132.32 3.80 0.30 0.04 44,006.67
Total 3,483.87 100.00 806.10 100.00 45,325.91
Sources of Funds:
1. Share Capital:
At present we have only one class of shares - Equity Shares of Rs.10/- each
fully paid up.
Our Authorised Capital is Rs.1400 Lacs divided into 140 Lakh Equity Shares
of Rs.10/- each. The issued, subscribed and paid up capital as on 31st
March 2009 is Rs.1201.71 Lacs and as on 31st March 2008 is Rs.280.92 Lacs.
During the year the company issue Initial Public Issue. The shares are
listed in NSE and BSE.
2. Reserves & Surplus:
A summary of the Reserves & Surplus is given below:
Rs. in Lacs
2009 2008
Reserves and Surplus:
Share Premium Opening Balance 271.68 271.68
Less Capitalised for issue of Bonus Shares 271.68 -
Add: Additions during the year 2040 -
2040 271.68
Profit and Loss Account:
Profit and Loss Account Opening Balance 163.50 5.20
Add: Profit brought forward from P & L Account 228.66 253.30
Less Capitalised for issue of Bonus Shares 150 95
Total 242.16 163.50
The addition of Share Premium is Rs.2040 Lacs on account of Initial Public
Issue of Equity Shares. During the year the Company issued Bonus Shares
prior to the Public Issue.
The balance retained in the Profit and Loss Account is Rs.242.16 Lacs as on
31st March 2009 and that of the previous year is Rs.163.50 Lacs.
During the year the company has converted the fully convertible debentures
and issued 9 Lacs Equity Shares of Rs.10 each.
The total Shareholders' fund increased to Rs.3483.87 as on 31st March 2009
from Rs.806.10 Lacs as on 31st March 2008.
Application of Funds:
3. Fixed Assets:
Statement of movement of Fixed Assets are as follows:
Rs. in Lacs
2009 2008
(Computer Software & IP Rights) 95.48 95.48
Plant & Machinery 0.36 -
Office Equipments 2.07 -
Furniture & Fixtures 13.57 11.91
Computers & Software 579.28 1.17
Gross Block 690.76 108.56
Less: Accumulated Depreciation 62.92 36.73
Net Block 627.84 71.83
Add: Capital Work in Progress 655.57 177.49
Net Fixed Assets 1,283.41 249.32
Depreciation - -
as % of revenues 3.05 3.26
as % of average Gross Block 3.79 11.86
Accumulated Depreciation as % of Gross Block 9.11 33.83
4. Investments:
There is no change in the investment during the year. The cost of the
investment is Rs.8.50 Lacs as on 31st March 2009 and 2008.
5. Sundry Debtors:
Sundry Debtors amount to Rs.661.01 as on 31st March 20009 and Rs.323.56
lacs as on 31st March 2008. There are no provision for doubtful debts for
both the years. All the debts are considered good and realizable. Debtors
are at 77.02% of revenues as on 31st March 2009 and 81.85% as on 31st March
2008.
6. Cash And Cash Equivalents:
The summary of the cash and cash equivalents are as follows:
Rs. in Lacs
2009 2008
Cash on hand 46.63 0.07
Balance with Banks in current accounts-Scheduled Banks 310.67 17.27
Balance with Banks in Deposit accounts-Scheduled Banks 500 270
Balance with Banks in current accounts-Others 3.89 4.65
Total 861.19 291.99
7. Loans And Advances:
The details of the Loans and advances are as follows:
Rs. in Lacs
2009 2008
Advances recoverable in cash or in kind or for 32.00 16.47
value to be received
Advance to suppliers 811.04 0.00
Deposits 25.29 22.10
TDS Receivable 8.90 5.35
Total 877.23 43.92
8. Current Liabilities:
A summary of the current Liabilities are as follows:
Rs. in Lacs
2009 2008
Sundry Creditors for Expenses and Services 52.87 56.42
Advance received from Customers 50.65 0.00
Provision for Dividend and Dividend Distribution Tax 140.46 0.00
Provision for Taxes 96.00 55.07
Total 339.98 111.49
Sundry Creditors for expenses and services represent the amount accrued for
various operational expenses and the creditors for the operation of the
company. Advance received from customers represent the advance received
for future services. The company has proposed declaration of dividend on
the equity shares for the year ended 31st March 2009 and provision for the
Dividend distribution Tax has been provided. Provision for tax represent
the estimated tax liabilities.
9. Net Current Assets:
Net current assets as on 31st March 2009 is Rs.2059.44 Lacs as against
Rs.547.98 Lacs as on 31st March 2008.
Current ratio as on 31st March 2009 is 7.05 and as on 31st March 2008 is
5.92.
Results of Operations:
The following are the summary of financial operations:
Rs. in Lacs
Financial Operation Details 2009 % 2008 % Growth
INCOME:
Income from operations 819.76 93.10 394.53 99.80 102.53
Sale of Machinery 25.00 5.33 - - -
Other Income 13.50 1.57 0.80 0.20 1587.50
Total 858.26 100.00 395.33 100.00 117.10
EXPENDITURE:
Purchase of Machinery 19.18 2.23 - - -
Administrative Expenses 166.79 19.43 52.18 13.20 219.64
Interest on Working Capital 8.78 1.02 6.81 1.72 28.93
Loans
Course Content and Brand 127.90 14.90 19.72 4.99 548.58
Expenses W/off
Operating Expenses 322.65 37.59 78.71 19.91 309.92
Operating Profit (PBITDA) 535.61 62.41 316.62 80.09 69.16
Preliminary Expenses 0.10 0.01 0.10 0.03
Depreciation 26.19 3.05 12.88 3.26 103.34
Share Issue Expenses written 33.08 3.85 - - 482.42
off
Profit after Depreciation & 476.24 55.49 303.64 35.38 56.84
Amortisations
Less: Provision for Income Tax:
- Current 58.83 6.86 39.11 9.89 50.45
Less: Provision for Fringe 0.41 0.05 0.24 0.06 70.83
Benefit Tax
Add (+)/Less (-) Provision for 47.89 5.58 10.99 2.78 335.76
Deferred Tax
Profit After Tax 369.11 43.01 253.30 64.07 45.72
Less: Provision for Dividend 120.06 13.99 - - -
Less: Provision for Dividend 20.40 2.38 - - -
Distribution Tax
Balance of Profit Carried to 228.65 26.64 253.30 64.07 -
Balance Sheet
The Company has only one segment of business.
1. INCOME:
The Company has the following income:
Rs. in Lacs
2009 2008
E-Learning 27,245,000 16,405,300
Training/ Media / Content Royalty 3,293,025 5,647,812
Registration Fees 9,628,126 -
Brand / License access fee 41,810,000 17,400,000
Total 81,976,151 39,453,112
2. EXPENDITURE:
a. The company has incurred the following administrative expenses:
Rs. in Lacs
2009 2008
Rent 22.10 5.23
Advertisement Expenses 6.35 0.09
Electricity 2.93 2.48
Printing and Stationeries 25.76 0.64
Repairs and Maintenance-Building 0.00 0.11
Repair and Maintenance-Others 5.09 3.34
Telephone and Fax Charges 4.48 2.23
Employment Expenses 51.37 11.80
Postage Telegram & Couriers 0.42 0.19
Travelling and Conveyance 10.19 5.43
Other Administration & Miscellaneous charges 15.47 2.38
Bank charges 1.07 0.55
Software Purchases 0.00 0.09
Audit Fees 2.00 2.00
Consultancy & Legal Charges 19.54 15.62
Total 166.77 52.18
b. The company is incurring Course Content, Contents and other Training
materials. The company has the policy of writing off 20% of the expenses
incurred for each year including the brought forward from earlier years.
The company written off an amount of Rs.127.90 Lacs for the year ended 31st
March 2009 and Rs.19.72 Lacs for the year ended 31st March 2008.
c. We provided Rs.26.15 Lacs and 12.80 for the years ended 31st March 2009
and 2008.
The company has no subsidiaries and no income derived in foreign
currencies.
ix. Material developments in Human Resources / Industrial Relations front,
including number of people employed:
The company has well-defined HR practices and performance appraisal
systems. The company has various departments and divisions based on the
businesses, operations, support, and administration that is required to
drive the company's business and its growth. Each department and division
is specifically provided the KRA (Key Result Area) defining the department
/ division's objections and result areas that would work towards the
company's business goals.
MAT REVIEWS - SCIENTIFIC WAY OF REWARDING PERFORMANCE:
The company has well-defined HR practices and performance appraisal
systems. The company has various departments and divisions based on the
businesses, operations, support, and administration that are required to
drive the company's business and its growth. Each department and division
is specifically provided the KRA (Key Result Area) defining the department
/ division's objectives and result areas that would work towards the
company's business goals. Monthly reviews and weekly activity reports on
business and operations are regular with appropriate heads of teams.
Minimum Achievable Targets (MAT) are defined as the minimum expected
targets in terms tasks, numbers, figures, revenues, and collections as
applicable for each and every department / division. MAT ensures that
individual team member figures collectively reach the team heads' MAT which
collectively reach the company's targets of business and operations that
include service and support efficiency as well as delivery effectiveness to
exceed the expectation of client. MAT is linked to variable components of
an employee's pay structure and is rewarded once the MAT is achieved.
Further, MAT is payable quarterly while salaries are paid monthly which
gives greater control of incentives / rewards disbursement after ensuring
the delivery of targeted results done by every team member and team head.
HUMAN RESOURCES - CREATING APPRECIATING ASSETS:
The company has 53 staff on rolls at work as on 31st Mar 2009. This
includes technology, delivery, deployment, support, branding, and content
divisions apart from Finance, accounts, administration, HR departments.
The content development which requires Subject Matter Experts (SME) for
each subject is managed by outsourcing the raw content delivery to
consultants.
Cautionary Statement:
Certain statements in the Management Discussion and Analysis describing the
Company's strategies and objectives, projections, estimates, expectations
and predictions may be forward-looking statements within the meaning of
applicable securities laws and regulations. Actual results could differ
from those expressed or implied. Important factors that could make a
difference to the Company's operations include Intellectual Property
thefts, Humanware turn-out and availability, Government policies on
education and employment, cyclical and seasonal demands and pricing in the
Company's principal markets, changes in economic developments, tax
structures within India and other incidental factors.
For and on behalf of the Board of Directors
Place: Chennai S. Giridharan
Date : 18.08.2009 Chairman & CEO
RISK MANAGEMENT REPORT:
Enterprisewide Risk Management (ERM) practice includes the processes and
activities related to identification, analysis, evaluation and treating
various risks associated with the functioning of the Organization. The
main objective of EdServ's ERM is to minimize the risk that may hinder your
company's objectives and to protect all the stake holders' interest.
The Risk Management Framework includes the Chief Executive Officer (CEO)
and Chief Technical Officer (CFO) and Top Level Management Executives who
are involved in framing and facilitating the risk management practices as
well as the business and operational unit heads who are directly involved
in managing the risks.
Risk Categories:
INDUSTRY:
The risk associated with the industry we are in which may arise due to the
government policies, service related issues, competition, business
dynamics, customer preferences.
STRATEGY:
Risk arising out of the short and long term decisions and choices we make
for taking the company forward maintaining the competitive edge for
betterment of shareholder value.
COUNTERPARTY:
Risk arising out of relationship with other parties such as Partners,
Associates, Vendors and others.
SYSTEM:
Risk related to reliability and the capacity of the systems used to run the
business as well as data integrity, content integrity, customer delivery,
physical and information security and natural calamities.
RESOURCES:
Risk inherent with usage of resources where the throughput and utilization
of the resources are concerned.
LEGAL:
Risk due to inadequate compliance to regulations, counterparty obligations,
Intellectual Property (IP) violations which may lead to litigation and dent
in the image and reputation.
Major Risk Management Activities:
RISK ANALYSIS AND ASSESSMENT:
Time to time the risks that may have serious impact on the company are
analysed and prioritized. The inputs are collected from the risk owners and
handlers in various departments through communication and consultation with
them.
RISK MONITORING AND REPORTING:
At unit level the risk reporting is done. The data is analysed to
understand the trend and the potential impact. Mitigation steps effected
and their status is discussed.
INTEGRATION WITH ORGANIZATION INITIATIVES:
The risk identification, analysis and assessment is fed as input for future
business plans and strategies.
The Risk Environment:
Your company in the learning industry linked with placement opportunities.
Due to global economic slowdown there had been a down turn and even
developed countries were nearing recession. So there had been lower sales
and lesser demand for products and services. Further the companies were
forced to stop hiring and lay-offs were also becoming rampant during the
year under consideration. Job oriented training businesses also went down
in volumes due to lower demand for trained professionals and IT and ITES
sectors. Also the power to buy went down in general and so higher fee
structure based courses and services were not seeing the demand.
Major Risk Management Activities carried out during the year:
During the year under consideration, your company made extensive study and
research of the market at large relating to training and placement.
A strategy of enhancing the business model with a focus on:
* Non-IT domains.
* Affordable costs of courses, services, placements.
* Servicing the masses at large, the bottom of the pyramid.
* Choosing such recession-proof segment of market.
Was adopted after taking inputs from the market through our Sales team as
well as independent market research. This called for a specific focus on
placement as an integral part of the business model as a strategy apart
from adopting technology based learning framework called e-learning.
Your company then introduced new products that cater to fresh job-seekers
as well as student communities at large right from drop-outs at school
level to under-graduate in non-IT streams to mitigate the referred risks in
the business. We further continously reviewed the risk management
practices in the operations involving resources, systems, third-parties,
and the security measures to ensure the business model thus upgraded and
enhanced go through in adequately protected risk free environment.
For and on behalf of the Board of Directors
Place: CHENNAI S. GIRIDHARAN
Date : 18.08.2009 Chairman & CEO