For Significant accounting policies please refer Significant Accounting Policies, “Annexure IV”
beginning on page 133 under Chapter titled “Auditors’ Report and Financial Information of our Company” beginning on page 127 of the Draft Red Herring Prospectus.
Break-Up of our Revenues
Vertical wise Break-up of our Operating Revenues:
(` Lacs)
Product Vertical 2008-2009 % of total
Operating Income 2009-2010 % of total Operating Income 2010-2011 % of total Operating Income HR 1,117.80 64.88% 1,308.16 73.12% 1,807.54 76.17% Insurance 529.98 30.76% 433.40 24.23% 491.94 20.73% Others 75.15 4.36% 47.38 2.65% 73.65 3.10% Total operating income 1,722.93 100.00% 1,788.94 100.00% 2,373.12 100.00%
Results of 0ur Operation
(` Lacs)
Particulars
For the year ended
31-Mar-08 31-Mar-09 31-Mar-10 31-Mar-11
Income
Sales & Operating Incomes
Domestic Income 1,103.96 1,661.43 1,741.56 2,297.01
Increase/(Decrease)% 50.50% 4.82% 31.89%
% to Total Operating Income 96.88% 96.43% 97.35% 96.79%
Export Income 35.51 61.50 47.38 76.11
Increase/(Decrease)% 73.19% -22.96% 60.64%
% to Total Operating Income 3.12% 3.57% 2.65% 3.21%
Total Operating Income 1,139.47 1,722.93 1,788.94 2,373.12
Increase/(Decrease)% 51.20% 3.83% 32.66%
% to Total Operating Income 100.00% 100.00% 100.00% 100.00%
Other Income 0.14 3.06 15.31 8.66
Total Income 1,139.61 1,725.99 1,804.25 2,381.78
Increase/(Decrease)% 51.45% 4.53% 32.01%
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Direct cost of Sales / Services 530.46 702.26 698.74 1,056.51
Increase/(Decrease)% 32.39% -0.50% 51.20%
% to Total Operating Income 46.55% 40.76% 39.06% 44.52%
Personnel Cost 197.91 400.73 379.25 356.79
Increase/(Decrease)% 102.48% -5.36% -5.92%
% to Total Operating Income 17.37% 23.26% 21.20% 15.03%
Administrative and Selling Expenses 206.19 354.84 394.31 383.29
Increase/(Decrease)% 72.09% 11.12% -2.79%
% to Total Operating Income 18.10% 20.60% 22.04% 16.15%
Total Operating Expenses 934.56 1,457.83 1,472.30 1,796.59
Increase/(Decrease)% 55.99% 0.99% 22.03%
% to Total Operating Income 82.02% 84.61% 82.30% 75.71%
PBDIT 205.05 268.16 331.95 585.19
Increase/(Decrease)% 30.78% 23.79% 76.29%
% to Total Operating Income 18.00% 15.56% 18.56% 24.66%
Less: Interest 47.48 82.28 139.86 185.39
Increase/(Decrease)% 73.29% 69.98% 32.55%
% to Total Operating Income 4.17% 4.78% 7.82% 7.81%
Less: Depreciation 26.53 32.03 43.73 38.17
Increase/(Decrease)% 20.73% 36.53% -12.71%
% to Total Operating Income 2.33% 1.86% 2.44% 1.61%
PBT 131.04 153.85 148.36 361.63
Increase/(Decrease)% 17.41% -3.57% 143.75%
% to Total Operating Income 11.50% 8.93% 8.29% 15.24%
Tax Impact 76.84 93.36 92.74 242.30
Profit After Tax before restatement 76.84 93.36 92.74 242.30
Restatement adjustment for Gratuity -1.01 -2.56 -2.58 6.51
Profit After Tax after restatement 75.83 90.80 90.16 248.81
Increase/(Decrease)% 19.74% -0.70% 175.96%
% to Total Operating Income 6.65% 5.27% 5.04% 10.48%
Comparison of FY 2011with FY 2010: Income from operations
The Income from operations for the FY 2011 is ` 2373.12 Lacs as compared to ` 1788.94 Lacs during the FY 2010 showing increase of 32.66%. This increase is mainly attributable to increase in revenue from HR Services from ` 1308.16 Lacs for FY 2010 to ` 1807.54 Lacs for FY 2011 showing a increase of 38.17%. Further, revenue from Insurance services increased from ` 433.40 Lacs for FY 2010 to ` 491.94 Lacs for FY 2011.
The Domestic Income from operations for the FY 2011 is ` 2297.01 Lacs as compared to ` 1741.56 Lacs during the FY 2010 showing increase of 31.89%. The Export Income from operations for the FY 2011 is ` 76.11 Lacs as compared to ` 47.38 Lacs during the FY 2010 showing increase of 60.64%.
Total Income
The Total Income for the FY 2011 is ` 2381.78 Lacs as compared to ` 1804.25 Lacs during the FY 2010 showing increase of 32.01%.
Expenditure:
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Direct Cost of Sales and Services increased to ` 1056.51 Lacs for FY 2011 from ` 698.74 Lacs for FY 2010 showing an increase of 51.20%. This includes cost of product vendor charges of ` 652.02 Lacs, verification charges of ` 356.92 Lacs and telephone mobile and internet expenses of ` 47.57 Lacs for FY 2011 as against cost of product vendor charges of ` 199.72 Lacs, verification charges of ` 420.98 Lacs and telephone mobile and internet expenses of ` 78.04 Lacs. The Direct Cost of Sales and Services cost was 44.52% of total sales during FY 2011 as against that of 39.06% during FY 2010.
Personnel Cost
Personnel Cost decreased from ` 379.25 Lacs for the year ended March 31, 2010 to ` 356.79 Lacs for FY 2011 showing a decrease of 4.92%. This decrease was mainly due to decrease in salaries. Personnel cost stood at 21.20% and 15.03% of income from operations for FY 2010 and FY 2011 respectively.
Administrative and Selling Expenses
Administrative and selling expenses decreased from ` 394.31 Lacs for FY 2010 to ` 383.29 Lacs for FY 2011 showing decrease of 2.79%. This decrease was mainly due to decrease in rent expenses, professional fees business promotion expenses and discount. During FY 2011, the Administrative and selling expenses was 16.15% of income from operations as against 22.04% during FY 2010.
Profit before Depreciation, Interest and Tax (PBDIT)
PBDIT increased from ` 331.95 Lacs for FY 2010 to ` 585.19 Lacs for FY 2011 showing the increase of 76.29%, mainly on account of increase in income from operations and decrease in personnel cost and administrative and selling expenses due to benefit of increased scale of operations. During FY 2011, our Company recorded PBDIT of 24.66% of the operating income as against 18.56% during FY 2010.
Interest and Financial Charges
Interest and Financial Charges increased from ` 139.86 Lacs for FY 2010 to ` 185.39 Lacs for the FY 2011 showing the increase of 32.55%. Interest and Financial expenses mainly includes interest and other financial and bank charges, which accounted for 7.81% of income from operations during FY 2011 as against 7.82% in the year 2010. The absolute increase is attributed to increase in the utilisation of working capital due to increase in operations. There was also an increase in utilisation of secured term loans and unsecured loans.
Depreciation
Depreciation on fixed assets was 1.61% of income from operations during FY 2011 as compared to 2.44% during FY 2010. The total depreciation during FY 2010 was ` 43.73 Lacs and during FY 2011 it was ` 38.17 Lacs. This decrease was mainly due no major additions in the fixed assets of our Company.
Profit after Tax and restatement adjustment (PAT)
PAT increased from ` 90.16 Lacs for the FY 2010 to ` 248.81 Lacs in FY 2011 showing an increase of 175.96%. This increase was due to increase in income from operations and decrease in personnel cost, administrative and selling expenses, depreciation and the other reasons as details above. During FY 2011, our Company recorded PAT margin of 10.58% as against 5.04% for FY 2010.
Comparison of FY 2010with FY 2009: Income from operations
The Income from operations for the FY 2010 is ` 1788.94 Lacs as compared to ` 1722.93 Lacs during the FY 2009 showing increase of 3.83%. This increase is mainly attributable to increase in revenue from HR Services from ` 1117.80 Lacs for FY 2009 to ` 1308.16 Lacs for FY 2010 showing a
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increase of 17.03%. However the same was offset due to decrease in revenue from Insurance services from ` 529.98 Lacs for FY 2009 to ` 433.40 Lacs for FY 2010.
The Domestic Income from operations for the FY 2010 is ` 1741.56 Lacs as compared to ` 1661.43 Lacs during the FY 2009 showing increase of 4.82%. The Export Income from operations for the FY 2010 is ` 47.38 Lacs as compared to ` 61.50 Lacs during the FY 2009 showing decrease of 22.96%.
Total Income
The Total Income for the FY 2010 is ` 1804.25 Lacs as compared to ` 1725.99 Lacs during the FY 2009 showing increase of 4.53%.
Expenditure:
Direct Cost of Sales and Services
Direct Cost of Sales and Services decreased to ` 698.74 Lacs for FY 2010 from ` 702.26 Lacs for FY 2009 showing a decrease of 0.50%. This includes cost of product vendor charges of ` 199.72 Lacs, verification charges of ` 420.98 Lacs and telephone mobile and internet expenses of ` 78.04 Lacs for FY 2010 as against cost of product vendor charges of ` 169.93 Lacs, verification charges of ` 475.75 Lacs and telephone mobile and internet expenses of ` 56.59 Lacs. The Direct Cost of Sales and Services cost was 39.06% of total sales during FY 2010 as against that of 40.76% during FY 2009.
Personnel Cost
Personnel Cost decreased from ` 400.73 Lacs for the year ended March 31, 2009 to ` 379.25 Lacs for FY 2010 showing a decrease of 5.36%. This decrease was mainly due to decrease in salaries and staff welfare expenses. Personnel cost stood at 23.26% and 21.20% of income from operations for FY 2009 and FY 2010 respectively.
Administrative and Selling Expenses
Administrative and selling expenses increased from ` 354.84 Lacs for FY 2009 to ` 394.31 Lacs for FY 2010 showing increase of 11.12%. This increase was mainly due to increase in rent expenses, professional fees and business promotion expenses and discount. During FY 2010, the Administrative and selling expenses was 22.04% of income from operations as against 20.60% during FY 2009.
Profit before Depreciation, Interest and Tax (PBDIT)
PBDIT increased from ` 268.16 Lacs for FY 2009 to ` 331.95 Lacs for FY 2010 showing the increase of 23.79, mainly on account of increase in income from operations. During FY 2010, our Company recorded PBDIT of 18.56% of the operating income as against 15.56% during FY 2009.
Interest and Financial Charges
Interest and Financial Charges increased from ` 82.28 Lacs for FY 2009 to ` 139.86 Lacs for the FY 2010 showing the increase of 69.98%. Interest and Financial expenses mainly includes interest and other financial and bank charges, which accounted for 7.82% of income from operations during FY 2010 as against 4.78% in the year 2009. The absolute increase is attributed to increase in the utilisation of working capital due to increase in operations and increase in utilisation of secured term loans and unsecured loans.
Depreciation
Depreciation on fixed assets was 2.44% of income from operations during FY 2010 as compared to 1.86% during FY 2009. The total depreciation during FY 2009 was ` 32.03 Lacs and during FY 2010 it was ` 43.73 Lacs. This increase was mainly due additions in the fixed assets of our Company. The gross block as at March 31, 2009 stood at ` 281.51 lacs which increased to ` 317.64 Lacs as at March 31, 2010.
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Profit after Tax and restatement adjustment (PAT)
PAT decreased from ` 90.80 Lacs for the FY 2009 to ` 90.16 Lacs in FY 2010 showing a decrease of 0.70%. Although PBIDT increased by 23.79%, this decrease was mainly due to increase in interest and depreciation costs. During FY 2010, our Company recorded PAT margin of 5.04% as against 5.27% for FY 2009.
Comparison of FY 2009with FY 2008: Income from operations
The Income from operations for the FY 2009 is ` 1722.93 Lacs as compared to ` 1139.47 Lacs during the FY 2008 showing increase of 51.20%. This increase is mainly attributable to increase in revenue from HR Services and Insurance Services.
The Domestic Income from operations for the FY 2009 is ` 1661.43 Lacs as compared to ` 1103.96 Lacs during the FY 2008 showing increase of 50.50%. The Export Income from operations for the FY 2009 is ` 61.50 Lacs as compared to ` 35.51 Lacs during the FY 2008 showing increase of 73.19%.
Total Income
The Total Income for the FY 2009 is ` 1725.99 Lacs as compared to ` 1139.61 Lacs during the FY 2008 showing increase of 51.45%.
Expenditure:
Direct Cost of Sales and Services
Direct Cost of Sales and Services increased to ` 702.26 Lacs for FY 2009 from ` 530.46 Lacs for FY 2008 showing a increase of 32.39%. This includes cost of product vendor charges of ` 169.93 Lacs, verification charges of ` 475.75 Lacs and telephone mobile and internet expenses of ` 56.59 Lacs as against cost of product vendor charges of ` 110.16 Lacs, verification charges of ` 367.80 Lacs and telephone mobile and internet expenses of ` 52.50 Lacs for FY 2008. The Direct Cost of Sales and Services cost was 40.76% of total sales during FY 2009 as against that of 39.06% during FY 2008.
Personnel Cost
Personnel Cost increased from ` 197.91 Lacs for the year ended March 31, 2008 to ` 400.73 Lacs for FY 2009 showing a increase of 102.48%. This increase was mainly due to increase in salaries and staff welfare expenses. Personnel cost stood at 17.37% and 23.26% of income from operations for FY 2008 and FY 2009 respectively.
Administrative and Selling Expenses
Administrative and selling expenses increased from ` 206.19 Lacs for FY 2008 to ` 354.84 Lacs for FY 2009 showing increase of 72.09%. This increase was mainly due to increase in rent expenses, professional fees, electricity, travelling and business promotion expenses and discount. During FY 2009, the Administrative and selling expenses was 20.60% of income from operations as against 18.10% during FY 2008.
Profit before Depreciation, Interest and Tax (PBDIT)
PBDIT increased from ` 205.05 Lacs for FY 2008 to ` 268.16 Lacs for FY 2009 showing the increase of 30.78%, mainly on account of increase in income from operations which was partly offset by increase in personnel cost and administrative and selling expenses. During FY 2009, our Company recorded PBDIT of 15.56% of the operating income as against 18.00% during FY 2008.
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Interest and Financial Charges increased from ` 47.48 Lacs for FY 2008 to ` 82.28 Lacs for the FY 2009 showing the increase of 73.29%. Interest and Financial expenses mainly includes interest and other financial and bank charges, which accounted for 4.78% of income from operations during FY 2009 as against 4.17% in the year 2008. The absolute increase is attributed to increase in the utilisation of working capital due to increase in operations.
Depreciation
Depreciation on fixed assets was 1.86% of income from operations during FY 2009 as compared to 2.33% during FY 2008. The total depreciation during FY 2008 was ` 26.53 Lacs and during FY 2009 it was ` 32.03 Lacs. This increase was mainly due additions in the fixed assets of our Company. The gross block as at March 31, 2008 stood at ` 231.68 Lacs which increased to ` 281.51 Lacs as at March 31, 2009.
Profit after Tax and restatement adjustment (PAT)
As a result of the foregoing PAT decreased from ` 75.83 Lacs for the FY 2008 to ` 90.80 Lacs in FY 2009 showing a increase of 19.74%. During FY 2009, our Company recorded PAT margin of 5.27% as against 6.65% for FY 2008.
Related Party Transactions
For further information please refer “Annexure XV” beginning on page 141 under Chapter titled “Auditors’ Report and Financial Information of our Company” beginning on page 127 of the Draft Red Herring Prospectus.
Financial Market Risks
We are exposed to financial market risks from changes in borrowing costs, interest rates and inflation.
Interest Rate Risk
Our interest rate risk results from changes in interest rates, which may affect our finance expenses. We bear interest rate risk with respect to the debts, which we have for the year ended March 31, 2011, since the interest rates could fluctuate in the near future. Any rise in interest rates would result in higher interest bearing debts.
Effect of Inflation
We are affected by inflation as it has an impact on the operating cost, staff costs, fuel cost etc. In line with changing inflation rates, we rework our margins so as to absorb the inflationary impact.
Factors that may affect the results of the operations:
1. Unusual or infrequent events or transactions including unusual trends on account of business activity, unusual items of income, change of accounting policies and discretionary reduction of expenses etc.
There have been no unusual or infrequent events or transactions that have taken place.
2. Significant economic changes that materially affected or are likely to affect income from continuing operations.
There are no significant economic changes that may materially affect or likely to affect income from continuing operations.
3. Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.
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Apart from the risks as disclosed under Section titled “Risk Factors” beginning on page 14 in the Draft Red Herring Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.
4. Future changes in relationship between costs and revenues, in case of events such as future increase in labour or material costs or prices that will cause a material change are known.
Our Company’s future costs and revenues will be determined by demand/supply situation, government/regulatory policies and prices quoted by service providers.
5. Extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices.
Increases in revenues are by and large linked to increases in volume of business.
6. Total turnover of each major industry segment in which the issuer company operated.
For details on the total turnover of the industry please refer to Chapter titled “Industry Overview”
beginning on page 79 of the Draft Red Herring Prospectus.
7. Status of any publicly announced new products or business segment.
Our Company has not announced any new product and segment, other than through the Draft Red Herring Prospectus.
8. The extent to which business is seasonal.
Our Company’s business is not seasonal in nature.
9. Any significant dependence on a single or few suppliers or customers. Customers’ contribution:
(` Lacs)
Particulars Year ended March 31,
2011
Top 5 customers 45.26%
Top 10 customers 59.95%
Vendors / Suppliers contribution:
(` Lacs)
Particulars Year ended March 31,
2011
Top 5 vendors 81.86%
Top 10 vendors 88.24%
10. Competitive conditions.
Competitive conditions are as described under the Chapters titled “Industry Overview” and
“Business Overview” beginning on pages 79 and 85, respectively of the Draft Red Herring Prospectus.
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