ZYLOG SYSTEMS LIMITED
ANNUAL REPORT 2011-2012
CHAIRMAN`S REPORT
Dear Members,
It is my immense pleasure to welcome you all to the Seventeenth Annual
General Meeting of your company.
Your Company has registered a strong performance during the year across all
the segments. The maintenance of sustained profitability despite the
volatile external trading environment is no mean feat. Your Company is
continuing to display remarkable resilience in the tough conditions
currently prevalent. This is amply illustrated by the following snapshot of
important indicators -the consolidated operating revenue for the year ended
31 March 2012 stands at Rs 2,273 crores, an increase of 19% over the prior
year. EBITDA stands at Rs 432 crores, an improvement of 45% over the
previous year. Net Profit after tax has reached Rs 204 crores - growth of
41% over the previous 12 months.
At the standalone level, which is fetching 54% and 85% of revenue and net
profit respectively, your Company at year end has 304 active clients of
whom 63 are newly added during the year in the US, the mainstay of our
operations. Included in this pool of active clients for the year are 58
clients who have brought revenues in excess of USD 1 Mn. Our staff strength
has grown from 4302 last year to 5137, reflecting a growth of 19% -
significant by any yardstick and even more so, given the current economic
conditions prevailing worldwide. For a predominantly onsite/offsite-based
company, we are always looking to increase the offshore element on a case-
by-case basis in new work orders procured from clients. This will
significantly ramp up our operating margins.
Your Company has partnered with US Universities namely, New Jersey
Institute of Technology, Fairleigh Dickinson University and Rutgers
University as a part of the recruiting mechanism to train and fuel our R&D
initiatives in conveyor-belt fashion in the Products/Solutions space in USA
with various Masters Degree and above students; so that the idea is to
mould the freshest and ablest minds to face the challenges of tomorrow in
our chosen specialist space. This proactive initiative alone speaks of your
Company`s far-sightedness in its thought processes towards preparing and
setting the foundation for continued prosperity in times ahead and by so
doing, to maintain our strategic advantage. Simultaneously, your Company is
committed to nurturing and engaging with young IT professionals so as to
create comprehensive career paths for them resulting in the staff members`
goals being congruent with the Company`s goals. Your Company`s modus
operandi is to continue to invest in new technologies, domains and
processes via a training model that is carefully calibrated towards engaged
collaboration. This paternalistic approach is very effective as it produces
creative and energetic individuals who are extremely malleable in
responding to given situations in a fast-changing world.
You are aware that your Company uniquely specializes in providing Products
& Solutions to various industry verticals in order to address the pain
points of the inherent business processes. In doing so, we wrap our
solutions with the technology services in specialized areas such as Package
Implementation, Enterprise Content Management, Mobile Computing, ERP
Services in SAP, MS Dynamics and Oracle, Business Intelligence, Data
Warehousing and Cloud Enablement and Software as a Service. With this novel
combination of solutions and services, we have forayed into and
consolidated in hitherto unchartered regions. Amongst our latest exploits
is in Singapore where we have won an order to supply Field Power, one of
our flagship solutions to a prestigious client. This will invariably help
us to widen our stretch in that geography as a customer reference from that
client will go a long way in furthering our business interests in South
East Asia region as a whole. We have similarly expanded our activities in
other regions in response to demand for our solutions which are
subsequently customized for those particular geographies.
From a business perspective, there was all round growth in all the
geographies that we serve. Of the most pleasing are the cases of Zylog
Ducont and Zylog Canada, our Dubai and Canada businesses which were
acquired in 2008 and 2010 respectively. These wholly-owned subsidiaries
have gone from strength to strength and represent Zylog`s success stories
in their respective geographies. We are seeing increasing cross-penetration
of selling efforts so that both parent company and the subsidiaries have
witnessed expansion in each other`s client base and revenues. Also, another
strategy that is pertinent in the above cases and also hugely relevant in
helping to integrate our acquisitions to date is one that has effectively
left day-to-day management in the hands of senior managers in the acquired
entities. By adopting such a hands-off policy, Zylog has deliberately
chosen not to run the various acquired companies from its headquarters in
India or the US. In this way, the newly-acquired subsidiaries have become
autonomous and profitable segmental units in the now far-flung Zylog empire
of operations. It is a measure of success at each of these segments that
whatever debt funding was used partially in the purchase consideration at
the time of acquisition, that debt not only sits on the books of those
subsidiaries but is being fully serviced by the same out of their own cash
flows.
We have recently set up Development centres in Dubai and Malaysia to be
able to better serve existing customers and also to take advantage of
excellent infrastructure and other benefits provided by the host
Governments to attract and boost inward investments. One of the benefits is
investor-friendly tax regimes which will help your Company to consolidate
its presence with a view to expand into hinterland regions holding enormous
potential for future growth. For example, our presence in Dubai through the
acquisition of Ducont has helped us to win new customers in the Middle East
vicinity. The effort that went into the winning of work order from the
Singapore client mentioned in previous paragraph conveys the same message
for that region.
Going forward, it is a concern that macro-economic challenges persist,
especially in North America where the bulk ofour operations take place. Due
to minimal economic growth and employment prospects, Corporations across
the world are walking a tightrope trying to juggle tight IT budgets,
currency volatility, control on costs and stock market and investor
expectations. Our continuing challenge, one that we have always responded
to in our history, is to how best to help companies adapt to changes in the
commercial environment and be nimble enough to bring new products and
solutions to market.
I speak for the entire Company including the Senior Management team in
saying a big thank you to all the shareholders.There is no question that it
is with their support that your Company has reached the current milestone
of progress. I can assure you wholeheartedly that we will endeavour to
ensure that all the stakeholders of your Company will continue to reap the
benefits in years to come.
Warm Regards
SUDARSHAN VENKATRAMAN
Chairman and Chief Executive Officer |