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Annual Report 2005-06

Bangalore Softsell Ltd.


Blending Solutions & Services

Protect your legacy

Future proof your systems

With LeMiT

Bangalore Softsell Limited


Regd. Office : No.17, II Floor, 100 Ft. Ring Road, 6th Block 3rd Phase, Kathriguppe
Banashankari III Stage BANGALORE - 560085.
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BANGALORE SOFTSELL LTD.


ANNUAL REPORT 2005-06
CONTENTS
BANGALORE SOFTSELL LTD.
LeMiT Story
Director's Report
Management Discussion & Analysis Report
Corporate Governance
Auditor's Report
Annexure to Auditor's Report
Balance Sheet
Profit & Loss Account
Schedules- 'A' to 'Q'
Additional Information
Cash Flow Statement
Report u/s212 of Companies' Act

^ No

'.
....
....

i
2
4
5
8
9
10
II
12
20
21
22

CONSOLIDATED FINANCIAL STATEMENT


Auditor's Report
Balance Sheet
Profit & Loss Account
Schedules 'A' to 'Q'
Cash Flow Statement

73
24
25
26
34

LEMITINC
Director's Report
Auditor's Report
Balance Sheet
Profit & Loss Account
Schedules 'A' to 'F'
Cash Flow Statement

35
35
36
37
38
39

LEMIT EUROPE SA
Director's Report
Auditor's Report
Balance Sheet
Profit & Loss Account
Schedules 'A' to 'H'
Cash Flow Statement

40
40
41
42
43
44

General Share Holders' Information


Notice of 19th Annual General Meeting

45
47

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Bangalore Softsell Ltd.


Blending Solutions & Services
BOARD OF DIRECTORS
Mr. S. Ragolhaman

Chairman and Managing Director

Ms. UshaP. Raikar

Technical Director

Mr. Y. N.Thakkar

Director

Mr. C. N. Govintlaraju

Director

Mr.H.R. K. Murlhy

Director

CHIEF FINANCIAL OFFICER &


COMPANY SECRETARY
Mr. B. Vijayakumar

AUDITORS
Mr. V. Raghavendran
Chartered Accountant

BANKERS
UNION B A N K O F I N D I A
CORPORATION BANK

REGISTERED OFFICE
No. 17. II Floor, 100 Ft. Ring Road,
6th Block, 3rd Phase, Kalhriguppe,
Banashankari 111 Stage,
BANGALORE-560085.

SUBSIDIARIES
1.

Leniitlnc
Newyork, U.S.A.

2.

Lemit Europe SA,


Basilly. BELGIUM

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Selling uniquely
Package services
Migration of legacy systems is an invasive process
that needs lot of mentoring and guidance. As each

coupling

a l l adds

its own d i m e n s i o n to

marketing pressures.

customer application grew over time, it evolved

Touching the corporate pulse center with right

and gathered its size in terms of lines, interfaces

tunes and demos is a first step. The art of leading

and complexity. The pain points are spread across


the life cycle of migration and have a cascading
effect on the project time lines.

into the required solution requires certain comfort


factor from the customer to the selling agents.
The major gains will arise when the customer feels
that the solutions is built with his samples and
domain reference. Customized solution needs

The established s e l l i n g mantra runs like

lot of technical f l a v o r s l i k e " B u i l d i n g of

"Proven processes", "Good c o n n e c t i v i t y " ,

acceptance

"Pool

technology", "Architecting for scalability".

of

support".

talents"

and " A u t o m a t i o n

The risk of f a i l u r e , the

user

frustration, management dynamism, technology

scripts", "Training

lor new

"Business Continuity support" and "Risk free


approach"

Setting up techniques
Migration has become mulli dimensional from the

Compounding solutions

days of simple translation. Flow driven programs

recommended solution and delivered services

have to become 3 Tier event driven programs.

surpass the goals at all time.

Every data access calls have to follow SQL syntax

Migration providers, by necessity, would need to

with efficient pooling of session and connections.

be all pervasive to draw the customer attention.

Multi screen formats have transformed to wizard


like thin clients with full navigation and locate
features. Simple activity based program model
have become full blown business bean appearing
to resolve dedicated services. The solution has

The larger the company, better the skills, the


company possesses. The more the customer
demands, the more the company can package its
services. It is universal that the larger companies
can support multiple requests. The current demand
for migration stem from larger players. Partnering

separaied layers for i n t e r n a l and e x t e r n a l

and out sourcing may be the first step in building

processes to provide belter security ol operations.

the critical size to serve the migration demands.

Each business demands that ,it be treated princely.

Technology providers must attain critical size to

With choice of solutions and service providers due

support emerging solutions to become a leader in

to globalization, customers demand that the

its segment.

(Annual Report 2005-06)


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Report of the Directors


To the Members,
Your Directors are pleased to present their N i n e t e e n t h
Annual Report with Audited Accounts of the Company
Cor the financial year ended 31 s ' March 2006
Performance Results:
The year 2005 - 2006 has been a year of consolidation
for your company. The technology of migration has
largely supported the emerging Java technology and
your company has been at this technology for the last
3 years. With companies demanding .Net as another
best option, the migration technology is opening up.
Now your company has supported many of market
needs for migrating DELPHI, PowerBuilder, Visual Basic
and Java to migrate .NET environments l i k e C#. Your
company has b u i l t lot of marketing collaterals to cater
to this emerging market.
This offering supports companies to migrate not only
from mainframe legacy systems, but also legacy systems
and languages in Windows platform.
The summarised Results are as follows:
(Rs. in Lacs)
Particulars
Sales & Other Income

2006

2005

196.55

134.30

92. 1 1

(45.34)

2.30

4.94

77.85

67.01

During the year, your company's total income from


Software Development & Services and others incomes
stood at Rs. 196.55 lacs against Rs.134.30 lacs for the
previous year. Loss after taxation stood at Rs.36.86
lacs as against Loss of Rs 77.88 lacs for the previous
year.
Significant Events:
Our solutions to migrate Delphi to C# was the need for
our partner. One of your company Managers was
selected to join the consultancy for one of the top 5
largest Automobile companies at Tokyo, to offer
modernization services.
Future Programmes:
Your company's Migration solutions space w i l l be
augmented for additional languages like Natural and
RPG that w i l l improve the reach and coverage of
emerging migration scenario.
Subsidiary Companies:
M/s. Lemit Inc at New york and M/s. Lemit Europe at
Belgium are Wholly Owned Subsidiaries of your
Company. The Audited Statement of Accounts and
Directors' Report of M/s. Lemit Inc and M/s. Lemit
Europe are attached pursuant to Section 212 of the
Companies Act 1956.

Profit Before Interest,


Depreciation & Taxation
Interest
Depreciation
Provision lor Taxation /FBT
Deferred Tax Adjustment
Loss After Taxation

Corporate Governance:
As required under Clause 49 of the Listing Agreement,
a report on Corporate Governance is provided
elsewhere in this Annual Report along with Auditor's
certificate on the compliance thereof.

2.60

46.22

(39.41)

Public Deposits:

(36.86)

(77.88)

Your Company has not accepted any deposits and as


such, no a m o u n t of P r i n c i p a l or I n t e r e s t was
outstanding on the date of the Balance Sheet.

Review of operations:

Evolving new channels of marketing of migration


solutions will improve the success criteria. Building
next generation of marketing executives who have core
migration strength would improve the selling process
considerably. Your company has i d e n t i f i e d four
emerging migration leaders to wear the marketing caps.
This has opened up the marketing funnel a lot more.

Directors:
Mr.H.R.K.Murthy. Director, retires by rotation at this
Annual General Meeting and being eligible, offers
himself for re-appointment. A brief profile of the
Director is given in ihe notes to die ensuing AGM.

(^Bangalore Softsell LttL)


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Report of the Directors (Contd

)
Energy & Technology Absorption:

Your Directors recommend that the resolutions relating


to the re-appointment of Mr. H.R.K.Murthy. as director
of" the Company he passed.

In pursuance of the provisions of Section 2 I 7 ( 1 )(e) of


the Companies Act, 1956. read with Rule 2 of the
Companies (Disclosure of Particulars in the Report of
Board of Directors) Rules, 1988, the particulars for the
year ended 31 sl March 2006 are given below.

Auditors:
Auditor Mr. V.Raghavendran, Chartered Accountant,
retires at the conclusion of the Nineteenth A n n u a l
General Meeting and being eligible, offers himself for
reappointment. The Company has received Certificate
under section 224( 1B) of the Companies Act, 1956 from
Mr.V. Raghavcnclran.

The operations of your Company are not energy


intensive. However, During the year under review,
efforts continued to conserve and avoid wastage
of energy in every possible way

Directors' Responsibility Statement:

In terms of Section 217(2AA) of the Companies Act.


1956, it is indicated as under:
i)

Conservation of Energy:

Research and Development:


R&D on Company's core Product LcMiT and new
services, process & methodologies continue to
be of importance which strengthens the company
to address the legacy migration and also several
vertical markets.

in the preparation of the a n n u a l accounts the


a p p l i c a b l e a c c o u n t i n g s t a n d a r d s h a d been
followed and there were no departures.

ii) the directors had 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 affairs of the
Company at the end of the financial year and of the
profit or loss of the Company for that period;

Technology Absorption : Not applicable

Foreign Exchange Earning and Expeiidure:


Foreign Exchange Earning

: Rs. 123.Kl lacs

Foreign Exchange Expenditure : Rs. 14.51 lacs


Acknowledgements:
Your Directors place on record their sincere gratitude
to the c o n t i n u i n g patronage of our shareholders,
business associates, customers, bankers, various
governmental and r e g u l a t o r y agencies for your
company's growth.

iii) that the directors had taken proper and sufficient


care for the maintenance of adequate accounting
records in accordance with the provisions of this
Act for safeguarding the assets of the Company
and for preventing and detecting fraud and other
irregularities;

Your Directors take this opportunity to place on record,


their sincere appreciation for the s i g n i f i c a n t
contribution made by the employees of the Company
and all channel partners who have together been
responsible for the growth of the Company.

iv) that the directors had prepared the annual accounts


on going-concern basis.
Personnel:
As no employee meets the remuneration criteria, as
required under section 217(2 A) of the Companies Act.
1956 read w i t h the C o m p a n i e s ( P a r t i c u l a r s of
Employees) Rules. 1975, as amended, this section does
not form part of this Report.

For and on behalf of the Board


Place: Bangalore
Date : 28-07-2006

S.Ragothamaii
Chairman & Managing
Director

(Annual Report 2005-06)


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Management discussion and analysis report


a)

Glohiil IT scenario

il)

Risks and concerns

Enlcrprises are conducting an assessment of their

Relying on custom solutions in migration would

IT strategy to moderni/e llieir applications. There

demand varying resources and ramp up time. With

is now a distinct perception that automation w i l l

less bench strength, the projects might have slower

definitely improve the effectiveness modernization

start rate and would demand greater management

projects. The fears of off shoring, imparting

lime. This cycle might lake away the sharpness in

sources and sharing of know how seems to recede

the solutions & services.

s l o w l y and the pace is g a i n i n g . When Tier


1 companies publish their successes, Migration

l>)

e)

Internal Control systems

will be embraced by Tier 2 & Tier 3 companies

The Company has a well conceived a n n u a l

which constitute the bulk of Softsell market.

budgeting , regular Internal audit covering all


areas of operations ensure that corrective action

Opportunity and threats

are taken as and when required lo ensure effective


With global market accepting migration, new zones

operation of all departments in the company.

will emerge. Australian, African & Asia pacific


regions w i l l provide the impetus for this market.

1')

Segment wise performance

However the top Indian players would explore

Your Company is engaged in Software service,

newer solutions and services to capture (his trend.

which constitutes the only segment

This might improve ihe chances of M&A activities

g)

Financial highlights

1.

Revenues

for niche players like us to seek strong leaders. At


the same time some of them might seek to find
effective way of in-house processes and third

Your Company is able to achieve

party tools that might shrink the margin of medium

lacs from Export of Software services.

Rs. 123.81

sized companies.
c)

Outlook

2.

Fixed Assets
The C o m p a n y added to its f i x e d assets

Building custom migration projects will always be

Rs. 127.48 lacs for the year ended 31" March

available in the market for true migration experts.

2006

Custom solutions r e q u i r i n g special efforts in


m a r k e t i n g , would open up l i c e n s i n g LeMiT
3.
technology to large Software houses. A mixed
bag of solutions to a variety of requirements
would force different engagement models that will
spur the growth of niche players.

Net Worth
The Networth stood at Rs. 1757.24 lacs as
against Rs. 1772.12 lacs for the same period
previous year.

(Bangalore Softsell LttT)

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Corporate Governance
IL

Philosophy:

The Board of Directors of Bangalore Softsell

The Company is committed lo a system of good


Corporate

Governance

which

comprises of five Directors of which, two are

envisages

executive directors (including Managing Director)

transparency, accountability, integrity & equity

and three non-executive - independent directors,

in all facets of iis operations, all inter-aclions with

which meets the requirement of the Listing

its s t a k e h o l d e r s , including shareholders,

Agreement.

employees and the Government. The Company's

During the financial year under review Six Board

internal control measures the reliability of financial

Meetings were held. These meetings were held

statements, ll is also committed to achieve the

on 29.04.05.29.06.05,07.07.05.29.07.05,29.10.05
and 30.01.06. Directors' attendance at the Board

highest international standards of Corporate

Meetings and last Annual General Meeting is as

Governance.

III

follows:
I'.xeculivc / Noil executive Status

Director

Mr.
Mrs.
Mr.
Mr.
Mr.

Board Of Directors:

S. Kugolhanum
Usha P. Kaikar
Y. N. Thakkar
C. N. Goviiidurajii
H. R. K. Munhy

No. ol
Board Meet
-ings held

-ings iiUciulcci

Yes .

ft

Yes
Yes

ft

ft

'remoter / Executive Managing Director


'remoter / Executive Technical Director
ndcpcndem - Non Executive Director
fidepciidenl - Non f-xeculive Director
ndcpemlcnl - Non Executive Director

Audit committee:
Terms of Reference

Oversee Company's financial reporting process


and disclosure of its financial information to ensure
the financial statements are correct, sufficient and
credible.

Recommending the appointment and removal of


external auditors, fixation of audit fee and also
approval for payment tor any other services.

Reviewing the adequacy of internal control


systems with the Management, Statutory and
Internal auditors.

To review, with the management the audited


quarterly, half yearly and annual financial
statements before submission to the Board for
approval.

R e v i e w the Company's financial and risk


management policies, related party transactions.

To review management letter / letters of internal


control weakness and appointment, removal and
terms of remuneration of the Internal Auditor.

Nil

YM J
Yes J

Mr. B. Vijaya kumar


Chief Financial Officer & Company Secretary
During the year under review, four meetings of the Audit
Committee were held, the dates being 29.0fi.05. 29.07.05.
29.10.05 and 30.01.06.
Meetings and attendance during the financial year
2005-06 :
Director

Meetings held

Mr. Y.N. Thakkar

Mr. C. N. Govindaraju

Mr. H.R.K.Murthy

Meetings Attended

IV. Remuneration Committee:


Terms of Reference
To address the policy on remuneration packages for Executive Directors, their Service Contracts. Slock Option details

etc.
Composition

Chairman
Member
Member

Mr. H.R.K.Murthy

Chairman

Mr. Y.N. Thakkar

Member

There was no occasion for the Committee to meet during the

By Invitation
Mr.V. Raghavendran
Mr.S. Vasudevan

No. of member
ships in Boards of
other public CD'S

Attendance at
the last A(iM
on (W.tW.OS

Secretary

The Audit Committee comprises of three Independent - NonExecutive Directors including the Chairman. All are
professionals and well qualified to carry out their
responsibilities as members of the committee.
Composition
Mr. Y ,N Thakkar
Mr. C.N.Govindaraju
Mr. H.R.K.Munhy

No. ol

Hoiml Meet

year since there was no review of the remunerations payable

Statutory Auditor
Internal Auditor

to the Directors.

(Annual Report 2005-06)


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Remuneration Package to Executive Directors


Name of the Director

Mr. S. Ragothaman
Managing Director

Mrs.Usha P. Raikar
Tech. Director

Salary, benefits etc.

Rs. 14.31 lacs

Rs.8.78 lacs

Performance linked incentives

Nil

Nil

Service Contract

Five years period t i l l 28.09.2006

Five years period till 28.03.2(K)7

Notice period

Six months

Six months

Severance tees

Nil

Nil

Stock options Details

Nil

Nil

VI. Details as to number of shareholders' complaints


received, number not solved to the satisfaction of the
shareholders and number of pending transfers.

Sitting tees paid to Non-Executive Directors during the period


under review
Mr. Y .N Thakkar

Rs. 20,000

Mr. C.N.Govindaraju
Mr. H.R.K.Murthy

Rs'. 20,000

These are provided in the section styled as "General


Shareholders Information" found elsewhere in this Annual
Report.

Rs. 30,000

V) Shareholders / Investors' Grievance Committee:

VII. Shareholders' Meetings:

Terms of Reference

Details of last three AGMs held & Special Resolutions


Passed :

The Committee looks into the shareholders' grievance like


transfer of shares, non-receipt of Annual Report, etc., and to
facilitate prompt and effective redressal of the same and also
placing periodical reports before the Board of Directors.

Year

Chairman
Member
Member

2. R e s o l u t i o n u/s 7 7 A . 7 7 A A and 77B of the


Companies Act, 1956 for buyback of securities.

Meetings held
4

Mr. S. Ragothaman

Mr. H.R.K.Murthy

Nil
Nil
Nil

1. Resolution u/s. 31 of the Companies Act, 1956 for


alteration of Articles of Association.

Four Committee meetings were held during the financial


year. These were held on 29.04.05. 29.07.05, 29.10.05 and
30.01.06

Mrs. Usha P. Raikar

Special
Resolutions
Passed

During the year two special resolutions were passed through


Postal Ballot, with 99% of the total valid votes polled in
favour.

Chief Financial Officer


& Company Secretary.

M e e t i n g s a n d a t t e n d a n c e d u r i n g the f i n a n c i a l year

Director

Time

Whether special resolutions were put through postal


ballot last year, details of voting pattern, person who
conducted the postal ballot exercise

Name & Designation of Compliance Officer


Mr. B. Vijaya Kumar

Venue

2002-03 29.09.2003 Rcgd. Office 1 1 .30 AM


2003-04 29.09.2004 Regcl. Office 10.00 AM
10.00AM
2004-05 09.09.2005 Woodlands
Hotel
Bangalore

The investor grievance c o m m i t t e e is headed by an


independent director, and consists of the following directors

Mr. H . R . K . M u r t h y
Mrs Usha P. Raikar
Mr S. Ragothaman

Date

Postal ballot was conducted by Mr. V. Sreedharan.


Practicing Company Secretary.
Whether any special resolution proposed to be
conducted through postal ballot and procedures for
postal ballot.
No.

(Bangalore Softsell Ltd?)

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VIII. Disclosures
A.

B.

IX.

X.

XI.

XII.

Disclosure on materially significant related party


transactions i.e., transactions of the company of
material nature, with its founders, the directors of
the management, their subsidiaries or relatives etc.,
that may have potential conflict with the interests
of company at large:
These are provided in the Notes forming part of A n n u a l
Accounts found elsewhere in this Annual Report.
Details of non-compliance by the Company,
penalties, strictures imposed on the company by
Stock Exchange or SEBI or any statutory authority,
on any matter related to capital markets during the
last three years:
None
Whistle Blower Policy:
The Company has not adopted Whistle Blower Policy
(non mandatory requirement). Hence, the details
pertaining to same is not provided
Mandatory / Non -mandatory requirements
The company has fully complied with the mandatoray
requirement of clause 49 of the Listing Agreement of
the Stock exchanges. Further, the Company has adopted
non-mandatory requirement of clause 49 of the Listing
Agreement vi/.. Remuneration Committee of the Board,
w h i c h h a s been c o n s t i t u t e d t o d e t e r m i n e t h e
remuneration package of the Executive Directors.
Means of Communication :
Yearly Report
Softsell regularly sends the Company's Annual Reports
to the Shareholders.
Quarterly results
The q u a r t e r l y results are g e n e r a l l y published in
Business Standard (Bangalore. Chermai & Ahmedabad
Edition) and in Regional Language -Hosadigantha
(Bangalore Edition). Audited results are displayed on
our website.
Management Discussion and Analysis
It is provided as a part of this Annual Report.
General Shareholder Information
I t is p r o v i d e d in the section styled as "General
Shareholders Information" published elsewhere in this
Animal Report.

XIH.Compliance
The certificate dated 23.06.2006 obtained from our
statutory auditor Mr. V. Raghavendran is found elsewhere
in this Annual Report.
CEO & CFO Certification
a. We have reviewed financial statements and the cash flow
statement for the year ended 31st March, 2006 and
certify, to the best of our knowledge and belief, that :
i. these statements present a true and fair view of the
Company's affairs, and are in compliance with

ii.

existing accounting standards, applicable laws and


regulations;
these statements do not contain any materially
untrue statement, or omit any material fact, or
contain statements that might be misleading;

iii. no transactions entered into by the company during


the year were fraudulent, illegal or violative of the
Company's code of conduct and no instances of
fraud took place;
iv. we accept r e s p o n s i b i l i t y for e s t a b l i s h i n g and
maintaining internal controls for financial reporting;
v.

we have evaluated the effectiveness of the internal


control systems of the Company, and have disclosed
to the auditors and the A u d i t Committee,
deficiencies in the design or operation of internal
controls, if any. of which we are aware and have
taken steps to rectify the same, wherever found;
vi. significant changes in internal control over financial
reporting, as well as changes in accounting policies,
if any. have been intimated to the auditors and the
Audit Committee, and been disclosed in the notes
to the financial statements;
b

We further declare, in compliance to clause 491(D)(ii) to


Listing Agreement, that all the Board members and senior
management personnel have affirmed compliance with
the code of conduct of the Company.

Place : Bangalore
Date : 23.06.06

S. Ragothaman
Managing Director
B.Vijaya Kumar
Chief Financial Officer & Company Secretary

AUDITOR'S
CKRTIFICATK
GOVERNANCE.

ON

CORPORATE

I h a v e e x a m i n e d the c o m p l i a n c e of c o n d i t i o n s of
corporate governance by B A N G A L O R h SOFTS ELL.
LIMITED, for llie year ended on 31st March. 2006, us stipulated
in clause 49 of the Listing Agreement of the said Company
with Stock Exchange(s).
The Compliance of conditions of corporate governance
is the responsibility of the management.
My examination was
limited to procedures and implementation thereof, adopted by
the Company lor ensuring the compliance of the conditions ol
the Corporate Governance.
It is n e i t h e r an audit nor an
e x p r e s s i o n of o p i n i o n on the f i n a n c i a l s t a t e m e n t s of t h e
Company.
In my opinion and to the best of my information and
according to the explanations given to me, I certify that the
Company has c o m p l i e d w i t h t h e c o n d i t i o n s of Corporate
Governance as s t i p u l a t e d in the above m e n t i o n e d L i s t i n g !
agreement. I state that no investor grievance(s) is / are pending
for a period exceeding one month against the Company as per
the records maintained by (he Investors Grievance Committee.
I f u r t h e r s t a t e t h a t such c o m p l i a n c e is n e i t h e r an
assurance as to the f u t u r e v i a b i l i t y of the company nor the
efficiency or effectiveness w i t h which the management has
conducted the affairs of the Company.
Place : Bangalore.
Dated : 23rd June 2006.

V. Raghiivendran
Chartered Accountant.
Membership No. 24151.

(Annual Report 2005-06)


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