Annual Report - Everonn Systems India - 2008-2009

EVERONN SYSTEMS INDIA LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

Your Directors have pleasure in presenting the Ninth Annual Report together
with the Audited Accounts of the Company for the year ended 31st March
2009.

I. FINANCIAL RESULTS
Rs. Lakhs

Financial Results
Particulars for the year as at
31-Mar-09 31-Mar-08

Total Revenue 12137.94 9123.21
Operating Profit 5720.62 3478.92
Depreciation 1532.44 972.75
Interest 518.18 332.04
Profit/(Loss) before tax 3670.00 2174.13
Provision for Taxation 1285.78 795.56
Profit after Tax 2384.22 1378.57
Add: Profit brought
forward from
previous year 2331.46 952.89
Profit available for
appropriations 4715.68 2331.46
Balance Carried to
Balance sheet 4715.68 2331.46

II. Operating Results and Business Overview

The company's performance in the year 2008-09, continued its strong
momentum and showed a healthy growth. The company earned as total revenue
of Rs.12137.94 lakhs in the year 2008-09 as against Rs.9123.21 lakhs in the
year 2007-08. The revenue growth has been 33% over the previous year. The
operating profit for the year 2008-09 was Rs.5720.62 lakhs as against
Rs.3478.92 lakhs for the year 2007-08. There is a significant increase of
64% in the operating profit as compared to the last fiscal. Net Profit has
grown from Rs.1378.57 lakhs to Rs.2384.22 lakhs, a growth over 73% over the
previous year.

ICT

Everonn's initiative for facilitating Computer Education in Govt. Schools,
Computer Literacy, Computer aided learning etc has expanded its footprint
to 3 more states in FY08-09 -Himachal Pradesh, Maharashtra and Tripura.

Our strong visibility and the guarantee of a steady stream of revenue,
continues to propel Everonn's growth in this division.

The company is currently operating in 4442 schools as compared to 3164
schools in the year 2007-08 and the presence has increased to 12 states.
The revenues from ICT division are Rs. 4712 lakhs for the year 2008-09.

VITELS

Everonn's growth in its VITELS [Virtual and Technology Enabled Learning
Solutions] division, is reflected by the phenomenal increase in the number
of Everonn Learning Centers - 557 Schools, 800 Colleges and 35 retail
centers as against 180 Schools, 230 colleges and 29 retail centers
respectively last year. In tune with the growth, the company has made
substantial investments in terms of-technology and delivery model.

The revenue from Vitels has grown up from Rs.3754.2 Lakhs in 2007-08 to
Rs.7425 lakhs in 2008-09.

With this division growing further in the past year, we have successfully
established ourselves as one of the leading providers of technology for
virtual classrooms.



Business Growth Vs Dividend

Your management has decided to conserve the resources for improving the
financial strength of Company. The resources so conserved would be utilized
to fund the new business initiatives and for the growth of the business as
a whole. As the company is in the growth phase, the fund requirement of the
Company has increased. Hence the management has decided to plough back the
profits earned during the year to partly fund the business initiatives and
so no dividend is recommended for the year 2008-09.

III. Preferential issue of Shares & Warrants

During the financial year 2008-09, the company made preferential issue of
1269219 equity shares of Rs.10/- each for cash at a premium of Rs.710.04/-
per equity share aggregating Rs. 91.39 Crores to SEBI registered FII's. The
company has also allotted 700000 warrants of Rs.10/- each for cash at a
premium of Rs.710.04/- per warrant to promoters/persons from promoter group
and an amount of Rs.5.04 Crores constituting 10% of, the total amount
payable was received from them. The Company further allotted 362634
warrants of Rs.10/- each for cash at a premium of Rs.710.04/- per warrant
to SEBI registered FII's and an amount of Rs. 2.62 Crores constituting 10%
of the total amount payable was received from them.

Subsequent to the preferential issue of shares, the Company's paid-up share
capital increased from Rs.13.85 crores to Rs.15.12 Crores and its
securities premium account increased to Rs.143.76 Crores from Rs.56.37
Crores.

The Equity Shares of your Company have been listed on National Stock
Exchange Limited (NSE) and Bombay Stock Exchange a Limited (BSE). The
Listing fee for the year 2009-10 has already been paid to BSE and NSE. The
custodial fees payable to depositories namely NSDL & CDSL has also been
remitted by the Company

IV. Utilisation of Public Issue Proceeds

The Company has deployed Rs. 3940.41 lacs towards projects and the IPO
expenses being Rs. 5644.87 lacs as on March 31, 2009. Pending deployment of
funds for the projects, the Company has deposited the un-utilised public
issue proceeds in liquid funds.

V. SUBSIDIARIES

The Company has four subsidiaries. During the year, the Company
incorporated a wholly owned subsidiary M/s Everonn Infrastructure Limited
and acquired a 51 % stake in AEG Skill Update Pvt Ltd. The details of the
subsidiaries are as follows:

Name of the Date of Owner- Activities
Subsidiary becoming ship
Subsidiary

EVERONN 06-11-2007 100% Dealing in technical
EDUCATIONAL and non-technical
RESOURCES educational aids for
SOLUTION'S students, teachers
LIMITED, etc.

TOPPERS 11-02-2008 100% To establish and run
TUTORIAL entrance examination
PRIVATE coaching institutes
LIMITED

EVERONN 25-02-2009 100% Creating and
INFRA- developing
STRUCTURE infrastructure for
LIMITED setting up of
educational
institutions

AEG SKILL 18-03-2009 51% Activities for
UPDATE dissemination of
PRIVATE knowledge, literature,
LIMITED skill update, skill
development in all
educational training

VI. CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements has been drawn up in accordance with
the applicable Accounting Standards, form part of the annual report. The
Company has applied to the Central Government under Section 212(8) of the
Companies Act, 1956 seeking exemption from attaching a copy of the Balance
Sheet, Profit and Loss Account of the Subsidiary companies along with the
report of the board of directors and that of the auditor's thereon required
to be attached under Section 212(1) of the Act, with the Company's accounts
and the said approval is awaited. Accordingly, the said documents are not
being attached with the Balance Sheet of the Company. A gist of the
financial performance of the subsidiaries is contained in the report. The
Company will make available these documents/ details upon request by any
member of the Company or its subsidiaries, interested in obtaining the
same. These documents will also be available for inspection during business
hours at our Registered Office and respective offices of subsidiaries.

VII. DIRECTORS

The Board of Directors of Everonn Systems India Limited comprises of
Managing Director, Mr. P.Kishore and six Directors, namely Mr. R.Kannan -
Whole Time Director, Ms. Susha John - Whole Time Director, Mr. R.Sankaran,
Dr. K.M.Marimuthu & Dr. V.K.Vijayaraghavan & Mr. Joe Thomas being Non
Executive and Independent Directors. However Mr. R. Kannan Whole-time
Director has resigned from the Board with effect from May 23, 2009. As
required under Section 255 and 256 of the Companies Act, 1956 Dr.
K.M.Marimuthu is retires by rotation and, being eligible, he offers himself
for re-appointment at the ensuing Annual General Meeting. Brief resume of
Dr.K.M.Marimuthu is provided in the annual report as stipulated under
clause 49 of the listing agreement with the Stock Exchanges.

VIII. AUDITORS

M/s. P.Chandrasekar, Chartered Accountants, Chennai, are the Statutory
Auditors of the Company and holds office up to the ensuing Annual General
Meeting of the Company and being eligible, offer themselves for
reappointment.

IX. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS AND OUTGO.

Information pursuant to section 217(1)(e) of the Companies Act, 1956 read
with the Company's (Disclosure of particulars in the report of the Board of
Directors) rules 1988 is provided hereunder.

(i) Conservation of Energy-Though the activities of the company are not
energy intensive and energy cost does not form significant portion of the
cost of the company, yet the company has been making continuous efforts
towards achieving energy conservation and minimize the power cost.

(ii) The company's business being IT education, every effort is made to
ensure that changes in technology are communicated throughout the
organization at every stage.

(iii) The foreign exchange earnings and outflows are detailed below

Amount in 000s
Particulars Year Ended Year Ended
31.3.2009 31.3.2008

CIF Value of Imports 2,220 549
Expenditure in
Foreign Currency
Business Associate Expenses 27805 -
Travel and Conveyance 5896 1225
Professional Fees 719 -
Earnings in
Foreign Exchange
Testing Services 14,585 8,336

X. EMPLOYEE PARTICULARS

The particulars of Employees as required to be disclosed in accordance with
the provisions of Section 217(2A) of the Companies Act, 1956, and the
Companies Rules, 1975.

XI. FIXED DEPOSITS

Your Company has not accepted any public deposits during the year.

XII. CORPORATE GOVERNANCE REPORTS & MANAGEMENT DISCUSSION AND ANALYSIS

The Company is committed to maintain high standards of Corporate Governance
and protecting Customers and Shareholders interests. Towards this goal, the
Company has adopted high standards of governance principles, practices and
disclosure levels. A detailed note on the Company's philosophy on Corporate
Governance and the Management Discussion and Analysis report and such other
disclosures as are required to be made under the Listing Agreement with the
Stock Exchanges, are annexed and forms part of this report. A Certificate
from the Statutory Auditors of the Company in relation to compliance with
the provisions of the Clause 49 of the Listing Agreement for the year ended
31St March, 2009, is attached to the Corporate Governance Report.

XIII. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956, with respect to Directors' Responsibility Statement, it is hereby
confirmed;

That the applicable accounting standards had been followed along with
proper explanation relating to material departures, if any;

That the selected accounting policies were applied consistently and
judgments and estimates that are reasonable and prudent were made so as to
give a true and fair view of the state of affairs of the Company at the end
of the financial year and of the profit of the Company for that period;

That the Directors have taken proper and sufficient care 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;

That the annual accounts were prepared for the financial year ended 31St
March 2009 on a going concern basis.

XIV. STATUTORY DISCLOSURE

None of the Directors of your Company is disqualified as per provision of
Section 274(1)(g) of the Companies Act, 1956. The Directors of the Company
have made necessary disclosures, as required under various provisions of
the Act and Clause 49 of the Listing Agreement.

XV. COMPLIANCE CERTIFICATE

A Certificate from the auditors of the company regarding compliance of
conditions of Corporate Governance as stipulated under Clause 49 of the
Listing Agreement is attached to this report.

XVI. ACKNOWLEDGEMENT AND APPRECIATION

Your Directors take this opportunity to convey their appreciation for the
support and co-operation received during the year under review, from all
the Government Authorities, Regulators, Stock Exchanges, Shareholders,
other Stakeholders, Clients, Vendors, Partners, Bankers and other Business
Associates. Your Directors wish to place on record their deep sense of
appreciation for the dedicated and sincere services rendered by the
employees at all levels.

For and on Behalf of the Board

Place : Chennai P. Kishore
Date : June 11, 2009 Managing Director

MANAGEMENT DISCUSSION & ANALYSIS REPORT

Company Progress:

Technological progress, governmental approval and increasing demand have
all acted to increase the competition in the education industry in recent
years. The growing awareness among parents about the need for quality
education as well as the inability of most educational institutions to
reach the remotest areas in the country have lead to the field seeing
increasing participation by private players. However, with our innovative
application of technological platform and widespread presence across the
nation, Everonn successfully leveraged crucial capabilities to garner a
year on year growth of 58% and 60% in its Revenue and PAT respectively.

Our ability to create an annuity business has helped us capitalize on the
growing demand and need for comprehensive solutions in this largely-
fragmented industry. We have recorded a total revenue of Rs.12137.94 Lakhs
as against Rs.9123.21 Lakhs last year. There is a significant increase of
64% in the operating profit as compared to the last fiscal. Net Profit has
grown from Rs.1378.57 lakhs to Rs. 2384.22 lakhs, a growth over 73% over
the previous year.

With the growing demand for higher interaction in schools and other
educational institutions, virtually enabled education has caught on in
different areas in the country and even the remotest parts have begun
adopting them. Government-run schools have long been the primary players in
the Indian education market, with an allocated spend of over $30 billion.
While government schools have usually been slow to accept change, they have
recently begun to adopt cutting-edge virtual learning technologies to
increase student participation. Everonn, with its VSAT platform for virtual
learning, has been ideally placed to benefit from this. opportunity.

Industry Overview

The Indian Education Industry: A Large Pie waiting to be shared.

The increasing demand for quality education and the opening up of remote
areas to technological progress have resulted in the Indian education
industry becoming a very attractive field for private players. As per World
Bank, the annual private market size for the K-12 segment in India is
estimated at INR 22,000 26,000 crores.

With 348 Universities, 25460 colleges and 10.5 Million students in the
higher learning segment, the potential of secondary and senior secondary
education are also looking up.

Medium to Low Threat of Substitutes:

Our excellence in the two division of the education industry, the organized
K-12 and universities segment as well as the ICT division, has resulted in
a medium to low threat of substitutes in the field. In the organized
division, our unique VSAT platform has enabled us to deliver our virtual
learning modules directly to schools in the remotest parts of India. The
number of substitute technologies available is very low. With the potential
for further growth in this division, Everonn is likely to maintain this
advantage in the industry.

Medium to Low Threat of New Competitors:

While the education industry has been seeing increasing demand for quality
education and the entry of a number of private players, the strict
regulations governing the field has resulted in a low level of entry by new
participants in the industry.

However, the prospects of established players like Everonn with cent per
cent adherence to regulations and unblemished track record, is unaffected
by the entry of new players in the segment.

Medium to High Competition

The diversity of opportunities available in the industry as a whole from
virtual learning providers to content providers and tutorials has lead to
an overall increase in competition levels.

Everonn's innovative application of technology, along with our presence in
diverse educational markets such as content, tutorials and virtual learning
has helped us overcome some of this competition and maintaining ourselves
as the second largest participant in the field.

By providing custom made solutions, both in the organized and the
unorganized segments, over the unique VSAT platform, we have been able to
differentiate our products from those of competitors' and stand out among
other companies in the field, thus reducing the threat from competition.

Medium to Low Bargaining Power of Customers

Due to government monopoly in the organized segment, this industry has
always seen a high degree of dependence on established systems of
distribution. However, with the introduction of technologically driven
solutions such as virtual classrooms and others, this situation is slowly
changing. As a result, educational institutions are turning to private
companies that can provide them value-added products to help increase their
customer base.

In the unorganized segment, the existence of a number of participants
providing highly differentiated products has increased customer bargaining
power.

Everonn has successfully-overcome some of the obstacles created due to
providing new channels of distribution through our VSAT plafform, while at
the same time providing customers with quality learning solutions. Finally,
our competitive pricing and the ability to reach even the remotest areas of
the country have enabled us to be one of the leading education providers in
India.

High Bargaining Power of Suppliers

Due to the restrictions as well as the low penetration levels in the
organized segment, the bargaining level of the limited number of suppliers
in the segment has increased in recent years.

We have, however, successfully overcome any supply related obstacles
through our dedicated supplier channels and technology application
capabilities.

Company Overview

Strengths

In the Indian Private Educational space, Everonn is a name synonymous for a
wide. range of high quality educational services and ranks as the second
largest participant in the Indian education industry. Content, Services and
Technology have been the 3 critical success levers in Everonn's journey and
they continue to be our core strengths.

Content

Content is always King... Knowledge Resource Development & Research (KRDR),
Everonn's content division proves this beyond qualm. Unique and fresh
content, completely mapped to curriculum, is constantly churned to provide
for the insatiable appetite of its large student base. The instructional
material generated is based on current research, best practices and proven
educational techniques.

Over 100 in house content developers, 200 independent expert contributors
and a creamy layer of educationalists form this team.

Services

ICT division has always been the firepower to Everonn's thrust in the
educational segment. Having pioneered the BOOT model, Everonn's reputation
as one of the champion campaigner in this business division is an
indisputable fact.

Cent per cent adherence to time lines, optimal Smpkementat%m and
maintenance cycles have been the mark of Everonn's services and they
continue to be so. Our 4442 points of presence testify Everonn's proven
track record in this segment. And as they say, Opinion is discounted, Data
is accounted.

The company has always scored high on the satisfaction levels and we
continue the journey embarked with 12 states in India, over a wide range of
ICT services. These established facets of, trust, faith and compatibility
continue to be our key drivers.

While acknowledging the ICT expertise, the systematic and well formulated
approach for de risking the company's ICT dependence, through the expansion
of our ViTELS business has been a major success. The end result today is a
large base of Everonn stronghold points, to the tune of 557 Schools, 800
Colleges and 35 Retail centers.

While the same accounts for sustainable revenue channels, the more
prominent feature of this business division is the captive student base.
This captive student base opens up a world of up selling, cross selling
opportunities and acts as the feeder centers for newer avenues like
Vocational Training and Test Preparation Training. This ever expanding
student base, from the services is one of company's strong points.

In tune with the changing landscape of learning systems and methodologies,
Everonn is also upbeat and ready with its web offerings -
www.classontheweb.com and www.schooljobs.in.

As an education company, Everonn's inherent ability to attune itself to
emerging trends in educational panorama places us, right among the top
players in the segment.

Technology

At times its not technology, rather the innovative and judicious use of it,
that makes a world of difference. This 'has been the story with Everonn's
use of VSAT technology, that changed millions of student lives.

Everonn was one of the pioneers in using VSAT [Very Small Aperture
Terminal] technology to deliver classes to students in even the remotest
locations. The digitally enabled Lecture platform' allows instructors to
use animation, video, audio and other presentation tools to enhance the
learning process. A powerful interface, enables students to engage in
participatory sessions with peers and instructors across the country.

Everonn's studios are fully equipped with the state-of-the-art
infrastructure which enable instructors to effectively communicate.

Everonn today, has the expertise to design wired and wireless knowledge
and training delivery platform' and has Government departments, corporate
and educational institutions as esteemed clients.

Everonn's Technology Squad is constantly studying and improving the
technology used at Everonn to enhance the teaching and learning experience.

Opportunities

Everonn has been in the field of education for the past 22 years and from
the face of available facts, the company is expecting more greener days to
come. The vast under penetrated private education system presents a
plethora of opportunities for established players like Everonn.

The share of private institutions in Indian educational system is 7%
primary, 21% upper primary and 32% secondary respectively. As per World
Bank, the annual private market size for the K-12 segment is estimated at
INR 22,000 -26,000 crores.

The graph below indicates the sharp demand for secondary education in the
coming decade

Actual and Projected Demand for

Secondary Education

From below -Lower Secondary, Senior Secondary and Total

source - Presentation by Sam Carlson educational consultant, World Bank

These are some of the strong indicators which places the company's k-12 and
allied services on the higher pedestal. The number of private schools in
India amount to 3,85,000.

348 Universities, 25460, colleges and 10.5 Million students in the higher
learning segment set the perfect tone for company's VITELS services and the
roadmap ahead.

Apart from the potential opportunities in the market, the Company is also
attuning itself to a wide range of custom made post school businesses in
its ICT and iSchools business streams. With its entire captive student base
as target audience, the Company has an enhanced focus on this emerging
business. Having equipped with the right set of competence and capability,
the company finds itself in slot to respond to this business channel.

It is estimated that in India, only 7 % of school students move up the
value chain and educational levels to complete their graduations. With an
enormously large base of school drop outs, who pursue various employ
ability options, the prospects of emerging streams like Vocational Training
looks bright and shining.

The Company is also making the right moves towards capturing the surging
coaching market in India. The huge investments made into Toppers Tutorial
testify the company's focus and plan for this segment.

Division or Product wise Performance

Instructional and Communication Technology [ICT]

The Company provides services to various state governments in India for
enabling Computer Education in Govt Schools, Computer, Literacy,Computer
Aided Learning and Teachers Training Projects. During the year, the Company
has signed MoU's with Tripura State Government, Himachal Pradesh State
Government, Nagpur Municipal Corporation and Gujarat Knowledge Corporation
[GKC]. During the fiscal,the Company's ICT division expanded its footprint
to 3 more states Himachal Pradesh, Maharashtra and Tripura.

The existing project associations with 12 state governments continued to
provide the steady stream of revenue.

With a student base of more than 8 Lakhs in the ICT schools, the Company
has an enhanced focus on the post school business in its points of
presence. Equipped with the right set of competence and capability, the
Company expects to see greener days in this hugely potential post school
business.

Virtual and Technology Enabled Learning Solutions [Vitels]

The company provides Education and Training solutions through satellite
based Very Small Aperture Terminal [VSAT] technology. FY 2008-09 witnessed
the ramp up of company's Vitels segment to a pan India level. From Jammu &
Kashmir to Kerala, the company has set up technology enabled virtual
classrooms, in 557 Schools ,800 Colleges and 35 retail centers. It has 7
studios in Chennai through which the teachers deliver lecturers to students
sitting in remote classrooms across schools and colleges.

Everonn's strength in the Vitel's division is also accentuated by the
strong alliance ecosystem. The Company's Vitels alliance partners include
Microsoft, Oracle, Indian Institute of Banking & Finance [IIBF], Prometric,
ETS, KGW Appin knowledge solutions pvt Limited among others.

Vitels - iSchool

The iSchool model features a blended format of curriculum delivery to
schools. The model blends server based content, loaded in each school
server, and the live sessions through the VSAT Platform, from Everonn
studios.

The concept of iSchool empowers the teachers to help students grasp complex
concepts with absolute ease and thereby imparting a new experience of
learning, over and above the conventional teaching mode.

iSchool, has been further strengthened by the additions of Primary content
[class 4,class 5], a host of high quality animations with voice-over
scripting ,customised Question Paper generation tool etc. over and above
its exhaustive curriculum mapped content.

Currently, we have 557 schools across India under the iSchool umbrella.

The model has been receiving exciting market acceptance as evident by the
ramp up in the number of schools and the steady rise in the number of
classrooms in each school. Leveraging its existing infrastructure and
student base, the company also plans to expand-its product portfolio with
the introduction of post school courses in these schools, thereby opening
up additional revenue channels.

Vitels - Colleges

The colleges business of Everonn stems from the philosophy of 'industry
ready graduates'. The company attempts to bridge the widening gap between
academia and industry requirements by catering to the student base at
college level and making them industry ready.

Currently, Everonn learning centers are present in 800 Colleges across
India.

Everonn has continued its proactive step in acquiring group institutions in
this division of business as well, wherein the company offers its services
to the Universities apart from the standalone colleges.

The company has received Letter of Intents [LOI] from West Bengal
University of Technology [WBUT] and MS Ramaiah Group of Institutions.

Vitels - Retail

35 Retail, centers managed by Everonn across India, is a story of Everonn's
continued pursuit towards equipping and supplementing the employability
skills of students and working professionals. Powerd by an ecosystem of
global educational pioneers, Everonn conducts a wide array of testing and
training services.

It was the sheer collaborative spirit, trust and confidence that prompted
Prometric to transfer 6 of its Testing, centers to be managed by Everonn.

Retail division have leveraged the strong ecosystem of alliance partners to
cater to a wider student spectrum. Some of the key milestones achieved in
our journey towards building a collaborative ecosystem of global vendors,
in FY 08-09:

1. Certified Learning Solutions Partner for Microsoft

2. Authorised Workforce Development Partner [WDP] for Oracle

3. Partner for APTC, GRE, USMLE and PMI tests for Prometric

4. Exclusive single point IT certification test vendor for TCS

Vitels - Web Products

Everonn's classontheweb.com [COTW] has come a long way from its ABAN days.
The portal has witnessed a 680 pc growth in traffic, complemented by the
School jobs services. The relentless content review, innovative marketing

approaches and enriched databases have changed the face of this web
offering.

Interactive features like student communities, blogs, discussion forums,
Video lessons of Theory and Practical sessions are just an indicator of the
metamorphosis undergone by the portal.

Toppers Tutorials Pvt. Ltd

Everonn has made significant investments into its Test Preparation Training
subsidiary. The subsidiary currently caters to IIT and Engineering
aspirants.

The Programmes are delivered through 3 models Retail Centers,
Correspondence Programs and Schools Programme

Everonn Educational Resources Solutions Limited [EduRes]

Everonn, through its key business segments, has built up a large customer
base of schools and colleges nationally and now sees an opportunity to
capitalize on and further strengthen its relationships by entering
educational supplies business.

Edures has defined its business as being a solutions provider and
technology advisor to educational institutions. Edures will do this by
identifying, developing and offering a range of innovative and value added
educational products to institutions

The subsidiary targets two key segments

a. Private schools and colleges which procure supplies either as part of
their infrastructure or for resale to students

b. The student directly - both inside and outside the school/college

Outlook

Being a largely under-penetrated field, the education industry in India
holds enormous opportunities for growth. While the entry barriers are
likely to stay high for new companies in the near future, those that have
already established themselves are likely to see tremendous growth. This is
mainly due to the growing awareness of the need for quality education as
well as the increasing population of students in the country, which are
likely to lead to companies in the industry adopting operation models that
can enable them to overcome both rigid regulations as well as low
scalability.

In terms of technology, the industry is likely to see more focused
technological developments aimed at providing easier and more effective
education to more parts of the country.

Risks and Concerns

1. The Company's performance depends largely on the government policies on
education and allocation of budgets towards education. Any adverse change
in the government policies towards education and reduction in the
allocation of government budget will materially affect the performance of
the Company.

2. Any adverse change in the tax laws of the Country that increases the tax
liability, particularly income tax and service tax will have serious impact
on the profitability of the Company.

3. Any increase in the taxes, duties, levies etc. on computer hardware will
affect the business of the Company.

4. The payment system with the government is exposed to delays due to
bureaucratic process & systemic procedures in making payments. The delay in
receiving payment from the Government will impact our working capital
requirements. The Company has taken measures to mitigate the risk by
including the additional cost which may be incurred due to payment delays,
into the price of the product/service offered by the Company. Further; the
Company has developed an efficient payment follow-up process to minimize
the time taken to receive the payments from the Government.

5. The Content developed by the Company is exposed to the risks of Piracy &
infringement of copyright which may result in loss of revenue. The Company
oversees the usage of the product by the client during the contract period,
there by minimizing the piracy risk. The copyright law, license agreement,
confidentiality agreements with employees and contractual confidentiality
requirements imposed on our customers protects our copyrights on the
content developed by us.

6. The Company is largely dependent on number of key personnel and one of
the related challenges is to attract talented people to work with the
Company & also retaining the pool of this talent. The Company is focused on
ensuring increasing levels of .employee's satisfactions and has implemented
employee friendly policies. Further the Company has set up an exclusive
trust for the welfare of the Employees namely Everonn Employees Welfare
Trust. The objective is to provide general welfare and general well being
including operation of various schemes to reward, enhance and reorganize
the talents of the Employees. The Company also plans to adopt an ESOP plan
as a step towards retention of its Senior & Key Management team members.

Internal Control Systems and their adequacy:

The Company recognizes the importance of internal Controls and has suitable
internal control systems and processes in place for the smooth conduct of
the business. The Company has proper and adequate system of internal
controls that all assets are safeguarded and protected against loss, from
unauthorized use or protected against loss from unauthorized use or
disposition, and all the transactions are authorized, recorded and reported
correctly. The Audit Committee of the Company deals with the significant
control issue rose by the internal and external auditors and instructs
further areas to be covered.

The Company has implemented Enterprise Resource Planning platform across
all business processes which will further strengthen the internal control
system and ensure that all transaction controls are reviewed and risk
mitigated. The Control mechanism is exercised through approved documented
policies, authorization guidelines commensurate with level of
responsibility and standard operating procedures.

Human Resources Development

The Company's Human Resource Department which is otherwise called as Talent
Management Unit (TMU) focus over the last 12 months has been to develop and
maintain a strong alignment with the business continuously supporting them
in their endeavor to confront, overcome and surmount challenges as they
continue to happen.

The Change Element

The human resources discipline is closer than ever before to being the
perfect supplement to corporate requirements partly as a result of a
sustained interaction that engages TMU, the business and its leadership in
building an overall people strategy. In 2008-09, we continued to foster the
finest standards of professionalism and employee relations whilst
incessantly continuing to instill values in our new employees and
facilitating them in their engagement.

Talent acquisition and retention

Recruiting high-quality talent and strengthening progression planning
continued in 2008-09. During the year, TMU was successful in attracting a
considerable number of top-notch professionals thereby positioning the
organization on a platform from which it could take its leap to next level.

Employee Engagement- During the year, several programs were initiated that
focused on the important aspects of productive employee engagement: 1. The
psychological make-up 2. Favorable conditions to engage and 3. Consistent
and sustained interaction - covering all senior positions and talents. The
TMU is focused on supporting Company's business priorities, with employee
engagement remaining high on the agenda. As at the end of March 2009, the
total number of employees stood at 3963.

FINANCIAL PERFORMANCE

OVERVIEW

The Company during the year under review, the total income aggregated
Rs.12,528.05 Lakhs in fiscal 2009 as compared to Rs.9,277.45 lakhs
registering a growth of 35%. In fiscal 2009 the company's profit before
taxes and exceptional items aggregated Rs.3,670.00 Lakhs as compared to
Rs.2,174.13 lakhs in the previous fiscal 2008 - a growth of 69%.

In fiscal 2009, the Company's consolidated total income aggregated
Rs.14,858.75 Lakhs as compared to Rs.9,318.44 lakhs in fiscal 2008,
recording a growth of 59.46%. The Company's consolidated profit before
taxes aggregated Rs.3407.68 in fiscal 2009 as compared to Rs.2,17632 in
fiscal 2008 a growth of 56.58%.

RESULTS OF OPERATION

The following table gives an overview of the Operating financial results of
the company.

Rs in Lakhs
PARTICULARS 31-Mar-09 31-Mar-08

TOTAL INCOME 12,528.05 9,277.45
TOTAL EXPENDITURE 8,858.04 7,103.32
PROFIT BEFORE TAX 3,670.01 2,174.13
TAX 1,285.78 795.56
PROFIT AFTER TAX 2,384.23 1,378.57
EARNINGS PER SHARE
(Basic) 16.06 10.82

INCOME

The Company's revenues consist mainly of income from implementation of
computer education in Government Schools and from implementation of
technology enabled learning solutions in various private schools and
colleges. The summary / break up of total Income for the fiscal 2009 & 2008
is given below:

REVENUE Rs. Lakhs
FY2009 FY2008

ICT 4,712.39 5,368.95
VITELS 7,425.55 3,754.26
OTHER INCOME 390.11 154.24
TOTAL 12,528.05 9,277.45

The total income of the Company has registered a growth of 35% in fiscal
2009 as compared to fiscal 2008. The increase in the total income of the
company is on account of increase in the number of schools and. colleges in
VITELS division as compared to the last fiscal. The above table shows
upward growth trend (increase by 96%) with respect to Vitels division for
the Fiscal 2009 as compared to Fiscal 2008. The Other Income during the
Fiscal 2009 has gone up mainly due to increase in the dividend income
earned on surplus funds invested in Mutual Fund.

The summary of total income as per the Consolidated Accounts of the Company
is given below:

Rs in Lakhs
PARTICULARS 31-Mar-09 31-Mar-08

TOTAL INCOME 14,858.75 9,318.43
TOTAL EXPENDITURE 11,451.09 7,142.11
PROFIT BEFORE TAX 3,407.66 2,176.32
TAX 1,199.35 796.28
PROFIT AFTER TAX 2,208.31 1,380.04
EARNINGS PER SHARE
(Basic) 14.87 10.84

EXPENDITURE

The summary of the consolidated expenditure is given below:

Rs. in Lakhs
EXPENDITURE 31-Mar-09 31-Mar-08

Manpower 2,541.66 1,188.42
Education and
Training expenses 2,915.45 3,973.56
Administration and
Other expenses 1,350.31 636.55
Interest and Finance
charges 518.39 332.04
Depreciation &
Amortisation 1,532.44 977.25
Total Expenditure 8,858.04 7,103.32

Manpower cost consists of compensation of all employees that includes
salaries which have fixed and variable components, contribution to
provident fund and gratuity fund. The total employee cost for fiscal 2009
was Rs. 2541.66 lakhs, an increase of 113% over the total employee cost of
Rs.1188.42 lakhs for fiscal 2008. Employee cost as a percentage of total
income was 20.28% in fiscal 2009 and 12.80% in fiscal 2008.

The education and training expenses for fiscal 2009 was Rs.2915.45 lakhs,
decreased by 27% over the expenses of Rs. 3973.56 lakhs for fiscal 2008.
The decrease was attributable to the hardware purchase made during the
fiscal 2008.

The administration and other expenses for the fiscal 2009 have increased
considerably by 112% due to increased points of presence to various states
in the country. The administration and other expenses as a percentage of
total income was 10.77% in fiscal 2009 and 6.85% in fiscal 2008.

Interest and finance charges have increased from Rs.332.04 lakhs in fiscal
2008 to Rs.518.18 lakhs in fiscal 2009 on account of OD facilities availed
from banks. Interest and finance charges as a percentage of total income
were 4.13% in fiscal 2009 and 3.57% in fiscal 2008.

Depreciation cost has increased from Rs.977.25 lakhs in fiscal 2008 to
Rs.1532.44 lakhs fiscal 2009 on account of increase in the gross addition
to the fixed assets.

FINANCIAL POSITION

SHARE CAPITAL

The Authorised Capital of the Company was increased from Rs.16 Crores to
Rs.20 Crores during the fiscal 2009. The Company during the year has made
preferential issue of 1269219 equity shares of Rs.10/- each for cash at a
premium of Rs.710.04/- per equity share aggregating Rs.91.39 Crores. The
paid up capital has increased from Rs.13.85 Crores to Rs.15.12 Crores as on
March 31, 2009.

During the year, the Company has allotted 1062634 warrants of Rs.10/- each
for cash at a premium of Rs.710.04/- per warrant to promoters/promoter
group as well as non promoters. An amount of Rs.7.65 Crores constituting
10% of the total amount payable was received from them.

RESERVES AND SURPLUS

The share premium account during the fiscal 2009 has gone up to Rs.143.76
Crores as against Rs.56.37 Crores during the previous fiscal 2008. The
details of share premium account are given below. The following table gives
the summary of securities premium account.

Securities Premium Account:

Rs in Lakhs
31-Mar-09 31-Mar-08

Securities Premium
Account 5,637.22 1,557.24
Add: Received in issue
of Equity Shares 9,011.96 4,644.85

14,649.18 6,202.09
Less: Utilised for issue
of Bonus Shares - -
Less: Share issue
expenes adjusted 273.15 564.87
Total 14,376.03 5,637.22

SECURED AND UNSECURED LOANS

During the fiscal 2009, the secured and unsecured Loan has gone up by
Rs.2.79 Crores as the company has availed additional OD facility with State
Bank of India to the tune of Rs.10.00 Crores.

FIXED ASSETS

Total addition to Gross block for the fiscal 2009 is Rs.63.70 Crores
(excluding capital work in progress). The main additions to assets were
made as detailed below:

Plant & Machinery = Rs.51.06 Crores
Electrical Fittings = Rs.1.29 Crores
Furniture & Fixtures = Rs.9.50 Crores
Vehicles. = Rs.0.42 Crores
Knowledge Resource/content
& Software = Rs.1.41 Crores

The increase in gross block of fixed assets is mainly due to increase in
the number of schools and colleges and also the increase in points of
presence during the year.

Investments

The details of investments for the fiscal 2009 are given below.

Investments Rs in Lakhs
31-Mar-09 31-Mar-08

Subsidiary Investments

Toppers Tutorials Pvt. Ltd. 50.00 50.00

Everonn Educational
Resources Solutions Ltd. 10.00 10.00

Everonn Infrastructure Ltd. 5.00 -

Rs in Lakhs
31-Mar-09 31-Mar-08

AEG Skill Update
Private Limited 0.51 -

Mutual Funds

Investment in Mutual Funds 2,345.82 868.74

Equity Shares
Investment in IOB Shares 0.12 0.12
Total Investments 2,411.45 928.86

The unutilized portion of the funds raised through IPO and preferential
issue has been invested in liquid mutual funds which resulted in increase
in investments during the fiscal 2009. Apart from the above, the company
has invested in two subsidiaries during the fiscal 2009.

Net Current Assets / Changes in Working Capital

Given below are the net Current assets details for the fiscal 2009 & 2008:

NET CURRENT ASSETS Rs in Lakhs
31-Mar-09 31-Mar-08

CURRENT ASSETS,
LOANS & ADVANCES

Sundry debtors 6214.98 4,239.61
Cash and bank balances 4015.91 3,845.98
Loans and advances 7621.41 1,328.56
17,852.30 9,414.15
LESS: CURRENT
LIABILITIES &
PROVISIONS 4,116.05 1,867.88
NET CURRENT ASSETS 13,736.25 7,546.28

Sundry Debtors balance has gone up by Rs.19.75 Crores during the fiscal
2009 as compared to previous fiscal 2008. This is mainly due to receivables
from various state Governments for ICT Projects coupled with increase in
revenue from Vitels division. The increase in Loans & Advances to the tune
of Rs.62.92 Crores as compared to previous fiscal 2008 is mainly due to
increase in advance payments made for project implementation.