Tushar's Stock Tips: November 2011

EMPOWERING THE CHANGE

Operating in an industry that has the power to change the very lives of people, EdServis poised as a noticeably upcoming player in this green field, technology driven learning.It takes in the vast industry of education in India and firmly places its focus onempowering the 'Real India' with its carefully designed products and learning aids.

RECOGNIZING INDIA'S RICH HUMAN RESOURCES

India is a nation of young people - out of population of above 1.1 billion, 672 millionpeople are in the age group 15 to 59 years, which is usually treated as the working agepopulation. It is predicted that India will see a sharp decline in the dependency ratioover the next 3 0 years, which will constitute a major demographic dividend for India. Inthe year 2001,11% of population of the country was in age group of 18-24 years which isexpected to rise to 12% by the end of XI Five Year Plan. This young population should beconsidered as an invaluable asset, which if equipped with knowledge and skills, cancontribute effectively to the development of the national as well as the global economy.EdServ's vision is to realize India's human resource potential to its fullest in theeducation sector, with equity and inclusion.

LEVERAGING THE ADVANTAGE OF DEMOGRAPHY

We're talking about the advantage of India's demographic dividend. This refers toIndia's favorable demographic profile, where in just 15 years, the country will have oneof the youngest populations in the world, a bulk of it in the working age group (20-59years). India will be adding about 150 lakh people to its workforce age group of (20-59years) providing for higher incomes, better standards of living and increased quality oflife. Research has shown that the reasons why students drop out of Higher Secondaryschools can be split into two. The first is economic, where the student has to either goto work or simply stop education itself as they cannot afford it.

The second relates to the low quality of their Primary & Secondary education, whichhave not prepared the him/her for higher studies. Considering the above, EdServ cannot buttake a holistic view of education in India, as it plans for the long haul in so far as theopportunities available for the company and, of course, the challenges facing it.

PRIMARYEDUCATIONFORALL

Elementary education is recognized as the foundation of the development of everycitizen as also of the nation as a whole. It is in this spirit that universalisation ofelementary education has been enshrined in the constitution and sustained efforts havebeen made to achieve this target duringthe last six decades. There is no doubt thatplanned interventions in this direction have resulted in very substantial progress inimproving the access, participation and retention of children. Special schemes andprograms have been initiated to reduce the regional, spatial, social and genderdisparities in education. In the year 2009-10 the movement for education for all receiveda major fillip through the enactment of the Right of Children to Free and CompulsoryEducation Act 2009.

SARVASHIKSHAABHIYAN (SSA)

The Government of India's unstinted efforts in seeking the cooperation and partnershipof the public & private sector in fulfilling the target of Universal ElementaryEducation has witnessed an enormous increase in number of institutions and enrollment.This is where EdServ can enter the arena and help take the nation forward by strengtheningthe hands of the government- thanks to the issue of universal access to primary educationbeing relentlessly and successfully addressed through the Sarva Shiksha Abhiyan program.The gross enrollment ratio (GER) has increased to 114.61 at the primary level and to 77.50percent at upper primary level in 2 007-08. The Gender Parity Index improved to 0.98 atprimary level and to 0.92 at upper primary level in 2007-08. The dropout rate hasconsiderably come down by to 25.55% in 2007-08 at primary level. The pupil teacher ratiois 46:1 at primary and 35:1 at upper primary level. With respect to enrolment of Childrenwith Special Needs, 29.57 lakh children were identified and 24.77 lakh children wereenrolled in schools by 2009-lO.number of institutions

SECONDARYEDUCATIONFORALL

Secondary education is an important stage of the school education system, being a linkbetween the elementary education and the higher education as well as a stepping stone formany, to the world of work. The major challenge before the Secondary Education sector isto cope with the demands of the continually expanding universe of knowledge and thechanging demands of industry, business and service sector for higher quality of manpower.It is in this context that universalisation of secondary education has been made animportant goal so as to achieve universal access by 2017 and universal retention by 2020.It's this scenario that offers tremendous scope for EdServ in ensuring that these effortson the education front bear timely fruit.

RASHTRIYA MADHYAMIK SHIKSHA ABHIYAN(RMSA)

During the XI Five Year Plan secondary education has been accorded relatively highpriority in the development agenda of the country keeping in view the demographic profileand the need of a knowledge society and economy. In order to give concrete goal-orientedshape to the efforts, Government of India launched a comprehensive centrally sponsorscheme called Rashtriya Madhyamik Shiksha Abhiyan (RMSA), in March 2009, with theobjective to make good quality secondary education available, accessible and affordable toall young persons, irrespective of gender, socioeconomic condition, disability,geographical and other barriers. The present aim is to have a secondary school ofacceptable norms and standards within 5 km of every habitation in the country.

HIGHEREDUCATION FOR ALL

Transition to higher education for an individual implies higher personal returns overlife time and for a nation, an addition to human and social capital with potential benefitto society. Therefore, higher rate of transition from secondary to higher education is anindex of progress and prosperity to the nation. The global statistics on education revealthat different nations are at different stages of development in terms of access to highereducation. While the world average of the Gross Enrolment Ratio (GER) in higher educationis around 26.7%, the average of the developed countries is approximately 57.7% and that ofthe developing countries is only 13%. India's Gross Enrolment Ratio in higher education,which is 12.4% needs to be raised to a significant level in a time bound manner to 15percent by the end of XI Five Year Plan and to 21 percent by the end of XII Five YearPlan. EdServ believes that it has got an important role to play at this crucial juncturein not only helping in the transition to higher education but also in keeping the drop outrate in check. Ways will also have to be found to provide increased funding for highereducation, including innovative models of public-private partnership to seek private, notfor profit participation in higher education, without compromising on equity andexcellence.

The process of expansion in higher education has to be inclusive and not a selectiveone. All categories of society, rich or poor, privileged or marginalised, must find theirway into the portals of higher learning based on their talent. In order to reap benefitsof demographic dividend of India, access, equity and quality have been major concerns ofthe Government in the higher education sector. Some of the important policy initiatives inhigher education are establishment of new institutions, programs for general developmentof universities and colleges, special grants for the construction of hostels for women;scholarships to students, scheme to provide interest subsidy on educational loans forprofessional courses to ensure that nobody is denied professional education because he orshe is poor, interventions to attract and retain talent in the teaching profession inhigher and technical education; emphasis has been laid on expansion with equity, use ofinformation & communication technology, and promotion of quality education.

HIGHER EDUCATION PROGRESS OVERVIEW

Government of India has taken major initiatives in academic and institutional reformsin higher education sector during the year 2009-10 which marks a paradigm shift in thedevelopment of higher education. A National Commission/Council for Higher Education &Research is proposed to be established as an apex body for determination, coordination andmaintenance of standards and promotion of higher education and research. All this augurswell for EdServ which is ensconced at a vantage point when it comes to development &delivery of learning & job linked modules. Indeed, the sheer size and space of theIndian education market that is simply waiting to be tapped is mind boggling. At presentthere are 504 universities and university level institutions, 243 state universities, 53state private universities,40 central universities, 130 institutions deemed to beuniversities, 33 institutions of national importance established under Acts of Parliament,5 Institutions established under various State Legislation. There are 25,951 collegesincluding approximately 2565 women's colleges. At the beginning of academic year 2009-10,the total number of students enrolled in the universities and colleges has been reportedat 136.42 lakhs -16.69 lakhs (12.24%] in university departments and 119.73 lakhs (87.76%)in affiliated colleges. The enrolment of woman students was 65.49 lakhs constituting41.40% of the total enrolment. The number of doctoral degrees awarded in 2007-08 was13,237. The regular faculty strength in universities was 0.90 lakhs and 4.98 lakhs incolleges, totaling 5.89 lakhs at the beginning of 2009-10. There are 66 Academic StaffColleges engaged in faculty training.

PROFESSIONAL EDUCATION IN INDIA

With more than 500 universities and deemed universities, over 15,000 colleges andhundreds of national and regional research institutes and with the Indian higher educationand research sector being the third largest in the world in terms of the number ofstudents it caters to, higher education in India is yet to attract the recognition itshould rightfully deserve. This is more so at a time when India is aiming to be animportant player in the emerging knowledge economy.

It's true that there is no company or institute in the world that has not benefited byIndian graduates, post-graduates or Ph.D.s- be it NASA, IBM, Microsoft, Apple, Intel,Bell, Sun, Harvard, MIT, Caltech, Cambridge or Oxford, and not all those students areproducts of our IlTs, IlMs, HSc/TlFR or central universities, which cater to barely oneper cent of the Indian student population. This goes to suggest that Indian highereducational institutions have not been able to achieve the same status for themselves astheir students seem to achieve elsewhere with their education from here these veryinstitutions. This is exactly where Edserv believes it should step in to remedy thesituation by helping the students slake their thirst for knowledge right here in India andthus stanch the brain drain that denies these campuses of its brilliant research minds.

EMPLOYABILITY FOR EMPLOYMENT

Productive employment generation with decent work, conditions is an important concernnot only for the national employment policy but also for the national agenda of inclusivegrowth. Although the overall economic growth achieved by the Indian economy, particularlyduring the current decade, has been impressive, employment growth has not kept pace. Thishas significantly limited the trickle-down effect and widespread distribution of thebenefits of the high economic growth. At a time, when India is aiming to achievedouble-digit economic growth, commensurate employment growth assumes crucial importancefrom the point of view of sustaining overall high growth in the medium to long term,distributing the benefits of growth, and impacting the rate of poverty reduction in thecountry.

Currently, India is passing through an unprecedented phase of demographic changes. Theon going demographic changes are likely to contribute to an ever increasing size of labourforce in the country. The census projection report shows that the proportion of populationin the working age group (15-59 years) is likely to increase from approximately 58% in2001 to more than 64% by 2021. In absolute numbers, there will be approximately 63.5million new entrants to the working age group of 15-59 years between 2011 and 2016. So theneed of the hour is twofold, more jobs and more skilled applicants per job.

It is important to note that the bulk of this increase in the population is likely totake place in relatively younger age group of 2 0-3 5 years. Such a trend would make Indiaas one of the youngest nations in the world. In 2020, the average Indian will be only 29years old, compared to 37 in China and the US, 45 in West Europe and 48 in Japan. Thistrend is seen significant on the grounds that what matters is not the size of thepopulation, but its age structure. A population bulge in the working age groups, howeverlarge the total population, is seen as an important advantage characterized as ademographic dividend. Hence, this report, inter alia, aims to focus on the young agegroups and suggest ways and means to economic growth of the country.

Accordingly, skill development of youth has immense implications for labour market ingeneral and inclusive growth in particular. In India, the recent demographic dividend canbest be harnessed by significantly enhancing levels of skills among workers. It is withthis perspective that India has set an overall target of creating 500 million skilledworkers by 2022 and this is one of the key areas where Edserv intents to make asignificant contribution.

VOCALIZING VOCATIONAL TRAINING

India's education system has undergone significant capacity expansion over the lastdecade. Most of it has been in the higher education and K12 space. The action onvocational training, which is a critical industry demand, is a recent development. India'svocational training structure is informal and apprenticeship driven. This is provingwoefully inadequate in terms of quantity as well as quality. India needs to train 70million people in vocational skills over the next five years. Besides, there is need toretrain another 360 million workers. The Government of India is targeting to train 500million people by 2022 and is encouraging participation of entrepreneurs and privateorganizations in the space.

Indeed, the demand spans across various sectors — construction, mining,agriculture, power, automotive, retail, hospitality, logistics, healthcare and so on. Eachsector requires manpower with varied skills representing an entire spectrum of trainingopportunity. A conservative estimate puts this opportunity at a whopping Rs. 3 50,000 croreover the next 10 years. EdServ intends to be in the thick of the action when it comes bybeing involved in encouraging institutes for developing human resources to reduce themismatch between demand and supply of manpower in the various sectors. Also, it would makeit its mission to reduce unemployment among youth by equipping them for suitableindustrial, self & wage employment programs through well designed formal & nonformal vocational education & training modules at. It will also establish links withindustry, Institutes & R & D organizations for its students so as to reap mutualbenefits.

MOBILE EDUCATION IN INDIA

EdServ believes mobile phones can play a significant role in imparting education inIndia. The importance of this medium is slowly but stead ily being realized by players inthe telecom industry, who are now developing the necessary applications to work towardsmobile education (m-education or m-learning). Since the mobile learning space is stillevolving, there is no industry calibration on the size of the market, as it is stillevolving. However, an estimate on mobile value added service in India by IAMA1/IMRB putsthe numbers at Rs. 5,780 crore annually in June 2008. The report estimates the VAS industryhas a potential to reach Rs. 16,520 crores soon.

Several telcos have started offering m-education services such as English lessons,dial-in tutorials, school syllabi, question sets, vocabulary general knowledge tutorials,exam tips, exam result alerts and education for the physically challenged. The apps alsoallows user access to content in areas of engineering, management, civil services andmedicine, school syllabi of CBSE and ICSE boards as well as skill development, vocabularyand general knowledge tutorials. There is a definite appeal in game-based learning usingmobile phones also, though this has not been explored in India so far. However, withincreasingly-capable hardware and connectivity available and dropping costs, it's only amatter of time before learning games on mobile become commonplace. Mobile has emerged as aviable medium for basic education, though the learning space is completely new and iswaiting to grow. There is a lot of opportunity but there is a need to find the rightcontent. Touch screen and large screen formats will do wonders, but they need to be madeavailable at cheaper rates. With good network and connectivity edu-content providers cancontribute hugely to keep the lamp of education and literacy burning brightly in India.

Speaking about how mobile learning; can evolve further, Sangeet Chowla, executivevice-president, Comviva, a. Gurgaon based provider of integrated VAS solutions fortelecom, i operators worldwide says, "The learning experience on mobile phones canchange dramatically if interactivity comes in. With a higher bandwidth, m-learning has theopportunity to get much more interactive. Use of video clips to explain a procedure suchas how to change a car tyre, training of employees and vocational stuff will be a bigopportunity area. Companies will make use of mobiles for employee training. Enterpriselearning is a huge opportunity." With such a viable medium available to revolutionizethe delivery of education, while at the same time generate high revenues, EdServ is allset to harness it in a big way. It plans to integrate mobile applications intolampsglow.com to offer them on pay-as-you-use basis into the smart phones by teaming upwith leading mobile phone providers and cellular service providers. This smartapplications on phones will help achieve widespread reach of EdServ's applications toevery user segment's requirements- be it education, entertainment, or job placement on themove.

same time generate high revenues, EdServ is all set to harness it in a big way. Itplans to integrate mobile applications into lampsglow.com to offer them on pay-as-you-usebasis into the smart phones by teaming up with leading mobile phone providers and cellularservice providers. This smart applications on phones will help achieve widespread reach ofEdServ's applications to every user segment's requirements- be it education,entertainment, or job placement on the move.

BUSINESS OUTLOOK & FUTURE PLANS

ADVANTAGE NextGen EDUCATION

Education has evolved through generations. The earlier generations failed to providethe much needed bridge between academics and industry leading to a heavy demand-suppymismatch. The First Generation beingthe Gurukula type of on-the-job-learning with aone-to-one guru-student relationship. It is not scalable anymore. The Second Generationsought excellence in education with a high demand and very low supply chain. This too isno more applicable, due to an excess pool of resources. The Third Generation that tries tobridge the academy-industry divide with a huge demand-supply dynamic is unfortunatelythoroughly mismatched. The Fourth Generation is technology-led, more authentic than everbefore, affordable, promises scalability in quality and numbers and is skill matched, needbased, industry vetted, and assessment driven education that leads to Industry DemandAligned (IDEA) careers for the child.

In this challenging scenario of educating the Next Gen of Leaders, EdServ has a boldand inspiring vision for the twenty first century—one that can be achieved with theparticipation of a truly great student community and an enabling Government. At EdServ, weembrace this challenge with enthusiasm and with our own compelling vision for the futureof education among the youth. We start with the conviction that tomorrow's world will beone in which the stakes are higher than ever before for organizations, and thatperformance matters. However global society evolves, managed organizations —publicand private —will continue to drive the production and delivery of goods andservices. When organizations perform well, people live well. When they perform poorly,people suffer. The responsibility to make the vital difference rests in the hands of thoseorganizations, who^e ambition will be to seek global solutions to educate the greatleaders of the next generation.

REINVENTING EDUCATION

To address the challenges of a changing world, EdServ is reinventing education for anew generation. Its introduction of bold new curricula for the various programs takesadvantage of not only the alacrity & intellectual potential of India's GenNext, butalso it own intimate scale and collaborative nature, and customizes learning to eachindividual student's interests and experience level. It emphasizes more in-depth andexperiential learning —in part made possible through the expansion of small-groupseminars, intensive faculty advising for each student, new opportunities for collaborationwith all of EdServ's other programs & services and a truly global perspective. Westrive to instill in our students a mindset that encompasses the four critical componentsembodied in our academic ethos - entrepreneurship, social impact, global awareness, andleadership.

KG2PG ONLINE

In India, online education has got tremendous scope, though currently it is in itsprimitive stages. A number of educational institutes have however, adopted the process inmatters of online admission and online result announcement. But the method of actuallyteaching online is relatively slow in India, not withstanding the fact that someinstitutes are already conducting their exams online. Reputed national institutes like IITMumbai, HM-Kozikode & 1GN0U are providing some courses through online.

With the admissions in regular university courses becoming highly competititve due tolimited number of seats available in specialized professional courses, the country isseeing an increase in students enrolling for on line courses. EdServ is fully equipped toleverage this important shift in the way education is to be delivered in the future- rightfrom kindergarten to post graduation.

ACADEMICS - LEARNING UNTIED

With 3G spectrum, low cost laptops & smart phones becoming part of our every daylife, learning is truly untied. Test preparations, live tuitions and board preparationsusing online rendering have become more authentic, reachable than ever before. Web basedlearning anywhere, anytime has also become more affordable. The student of tomorrow hasthe world in his pocket. Online education is the way to go- that's the days' headline!With affordability and reach, the NextGen is sure to get onto online learning anywhere,anytime as the right education support. The paperless future is here already, to savenature. It will be classroom-less to save commuting time and effortless, because it is atyour convenience. Today, with easier access to the Internet and faster speeds, learningonline is a breeze.

While, in India, it is still imperative that a student goes to school/college andattend classes regularly, it is the additional education, preparation for professionalcourses and knowledge gathering that takes up time if the student has to go physically tosuch institutions. Online education, coaching and training classes have mushroomed allover the country providing every kind of aid for a student to prepare for a career of hischoice. EdServ, with its online educational web portals like lampsglow, 2tion.com, EdCademy, SmartLearn, EdCampus, Sparkling Minds& EdCenter, we are comprehensively equipped to take advantage of the changing trends.

SKILL DEVELOPMENT TRAINING

In spite of the fact that India is a fast developing economy, difficulties have led theGovernment to conclude that far more needs to be done to engender more employmentopportunities for the majority of Indians, to enable them to participate in the benefitsof growth and to contribute to that growth. To do this they must have education andtraining that equips them for the labor market. One of the sources of the skilledworkforce is the vocational education and training system. However, the governmentrealizes that the system is not being able to appropriately respond to the needs of thelabor market. A key issue, then, is what reforms are needed to improve the effectivenessof the system. On the one hand India faces the future with its changing realities, on theother hand it must deal with the nature of its established traditions and structures.

Changing realities - globalization, competitiveness and the knowledge economy India'stransition to a knowledge-based economy requires a new generation of educated and skilledpeople. Its competitive edge will be determined by its people's ability to create, share,and use knowledge effectively A knowledge economy requires India to developworkers-knowledge workers and knowledge technologists - who are flexible and analyticaland who can be the driving force for innovation and growth. To achieve this India needs aflexible education system: basic education to provide the foundation for learning;secondary and higher education to develop core capabilities and core technical skills; andfurther means of achieving lifelong learning. The education system must be attuned to thenew global environment by promoting creativity and improving the quality of education andtraining at all levels. Countries that have had the most rapid increases in educationalattainment, as well as sustained economic growth, have upgraded education sequentially. Ina globalized economy, a large pool of skilled workers is indispensable for attractingforeign direct investment. Developing skilled workers enhances the efficiency andflexibility of the labor market; skills bottlenecks are reduced, skilled workers are moreeasily absorbed into the economy and their job mobility is improved. It is crucial toinvest in quality secondary and higher education and in vocational education and training(VET] if India's economy is to develop and remain competitive in world markets.

Established Realities - Demographic Pressures & Financial Constraints

India's ability to deal with these changing realities is constrained as in few otherplaces. While its population growth rate has declined over many years the labor force isstill projected to growby close to 2 percent or some 7 million or more a year over thenext few years. Much of the economy and much of the population are still rooted intraditional activities and structures. Significant elements such as the cultural, socialand political traditions of the country should, of course, be retained and education has aparticular role to play in that. But other aspects should change if people are to move outof poverty. Over half of the labor force is still engaged in rural activities. Althoughthere has been a significant movement away from agriculture this has still left most ofthe labor force, over 90 percent, working in the informal sector, much of it at low levelsof productivity. For this majority group, access to secondary education and VET is crucialand for most of them secondary education and VET will be the last stage of their formalschooling. An effective school to work transition for these young people, made possible byhigher quality secondary and tertiary education and VET, will improve their employmentprospects and lifetime earnings.

This is exactly where a collaboration between EdServ, through its EdCademy MODES andthe Ministry of Labour & Employment will throw up exciting solutions to this problem.The Government's initiative to develop vocational training and skill development namelyMES has been in close consultation with industry, state governments and experts. MES isminimum skills which is sufficient to get an employment in the labour market. Tofacilitate MES, EdServ works with the Ministry of Labour & Employment across thecountry, besides being a VTP for Chennai and Hyderabad regions. Through EdServ's wideningpartner/dealer base, EdCenters can now be accessed in more places than ever. Here anybodywith academic/career mismatch, irrespective of their socio-economic, academic or ob statuscan register with EdCenter and choose online the services and support that they requireseamlessly. According to the Indian President Pratibha Patil in her 2010 address at IGNOU,Delhi, only five percent of the workforce in India has some kind of certification. This isin contrast to over 85 percent in the developed countries. To drive home the pointfurther, the need of the hour may not be the much vaunted FD1 that promises more jobs inIndia but rather trained Indian jobbers. The same refrain is repeated across industries,from automobile to small scale industries to pharma to computer hardware. The irony isapparent. How can the world's second most populated country suffer from lack of labourRs.The answer is simply that the education industry has not reached the right people with theright products. Today EdServ has in place the framework to render this problem a thing ofthe past!

CAREER SOLUTIONS

EdServ offers career solutions from a virtual online placement campus-EdCampus, byextending a value driven consultancy services to its job seeking candidates and employeesearching clients. It endeavors to provide highly promising career avenues by focusing onspecific employment opportunities in high growth areas while at the same time competentstaffing solutions for the employer. With quality being the key element of its commitmentto deliver value for its candidates and customers, today it's blazing its trail by housingmore than two lakh live jobs that cuts across a plethora of verticals including retail,BFS1, telecom, manufacturing, BPO &IT.

KNOWLEDGE SHARING ON THE MOVE

Sharing knowledge is not about giving people something, or getting something from them.That is only valid for information sharing. Sharing knowledge occurs when people aregenuinely interested in helping one another develop new capacities for action. It is aboutcreating learning processes. In fact, the only irreplaceable capital an organizationpossesses is the knowledge and ability of its people. The productivity of that capitaldepends on how effectively people share their competence with those who can use it.

Humthum.com is a first of its kind knowledge sharing product developed for the Indianmarket by EdServ in association with Samsung. By foraying into the mobile applicationspace with its wide range of educational contents, it has taken on the whole gamut oftuition, academics, skill developments: test prep services. Launched in June2011,humthum.com-a unique mobile based knowledge sharing apps made available across allSamsung smart phones through their Java Apps Stores in India, literally symbolizes theidea that knowledge is power and therefore, controls all access to opportunities andadvancement. Not surprisingly, this apps will provide area wise services covering over20,000 pin codes pan India. It will enable students to instantly access its educationalservices even when they are on the move, anytime anywhere. Just the pilot phase of theroll out got more than 50,000 students enrolled, who have already started accessinghumthum mobile apps in a big way. EdServ is targeting a user base of ten million in thenext 18-24 months and revenues of Rs. 200 crores over the next 3 years. By foraying intothe mobile application space with its wide range of educational contents, it has taken onthe whole gamut of tuition, academics, skill development &test prep services.

Launched in June 2011 ,humthum.com - a unique mobile based knowledge sharing apps madeavailable across all Samsung smart phones through their Java Apps Stores in India,literally symbolizes the idea that knowledge is power and therefore, controls all accessto opportunities and advancement. Not surprisingly, this apps will provide area wiseservices covering over 20,000 pin codes pan India. It will enable students to instantlyaccess its educational services even when they are on the move, anytime anywhere. Just thepilot phase of the roll out got more than 50,000 students enrolled, who have alreadystarted accessing humthum mobile apps in a big way. EdServ is targeting a user base of tenmillion in the next 18-24 months and revenues of Rs.200crores over the next 3 years.

CONTENT ON LEASE

EdServ plans the following for the future to consolidate its growth and stake its claimfor a national and global presence in providing learning and career solutions. The highcost of effectively presenting its services has made the service-on-lease model as anintriguingly sensible option. With its low start up costs, high leverage and containmentof corporate resources it wa^ decided that it is smart to go this route. In fact, today,content leasing is one of the fastest growing methods that the world's leading onlineeducators companies enlisting to not only more effectively cost control their webapplications, but also steer away from the pitfalls of hosting stale, static & datedcontents. EdServ plans to get fresh, diversified, appealing, best seller contents fromthird-parties on a park-on-lease framework and pay royalties on its hourly usage. It hasalready implemented this appealingly interactive and dynamic content-on-lease format inlampsglow.com portal.

PARTNERS IN PROGRESS

Partners are essential for the development of an organization, needed someone who wasnot afraid to force issues, confront us, and, if necessary, drive us where we needed togo.

At EdServ, we just decided to grow them as our partners in progress organically insteadof buying them and drive us where we needed to go. Giants in their own game who will helpaccurately assess situations and help address critical issues. So that we maximize thebenefit of the various education services that we offer our customers. With this view inmind, we took the strategic decision to tie up with Corel Corporation, Sreeram CoachingPoint, Samsung & Blackberry to help EdServ achieve the magnitude of change that weneeded. Corel e-Training Partnership

In a significant initiative for training through e-learning, EdServ has struck a globale-training partnership in August 2010 with Ottawa, Canada headquartered COREL Corporation.By this strategic tie up, EdServ has become the first and only authorized online trainingpartner of Corel with rights to train and certify students on the Corel technology,graphic design, and desktop publishing space. EdServ will develop exclusive e-content forvarious tools of COREL which will be marketed worldwide as the authorized e-content forbecominga certified COREL professional. Sreeram Coaching Point, Partners In CA Coaching InJanuary 2011, EdServ has struck an eLearning partnership with Chennai based SreeramCoaching Point, a CA training institute established in 1989. This partnership will enableEdServ to provide online CA coaching for students through its education portalwww.lampsglow.com. This marks EdServ's foray into the estimated Rs. 2000 crore charteredaccountancy training market in India and this association is expected to provide onlineaccess to expert classroom videos and assessments modules to an estimated one millionstudents aspiring annually to clear CA-CPT, inter, and final exams.

Samsung humthum Mobile Educational Apps

In a first of its kind product developed for the Indian market, EdServ has forayed intothe mobile application space with its wide range of educational contents- the whole gamutof tuition, academics, skill development & test prep services. In June 2011, EdServhas launched humthum.com a unique mobile based knowledge apps made available across allSamsung smart phones through their Java Apps Stores in India. Just the pilot phase of theroll out got more than 50,000 students enrolled and EdServ is targeting a user base of tenmillion in the next 18-24 months and revenues of Rs. 200 crores over the next 3years.

Blackberry humthum Mobile Educational Apps

In July 2011, EdServ has tied up with Blackberry Smart Phones, where EdServ's widerange of educational content on its flagship education portal www.lampsglow.com will go inas humthum apps into Blackberry Apps Store for Blackberry phones worldwide. Similar to theSamsung tie up, it will provide the entire online education content that includes tuition,academics, skill development & test prep services on the Blackberry smart phone.

RISK MANAGEMENT

The company is investment smart and information smart at the same time by exploitingcontent-on-lease model as a key risk management option. With its modest start up costs,assured fresh content, high leverage and containment of corporate resources, it wasdecided that this is the way to go. The Risk Management Committee shall provide assistanceto the Board of Directors in fulfilling its responsibility to the shareholders, potentialshareholders and investment community by assessing, and providing oversight to managementrelating to the identification and evaluation of not only content leasing but also allmajor strategic, operational, regulatory, information and external risks inherent in thebusiness of the company.

The Vigilant Watch Dog-Internal Control Systems

By having in place an adequate internal control system, that is commensurable with thesize and nature of its business. The system is supported by documented policies,guidelines, procedures to monitor business and operational performance aimed at ensuringnot only business integrity but also promoting operational efficiency. Regular review ofthe reports of the internal auditors by the Audit Committee Meetings. The Audit Committeeof the Board reviews the adequacy and effectiveness of the internal control systems andsuggests improvements for strengthening them on an on going basis.

Discussion on financial performance with respect to operational performance

Financial Condition

A summary of our financial position as on 31st March 2011 and 2010 are as follows:(Rs.)in Lakhs

	2011	%	2010	%	Growth
1. Sources of Funds
Shareholder's Funds:
Share Capital	1557.72	27.27	1200.60	33.89	-
Share Application money pending allotment	875.11	15.32	50.11	0.88
Reserves & Surplus	13850.57	242.48	3662.76	64.12	60.50
Loan Funds	-	-	-	-	-
Secured Loans
Loan against Security of Fixed Deposits	170.47	2.98	574.28	10.05	-
Vehicle Loan ( Secured by hypothecation of Vehicles)	16.57	0.29	22.26	0.39	-
Equipment Loan (Secured by hypothecation of equipments)	68.40	1.20	-	-	-
Deferred Tax Liability Net (See Note 13)	403.29	7.06	201.93	3.54	242.95
	16942.13		5711.94		-
II. Application of Funds
Fixed Assets
Gross Block	2491.43	14.71	1177.76	20.62	70.50
Less: Depreciation	393.04	2.32	213.03	3.73	238.57
Net Block	2098.39	12.39	964.73	16.89	53.66
Capital Work in progress-Product Development	4765.17	28.13	1753.46	30.70	167.47
Investments	9.50	0.06	9.50	0.15	-
Current Assets, Loans & Advances
A. Current Assets
Sundry Debtors	9052.44	53.43	2797.21	48.97	323.17
Cash and Bank Balances	2695.50	15.91	961.36	16.83	11.63
B. Loans & Advances
Loans & Advances	1132.11	6.68	213.08	3.73	(75.71)
	12880.05	76.02	3971.65	-	65.52
Less: Current Liabilities & Provisions	2889.67	17.06	1095.09	19.15	289.20
Net Current Assets	9990.38	58.96	2876.56	50.38	35.84
Miscellaneous Expenditure (to the extent not written off or adjusted)
Preliminary Expenses	-	-	0.10	-	(50.00)
Share Public Issue Expenses	78.69	0.46	107.59	1.88	(18.69)
	16,942.13		5711.94		-

Sources of Funds

1. Share Capital

At present we have only one class of shares Equity Shares ofRs. 10/-eachfullypaidup.

Our Authorised Capital is Rs. 2500 Lakhs divided into 250 Lakh Equity Shares of Rs. 10/-each. The issued, subscribed and paid up capital as on 31st March 2011 is Rs. 1557.72Lakhs and as on 31st March 2010 is Rs. 1200.60 Lakhs.

2. Reserves & Surplus

The position of Reserves & Surplus for the year 2010 and 2011 is given below.During the year the company has transferred Rs. 416.90 Lakhs to General Reserve as per thestatutory requirement.

Reserves and Surplus
Share Premium Opening Balance	2040.00	2040.00
Less: Capitalised for issue of Bonus Shares
Add: Additions during the year	6573.52	-
	8613.52	2040.00
General Reserves	180.19	180.19
Add: Additions during the year	416.90	-
	597.09	180.19
Profit and Loss Account
Profit and Loss Account Opening Balance	1442.56	242.16
Add: Profit brought forward from P & L Account	3197.40	1200.41
Less: Capitalised for issue of Bonus Shares	-	-
	4639.96	1442.56

Application of Funds

3. Fixed Assets

Statement of movement of Fixed Assets are as follows:

	2011	2010	Growth
(Computer Software & IP Rights)	926.14	97.24	852.43
Plant & Machinery	10.03	0.36	2686.11
Office Equipments	11.34	8.46	34.04
Furniture & Fixtures	522.69	145.95	258.13
Vehicles	28.97	28.97	-
Computers	992.26	896.77	10.65
Gross Block	2491.43	1177.75	111.54
Less: Accumulated Depreciation	393.04	213.02	84.51
Net Block	2098.39	964.73	117.51
Add: Capital Work in Progress	4765.17	1753.46	171.76
Net Fixed Assets	6863.56	2718.19	152.50
Depreciation	-	-	-
as % of revenues	1.67	2.85	-
as % of average Gross Block	7.23	12.74	-
Accumulated Depreciation as % of Gross Block	15.78	18.09	-

4. Investments

There is no change in the investment during the year.

5. Sundry Debtors

Sundry Debtors amount to ^ 9052.44 lakhs as on 31st March 2011 and ^ 2797.21 lakhs ason 31st March 2010. There are no provision for doubtful debts for both the years.

Debts outstanding for a period exceeding 6 months	3463.95	607.36
Other Debts	5588.49	2189.85
	9052.44	2797.21

6. Cash And Cash Equivalents

The summary of the cash and cash equivalents are as follows (Rs in Lakhs)

	2011	2010
Cash on hand	27.42	29.34
Balance with Banks in current accounts-Scheduled Banks	2228.35	298.53
Balance with Banks in Deposit accounts-Scheduled Banks	409.17	608.57
Balance with Banks in current accounts-Others	29.96	44.92
Balance in Unpaid Dividend Account	0.60	-
	2695.50	961.36

7. Loans And Advances

The details of the Loans and advances are as follows (Rs. in Lakhs

	2011	2010
Advances recoverable in cash or in kind or for value to be received - Considered Good	75.99	23.99
Advance received from suppliers	480.40	-
Rent Deposits	38.87	33.20
Inter corporate Deposits	5.00	-
Service Tax Input Credit	242.88	49.03
VAT Input Credit	55.22	5.54
Advance Income Tax	218.02	88.02
Income Tax Deducted at Source on Income	13.61	8.64
Income Tax Deducted at Source on Interest held in Banks	2.12	4.66
	1132.11	213.08

8. Current Liabilities and Provision

A summary of the current Liabilities are as follows

(Rs. in Lakhs)

Sundry Creditors for Expenses and Services (Other than Micro Enterprises and Small Enterprises)	756.12	33.12
Dues to Whole time Directors	78.19	-
Dues to Non Executive Directors	19.38	-
Provident Fund Payable	2.05	1.13
ESI Payable	0.79	0.12
Professional Tax Payable	1.49	0.66
VAT Payable	12.77	-
Service Tax Payable	-	2.31
Unpaid Dividend	233.08	185.91
	0.60	-
	1104.47	223.25
Provisions
Provision for Dividend	467.32	360.18
Provision for Gratuity	13.77	8.93
Provision for Taxes on Distributed Profits	79.42	61.21
Provision for Income Tax	1216.70	441.52
	1777.21	871.84

Sundry Creditors for expenses and services represent the amount accrued for variousoperational expenses and the creditors for the operation of the company. Advance receivedfrom customers represent the advance received for future services. The company hasproposed declaration of dividend on the equity shares for the year ended 31st March 2011and provision for the Dividend distribution Tax has been provided. Provision for taxrepresent the estimated tax liabilities.

9. Net Current Assets

Net current assets as on 31st March 2011 is Rs. 9990.38 lakhs as against Rs. 2876.56lakhs as on 31st March 2010. Current ratio as on 31st March 2011 is ^ 4.06 and as on 31stMarch 2010 is ^ 3.63 Results of Operations

The following are the summary of financial operations.

(Rs. in Lakhs)

	2011	%	2010	%	Growth
Income
Software Development Services, Education & Training	7626.43	70.76	5208.81	98.87	46.41
Sale of Machinery		-	3.09	0.06	-100
Export Income	3116.02
Other Income	34.84	0.32	56.40	1.07	-38.23
	10777.29	71.08	5268.30	100	104.57
Expenses
Purchase of Software	1076.31	9.99	1503.33	28.54	-28.40
Administrative Expenses	2890.73	26.82	714.89	13.57	304.36
Interest on Working Capital Loans	33.53	0.31	43.41	0.82	-22.76
Course Content and Brand Expenses W/off	1069.31	9.92	439.49	8.34	143.31
Operating Expenses	5069.88	47.04	2701.12	25.06	87.70
Operating Profit (PBITDA)	5707.41	52.96	2567.18	23.82	122.32
Preliminary Expenses	0.10	-	0.10	-	-
Depreciation	180.01	1.67	150.10	1.39	19.93
Share Issue Expenses written off	35.37	0.33	35.37	0.33	-
Profit after Depreciation & Amortisations	5491.93	50.96	2381.61	22.10	130.60
Less: Provision for Income Tax - Current	1121.56	10.41	436.55	4.05	156.91
Less: Provision for Fringe Benefit Tax	-	-	-	-	-
Add (+) / Less (-) Provision for Deferred Tax	201.36	1.87	143.06	1.33	40.76
Profit After Tax	4169.01	38.68	1802.01	16.72	131.35
Less: Transfer to General Reserve	416.90	3.87	180.19	1.67	131.35
Less: Provision for Dividend	474.14	4.40	360.18	3.34	31.64
Less: Provision for Dividend Distribution Tax	80.58	0.75	61.21	0.57	31.65
Balance of Profit Carried to Balance Sheet	3197.39	29.67	1200.40	11.14	166.36

The Company has only one segment of business.

Income

	2011	2010
Software Trading and Sales	-	1659.46
Royalty - Franshisee Centers	-	0.41
Training, Media Reimbursement, Course Content	-	282.04
Reimbursement of Vocational Training	4152.73	1859.42
Application Fees	2277.52	50.14
Recruitment services	-	0.26
Student Registration Fee	24.83	576.60
Brand License Access Fee	1171.35	780.48
	7626.43	5208.81

2. Expenditure

a. The company has incurred the following administrative expenses (Rs.) in Lakhs

	2011	2010
Rent	66.46	39.11
Advertisement Expenses	636.37	58.40
Electricity	10.40	7.31
Printing and Stationary	10.59	18.59
Repairs and Maintenance-Building	3.80	1.81
Repair and Maintenance -Others	35.60	18.84
Telephone and Fax Charges	47.35	12.22
Employment Expenses	467.06	203.79
Commission to Executive Directors	80.00	-
Commission to Non-Executive Directors	21.53	-
Postage Telegram & Couriers	5.48	2.78
Travelling and Conveyance	42.02	30.50
Other Administration & Miscellaneous charges	118.94	42.93
MODES Expenses	1245.20	207.49
Sponsorship Charges	-	10.28
Bank charges	1.90	1.12
Vehicle Finance Charges	2.04	1.57
Interest on Other Loans	4.18	-
Audit Fees	20.00	5.00
Internal Audit Fees	3.00	-
Consultancy & Legal Charges	68.80	53.16
	2890.72	714.90

Material Developments in Human Resources / Industrial Relations Front, including numberof people employed.

Minimum Achievable Target (MAT) as a performance parameter has been fully implementedand practiced in the company. This means, all appraisals and performance evaluation havebeen done using MAT as the principal metrics. Every employee's KRA has been fixed in termsof MAT parameters and the same have been recorded month-on-month as either achieved or notachieved and the yearly appraisal is made based on the MAT achievements.

MAT this year also got improvised by bringing the MAT parameter for all communities inthe company including HORIZONTAL service teams as well as VERTICAL Sales teams. Further,MAT serves hugely on yearly appraisal system to scientifically appraise a workforce basedon their month-on-month MAT achievement.

MAT also works for descriptive tasks based roles for certain workforces by makingMANDATORY MAT.

The company has immensely got benefitted out of MAT system in improving the utilizationand throughput of human resources, thereby improving the efficiency of the companymanagement and thus the business execution.

Human Resources Creating Appreciating Assets

This includes technology, delivery, deployment, support, branding, and contentdivisions apart from Finance, accounts, administration, HR departments. The contentdevelopment which requires Subject Matter Experts (SME) for each subject is managed byoutsourcing the raw content delivery to consultants.

Cautionary Statement

Certain statements in the Management Discussion and Analysis describing the Company'sstrategies and objectives, projections, estimates, expectations and predictions may beforward-looking statements within the meaning of applicable securities laws andregulations. Actual results could differ from those expressed or implied. Importantfactors that could make a difference to the Company's operations include IntellectualProperty thefts, Humanware turn-out and availability, Government policies on education andemployment, cyclical and seasonal demands and pricing in the Company's principal markets,changes in economic developments, tax structures within India and other incidentalfactors.

For and on behalf of the Board of Directors

S. Giridharan Chairman & CEO

Place: Chennai

Date: 30.08.2011

Source:http://www.indiainfoline.com/Markets/Company/Fundamentals/Management-Discussions/Edserv-Softsystems-Ltd/533055