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Letter to Shareholders:
The previous twelve months have been both challenging and interesting to observe as the worldwide economy continued to struggle in 2012 with prolonged distress in many geographies. The economic downturn in many economies in Europe including Spain and Italy, the volatile oil prices and rising inflation in Asia and other emerging economies meant that anticipated recovery from 2011 was slower than normal. Despite these challenges, 2012 was a year of steady growth for technology and related services sector, with worldwide spending of USD 1.9 trillion, a growth rate of 4.8 per cent over 2011. IT services contributed 3.3 per cent in this growth while BPM services grew faster at 4.9 per cent.
Against this backdrop, your Company had a steady year with revenues coming in at Rs. 161.4 crore, an increase of 33 per cent over 2012. The net profit increased to Rs. 19.4 crore and this is a growth of 71% over fiscal 2012. The growth in the top line was primarily on the back of good traction that the Company is witnessing in select geographies like North America while pipeline of opportunities from India also showed a significant uptick. As you know, your Company is India's only pure play listed entity in the independent software space and provides software validation and verification services to the banking and financial services industry worldwide. NASSCOM in its latest strategic review report 2013 has mentioned that two areas that have been responsible for steady growth in IT services exports have been Software Testing and IS outsourcing. According to the report, both the areas grew 50% faster than industry average and according to estimates FY 2013 is expected to garner software testing exports of USD 3.1 billion, up from the 2.8 billion recorded in FY 2012.
Today there is a lot of talk about mobility applications testing, crowd sourced testing, cloud–based testing platforms etc. and it is being projected that these are expected to provide significant growth opportunities in coming years. But what are some of the real factors that have a significant impact on the way corporations across the world carry out testing? Some of the important dimensions could be:
1. Customer requirements
2. Technology advancements and innovations
3. Changing Regulatory environment
4. Competition driving shorter time to market
5. Cost reduction imperatives
These in turn have fashioned the following trends that are shaping the testing industry today.
1. The increased use of automated tools for test execution
2. New User Acceptance frameworks beyond the traditional IT processes to include the user experience
3. The emergence of cloud based test delivery platforms
The indispensability of domain expertise based testing methodologies
In keeping in line with these trends, the company has invested substantially in initiatives to create IP based test offerings using all its cumulative knowledge and expertise of the last decade and distilling them into a suite of products, frameworks and service delivery models. It is hoped that these would lead to revenue streams in the coming years and also serve to extend our appeal to a larger set of potential customers. In the last year, we added 20 clients increasing our client count to 69. The split of revenue came from US 27%, Europe 35% and IMEA 38%. During the year, your Company also invested in its own modern facility in Chennai on the Old Mahabalipuram Road which is the main IT corridor in the city. The facility has a super built–up area of 38,000 sq. ft. and can accommodate 450 employees. The key reason for investing in this property was to consolidate our delivery centres in Chennai which would benefit the Company by way of reduced operating costs as well as providing administrative efficiency. The new facility has been built to meet specific client requirements and also confirms with international security and confidentiality standards.
The company has successfully completed the first phase of its ERP implementation by deploying the Netsuite package to bring into the fold the Finance, HR and commercial functions of the organisation. This is expected to further boost the efficiency levels across the company and make available timely, comprehensive and accurate enterprise information to the management and governance functions. We also stepped our investment in training and talent management processes, adding to and improving our curriculum for imparting critical industry, product and process training. Our employees are the key pillars that drive the Thinksoft engine and we are extremely thankful to all of them for their continued dedication and commitment to make this a world class company.
I also would like to take this opportunity to thank our partners, our vendors and most importantly, the shareholders whose unwavering commitment and support have propelled us to this position and we hope that the same will continue in the future.
The Board of Directors has recommended a final dividend of Rs. 3 per share.
In conclusion, I would like to say that with much of the IT industry still struggling to overcome the economic malaise of recent years, testing is one of the few areas in enterprise technology which is bucking the trend and prevailing market data points to the fact that demand in the sector shows no signs of slowing. With the total addressable market size for testing increasing exponentially, the potential rewards for companies and individuals which can succeed in this space are significant and Thinksoft will strive to be one of the success stories of this genre and will strive to ensure that all its stakeholders are rewarded as they continue their journey with the Company.
A V Asvini Kumar
Chairman & Managing Director