Directors’ Report

Your Directors have great pleasure in presenting the Sixth Annual Report of your Company along with the audited Statement of Accounts for the period ended March 31, 2005.

Financial Highlights

The financial highlights of your Company for the year 2004-2005 are as follows:     

                                                                                           (Rs. in lakhs)

The Directors have not recommended any dividend for the financial year ended March 31, 2005 due to the accumulated losses sustained by the Company.  The Company has not accepted any deposits during the year. 

Performance

The Directors are pleased to state that your Company has generated a net profit of Rs 5.77 lacs for the first time since inception. A consistent financial discipline has helped the Company to achieve this. Your Company has been making all out efforts continuously to reduce its operating costs on one hand and to enhance its income on the other. Consequently, the Company has been able to increase its income from Rs 32.92 lacs to Rs 35.89 lacs in spite of reduction in turnover and reduce the total expenditure by Rs 5.82 lacs in comparison to previous financial year.

Your Company currently has 36 registered sub-brokers of whom 18 are active as compared to 34 registered and 23 active in 2003-2004. The applications of 6 new sub-brokers are at various stages of consideration.

The Road Ahead

The Securities and Exchange Board of India (SEBI) had made significant amendments having far reaching implications to the SEBI (Stock Broker & Sub-broker Regulations), 1992 in September 2003. As per SEBI directive, these amendments are now made applicable to the Subsidiary Company promoted by an Exchange like our Company with effect from June 1,2005. As a result, there has been a significant change in the roles and responsibilities of your Company and its sub brokers, which in turn have significant impact on the manner in which the operations of your Company are performed. These amendments necessitate complete change in its operations, technology, infrastructure etc. The full impact of changes on the future viability of the operations will be assessed.

Information Technology & Infrastructure

Your company uses the Order Routing System (ORS) software provided and managed by NSE.IT. The software and hardware are continuously monitored to assess the need for up-gradations / modifications / replacements etc. based on capacity required and regulatory changes.    

Your Company has upgraded its back office software provided and managed by “Comtek Technologies Pvt. Ltd”. This software will provide the inter connectivity of business operation between the Head office and its branches (Registered sub-brokers) for their daily back office accounting needs. The software will provide only the display & printing option for all daily,  & periodical reports.  

Corporate Governance

Your Company has persistently observed the high standards of corporate governance. The Chief Executive Officer is in charge of day-to-day management of the affairs of the Company, subject to the superintendence, control and directions of the Board of Directors. At present there are 4 Directors on the Board; the Chairman of the Board is a non-executive Director.

During the financial year 2004-2005, the Board met five times. The names of members of the Company’s Board of Directors, their attendance at the Board meetings and the number of their directorships are set out below:

The paid-up capital of your Company being less than Rs 5 crores, the provisions of Section 292A of the Companies Act, 1956 related to Audit Committee are not applicable.

Directors

In accordance with the provisions of the Companies Act, 1956, and pursuant to the Articles of Association of the Company, Shri I D Agarwal Chairman of the Company, retires at the Sixth Annual General Meeting and is eligible for re-appointment.

As per SEBI’s directive Prof. G Sethu and Shri B R Gupta, Directors, were appointed as Public Representative (PR) Directors for one year or Annual General Meeting whichever is earlier. The Board of Directors have recommended their re-appointment subject to approval of SEBI.

Pursuant to the resignation of Shri K Kumar (Managing Director of OTCEI), CEO, w.e.f. September 23, 2004, the Board appointed Shri Dipak D. Shah (Managing Director of OTCEI) as the new CEO of the company. The Board records its appreciation for Shri K Kumar’s valued contribution in the growth of the company during his tenure. The Board also records its appreciation of guidance and support provided by Shri N Ganga Ram and Shri Vinod Balmukund Agarwala, Directors, during their tenure on the Board of the Company.

SEBI had allowed the present arrangement of Managing Director of OTCEI to continue as CEO of the Subsidiary till 31 March 2005 and advised OTCEI to initiate the process of appointment of CEO for the Subsidiary Company, so as to ensure that CEO takes charge of office on or before April 1, 2005. Therefore, your Company, to implement SEBI’s directive, has asked Shri Munesh Goel, the senior most employee of the Company, to act as CEO of the Subsidiary in the interim. At the same time, your Company has requested SEBI to allow the present arrangement for atleast another one year.

Directors’ Responsibility Statement

The Directors confirm –

     a.      That in the preparation of the annual accounts, the applicable Accounting Standards have been followed and that no material departures have been made from the same;

     b.      That they have selected such Accounting Standards and policies and applied them consistently and made fair judgement and estimates that are reasonable and prudent 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 & loss of the Company for that period;

      c.      That they have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the applicable provisions of the Companies Act, 1956, for safeguarding of assets and for preventing and detecting fraud and irregularities; and

     d.      That they have prepared the annual accounts on a going concern basis.

Auditors

The Statutory Auditors, M/s. K. S. Aiyar & Co., Mumbai, will retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Board has recommended the re-appointment of M/s. K. S. Aiyar & Co. as Auditors to audit the accounts of the Company for the financial year ending on March 31,2006. M/s. K. S. Aiyar & Co. has confirmed their eligibility and willingness to accept the office of Statutory Auditors, if reappointed.

Personnel and Other Matters

There are no employees within the purview of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975.  Your Company has recorded no Foreign Exchange earnings or outgo during the year 2004-2005. 

The requirements of disclosure in terms of Section 217(1)(e) of the Companies Act, 1956, of steps taken with regard to conservation of energy and technology absorption do not apply to your Company. Since the Company does not own any manufacturing facility, the other particulars in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are not applicable and hence have not been given. The Company has, however, used information technology extensively in its operations.

Pending Legal Cases

There are no legal cases pending against your Company in any court of law.

Acknowledgements

The Board of Directors would like to express their gratitude for the support, advice and financial backing from OTC Exchange of India as also from its promoter institutions.

The Company also sincerely acknowledges the support, co-operation and guidance received from Securities and Exchange Board of India, National Stock Exchange of India Limited, NSE.IT, BSNL, Stock Holding Corporation of India Limited, HDFC Bank Limited, UTI Bank Limited, other Banks and all its constituents and Members/Dealers of OTCEI.

Your Company takes this opportunity to wholeheartedly thank the Members and Dealers of OTC Exchange of India for providing their unstinting support and assistance.  Your Directors appreciate the laudable teamwork and enthusiastic contribution of all the employees of your Company. 

For and on behalf of the Board of Directors

Mumbai                                                  I. D. Agarwal

July 1, 2005                                       Chairman