DIRECTORS' REPORT TO THE MEMBERS, Your Directors have pleasure to present their report of your company on the business and operations for the 15 months period ended 31 March 2015 Overview During the financial period ended 31 March 2015 (15 months), your company recorded consolidated revenues of Rs. 10,072.85 lakhs as compared to Rs. 10,550.75 lakhs in the previous year. The consolidated profit was Rs. 73.82 lakhs as compared Rs. 267.74 lakhs in the previous year. Change in financial year In compliance with the provisions of the Companies Act, 2013, your company decided to change its financial year from "January-December" to "April-March". Accordingly, the last financial year of your company was extended up to 31 March 2015 covering a period of fifteen months commencing from 1 January 2014. Your company shall henceforth follow its financial year commencing from 1 April and ending on 31 March, every year. Dividend On account of inadequacy of profits during the financial year ended 31 March 2015, the Board of Directors of the company have not recommended dividend. Share capital The paid-up equity share capital as on 31 March 2015 was Rs. 4,426.73 lakhs comprising of 4,42,67,293 equity shares of Rs. 10 each. During the year under review, the company has not issued shares with differential voting rights nor granted stock options or sweat equity. Material changes from end of financial year to date of this report The company received the title and completed the registration formalities on 23 May 2015 for lands situated at Madhapur (0.75 acres) and Nanakramaguda, Hyderabad (acquired through amalgamation of VisualSoft Technologies Limited in 2006-2007) allotted by TSIIC (previously APIIC). Out of 15.61 acres originally allotted at Nanakramguda, Hyderabad, as per the directions of Government of Telangana, your company surrendered 7.29 acres and retained the balance land. Directors and Key Managerial Personnel Your company re-appointed Mr R Janardhana Reddy [DIN-02544300], Mr Anil Kumar Sood [DIN-00086577] and Mr Anish Mathew [DIN-02545538] as Independent Directors with effect from 26 December 2014 to hold such office for a term of five years through a postal ballot process under the Companies Act, 2013. The company has received declarations from all the independent directors of the company confirming that they meet with the criteria of independence as prescribed both under section 149 (6) and Schedule IV of the Companies Act, 2013 and clause 49 of the Listing Agreement with the stock exchanges. Mr SV Ramkumar [DIN-00460119], a Non-Executive Independent Director of your company resigned on 13 August 2014. The board of directors places on record their sincere appreciation for the contribution and valuable service rendered by Mr SV Ramkumar during his tenure. Ms Leona Ambuja [DIN-07138817] was appointed as an Additional Director with effect from 31 March 2015 to fulfil the requirement of appointing a Woman Independent Director on the Board of your company and now it is proposed to appoint her for a period of five years at the ensuing Annual General Meeting. In accordance with the provisions of the Companies Act, 2013 and in terms of the Memorandum and Articles of Association of the company, Mr GV Kumar [DIN-00059107] and Mr D Sudhakar Reddy [DIN-00047707], directors of your company, retire by rotation and are eligible for reappointment. The KMP positions, CFO and Company Secretary, have fallen vacant by end of the current financial year and the company is in the process of filling these positions within the prescribed time limits under the applicable laws. Board meetings The Board of Directors met five (5) times during the financial year. The provisions of Companies Act, 2013 and listing agreement were adhered to while considering the time gap between two meetings. Remuneration policy The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is available on the website of the company and the terms of reference are given separately in the Corporate Governance Report. Board evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its committees. The manner in which the evaluation has been carried out has been detailed out in the Corporate Governance Report. Directors' responsibility statement To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of section 134(3)(c) of the Companies Act, 2013: (i) in the preparation of the annual financial statements for the year ended 31 March 2015, the applicable accounting standards had been followed along with proper explanations relatingto material departures; (ii) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at the end of the financial year and of the profit and loss of the company for the year; (iii) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; (iv) the directors had prepared the annual accounts on a "going concern basis"; (v) the directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (vi) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Outlook A detailed discussion on the performance of the company, industry structure, threats, opportunities, risks, future outlook and strategy is given separately in the Management's Discussion and Analysis section, which forms a part of this annual report. Energy conservation, technology absorption and foreign exchange earnings and outgo In terms of Section 134(3)(m) of the Companies Act, 2013 and the rules framed thereunder, your Directors furnish the required details below: (a) Conservation of Energy: Your company uses electric energy for all its equipments such as air conditioners, computer terminals, lighting and utilities in the work premises. All possible measures have been taken to conserve energy: • through periodic energy audits to identify potential areas for saving • by incorporating energy-efficient equipment • through automation i.e. using timers, automatic level controllers, etc. (b) Research and Development (R&D): Your company being a technology products company, Research and Development is the single most important investment into securing the future of the company. Especially in the area of Mobile technologies, which requires constant innovation to be ahead of market and competition, research and development becomes a necessity. This is also reflected in your company Brand Tag Line "Innovate. Lead." During the past year we have spent around 30% of resources on building technologies in packet core, convergent billing, policy management, 4G capabilities, mobile banking and wallet products. Apart from building new products and components, past year significant time has been spent in enhancing the capabilities of existing products making them more feature rich, flexible to manage and at the same time robust to handle higher performance demands. This has enabled your company not only to launch newer products but also enhance existing products during the year. Your company believes this will culminate into enhanced customer satisfaction and revenue there by. In an effort to further develop exclusivity of the technologies company is actively seeking patent grants on some of these areas. Addition of a new patent in Mobile Service Platform area in April 2015 is an example of the same. (c) Technology Absorption: As the communication protocols and technologies are evolving, your company is keeping up the speed with them and actively absorbing them into product line as well as infrastructure planning. During the year, your company has adapted newer technologies like 4G, NFV, SIP, Cloud and Diameter into its product line and enhanced the capabilities of the products to match the demands of the market. Further your company also made conscious attempt to build technologies on Inter-operation between 3G and 4G, Wifi to GSM and Wifi to LTE areas. (d) Foreign Exchange Earnings and Outgo: The details of foreign exchange earnings and outgo are given in note no. 29 and 28 of the Notes forming part of the standalone financial statements of the company. Quality certifications The company's quality management system (QMS) has its foundation on decades of experience and industry best practices that are aligned with international standard quality models and certifications. ISO 9001:2008 - Quality Management System QMS enhancing customer satisfaction The company is certified for ISO 9001:2008 by bsi, India. Our products & solutions therefore ensure customer satisfaction. ISO 27001:2005 - Information Security Information security management system enhancing Confidentiality, Availability and Integrity The company is also certified for ISO 27001:2005 by Bureau VERITAS Certification, India. This assures that the company maintains confidentiality, integrity and availability of corporate and client information. Risk management Although the company has long been following the principle of risk minimisation as is the norm in every industry, it has now become a compulsion. Therefore, in accordance with clause 49 of the listing agreement the Board members were informed about risk assessment and minimisation procedures after which the Board formally adopted steps for framing, implementing and monitoring the risk management plan for the company. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on risk related issues. In today's challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the company are imperative. The common risks inter alia are: Regulations, competition, Business risk, Technology obsolescence, Investments, retention of talent and expansion offacilities. Business risk, inter-alia, further includes financial risk, political risk, fidelity risk, legal risk. As a matter of policy, these risks are assessed and steps as appropriate are taken to mitigate the same. Internal control systems and their adequacy The company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit (IA) function is defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board. The Internal Audit monitors and evaluates the efficacy and adequacy of internal control system in the company, its compliance with operating systems, accounting procedures and policies at all locations of the company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. Vigil mechanism / whistle blower policy In order to ensure that the activities of the company and its employees are conducted in a fair and transparent manner by adoption of highest standards of professionalism, honesty, integrity and ethical behaviour, the company has adopted a vigil mechanism policy. This policy is explained in corporate governance report and also posted on the website of the company. Related party transactions All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the company with the promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the company at large. All related party transactions are placed before the Audit Committee as also the Board for approval. The Board of Directors of the company has, on the recommendation of the Audit Committee, adopted a policy to regulate transactions between the company and its related parties, in compliance with the applicable provisions of the Companies Act, 2013, the Rules framed there under and the Listing Agreement. This Policy was considered and approved by the Board and has been uploaded on the website of the company. Enhancing shareholder value Your company believes that its shareholders are among its most important stakeholders. Accordingly, your company's operations are committed to achieving high levels of operating performance and cost competitiveness, consolidating and building for growth, enhancing the productive asset and resource base and nurturing overall corporate reputation. In the last few years, due to declining revenues and performance, the company had been unable to declare dividends and these issues have also impacted negatively on the share price of the company. However, your company is also committed to creating value for all its stakeholders by ensuring that its corporate actions positively impact the stock price and creation of Shareholder Value. In addition, your company is committed to keep in mind the socioeconomic and environmental dimensions and contribute to sustainable growth and development. Corporate social responsibility The provisions for corporate social responsibility ("CSR") under the Companies Act, 2013, are not applicable to the company for the current financial year. However, your company has been, over the years, pursuing as part of its corporate philosophy, an unwritten CSR policy voluntarily which goes much beyond mere philanthropic gestures and integrates interest, welfare and aspirations of the community with those of the company itself in an environment of partnership for inclusive development. Corporate governance A report on Corporate Governance including the relevant Auditors' Certificate regarding compliance with the conditions of Corporate Governance as stipulated in Clause 49 of the listing agreement with the stock exchanges is annexed. Management's Discussion and Analysis is also annexed. Particulars of loans, guarantees & investments Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in note no.24 and 13 of the Notes forming part of the standalone financial statements of the company. Subsidiary companies The statement pursuant to Section 129 of the Companies Act, 2013 in respect of subsidiaries is attached (Annexure-1). The consolidated financial statements duly audited are presented as part of this report in accordance with the prescribed accounting standards and the Listing Agreement with the Stock Exchanges, wherever applicable. The Ministry of Corporate Affairs has granted general exemption from attaching the Balance Sheet, State of Profit and Loss and other documents of the subsidiary companies with the Balance Sheet of the company. The Board of Directors of the company has by a resolution given consent for not attaching the Balance Sheet of the subsidiaries concerned. A statement containing brief financial details of the company's subsidiaries for the financial year ended 31 March 2015 is included in the Annual Report. The annual accounts of these subsidiaries and the related detailed information will be made available to any member of the company seeking such information at any point of time and are also available for inspection by any member of the company at the registered office of the company. The company shall furnish a copy of annual accounts of subsidiaries to any member on demand. Consolidated financial statements The consolidated financial statements of the company prepared in accordance with the prescribed Accounting Standards form part of this Annual Report. Fixed deposits The company has not accepted any deposits from the public, and as such, there are no outstanding deposits in terms of the Companies (Acceptance of Deposits) Rules, 2014. Particulars of employees There are no employees falling within the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 [corresponding provisions - section 134(3)(q) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014] as amended and applicable to your company. Employee stock option scheme As required by clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, the particulars of the stock option schemes are furnished as annexure to this report (Annexure-2). Extract of annual return The details forming part of the extract of the Annual Return in form MGT-9 has been given in the annexure appended hereto and forms part of this report (Annexure-3). Auditors' Report There are no qualifications, reservations, or adverse remarks or disclaimers in the Auditors' Report. Observations made in the Auditors' Report are self-explanatory and therefore do not call for any further comments under Section 134(1) of the Companies Act, 2013. Auditors Statutory Auditor The company's joint statutory auditors, M/s Srikanth & Shanthi Associates [Firm Registration No.004006S], Chartered Accountants and M/s TN Rajendran & Co. [Firm Registration No.005080S], Chartered Accountants, hold office as auditors of the company till the conclusion of the ensuing Annual General Meeting, and being eligible, offer themselves for reappointment. They have confirmed their eligibility in terms of Section 141 of the Companies Act, 2013 and the rules framed there under for reappointment as Auditors of the Company. The Auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India as required under the provisions of revised Clause 49 of the Listing Agreement with the Stock Exchanges. Pursuant to the provisions of section 139 of the companies act, 2013, the auditors are proposed to be reappointed for a term of two years, subject to ratification by the members at every annual general meeting. Internal Auditor Mr R Balasubramanian (FCA-220677), Chartered Accountants, perform the duties of internal auditors of the company and their report is reviewed by the audit committee from time to time. Secretarial Auditor Pursuant to the provisions of Sections 204 of the Companies Act, 2013 and the rules framed thereunder, the company has appointed M/s M Damodaran & Associates (CoP-5081 / FCS-5837), Practicing Company Secretaries, to undertake the Secretarial Audit of the company. The Secretarial Auditors' Report, in the prescribed format, for the fifteen months period ended 31 March 2015 is annexed to this Directors' Report and forms part of the Annual Report (Annexure-4). Human resources development Your company recognises the importance of human resources and has created a performance driven environment where innovation is encouraged, performance is recognised and employees are motivated to realise their potential. Your company reinforced the best HR practices to attract, develop and retain talented employees. Your company has framed a strong, structured, and systematic recognition programs, which motivates the employees to excel. Your company fosters a culture of open communication that empowers employees to articulate their thoughts and feelings freely, exchange ideas and contribute to organisational growth. Regular HR connect sessions helps the company understand the pulse on the ground and take necessary steps to keep the workforce engaged and motivated. A number of initiatives have been taken up that serve as effective platform for employees to connect and interact and share their goals and aspirations. Employees also receive feedback on technical, behavioral, other professional and personal areas on a regular basis. Disclosure as required under section 22 of Sexual harassment of women at workplace (prevention, prohibition and redressal) Act, 2013 Your company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Internal Complaints Committee ("ICC") has been set up to redress the complaints received regarding sexual harassment. All employees are covered under this policy. Listing with stock exchanges Your company's equity shares are listed on BSE [532408] and NSE [MEGASOFT]. Necessary stock exchange regulations are complied with from time to time. Applicable listing fee for the year 2015-16 has already been paid to the respective stock exchanges. During the year, your company's equity shares have been delisted from the Madras Stock Exchange (MSE) on a voluntarily basis in terms of regulations 6 and 7 of the SEBI (Delisting of Equity Shares) Regulations, 2009, and due to proposed closure of the regional stockexchanges. Acknowledgements Your directors place on record their appreciation of the customers, bankers, Government of India and of other countries, Registrar and Share Transfer Agent, vendors and technology partners for the support extended. Your directors also wish to place on record their appreciation of the contribution made by employees at all levels without whom the growth of the company is unattainable. Your directors seek and look forward to the same support during future years of growth. Disclaimer The Ministry of Corporate Affairs vide its Circular No. 08/2014 dated April 4, 2014 clarified that the financial statements and the documents required to be attached thereto, the Auditor's and Boards' Report in respect of the financial year under reference (financial year commencing on or before 1 April 2014) shall continue to be governed by the relevant provisions of the Companies Act, 1956, schedules and rules made there under. Accordingly, whilst the financial statements and the Auditor's Report as aforesaid are prepared as per the requirements of the Companies Act, 1956, the company, as per its commitment to transparency and good governance, has to the extent possible provided the information in the Board's Report and the Corporate Governance Report as per the Companies Act, 2013. For and on behalf of the Board of Directors GV Kumar Managing Director D Sudhakar Reddy Executive Director Place: Hyderabad Date : 26 May 2015 |