DIRECTORS' REPORT 1. Your Directors are pleased to present the Sixth Annual Report of your Company for the period ended March 31, 20 2. Management Analysis and Discussions Discussion on financial performance with respect to operational performance During the year, your Company earned total revenues of Rs. 3606.18 lacs compared with Rs. 3188.22 lacs during the previous year, reflecting a growth of 13.11 % over the previous year. The profit before tax stood at Rs. 18.74 lacs as compared to Rs. 16.24 lacs in the previous year. The Company has made a provision of tax totaling toRs. 9.09 lacs and the profit after tax stood at Rs. 9.65 lacs for the current year. The Operating Profit (earnings before depreciation and interest and tax) grew from Rs. 181.32 lacs to Rs. 195.82 lacs, a growth of 8 % over the previous year. The Company has built a comprehensive brand portfolio across various verticals including software, server and security, and this has helped the company to increase its earnings. The company has a mix of products, services and technology integration in order to build opportunities for incremental revenue growth. Review of Operations including Industry Structure and Developments The year under review was one of the most challenging ones in recent years. The year witnessed moderate growth in Global demand of IT products reflecting broad pricing pressures, government spending constraints from continued fiscal challenges, datacenter consolidation enabled by virtualization, accelerating cloud adoption and a shift toward lower-cost hardware products. In India although the sentiment continues to be positive, demand on the ground has not picked across product categories. From an IT products standpoint, the market remains sluggish. Projects, essentially driven out of investment in infrastructure by government and corporates, have slowed down and only old projects are being executed. Your Company has demonstrated its high adversity quotient and its capacity for implementing differentiated strategic solutions. Information Technology lies at the core of your Company's business. The sector prompted and shaped industrial growth and transformed the lifestyle of the citizens. Now a new trend is emerging where the enterprise focus is gradually shifting from capital expenditure to operating expenditure and billing style is changing from transaction to annuity, pay-per-use, and pay-per-click. The trend is not disruptive today and is at a nascent stage. But it is expected to evolve in the next decade. The strong fundamentals of business and the current model will continue to be in vogue but at a lower pace of growth as compared to the new tech trend. Looking ahead there are a few significant trends shaping the distribution business in general and IT distribution in particular. Your Company is engaged in monitoring and suitably adapting its strategy to participate and be relevant in the changed scenario. Adoption of Cloud based infrastructure and solutions is gaining traction in India and there is a gradual acceptance on the part of organizations in the SMB sector to embrace this practice in order to shift their IT Infrastructure from a Capex to an Opex model. Cloud technology allows users access to applications over the Internet displacing the age-old practice of running programs by downloading software onto a physical server or computer. We aspire to position ourselves as a single company that acts as a bridge between the Cloud Technology providers and the End Customers by offering a complete bouquet of Cloud solutions and services. Your Company is looking to sell Cloud Solution as a product. As the demand pattern in India matures, your Company will evaluate appropriate Cloud business strategies and invest in this space accordingly. Given that India is one of the fastest growing markets in the world, all major brands in the enterprise and retail verticals, even those with an existing presence in the country, are keenly looking at ways to increase their market share. Our diversity in terms of a largebouquet of products lines and vendors and geographical reach has enabled your Company to take maximum advantage of the available growth opportunities. Your Company has embarked on the set up of a robust services platform that benefits both the brand and the end customer. This will involve offering complete parts planning, parts warehousing, forward and reverse logistics, imports and re-exports, and assets recovery and e-waste management to provide a single-window fret-free parts management service to brands. With growing dependence on IT, thanks to the Internet and mobility, uptime of devices be it PCs,Tablets or Smartphones, and enterprise assets like networking devices, servers and storage which support them, has become critical for running business applications and maintaining operational efficiencies. User organizations have therefore time and again necessarily refurbished their IT hardware from a plethora of vendors ending up with products from multiple brands. To complicate matters further, rapid strides in technology have successfully shortened product life cycles and put tremendous strain on parts availability for maintenance of assets beyond service life. Managing the uptime of heterogeneous IT hardware is therefore a huge challenge for user companies. Your company is looking to tap this into a big opportunity and offer single window SLA bound AMC service for heterogeneous hardware, which spans PCs, peripherals, and enterprise assets. Your Company's investment and engagement over the years has enabled it to develop a strong foothold catering to Enterprise & Infrastructure projects. While strengthening and consolidating its core business, it is evaluating ways and means of transforming through better efficiencies and increased process driven automation. Your company is evolving into a Solution oriented partner for its vendors and customers. Pre-Sales and Technical Sales talents are deployed to help partners provide their customers with customized solutions to achieve their desired business outcomes. Strengths The inherent strength of your Company derives from its absolute belief in sound, sustainable business practices and an ability to continuously address the diverse needs of its customers. The strengths have enabled your Company to successfully articulate its various differentiated value propositions in the markets in which it operates. We believe our strong brand, robust quality process and our access to skilled talent base at lower costs of providing services places to us in a unique position to take advantage of the opportunities available. The Company provides the entire spectrum of Information Technology products. The strength of your Company is the brand and products diversification along with wide product range, dedicated group of talented professional who drive its business and relationships with its business partners and manage its support functions. Quality Your Company continues to strive towards operational and delivery excellences with a renewed focus on the path of business excellence. Customer satisfaction and excellence in quality are key elements for succeeding in the competitive global market. A strong emphasis is based on quality in every aspect of the company's activities. In line with this philosophy we have designed our quality management program and have defined several key parameters for measurement of quality levels to ensure improvement in the quality of the deliverables. Several initiatives have been taken to implement result oriented quality management models. In order to be able to respond quickly to the customers, your Company continues with various internal initiatives to compete effectively, improve organizational flexibility and efficiency, streamline internal processes and institutionalize a culture of continuous improvement. The system comprises well defined organization structure, pre-identified authority levels and documented policy guidelines and manuals for delegation of authority. Review of key business processes like business planning, reporting and communication has been done to make them more effective in meeting business objectives. Moving forward, your company shall continue to further strengthen its processes by adopting best-in-class standards. Customer Satisfaction and excellence in quality are key elements for succeeding in this competitive market. In order to be able to respond quickly to the customers, your Company continues with various internal initiatives to implement result oriented quality management models, compete effectively, improve organizational flexibility and efficiency, streamline internal processes across all its entities globally and institutionalize a culture of continuous improvement. Outlook In the near term, the outlook is a little gloomy. The expected pickup in demand in India which had been anticipated eagerly since last fiscal year, is yet to take shape. Looking ahead there are a few significant trends shaping the distribution business in general and IT distribution in particular. Your Company is engaged in monitoring and suitably adapting its strategy to participate and be relevant in the changed scenario. Your Company is in the process of preparing itself for the changes in business paradigms which are expected to reshape the Indian Market. Your Company's ability to capture emerging business opportunities across social, mobile, analytics, cloud (SMAC), particularly solutions with higher customer value, is critical to achieving revenue growth and maintaining profitability on a sustainable basis in the coming years. We believe that with our diverse portfolio of solutions and services, domain expertise and increasing value-add to customers, we are best suited to be a strategic partner to our customers. Your Company is also exploring distribution in other areas such as Telecom products and Consumer Durables, thereby leveraging in its infrastructure and of course optimizing its core competency. The Company is undertaking several key initiatives including enhancement of existing skill sets and domain knowledge for providing implementation and application services to customers on behalf of its vendors and partners. Opportunities and threats Opportunities We believe there is a growing demand for additional services and solutions from companies that already have an established global presence and existing infrastructure, which is why we are strategically focused on increasing our capabilities in these areas. Our diversification strategy continues to provide us with new growth opportunities. Looking towards the future, your Company will remain focused on agility, innovation and operational excellence. Threats Competition is the main threat to most tech outfits, considering the relentless product cycles, the typically rapid move toward commoditization in the sector and also changes in technology and markets, changes in government policy or regulations / legislation etc also brings challenges and treats to the smooth functioning of the Company. Risks and Concerns The productive life of IT resources and competencies is shrinking, thereby increasing the level of investment needed to meet the market requirements. The convergence of IT and Telecommunication industries, while provide huge growth opportunities to your Company, also exposes it to increased competition. The Company's objectives and expectations may be forward looking within the meaning of applicable laws and regulations. The competition from large international and Indian IT companies is increasing in the domestic market space. Actual results may differ materially from those expressed. Important factors that could influence the Company's operations include change in government regulations, tax laws, increased competition, economic and political developments. Internal control systems and their adequacy The Company's internal control system is commensurate with its size, scale and complexities of its operations. The Company has a well-defined delegation of power with authority limits for approving revenue as well as expenditure and processing payments. Your Company has an effective internal control and risk mitigation system, which are constantly assessed and strengthened with new/revised standards operating procedures. The Company has the robust Management Information System, which is an integral part of the control mechanism. Dynacons Techonologies Limited has an audit committee, the details of which have been provided in the corporate governance report.The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggest improvements to strengthen the same. 3. Dividend With a view to plough back the profits of the Company and keeping in mind the expansion of business activities, the Board of Directors consider it prudent and recommend not declaring any dividend for the year ended March 31, 2015. 4. Directors and Key Managerial Personnel Pursuant to Section 149 of the Companies Act, 2013, the Board recommended the appointment of Mrs. Archana Phadke for a period of 5 Years as an Independent Director of the Company, not liable to retire by rotation from the date of its 6th Annual General Meeting subject to approval of the Members of the Company. Mrs. Archana Phadke (holding Din 07138774), was appointed as an Additional Director designated as an Independent Director w.e.f. March 27, 2015. The Director has given the declaration to the Board that she met the criteria of independence as provided under Section 149(6) of the said Act and also confirmed that she will abide by the provisions as mentioned in Schedule IV of the Companies Act, 2013. Mr. Parag Dalal, Director, retires by rotation and being eligible, has offered himself for re-appointment. The Board recommends the same for your approval. The Board recommends the resolutions for your approval for the above appointments. During the year, Ms. Pooja M. Dere was appointed as Key managerial personnel w.e.f. 1st October, 2014. Mrs. Dere resigned from the office of Key managerial personnel dated 24th August, 2015. 5. Auditors Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, M/s. Palan & Co., Chartered Accountants, were appointed as Statutory Auditors of the Company from the conclusion of the 5th Annual General Meeting (AGM) of the Company held on 30th September, 2014 till the conclusion of the 8th AGM to be held in the year 2017, subject to ratification of their appointment at every AGM. Auditors Report The Auditors' Report does not contain any qualification. Notes to Accounts and Auditors remarks in their report are self-explanatory and do not call for any further comments. 6. Open Offer During the year under review, the promoter and promoter group of Company entered in to Share Purchase Agreement (SPA) dated August 8, 2014 with Mr. Arun Govil. Mr. Govil gave an Offer to the equity shareholders of the Company (other than parties to the SPA) to acquire 2,03,90,006 Equity shares of the Company of face value of Rs.1/- each representing in aggregate 26.00% of the paid up equity share capital and voting capital of the Target Company at a price of Rs. 1.30/- (Rupee one and Thirty Paisa only) per fully paid up equity share. The open offer was open from February 26, 2015 to March 12, 2015. The entire contents of Open Offer are available on www.sebi.gov.in. 7. Corporate Governance Your Company has always practiced sound corporate governance and takes necessary actions at appropriate times for meeting stakeholders' expectations while continuing to comply with the mandatory provisions of corporate governance. As required under Clause 49 of the Listing Agreement with the Stock Exchanges, the report on Management Discussion and Analysis, Corporate Governance as well as the Statutory Auditors' Certificate regarding compliance of conditions of Corporate Governance forms part of the Annual Report. 8. Code of Conduct For Directors And Senior Management The Directors and members of Senior Management have affirmed compliance with the Code of Conduct for Directors and Senior Management of the Company. The copies of Code of Conduct as applicable to the Executive Directors (including Senior Management of the Company) and Non Executive Directors are uploaded on the website of the Company - www.dtlindia.com . 9. Relationship Between Directors Inter-Se The Directors Mr. Shirish M. Anjaria & Mr. Dharmesh S. Anjaria having father and son relationship are related to each other within the meaning of the term "relative" as per Section 2(77) of the Act and clause 49(VIII)(E)(2) of the revised listing agreements. Other than these none of the Directors are related. 10. Familiarization Program for Independent Directors The Company has practice of conducting familiarization program of the independent directors as detailed in clause 8 of the Corporate Governance Report which forms part of the Annual Report. 11. Particulars of the Employees The information as required under Section 197 of the Act and rules made there-under is not applicable as none of the employees are in receipt of remuneration which exceeds the limits specified under the said rules. 12. Documents Placed on the Website The following documents have been placed on the website in compliance with the Act: • Financial statements of the Company along with relevant documents. • Details of Vigil mechanism for directors and employees to report genuine concerns as per proviso to Section 177(10). • The terms and conditions of appointment of Independent Directors as per Schedule IV to the act. 13. Human Resource Management (Material developments in Human resources/Industrial Relations front, including number of people employed) Your Company's core strength is its people. To bring in more business focus and total ownership, your Company's business organizational structure has been redesigned. This is expected to allow better growth and reward opportunities for talent, while simultaneously delivering better value to shareholders. Your Company has HR policy that elaborates on each aspect of human resource management including recruitment, employee development & training, staff welfare, administration services & recreation events. The Company offers a growth environment along with monetary benefits in line with industry standards. The Company has a number of employee initiatives to attract, retain and develop talent in the organization. Your Company encourages regular training and development program. Continuous training is imparted in advanced technology managerial and soft skills for the employees to enhance their skill-sets in alignment with their respective roles. The major thrust continues in the effort to bring about measurable change in training coverage and effectiveness, increasing the Leadership and Development opportunities for every staff member. Company's people centric focus providing an open work environment fostering continuous improvement and development helped several employees realize their career aspirations during the year. Dynacons has continually adopted structures that help attract best external talent and promote internal talent to higher roles and responsibilities. Employee Retention is a key focus area. The Company has initiated various measures to enhance the retention of employees during the year which includes, employee engagement surveys, transparent Performance Management System, and connect to maintain employee-friendly culture in the organization. 14. Fixed Deposits Your Company has not accepted any fixed deposits and, as such, no amount of principal or interest was outstanding as on the date of the Balance Sheet. 15. Directors Responsibility Statement Pursuant to the provisions of clause (C) of sub-section (3) of Section 134 of the Companies Act, 2013 the Directors based on the information and representations received from the operating management confirm that: i)In the preparation of the annual accounts, the applicable accounting standards had been followed along with no 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 at the end of the financial year and of the profit of the Company for that period; iii) The Directors had taken proper and sufficient care, to the best of their knowledge and ability, 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; iv) The Directors had prepared the annual accounts on a going concern basis; and 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. 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. 16. Board Evaluation Pursuant to the provisions of the Companies Act, 2013, 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 Audit, Nomination & Remuneration Committee. 17. Declaration by an Independent Director(s) A declaration has been received by an Independent Director(s) that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 and revised Clause 49 of the Listing Agreements. Further, there has been no change in the circumstances which may affect their status as independent director during the year. 18. 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. 19. Risk Management Risks are events, situations or circumstances which may lead to negative consequences on the Company's businesses. Risk management is a structured approach to manage uncertainty. As a formal roll-out, all business divisions and corporate functions will embrace Risk Management Policy and Guidelines, and make use of these in their decision making. Key business risks and their mitigation are considered in the annual/strategic business plans and in periodic management reviews. The risk management process in our multi-business, multi-site operations, over the period of time will become embedded into the Company's business systems and processes, such that our responses to risks remain current and dynamic. The Risk Management is overseen by the Audit Committee of the Company on a continuous basis. The Committee oversees Company's process and policies for determining risk tolerance and review management's measurement and comparison of overall risk tolerance to established levels. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuous basis. For details, please refer to the Management Discussion and Analysis report which form part of the Board Report. 20. Vigil Mechanism Your Company has established a mechanism called 'Vigil Mechanism' for directors and employees to report the unethical behavior, actual or suspected, fraud or violation of the Company's code of conduct or ethics policy and provides safeguards against victimization of employees who avail the mechanism. 21. Particulars of Remuneration The information required under Section 197 of the Act and the Rules made there-under, in respect of employees of the Company, is given under Annexure IV. 22. Internal Audit & Controls The Company has in place proper and adequate internal control systems commensurate with the nature of its business, and size and complexity of its operations. Internal Auditors findings are discussed with the process owners and suitable corrective actions taken as per the directions of Audit Committee on an ongoing basis to improve efficiency in operations. During the year, the Company continued to implement their suggestions and recommendations to improve the control environment. Their scope of work includes review of processes for safeguarding the assets of the Company, review of operational efficiency, effectiveness of systems and processes, and assessing the internal control strengths in all areas. 23. Extract of Annual Return As required pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in MGT-9 as a part of this Annual Report as Annexure-I. 24. Secretarial Audit Report Pursuant to Section 204 of the Companies Act, 2013, the Company had appointed, Ms. Shruti Shah, Practicing Company Secretary as its Secretarial Auditor to conduct the Secretarial Audit of the Company for the F.Y 2014-15. The Company provides all the assistance and facilities to the Secretarial Auditor for conducting their audit. Report of Secretarial Auditors for the F.Y 2014-15 in Form MR-3 is annexed to this report as Annexure-II. 25. Particulars of Loans, Guarantees or Investments Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. 26. Particulars of contracts or arrangements with related parties The particulars of every contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 including certain arm's length transactions under third proviso thereto have been disclosed in Form No. AOC-2 as Annexure-III. 27. Obligation of company under the sexual harassment of women at workplace (prevention, prohibition and redressal) act, 2013 In order to prevent sexual harassment of women at work place, a new act The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 has been notified. Your Company has adopted a policy for prevention of Sexual Harassment of Women at workplace and has set up Committee for implementation of said policy. During the year Company has not received any complaint of harassment. 28. Conservation of Energy, Technology Absorption, Research & Development and Foreign Exchange Earnings and Outgo Information pursuant to Section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) the Companies (Accounts) Rules, 2014 forming part of Directors' Report for the year ended 31st March, 2015 is as under : Conservation of Energy: The Company's operations involve low energy consumption. However efforts to conserve and optimize the use of energy through improved operational methods and other means will continue. Technology Absorption: The Technology available and utilized is continuously being upgraded to improve overall performance and productivity. Research & Development: Your Company believes that research & development is a continuous process for sustained corporate excellence. Our research & development activities help us in product and service improvement, effective time management and are focused to provide unique benefits to our customers. Such methods do not involve any specific cost burden to the Company. Foreign Exchange Earnings : Rs. NIL (previous year Nil) Foreign Exchange Outgo : Rs.0.03 (previous year 0.13) 29. Acknowledgements Your Directors thank the Company's Investors, Clients, Vendors, Bankers, Business and various governmental as well as regulatory agencies for their continued support and confidence in the management. Your Directors wish to place on record their deep sense of appreciation of the dedicated and sincere services rendered by employees at all levels during the year. Your Company's consistent growth was made possible by their hard work, solidarity, cooperation and support. For and on behalf of the Board of Directors Shirish Anjaria Chairman cum Managing Director Din no.: 00444104 Parag Dalal Director Din no.: 00409894 Date : August 31, 2015 Place: Mumbai |