Directors' Report To the Members, We are pleased to present the 24th Annual Report together with the Audited Accounts of your Company for the year ended 31st March 2016. 1.Note on discontinuing operations: During the year Company has transferred its Enterprise Application business to Subsidiaries of Alten SA, France, for a consideration of Rs.63.02 Crores of which Rs.18.49 Crores received in India for the business transferred from the holding Company and Rs.44.53 Crores towards transfer of Abacus Business solutions Inc shares, transfer of business from Advanced synergic Pte Ltd and ESR Associates Inc. Said Consideration includes Rs.19.87 Crores to be received and is subject to fulfillment of business commitments and Representations and Warranties provided by the Company. Amount received towards sale of business has been shown as profit from discontinuance of business after deducting the direct cost of sale and adjusting the Investment value. 2. Results of Operation ASM along with its subsidiaries provides world class consulting and product development services in the areas of Engineering Services and Product R&D Services with successful Offshore Development and Support Centers in India and Overseas for its global clientele. On the standalone front your company registered a total revenue of Rs. 10,147.95 lakhs for the year ended 31st March 2016. Domestic sales was Rs. 3446.71 lakhs while Export sales was Rs. 6701.24 lakhs. EBIDTA was at Rs. 688.18 lakhs and Net profit after tax was Rs. 1352.11 lakhs. The Consolidated total revenue for the year ended 31st March 2016 was Rs. 17815.27 lakhs. EBIDTA was at Rs. 428.22 lakhs and Net Profit after tax at Rs. 605.70 lakhs. 3. Dividend/ Transfer to Reserves During the year 2015-16 the company declared an Interim dividend of Rs. 1.80/- on 15th October, 2015 followed by a Special 2nd Interim dividend of Rs. 6/- on 15th March 2016 and Rs.79.39 lakhs was paid towards dividend tax and surcharge thereon. With a view to augment resources for long term growth your Directors have not recommended any final dividend. The dividend payout for the year under review has been formulated in accordance with the Company's policy to pay sustainable dividend linked to long term growth objectives of the company to be met by internal cash accruals and the shareholders' aspirations. 4. Subsidiary Companies The consolidated Accounts of your Company and its subsidiaries viz., Advanced Synergic Pte Ltd, Singapore and Pinnacle Talent Inc, USA, duly audited are presented as part of this Report in accordance with Accounting Standard 21 and the Listing Regulations with the Stock Exchange, wherever applicable. The statement pursuant to the provisions to Section 129(3) of the Companies Act 2013, containing salient features of the financial statement of the Company's Subsidiaries in FormAOC1 is given in Annexure -I1. Your Company has formulated and adopted a "Policy for determining Material Subsidiaries" so that your company could identify such subsidiaries and formulate governance framework for them. Copy of the Policy form part of this Report in Annexure- III 5. Future Outlook With the maturity of "Globalization of Engineering" and "Digital & Mobile Technology" over the last few years, there is an intense race to rapidly create new products across the world, causing a "New Product Revolution".The thrust areas are in the Semiconductor Equipment, Medical Devices, Hi -Tech, Consumer Electronics, Automotive& Aerospace and telecom industries. This "New Product Revolution" has opened opportunities for companies, like ASM, in the space of Engineering Services. Cashing in on this opportunity, ASM, through the initiative of ARISE (ASM Research and Innovation Step for Excellence) has seen remarkable success in the "Co-Creation of IP led Product Innovation" and Platform Services for its clients. As a System Design House, ASM is fully equipped to handle complex Electronics, Mechanical and Embedded software design and development to complete the product under one roof. Further, working prototype and manufacturing results in the entire product realization for the client. The future looks exciting and upbeat in the R&D - Products and Engineering Services Outsourcing (ESO)space. There are lot of drivers for the clients like Reducing Product Development Life Cycles, Global Competition and getting a first mover advantage by ring-fencing the IP. The clients are equally excited to collaborate with the Engineering Service providers, like ASM, to leverage their capability for global, regional and adjacent markets, thereby optimize the R&D Operations. 6. Management Discussion and Analysis Report Management Discussion and Analysis Report as required under Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements ) Regulations 2015, is disclosed separately in the Annual Report. 7. Board Meetings During the year under review the Board of Directors 6 meetings of the Board were held, on 26.05.2015, 14.08.2015, 15.10.2015, 29.10.2015, 15.02.2016, and 15.03.2016. The maximum interval between two meetings did not exceed 120 days. 8. Directors and Key Managerial Personnel Ms. Preeti Rabindra , Director, retires by rotation and being eligible, offers herself for re-appointment at the ensuing Annual General Meeting. During the year under review Mr. M Lakshminarayan was appointed as an Additional Director on the Board of your company and at the ensuing Annual General Meeting it is proposed to seek your approval to appoint him as a NonExecutive, Non-Independent Director liable to retire by rotation. 9. Independent Directors The company has received the necessary declaration from the Independent Directors under Section 149(7) of the Companies Act 2013 and they have met the criteria of Independence as laid down in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. 10. Director's Responsibility Statement Pursuant to the provisions of Section 134 (5)of the Companies Act 2013, the Directors hereby confirm that: a) in the preparation of the annual accounts, for the financial Year 2015 , the applicable accounting standards has been followed along with proper explanation relating to material departures: b) the Directors have 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 or loss of the company for that period; c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; d) the Directors have prepared annual accounts of the company on a going concern basis. e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively. f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 11. Material Changes and commitments affecting the financial position of the company In continuation of the execution of a non-binding Letter of Intent dated February 28, 2015, for transfer of certain assets of the company relating to its business of enterprise application solution that that provides implementation, up-gradation and support services to Alten SA, a company organized under the laws of France, having its office at avenue Andre Morizet, 92513 Boulogne-Billancourt Cedex, France by itself or through its affiliates, the Board of Directors, during the year have signed definitive agreements for transfer and sale of identified business to M/s Alten Calsoft Labs( India) Private Limited an affiliate of M/s Alten, SA , to consummate the proposal. 12. Audit Committee The Audit committee comprises of Mr.M.R.Vikram, Chairman, Prof. B.S.Sonde and Mr. Shekar Viswanathan as members. The committee met four times during the Financial year under review and all its recommendations were accepted by the Board. Your Company has established the Vigil Mechanism, an Ombuds process which is a channel for receiving and redressing of employees complaints. This mechanism covers questionable financial or accounting matters and reporting fraudulent financial information to the shareholders, the government or any other legal authority. This meets the requirement under Section 177(9) and 10 of the Companies Act, 2013 and Regulation 22 of SEBI(Listing Obligations and Disclosure Requirements) Regulations, 2015. 13. Nomination and Remuneration Committee and Stakeholders Relationship and Share Transfer Committee. The present composition of the Nomination and Remuneration Committee includes Mr. Shekar Viswanathan , Chairman, Prof.B.S.Sonde and Mr. M.R.Vikram as its members. The Nomination and Remuneration Committee has framed a policy for selection and appointment of Directors including determining qualifications of Independent Director, Key Managerial Personnel, Senior Management Personnel and their remuneration as part of its charter and other matters provided under Section 178(3) of the Companies Act, 2013. A copy of the policy forms part of this report vide Annexure- I The Stakeholders Relationship and Share Transfer Committee comprises of Prof. B.S.Sonde and Mr. Rabindra Srikantan as its members. 14. Secretarial Audit Pursuant to the provisions of Section 204 of the Companies Act , 2013 and The Companies ( Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. K Dushyantha Kumar, Company Secretary in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit in Form MR3 for the financial year ended March 31, 2016 is annexed as Annexure - IV to the Report. There are no qualifications, reservations or adverse marks made by Secretarial Auditor in the Report. 15. Auditor's Report There are no qualifications, reservations or adverse remarks made by M/s Sudhakar Pai Associates, Statutory Auditors in their report for the financial Year ended 31st March, 2016. The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review. 16. 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 the Annual Report in form MGT 9 is annexed as Annexure- V to this Report. 17. Conservation of energy, technology absorption and Foreign Exchange Outgo: The company's operations involve low energy consumption. However the efforts to conserve and optimize the use of energy through improved operational method and other means will continue. The Company has not imported any technology during the year. Foreign exchange earnings and outgo During the financial year under review,66 % of the revenue came from export of software services resulting in a foreign exchange inflow of Rs.6701.24 lakhs and the foreign exchange outgo on account of overseas salaries, travelling etc was Rs.1294.99 lakhs 18. Public Deposits Your Company has not accepted any deposits from the public during the financial year under review. 19. Disclosures as required under Section 22 of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act , 2013 Your Company has in place a Prevention of Sexual Harassment ( POSH) Policy in line with the requirements of Sexual harassment of Women at Workplace ( Prevention, Prohibition and Redressal) Act 2013. Your Company has through the Policy constituted a committee and has established a grievance procedure for protection against victimization. Your Company is committed to provide a healthy environment to all employees conducive to work without the fear of prejudice and gender bias. 20. Details of Adequacy of Internal Financial Controls Your Company has deployed adequate Internal Control Systems in place to ensure a smooth functioning of its business. The processes and systems are reviewed constantly and improved upon to meet the changing business environment. The Control Systems provide a reasonable assurance of recording the transactions of its operations in all material aspects and of providing protection against misuse or loss of Company's assets. The Internal auditors periodically review the internal control systems, policies and procedures for their adequacy, effectiveness and continuous operation for addressing risk management and mitigation strategies. 21. Particulars of Loans, guarantees or investments Your company has not granted loans or corporate guarantees in the year under review but the balance outstanding as on 31st March 2016 in respect of those granted in the earlier years is provided in Note 30 of Notes forming part of the financial statements. 22. Risk Management Policy The Risk management Policy of your company continuously evaluates the various risks surrounding business and seeks to review and upgrade its risk management process. To further the endeavour your Board constantly formulates strategies directed at mitigating these risks which get implemented at the Executive Management level and a regular update is provided to the Board. 23. Corporate Social Responsibility Policy (CSR) Your company has in pursuance to the provisions of Section 135 and Schedule VII of the Companies Act, 2013 constituted during the year a CSR Committee of the Board to (a) formulate and recommend a CSR policy (b) recommend the amount of expenditure to be incurred on the CSR activities and (c) monitor implementation of the CSR policy from time to time. The terms of reference of the CSR committee are in accordance with Section 135 of the Companies Act 2013. The Committee comprises of Mr. M.R.Vikram, Mr. Rabindra Srikantan, Prof. B.S. Sonde and Mr. Shekar Viswanathan. The Annual Report on CSR in the prescribed format is enclosed to this Report as Annexure-VI 24. Related Party Transactions The company has in place formulated a Policy on materiality of Related Party transactions for dealing with such transactions in line with the requirements of the Listing Regulations with the Stock Exchange. A copy of the Policy forms part of this Report as Annexure- VII Particulars of contracts or Arrangements with related parties referred to in Section 188(1) of the Companies Act 2013 in the format specified as Form AOC2 forms part of this Report as Annexure- VIII 25. Board Evaluation Pursuant to the provisions of the Companies Act 2013 and Listing Regulations with the stock exchange peer evaluation of all Board members, annual performance evaluation of its own performance, as well as the evaluation of the working of the Committees of the Board was conducted. This evaluation was led by the Chairman of the Board and Nomination and Remuneration Committee with focus on the performance and effective functioning of the Board. The evaluation process also considered the time spent by each of the Board members, core competencies, personal characteristics, accomplishment of specific responsibilities and expertise. 26. Remuneration to Director and Employees Details/Disclosures of ratio of remuneration to each Director to median employee's remuneration as required pursuant to Section 197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and details of remuneration paid to Employees vide Rule 5(2) of the Companies( Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given as Annexure- IX 27. Listing with Stock Exchange The SEBI on Sept 2nd 2015, issued the SEBI (Listing Obligations and Disclosure Requirements ) Regulations 2015 with the aim to consolidate and streamline the provisions of the Listing Agreement for different segments of Capital markets. And the said regulations were effective December 1, 2015. The company has accordingly entered into the new Listing Agreement with BSE Ltd. The company is current with regard to payment of Annual Listing fees with BSE Ltd where the shares of the company are listed . 28 Corporate Governance Report Your Company has taken adequate steps to adhere to all the stipulations as laid down in Pursuant to Schedule V ( C ) of SEBI (Listing Obligations and Disclosure Requirements ) Regulations 2015. As required, a Report on Corporate Governance is provided elsewhere in this Annual Report along with Auditor's Certificate on compliance thereof. 29. Auditors At the AGM held on 14th August, 2015 M/s. Sudhakar Pai Associates, Chartered Accountants were appointed as statutory Auditors of the Company to hold office till the conclusion of the AGM to be held in the year 2017. In terms of Section 139 of the Companies Act 2013 the appointment of as the statutory Auditors is placed for ratification by the shareholders at the ensuing AGM. 30. Acknowledgements Your Directors take this opportunity to express their gratitude to • Our esteemed customers, employees, shareholders, vendors, business partners, advisors and consultants for their unstinted support. • State Bank of India, Overseas Branch, Bangalore and Axis Bank, Bangalore and Indian Bank, Singapore for their support and guidance • Central & State Governments, Software Technology Park (STPI) and NASSCOM for their continued support. For and on behalf of the Board M. R. Vikram Rabindra Srikantan Chairman Managing Director Place : Bangalore Date : 11.05.2016 |