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3i Infotech Ltd.

BSE: 532628 Sector: IT
NSE: 3IINFOTECH ISIN Code: INE748C01020
BSE LIVE 15:43 | 06 Dec 5.94 0.27
(4.76%)
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5.70

HIGH

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NSE LIVE 15:43 | 06 Dec 5.95 0.25
(4.39%)
OPEN

5.65

HIGH

6.10

LOW

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OPEN 5.70
PREVIOUS CLOSE 5.67
VOLUME 912075
52-Week high 7.20
52-Week low 3.75
P/E
Mkt Cap.(Rs cr) 533.93
Buy Price 0.00
Buy Qty 0.00
Sell Price 5.94
Sell Qty 2178.00
OPEN 5.70
CLOSE 5.67
VOLUME 912075
52-Week high 7.20
52-Week low 3.75
P/E
Mkt Cap.(Rs cr) 533.93
Buy Price 0.00
Buy Qty 0.00
Sell Price 5.94
Sell Qty 2178.00

3i Infotech Ltd. (3IINFOTECH) - Director Report

Company director report

FOR THE FINANCIAL YEAR 2014-15

Dear Shareholders

Your Directors present the Twenty Second Annual Report (the "Report") of theCompany along with the Audited Financial Statements for the year ended March 31 2015.

STATE OF THE COMPANY’S AFFAIRS

Financial Performance of the Company on Standalone and Consolidated basis:

Rs in crores
Particulars

Standalone

Consolidated

Year ended March 31 2015 Year ended March 31 2014 Year ended March 31 2015 Year ended March 312014
Total Income 403.81 395.32 1348.43 1438.50
Total Expenses 747.37 813.24 1611.78 1794.23
Profit/(Loss) before exceptional items and tax (343.56) (417.92) (263.35) (355.73)
Exceptional items 690.62 35.85 673.17 -
Profit / (Loss) before tax (1034.18) (453.77) (936.52) (355.73)
Tax expense - - 14.17 15.97
Deferred Tax Expense - (17.67) (3.03) (18.45)
Tax Expense from earlier years 23.57 4.12 28.40 3.81
Profit/(Loss) after tax (1057.75) (440.22) (976.06) (357.06)
Minority interest - - (0.21) (0.50)
Profit/(Loss) for the period (1057.75) (440.22) (976.27) (357.56)
Earnings Per Share (Basic in Rupees) (Before exceptional items (6.39) (7.15) (5.29) (6.33)
Earnings per share (Basic in Rupees) (After exceptional items (18.25) (7.78) (16.85) (6.33)

TRANSFER TO RESERVES

There is no amount proposed to be transferred to general reserve this year due tounavailability of profits.

DIVIDEND

The Board of Directors regrets its inability to recommend any dividend (equity orpreference) for the year ended March 31 2015 due to non-availability of profits..

BUSINESS

Your Company has a comprehensive set of IP based software solutions (20+) coupled witha wide range of IT Services to address the dynamic requirements of a variety of industryverticals including Banking Insurance Capital Markets Asset & Wealth Management(BFSI). The Company also provides solutions for other verticals such as GovernmentManufacturing Distribution Telecom and Healthcare.

The business activities of the Company are broadly divided into two categories viz: ITSolutions and Transaction Services. IT Solutions business comprises of software productsand IT enabled services while the transaction services comprise of BPO and KPO services.The Company has good product portfolio and has dominant presence in fast growing emergingeconomies. The Product Business of the Company has wide base with more than 800 activecustomers who are satisfactorily using the Company's products.

The contribution to the revenue for the year from IT Solutions was 95% and that ofTransaction Services was 5%.

Your Company has presence in 50 countries and seven geographies viz. South Asia AsiaPacific (APAC) China Middle East and Africa (MEA) Kingdom of Saudi Arabia (KSA)Western Europe (WE) and North America (US). Your Company has marketing network around theworld including North America Western Europe Middle East and Africa and Asia Pacific.

The business of your Company is largely divided into Emerging Markets and DevelopedMarkets. The share of the Emerging Markets to total revenue of the Company is about 62%while that of Developed Markets is about 38%.

For detailed operations and business performance and analysis kindly refer theManagement Discussion & Analysis which forms a part of this Report.

SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES

In terms of the CDR package the Company was given a mandate to identify its non corebusiness/ assets for sale and utilize the proceeds to deleverage its balance sheet. TheMaster Restructuring Agreement (MRA) signed with the Lenders had also identified certainsuch assets. Therefore as per this mandate the following subsidiaries were divestedduring the year:

i. In August 2014 Professional Access Limited (US) was hived off along with the entirebusiness of Professional Access Software Development Private Limited (India) to ZensarTechnologies Limited (including its affiliates).

ii. In December 2014 3i Infotech (Western Europe) Limited and 3i Infotech (Flagship -UK) Limited were sold to Objectway UK Limited.

On July 29 2014 Locuz Inc. was incorporated as a step down subsidiary to tap businessopportunities in the U.S. region.

Later in February 2015 the name of one of the Company's step-down subsidiaries 3iInfotech Outsourcing Services Limited was changed to "IFRS Cloud SolutionsLimited" and its main objects were amended to include "providing solutions onimplementation of International Financial Reporting Standards (IFRS) on the cloudplatform".

As on March 31 2015 the number of subsidiaries was reduced to 25 (twenty five) from27 (twenty seven) at the beginning of the year.

As per the first proviso to Section 129(3) of the Companies Act 2013 (the"Act") read with Rule 5 of Companies (Accounts) Rules 2014 the statementcontaining salient features of the financial statements of subsidiaries/associatecompanies/joint ventures in the prescribed Form AOC-1 is attached to the consolidatedfinancial statements.

Pursuant to the provisions of Section 136 of the Act the financial statements of theCompany consolidated financial statements along with relevant documents and separateaudited accounts in respect of subsidiaries are available on the website of the Company.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186

Particulars of loans guarantees or investments granted/made during the year are givenunder the notes to standalone financial statements forming part of the Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All contracts / arrangements / transactions entered into by the Company during thefinancial year with related parties were in the ordinary course of business and on anarm's length basis. During the year the Company has not entered into any contract /arrangement / transaction with related parties which could be considered material inaccordance with the policy of the Company on related party transactions. The said policycan be viewed on the Company's website by accessing the following link:http://www.3i-infotech.com/content/investors/investors.asp under "CorporateGovernance"

Details regarding related party disclosure are given under the notes to standalonefinancial statements which form part of the Annual Report.

REPORT ON CORPORATE GOVERNANCE

The Corporate Governance Report is appended herewith as Annexure I to this Report.

EXTRACT OF ANNUAL RETURN

In terms of the requirements of Section 92 (3) of the Act read with Rule 12 of theCompanies (Management and Administration) Rules 2014 an extract of the Annual Return inthe prescribed form MGT- 9 is attached herewith as Annexure II and forms part of thisReport.

CAPITAL

a) Preference Capital:

The Company has not allotted any preference shares during the year and therefore as onMarch 31 2015 the preference share capital remains unchanged at '650000000/-(130000000 Preference Shares of '5/- each). All the preference shares are held by IDBITrusteeship Services Limited (ICICI Strategic Investments Fund).

b) Paid-up Equity Capital:

1) ESOS allotments:

The Company has not allotted any shares under the Employees Stock Option Schemes (ESOS)during the year.

2) Allotments against conversion of Foreign Currency Convertible Bonds (FCCBs):

During the year the Company had received conversion notices from FCCB holders againstwhich 29661822 Equity Shares of face value of '10/- each were allotted by the Companyat a premium of '6.50/- per share.

3) Allotments of Equity Shares under the Corporate Debt Restructuring (CDR) Package:

On December 9 2014 1444747 Equity Shares of face value '10/- each at a premium of'9.74/- per Equity Share were allotted to a CDR Lender towards sacrifice as agreed underthe CDR Package.

As a result of the aforesaid allotments the paid-up equity share capital of theCompany stands at '6037509470 as on March 31 2015.

The Company has neither issued equity shares with differential rights as to dividendvoting or otherwise nor any shares (including sweat equity shares) to the employees of theCompany under any Scheme.

EMPLOYEES STOCK OPTION SCHEMES

As per SEBI Circular (CIR/CFD/POLICY CELL/2/2015) dated June 16 2015 relating torequirements specified under the SEBI (Share Based Employee Benefits) Regulations 2014details of the Employee Stock Option Schemes (ESOS) of the Company are given in AnnexureIII to this Report.

PUBLIC DEPOSITS

During the year the Company has not invited/accepted any deposit under Section 73 ofthe Act.

DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)

Effective September 12014 IDBI Bank Limited the Lender and Monitoring Institutionunder CDR nominated Mr. Shantanu Prasad as Director on the Board of the Company. Mr.Shantanu Prasad replaced Mr. N. S. Venkatesh who was a nominee director representing IDBIBank then. Further Dr. Ashok Jhunjhunwala Non-Executive Independent Director alsostepped down as Director of the Company with effect from September 15 2014.

Dr. Shashank Desai and Ms. Sarojini Dikhale were appointed as Additional Directors witheffect from November 3 2014 and July 28 2015 respectively. It is proposed to appoint Dr.Shashank Desai and Ms. Sarojini Dikhale as Independent Directors for a period of 5 yearseffective September 23 2015 at the ensuing Annual General Meeting of the Company.

Pursuant to the provisions of Section 149 of the Act which came into effect from April1 2014 Mr. Hoshang N. Sinor and Mr. Ashok Shah were appointed as Independent Directorsat the Annual General Meeting (AGM) of the Company held on September 16 2014 to holdoffice for a period effective April 1 2014 to September 30 2015. The terms andconditions of appointment of Independent Directors are as per Schedule IV of the Act. Theyhad submitted a declaration that each one of them meets the criteria of independence asprovided under Section 149 (6) of the Act and there has been no change in thecircumstances which may affect their status as Independent Director.

Mr. Hoshang N. Sinor who has been on the Board for over 12 years retires on September30 2015. In spirit of the provisions of the corporate governance he does not offerhimself for appointment as Independent Director for a fresh term thereafter. It isproposed to appoint Mr. Ashok Shah as Independent Director on the Board of the Company fora period of 5 years to hold office up to September 30 2020.

During the year with effect from November 112014 Mr. Charanjit Attra ExecutiveDirector and Chief Financial Officer was redesignated as Executive Director - NewBusiness Initiatives Strategy and Finance while Mr. Padmanabhan Iyer was appointed asthe Chief Financial Officer of the Company on November 11 2014.

Subsequently he has resigned from the Board with effect from May 28 2015 in order topursue opportunities in other professional areas.

As per the provisions of Section 152 of the Act Mr. Madhivanan Balakrishnan is liableto retire by rotation at this AGM and being eligible seeks re-appointment. The Board ofDirectors recommends these appointments.

As on the date of this Report the Board of the Company consists of 7 Directors out ofwhich four are Independent Directors two are Nominee Directors and one is an ExecutiveDirector.

None of the Independent Directors have had any pecuniary relationship or transactionswith the Company during Financial Year 2014-15 except to the extent of theirdirectorship. None of the Directors or KMP of the Company is related inter-se.

Five meetings of the Board of Directors were held during the year. The details of thesame are given on page no. 9 of the Annual Report.

Mr. Ninad Kelkar Company Secretary is the Compliance Officer of the Company and alsoone of the KMPs of the Company.

COMMITTEES

As on date of this Report the Board has four committees-

i. Audit Committee

ii. Nomination and Remuneration Committee

iii. Stakeholders' Relationship Committee

iv. Corporate Social Responsibility Committee

The Company also has an internal committee comprising of the Head-HR and the ComplianceOfficer of the Company to address the functioning of the vigil mechanism as mandated bythe Act and assist the Audit Committee thereunder.

The detailed information regarding the committees of the Board including compositionof the Audit Committee has been given in the Corporate Governance Report which forms anintegral part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Act and Accounting Standard (AS) - 21 on Consolidated FinancialStatements read with (AS) - 23 on Accounting for Investments in Associates and (AS) - 27on Financial Reporting of Interests in Joint Ventures the audited consolidated financialstatements presented by the Company include the financial results of its subsidiarycompanies associates and joint ventures and form part of the Annual Report.

AUDITORS

M/s. Lodha & Co. Chartered Accountants were appointed as the Statutory Auditors ofthe Company at the previous AGM held on September 16 2014 till the conclusion of theTwenty Fourth AGM of the Company to be held in the year 2017. As per the provisions ofSection 139 of the Act the appointment of Auditor is subject to ratification by membersat every AGM. Accordingly the ratification of the appointment of Auditor has been takenup as an item in the Notice of the forthcoming AGM for the approval of Members.

CONSERVATION OF ENERGY

Although the operations of the Company are not energy intensive the management ishighly conscious of the criticality of the conservation of energy at all operationallevels. The requirement of disclosure of particulars with respect to conservation ofenergy as prescribed in Section 134(3)(m) of the Act read with Rule 8(3) of the Companies(Accounts) Rules 2014 is not applicable to the Company and hence are not provided.

TECHNOLOGY ABSORPTION ADOPTION AND INNOVATION

The Company continues to use the latest technologies for improving the productivity andquality of its services and products.

During the year your Company has taken the following technology initiatives:

• Information Security Awareness programmes;

• Strengthened its IPRs through technology innovation and appropriate securitycontrols;

• Improved utilization and delivery productivity by use of LEAN IT techniques forproject delivery and

• Partnerships with major technology providers and publishers for win-winrelationships and go-to-market strategies.

RESEARCH AND DEVELOPMENT (R & D)

The solutions offered by the Company for various market segments are continuouslydeveloped and upgraded through the Global Development Centers (GDCs).

The GDCs function as the product research and development facility of the Company andfocus on developing and expanding the Company's products and IPRs. Besides this theCompany is also in the process of upgrading its varied product lines to standard andlatest technological platforms.

With a focus to further enhance the Company's software products i.e. its IntellectualProperty based on market needs the GDCs work in line with the Company's strategy forgrowth.

Expenditure on R & D

Rs in crores
Particulars 2014-15 2013-14
Revenue Expenditure 5.83 16.34
Capital Expenditure - -
Total 5.83 16.34
Total R&D expenditure as a percentage of total standalone revenue 1.44% 4.13%

FOREIGN EXCHANGE EARNINGS AND OUTGO

a) Activities relating to exports initiatives taken to increase exports developmentof new export markets for products and services and export plans More than 19.60% of therevenue of the Company is derived from exports.

b) Foreign Export earnings and expenditure

During the year 2014-15 the expenditure in foreign currencies amounted to Rs 111.19crores on account of cost of outsourced services and bought out items travelling andother expenses and interest. During the same period the Company earned an amountequivalent to Rs 78.55 crores in foreign currencies as income from its operations abroad(excluding income form Dubai Branch).

PERSONNEL

The Company has continued to improve the quality of Human Resource. The key facet hasbeen better levels of productivity as compared to earlier years which has contributed inoperating financial parameters showing a strong uplift. Regular interactions and careerenhancements by way of bigger roles to talented employees have helped in strengthening theconfidence of the employees in the tough financial scenario of the Company. The talentpipeline is looking healthy though attrition and retention remains a challenge for theindustry and more so for the Company.

Your Company will continue to focus and build the human potential which would help inimproving operating parameters in the coming year.

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of the limits set out in the said rules is provided in a separate annexure formingpart of this Report. Having regard to the provisions of the first proviso to Section136(1) of the Act the Annual Report excluding the aforesaid information is being sent tothe members of the Company. In terms of Section 136 the said annexure is open forinspection at the Registered Office of the Company. Any shareholder interested inobtaining a copy of the same may write to the Company Secretary.

Disclosures pertaining to the remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are provided in the Annual Report as Annexure IV.

Prevention of Sexual Harassment at Workplace

The Company has in place a Policy aiming at prevention of Sexual Harassment at allCompany's workplaces in line with the requirements of The Sexual Harassment of Women atthe Workplace (Prevention Prohibition and Redressal) Act 2013 and the rules thereunder.All employees (permanent contractual temporary trainees) are covered under this Policy.An internal Complaint Committee has been set up in the Company to consider and redresscomplaints received with respect to sexual harassment. During the year under review theComplaint Committee has not received any grievances or complaints of the nature coveredunder the said Act.

PERFORMANCE EVALUATION

The Company's policy relating to appointment and remuneration of Directors KMPs andother employees including criteria for determining qualifications positive attributesand independence of a director are covered under the Corporate Governance Report whichforms a part of this Report.

It is a practice of the Board of Directors to annually evaluate its own performance andthat of its committees and individual directors. Details of the process of Boardevaluation are also covered under the Corporate Governance Report.

QUALITY

The Company is committed to providing innovative and high quality products and servicesthat meet or exceed customer expectations.

This includes-

• Maintaining a quality focus on continuous improvement to our Products Processand Services

• Process adherence and governance ensuring lower Defect & On Time delivery

The Company's Quality Management System (QMS) addresses process required for entireSoftware Development Cycle (SDLC) and Project Management Life Cycle (PMLC) supported withindustry standard templates and guidelines to ensure disciplined project execution thereby transforming business from taking corrective & preventive measures to the state ofpredicting outcomes. This framework is designed based on the CMMi Process framework toenhance productivity and to reduce inefficiencies.

The Company has achieved CMMi Level 3 certification to meet the Company's commitmenttowards quality & business process.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Owing to the losses incurred during the year the Company has not been able tocontribute monetarily towards CSR activities. However the Company has taken manyinitiatives to sensitise and encourage its employees to participate in CSR activities atan individual level in order to keep alive in them the noble spirit of giving back to thesociety.

The Company has reaffirmed its concurrence with the concept of CSR through formulationof a specific policy on CSR and constitution of a CSR Committee details of which arecovered under the Corporate Governance Report.

AUDITOR'S REPORT AND SECRETARIAL AUDITOR'S REPORT

The auditor's report does not contain any qualifications reservations or adverseremarks. The Company appointed a Woman Director on the Board on July 28 2015 i.e. afterthe completion of the audit period. The report of the secretarial auditor which isannexed herewith as Annexure V in accordance with Section 204 of the Act is qualified tothat extent.

DISCLOSURE REQUIREMENTS

Disclosures required under Clause 49 of the Listing Agreement entered into with theStock Exchanges are shown under the Corporate Governance Report (CGR). The CGR along withauditor's certificate thereon and the Management Discussion and Analysis form part of thisReport.

FUTURE OUTLOOK

The Company will continue to technologically upgrade its products and concentrate onthe Software Products IT Services and IT enabled Services for its growth. The businessoutlook and the initiatives proposed by the management to address its financial risks havebeen discussed in detail in the Management Discussion and Analysis which forms a part ofthis Report.

FORWARD LOOKING STATEMENTS

This Report along with its annexures and Management Discussion & Analysis containsforward-looking statements that involve risks and uncertainties. When used in this Reportthe words 'anticipate' 'believe' 'estimate' 'expect' 'intend' 'will' and othersimilar expressions as they relate to the Company and/or its businesses are intended toidentify such forward looking statements. The Company undertakes no obligation to publiclyupdate or revise any forward- looking statements whether as a result of new informationfuture events or otherwise. Actual results performances or achievements could differmaterially from those expressed or implied in such forward-looking statements. Readers arecautioned not to place undue reliance on these forward-looking statements that speak onlyas of their dates. This Report should be read in conjunction with the financial statementsincluded herein and the notes thereto.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 134(5) of the Companies Act 2013 your Directors herebyconfirm that:

a) i n preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;

b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at March 31 2015 and of the loss of theCompany for the financial year ended on that date;

c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

d) they have prepared the annual accounts on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and are operating effectively and

f) t hey have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and are operating effectively.

Based on the reviews of internal statutory and secretarial auditors externalconsultants the management and respective committees of the Board the Board is of theopinion that the Company's system of internal financial controls was adequate and theoperating effectiveness of such controls was satisfactory during the financial year2014-15.

ACKNOWLEDGEMENTS

The Directors are thankful to the Members for their confidence and continued support.The Directors are grateful to the Central and State Government Stock ExchangesSecurities & Exchange Board of India Reserve Bank of India Customs and othergovernment authorities Lenders CDR Cell FCCB holders and last but not the least itstrusted clients for their continued support.

The Directors would like to express their gratitude for the unstinted support andguidance received from alliance partners and vendors.

The Directors would also like to express their sincere thanks and appreciation to allthe employees for their commendable team work and professionalism.

For and on behalf of the Board
Sd/- Sd/-
Hoshang N. Sinor Madhivanan Balakrishnan
Chairman Managing Director & Global CEO

July 28 2015 at Navi Mumbai

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