The Board of Directors of 8K Miles Software Services Limited have pleasure inpresenting the Thirty First Report on the business & operations for the year endedMarch 312016 along with the Audited financial statements for the year.
The comparative figures of the financial performance of the Company for the last twoyears are presented in the table below.
| || |
(Rs in Lakhs)
|Particulars || |
| ||FY 2015-16 ||FY 2014-15 ||FY 2015-16 ||FY 2014-15 |
|Revenue ||27193.10 ||12485.30 ||2095.59 ||1239.03 |
|Earnings Before Interest & Depreciation ||8872.78 ||3855.78 ||666.65 ||564.56 |
|Interest ||20.95 ||44.76 ||20.95 ||44.69 |
|Depreciation and Amortization ||2022.89 ||911.95 ||460.93 ||413.01 |
|Profit Before Tax (PBT) ||6828.95 ||2899.07 ||184.76 ||106.86 |
|Profit After Tax (PAT) before Minority Interest ||5323.61 ||2309.05 ||121.62 ||70.42 |
|Profit After Tax (PAT) after Minority Interest ||3958.60 ||1897.66 ||121.62 ||70.42 |
Revenue for the year is INR 2719.3 million signifying a growth of 117.8 % in Rupeeterms. EBITDA margin for the current year is 30.9% as compared to 31.5% in previous year.our effective tax rate is about 22.04 % as compared to about 20.35 % in the previous year.Pat after Minority Interest has increased by 108.6 % to 395.8 million as compared to 189.7million in the previous year.
Your company has not declared any dividend for the year.
Your company has not accepted any deposits within the meaning of Section 73 of thecompanies Act 2013 and the companies (Acceptance of Deposits) Rules 2014.
Transfer of unclaimed dividend to investor education and protection fund
The provisions of Section 125(2) of the companies Act 2013 do not apply as there wasno dividend declared and paid during the year.
Material changes and commitment if any affecting the financial position of the company
There have not been any material changes and commitments if any affecting thefinancial position of the company which have occurred between the end of the FinancialYear of the Company to which the financial statements relate and the date of the Report& change in nature of business if any.
Particulars of loans guarantees or investments
The company has not given any loans or guarantees covered under the provisions ofsection 186 of the companies Act 2013. The detail of the investments made by Company isgiven in the notes to the financial statements.
Board and committee meetings
The Board met 7 times during the year. The details regarding the board meetings andcommittee meetings are given separately in the corporate Governance Report.
1) 8K Miles Software Services Inc. USA
2) 8K Miles Software Services FZE - UAE
3) 8K Miles Health cloud inc. USA
4) Mentor Minds Solutions and Services inc. USA
5) Mentor Minds Solutions and Services Private Ltd. INDIA
The accounts of the subsidiary companies are consolidated with the accounts of thecompany in accordance with the provisions of section 129 of the companies Act 2013 andregulation 33 of SEBi (LODR) Regulations 2015. The consolidated financial informationforms part of the Annual report.
A statement under Section 129 (3) of the companies Act 2013 in Form Aoc-1 is annexedto the Directors report.
Conservation of energy
a) company ensures that the operations are conducted in the manner whereby optimumutilisation and maximum possible savings of energy is achieved.
b) No specific investment has been made in reduction in energy consumption.
c) As the impact of measures taken for conservation and optimum utilisation of energyare not quantitative its impact on cost cannot be stated accurately.
d) Since the company does not fall under the list of industries which should furnishthis information in Form A annexed to the aforesaid Rules the question of furnishing thesame does not arise.
MANAGEMENT DISCUSSION AND ANALYSIS
As required under Regulation 34 of the SEBi (Listing obligations and DisclosureRequirements) Regulation 2015 a detailed Report on Management Discussions and Analysis isgiven below:
"We continue to see significant growth in our Cloud Security Solutions and cloudManaged Services. our recent launch of cloudEzRx a cloud-platform
designed to answer the compliance and regulatory needs of Pharmaceutical/Life Sciencesindustry is gaining market awareness while adding more key-functionalities to meetuprising demand by healthcare providers".
We have accomplished integration of businesses acquired - SERJ Mindprint cintel andNexage. We are leaders in the Life Sciences and Healthcare space where the cloud ishelping companies change the way drugs are developed and brought to market. We are alsoprepared for changes in our client's industry like consumerisation of healthcare. ourcloudEzRxTM gives Pharmaceutical companies the ability to quickly bring new drugs tomarket by offering on-demand scalable compute resources quickly & efficientlyreducing cost and decreasing the time to market irrespective of the composition of theirteams and resources.
Your company has been working on strategy to monitor and grow annuity business and hassucceeded to increase the proportion to over 37% in March 2016. in last 18 months we havedelivered iP led cloud solutions to the clients and have migrated multiple clients tocategory of over $ millions TcV. our clients are amongst top 5 companies in bothhealthcare and life sciences sector; Your company has become one of the leading providersof public cloud services and solutions to highly regulated customers.
As a geography North America contributes 80% of our revenue. About 40% of our revenueis from fixed price contracts.
Industry structure and opportunities
NASScoM data states that iT-BPM industry (global) grew by 0.4% in cY 2015 to US$ 1.2trillion. of that US$ 1.2 trillion iT services is at US$ 650 billion. india's share inglobal sourcing market (iT services) of US$ 97 - 99 billion stands at 67%. NASScoMprojects revenue of US$ 175 to 190 billion for india from iT services market. it emphasisfocus on going bimodal iT gaining share in both traditional and digital marketsincreased emphasis on value addition and innovation gaining customer experience buildingdigital talent pool. The future of the industry is in Managed Services and for that tobecome reality collapsible infrastructures such as cloud computing and low-costaffordable technologies will make it a key priority on enterprise customer's mind.
Gartner Says Worldwide Public Cloud Services Market Is Forecast to Reach $204 Billionin 2016. The worldwide public cloud services market is projected to grow to total $204billion at 16.5 percent in 2016 up from $175 billion in 2015 according to Gartner inc.The highest growth will come from cloud system infrastructure services (infrastructure asa service [iaas]) which is projected to grow 38.4 percent in 2016. it is estimated thatby 2018 more than 60% of all enterprises will have at least half of their infrastructureon cloud based platform.
8K miles ip driven cloudez solutions and As-A-sERVIOE offerings:
Life sciences solutions built on Cloud
8K Miles is partnering with major cloud providers such as AWS and Microsoft Azure andiBM in building Life Sciences solutions on a sustainable cloud environment that solves thechallenge of digital transformation facing regulatory affairs and security concerns.
8K Miles is helping highly regulated large enterprise companies to build a secure andstandardized enterprise wide self-service platform using 8K Miles CloudEz solutions andCloud security and compliance control framework that address the pharma qualification& validation compliance requirements.
Deep domain expertise particularly in Pharma/Healthcare
Recent acquisition of NexAge Technologies one of the principal regulatory complianceand technology solutions firms in the U.S. with more than 15 years of experience incomputer systems validation quality review vendor audits data analysis and migrationas well as process governance for the life science and pharmaceutical industry has broughtsignificant experience in system validation mandated for regulated systems and workingwith GxP guidelines. This helps to provide services that help Pharma companies achievegold standard in compliance improve quality and bring in operations efficiencies acrossthe entire product development lifecycle.
8K Miles provides CloudEzRx a highly regulated vertical focussed framework composed ofinter-dependent infrastructure security automation compliance governance and servicemanagement functionality (ITSM) to deploy a fully qualified and validated infrastructureplatform design and implementation service. The validated framework defines a Companywidesolution to provide cloud services for users via a self-service dashboard.
Thus CloudEzRx enables life sciences companies creating a cloud environment meetingstringent security privacy and regulatory challenges and strategies including GxP HiPAAetc. integrated advanced Devops automation ensures that continuous compliance is met atevery step of cloud adoption implementation and managed services. An all-in-oneintegrated dashboard provides a powerful interface to manage control and audit the entireiT portfolio.
While investments are being made towards digital healthcare world we target to achieveby 2020 there is significant resistance in healthcare and life sciences ecosystem toadapt public cloud and digital technology. 8k Miles has been at the forefront to work withthe leading providers payors and life sciences companies to prepare them for digitalrevolution. We engage with our clients at consulting stage where we formulate their data/workload migration strategy and then we migrate and maintain the workloads using ourin-house build iP/ tools. our process is fully automated agile and scalable to take careworkload requirements of any size in a secure environment. our focus is to provide moresolutions and analytics to our clients once they have migrated to cloud.
Financial services - the next focus segment
By 2018 more than 60% of all enterprises will have at least half of theirinfrastructure on cloud based platforms. Financial service providers are starting to movelegacy systems to the cloud which can accommodate its fast online growth. Functionalitiesincluding data warehousing and electronic business processing systems are to replacepaper-based application systems. Some of the customers are even moving their entire retailbanking platforms to the cloud to reduce complexity and costs while improving agilitymaking the banks much more responsive to changing customer demands.
Another area is moving storage to the cloud which cuts costs in half. Similar savingscan be achieved by moving application testing and development to cloud. Major cloudproviders such as Amazon Web Services (AWS) has scooped up significant business fromfinancial services firms which have been early adopters of cloud. Amazon cloud is able torun credit
risk simulations for its customers in 20 minutes down from 23 hours before.
Adopting a cloud model will provide the banks mortgage and insurance agencies with aplatform that is secure scalable and can handle mission- critical workloads whileoffering greater flexibility and performance. Following are the top established andemerging financial services related opportunities for cloud providers:
1. card and mobile payment processing -- Visa Mastercard and trusted 3rd parties
2. Marketing and customer relationship management
3. core banking
4. Human Resources and talent management
5. Infrastructure as a service
6. Wealth management
7. Mortgage and insurance applications
8K Miles can take a leadership role in these areas and be part of the cloud journey forfinancial service providers by providing the digital transformation services and cloudsolutions in banking insurance and mortgage industries.
IT is undergoing significant change. Agility security speed connectivity and storageare at the forefront of this change. Your company is blessed to be born in this age. Wehave grown our top line at over 100% last 2 years. infrastructure as a service is expectedto grow at 38.4% in 2016 (Gartner).
Risk and risk mitigation
1. Execution risk: While fixed price contracts offer an opportunity to add bettermargins in iP/ non-linear execution model they also expose us to execution risk in remotescenarios of any inability to adhere to delivery or quality SLA. your company has madesignificant investments in it's platform (IP).
2. Employee related risk: Employee attrition and/ or constraints in the availability ofskilled human resources could pose a challenge for any services company. your company haskept its human capital at the centre and has initiated multiple steps for overalldevelopment of its employees. We encourage entrepreneurship culture within organizationand offer new challenges and opportunities for our employees. We have made significantinvestments in our recruitment and training procedures.
3. M&A execution risk: your company has been acquisitive in past when comes toacquisition of capabilities at right price. We believe in reducing our time to tapopportunity offered in this age of iT transformation but at the same time we have put inplace stringent evaluation criteria diligence parameters and high standard of corporategovernance practices for any target opportunity to cross the line. We have seniormanagement team and independent board of advisors to monitor the progress of eachopportunity pre- and post-closure.
4. Exchange rate risk: Given that the company's revenues are largely denominated in uSdollars and fluctuations in foreign currency exchange rates could have an impact oncompany's earnings.
5. Investment risk: The strength of your company is iP developed over years of researchand development. We expense the costs that is unlikely to yield significant results infuture in the year of accrual. We conduct regular impairment test of all intangibleassets created either by way of internal Research and Development (R&D) and/ or assetsacquired through acquisitions.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company ensures that all transactions are authorized recorded and reported. Alsothe Company has adequate internal control systems to ensure that the assets aresafeguarded and protected against any loss. The scope and authority of internal auditorsare clearly defined. The audit committee on periodical basis reviews the findings andrecommendation of the internal auditors and the board takes necessary corrective actions.
It was a year where we grew by 40% in our human capital. Your Company has takeninitiatives to see that Employees are encouraged to complete the professionalcertification in the area they specialise be it AWS Azure iAM Big-Data Analytics etc.About 20% of our cloud Engineers are "AWS Certified Associates orProfessionals". other key steps to ensure overall development of our human capital:
Technopreneur @ 8K Miles - At 8K Miles we believe Independent thinkers need to begiven the space time to brood ideate and create. that is why at 8K Miles ideas are seenas a true potential.
comPass - ah employees are assigned to the leaders of the organisation who act asMentors. this enables in building up future leaders of the organisation.
Smile - As responsible corporate citizens the employees of 8K Miles under the socialgroup sMile undertake projects that bring smiles in people.
Fun @ Work - At 8K Miles we take the quote "All work and no play makes Jack a dullboy" little seriously. We have fun filled evenings organized to lighten up the moodof the employees.
CHANGE IN SHARE CAPITAL
During the year the Authorised share capital of the Company was increased from Rs 15crores to Rs 20 crores with the shareholders' approval at the Annual General Meeting heldon 18.09.2015. The paid up share capital of the Company was increased from Rs 103441020consisting of 10344102 equity shares to Rs 108941020 consisting of 10894102 equity sharesof Rs 10 each. During the year the Company allotted 550000 shares to promoter andNon-promoter strategic investor pursuant to exercise of conversion of warrants.
APPOINTMENT OF DIRECTORS
Mr. Lakshmanan Kannappan Who retires by rotation being eligible offers himselfre-appointment.
Mr. R.S. Ramani whose appointment as whole-time Director ended on 13th August 2016and being eligible for re-appointment. The board recommends his re-appointment for aperiod of five years effective August 13 2016.
Mr. Dinesh Raja Punniamurthy was appointed as an Additional Director under Independentand Non-Executive Category at the meeting of board of directors held on March 31 2016pursuant to Section 152 & 161 of the Companies Act 2013 who holds office up to thedate of ensuing AGM and is proposed to be appointed as an Independent Director for fiveyears effective 30th September 2016.
Ms. Babita Singaram was appointed as an Additional Director under Independent andNon-Executive Category at the meeting of board of directors held on
March 31 2016 pursuant to Section 152 & 161 of the Companies Act 2013 who holdsoffice up to the date of ensuing AGM and is proposed to be appointed as an IndependentDirector for a period of five years with effect from 30th September 2016.
At the Annual General Meeting held on September 18 2015 M/s GHG Associates CharteredAccountants were appointed as statutory auditors of the Company to hold office till theconclusion of Annual General Meeting to be held in the calendar year 2021. In terms offirst proviso to Section 139 of the Companies Act 2013 the appointment of the auditorsshall be placed for ratification at every AGM. Accordingly the appointment of M/s GHGAssociates statutory auditors of the Company is placed for ratification by theshareholders. In this regard the Company has received a certificate from the auditors tothe effect that if they are reappointed it would be in accordance with the provisions ofSection 141 of the Companies Act 2013.
PARTICULARS OF EMPLOYEES
Statement of personnel particulars of employee's pursuant to Section 197(12) of theCompanies Act 2013 are not applicable since none of the employees are in receipt ofremuneration in excess of the limits specified herein ('500000 per month or '6000000per annum) during the period under review
RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the financial year were onarm's length basis and were in the ordinary course of the business and are in complianceof the provisions of the Companies Act 2013 and the Listing Regulations. There are nomaterial related party transactions made by the Company with Promoters Key ManagerialPersonnel or other designated persons which may have potential conflict with interest ofthe Company at large.
The Audit Committee on a quarterly basis approves all related party transactions. Thedetails of the transactions with related parties are provided in the financial statements.Policy on Related Party transactions are available in the website.
The Company had the following Committees of the Board during the year 2015-16:
1. Audit Committee;
2. Nomination and Remuneration Committee;
3. Stakeholders' Relationship Committee;
CORPORATE SOCIAL RESPONSIBILITY
The provisions of Section 135 of the Companies Act 2013 are not applicable to theCompany. However CSR activities have already embodied in the value system of the Company.
Code of business conduct and ethics
The Board of Directors has approved a Code of Conduct and Ethics in terms of ScheduleIV of Companies Act 2013 and Listing Agreement. All the Board Members and the SeniorManagement personnel have confirmed compliance with the Code for the year ended 31st March2016. The annual report contains a declaration to this effect signed by the ManagingDirector.
Vigil mechanism / whistle blower policy
In accordance with Section 177(9) and (10) of the Companies Act 2013 and Regulation 22of SEBi (LoDR) Regulations 2015 the Company has established a Vigil Mechanism and has aWhistle Blower Policy. The policy provides a mechanism for all employees to report to themanagement grievances about the unethical behaviour or any suspected fraud. The policy isavailable at the website of the Company.
Prevention of insider trading
The Company has complied with the provisions of SEBI (Prevention of Insider Trading)Regulations. The Company has adopted a Code of Conduct for Prevention of Insider Tradingwith a view to regulate trading in securities by the Directors and designated employees ofthe Company. The Code requires pre-clearance for dealing in the Company's shares andprohibits the purchase or sale of Company shares by the Directors and the designatedemployees while in possession of unpublished price sensitive information in relation tothe Company and during the period when the Trading Window is closed. The Board isresponsible for implementation of the Code. The code of conduct for prevention of insidertrading is available in the website of the Company.
Evaluation of boards performance
The board has carried out an evaluation of its own performance and that of itsdirectors individually. The manner in which the evaluation has been carried out isexplained in the Corporate Governance Report.
Pursuant to provisions of section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. Gouri Shanker Mishra Company Secretary in Practice to undertake theSecretarial Audit of the Company. The Secretarial Audit report forms part of the AnnualReport.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is appendedto this report.
CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION & ANALYSIS REPORTS
The Corporate Governance and Management Discussion & Analysis Report which form anintegral part of this Report are set out as separate Annexures together with theCertificate from the auditors of the Company regarding compliance with the requirements ofCorporate Governance as stipulated in Regulation 27 (2) of SEBi (LoDR) Regulations 2015.
Directors responsibility statement
In terms of Section 134 (5) of the Companies Act 2013 the directors would like tostate that:
i) In the preparation of the annual accounts the applicable accounting standards havebeen followed.
ii) The directors have selected such accounting policies and applied them consistentlyand made judgements and estimates that were reasonable and prudent so as to give a trueand fair view of the state of affairs of the Company at the end of the financial year andof the profit or loss of the Company for the year under review.
iii) The directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this
Act for safeguarding the assets of the Company and for preventing and detecting fraudand other irregularities.
iv) The directors have prepared the annual accounts on a going concern basis.
v) The directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.
vi) the directors had devised proper system to ensure compliance with the provisions ofall applicable laws and that such system were adequate and operating effectively.
ACKNOWLEDGMENT AND APPRECIATION
The Directors take this opportunity to thank the shareholders Financial InstitutionsBanks Customers suppliers and regulatory & Governmental Authorities for theircontinued support to the Company. further the Directors appreciate and value thecontributions made by Employees at all levels.
| ||For and on behalf of the Board |
| ||8K Miles Software Services Limited |
| ||Sd/- |
| ||Venkatachari Suresh |
| ||Managing Director |
|Place: Chennai || |
|Date: August 24 2016 || |