The Directors are pleased to present their Twenty Fifth Annual Report on the businessand operations of Hexaware Technologies Limited (hereafter referred to as theGroup or The Company) together with audited financial statements for thefinancial year ended December 31 2017. The financial statements are prepared inaccordance with Indian Accounting Standards (Ind AS). In accordance with thenotification issued by Ministry Corporate Affairs the Group has adopted Ind AS witheffect from January 1 2017 being first Ind AS financial statement with transition date ofJanuary 1 2016. Accordingly figures for the fiscal year (FY) 2016 has been restated inaccordance with Ind AS (refer note 2.1 and 3 of consolidated
|Global Operations: || ||(USD million) |
| ||FY 2017 ||FY 2016 |
|Income from Operations ||607.49 ||525.55 |
|EBITDA before ESOP/ RSU cost ||106.41 ||89.44 |
|EBITDA after ESOP/ RSU cost ||101.02 ||85.77 |
|Profit from Operations * ||91.26 ||77.56 |
|Profit before Tax ||98.75 ||83.37 |
|Profit afterTax including share in profit of associate ||77.03 ||62.36 |
|Total Customers ||221 ||220 |
|Average account size ||2.75 ||2.39 |
| || ||(Rs. million) |
| ||FY 2017 ||FY 2016 |
|Income from Operations ||39420.14 ||35348.99 |
|EBITDA before ESOP/RSU cost ||6901.14 ||6010.30 |
|EBITDA after ESOP/RSU cost ||6551.64 ||5763.56 |
|Profit from Operation * ||5918.87 ||5211.03 |
|Add: Exchange Rate Gain (net) ||449.62 ||355.93 |
|Add: Other Income ||35.82 ||38.41 |
|Less: Interest ||(1.19) ||(1.41) |
|Profit before share in profit of associate ||6403.12 ||5603.96 |
|Add: Share in profit of associate ||2.70 ||- |
|Profit before Tax ||6405.82 ||5603.96 |
|Less: Provision for Taxation ||1410.56 ||1412.34 |
|Profit after Tax ||4995.26 ||4191.62 |
|Other Comprehensive Income (OCI) ||91.86 ||262.29 |
|Total Comprehensive Income ||5087.12 ||4453.91 |
* excludes Exceptional items Exchange Rate Difference Interest Other Income andProvision for Taxation
|India Operations: || ||(Rs. million) |
| ||FY 2017 ||FY 2016 |
|Income from Operations ||15241.07 ||13930.41 |
|EBITDA after ESOP/RSU cost ||4894.66 ||4563.49 |
|Profit from Operations * ||4401.30 ||4140.31 |
|Add: Exchange Rate Gain (net) ||537.40 ||284.64 |
|Add: Other Income ||29.16 ||35.61 |
|Less: Interest ||(0.62) ||(1.14) |
|Profit before Tax ||4967.24 ||4459.42 |
|Less: Provision for Taxation ||857.64 ||945.10 |
|Profit after Tax ||4109.60 ||3514.32 |
|Total Comprehensive Income for the year ||4194.13 ||3508.05 |
|Add: Balance brought forward from previous year ||4886.20 ||3887.80 |
|Other Comprehensive Income (OCI) ||84.53 ||(6.27) |
|Add: Transfer from Special Economic Zone Reinvestment Reserve ||487.22 ||174.30 |
|Balance available for appropriation ||9567.55 ||7570.15 |
|Appropriation || || |
|Interim dividend including tax on dividend ||1428.09 ||2506.22 |
|Transfer to Special Economic Zone Reinvestment Reserve ||178.35 ||177.73 |
|Expense on buyback of shares ||12.15 ||- |
|Balance carried to Balance Sheet ||7948.96 ||4886.20 |
Note: During the year the Company merged its wholly owned subsidiary Risk TechnologyInternational Limited with itself. The said merger has been accounted for using pooling ofinterest method as if the merger had occurred from January 1 2016. Accordingly priorperiod figures of India operation (Standalone financial statements) are restated (refernote 31 of standalone financial statements).
Results of Operations
a) Global operations:
Income from operations increased to Rs. 39420.14 million in 2017 from Rs. 35348.99million in 2016 growth of 11.5%. The growth in Dollar terms was 15.6% reaching USD607.49 million in 2017 from 525.55 million in 2016. Revenue in constant currency was USD606.1 million in 2017 growth of 15.3%.
Growth was driven largely by volume increase aided by higher onsite mix.
EBITDA after RSU costs increased to USD 101.02 million in 2017 compared to USD 85.77million in 2016 growth of 17.8%. In INR terms it saw growth of 13.7% and increased toRs. 6551.64 million in 2017 compared to Rs. 5763.56 million in 2016.
Profit from Operations (profit before Exchange rate difference Interest Other incomeand Provision for taxation) was at Rs. 5918.87 million in 2017 as against Rs.5211.03 million in 2016 growth of 13.6%. The growth in profit from operations withoutconsidering RSU cost under long term incentive plan was 14.9%. Profit before tax grew14.3% to Rs. 6405.82 million in 2017 compared to Rs. 5603.96 million in 2016.
Profit after tax stood atRs. 4995.26 million in 2017 as compared to a profit ofRs.4191.62 million in 2016 growth of 19.2%. PAT margins in Rupee terms were at 12.7% in2017 compared to 11.9% in 2016.
Material changes from end of financial year till date of report
There are no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year of statements relate andthe date of the report.
Companys major achievements in 2017
The Companys investments in building the growth momentum has started paying offwith the Group achieving stellar growth both in revenue as well as in profits. In 2017growth in revenue was 11.5% in INR terms and 15.6% in USD terms compared to 2016.
EBITDA after ESOP/RSU cost growth in 2017 was 17.8% in USD terms and 13.7% in INRterms during the year 2017. Profit for the year grew at 23.5% in USD terms and 19.2% inINR terms. Diluted EPS grew by 20% in 2017 over 2016.
Return on net-worth continues to be above 25%.
The Company has strong order book with the New Logo (NN)
TCV booking of ~USD180 million during the year growth of 18% compared to FY 2016. Overthe past few years the focus has been increasing the client base which has started tomaterialise. The Company added 10 clients contributing over USD 1 million revenue ofwhich 4 clients contributed between USD 5-20 million revenue during the year. The revenuefrom the current top 5 has increased by 14% from next 5 increased by 8% and from next 10increased by 22%. The Company is poised to see the shaping of pyramid.
b) India operations:
In the year 2017 the revenue of the standalone legal entity increased by 9.4 % to Rs.15241.07 million in comparison with revenue of Rs. 13930.41 million in the previousyear. The net profit after tax was Rs. 4109.60 million as compared to Rs. 3514.32million in 2016 showing growth of 16.9%.
The paid-up Share Capital of the Company as on December 31 2017 was Rs. 593.61 millioncomprising of 296803757 Equity Shares of Rs. 2/- each. During the year 470397 shareswere exercised under different ESOP schemes.
The Company during the year completed the buyback of 5694835 shares at a price of Rs.240/- per share another form of rewarding the shareholders. The market capitalization ofthe Company as on December 31 2017 was at Rs. 101106.20 million (USD 1582.88 million).The market capitalization is calculated on the basis of closing prices of Rs. 340.65 onThe National Stock Exchange and the closing exchange rate of 1 USD = INR 63.875 as ofDecember 31 2017.
Other equity (Reserve and surplus and other comprehensive income)
The Securities premium reserve balances stood at Rs. 3517.94 million which is afterutilisation of Rs. 1366.76 million for the purpose of buy-back of shares.
The balance of the Retained earnings after the appropriations for the year is Rs.7948.96 million.
Forex Mark-To-Market: The year-end cash flow hedging reserve (net of tax) stood at gainof Rs. 465.83 million as compared Rs. 240.78 million in the previous year recognised inaccordance with the hedge accounting provision of IndAS 109 Financial Instruments. TheCompany recorded Rs. 732.44 million in as Share options outstanding reserve beingamortisation of compensation cost of
RSUs granted to the employees of the Group.
There was no transfer to General reserve during the year. The general reserve balanceas at end of the year is Rs. 2117.71 million.
In summary total other equity stood at Rs. 14823.34 million.
During the year 2017 the Company paid four interim dividends on equity shares Q4 2016Rs. 1.00 (50%) Q1 2017 Rs. 1.00 (50%) Q2 2017 Rs. 1.00 (50%) Q3 2017 Rs. 1.00 (50%)totalling to Rs. 4.00 per share (200%).
The board of Directors at its meeting held on February 7 2018 declared interimdividend of Rs. 1.00 (50%) for the Q4 2017.
The Board of Directors have not recommended payment of any final dividend and interimdividends as aforesaid be considered as final. The total dividend declared and paid in2017 on account of interim dividend & tax thereon amounts to Rs. 1428.09 million.
The break-up of dividend is as under:
| ||Q1 ||Q2 ||Q3 ||Q4 ||Total |
|Dividend ||296.33 ||296.68 ||296.73 || |
|Tax ||60.33 ||60.40 ||60.41 ||60.41 ||241.55 |
|Total ||356.66 ||357.08 ||357.14 ||357.21 ||1428.09 |
In accordance with Regulation 43A of the Listing Regulations the Company hasformulated a Dividend Distribution Policyand details of the same have beenuploaded on the Companys website at http:// hexaware.com/investors/
Particulars of loan guarantee or investments
Loan guarantees and investments covered under section 186 of the Companies Act 2013form part of the notes to the financial statements provided in this Annual Report. Pleaserefer note no. 6A 6B 8A 8B and note no. 24 of Standalone Financial Statements.
Subsidiaries and associates
During the year 2017 the Company formed three Wholly Owned Subsidiaries in Hong KongSweden & China and two step down subsidiary companies in US primarily to cater needsof customer.
The total amount of initial investment in these companies are given below:
|Sr. No. ||Name of Company ||Rs. Million |
|1 ||Hexaware Technologies Hong Kong Limited ||16.13 |
|2 ||Hexaware Technologies Nordic AB ||0.40 |
|3 ||Shanghai Hexaware Information Technologies Company Limited ||Nil |
|4 ||Hexaware Technology and Business Solutions Inc. (subsidiary of Hexaware Technologies Inc.) (closed during the year) ||Nil |
|5 ||Digitech Technologies Incorporated (subsidiary of Hexaware Technologies Inc.) ||Nil |
During the year 2017 the Company has also invested further funds in the followingwholly owned subsidiary. The total further investment in the subsidiary is given below:
|Sr. No. ||Name of Company ||Rs. Million |
|1 ||Guangzhou Hexaware Information Technologies Company Limited ||6.41 |
On July 6 2017 Honble National Company Law Tribunal has approved merger of thewholly owned subsidiary company M/s. Risk Technology International Limited with theCompany and it is effective from July 27 2017.
In accordance with Section 129(3) of the Companies Act 2013 consolidated financialstatements of the Company and all its subsidiaries forms part of the Annual Report.Further a statement containing the salient features of the subsidiaries in the prescribedformat AOC - 1 is appended as Annexure 1 to the Board's report. The statement alsoprovides the details of performance financial positions of each of the subsidiaries.
In accordance with Section 136 of the Companies Act 2013 the audited financialstatements and related information of the Company and audited financial statements of eachof its subsidiaries are available on our website www.hexaware.com. These documents willalso be available for inspection during business hours at the registered office Company.
Out of the top 10 trends impacting humanity ranging from end of cancer tohyperconnected world 7 are themed on Automation Machine Learning and ArtificialIntelligence. Hexaware is on a journey to transform how IT servicesaredeliveredandbethefirstIT services company in the world where majority of workforcetalks about Digital - keeping ourselves in line with the top trends impacting humanity.
The Company strives to do so with its basic philosophies of delighting customers whilegenerating profitable growth for our its investors.
There are three pillars to Hexaware's business strategy:
1. GTM Strategy: The Company has outlined a 3-pronged GTM strategy for itsbusiness.
a. Automate Everything: In order to achieve its to make its workforce digital ina big way the Company is building a culture where its employees are incentivised forautomating work. The Company is tapping into cutting edge technologies of AI/ML andBlockchain to implement automation at scale for our clients. Hexawares motto toautomate everything stems from a comprehensive top-down view starting from customerexperience moving onto underlying business processes and their applications and endingwith the infrastructure that empowers them.
The automation solution that the Company offers is infused with self-healingapplication management along with fully automated infrastructure and operationsmanagement. Ultimately resulting in lowered costs minimal human intervention anddramatically improved end-user experience.
b. Cloudify Everything: Cloud technology today is so much more than justlifting and shifting workloads. Hexawares enterprise cloud services help enterprisesin realizing a digital future all while optimizing IT increasing agility and reducingcost. The Company understands that designing and building native cloud applications isfundamentally different from traditional in-premise development. The
Company's cloud consultants help in navigating the change and take advantage of thecloud ecosystem. Migrate faster and operate in new environment better and cheaper with itsunique and proven framework. Hexaware can help reduce complexity and leverage cloudbetter irrespective of customer corporate landscape.
c. Transform Customer Experience: statement of our A vast majority ofenterprises dont deliver consistent & superior customer experience (CX). Thecomplexities in delivering superior
CX are manifold but mainly it is on bringing together diverse and complextechnologies. The Company believes that Natural language will be the most common waystatements including the consolidated financial humans interact with businesses andmachines; & this will transform CX management again. A design-led approach helpsstitch these capabilities together and narrowing focus to help clients build CustomerExperience hitherto delivering ultimate value to them. of the
2. Culture: No strategy can see the light of the day until every employee hasimbibed the strategy and is living it day in and day out. Hexawarians around the world areproud of the Automation first approach as evident from the fact that majority ofHexawarians participated in bottom-up innovation. 70% out of 2800 ideas posted byemployees have been implemented resulting in almost USD54mn savings for customers in last3 years and a saving of 1170698 man-hours/year. Hexaware automates low skilledactivities fosters a culture of David vs. Goliath with a chip on the shoulder attitude.
3. Leadership: One of the corner-stones of the Company's growth andtransformation over the last few years has been its fabulous leadership team. The Companyadded as many as 10 senior leaders in 2017 who joined Hexaware with 10x executionexperience. The Company believes that its leadership is one of the best in the industry.
The Company has seen tremendous success with this strategy and as an outcome theCompany is proud to be the fastest organically growing IT services company with industryleading shareholder returns. The Company is rated number one in Whitelanes 2017 UKand 2016 European IT Outsourcing study. The Company continues to remain nimble and closelyaligned to the customer needs to keep marching towards the path to sustainable growth.
India based Global Delivery Centers
The Company has two Offshore Development Centers (ODCs) at Millennium Business Park inMahape Navi Mumbai. One of these is the registered office of the Company. Both thisODCs houses around 1700 employees.
The Companys BPS arm operates out of two service centers in the same complexwith around 1600 employees providing BPS services to its global clients in shift mode.
The Company has also taken premises on long-term lease for its IT and BPS operation inthe SEZ facility named Loma IT Park Ghansoli Navi Mumbai with seating capacity of 1600employees including for BPS operations. There are around 630 employees working from thiscenter.
There are around 4170 IT Professional employees working from the Companys 27acre campus in Chennai. This campus has employee-friendly amenities like recreationcenter library and gymnasium facilities offering plenty of avenues for relaxation andrejuvenation as well as knowledge enhancement through Hexavarsity the Companys in-house Learning and Development University.
The Companys Chennai "green campus" conforms to eco-friendly norms andregulations like optimal use of solar energy use of eco- friendly building materials anda judicious spread of landscaped spaces around seating facilities across various levels.
The said green campus also house state of the art customer experience center.
Currently seating capacity is expanded to 5500 seats in Phase 1. The Company has alsoconstructed Phase 2 with approximately 3300 seats. The BPS arm also operates out ofanother two facilities in Chennai of which one is in SEZ unit with seating capacity of1975. The combined strength of around 930 employees operates from these facilities.
In Pune the Company has moved to its own SEZ campus at Hinjewadi from January 2017.The first phase of this campus has seating capacity of 1900 seats. Around 520 ITProfessional employees are currently operating from this campus.
The Company owns 20 acres of land in MIHAN SEZ Nagpur a tier II city. This facilityis currently operational with around 500 employees and has seating capacity to accommodate1104 professionals in different shifts.
This facility in the Indias IT capital of Bengaluru has capacity of 50 seatswhich is fully occupied.
Hexaware BPS arm has a facility in Coimbatore with seating capacity of 256 employeesand around 250 employees are working from this facility for providing BPS services to itsglobal clients in shift mode.
The Company has opened New Delivery Centre at Noida. It has seating capacity of 32employees. This delivery Centre is in operation at its 100% capacity.
Overseas GlobalDelivery Centers Alpharetta GA (USA)
The Company has Global Delivery Centre (GDC) at Alpharetta in the state of Georgia USAwith seating capacity of 170 employees. 150 IT professional employees are currentlyworking from this delivery center.
Dunwoody GA (USA):
The Company has Global Delivery Centre (GDC) at Dunwoody in the state of Georgia USAwith seating capacity of 220 and currently 190 IT professional employees are working fromthis delivery Centre.
Reston Virginia (USA):
The company has delivery centre at Sunrise Valley in the state of Virginia with seatingcapacity of 53 which is fully occupied.
The Company has Global Delivery Centre (GDC) at Amsterdam with seating capacity of 12and currently 10 IT professional employees are working from this delivery Centre.
The Company has a strong presence in Mexico with a near-shore
Delivery Centre at Saltillo with employees seating capacity of 491. While Mexicooffers cost competitiveness compared to the United
States of America the country also provides immense benefits in the form of same timezone enables immediate response and access to a vast talent pool and an untapped emergingmarket. The
Company intends to leverage its near shore Delivery Centre to cater to several globalclients as an addition to the other existing options of continuing operations in the USAor in the Companys locations in India. Currently around 350 IT and BPS ProfessionalEmployees are working from this delivery Centre.
The Company has center in Russia for its BPS operation which has seating capacity of156 Employees. Currently around 120 employees are working from this location for providingBPS Services to Global Client.
The Company has Global Delivery Centre (GDC) at Bucharest (Romania).
The Company has center in Guangzhou China for its BPS operation with a small office.
Cash Flow (Consolidated)
The cash generated from operations in 2017 was Rs. 4762.40 million. The Company hasinvested Rs. 956.78 million in property plant and equipment and intangible assets mainlyfor new development centre in Chennai and Pune to cater long term need and to providequality support to global delivery operations and sales.
During the year the Company paid dividend including dividend tax of Rs. 1428.09million. The Company also used Rs. 1378.91 million on buy-back of shares.
The Company has received Rs. 12.39 million from issue of shares. As of December 31 thecash position of the Company was Rs. 5332.22 million including the restricted bankbalance equivalent in USD 83.48 million. Including the Mutual Fund investments (cashequivalent) the total cash & bank balance was at Rs. 5521.41 million equivalent USD86.44 million.
Human Resource Capital
Human Resource Capital and the value that it creates form a big part of Hexawaresgrowth story. The industry today is changing rapidly with many disruptive business modelsnecessitating a need for human capital to adapt in an agile manner. Automation anddigitization have become buzzwords today. The focus of the Company has been to leveragedigital re-imagination to drive growth and efficiency of our business models products andservices business processes as well as the workplace. This helps the Company to deliver asuperior experience to every key stakeholder viz. customers employees investors and thecommunity at large.
Exceeding customers expectations requires a high level of focus competence andtechnical expertise. The Company strengthened its recruitment efforts through continuedemployee referrals job fairs social media & campus recruitment drives. Over the lastyear the Company has added 1590 employees taking the total strength to 13705 from12115 at the end of the previous year. The Company is focused towards attracting andretaining high calibre employees through comprehensive Hiring and on-going Deploymentprocesses. The Company's Gender Diversity is more evident now with a healthy 26.85% of ourworkforce being women.
The Company takes pride in its continued focus on employee retention. In its sustainedefforts to make Hexaware a Great Place to Work the focus has been on furtheringemployees career aspirations. This focus strengthened by the Rewards &Recognition program has helped reduce the attrition rate from 16.1% last year to 13.1% ason December 31 2017. The Company believes that its workforce lives its brand and to thatend the HR team is always working on initiatives that help build an engaging organization.
Today the youthfulness and the agility in its talent reflects the new brand identityof Hexaware.
To sustain its Human Capital Strategy the Company has identified and consolidatedstrong performance indicators. This has led to an increased focus on accountability andownership from all.
Talent Management - Asset Development
Hexaware believes that great talent is the biggest source of competitive advantage.Keeping its talent pool at the centre of all the management strategies is the prime focusand the senior leadership team is clear in its expectations from the vast reservoir oftalent that the company has.
The companys focus is to develop a strong internal pipeline of talent and toprovide a platform for talented individuals to shine innovate and create value for itsclients. The company is abreast of the emerging market trends and is at the fore front of"Shrink IT Grow Digital" mantra. The company focusses on Talent Managementthrough interventions at every step of the way right from Hiring to Retention.
Hexaware believes that appreciation propels people to give their best at work and itsrobust Rewards & Recognition portal bears testimony to that. Managers are continuouslyencouraged to ingrain a culture of appreciation and nominate deserving employees forawards such as Spot/Ace/Star Best Debutant and Best Team etc. Winners are guaranteedglobal recognition in the Hexaware world creating a memorable employee experience that isparamount to its R&R strategy. The Company has also linked this system to thePerformance Management System.
To help smoothen the process of Performance Management and to familiarize the peoplewith the nuances of the tool the Company has regular connect sessions and specificlearning modules designed by the HR team. The Performance Management System has an inbuiltstructured and streamlined process to objectively evaluate ones performance againstpre-defined goals. The PMS also has the functionality to identify future talent needed bythe organization and a pipelined approach to groom the future leaders of Hexaware incollaboration with its Learning and Development arm: Hexavarsity.
The Company helps hone the skills of its consultants through various traininginterventions regular Hackathons both internal and those organized by its servicepartners. The Technical Competency Development Program (TCDP) run by the Learning andDevelopment team focusses on aligning the technical skills of its people to their specificroles. The new Project End Feedback system ensures that consultants get feedback for everyproject that they work on and are aware of their areas of improvement. The Company focuseson holistic employee development. In its quest for consistency and excellence the Companyrewards its top performers and in 2017 the Company launched the exclusive High PerformersClub (HPC) program the membership to which is restricted only to its consistent topachievers.
Another popular initiative at Hexaware that helps to tap into the collectiveintelligence of its talent is Brainbox. This is a platform for the consultants to postingenious ideas that go a long way in helping its customers save time and money. In 2017over 4384 employees have participated in this initiative and nearly 1096 ideas wereposted. The passion of the people in contributing to this initiative is evident from theparticipation and reflects our belief in creating a highly engaged customer centric talentpool.
Employee Engagement is a binding force that helps us work globally.
The Company understands the need for employees to connect with the Hexaware world on aglobal platform and its internal social networking tool Facebook@ Work helps us tocollaborate brainstorm provide real-time feedback and communicate with its leadersdirectly. The Fun@Work activities throughout the year helps the consultants to relaxrewind and rejuvenate themselves. These activities run by the different Funsters groupsalong with unit picnics project lunches ODC based fun initiatives are all geared towardteam bonding and strengthening the common goal of working together as one Hexaware despitebeing spread out in various locations worldwide.
Hexawares Talent Management approach is to bring about transformation and growthopportunities for the consultants keeping in mind the evolving industry trends and thepeople practices pivots on a culture that embraces and nurtures talent rewards topperformance and focusses on Customer delight.
Information Security assurance has become a critical requirement in the prevailingthreat landscape of digital world. The thought leadership dynamic alignment with theindustry best practices smart tools and latest technology have become essential forcustomer confidence thorough secured business operations.
The Company had invested substantially in advanced technology adoption latest toolsand competent work force. Ensuring the adequacy and compliance to global Certificationstandards and assessments had been the baseline requirement of Information Security of thecompany to assure Confidentiality Integrity and Availability of Information. In additionto planned audits and assessments surprise checks are done for sustainable compliancecustomer confidence and secured operations. Emerging legal and regulatory requirements inaddition to the existing ones provide an opportunity to minimize risk and progress throughcontinuous improvement in the industry forefront. Some such initiatives include GDPR andPrivacy Shield compliance of the company. The resilience to provide service and businesscontinuity during natural man-made or technical disruptions had been well thought throughand has resulted in preparedness capability and event response processes which arerehearsed for readiness. Imbibing security culture in every employee through continuededucation and awareness is planned and executed with periodic Management review.
The Company has sustained its commitment to the highest levels of qualitybest-in-class service management robust information security practices and maturebusiness continuity processes that have milestones during the year.collectively helpedachieve While sustaining existing external benchmarks and certifications the Company hasadded new certifications and further enhanced its programs and initiatives. The Companycontinues to adhere to international quality standard certifications such as ISO9001-2015 ISO 27001:2013 ISO 20000-1:2011 CMMI - DEV & SVC Version 1.3 - Level 5ISAE3402 and SSAE16 SOC-2 Type II. The Company commissioned a survey on customer delightfor 2017 by Feedback Consulting an independent market research firm to capture customerexpectations and measure customer experience. On a scale of -100 to 100 the Companyscored the highest score of 78.5 as against an industry score ranging from 42.2 to 78.5.There is a significant improvement seen across key business metrics as well as in theoverall score of 66.2 achieved in fiscal 2016.
Benefits to customers:
"Brain Box" is the platform to encourage the employees to bring their ideasvalue addition to our customers and systematically mange the ideation process.
The Company harnesses the power of knowledge gained by its employees working on theircustomer accounts by encouraging them to create value addition ideas. In the last threeyears the employees have posted over 2800 ideas proposing value additions undercategories like bring automation / productivity improvement financial savings andaccelerate the time to market the customers products and services. 1950 of theseideas have been successfully delivered generating a saving of over USD 54 millon in last 3years which is being approved by the esteemed customers. In year 2017 employees havedelivered value added savings worth USD24.3 million by delivering 716 ideas to thecustomers. This amounted to 4% of the revenues in 2017 and ~45% of the employees haveproudly participated in this initiative. The Brain Box platform has promoted the cultureof deep expertise value creation attitude extraordinary proficiency in thecustomers business function technical engineering knowledge sharing and problemsolving approach thereby identifying and delivering values to the customers at no extracost to them. Through a structured governance and rewards program the Company suitablyrewards its employees passion and best values adds on quarterly basis which is personallydriven by the CEO Mr. R Srikrishna which made more and more employees participating inthis CVA culture.
The customers / clients have benefitedas a result of fewer defects reduction in cycletime and improved delivery capabilities.
Hexaware has provided value-additions through improvement in the performance of thesystems that have been outsourced a reduction in the problems and failures and improvedstability. This has resulted in high levels of customer satisfaction and repeat business.Implementing the processes has trained the organization and people to be methodical andprocess-driven. The Company has introduced and improved upon best-of-breed industrypractices and standards and thereby improved our delivery capability. Focus on quality hasled to lower costs and improved efficiency within the organization. The customers havebenefited delivery and support stringent information security practices and xiblefle andproactive approach. Hexawares understanding of customers business andtechnology landscape enables it to provide comprehensive multi-service solutions alongwith cost reduction for the customer. This has resulted in high levels of customer delightand repeat business.
Company focused on Corporate Governance
Good governance facilitates efficient and effective management that can deliverstakeholder value over the longer term. It is a reflection of the Companys culturepolicies relationship with stakeholders commitment to values and ethical businessconduct. In the same spirit timely and accurate disclosure of information regarding thefinancial position performance ownership and governance of the Company is an importantpart of the Companys corporate governance. Hexawares Board exercises itsfiduciary responsibilities in the widest sense of the term. The companys disclosuresseek to attain the best practices in corporate governance. The Company also endeavors toenhance long-term shareholder value and respects minority rights in all its businessdecisions.
The Company has two "Big 4" firms as auditors - Price Waterhouse CharteredAccountants LLP was Statutory Auditors for the financial year ended December 31 2017 andKPMG as its Internal Auditors. Ernst & Young are the tax advisors of the Company. TheBoard of Directors at its meeting held on February 08 2018 appointed BSR & Co. LLPChartered Accountants Mumbai as Statutory Auditors in place of Price Waterhouse CharteredAccountants LLP.
The Companys Board of Directors comprises eminent professionals in theirrespective fields with rich experience in policy-making and strategy formulation. All themajor committees of the Board are headed by Independent Directors and the Company hasfollowed
Cadbury Committees recommendation of having two different individuals as Chairman& CEO for several years. The Company was the winner of the prestigious Golden PeacockAward for excellence in Corporate Governance for the year 2011 and 2015 and won theSpecial Commendation in the year 2009 and 2013.
In compliance with Regulation 34 of the Listing Regulations a separate report onCorporate Governance along certificate from the practising Company Secretary on itscompliance is attached and forms part of this Report.
Awards & Recognition:
Hexaware has been mentioned in High Potentials category in the report titled"Capital Markets Operations- HFS Blueprint" Dated 12th January 2017 by AnalystReetika Joshi.
Forrester mentions Hexaware as "STRONG PERFORMERS" in their Wave Reporttitled" Continuous Testing Service Providers Q3 2017" dated 27th July 2017 byAnalyst Diego Lo Giudice.
Hexaware has been mentioned among the Testing Vendors in the HfS report titled"Application Testing Services Supporting Digital Transformation 2017" dated 24thAugust 2017 by Analyst Tom Reuner. as a result of high quality of
Hexaware has been mentioned in "Major Contenders" category in the Everestreport titled "Healthcare Payer IT Services PEAK Matrix 2017" dated 31stOctober 2017 by Analyst Abhishek Singh.
Hexaware featured in Everest Groups IT Service Provider of the year awards2017 dated 13 th April 2017.
Hexaware has been mentioned in "High Performers" category in the HfS reporttitled "Application Development & Management Services 2017" Dated 7thSeptember 2017 by Analyst Phil Fersht & Jamie Snowdown.
Hexaware has been mentioned in "Major Contenders" category in the Everestreport titled "Healthcare Provider IT Services" dated 9th November 2017 byAbhishek Singh.
Additional awards and recognisations are given in page no. 26.
Risk Management is an enterprise wide function that aims at assessing threats tobusiness sustainability and mitigating those threats. The Board of Directors and seniormanagement team with deep industry experience develop frameworks and methodologies forassessing and mitigating risks. The Board has also formed Strategy and Risk Committee tooversee activities related to risk minimization. The Company has well definedEnterprise-wide (ERM) framework in place. The primary objective of ERM function is toimplement a framework that augments risk response decisions and reduce surprises. ERMprogramme involves risk identification assessment and risk mitigation planning forstrategic operational and financial and compliance related risks across various levelsof the organization.
The details of risk faced by the Company is discussed in detail in the ManagementDiscussion and Analysis section of this Annual Report.
The Company has sufficiently insured itself under various insurance policies tomitigate the risks arising from third party or customer claims property/casualty etc.
Errors & Omissions/ Cyber Liability/General Liability: In a global servicesbusiness customers insist on taking suitable insurance covers like - Errors &Omission (Professional Indemnity) Cyber Liability and Commercial General Liability. TheCompany has taken appropriate level of insurance covers with reputed insurers/re- insurersto protect the Company from any third party liability claims that may arise at any pointof time.
Directors & Officers Liabilities (D&O) /Employment LiabilityInsurance (EPLI) / Crime: D&O policy covers the Directors & Officers of theCompany against the risk of third party claims arising out of their actions / decisionswhich may have resulted in loss to any third party. The Company has appropriately insureditself to mitigate such risks emanating from any third party. EPLI Insurance protects theCompany from claims from employees or third parties on account of any actual or allegedEmployment Practice Violation.
Crime insurance protects the Company from loss of money securities or other financialloss arising from any fraudulent or criminal activity of employees or third parties.
Property / Employee Benefits: The Company has properties & facilities against therisk of fire damage theft etc. so that the financials are not impacted by suchunfortunate events. The employees of the Company are covered under various employeebenefit insurances that provide cover for Hospitalization Accidental Disability andDeath.
Internal Financial Control Systems
The Company has presence across multiple countries and has a large number ofemployees suppliers and other partners collaborate to provide solutions to its customerneeds. The Management has laid down proper and adequate system for internal financialcontrols to be followed to ensure safeguarding of its assets the prevention and detectionof frauds and errors the accuracy and completeness of the accounting records and thetimely preparation of reliable financial disclosures. This ensures that all transactionsare authorised recorded and reported correctly and assets are safeguarded and protectedagainst loss from unauthorized use or disposition. In addition there are operationalcontrols.
The Company has adopted accounting policies which are in line with the AccountingStandards (Ind AS) notified under the Companies Act 2013 [Companies (Indian AccountingStandards) Rules 2015] and other relevant provisions of the Companies Act. These are inaccordance with generally accepted accounting principles in India.
Changes in policies if any are approved by the Audit Committee in consultation withthe Statutory Auditors.
The policies to ensure uniform accounting treatment are prescribed to the subsidiariesof the Company. The accounts of the subsidiary companies are audited and certified bytheir respective auditors for consolidation.
The Company has constituted an Audit Committee comprising of 5 (Five) professionallyqualified and well experienced Directors who review the operational efficiency adequacyand effectiveness of systems processes and Internal finance control of the Company.
In addition to this the Company continued to engage KPMG as its Internal Auditor forthe year ended December 31 2017. The Internal Auditors findings are discussed with theprocess owners and suitable corrective actions are 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 suggestions and recommendations bythe internal auditor and audit committee to financial improve the control environment.
The further details regarding internal in the Management Discussion and Analysis whichform part of this report. Report of statutory auditor on the internal financial control isalso included in this report on page 154.
Hexawares Learning and Development Team itsvarious
People Development is a very important function in a knowledge industry such asHexaware. The Company is strongly focussed on learning and development throughHexavarsity its corporate
University. During the year Hexavarsity conducted several programs for continuouslearning and development of its people for technical competency development AccountSpecific Training and Knowledge base and peer-to-peer learning. In recognition of itspeople development efforts the company won the prestigious award for "BestOrganizational Development Programme 2017" in the 6th edition of the National Awardsfor Excellence in Training and Development hosted by WHRD Congress for the Ignite ODInitiative.
Fresher Training Program
The companys Fresher intake program is an important channel for bringing in freshtalent into the organization. During the year the company designed and launched a newpath-breaking training program for Fresher training to address the growing requirements ofits clients for full stack Agile developers. This program includes a rigorous foundationtraining covering hands-on full stack agile development using 20+ technologies to delivera product and a strong behavioural training to prepare freshers for corporate life. Thisis followed by a Technology and Domain specific covering is the summary of the complaintsreceived and disposed of during the
Hexawarehasachievedto 84.57% of CSR obligation. financial year 2017: a) No. ofcomplaints received during the year: 06 b) No. of complaints disposed of: 06 c) No. ofcomplaints pending : NIL
The Company started a sustainability initiative with the aim of going green andminimizing the impact on the environment. Like the previous years this year too theCompany is publishing only the statutory disclosures in the print version of the AnnualReport.
Additional information is available on the website www.hexaware. com.
Electronic copies of the Annual Report 2017 and Notice of the 25th Annual GeneralMeeting are being sent to all members whose from January 1 to December 31. email addressesare registered with the Company / Depository Participant(s). For members who have notregistered their email addresses physical copies of the Annual Report 2017 and the Noticeof the 25th Annual General Meeting are being sent by the permitted mode. Members requiringphysical copies can send a request to the Company.
The Company provides e-voting facility to all its members to enable them to cast theirvotes electronically on all resolutions set forth in the Notice. This is pursuant to theSection 108 of the Companies Act 2013 and Rule 20 of the Companies (Management andAdministration) Amendment Rules 2015.
Business Responsibility Report
The Business Responsibility Report (BRR) of the Company for the year
2017 forms part of this Annual Report as required under Regulation 34(2)(f) of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015.
The Directors place on record their sincere appreciation of the customers Governmentof India and of other countries vendors bankers and Technology Partners for the supportextended. The Directors are also deeply touched by the efforts sincerity and loyaltydisplayed by the employees without whom the growth of the Company is unattainable.
The Directors wish to thank the investors and shareholders for placing immense faith inthem. The Directors seek and look forward to the same support during the future years ofgrowth.
|location where it operates ||For and on behalf of the Board of Directors |
| ||Atul K. Nishar |
| ||Chairman |
|Date: April 03 2018 || |
|Place: Mumbai || |