|BSE: 539289||Sector: IT|
|NSE: MAJESCO||ISIN Code: INE898S01029|
|BSE 15:57 | 23 Feb||470.80||
|NSE 15:43 | 23 Feb||472.15||
|Mkt Cap.(Rs cr)||1,321|
|Mkt Cap.(Rs cr)||1321.06|
Majesco Ltd. (MAJESCO) - Director Report
Company director report
The Directors present the Annual Report of Majesco Limited (the Company) along with theaudited financial statement for the financial year ended March 31 2017. The Consolidatedperformance of the Company and its subsidiaries has been referred to wherever required.
1. FINANCIAL RESULTS-CONSOLIDATED RESULTS OF MAJESCO LIMITED AND ITS SUBSIDIARIES
FINANCIAL RESULTS-MAJESCO LIMITED
2. RESULTS OF OPERATIONS A) Majesco consolidated operations Financials
On a consolidated basis the Group registered total operating revenue ofRs 82750.54lakhs for the year ended March 31 2017 as compared to Rs 75715.26 lakhs for the yearended March 31 2016.
The Group earned a net profit of Rs 1939.37 lakhs for the year ended March 31 2017 ascompared to net profit ofRs 730.77 lakhs for the year ended March 31 2016.
Breakup of the Operating revenue by regions
Breakup of the Operating Revenue by offerings
Breakup of Operating Revenue by Line of Business
B) Majesco Standalone Operations
On a standalone basis Majesco reported a total income of Rs 3061.87 lakhs for theyear ended March 31 2017 as compared to Rs 2756.87 lakhs for the year ended March 312016. The Company made a Net profit of Rs 236.66 lakhs for the year ended March 31 2017as compared to Net profit of Rs 621.21 lakhs for the year ended March 31 2016.
3. INDUSTRY SCENARIO
Today information technology (IT) industry is re-imagining itself to become the digitalsolutions partner globally. It continues to be the ligament of ongoing innovation anddisruption. According to Nasscom IndiaRss IT-BPM industry is projected to grow ~8% inFY2017 to USD 154 billion. Indian IT services is expected to reach USD 80 billion inFY2017 as service providers are converting from process and delivery driven to strategicand transformational solution providers. Nasscom has projected global IT-BPM industry toincrease to USD 4 trillion by CY2025 a CAGR of 3.6% for the forecast
period of CY2015 - CY2025 driven by the adoption of digital technologies. IndiaRssIT-BPM sector is projected to reach USD 200-225 billion revenue by FY2020 and USD 350-400billion by FY2025.
According to Gartner Worldwide IT spending is forecast to total USD 3.46 trillion inCY2017 an increase of 1.4% over CY2016 spending of USD 3.41 trillion. By CY2018 spendingis forecast to exceed USD 3.56 trillion a growth of 2.9% over CY2017 spending. Gartnerhas forecasted the global IT services spending to grow at 2.3% in CY2017 down from 3.6%growth in CY2016. IndiaRss share in the global IT spend has been increasing graduallytouchingthe double-digit mark 10% in FY2016 from 7.2% in FY2012. According to Celentglobal insurance IT spending is estimated to reach to USD 184.8 billion in CY2017 and USD208.1 billion in CY2018. Three overarching trends - digitalization data analytics andlegacy and ecosystem transformation are dominating investments.
Moderate global economic growth is expected to support insurance sector growth over thenext two years. According to Swiss ReRss publication Global insurance review and outlookfor 2017/18 report growth in global non-life premiums is forecast to fall slightly from2.4% in CY2016 to 2.2% in CY2017 and accelerate to 3.0% in CY2018. In the life insurancesector global premiums are expected to grow by 4.8% in CY2017 and 4.2% in CY2018. Thepremium growth is expected to be driven by emerging markets. An improvement in commodityprices and strengthening economic activity is expected to stimulate the demand forinsurance from the emerging regions. In Advanced market premiums are expected to grow by2.1% in CY2017 and CY2018. Today in the disruptive technology environment large number ofinsurers are investing in building digital infrastructure and striving for growth bydeveloping new business models using digital platforms. However insurers are yet to fullycapitalize upon the transformative power of digital technology and many are stillstruggling to develop digital strategies that align with their business objectives. Theinsurance industry recognizes the need to overhaul traditional business models tocapitalize on the advantages of digital technology and respond to the challenges ofdigital disruption. The future of the insurance business lies in technology-drivenprocesses restructuring. Internet of Things (loT) cloud computing digital integrationand big data environments are opening more opportunities for the insurance companies. Themajor shift in consumer patterns in the last few years has forced the insurance industryto move forward and adapt the new digital age. Most of the insurers have started investingin SMAC (Social Mobile Analytics and Cloud) to stay competitive with the changingtechnology environment. Today Cloud computing is playing vital role in transforminginsurance industry. Cloud computing enables insurers to reduce cost by using pay-as-usemodels and enhance business agility without compromising customer data and security. Ithelps to remove the complexity of on-premises deployment and management. Thus in CY2017insurers are expected to deploy their services rapidly giving high priority to consumerschanging demand to stay competitive and ensure a successful digital evolution.
Majesco continues to focus exclusively on serving the global insurance industry withcore business solutions and
consulting services that help modernize and bring change to Property and Casualty(P&C) Life and Annuity (L&A) and Group insurance carriers. Insurers clearlyrecognize that the insurance industry is changing and that they need to adapt to enablegrowth and remain competitive. In this new landscape modernizing legacy systems providesthe "table stakes" foundation to enable innovation and speed to market for newproducts channels and processes in response to fast changing customer expectationsneeds and risk profiles. TodayRss new market paradigm requires a modern foundation withexpanding digital and data capabilities enabling an insurance renaissance not unlikeother industries the insurance industry is rapidly evolving and changing. As insurancecustomer expectations change so do the carrierS' requirement to respond quickly withlowerrisk and speed-to- value business platforms that provide the ability to innovate newproducts reach new markets create new customer experiences and liberate differentbusiness models.
In this rapidly evolving environment undertaking multi-year multi-milliondollartransformation programsto replace legacy systems no longer serves the need ofcarriers. As a result Majesco proactively began realigning its business strategy to thismarket shift to focus on speed to value using our cloud based platform MajescoCloudlnsurer. The Company believes this platform will lead the next wave of innovation andinvestment in insurance. With the Majesco Cloudlnsurer platform the company hassuccessfully partnered with over 30 clients including existing legacy insurers newstartups or greenfields backed by existing insurers or by venture capital funds to empowertheir business strategies by helping them innovate grow and transform their businessmodels to capture the opportunities today and in the future
The industry is also in the midst of a market shift that is pushing a some-timesslow-to-adapt industry by challenging the traditional business assumptions operationsprocesses and products of the last 50+ years. The digital age shift in insurance isseparating the insurance business models of the past 50+ years that have been based on thebusiness assumptions products processes channels of the Silent and Baby Boomergenerations from those of the next generation the Millennial and Gen Z as well as manyin Gen X. This shift indicates that the business models of the past will not meet theneeds or expectations of the future.
Building these new business models will continue to intensify. Majesco is increasinglyworking with existing insurers and reinsurers who are taking new paths to capture the nextgeneration of customers and position themselves for growth and sustainable agility acrossthe new insurance landscape. Because new competitors donRst play by the traditional rulesof the past insurers need to be a part of rewriting the rules for the future. There isless risk in a game where you write the rules.
The IBM - Majesco partnership has successfully kicked off with the inception work witha Tier 1 insurer specifically on a platform-as-a-service model. The company views thispartnership as a strategic avenue for growth in the future.
The Company also expects good growth coming from its consulting services that supportbusiness process transformation as well as data and digital needs of the market.
In the new fiscal year the company is enthused about the strategy the marketpotential of its portfolio of solutions its cloud platform and Partner Ecosystem andexpanding partnership with IBM around cognitive core and cloud that help differentiateMajescoRss value proposition for current and prospective customers. The company expectsmomentum in the cloud business will remain strong as it takes advantage of the shiftunderway in insurance software. It also expects to see improvement in non-cloud businessas demand increases for MajescoRss data and digital solutions.
The company has an excellent leadership team and an exceptional workforce thatcontinues to drive growth while expanding the existing customer relationships. It willcontinue to focus on enhancing the capabilities of its product offerings data and digitalofferings and investing in its sales and marketing engine. As a result the companyexpects that it will experience a reacceleration in growth in fiscal 2018
Rs 236.66 Lakhs is proposed to be transferred to reserves for the year ended March 312017.
To conserve cash resources for future business operations the Directors do not proposea dividend for the year ended March 31 2017.
7. HUMAN RESOURCES
Majesco Group deploys its intellectual capability to create and deliver intellectualproperty (IP)-led solutions that make a positive business impact for its global clients.For this the key success enabler and most vital resource is world-class talent. MajescoGroup continually undertakes measures to attract and retain such high quality talent.
As on March 31 2017 Majesco Group had a total Head count of 2163. The Directors wishto place on record their appreciation for the contributions made by employees to theCompany during the year under review.
8. DETAILS OF SUBSIDIARY COMPANIES JOINT VENTURES AND ASSOCIATES
Your Company has one direct subsidiary and eight step down subsidiaries as on March 312017 the names of which are as under:
Rs in Lakhs
9. DIRECTORS' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to
the information and explanations obtained by them your
Directors make the following statements in terms of Section
134(3) (c) of the Companies Act 2013:
a. In the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
b. Accounting policies selected have been applied consistently. Reasonable and prudentjudgments and estimates have been made so as to give a true and fair view of the state ofaffairs of the Company as at end of March 31 2017 and of the profit of the Company forthe year ended on that date.
c. Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting frauds and other irregularities.
d. The Annual accounts of the Company have been prepared on a going concern basis.
e. Internal Controls have been laid down to be followed by the Company and suchinternal controls are adequate and were operating effectively; and
f. Systems to ensure compliance with the provisions of all applicable laws are in placeand were adequate and operating effectively.
10. DIRECTORS AND KEY MANAGERIAL PERSONNEL
a. Re- appointment of Mr. Farid Kazani as Managing Director of the Company
The Members of the Company had appointed Mr. Farid Kazani to hold the office asManaging Director up to May 31 2018. Pursuant to the recommendation of the Nomination andRemuneration Committee the Board of Directors has by a resolution passed at its meetingheld on July 3 2017 re-appointed him as the Managing Director for a further term of years with effect from July 4 2017 till July 3 2020.
Keeping in view that Mr. Farid Kazani has rich and varied experience in the industryand has been involved in the operations of the Company over a long period of time itwould be in the interest of the Company to continue the employment of Mr. Farid Kazani asthe Managing Director.
The Board recommend the same for members approval.
b. Retirement by rotation of Mr. Radhakrishnan Sundar (DIN 00533952) ExecutiveDirector
Mr. Radhakrishan Sundar Executive Director retires by rotation at the forthcomingAnnual General Meeting and is being eligible offers himselffor reappointment.
c. Independent Directors
Pursuant to the provisions of Section 149 of the Companies Act 2013 Mr. VenkateshChakravarty (DIN 01102892) Ms. Madhu Dubhashi (DIN 00036846) Dr. Arun Maheshwari (DIN01682147) were appointed as Independent Directors at the Annual General Meeting of theCompany held on April 30 2015 for term of five (5) years from May 1 2015 to April 302020. They have submitted a declaration that each of them meet the criteria ofindependence as provided in Section 149 (6) of the Companies Act 2013 and there has beenno change in the circumstances which may affect their status as an independent directorduring the year.
During the year non-executive directors of the Company had no pecuniary relationshipor transactions with the Company other than siffing fees and reimbursement of expensesincurred by them for the purpose of attending meetings of the Company.
d. Key Managerial Personnel
The following employees were Key Managerial Personnel for the year 2016-17
Mr. Farid Kazani- (DIN 06914620) Managing Director
Mr. Radhakrishnan Sundar- (DIN 00533952) Executive Director
Mr. Kunal Karan- Chief Financial Officer
Mr. Nishant Shirke- Company Secretary
11. EVALUATION OF THE BOARDRsS PERFORMANCE
In compliance with requirement of the provisions of Section 178 of the Companies Act2013 read with Rules framed thereunder and provisions of Schedule IV to the Act as well asRegulation 17 (10) of the SEBI (Listing Obligations and Disclosures Requirements)Regulations 2015 ("LODR") the performance evaluation of the Board as a wholeand individual director was carried out during the year under review.
With the help of outside expert a structured questionnaire was prepared after takinginto consideration inputs received from the Directors covering various aspects of theBoardRss functioning such as adequacy of the composition of the Board and its CommitteesBoard culture execution and performance of specific duties obligations and governance.
12. COMPANYRsS POLICY ON APPOINTMENT AND REMUNERATION
The Company has a policy on remuneration of Directors and Senior Management Employees.The policy is approved by the Nomination & Remuneration Committee and the Board.
The policy covers:
1. DirectorS' appointment and remuneration; and
2. Remuneration of Key Managerial Personnel and other employees.
The more details on the same are given in the Corporate Governance Report which formspart of DirectorS' Report.
A strong internal control system is pervasive in the Company. The Company hasdocumented a robust and comprehensive internal control system for all the major processesto ensure reliability oftinancial reporting.
14. INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company has in place adequate internal financial controls commensurate with thesize scale and complexity of its operations.
During the year such controls were tested and no reportable materials weakness in thedesign or operations were observed. The Company has policies and procedures in place forensuring proper and efficient conduct of its business the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information.
The Company has adopted accounting policies which are in line with the AccountingStandards and Act. These are in accordance with generally accepted accounting principle inIndia. Changes in policies if required are made in consultation with the Auditors andare approved by the Audit Committee.
The Company has a robust financial closure certification mechanism for certifyingadherence to various accounting policies accounting hygiene and accuracy of provisionsand other estimates.
15. NUMBER OF BOARD MEETINGS
The Board of Directors met 6 (Six) times during the year 2016-2017. The details of theBoard meetings and the attendance of the Directors please refer to the CorporateGovernance Report which forms part of this report.
16. FAMILIARIZATION PROGRAM OF INDEPENDENT DIRECTORS
The details of the familiarization program of Independent Directors are available onthe website of the Company at https://ir.majesco.com/investor-communications/.
The details in respect to composition of audit committee are included in the CorporateGovernance Report which forms of this report.
18. STATUTORY AUDITORS THEIR REPORT AND NOTES TO FINANCIAL STATEMENTS
At the 2nd Annual General Meeting (AGM) held on April 30 2015 the M/s.Varma & Varma Chartered Accountants have been appointed as the Statutory Auditors ofthe Company for a period of 5 years. Ratification of appointment of Statutory Auditors isbeing sought from the members of the Company at the ensuing AGM.
Further the report of the Statutory Auditors is enclosed to this report. Theobservations made in the AuditorS' Report are self-explanatory and does not contain anyqualification. Therefore it does not call for any further comments.
19. SECRETARIAL AUDIT
In terms of Section 204 of the Companies Act 2013 and Rules made there under M/s.Abhishek Bhate & Co. Practicing Company Secretary Thane has been appointed asSecretarial Auditor of the Company. The report of the Secretarial Auditor is enclosed asAnnexure IV to this report. The report is selfexplanatory and does not contain anyqualification. Therefore it does not call for any further comments.
20. CHANGE IN SHARE CAPITAL
During the year the Company allotted 310634 Equity Shares of face value of Rs 5/-each for a total nominal value of who exercised their vested Employee Stock Options. TheseEquity Shares rank pari passu in all respects with the existing Equity Shares of theCompany.
As on March 31 2017 the issued subscribed and paid up share capital of your companystood at Rs 116815175/- comprising 23363035 Equity shares ofRs 5/- each.
21. RISK MANAGEMENT
The Board of the Company has formed a risk management committee to frame implement andmonitor the risk management plan of the Company. The Audit Committee quarterly reviewsthe risks and remedial measures taken. The risks are identified and discussed by RiskCommittee at its meeting at regular intervals. The various risks are categorized as Highrisk Medium risk and Low risk and appropriate steps/ measures are taken/initiated tomitigate the identified risks from time to time.
22. PARTICULARS OF LOANS GUARANTEE OR INVESTMENT UNDER SECTION 186 OF THE COMPANIESACT 2013.
Details of Loans guarantees Investments covered under provisions of Section 186 ofthe Companies Act 2013 are given in the notes 1116 and 27 to the financial statements.
23. RELATED PARTYTRANSACTIONS
All the Related Party Transactions are entered into on armRss length basis and are incompliance with the applicable provisions of the Act and SEBI (Listing Obligations andDisclosures Requirements) Regulations 2015. There are no material significant relatedparty transactions made by the Company with Promoters Directors or Key ManagerialPersonnel etc. which may have potential conflict with the interest of the Company atlarge.
All the Related Party Transactions are presented to the Audit Committee and Board fortheir approval. Omnibus approval is given by Audit committee for the transactions whichare foreseen and repetitive in nature. A statement of all Related Party Transactions ispresented before the Audit Committee
and Board on quarterly basis specifying the nature value and terms and conditions ofthe transactions. The said transactions are approved by Audit Committee as well as byBoard.
The Related Party Transactions Policy as approved by the Board is uploaded on theCompanyRss website at https:// ir.majesco.com/policies/.
Detailed explanation on transactions with related parties is given in Annexure I.
24. CHANGE IN NATURE OF BUSINESS
There has been no change in the nature of business of the Company during the financialyear ended March 31 2017.
25. CORPORATE SOCIAL RESPONSIBILITY
The brief outline of the Corporate Social Responsibility (CSR) policy of the Companyand the initiative undertaken by the Company on CSR activities during the year are set outin Annexure II of this report in the format prescribed in the Companies (Corporate SocialResponsibility Policy) Rules 2014. For other details regarding the CSR Committee pleaserefer to the Corporate Governance Report which is a part of this report. The Policy isavailable on the website of the Company at https://ir.majesco.com/policies
Pursuant to section 92(3) of the Companies Act 2013 (Rsthe ActRs) and rule 12(1) ofthe Companies (Management and Administration) Rules 2014 the extract of annual return isgiven in Annexure III.
27. MANAGEMENT OF RISKS OF FRAUD CORRUPTION AND UNETHICAL BUSINESS PRACTICES.
WHISTLE BLOWER POLICY/VIGIL MECHANISM
In compliance with the requirement of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Company has established aWhistle Blower Policy /Vigil mechanism and the same is placed on the CompanyRss web siteat https:// ir.majesco.com/policies/
The employees of the company are made aware of the said policy at the time ofjoiningthe Company.
28. EMPLOYEE STOCK OPTIONS
The Board of Directors confirms that there is no material change in the ESOP schemeplan I of the Company is in compliance with SEBI guidelines. The required disclosures isenclosed as Annexure V.
29. PARTICULARS OF EMPLOYEES AND REMUNERATION
The information required in terms of the provisions of Section 197(12) of the CompaniesAct 2013 read with Rule 5 of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rule 2014 are given below:
a) The ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the financial year:
b) The percentage of increase in remuneration of each Director Chief FinancialOfficer Company Secretary in the financial year:
c) Percentage of increase in the median remuneration of employees in the Financial YearMarch 31 2017 - 6.3%
d) The number of permanent employees on the rolls of the Company as on March 312017:109 employees
e) Average percentage increase made in the salaries of the Employees other than theManagerial Personnel in the Financial Year was (8.6%) vis a vis increase of 12.86% in thesalaries of Managerial Personnel.
f) Affirmation that the remuneration is as per the remuneration policy of the Company:
The Company affirm that the remuneration is as per the remuneration policy of theCompany.
g) The statement containing names of top ten employees in terms of remuneration drawnand the particulars of employees as required under Section 197 (12) of the Act read withRule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rule2014
is provided in a separate annexure forming part of this report. Further the report andthe accounts are being sent to the members excluding the aforesaid annexure. In terms ofSection 136 of the Companies Act 2013 the said annexure is open for inspection at theRegistered Office of the Company. Any shareholder interested in obtaining a copy of thesame may write to the Company Secretary.
30. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
During the year under review no significant and material orders were passed by theregulators or courts or tribunals impacting the going concern status and companyRssoperations:
31. PUBLIC DEPOSITS
Your Company has not accepted any deposits from public in terms ofSection 73 and/or 74of the Companies Act 2013.
32. MANAGEMENT DISCUSSION AND ANALYSIS
(a) Conservation of energy: As a software Company energy costs constitute a smallportion of the total cost and there is not much scope for energy conservation.
(c) Foreign exchange earnings and outgo
Total foreign Exchange used and earned by Majesco Limited
Rs in Lakhs
33. CORPORATE GOVERNANCE
The Company has complied with Corporate Governance requirement under the Companies Act2013 and as per LODR. A separate section on Corporate Governance practices followed by theCompany together with the Certificate from M/s. Abhishek Bhate & Co. PracticingCompany Secretary appearing elsewhere in this report forms an integral part of thisreport.
Your Directors place on record their appreciation for employees at all levels who havecontributed to the growth and performance of your Company.
Your Directors also thank the clients vendors bankers shareholders and advisers ofthe Company for their continued support.
Your Directors also thank the Central and State Governments and other statutoryauthorities for their continued support.
Form No. AOC-2
(Pursuant to Clause (h) ofSub-Section (3) ofSection 134 of the Act and Rule 8(2) of theCompanies (Accounts) Rules 2014)
Form for disclosure of particulars of contracts/arrangements entered into by theCompany with related parties referred to in sub-section (1) ofSection 188 of the CompaniesAct 2013 including certain arms length transactions under third proviso thereto:
DETAILS OF RELATED PARTY TRANSACTIONS
1. Details of contracts or arrangement or transactions not at armRss length basis: MajescoLimited has not entered into any contract or arrangement or transaction with its relatedparties which are not armRss length during financial year 2016-2017.
2. Details of material contracts or arrangement or transactions at armRss lengthbasis.:
The details of material contracts or arrangement or transactions at armRss length basisfor the year ended March 31 2017 are as follows:
1. The above reported transaction has been executed at ArmS' Length Pricing Basis andis in ordinary course of business
2. Necessary approval of the Audit Committee and the Board (omnibus and specific) hasbeen obtained prior to entering into transaction.