On behalf of the Board of Directors ("Board") of Mindtree Limited("Mindtree" or "Company") We are happy to present the EighteenthBoard's
Report of your Company along with the audited financial statements on consolidated andstandalone basis for the year ended March 31 2017.
Rs. in million
| ||For the year ended March 31 |
|Financial Particulars ||2017 ||2016 ||2017 ||2016 |
| || |
|Revenue from operations ||52364 ||46730 ||47526 ||43398 |
|Other income ||553 ||839 ||633 ||973 |
|Total revenues ||52917 ||47569 ||48159 ||44371 |
|Employee benefits expense ||34125 ||27991 ||30215 ||25732 |
|Finance costs ||191 ||160 ||190 ||159 |
|Depreciation and amortization expense ||1858 ||1658 ||1331 ||1318 |
|Other expenses ||11194 ||10529 ||10106 ||9653 |
|Total expenses ||47368 ||40338 ||41842 ||36862 |
|Pro t before tax ||5549 ||7231 ||6317 ||7509 |
|Tax expense ||1363 ||1706 ||1426 ||1699 |
|Pro t for the year ||4186 ||5525 ||4891 ||5810 |
|Other comprehensive income ||(621) ||(242) ||(11) ||(27) |
|Total comprehensive income ||3565 ||5283 ||4880 ||5783 |
Your Company's financial statements for the year ended March 31 2017 are the firstfinancial statements prepared in accordance with Ind AS notified under the Companies(Indian Accounting Standards) Rules 2015. Accordingly numbers for all the comparativeperiods have been restated.
On consolidated basis revenue for the year was Rs. 52364 million signifying a growthof 12.1% in Rupee terms. Your Company had 328 active customers as on March 31 2017 ofwhich 111 customers had revenues in excess of US$ 1 million 30 customers had revenues inexcess of US$ 5 million 16 customers had revenues in excess of US$ 10 million 4customers had revenues in excess of US$ 25 million 1 customer had revenues in excess ofUS$ 50 million and 1 customer had revenues in excess of US$ 100 million.
EBITDA margins have dropped from 17.6% in the previous year to 13.7% in the currentyear mainly due to:
Increase in onsite revenue by 23% which has lower margins as compared to o shoremargins.
Increase in employee benefits expenses by 22%.
Lower margin pro le of acquired entities.
Our effective tax rate was about 24.6% as compared to about 23.6% in the previous year.PAT has decreased by 24% to Rs. 4186 million as compared to Rs. 5525 million in theprevious year on account of drop in EBIDTA margins and also due to foreign exchange lossin FY 16-17 compared to a gain in FY 15-16 due to the sharp drop in exchange rates in thelast quarter of FY 16-17.
On standalone basis revenue for the year was Rs 47526 million signifying a growth of9.5% in Rupee terms. EBITDA margins have dropped from 18.5% in the previous year to 15.5%in the current year mainly due to:
Increase in onsite revenue by 3% which has lower margins as compared to o shoremargins.
Increase in employee costs by 17% and increased investments in selling generaland administrative expenses.
Our effective tax rate for the current year remained at 22.6% as last year. PAT hasdecreased by 15.8% to Rs. 4891 million as compared to Rs. 5810 million in the previousyear on account of drop in EBIDTA margins and also due to foreign exchange loss in FY16-17 as compared to a gain in FY 15-16 due to the sharp drop in exchange rates in thelast quarter of FY 16-17.
Your Company allotted 239370 equity shares of Rs. 10/- each to various employees("Mindtree Minds") and to Directors on exercise of stock options under variousEmployee Stock Option Plans (ESOPs)/ Mindtree Employee Restricted Stock Purchase Plan 2012(ESPS/ERSP 2012) during 2016-17. Consequently the paid-up equity share capital hasincreased from Rs. 1677861760 as on March 31 2016 to Rs. 1680255460 as on March 312017.
Your Directors have declared three interim dividends during the year (i) The Board onOctober 21 2016 declared an interim dividend of Rs. 3/- per equity share of face valueof Rs. 10/- each to the Shareholders who were holding shares on the record date i.e.November 01 2016 (ii) The Board on January 19 2017 declared an interim dividend of Rs.2/- per equity share of face value of Rs. 10/- each to the Shareholders who were holdingshares on the record date i.e. January 28 2017 (iii) The Board on March 27 2017declared an interim dividend of Rs. 2/- per equity share of face value of Rs. 10/- eachto the Shareholders who were holding shares on the record date i.e. April 10 2017.
Further Your Directors have also recommended a final dividend of Rs. 3/- per equityshare of face value of Rs. 10/- each for the Financial Year ended March 31 2017 which ispayable on obtaining the Shareholders' approval at the Eighteenth Annual General Meeting.
The dividend pay-out amount for the current year inclusive of tax on dividend will beRs. 2005 million as compared to Rs. 2489 million in the previous year.
Your Company intends to maintain similar or better levels of dividend payout overthefinext few years. However the actual dividend payout in each year will be subject tothe investment requirements of the annual operating plan for the year and any otherstrategic priorities identified by the Company. The Company has formulated a DividendPolicy in accordance with SEBI (Listing obligation and Disclosure Requirement)Regulations 2015 (hereinafter "LODR Regulations") and the same is available onyour Company's website:https://www.mindtree.com/dividend-policy.
Mergers and Amalgamations
Your Company had filed a petition with the Hon'ble High Court of Karnataka [which wastransfered to National Company Law Tribunal (NCLT)] for the merger of DiscovertureSolutions LLC and Relational Solutions Inc. the whollyflowned subsidiaries with yourCompany. The Company has obtained all necessary approvals and complied with all theprocedures. The final Order for the merger is awaited.
Adoption of new Articles of Association
During the year your Company has amended its Articles of Association inaccordancewiththeprovisionsofCompaniesAct2013(hereinafter "the Act"). Theapproval of the Shareholders for the above amendment was obtained at the SeventeenthAnnual General Meeting of the Company. The amended Articles are avaliable on the websiteof the Company at https://www.mindtree.com/sites/default/les/amended-articles-of-association. pdf.
Your Company has 5 direct subsidiaries and 7 step down subsidiaries as on March 312017. During the year the dormant step down subsidiary Discoverture Solutions EuropeLimited was liquidated. The details of the subsidiaries as at the year ended March 312017 are as follows:
|Sl. No ||Name of Subsidiary ||Date of Incorporation/ Acquisition ||Country ||Business |
|1 ||Mindtree Software (Shanghai) Company Limited ||January 29 2013 ||China ||Information Technology Services |
|2 ||Discoverture Solutions LLC ||February 13 2015* ||USA ||Information Technology Services |
|3 ||Relational Solutions Inc. ||July 16 2015* ||USA ||Information Technology Services |
|4 ||Blue n Solutions Limited ||July 16 2015* ||UK ||Information Technology Services |
|5 ||Magnet 360 LLC ||January 19 2016* ||USA ||Information Technology Services |
| ||Step Down (Subsidiaries of Blue n Solutions limited) || || || |
|1 ||Blue n Solutions Pte. Limited ||July 16 2015* ||Singapore ||Information Technology Services |
|2 ||Blue n Solutions Inc. ||July 16 2015* ||USA ||Information Technology Services |
|3 ||Blue n Solutions Sdn Bhd ||July 16 2015* ||Malaysia ||Information Technology Services |
|4 ||Blouvin (Pty) Limited ||July 16 2015* ||South Africa ||Information Technology Services |
| ||Step Down (Subsidiaries of Magnet 360 LLC) || || || |
|1 ||Reside LLC ||January 19 2016* ||USA ||Information Technology Services |
|2 ||Numerical Truth LLC ||January 19 2016* ||USA ||Information Technology Services |
|3 ||M360 Investments LLC ||January 19 2016* ||USA ||Information Technology Services |
*Date of acquisition
In accordance with Section 129 (3) of the Act the statement containing salientfeatures of the financial statements of the subsidiaries in Form AOC-1 is given inAnnexure 1. In accordance with Section 136 (1) of the Act the annual report of yourCompany containing inter alia financial statements including consolidated financialstatements have been placed on our website: https://www.mindtree.com/about-us/investors.Further the financial statements of the subsidiaries have also been placed on ourwebsite: https://www.mindtree.com/about-us/investors.
Awards and Recognitions
During the year under review your Company received the following awards andrecognitions:
Ranked in the NASSCOM Top 20 IT-BPM Employers in India for 2016.
Recognized in Forbes India's Super 50 2016 list for the second consecutive yearbased on consistent shareholder returns sales growth and return on equity.
Magnet 360 a Mindtree Company awarded the Salesforce Marketing CloudInnovation Award for 2016.
Recognized as an overall leader in software testing services by NelsonHall inits Vendor Evaluation and Assessment (NEAT) Report 2016.
Awarded the Porter Prize for Enabling Smart Connected Products' byInstitute for Competitiveness for reshaping industry boundaries higher productutilization transcending traditional product boundaries building capabilities withinenterprises and rethinking & retooling internal processes.
Ranked #3 under the categories Best CEO IR Professional IR programAnalyst Days Website' in the IT sector and recognized as one of the Most HonouredCompanies' in the All Asia (ex-Japan) Executive Team rankings by Institutional Investor.
Named as 2016 Azure Innovation Partner of the Year by Microsoft.
Positioned as a leader for digital services in Zinnov's Zone for DigitalServices'.
Recognized by the Institute of Company Secretaries of India (ICSI) forexcellence in Corporate Governance.
Magnet 360 a Mindtree Company included in Gartner's Market Guide forSalesforce Service Providers.
Positioned in the leadership zone for product engineering and embedded systemsby Zinnov in the Zinnov Zones 2016 Product Engineering Services report.
Recognized as a Leader in IAOP's 2016 Global Outsourcing 100 for globalexcellence.
Named as a leader for Application Outsourcing Capabilities among Midsize O shoreVendors by Forrester Research.
Mindtree's Relational Solutions has been included in the Market Guide for TradePromotion Management and Optimization for the Consumer Goods Industry by Gartner.
SAFA best presented Annual Report Award for 2015 for the communication andInformation Technology sector for transparency accountability and governance in theAnnual Report by South Asian Federation of Accountants.
Awarded the winner of the Silver Shield for the Annual Report including theFinancial Statements for the year ended March 31 2016 by the Institute of CharteredAccountants of India (ICAI)
Making Mindtree a Great Place to Work
The key differentiator at Mindtree is its unique culture and well thought out peoplepractices which suits the ever changing needs and results in highly engaged Mindtree Minds- starting from pre-joining till exit engagement the experience is worthwhile.
Orchard - a three month residential program at the Kalinga campus in Bhubaneswar isprudently planned for campus Mindtree Minds and the Arboretum helps in the suaveassimilation of lateral Mindtree Minds joining from other organizations. The primaryobjective of both the assimilation programs is to provide a welcoming ground and supportnew talent to transition & adapt to the Mindtree way! Homecoming a programconceptualized and executed to bring back Mindtree Minds who quit due to various reasonsresulted in 70 Ex-Mindtree Minds proudly walking back to the place where they belong.
As we attract potential talent to join us we also are equally focused on nurturing aninclusive talent pool. With a matrix structure the involvement of all Mindtree Minds indecision making and customer interaction is quite high. Their ideas and thoughts addsignificant value to the business and their energy & ability to question the statusquo is the game changer. We have adequately lined up our practices systems and processesto drive the spirit of inclusivity at Mindtree.
At Mindtree we celebrate the fact that our workforce just don't include Millennialsbut is dominated by them and hence managers are prepared to engage and retain them inevery possible way. A lot of focus is given in grooming managers to be effective in theirroles and managing millennials is a key theme in all leadership development programs - oneof the program focusses on grooming enterprise leaders and has a module focused oninspiring "Digital Natives". As part of the module techniques like reversementoring is used where leaders worked with campus minds our millennials as theirmentors.
The Diversity story is another feather in the cap! The current workforce comprises of51 nationalities and 29% of the Company are Lady Mindtree Minds. Learning courses onculture and inclusivity helps understand each other and the customer better. Flagshipleadership programs like Enterprise Leadership and Exuberance an exclusive program for thetop 100 Lady Mindtree Minds results in key positions being successfully lled internally.
As we embark on Mindtree 3.0 the in-house talent is gearing up for the journey. 6200Mindtree Minds have reskilled themselves to suit thefineeds of the customer andcontinuously value add. Full stack engineers and specialists are being home grown and willbe the key differentiator in being successful.
The total number of Mindtree Minds including subsidiaries as on March 31 2017 was16470 as against 16623 as on March 31 2016.
Disclosure as required under Section 22 of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013
Your Company believes in providing a healthy environment to all Mindtree Minds and doesnot tolerate any discrimination or harassment in any form. The Company has in place agender neutral Prevention of Sexual Harassment (POSH) policy in line with the requirementsof the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013. This policy is frequently communicated in assimilation programs and at regularintervals to all Mindtree Minds. Following are some of the awareness programs imparted totrain Mindtree Minds and Internal complaints committee (ICC).
1. Every Mindtree Mind is supposed to undergo mandatory e-learning module on"Prevention of Sexual Harassment" at workplace on our learning platform calledYorbit.
2. It is mandatory for every new joiner to undergo a program on Prevention ofSexual Harassment' during induction program.
3. The Internal Complaints Committee is trained by external agency when the committeemembers are on-boarded to the committee.
4. Policy of Prevention of Sexual Harassment' at workplace is available onintranet for Mindtree Minds to access as and when required.
5. The Prevention of Sexual Harassment' policy is placed in conspicuous placesfor better visibility and communication of the policy across all the locations. Mindtreehas setup an Internal Complaints Committee (ICC) both at the Head office / Corporateoffice and at every location where it operates in India. ICC has equal representation ofmen and women. ICC is chaired by Senior lady mind and has an external womenrepresentation. ICC investigates the case and provides its recommendations to the apexauthority. The apex authority upon receiving the recommendations from ICC arrives at theconclusion and acts upon such recommendations.
Penal consequences of Sexual Harassment ("SH") and the constitution of theICC is displayed at conspicuous places. The posters are also displayed in regionallanguages at all Mindtree offices. The following are the summary of complaints receivedand resolved during the Financial Year 2016-17:
a) No. of SH complaints received: 2
b) No. of SH complaints resolved: 2
Rest of the World
a) No. of SH complaints received: 0
b) No. of SH complaints resolved: 0
Your Company's brand and logo represent our values and beliefs as an organization. YourCompany firmly believes that it is our identity that gives shape to our vision andcommunicates to the world what Mindtree stands for. Your Company functions on theprinciples of Collaborative Spirit Unrelenting Dedication and Expert Thinking. We havetherefore consciously and deliberately incorporated these elements into our branding andlogo. Your Company's brand voice is bright confident and active. It reflects our forwardthinking confidence strength and passion. Mindtree's unique approach balances humanperspective with deep strategic thinking that enables to create opportunities to help ourclients succeed.
Your Company has been successful in building its brand by wielding the right mix ofPublic Relations Social Media Advertisement and Digital Marketing. Additionally yourCompany hosts multiple client round tables to collaborate closely with customers forsolutions. Your Company's "Make Digital Real" campaign initiated last year hasbeen pivotal in strengthening our position as a leader in the digital space.
In the beginning of the year your Company had 2182000 sq.ft of space consisting of17873 seats spread across various locations in India apart from Mindtree Kalinga Trainingand residential facility for 500 campus minds measuring about 272000 sq.ft. Followingare the key changes made during the year: Bhubaneswar: Your Company added about 263 seatsafter expansion of existing facility by about 30000 sq.ft. In addition your Company hastaken up construction of Software Development Block Building measuring about 180000sq.ft. This is likely to be ready for occupation by March 31 2018.
Your Company has sufficient capacity to meet its growth needs over short and mediumterms. Your Company has prioritized adopting Sustainable best practices in accordance withLEED green building design for creating & maintaining workplace infrastructureprojects.
In terms of the provisions of Section 73 read with the relevant rules of the Act theCompany had no opening or closing balances and also has not accepted any fixed depositsduring the year under review and as such no amount of principal or interest wasoutstanding as on March 31 2017.
Board of Directors
The Board of Directors comprised of three Executive Directors two Non-Executive &Non- Independent Directors and six Independent Directors including two Women Directors asat the end of March 31 2017.
Declaration of Independence by Independent Directors
The Company has received necessary declaration from each Independent Director of theCompany under Section 149(7) of the Act and LODR Regulations confirming that they meetthe criteria of independence as laid down in Section 149(6) of the Act and that of LODRRegulations.
Policy relating to appointment of Directors
The policy framed by the Nomination and Remuneration Committee (NRC) under theprovisions of Section 178(3) & (4) of the Act is as below:
a. The person to be chosen as a Director shall be of high integrity with relevantexpertise and experience so as to have a diverse Board with Directors having expertise inthe fields of information technology sales / marketing finance taxation lawgovernance and general management.
b. The NRC considers the following attributes / criteria whilst recommending to theBoard the candidature for appointment as Director:
(i) Qualification expertise and experience of the Directors in their respectivefields;
(ii) Personal professional or business standing and
(iii) Diversity of the Board.
c. In case of appointment of Independent Directors the Committee satisfies itself withregard to the criteria for independence of the Directors in order to enable the Board todischarge its function and duties effectively.
d. In case of reappointment of Non-Executive and Independent Directors the Board takesinto consideration the performance evaluation of the Director and his / her engagementlevel.
Your Company's remuneration policy framed by NRC is focused on recruiting retainingand motivating high talented individuals. It is driven by the success and performance ofthe individual employees and the Company. Through its compensation programme your Companyendeavors to attract retain develop and motivate a high performance workforce. YourCompany follows a compensation mix of fixed pay benefits and performance based variablepay. Individual performance pay is determined by business performance of the Company. TheCompany pays remuneration by way of salary benefits perquisites and allowances (fixedcomponent) and performance incentives commission (variable component) to its ChairmanManaging Director and other Executive Directors. Annual increments are decided by the NRCwithin the salary scale approved by the Board and Shareholders.
Directors and Key Managerial Personnel (KMP) Appointment of Directors and KMP
The following appointment of Directors/KMP have taken place during the year:
1. Mr. Rostow Ravanan was appointed as CEO & Managing Director with effect fromApril 01 2016 till March 31 2021.
2. Mr. Krishnakumar Natarajan was appointed as Executive Chairman with effect fromApril 01 2016 till June 30 2017. Mr. Krishnakumar Natarajan has been reappointed by theBoard of Directors as Executive Chairman for a further period of three years from July 012017 to June 30 2020 and the same is placed for the approval of the Shareholders at theensuing Annual General Meeting.
3. Mr. Milind Sarwate was appointed as Independent Director for a period commencingfrom July 19 2016 to July 18 2021.
4. Mr. N S Parthasarathy was elevated as Executive Vice Chairman for a periodcommencing from October 21 2016 to December 31 2018.
5. Mr. Akshaya Bhargava was appointed as Independent Director for a period commencingfrom December 12 2016 to September 30 2021.
Reappointment of Director retiring by Rotation
As per the Articles of Association of the Company one third of the Directors areliable to retire by rotation at the Annual General Meeting of the Company every year. Mr.Subroto Bagchi retires by rotation and being eligible offers himself for reappointment atthe ensuing Annual General Meeting.
Resignations Cessations and Changes in Directors
1. Mr. Ramesh Ramanathan has resigned as a Board member with effect from October 212016.
2. Dr. Albert Hieronimus has retired from the Board with effect from April 01 2017.
There has been no change in the KMP other than mentioned above during the year.
Details of remuneration to Directors
The information relating to remuneration of Directors as required under Section 197(12)of the Act is given in Annexure 3.
Pursuant to the applicable provisions of the Act and LODR Regulations the Board hascarried out annual evaluation of performance of the following in detail:
(i) Board as a whole;
(ii) Functioning of various Committees;
(iii) Individual Directors including that of Independent Directors;
(iv) Chairman of the Board.
The evaluation was led by the Chairman of the Board. The Board evaluation was conductedthrough questionnaire having qualitative parameters.
The questionnaires were framed in line with the guidance note issued by SEBI on January05 2017.
The performance of the Board was evaluated after seeking inputs from all the Directorson the basis of criteria such as Board composition focus on strategy organizationalmatters effectiveness of Board process timelines of information functioning etc.
The performance of the Committees were evaluated after seeking inputs from theCommittee members on the criteria such as Committee composition frequency of meetingeffectiveness independence contributions to Board decisions etc.
The performance of the individual Directors was evaluated after seeking inputs from allthe Directors other than the one who is being evaluated.
The evaluation was based on the criteria such as commitment attendance preparednessparticipation expression of opinions etc.
The performance of the Board Chairman was evaluated after seeking inputs from all theDirectors on the basis of the criteria such as leadership preparedness commitmentdelegation of responsibilities protection of shareholders' interest etc.
The outcome of the Board evaluation of the individual Directors was discussedindividually with the Board members in detail.
The outcome of the evaluation of the Board Committee and that of Chairman werediscussed at NRC and at the Board meeting in detail. The feedback from the evaluation wasthat many process followed by Mindtree met best practice benchmarks as well as areas wherewefineed to focus on strengthening few processes. The action plans were put in place forincorporating the findings of the evaluation.
The Board of Directors of the Company met six times during the Financial Year 2016-17.The details of Board Meetings are provided in the Corporate Governance Report. The gapintervening between two meetings of the board is within the stipulated time frameprescribed in the Act and LODR Regulations.
The following are the details of the Board Committees during the year 2016-17:
1 Audit Committee;
2 Nomination and Remuneration Committee;
3 Stakeholders' Relationship Committee;
4 Administrative Committee;
5 Corporate Social Responsibility Committee and
6 Risk Management Committee
The composition of each of the above Committees their respective roles andresponsibilities are provided in detail in the Corporate Governance Report.
Vigil Mechanism / Whistle Blower Policy
The Company has established a Whistle Blower Policy for Directors and employees toreport their genuine concern. The details of the same is explained in the CorporateGovernance Report.
Related Party Transactions
All Related Party Transactions that were entered into during the Financial Year were atarm's length basis and in the ordinary course of business. There were no materiallysignificant related party transactions entered into by the Company with PromotersDirectors or Key Managerial Personnel which may have a potential conflict with theinterest of the Company at large. All related party transactions were entered into withprior approval of the Audit Committee. There were no related party transactions thatrequired approval of the Shareholders. The details of Related Party transactions enteredinto during the quarter were placed before the Audit Committee and the Board.
The policy for determining material related party transactions as approved by the Boardis uploaded on the Company's website and can be accessed athttps://www.mindtree.com/policy-for-determining-material-related-party-transactions
The details of the related party transactions referred to in Section 188(1) of theAct as required under Section 134 (3)(h) read with Rule 8 of the Companies (Accounts)Rules 2014 is attached in Form AOC-2 as Annexure 5.
Employee Stock Option Plans and Employee Stock Purchase Scheme
Your Company believes in the policy of absorbing and retaining the best talents byallowing them to participate in theflownership of the Company and share its wealthcreation as they are responsible for the management growth and financial success of yourCompany.
Your Company has granted various options under the following Employee Stock OptionPlans viz. ESOP 1999 ESOP 2001 ESOP 2006 (a) ESOP 2006 (b) ESOP 2008 (A) DSOP 2006ESOP 2010 (A) a Employee Stock Purchase Scheme namely Mindtree Employee Restricted StockPurchase Plan 2012 (ESPS or ERSP 2012). The Employee Stock Option Plans (ESOPs) and ESPSor ERSP 2012 are in compliance with SEBI (Share Based Employee Benefits) Regulations 2014("Employee Benefit Regulations") and there has been no material changes to theseplans during the Financial Year. The summary information of various ESOPs and ESPS or ERSP2012 of the Company is provided under Notes to Accounts under Standalone FinancialStatements of this Annual Report. The Company has recorded compensation cost for allgrants using the fair value- based method of accounting in line with prescribed SEBIguidelines. Refer to Notes to accounts under Standalone Financial Statements of thisAnnual Report for details on accounting policy. Disclosure on various plans details ofoptions granted shares allotted on exercise etc. as required under Employee BenefitsRegulations read with SEBI circular no. CIR/CFD/POLICYCELL/2/2015 dated June 16 2015 areavailable on the Company's website: https://www.mindtree.com/ sites/default/les/details-under-sebi-regulations-2014.pdf.No employee was granted options / shares(under ESOPs or ESPS/ERSP 2012) during the year equal to or exceeding 1% of the issuedcapital. A Reconciliation Statement of the Equity Shares is attached as Part B Annexure 2.
Details of unclaimed shares
The details of unclaimed shares as required under LODR Regulations is provided in PartA Annexure 2.
Your Company maintains sufficient cash to meet its operations and strategic objectives.Our cash and investments (net of short term borrowings) have increased from Rs. 3790million as on March 31 2016 to Rs. 7177 million as on March 31 2017. The balance fundshave been invested in deposits with banks highly rated financial institutions and debtschemes of mutual funds.
No material litigation was outstanding as on March 31 2017. Details of litigation ontax matters are disclosed in the financial statements.
Your Company has been practicing the principles of good Corporate Governance. Adetailed Report on Corporate Governance is available as a separate section in this AnnualReport. Auditor's Certificate on Corporate Governance obtained from Deloitte Haskins &Sells Chartered Accountants (Firm Registration No. 008072S) for compliance with LODRRegulations is provided in Annexure 9 and is a part of this Report.
Shareholder Satisfaction Survey
During the last quarter of FY 2017 Your Company conducted Shareholder SatisfactionSurvey to engage more with the Shareholders and to seek your valuable feedback onimproving our services. The questionaire was sent to those Shareholders who haveregistered their e-mail IDs' with the Company / Registrar and Share Transfer Agent. Thesurvey was also published on social media and Company's website. The feedback was largelypositive which reflects that the investors / Shareholders services provided by yourCompany are satisfactory.
The Summary of responses received as below:
Transfer to Investor Education and Protection Fund (IEPF)
Pursuant to Section 124(5) and other applicable provisions of the Act read withInvestor Education and Protection Fund Authority (Accounting Auditing Transfer andRefund) Rules 2016 Dividends that are unpaid/ unclaimed for a period of seven years arerequired to be transferred to the Investor Education and Protection Fund administered bythe Central Government. Once unpaid/ unclaimed dividend/ application money for allotmentof any securities and due for refund is transferred to IEPF no claim shall lie inrespect thereof against the Company. To ensure maximum disbursement of unpaid/ unclaimeddividend the Company sends reminders to the concerned investors before transfer ofdividend to IEPF.
The Company had transferred unpaid dividend amounts within the statutory period to theIEPF. During the Financial Year 2016-17 unpaid or unclaimed dividend of Rs. 476758/- wastransferred to the IEPF.
Attention is drawn that the unclaimed/ unpaid dividend for the Financial Years 2009-10and 2010-11 is due for transfer to IEPF during September 2017 and December 2017. In viewof this the Members of the Company who have not yet encashed their dividend warrant(s)or those who have not claimed their dividend amounts may write to the Company/ Company'sRegistrar and Share Transfer Agent Link Intime India Private Limited.
The details of the consolidated unclaimed/unpaid dividend details as required by theInvestor Education and Protection Fund (Uploading of information regarding unpaid andunclaimed amounts lying with companies) Rules 2012 for all the unclaimed/ unpaiddividend accounts outstanding (drawn up to the date of Seventeenth Annual General Meetingon July 19 2016) in terms of the Ministry of Corporate A airs Notification No. G.S.R 352(E) dated May 10 2012 has been uploaded under the Company website:https://www.mindtree.com/about-us/ investors/unpaid-dividend-information
Further Pursuant to the provisions of Section 124(6) of the Act and the InvestorEducation and Protection Fund Authority (Accounting Auditing Transfer and Refund) Rules2016 as amended stipulates that shares on which dividend has not been paid or claimedfor seven consecutive years then such shares are to be transferred in favor of InvestorEducation and Protection Fund (IEPF).
Accordingly the Company through individual notices as on March 31 2017 and anewspaper notice as on April 4 2017 in Business Standard and Kannada Prabha requestedconcerned Shareholders to encash their unclaimed dividend warrants on or before May 252017 in order to circumvent their shares being transferred in favor of IEPF Suspenseaccount.
Post the above due date the Company would go ahead and transfer the shares in favor ofIEPF Suspense Account on the date and the manner referred in the said rules without anyfurther notice. Further no claim shall lie against the Company in respect of unclaimeddividend amount or shares once the same are transferred in favor of IEPF Authority.
a) Statutory Auditors:
The Audit Committee and the Board have recommended the proposal to ratify theappointment of M/s. Deloitte Haskins & Sells Chartered Accountants (Firm RegistrationNo. 008072S) Statutory Auditors of the Company up to the conclusion of the NineteenthAnnual General Meeting and to authorize the Board of Directors or Committee thereof to xtheir remuneration. The Company has received a certificate from the Auditors to the effectthat the ratification of appointment if made would be in accordance with limitsspecified by the Act and that they meet the criteria of independence. The proposal oftheir ratification is included in the notice of ensuing Annual General Meeting.
b) Secretarial Auditor:
Pursuant to the provisions of Section 204 of the Act and Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 Secretarial Audit has been carried outby Mr. G Shanker Prasad Practising Company Secretary.
Auditor's Report and Secretarial Audit Report
The Auditor's report and Secretarial Audit Report do not contain any qualificationsreservations or adverse remarks. Report of the Secretarial Auditor is annexed as Annexure8 and is a part of this report.
Particulars of Employees
Information as required under the provisions of Rules 5(2) & 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are set out inAnnexure 3 to the Directors' Report. As per the proviso to Rule 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the particulars ofemployees posted and working outside India not being Directors or their relatives drawingthe salary in excess of the prescribed limits under the above rules need not be includedin the statement but such particulars shall be furnished to the Registrar of Companies.Accordingly the statement included in this report does not contain the particulars ofemployees who are posted and working outside India. If any Member is interested inobtaining a copy of the same such Member may write to the Company in this regard.
Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outflow
The particulars as prescribed under Section 134(3) (m) of the Act read with Rule 8 ofthe Companies (Accounts) Rules 2014 are set out in Annexure 6. The Company has takenseveral constructive steps to conserve energy through its sustainability initiatives aselaborately disclosed in Business Responsibility Report in this Annual Report.
Directors' Responsibility Statement
Your Company's Directors make the following statement in terms of sub-section (5) ofSection 134 of the Act which is to the best of their knowledge and belief and accordingto the information and explanations obtained by them:
I. The financial statements have been prepared in conformity with the applicableAccounting Standards and requirements of the Act to the extent applicable to Company; onthe historical cost convention; as a going concern and on the accrual basis. There are nomaterial departures in the adoption of the applicable Accounting Standards.
II. The Board of Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of a airs of the Company at the end of theFinancial Year and of the profit of the Company for that period.
III. The Board of Directors have taken proper and sufficient care for the maintenanceof adequate accounting records in accordance with the provisions of the Act forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.
IV. The Board of Directors have laid down internal financial controls to be followed bythe Company and that such internal financial controls are adequate and were operatingeffectively.
V. The Board of Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
VI. The financial statements have been audited by M/s. Deloitte Haskins & SellsChartered Accountants the Company's Auditors. VII. The Audit Committee meets periodicallywith the Internal Auditors and the Statutory Auditors to review the manner in which theAuditors are discharging their responsibilities and to discuss audit internal control andfinancial reporting issues.
VIII. To ensure complete independence the Statutory Auditors and the Internal Auditorshave full and free access to the Members of the Audit Committee to discuss any matter ofsubstance.
Management Discussion and Analysis Report
Management Discussion and Analysis Report as required under LODR Regulations isdisclosed separately in this Annual Report.
Corporate Social Responsibility Initiatives
As part of its Corporate Social Responsibility (CSR) initiatives Your Company hasundertaken several projects in accordance with Schedule VII of the Act. Mindtreeimplements its CSR initiatives via three channels:
- Directly by Mindtree;
- Through Mindtree Foundation;
- Through "Individual Social Responsibility" programs undertaken by MindtreeMinds and supported by Mindtree as appropriate.
Further Mindtree's CSR primarily focuses on programs that:
- Benefit the differently abled;
- Promote education;
- Create sustainable livelihood opportunities.
The Annual Report on CSR activities is annexed herewith as Annexure 7.
Quality Initiatives and Certifications
Your Company continues its journey of delivering value to its clients throughinvestments in quality programs. Your Company has adopted several external benchmarks andcertifications. Your Company is certi ed under various standards to meet clients'requirements and enhancing valuable delivery and following is the summary ofcertifications held by your Company.
|Certificate Name ||Issuing Authority ||Certification Date ||Certificate Expiry Date ||Frequency of Surveillance Audits ||Description |
|PCI-DSS V 3.1 ||Trustwave ||March 01 2017 ||February 28 2018 ||Annual ||The Payment Card Industry Data Security Standard (PCI DSS) is a proprietary information security standard for organizations that handle branded credit cards from the major card schemes including Visa MasterCard American Express Discover and JCB. |
|CMMI SVC L3 Ver 1.3 ||QAI ||March 27 2014 ||March 27 2017 (renewal certificate awaited) ||Once in 3 years ||CMMI for services (CMMI-SVC) model which is a comprehensive set of guidelines that helps organizations in the Services industry domain to establish and improve processes for delivering services. |
|ISO/IEC 20000- 1:2011 ||BSI ||November 28 2016 ||November 27 2019 ||Once in 3 years ||ISO/IEC 20000 is an international IT standard that allows companies to demonstrate excellence and prove best practice in IT management. |
|ISO 14001:2004 ||BSI ||September 21 2016 ||September 14 2018 ||Once in 2 years ||ISO 14001:2004 speci es requirements for an environmental management system to enable an organization to develop and implement a policy and objectives which take into account legal requirements and other requirements to which the organization subscribes and information about significant environmental aspects. |
|BS OHSAS 18001:2007 ||BSI ||September 21 2016 ||September 24 2019 ||Once in 3 years ||BS OHSAS 18001 is a truly international standard which sets out the requirements for occupational health and safety management good practice for any size of organization. |
|Information Security Management System - ISO/IEC 27001:2013 ||BSI ||May 18 2015 ||May 09 2018 ||Once in 3 years ||ISO/IEC 27001 (ISO 27001:2013) is the international standard that describes best practice for an Information Security Management System (ISMS). Accredited certification to ISO 27001 demonstrates that an organization is following international information security best practices. |
|CMMI Dev L5 Ver 1.3 ||QAI ||June 08 2016 ||June 09 2019 ||Once in 3 years ||CMMI for development contains practices that cover project management process management systems engineering hardware engineering software engineering and other supporting processes used in development and maintenance. |
Business Responsibility Report
Your Company has prepared Business Responsibility Report in line with LODR Regulationswhich is annexed to this Annual Report. The said report comprehensively covers yourCompany's philosophy on Corporate Social Responsibility its sustainability activitiespertaining to the orts on conservation of environment conducting green awareness eventsits commitment towards society enhancing primary education initiatives and activitiestaken up as part of this philosophy for the year 2016-17.
Code of Conduct for Prevention of Insider Trading in Mindtree securities
Your Company has formulated Code of Conduct for Prevention of Insider Trading inMindtree Securities ("Code") in accordance with SEBI (Prohibition of InsiderTrading) Regulations 2015. The objective of this Code is to protect the interest ofShareholders at large to prevent misuse of any price sensitive information and to preventany insider trading activity by dealing in shares of the Company by its DirectorsDesignated Persons and other Mindtree Minds. Mr. Jagannathan Chakravarthi CFO continuesto act as Compliance Officer under the Code.
Internal Control Systems and Adequacy of Internal Financial Controls
Your Company has a proper and adequate system of internal controls. Adequate internalcontrols ensures transactions are authorized recorded and reported correctly and assetsare safeguarded and protected against loss from unauthorized use or disposition. Inaddition there are operational controls and fraud risk controls covering the entirespectrum of internal financial controls.
An extensive programme of internal audits and management reviews supplements theprocess of internal financial control framework. Documented policies guidelines andprocedures are in place for effective management of internal financial controls. Theinternal financial control framework design ensures that the financial and other recordsare reliable for preparing financial and other statements. In addition the Company hasidentified and documented the key risks and controls for each process that has arelationship to the financial operations and reporting. At regular intervals internalteams test identified key controls. The internal auditors also perform an independentcheck of effectiveness of key controls in identified areas of internal financial controlreporting.
The Audit Committee which comprises of professionally qualified Directors interactswith the statutory auditors internal auditors and management in dealing with matterswithin its terms of reference.
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The Audit committee defines the scope and authority of theinternal auditor. To maintain its objectivity and independence the internal auditorreports to the Chairman of the Audit Committee of the Board. The internal auditor monitorsand evaluates the the efficacy and adequacy of internal control system in the Company itscompliance with operating systems accounting procedures and policies at all locations ofthe Company and its subsidiaries. Based on the report of internal auditor process ownersundertake corrective action in their respective areas and thereby strengthen the controls.Significant audit observations and corrective actions proposed to x the observations arepresented to the Audit Committee of the Board.
Any other material changes and commitments
Any material changes and commitments affecting the financial position of the Companyoccurred between April 1 2017 and the date of signing this Report has been reported inthe financial statements.
Audit Committee Recommendation
During the year all recommendations of the Audit Committee were accepted by the Board.The Composition of the Audit Committee is as described in the Corporate Governance Report.
Extract of Annual Return
The details forming part of extract of Annual Return in Form MGT-9 is annexed herewithas Annexure 4.
Significant & Material Orders passed by Regulators or Courts
There are no significant and material orders passed by Regulators or Courts during theyear under review.
Particulars of Loans Guarantees and Investments u/s 186
Pursuant to Section 186 of the Act and LODR Regulations disclosure on particularsrelating to loans guarantees and investments are provided in the financial statements.
Risk Management Policy
At Mindtree Enterprise Risk Management (ERM) is an organization wide function lookinginto the risks which can have an adverse impact on Mindtree's business. ERM encompassesareas of organizational exposure to risk (financial strategic operational andcompliance). ERM also provides a structured process for management of risks whether thoserisks are quantitative or qualitative in nature.
Our risk framework is based on standards such as COSO ISO 31000:2009 and IRM RiskManagement Standard which enable us to structure our systems and mechanisms of riskmanagement effectively. ERM involves risk identification assessment and risk mitigationplanning for strategic operational compliance and financial related risks acrossbusiness units functions and geographies.
The Company a firms that the annual listing fees for the year 2017-18 to both NationalStock Exchange of India Limited (NSE) and BSE Limited (Bombay Stock Exchange) has beenpaid.
The Board places on record their deep sense of appreciation to all the Mindtree Mindssupport staff for adopting to the values of the Company viz. collaborative spritunrelenting dedication and expert thinking for making Mindtree an expertise ledorganization and the Company's customers for letting us deliver the Company's Missionstatement to engineer meaningful technology solutions to help the businesses andsocieties flourish. The Board also immensely thank all the Departments of Government ofIndia Central Government State Government Tax Authorities Reserve Bank of IndiaMinistry of Corporate A airs Securities and Exchange Board of India Stock Exchanges andother governmental/ Semi-governmental bodies and look forward to their continued supportin all future endeavors. The Board also would like to thank our Shareholders investorsvendors service providers bankers and academic institutions and all other stakeholdersfor their continued and consistent support to the Company during the year.
| ||For and on behalf of the Board of Directors |
|Place: Bengaluru ||Krishnakumar Natarajan |
|Date: April 20 2017 ||Chairman |