To the Members
Your Directors have pleasure in presenting the Eighteenth Annual Report together withthe Audited Financial Statements (both Consolidated & Standalone) of the Company forthe year ended 31st March 2017.
| ||Year ended 31 March 2017 ||Year ended 31 March 2016 |
| ||Standalone ||Consolidated ||Standalone ||Consolidated |
|Total Income ||1859.14 ||3944.34 ||524.44 ||551.27 |
|Operating Profit before Depreciation & Tax ||(118.93) ||(38.83) ||(1053.22) ||(1128.80) |
|Less: Depreciation ||15.98 ||25.40 ||17.65 ||17.82 |
|Profit before Tax ||(102.95) ||(13.43) ||(1070.87) ||(1146.62) |
|Less: provision for FBT ||0 ||0 ||0 ||0 |
|Profit after Tax before extraordinary and Prior period item ||(102.95) ||(25.53) ||(1070.87) ||(1146.62) |
|Less: Extraordinary and prior period item ||0 ||0 ||4.23 ||47.24 |
|Less: Pre acquisition (+) Profit/ (-) loss ||0 ||(151.00) ||0 ||0 |
|Profit after tax after extraordinary and Prior period item ||(102.95) ||125.47 ||(1118.10) ||(1193.86) |
|Earnings per Share (EPS) || || || || |
|Before extraordinary and prior period item || || || || |
|Basic ||(0.09) ||(0.01) ||(2.33) ||(2.49) |
|Diluted ||(0.09) ||(0.01) ||(2.33) ||(2.49) |
|After extraordinary and prior period item || || || || |
|Basic ||(0.09) ||0.11 ||(2.43) ||(2.59) |
|Diluted ||(0.09) ||0.11 ||(2.43) ||(2.59) |
On consolidated basis revenue from operations for FY 2016-17 at Rs.3944.34 lakhs asagainst Rs.551.27lakhs for the FY 2015-16. Consolidated Net profit for the FY 2016-17 wasRs.125.47 lakhs as against to the Net loss of Rs. 1193.86 lakhs for the FY 2015-16.
On standalone basis revenue from operations for FY 2016-17 at Rs.1859.14 lakhs asagainst Rs.524.44 lakhs for the FY 2015-16. Standalone Net Loss for the FY 2016-17 wasRs.102.95 lakhs as against Net Loss of Rs.1118.10 lakhs for the FY 2015-16.
MosChip Semiconductor Technology Limited (MosChip India) is a fabless modelsemiconductor and Internet of Things/Everything (IOT/E) focused company specializes inproviding value added services in VLSI design Software development & development SOC
(System On a Chip) for Aerospace & Defense Consumer and Industrial applicationsand IOT/E Products and Services across various industries.
Management Discussion & Analysis
Pursuant to the provisions SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 a report on Management Discussion & Analysis is set out as Annexure A to this report.
Subsidiaries Joint Ventures and Associate Companies
At the beginning of the year the Company had 1 direct subsidiary. As on March 312017 the Company has 5 direct subsidiaries and 1 step-down subsidiary.
Names of 6 subsidiaries as on March 31 2017 are:
01) MosChip Semiconductor Technology USA
02) ElitePlus Semiconductor Technologies Private Limited
03) Orange Semiconductors Private Limited 04) Maven Systems Private Limited 05)TexoTech Solutions Private Limited 06) MosChip Global Pte Limited
There are no associate companies or joint venture companies within the meaning ofsection 2(6) of the Companies Act 2013. There has been no material change in the natureof the business of the subsidiaries.
During the year the Board of Directors reviewed the affairs of the subsidiaries. Inaccordance with Section 129(3) of the Companies Act 2013 a statement containing salientfeatures of the financial statements of the subsidiaries companies in Form AOC-1 isenclosed as Annexure B of the Board's Report.
Further pursuant to the provisions of Section 136 of the Act the financial statementsof the Company consolidated financial statements along with relevant documents andseparate audited accounts in respect of subsidiary are available on the website of theCompany.
In view of the losses (Standalone) your directors have not recommended any dividend forthe year under review.
Increase in Paid-up Share Capital
During the year under review your Company issued and allotted Equity Shares asfollows:
i. On 18.02.2016 the Company has issued
67757000 Equity Shares of Rs.2 at a premium of Rs.3.41 through Private Placementand all 67757000 Eq. Shares were allotted on 12.04.2016.
ii. On 30.09.2016 451000 Equity Shares were allotted at a price of Rs.5.98 onexercise of ESOP's Scheme.
iii. On 09.09.2016 the Company has issued
11489000 Eq. Shares 6300000 Series 1 Warrants 6636000 Series 2 Warrants and2000000 Warrants through Private Placement. On 04.01.2017 the Company has allotted10624998 Equity Shares of Rs.2.00 each at a premium of Rs.19.80 per Share.
Consequent to the above the subscribed and paid-up Equity Share capital of yourCompany as on March 31 2017 stood at Rs.249737030/- comprising of 124868515 EquityShares of Rs.02 /- each.
Material changes and commitments if any affecting the financial position of the Companyoccurred between the end of the financial year to which this Financial Statements relateand the date of the report
There have been no material changes and commitments affecting the financial positionof the Company which occurred during between the end of the financial year to which thefinancial statements relate and the date of this report.
Details of significant and material orders passed by the regulators/ courts/ tribunalsimpacting the going concern status and the Company's operations in future
There are no significant material orders passed by the Regulators/ Courts which wouldimpact the going concern status of the Company and its future operations
Transfers to Reserves
In view of the loss your Board of Directors does not appropriate any amount to betransferred to the reserves during the year under review.
Buy Back of Securities
The Company has not bought back any of its securities during the year under review.
The Company has not issued any Sweat Equity Shares during the year under review.
The Company has not issued any bonus shares during the year under review.
Dematerialization of Shares
96.70% of the company's paid up Equity Share Capital is in dematerialized form as on31st March 2017 and balance3.30% is in physical form. The Company's Registrars are KarvyComputershare Pvt. Ltd. Karvy Selenium Tower B Plot No. 31 & 32 FinancialDistrict Gachibowli Hyderabad Telangana- 500 032.
Number of Board Meetings held
A tentative calendar of Board Meetings to take place in each year is prepared andcirculated to Board Members before the beginning of each Financial Year. The Board ofDirectors duly met 08 times during the financial year from 1st April 2016 to 31st March2017. The dates on which the meetings were held are as follows:
(i) April 12 2016 (ii) May 27 2016 (iii) July 15 2016 (iv) August 31 2016 (v)September 09 2016 (vi) September 30 2016 (vii) October 27 2016 and (viii) February14 2017.
Details of number of Meetings attended by each Director have been given in thecorporate governance report which forms part of the Annual Report.
Directors and Key Managerial Personnel
Inductions Changes & Cessations in Directorships
Mr. C. Dayakar Reddy (DIN: 00042663) Whole-time Director resigned on 12.04.2016. TheBoard in its Meeting dated 12.04.2016 placed on record its appreciation for the Servicesassistance and guidance provided by Mr. C. Dayakar Reddy since incorporation of theCompany as a Director.
On recommendation of the Nominations and Remuneration Committee the Board hasappointed Mr. Damodar Rao Gummadapu (DIN: 07027779) and Mr. Seetha Ramam Voleti (DIN:07332440) as Additional Directors with effect from 12.04.2016 and their appointments wereregularized in the AGM held on 30.09.2016. Mr. Damodar Rao Gummadapu has rich experiencein various capacities in several companies Mr. Seetha Ramam Voleti has rich experience invarious capacities in Banking & Finance industry.
In the Board Meeting held on 31.08.2016 Mr. Damodar Rao Gummadapu (DIN: 07027779) wasre-designated as Non-Executive Director of the Company and Mr. Seetha Ramam Voleti (DIN:07332440) was appointed as Whole-time Director of the Company for a period of five yearswith effect from 01.09.2016 and approval members was taken in the AGM held on 30.09.2016.
On 06.04.2017 Mr. Kadiri Ramachandra Reddy was redesignated as Non-Executive Directoras he resigned from the office of the Whole-time Director and CEO.
On 06.04.2017 Mr. Gummadapu Damodar Rao resigned from the office of the Director.
On recommendation of the nominations and Remuneration Committee the Board hasappointed Mr. Camillo Martino (DIN: 07785530) as Additional Directors in the IndependentCategory with effect from 06.04.2016.
Approval of members by way of ordinary resolution is required for regularization ofappointment of Mr. Camillo Martino at the ensuing Annual General Meeting scheduled to beheld on September 29 2017.
Directors retire by rotation:
Pursuant to the requirements of the Companies Act 2013 and Articles of Association ofthe Company Mr. Seetha Ramam Voleti Director retires by rotation at the ensuing AnnualGeneral Meeting and being eligible offers them self for re-appointment.
Key Managerial Personnel
Pursuant to the provisions of Section 203 of the Companies Act 2013 the KeyManagerial Personnel of the Company as on 01.04.2016 were
Mr. K. Ramachandra Reddy Chief Executive Officer. Mr. Kasinath Tumuluru - ChiefFinancial Officer Mr. CS Suresh Bachalakura Company Secretary Changes in the keymanagerial personnel :
On 31.08.2016 Mr. Kasinath Tumuluru resigned from the office of Chief FinancialOfficer. And the Board has appointed Mr. Seetha Ramam Voleti as Chief Financial Officerwith effect from 01.09.2016.
On 06.04.2017 Mr. K Ramachandra Reddy resigned from the office of Chief ExecutiveOfficer. And the Board has appointed Mr. Damodar Rao Gummadapu as Chief Executive Officerwith effect from 06.04.2017.
Appointment of Independent Directors
At the Fifteenth Annual General Meeting held on 11.09.2014 Mr. G. Prasad Mr.K.V.Ramana and Ms. Poornima Shenoy were appointed as Independent Directors of the Companyto hold office for a period of 3 years.
On recommendation of the Nomination and Remuneration Committee the Board of Directorsof the Company as its meeting held on 24.08.2017 approved subject to the members'approval reappointment of Mr. G. Prasad and Ms. Poornima Shenoy as Independent Directorsfor a second term of five year.
Mr. Camillo Martino who has been appointed as an Additional Director in the category ofIndependent possess appropriate balance of skills expertise and knowledge and arequalified for appointment as Independent Directors.
All Independent Directors have submitted a declaration that each of them meets thecriteria of independence as provided in Section 149(6) of the Act and there has been nochange in the circumstances which may affect their status as an independent directorduring the year.
Familiarization programme for Independent Directors
At the time of appointment the Company conducts familiarization programmes for anIndependent Director through meetings with key officials of the Company. During thesemeetings presentations are made on the roles and responsibilities duties and obligationsof the Director Company's business Company's strategy financial reporting governanceand compliances and other related matters.
The Board of Directors has carried out an annual evaluation of its own performanceBoard Committees and individual directors pursuant to the provisions of the Act and thecorporate governance requirements as prescribed by Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 ("SEBI ListingRegulations").
The performance of the Board was evaluated by the Board after seeking inputs from allthe directors on the basis of the criteria such as the Board composition and structureeffectiveness of board processes information and functioning etc.
The performance of the committees was evaluated by the Board after seeking inputs fromthe committee members on the basis of the criteria such as the composition of committeeseffectiveness of committee meetings etc.
The Board and the Nomination and Remuneration Committee ("NRC") reviewed theperformance of the individual directors on the basis of the criteria such as thecontribution of the individual director to the Board and committee meetings likepreparedness on the issues to be discussed meaningful and constructive contribution andinputs in meetings etc. In addition the Chairman was also evaluated on the key aspectsof his role.
In a separate meeting of independent Directors performance of non-independentdirectors performance of the board as a whole and performance of the Chairman wasevaluated taking into account the views of executive directors and non-executivedirectors. The same was discussed in the board meeting that followed the meeting of theindependent Directors at which the performance of the Board its committees andindividual directors was also discussed.
The Composition of the Audit Committee is provided in the Corporate Governance Reportforming part of this report. All the recommendations made by the Audit Committee wereaccepted by the Board.
Nomination and Remuneration Policy
The Company's Nomination and Remuneration Policy prepared in conformity with therequirements of the provisions of Section 178(3) of the Act.
The Policy on directors' appointment and remuneration including criteria fordetermining qualifications positive attributes independence of a director and othermatters provided under Section 178(3) for payment of remuneration to Directors and policycontaining guiding principles for payment of remuneration to Senior Management KeyManagerial Personnel and other employees including Non-executive Directors has beenuploaded on the website of the Company at https://moschip.com/wp-content/uploads/2017/07/Nominatio-remuneration-Policy.pdf.
Corporate Social Responsibility (CSR) Initiatives:
Section 135 of the Companies Act 2013 provides the threshold limit for applicabilityof the CSR to a Company i.e. (a) Networth of the Company to be Rs.500 crore or more; or(b) turnover of the company to be Rs.1000 crore or more; or (c) net profit of the companyto be Rs.5 crore or more. As the Company does not fall under any of the threshold limitsgiven above the provisions of Section 135 are not applicable to the Company.
Internal control systems and their adequacy:
The Company maintains appropriate systems of internal control including monitoringprocedures to ensure that all assets are safeguarded against loss from unauthorized useor disposition. Company policies guidelines and procedures provide for adequate checksand balances and are meant to ensure that all transactions are authorized recorded andreported correctly.
The Head of Internal Audit together with external audit consultants review theeffectiveness and efficiency of these systems and procedures to ensure that all assets areprotected against loss and that the financial and operational information is accurate andcomplete in all respects. The Audit Committee of the Board of Directors approves andreviews audit plans for the year based on internal risk assessment. Audits are conductedon a on-going basis and significant deviations are brought to the notice of the AuditCommittee.
Employee Stock Option Plan
During the year under report the company has eight schemes in operation as mentionedbelow for granting stock options to the employees and directors of the company and itswholly owned subsidiary in accordance with SEBI (Share Based Employee Benefits)Regulations 2014.
(a) MosChip Stock Option Plan 2001 (b) MosChip Stock Option Plan 2002 (c)MosChip Stock Option Plan 2004 (d) MosChip Stock Option Plan 2005(MI) (e)MosChip Stock Option Plan 2005(WOS) (f) MosChip Stock Option Plan 2008 (g)MosChip Stock Option Plan 2008(ALR) (h) MosChip Stock Option Plan 2008(Director)
During the year the company has not issued stock options. The details of the employeestock options plan form part of the Notes to accounts of the financial statements in thisAnnual Report.
Vigil Mechanism / Whistle Blower Policy
In pursuant to the provisions of Section 177(9) & (10) of the Companies Act 2013a Vigil Mechanism Whistle Blower Policy in line with listing regulations for directors andemployees to report genuine concerns has been established. The Vigil Mechanism / WhistleBlower Policy has been uploaded on the website of the Company at https://moschip.com/investors-relations/policies-documents/WhistleBlower Policy-document.pdf
The Company has not accepted any deposits from public and as such no amount on accountof principal or interest on deposits from public was outstanding as on the date of thebalance sheet.
Statutory Auditors and Auditors' Report
M/s. Gokhale & Co. Chartered Accountants (Firm Registration No. 000942S) werere-appointed as the Statutory Auditors of the Company to hold office from the conclusionof the 15th Annual General Meeting (AGM) held on September 11 2014 until the conclusionof the third consecutive AGM of the Company to be held in the year 2017 (subject toratification of their appointment by the Members at every AGM held after the AGM held onSeptember 11 2014). As such M/s Gokhale & Co. retire at the conclusion of the 18thAGM. In view of the provisions of Section 139 of the Act M/s Gokhale & Co. can nomore continue as the Auditors. The Board upon the advice of the Audit Committee wishesto recommend the appointment of M/s. S.T. Mohite & Co. Chartered Accountants asAuditors for a period of five years from the conclusion of the 18th AGM. A resolution tothis effect is being proposed at the forthcoming AGM.
As required under the provisions of section 139(1) of the Companies Act 2013 theCompany has received a written consent from M/s S.T. Mohite & Co. CharteredAccountants to their appointment and a Certificate to the effect that their appointmentif made would be in accordance with the Companies Act 2013 and the Rules framedthereunder and that they satisfy the criteria provided in section 141 of the CompaniesAct 2013.
The Notes on Financial Statements referred to in the Auditors Report areself-explanatory and do not call for any further comments.
The Report of the Statutory Auditors for the year ended 31st March 2017 forming partof the Annual Report does not contain any qualification reservation observation adverseremark or disclaimer.The Statutory Auditors have not reported any incident of fraud to theAudit Committee of the Company in the year under review.
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Board of Directors has appointedM/s. B S S & Associates Company Secretaries for conducting Secretarial Audit of theCompany for the financial year 2016-2017. The Secretarial Audit Report is annexed herewithas
The Secretarial Audit report does not contain any qualification reservation or adverseremark
Conservation of energy research and development technology absorption foreignexchange earnings and outgo
Information required under Section 134(3)(m) of the Act read with Rule 8(3) of theCompanies (Accounts) Rules 2014 with respect to conservation of energy technologyabsorption and foreign exchange earnings/outgo is included in Annexure - D.
RELATED PARTY TRANSACTIONS:
Related party transactions that were entered during the financial year were on an arm'slength basis and were in the ordinary course of business. There were no materiallysignificant related party transactions with the Company's Promoters Directors Managementor their relatives which could have had a potential conflict with the interests of theCompany. All Related Party Transactions are placed before the Audit Committee and beforethe Board for approval. Prior omnibus approval of the Audit Committee was obtained for thetransactions which are of a foreseeable and repetitive nature. The particulars ofcontracts or arrangements with related parties referred to in section 188(1) andapplicable rules of the Companies Act 2013 in Form AOC-2 is provided as Annexure - Eto this Annual Report.
The Board of Directors of the Company has on the recommendation of the AuditCommittee adopted a policy to regulate transactions between the Company and its RelatedParties in compliance with the applicable provisions of the Companies Act 2013 the Rulesthereunder and the Listing Agreement. This Policy was considered and approved by the Boardhas been uploaded on the website of the Company at http://www.moschip.com/corporategovernance/Related Party Policy link
Extract of Annual Return:
Pursuant to section 92(3) and Section 134(3)(a) extract of the Annual Return as onMarch 31 2017 in Form MGT-9 is annexed herewith as Annexure F.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Pursuant to Section 186 of Companies Act 2013 and Schedule V of the ListingRegulations disclosure on particulars relating to Loans Advances Guarantees andInvestments are provided as part of the financial statements.
REMUNERATION RATIO OF THE DIRECTORS / KEY MANAGERIAL PERSONNEL (KMP) / EMPLOYEES:
The information required pursuant to Section 197 read with Rule 5 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed herewith as Annexure G to this report.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(5) the Companies Act 2013 and based upon representations fromthe Management the Board to the best of its knowledge and belief states that: a) in thepreparation of the annual accounts the applicable accounting standards had been followedalong with proper explanation relating to material departures;
b) the Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;
c) The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;
d) the Directors had prepared annual accounts on a going concern basis; and
e) the Directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and operating effectively;
f) the directors had devised proper systems to ensure compliance by the Company withthe provisions of all applicable laws and that such systems were adequate and operatingeffectively.
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company the work performed by the internal statutoryand secretarial auditors and external consultants including the audit of internalfinancial controls over financial reporting by the statutory auditors and the reviewsperformed by management and the relevant board committees including the audit committeethe Board is of the opinion that the Company's internal financial controls were adequateand effective during the financial year 2016-2017.
CORPORATE GOVERNANCE AND SHARE HOLDERS INFORMATION
The Company is committed to good corporate governance in line with the provisions ofSEBI (LODR) Regulations 2015 and Provisions Rules and Regulations of the Companies Act2013. The Company is in compliance with the provisions on corporate governance specifiedin the Listing Agreement with BSE. A certificate of compliance from Mr. Sompally Srikantha Practicing Company Secretary and the report on Corporate Governance form part of thisDirectors' Report as Annexure H.
Company's Policy on Prohibition Prevention and Redressal of Sexual Harassment of Womenat Workplace
The Company prohibits any form of sexual harassment and any such incidence isimmediately investigated and appropriate action taken in the matter against the offendingemployee(s) based on the nature and the seriousness of the offence. The Company has apolicy on Prohibition Prevention and Redressal of Sexual Harassment of Women at Workplace(the Policy) and matters connected therewith or incidental thereto covering all theaspects as contained under the "The Sexual Harassment of Women at Workplace(Prohibition Prevention and Redressal) Act 2013" notified by the Government ofIndia vide Gazette Notification dated 23rd April 2013.
There was no case of sexual harassment reported during the year under review.
Development and Implementation of a Risk Management Policy:
The Company has been addressing various risks impacting the Company and the policy ofthe Company on risk managementis provided elsewhere in this Annual Report in ManagementDiscussion and Analysis.
Annexures forming part of this report
|Annexures ||Particulars |
|A ||Management Discussion & Analysis |
|B ||Form AOC - 1 |
|C ||Secretarial Audit Report |
|D ||Details of Energy Conservation Technology absorption Foreign exchange earnings & out go |
|E ||Form AOC - 2 |
|F ||Extracts of Annual Return Form MGT-9 |
|G ||Remuneration related disclosures per Section 197 |
|H ||Report on Corporate Governance |
The Board wishes to gratefully acknowledge the understanding and support received bythe Company from its employees. It would wish to thank the banking system the CentralGovernment the various State Governments and the local authorities for the supportreceived during the year.
This Report will be incomplete without a specific appreciation for the Members of theCompany who have shown immense confidence and understanding in the Company's well-being.
For and on behalf of the Board of Directors
|K. Ramachandra Reddy |
Place : Hyderabad
Date : 24th August 2017