We are pleased to present your Company's Twenty Eighth Annual Report together with theAudited Statement of Accounts for the year ended March 31 2017.
1. RESULTS OF OPERATIONS - Financial Results
The financial statements of the Company have been prepared in accordance with theGenerally Accepted Accounting Principles in India (Indian GAAP) to comply with theAccounting Standards specified under Section 133 of the Companies Act 2013 read withRule 7 of the Companies (Accounts) Rules 2014 and the relevant provisions of theCompanies Act 2013 ("2013 Act") as applicable and guidelines issued by theSecurities and Exchange Board of India ("SEBI"). Accounting policies have beenconsistently applied except where a newly issued accounting standard if initially adoptedor a revision to an existing accounting standard requires a change in the accountingpolicy hitherto in use. Management evaluates all recently issued or revised accountingstandards on an ongoing basis. The Company has nine subsidiary companies across the globe.The Company discloses stand-alone audited financial results on a quarterly and annualbasis consolidated un-audited financial results on a quarterly basis and consolidatedaudited financial results on an annual basis.
a) Consolidated Operations
Revenue from consolidated operations for the year was ' 372.39 crore as compared to '348.70 crore in the previous year. As the Company continued its focus on strategicinitiatives for new products focused sales and market development and hiring of seniorexperienced personnel to help drive transformation the overall operational expense forthe year continued to be high at ' 320.64 crore against ' 318.51 crore in the previousyear. The Operating Profit (EBITDA) was at ' 51.75 crore 14% of revenue against ' 30.19crore 9% of revenue in the previous year. Profit after Tax for the year was higher at '62.69 crore 17% of revenue against ' 32.47 crore 9% of revenue in the previous year.
The consolidated financial results are as below:
|For the Year Ended March 31 ||2017 ||% of Revenue ||2016 ||% of Revenue |
|Income from Operations ||372.39 || |
|348.70 || |
|Expenses || || || || |
|a) Employee benefit expense ||245.26 || |
|226.84 || |
|b) Travel expense ||13.18 || |
|20.99 || |
|c) Finance costs (Bank charges) ||0.54 || |
|0.62 || |
|d) Other expenses ||61.66 || |
|70.06 || |
|Total Expense ||320.64 || |
|318.51 || |
|Operating Profit (EBITDA) ||51.75 || |
|30.19 || |
|Depreciation ||11.21 || |
|12.22 || |
|Operating Profit after Interest and Depreciation ||40.54 || |
|17.97 || |
|Other Income ||30.33 || |
|25.08 || |
|Foreign Exchange Gain/ (Loss) ||(0.48) || |
|0.83 || |
|Profit Before Tax ||70.39 || |
|43.88 || |
|Taxation ||7.70 || |
|11.41 || |
|Profit After Tax ||62.69 || |
|32.47 || |
b) Standalone Operations
Revenue from the standalone operations for the year was ' 299.35 crore against ' 278.17crore in the previous year. Total operational expense for the year was ' 266.38 croreagainst ' 265.24 crore in the previous year an increase of 0.4%.
Operating Profit (EBITDA) for the year was at ' 32.97 crore 11% of revenue against '12.93 crore 5% of revenue in the previous year. Profit after Tax for the year was at '47.82 crore 16% of revenue against ' 44.66 crore 16% of revenue in the previous year.
Standalone financial results are as below:
|For the Year Ended March 31 ||2017 ||% of Revenue ||2016 ||% of Revenue |
|Income from Operations ||299.35 || |
|278.17 || |
|Expenses || || || || |
|a) Employee benefit expense ||176.57 || |
|166.02 || |
|b) Travel expense ||11.01 || |
|17.04 || |
|c) Finance costs (Bank charges) ||0.35 || |
|0.43 || |
|d) Other expenses ||78.45 || |
|81.75 || |
|Total Expense ||266.38 || |
|265.24 || |
|Operating Profit (EBITDA) ||32.97 || |
|12.93 || |
|Depreciation ||10.27 || |
|10.91 || |
|Operating Profit after Interest and Depreciation ||22.70 || |
|2.02 || |
|Other Income ||29.41 || |
|50.40 || |
|Foreign Exchange Gain/ (Loss) ||(0.17) || |
|0.33 || |
|Profit Before Tax ||51.94 || |
|52.75 || |
|Taxation ||4.12 || |
|8.09 || |
|Profit After Tax ||47.82 || |
|44.66 || |
A detailed analysis on the Company's performance both consolidated and standalone isincluded in "Management's Discussion and Analysis" Report which forms part ofthis Annual Report.
2. SHARE CAPITAL
Issued and Paid-up Share Capital
The paid-up share capital of the Company as on March 31 2017 is 32383724 equityshares of '10 each similar to the paid-up share capital as on March 31 2016.
Shares under Compulsory Dematerialization
The shares of the Company are under compulsory dematerialization ("Demat")category and are available for trading on both the depositories in India viz. NationalSecurities Depository Limited (NSDL) and Central Depository Services (India) Limited(CDSL). Out of the entire paid up shares i.e. 32383724 shares 99.59% are indematerialized form as at March 31 2017. The International Securities IdentificationNumber (ISIN) allotted to the Company's shares is INE096B01018.
Your Company is listed at National Stock Exchange of India Ltd. and BSE Ltd.
|Stock Exchange where Company shares are listed ||Scrip Symbol / Code |
|National Stock Exchange of India Ltd. (NSE) w.e.f. December 19 2002 ||NUCLEUS |
|BSE Ltd. (BSE) w.e.f. November 6 1995 ||531209 |
4. LIQUIDITY AND CASH EQUIVALENTS
Your Company continues to retain its debt-free status and maintains sufficient cash andcash equivalents to meet future strategic initiatives. The Company has been conservativein its investment policy over the years maintaining a reasonably high level of cash andcash equivalents which enable the Company to completely eliminate short and medium termliquidity risks and at the same time also help scale up operations at a short notice. Thegoal of cash management at Nucleus is to:
a. Use cash to provide sufficient working capital to manage business operations of theCompany to be able to add value to all our stakeholders and continuously enhance the same.
b. Maintain sufficient cash as reserves that will aid the Company in capturingmeaningful business opportunities including acquisitions.
c. Invest surplus funds in low-risk bank deposits debt schemes of mutual fundspreference shares and tax free secured bonds of Public Sector Enterprises.
Cash and cash equivalents including current investments at a consolidated level of '293.40 crore constitute 69% of the shareholders' funds at the year end against ' 237.48crore 49% of the shareholders' funds at the close of the previous year. In addition theCompany holds tax- free bonds issued by public sector enterprises on a 'hold to maturity'basis of a face value of ' 77.74 crore against ' 77.74 crore in the previous yearlong-term fixed maturity plans of mutual funds of ' 52.51 crore against ' 27.00 crore lastyear preference shares of ' 51.06 crore against ' 14.91 crore last year and debentures of' 5.00 crore against ' Nil in the previous year.
The Dividend Policy of your Company stipulates a dividend payout in the range of 15-30%of the profits available for distribution subject to:
a) Provisions of The Companies Act 2013 and other applicable laws and
b) Cash flows of the Company
We are pleased to state that for the 17th consecutive year your Company hasrecommended a dividend. The proposed dividend for the year is 50% (' 5.00 per equity shareof ' 10 each). Last year the dividend paid was also 50% (' 5.00 per equity share of ' 10each). Dividend is subject to the approval of shareholders at the forthcoming AnnualGeneral Meeting. If approved the total dividend payout will be ' 16.19 crore againstpayout of ' 32.38 crore in the previous year (' 16.19 crore was paid as final dividend forFY 14-15 in July 2015 and ' 16.19 crore was paid as interim dividend for FY 15-16 in March2016) .
The Register of Members and Share Transfer Register shall remain closed during theperiod July 3 - July 8 2017 (both days inclusive) for the purpose of Annual GeneralMeeting and payment of dividend. The dividend if approved at the Annual General Meeting will be payable to such members whose names appear on the Register of Members of theCompany and as beneficial owners in the records of National Securities Depositories Ltd.and Central Depository Services (India) Ltd. at close of business hours as on July 12017.
6. BUY BACK OF EQUITY SHARES
The Board of Directors at their meeting held on April 25 2017 approved subject tothe approval of regulatory authorities shareholders Companies Act 2013 the Securitiesand Exchange Board Of India (Buyback of Securities) Regulations 1998 as amended (the"Buyback Regulations") and such applicable acts or rules including amendments ifany a Buyback of up to an aggregate amount not exceeding ' 117.79 crore (representing 25%of the paid up share capital and free reserves as on March 31 2017) ("Maximum OfferSize") at a price not exceeding ' 350 per equity share ("Maximum BuybackPrice") from the existing equity shareholders of the Company on the Record Date tobe determined on a proportionate basis through the "Tender Offer" route asprescribed under the SEBI Buyback Regulations. The Promoters have undertaken not to tenderany shares in the offer.
At the maximum offer price of ' 350 per equity share and for the maximum offer size of' 117.79 crore the indicative maximum number of equity shares that can be bought backwould be fully paid up 3365523 equity shares representing 10.39% of the total paid upequity share capital of the Company. In case the final Buyback price is lower than themaximum Buyback price the indicative maximum number of shares will also go upaccordingly.
The current Buyback is a capital allocation decision taken with the objective of usingsome of the cash reserves seeking a fairer valuation of the Company's stock improvingthe Company's Return on Equity and increasing shareholder value in the longer term.
7. INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to applicable provisions of the Companies Act 2013 read with IEPF Authority(Accounting Audit Transfer and Refund) Rules 2016 ('the Rules') all unpaid or unclaimeddividends are required to be transferred by the Company to the IEPF Account established bythe Central Government after completion of seven years. Further according to the Rulesthe shares in respect of which dividend has not been paid or claimed by the members forseven consecutive years or more shall also be transferred to
the Demat account created by IEPF Authority. Accordingly the Company has transferredall unclaimed and unpaid dividends. Further the details of the shares that will betransferred as per the requirement of the IEPF Rules is provided on Company's websitehttp://www.nucleussoftware.com/investors.
8. DEPOSITS FROM PUBLIC
Your Company has not accepted any deposits from public covered under Chapter V of theCompanies Act 2013 and as such no amount of principal or interest was outstanding onthe date of the Balance Sheet.
9. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134 of the Companies Act 2013 read withthe Companies (Accounts) Rules 2014 is provided as Annexure I to this Directors' Report.
10. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
Particulars of contracts or arrangements with related parties in the prescribed FormAOC-2 are provided as Annexure A to this Directors' Report.
The Company policy for determining 'Material Subsidiaries' and on 'Related PartyTransactions' as approved by the Board can be accessed on the Company website link:
11. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are provided in the notes to the Financial Statements.
12. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THE COMPANYBETWEEN THE END OF FINANCIAL YEAR 2017 AND DATE OF THIS REPORT
No material changes and commitments have occurred after the close of the year till thedate of this Report which affect the financial position of the Company.
13. CHANGE IN THE NATURE OF BUSINESS
There has been no change in the nature of business of the Company.
14. MANAGEMENT DISCUSSION & ANALYSIS
As per requirements of Regulation 34 of Securities and Exchange Board of India (ListingObligations and Disclosures) Regulations 2015 the Management's Discussion and Analysis ofthe financial condition and results of both standalone and consolidated operations havebeen provided separately in this Annual Report.
15. REVIEW OF BUSINESS & OUTLOOK
Your Company continues its journey as a preferred partner for banking and financialorganizations worldwide providing innovative and pioneering products services andsolutions. Continuing the relentless focus on customer success your Company launched arange of innovative solutions during the year.
As technology continues to evolve rapidly and permeate more layers of businessoperations digital solutions have become an integral component of the growth roadmaps formost enterprises. Packaged software was the fastest growth segment (6.2%) in 2016.Investments are being done on applications that facilitate enterprise and IT operationssuch as enterprise resource management and operations & manufacturing applicationscollaborative applications SaaS etc.
The Indian IT sector is expected to grow at a rate of 12-14 per cent for FY 2017-18 inconstant currency terms. The sector is also expected triple its current annual revenue toreach US$ 350 billion by FY 2025 (source: Nasscom). On the other hand the public cloudservices market in India is slated to grow 35.9 per cent to reach US$ 1.3 billionaccording to IT consultancy Gartner.
The most successful banks in the future will be those that understand the tremendouspower of technology and use it to transform their lending businesses. Delivering greatcustomer experiences and living up to the needs of digital banking are some of thebusiness challenges that banks face today. The pace of technological change will not slowdown and the tech sector as a whole must continue to seek the answer to achieve seamlessintegration and communication between products and platforms.
16. NEW PRODUCT LAUNCHES
Your Company's flagship product FinnOne Neo was launched on cloud and is alreadya success in the domestic market. By providing FinnOne Neo on cloud we are makingone of the best lending software more affordable quickly deployable and scalable as perour customer's business requirements.
Your Company has also launched Collections module as part of FinnOne Neo LendingSuite. Collections module is aimed at automating the collection operation in a financialinstitution increase collection efficiency and thereby also reduce delinquency.
As a part of ongoing development program your Company also launched FinnAxia4.0 the latest version of its next- generation integrated transaction banking productsuite. This new product suite includes extended compliance to global and regionalregulations; increased flexibility for corporate treasurer for greater controlvisibility management of liquidity and enhanced capabilities to digitize the financialvalue chain of supplier's-buyer's-dealer's thereby creating a business network forcollaborative commerce leading to working capital optimization.
During the year PaySe the world's first offline digital cash solution innovatedby your Company in the previous year was made available in 3 new form factors: smartwatch band and micro SD. With this we can now cater to consumers more effectively.During the year we also launched an innovative project with an esteemed educationinstitution in India.
Your Company remains committed to providing its existing and potential customers withcompetitive and cuffing-edge products and will continue to focus on investments in productinnovation and business expansion.
17. NOTABLE ACCOLADES RECEIVED DURING THE YEAR
bob Finance and FinnOne win The Banking Technology Award 2016 bobFinance AG a financial service company in Switzerland deployed Nucleus Software'sFinnOne for offering an innovative and completely digitized loan service. Thisimplementation won The Banking Technology Award 2016 - Highly Commended for Best Use of ITin Lending.
18. SUBSIDIARY COMPANIES
Your Company has nine subsidiaries across the globe. There are no associate companiesor joint venture companies within the meaning of Section 2(6) of the Companies Act 2013("Act").
The following table provides a list of all these subsidiaries as on March 31 2017:
|Name of Subsidiary ||Location ||Date of Incorporation/ Acquisition ||Percentage of Shareholding |
|Nucleus Software Solutions Pte. Ltd. ||Singapore ||February 25 1994 ||100% |
|Nucleus Software Inc. ||USA ||August 5 1997 ||100% |
|Nucleus Software Japan Kabushiki Kaisha ||Japan ||November 2 2001 ||100% |
|VirStra i- Technology Services Ltd. ||India ||May 6 2004 ||100% |
|Nucleus Software Netherlands B.V. ||Netherlands ||February 3 2006 ||100% |
|Nucleus Software Ltd. ||India ||April 21 2008 ||100% |
|Nucleus Software Australia Pty. Ltd. ||Australia ||February 3 2014 ||100% |
|Nucleus Software South Africa Pty. Ltd. ||South Africa ||February 10 2015 ||100% |
|Avon Mobility Solutions Pvt. Ltd. ||India ||March 17 2016 ||96% |
| || || |
(Date of Acquisition)
There has been no material change in the nature of the business of the subsidiaries.
A statement containing the salient features of the financial statement of oursubsidiaries in the prescribed form AOC 1 is provided as Annexure B to this Directors'Report. The statement also provides the details of performance financial position of eachof the subsidiaries.
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 subsidiaries are available on the website of theCompany.
a) Nucleus Software Solutions Pte. Ltd.
Nucleus Software Solutions Pte. Ltd. (NSS) is based in Singapore. It was incorporatedin 1994 to expand the Company's business in South East Asia. Currently it is the centralentity for Asia-Pacific excluding Japan and Australia with responsibility for businessdevelopment sales and software development services for customers in the region.
b) Nucleus Software Inc.
Nucleus Software Inc. (NSI) is based in New Jersey USA. It was incorporated in 1997for providing business presence in the Americas. NSI operates as a business developmentand sales hub for the region.
c) Nucleus Software Japan Kabushiki Kaisha
Nucleus Software Japan Kabushiki Kaisha (NSJKK) is based in Tokyo Japan. It wasincorporated in 2001 to expand business in the country. NSJKK operates as a businessdevelopment and sales hub for Japan. Additionally the subsidiary provides softwaredevelopment services to the local customers in Japan.
d) VirStra i- Technology Services Ltd.
VirStra i- Technology Services Ltd. is based in Pune India. It was incorporatedin 2004 to provide software development services targeted at the Japanese market.
e) Nucleus Software Netherlands B.V.
Nucleus Software Netherlands B.V. (NSBV) is based in Amsterdam The Netherlands. It wasincorporated in 2006 for enlarging business presence in the European market. NSBV is abusiness development and sales hub for Nucleus in Europe.
f) Nucleus Software Ltd.
Nucleus Software Ltd. (NSL) has operations in Jaipur with registered office in NewDelhi. It was incorporated in 2008 for facilitating delivery to larger clients throughoperations in a Special Economic Zone. NSL acquired 17.41 acre of land in the MahindraWorld Special Economic Zone Jaipur and has co-developed a 250-seater facility.
g) Nucleus Software Australia Pty. Ltd.
Nucleus Software Australia Pty. Ltd. (NSA) is based in Sydney Australia. It wasincorporated in 2014 for tapping the growing business opportunities in ANZ region. NSAoperates as a business development and sales hub for the region. Additionally thesubsidiary provides software development services to the local customers in Australia.
h) Nucleus Software South Africa Pty. Ltd.
Nucleus Software South Africa Pty. Ltd. (NSSA) is based in Johannesburg South Africa.It was incorporated in 2015 for tapping the growing business opportunities in SouthAfrican region. NSSA operates as a business development and sales hub for the region.
i) Avon Mobility Solutions Pvt. Ltd.
Avon Mobility Solutions Pvt. Ltd is based in Chennai and has very good experience inlogistics domain and expertise in developing mobile applications.
Avon Mobility Solutions Pvt. Ltd. became subsidiary of your Company on March 17 2016.
Your Company along with its subsidiaries has offices at several locations across theglobe. The office space and seating capacity of these offices as on March 31 2017 isdetailed below:
|Office Location ||Area in Sq. ft. ||Seating Capacity - No. of Persons |
|India || || |
|NOIDA ||208122 ||1677 |
|Jaipur ||22312 ||250 |
|Pune ||9573 ||114 |
|Chennai ||8100 ||67 |
|New Delhi ||4200 ||40 |
|Mumbai ||3250 ||31 |
|Overseas || || |
|Singapore ||4807 ||61 |
|Dubai UAE ||1290 ||17 |
|Tokyo Japan ||735 ||15 |
|Johannesburg South Africa ||1605 ||8 |
|Manila Philippines ||151 ||2 |
|Jakarta Indonesia ||97 ||3 |
|London UK ||226 ||2 |
|Sydney Australia ||130 ||2 |
|California USA ||100 ||2 |
| ||264698 ||2291 |
NOIDA New Delhi and Jaipur premises are owned by the Company and its subsidiaries. InChennai we have two offices out of which one office is for Avon Mobility Solutions Pvt.Ltd subsidiary of the Company.
20. QUALITY PROCESSES
Your Company is committed to ensure the highest level of quality for its products andservices. The key focus for this year was to synchronize the quality processes with thetransformational journey of the organisation and optimize the cost of quality. Processimprovement initiatives were centred on 'Process Optimization'. The FinnEdgeimplementation methodology has been successfully implemented in multiple projects and hasstarted to pay dividends. FinnEdge covers various aspects of the project from 'ValueCreation to Value Realization' and from 'Project Discovery' to 'Project Implementation' to'Project Upgrade'. Additional focus is on increasing product quality by early detection ofRisks and Defects.
A dedicated Quality Assurance team handles the process change managementimplementation and it's adherence across the organization. The Quality Assurance teammonitors quality and productivity improvements through audits and dashboard reporting.
21. BRAND VISIBILITY
In FY 2017 your Company continued to grow its marketing operations and activities insupport of its strategic aspirations.
During the year the Company moved forward on its agenda of growth into new marketsaround the world by establishing brand awareness and generating demand from focused targetsegments. Your Company is continually investing in marketing with the below objectives:
Ensure that your Company is known to provide high quality innovative lendingand transaction banking solutions to the target markets.
Establish your Company as an Industry Thought Leader.
Equip the sales team fully with the material and tools required tosell the product or service they represent.
To showcase our expertise and product offerings your Company continued to participatein the leading industry events and business forums worldwide.
In Europe we exhibited at 'Sibos 2016' the world's premier financial services eventin Geneva and engaged in insightful discussions with leading bankers on the key trendsthat are shaping the transaction banking Industry. In Africa we sponsored the '3rd AnnualWest Africa International Retail Banking Dialogue 2016' in Nigeria organized by The AsianBanker in Nigeria. PaySe our offline digital cash solution showcased its offering at the'Cards & Payments 2016' in Kenya. We also hosted leading bank executives for anexclusive round table on 'Adapting to the Pace of Change' in Australia. We participated inthe 'Australian Retail Banking Summit 2016' organized by the RFi Group in partnershipwith Asia-Pacific Banking & Finance (AB+F). In Las Vegas USA we presented our viewson 'Unleashing the High- Tech Power of the Underbanked' at Digital Money Forum at CES(Consumer Electronics Show). In the Middle East we participated in the 'Islamic BankingForum' organized by the RFi Group at Dubai. In South East Asia we participated in the'Asian Banking and Finance Retail Banking & Wholesale Banking Awards 2016' inSingapore. In India we organized a focused roundtable discussion around 'Shaping thefuture of lending for NBFCs' in association with Dun & Bradstreet and Amazon WebServices.
Digital Presence & Visibility
Your Company continued to build its presence in traditional media as well as on socialmedia channels. Media activities continued with interactions with worldwide mediaincluding television print wires and online portals and source exclusive mediaopportunities in various geographies such as Australia Africa Middle East and India.Social media has been a focus area covering a wide range of brand activities and oursuccesses. The Company used social media primarily for activities involving thoughtleadership blogs articles press releases customer video testimonials and other businesscontent marketing purposes.
22. HUMAN RESOURCE MANAGEMENT
Your Company is determined to accelerate its growth story by corresponding to thechanging needs of diverse workgroup by fostering an engaging work environment toconstantly build the unique capabilities and skills of the people.
The global employee strength of the Company at the end of FY 2017 was 1665.
During the year there were launches of various organizationwide HR initiatives toensure high-performing and engaged workforce like:
1. Delivering Business Excellence - Frequent connect sessions with associateslargely targeting the high potentials
a. Gathering insights about the workplace culture & opportunities offered& sharing them with the business for preventive action
b. Acting as strategic business partner by regularly sharing HR metrics in the formof dashboard
2. Employee Assist - Conceptualize & execute suitable interventions to keepassociates motivated
a. Revamping referral program to attract talent from the industry
b. Aligning the annual performance management process (NucEDGE17) to the industrystandards by moving away from forced distribution
c. Working with legal team to protect IP of the organization through proactiveintervention & case management
d. Launch of day care in Nucleus Software premises
Going forward your Company's focus lies in creating a performance-based culturedriven by clear career development plan for each employee. Going forward the HR roadmapwill also focus on 'Collaboration & Acceleration' to stimulate our strategic growththrough employee empowerment to make it a great place to work for.
23. CORPORATE GOVERNANCE
We at Nucleus believe that good and effective Corporate Governance is critical toachieve corporate vision and mission of the organization; it is more of an organizationalculture than a mere adherence to rules and regulations. Law alone cannot bring changes andtransformation and voluntary compliance both in form and in substance plays an importantrole in developing good Corporate Governance.
Your Company has established and maintained a strong ethical environment overseen byBoard of Directors where 6 out of 9 Directors are Independent. The Company practices andpolicies reflect true spirit of Corporate Governance initiatives.
Your Company is in compliance of all mandatory requirements of Corporate Governance asstipulated as per Securities and Exchange Board of India (Listing Obligations andDisclosure) Regulations 2015. Compliance status is provided in the Corporate Governancesection of the Annual Report. A certificate issued by the Statutory Auditors of theCompany under Regulation 34 of Securities and Exchange Board of India (Listing Obligationsand Disclosure) Regulations 2015 confirming compliance of the conditions of CorporateGovernance is provided as Annexure C to this Directors' Report. The auditors' certificatefor fiscal 2017 does not contain any qualifications reservations or adverse remark.
A detailed report on Corporate Governance for the year forms part of this AnnualReport.
24. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Mr. Vishnu R Dusad Managing Director of the Company retiresby rotation at the ensuing Annual General Meeting and being eligible has offered himselffor re-appointment.
Mr. Janki Ballabh Mr. Prithvi Haldea Prof. Trilochan Sastry Mr. N. Subramaniam Mr.S. M. Acharya and Mrs. Elaine Mathias are Independent Directors as per the Companies Act2013 not liable to retire by rotation to hold office for five consecutive years. Theyhave submitted a declaration that each of them meets the criteria of independence asprovided in Section 149(6) of the Act and there has been no change in the circumstanceswhich may affect their status as Independent Director during the year.
During the year the Board of Directors on the recommendation of Nomination andRemuneration/Compensation Committee appointed Ms. Ritika Dusad as a Non-ExecutiveDirector (Additional Director) of the Company on July 20 2016.
The resolution seeking approval of the members for the appointment of Ms. Ritika Dusadas a Non-Executive Director liable to retire by rotation was incorporated in the PostalBallot Notice dated April 25 2017. The Company has received a notice under Section 160 ofthe Companies Act 2013 along with the requisite deposit proposing the appointment of Ms.Ritika Dusad.
Mr. Vishnu R Dusad. CEO and Managing Director had been reappointed as ManagingDirector w.e.f January 1 2017 for a period of 5 years. His present term expires onDecember 31 2021.
During the year the Non-Executive Directors of the Company had no pecuniaryrelationship or transactions with the Company other than siffing fees commission andreimbursement of expenses incurred by them for the purpose of attending meetings of theCompany.
Pursuant to provisions of Section 203 of the Companies Act 2013 Mr. Vishnu R DusadManaging Director & CEO Mr. Ashish Nanda Chief Financial Officer and Ms. PoonamBhasin Company Secretary are the Key Managerial Personnel of the Company as on March 312017.
25. BOARD EVALUATION
The Board of Directors carried out an annual evaluation of its own performance andperformance of the Chairman Board committees and individual Directors pursuant to theprovisions of the Companies Act 2013 and the Corporate Governance requirements underRegulation 25 (4) of Securities and Exchange Board of India (Listing Obligations andDisclosure) Regulations 2015.
The Board along with the Nomination and Remuneration/ Compensation Committeedeveloped and adopted the criteria and framework for the evaluation of each of theDirectors and of the Board and its Committees.
The evaluation was then conducted as per the approved process (explained in detail inthe Report on Corporate Governance of this Annual report). The Chairman of the Committeealso had interactions with each of the Directors and sought their feed back andsuggestions on the overall Board Effectiveness and Directors performance.
In addition pursuant to the provisions of Schedule IV to the Companies Act 2013 theIndependent Directors reviewed the performance of the Non-Independent Directors and of theBoard as a whole performance of the Chairman of the Board taking into account the viewsof all the Directors and the quality quantity and timeliness of flow of informationbetween the Company management and the Board and its sufficiency for the Board toeffectively perform its duties.
The Chairman placed the Evaluation Summary before the committee members. The same wasdiscussed in detail and the members recorded their satisfaction.
26. COMPANY'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION
The primary responsibility of the Nomination and Remuneration/ Compensation Committee(NRC) is to identify and nominate suitable candidates for Board membership. The Committeealso formulate policies relating to the remuneration of Directors Key ManagerialPersonnel and other senior employees of the Company.
The Committee while evaluating potential candidates for Board membership considers avariety of personal attributes including experience intellect foresight judgment andtransparency and match these with the requirements set out by the Board. The basicresponsibilities of NRC with regard to Directors' appointment are as follows:
Recommending desirable changes in Board size composition Committee structureand processes and other aspects of the Board's functioning;
Formulating criteria for determining qualifications positive attributes andIndependence of a Director;
Conducting search and recommending new Board members in light of resignation ofcurrent members or a planned expansion of the Board;
Identifying persons who are qualified to become Directors and who may beappointed in senior management in accordance with the criteria laid down and recommend tothe Board their appointment and removal.
The policy of the Company for selection of Directors is provided as Annexure D andRemuneration Policy for Directors Key Managerial Personnel and other employees isprovided as Annexure E to this Directors' Report.
27. DECLARATION BY INDEPENDENT DIRECTORS
The Company has received declarations from all the Independent Directors that they meetthe criteria of independence as laid down under Section 149(6) of the Companies Act 2013and Regulation 25 of Securities and Exchange Board of India (Listing Obligations andDisclosure) Regulations 2015.
28. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTOR'S
The details of programmes for familiarisation of Independent Directors with theCompany their roles rights responsibilities in the Company nature of the industry inwhich the Company operates business model of the Company and related matters can beaccessed on the Company website link : http://www. nucleussoftware.com/investors .
29. MEETINGS OF THE BOARD OF DIRECTORS
The Board met 9 ttmes during the year. The details are provided in the Report onCorporate Governance a part of this Annual Report.
30. COMMITTEES OF THE BOARD
There are four Committees of the Board as on March 31 2017 as follows:
Nominatton and Remuneratton/Compensatton Committee
Stakeholder Relattonship Committee
Corporate Social Responsibility Committee
Details of all the Committees along with their charters compositton and meettngs heldduring the year are provided in the Report on Corporate Governance a part of this AnnualReport.
The Compositton of Board Committees as on March 31 2017 is as follows:
| || |
Memberships across Board Committees
| ||Audit Committee ||Nomination & Remuneration / Compensation Committee ||Stakeholder Relationship Committee ||Corporate Social Responsibility Committee |
|Mr. Janki Ballabh || || || || |
|Mr. Vishnu R Dusad || || || || |
|Mr. S. M. Acharya || || || || |
|Mr. Prithvi Haldea || || || || |
|Mrs. Elaine Mathias || || || || |
|Prof. Trilochan Sastry || || || || |
|Mr. N. Subramaniam || || || || |
31. VIGIL MECHANISM
The Company has a well established whistle blower policy as part of vigil mechanism forDirectors and employees to report concerns about unethical behaviour actual or suspectedfraud or violatton of the Company's Code of conduct or ethics policy. This mechanism alsoprovides for adequate safeguards against victtmizatton of Director(s)/employee(s) whoavail of the mechanism and also provides for direct access to the Chairman of the AuditCommittee in excepttonal cases.
32. SIGNIFICANT AND MATERIAL ORDERS
No significant or material orders were passed by the Regulators or Courts or Tribunalswhich impact the going concern status and Company's operattons in future.
33. RISK MANAGEMENT POLICY
The Company has developed and implemented a 'Risk Management Policy' that includesidenttficatton of elements of risk which in the opinion of the Board may threaten theexistence of the Company. Risk Management Report forms a part of this Annual Report.
34. ADDITIONAL INFORMATION TO SHAREHOLDERS
Detailed informatton to the shareholders is provided in the Shareholders' Referencer apart of this Annual Report.
35. AUDITORS Statutory Auditors
Pursuant to the provisions of Sectton 139 of the Companies Act 2013 and the rulesframed thereafter M/s BSR and Co. LLP Chartered Accountants were appointed asstatutory auditors of the Company from the conclusion of the Annual General Meettng (AGM)of the Company held on July 8 2016 unttl the conclusion of Annual General Meettng of theCompany to be held in Calendar year 2021 subject to rattficatton of their appointment atevery AGM.
M/s BSR and Co LLP Chartered Accountants have furnished a certtficate of theireligibility as per Sectton 141 of the Companies Act 2013
The Statutory Auditors have submitted the Auditors' Report for the year ended March 312017 which is self explanatory and does not call for any further comments from the Boardof Directors.
As per the Companies Act 2013 Secretarial Audit by a practtcing Company Secretary hasbecome mandatory for prescribed companies and they are required to annex the SecretarialAudit report with their Board Report in the Annual Report. We are pleased to inform thatyour Company as a voluntary practtce has been geffing Secretarial Audit done for thepast several years and also reporttng it in the Annual Report.
Pursuant to the provisions of Sectton 204 of the Companies Act 2013 and The Companies(Appointment and Remuneratton of Managerial Personnel) Rules 2014 the Board appointedSanjay Grover & Associates Practtsing Company Secretaries to undertake theSecretarial Audit of the Company. Secretarial Audit Report in the prescribed Form MR 3 isprovided as Annexure F to this Directors' Report. The Secretarial Auditors' Report doesnot contain any qualification reservation or adverse remark.
The Company also adheres to the various Secretarial Standards issued by the Instituteof Companies Secretaries of India.
36. INTERNAL FINANCIAL CONTROLS
Your Company has in place adequate internal financial controls with reference to thefinancial statements.
M/s BSR and Co LLP the statutory auditors of the Company has audited the financialstatements included in this annual report and has issued an attestation report on ourinternal control over financial reporting (as defined in Section 143 of Companies Act2013).
37. CORPORATE SOCIAL RESPONSIBILITY (CSR)
Inclusive growth and sustainable development are strong pillars of your Company'sresponsible corporate citizenship and are a part of the core values and driving force formany of its initiatives. The Company believes that responsible investments in this regardwill generate long term value for all the stakeholders.
In accordance with requirements of The Companies Act 2013 the Company has a CorporateSocial Responsibility Committee comprising of a majority of Independent Directors andchaired by an Independent Director. Prof. Trilochan Sastry is the Chairman of theCommittee and Mr. Vishnu R Dusad Mr. Prithvi Haldea and Mr. S. M. Acharya are the othermembers. The Committee framed and recommended a CSR Policy to the Board for adoption andinstituted a transparent monitoring mechanism for ensuring implementation of the projects/ activities to be undertaken by the Company.
The CSR Policy may be accessed on the Company website link:http://www.nucleussoftware.com/investors.
Your Company has set up Nucleus Software Foundation a Trust for the purposes ofundertaking CSR activities of the Company. This Foundation established in 2014 as aSection 25 Company works towards its stated mission: "Empowering underprivilegedwith essence of education and thereby better livelihood and better life".
During the year under review the Foundation continued working towards its aim to taketechnology aid for enabling Quality Education at the bottom of pyramid. It has continuedits efforts on the projects to support the education for the underprivileged children byuse of digital games in app format for better engagement and assessments.
The schools which were selected for the pilot run were for the underprivilegedchildren managed by NGOs and located in the NCR area. During the year the schoolsoutside NCR area were also selected for the project.
The other CSR initiatives undertaken by the Foundation during the year are:
Sponsor of college and hostel fees of two students of IIT Roorkee.
Funding for health assistance facilities
Funding for skill development
During the year the Company contributed ' 1.10 crore as a mandatory requirementtowards CSR activities to the Foundation. Out of this the Foundation expended ' 0.93crore. The Foundation is still in the process of stabilizing the initiative of digitaleducation for making it a long-term project and as such there is a shortfall of ' 0.17crore in the expenditure. The Annual Report on CSR activities is provided as Annexure G tothis Directors' Report.
38. EMPLOYEE STOCK OPTION PLAN (ESOP)
Currently there is only one ESOP scheme prevalent in the Company; ESOP scheme - 2015(instituted in 2015). As per ESOP scheme 2015 equity shares would be transferred toeligible employees on exercise of options through Nucleus Software Employee Welfare Trustwhich is established to carry out activities for the benefit and welfare of its Employeesby launching various Schemes in accordance with the Securities and Exchange Board of India(Share Based Employee Benefits) Regulations 2014.
Details of ESOP as per the provisions of Companies Act 2013 and Rules made there underare as follows:
|Particulars ||2015 Plan |
|(a) Total number of options under the Plan ||500000 |
|(b) Pricing formula ||100% of the Fair Market Price as on date of grant |
|(c) Options granted during the year ||- |
|(d) Options vested as of March 31 2017 ||- |
|(i) Options exercised during the year ||- |
|(ii) Total number of shares arising as a result of exercise of above options during the year || |
|(e) Options forfeited during the year ||- |
|(f) Option lapsed during the year ||- |
|(g) Variation of terms of options during the year ||- |
|(h) Amount realized by exercise of options during the year ||- |
|(i) Total number of options in force as on March 31 2017 ||- |
During the year no stock options were granted to any employee under theabove-mentioned ESOP plan and therefore no calculations are required to be made orreported regarding difference between intrinsic value and fair market value of ESOPsgranted.
39. PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are provided in the prescribed format and annexedherewith as Annexure J to this Report.
40. DIRECTOR'S RESPONSIBILITY STATEMENT
Pursuant to as per Section 134 (5) of the Companies Act 2013 the Directors confirmthat:
(a) in the preparation of the annual accounts for the financial year ended March 312017 the applicable accounting standards had been followed along with proper explanationrelating 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 the annual accounts on a going concern basis;
(e) the Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
(f) the Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutory andsecretarial auditors including audit of internal financial controls over financialreporting by the statutory auditors and the reviews performed by the management theBoard is of the opinion that the Company's internal financial controls were adequate andeffective during FY 2016-17.
41. EXTRACT OF ANNUAL RETURN
Extract of Annual Return of the Company in the prescribed Form MGT-9 is provided asAnnexure H to this Directors' Report.
Your Directors would like to place on record their gratitude for the co-operationreceived from the Government of India State Governments of Delhi Uttar Pradesh andRajasthan Customs and Excise Departments Department of Scientific and IndustrialResearch (Ministry of Science and Technology) Software Technology Park-Noida SoftwareTechnology Park-Pune Special Economic Zone authorities and other government agencies.
Your Directors would also like to thank the Company's customers bankers vendorspartners and shareholders for their continued support to the Company. In specific theBoard would like to put on record its sincere appreciation of the commitment andcontribution made by all employees of the Company.
| ||For and on behalf of the Board of Directors |
|New Delhi ||Janki Ballabh |
|April 25 2017 ||Chairman |