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Oracle Financial Services Software Ltd.

BSE: 532466 Sector: IT
NSE: OFSS ISIN Code: INE881D01027
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VOLUME 259
52-Week high 4088.60
52-Week low 2795.75
P/E 27.66
Mkt Cap.(Rs cr) 30,485
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
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OPEN 3566.40
CLOSE 3544.60
VOLUME 259
52-Week high 4088.60
52-Week low 2795.75
P/E 27.66
Mkt Cap.(Rs cr) 30,485
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Oracle Financial Services Software Ltd. (OFSS) - Director Report

Company director report

Financial year 2016-17

Dear Members

The Directors present their report on the business and operations of your Company alongwith the Annual Report and audited financial statements of the Company for the financialyear 2016-17.

Financial highlights

As per Consolidated financial statements:

(Amounts in Rs million)
Particulars Year ended March 31 2017 Year ended March 31 2016
Revenue from operations 44265.33 41312.17
Finance income 1491.16 2180.22
Other income net 72.53 (72.82)
Total income 45829.02 43419.57
Depreciation and amortization (701.92) (529.27)
Profit before exceptional item and tax 18198.03 17695.22
Exceptional item (628.25) (219.33)
Profit before tax 17569.78 17475.89
Tax expenses (5715.93) (6986.96)
Profit for the year 11853.85 10488.93

As per Unconsolidated financial statements:

(Amounts in Rs million)
Particulars Year ended March 31 2017 Year ended March 31 2016
Revenue from operations 37363.12 35284.31
Finance income 1420.83 2151.82
Other income net 215.76 (23.14)
Total income 38999.71 37412.99
Depreciation and amortization (667.99) (497.71)
Profit before exceptional item and tax 14663.34 14681.02
Exceptional item 2162.59
Profit before tax 16825.93 14681.02
Tax expenses (3944.96) (5703.47)
Profit for the year 12880.97 8977.55

Performance

On consolidated basis your Company's revenue stood at Rs 44265.33 million this yearan increase of 7% from Rs 41312.17 million of the previous financial year. The net incomewas Rs 11853.85 million this year an increase of 13%.

On an unconsolidated basis your Company's revenue grew to Rs 37363.12 million duringthe financial year 2016-17 from Rs 35284.31 million last year. This represents a growthof 6%. The Company's net income for the financial year 2016-17 was Rs 12880.97 millionan increase of 43% over the previous financial year.

A detailed analysis of the financials is given in the Management's discussion andanalysis report that forms a part of this Directors' report.

Previous year's figures have been re-arranged/re-classified wherever necessary as perthe applicable regulations.

Dividend

The Company distributed an interim dividend of Rs 170 per equity share of Rs 5 each inApril 2017 for the financial year ended March 31 2017. The Board of Directors has notrecommended any additional final dividend for the financial year 2016-17.

Transfer to reserves

The Company does not propose to transfer any amount to the General Reserve out of theamount available for appropriation.

Particulars of loans guarantees or investments

Pursuant to Section 186 of the Companies Act 2013 ("the Act") there are nonew loans granted or investments made by the Company during the financial year 2016-17.

Share capital

During the financial year 2016-17 the Company allotted 250228 equity shares of facevalue of Rs 5 each to its eligible employees who exercised their stock options under theprevailing Employee Stock Option Schemes of the Company. As a result as on March31 2017 the paid-up equity share capital of the Company was Rs 425532030 divided into85106406 equity shares of face value of Rs 5 each.

Extract of annual return

Pursuant to Section 92(3) of the Companies Act 2013 and Rule 12(1) of the Companies(Management and Administration) Rules 2014 extract of Annual Return (in form MGT-9) isannexed as Annexure 1 to this report.

Directors and key managerial personnel

Ms. Maria Smith Director of the Company retires by rotation at the ensuing AnnualGeneral Meeting and being eligible offers herself for re-appointment. Pursuant to Section161 of the Companies Act 2013 Ms. Kimberly Woolley was appointed as an

Additional Director of the Company on March 29 2017 and holds office up to the date ofensuing Annual General Meeting. The Company has received Notice in writing from aMember pursuant to Section 160 of the Companies Act 2013 proposing the candidature ofMs. Kimberly Woolley for the office of the director.

The Board recommends to the Members the resolution for re-appointment of Ms. MariaSmith and appointment of Ms. Kimberly Woolley as Directors of the Company liable toretire by rotation.

Mr. Derek H Williams Non-Executive Non-Independent Director of the Company expiredon July 23 2016. The Board while condoling the death of Mr. Williams places on recordits appreciation for the contributions made by him as a Member of the Board.

Ms. Samantha Wellington Non-Executive Non-Independent Director of the Companyresigned from the Board with effect from October 28 2016. The Board places on record itsappreciation for the contributions made by her as a Member of the Board.

Brief resumes of the Directors proposed to be appointed / re-appointed the nature oftheir expertise in specific functional areas and the names of companies in which they holddirectorships and Chairpersonships / Memberships of Board Committees etc. are provided inthe Notice to Members and Report on Corporate Governance forming part of this AnnualReport.

All the Independent Directors of the Company have given declaration under Section149(6) of the Companies Act 2013 confirming that they meet the criteria of independence.

During the year there were no changes to the Key Managerial Personnel.

Board policies

Board evaluation policy

In accordance with the requirements of the Section 178 of the Companies Act 2013 andthe Regulation 17(10) of the Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015 ("Listing Regulations") theChairperson of the Nomination and Remuneration Committee conducts the Board evaluation.The report of the evaluation is tabled at the Board meeting.

Record retention policy

Pursuant to Regulation 9 and 30(8) of Listing Regulations the Company has framed aRecord retention policy.

Risk management policy

The Company's principles and processes has been established by Risk Management Policywith regard to identification analysis and management of applicable risks.

Remuneration policy

The Nomination and Remuneration Committee determines the remuneration payable to theDirectors within the limits approved by the shareholders. The Independent Non-ExecutiveDirectors are paid commission based on the committee Chairpersonships/ Memberships.

The remuneration to Executive Directors Key Managerial Personnel and Senior Managementconsists of fixed pay and incentive pay in compliance with the policies of the Company.

The Committee reviews and approves the stock options and other share based awards /payments to Executive Directors Key Managerial Personnel and employees of theCompany.

Policy on determination of material events and information

The Company has a policy on determination of material events and information and setsout the classes and types of material events or information which require disclosure tostock exchanges. The policy is available on the Company's website at: http://www.oracle.com/us/industries/financial-services/policy-determination-events-2889567.pdf

Vigil mechanism / whistle blower policy

The Company has established a Code of Ethics and Business Conduct ("Code")which is applicable to its Directors and employees. The Code also extends to the Company'ssuppliers and partners. Regular dissemination of the Code and trainings are conducted toreinforce the concepts and ensure that any changes are communicated. The Company's vigilmechanism deals with reporting and dealing with instances of fraud and mismanagement andforms part of the Code. The Company has in place a confidential reporting mechanism forany whistle blower to report a matter.

In terms of Companies Act 2013 and Regulation 46 of the Listing Regulations the VigilMechanism / Whistle Blower

Policy forms part of the Company's Code of Ethics and Business Conduct which isavailable on website of the Company at: http://www.oracle.com/us/corporate/investor-relations/cebc-176732.pdf

Related party transactions policy

The Company has framed a related party transactions policy in accordance with theprovisions of the Companies Act 2013 and the Listing Regulations. All related partytransactions which were entered into during the financial year 2016-17 were on an arm'slength basis and in the ordinary course of business. Form AOC-2 providing the details ofrelated party transactions of the Company is annexed to this report as Annexure 2. Thepolicy is available on website of the Company at: http://www.oracle.com/us/industries/financial-services/ofss-party-transactions-policy-2288144.pdf

Dividend Distribution policy

As per Regulation 43A of the Listing Regulations the Company has framed a dividenddistribution policy and the same is made available on website of the Company at:http://www.oracle.com/us/industries/financial-services/ofss-dividend-distribution-policy-3125465.pdf

Directors' familiarization program

The Company has a formulated familiarization program for its new directors includingindependent directors. The program provides an insight into the Company's productscompetition emerging technologies etc. to gain a better understanding of the businessenvironment and also covers the regulatory landscape. The familiarization program isavailable on Company's website at: http://www.oracle.com/us/industries/financial-services/financial-familarization-program-2547373.pdf

Subsidiaries

Your Company has subsidiaries in Greece India Republic of Chile People's Republic ofChina Republic of Mauritius Singapore the Netherlands and the United States of America.

Pursuant to provisions of Section 129(3) of the Companies Act 2013 a statementcontaining salient features of the financial statements of the Company's subsidiaries inForm AOC-1 is attached to the financial statements of the Company.

Further pursuant to the provisions of Section 136 of the Companies Act 2013 thefinancial statements of the Company its consolidated financial statements along withrelevant documents and separate annual accounts in respect of subsidiaries are availableon the website of the Company at www.oracle.com/financialservices

Indian Accounting Standards (Ind AS)

Your Company adopted Ind AS with effect from April 1 2016 pursuant to the Ministry ofCorporate Affairs' notification dated February 16 2015 notifying the Companies (IndianAccounting Standard) Rules 2015. Your Company has published Ind AS

Financials for the year ended March 31 2017 along with comparable figures for theprevious financial year and Opening Statement of Assets and Liabilities as on April 12015.

Research and development

Your Company continuously makes significant investments in research and development todevelop solutions that the global banking industry needs today and will need tomorrow.Your Company strives to be at the forefront of innovation at the same time taking thetechnology risk away from the banks. Your Company's dedicated in-house research anddevelopment (R&D) centers have produced a number of products that are today used bybanks in more than 120 countries around the world for running their most criticaloperations. The investment your Company makes in building applications coupled with accessto Oracle's technology provides a unique competitive edge to its offerings.

Six in-house R&D centers in India of your Company have been accorded recognition bythe Department of Scientific and Industrial

Research (DSIR) from February 26 2016. The aggregate expenditure on research anddevelopment activities in these in-house R&D centers is as follows:

(Amounts in Rs million)
Particulars Year ended March 31 2017 Year ended March 31 2016
Revenue Expenditure 2100.73 2711.00
Capital Expenditure 230.35 35.27

Fixed deposits

During the financial year 2016-17 the Company has not accepted any fixed depositswithin the meaning of Rule 2(c) of the Companies (Acceptance of Deposits) Rules 2014 andas such no amount of principal or interest was outstanding as of the date of the BalanceSheet.

Corporate governance

The Company has taken appropriate steps and measures to comply with all the corporategovernance regulations and related requirements as envisaged under Regulation 27 of theListing Regulations. A separate report on Corporate Governance along with a certificate ofPracticing Company Secretary with regard to compliance of conditions of CorporateGovernance as stipulated in Regulation 34(3) of the Listing Regulations forms part of thisAnnual Report.

Secretarial audit

In terms of Section 204 of the Companies Act 2013 and the Rules made thereunder theBoard has appointed Mr. Prashant Diwan Practicing Company Secretary as SecretarialAuditor of the Company for the financial year 2016-17. The Secretarial Audit report issuedby Practicing Company Secretary is annexed as Annexure 3 to this report.

Business responsibility report

Business Responsibility Report for financial year 2016-17 that forms part of thisAnnual Report has been hosted on the Company's website atwww.oracle.com/financialservices. The Members who wish to obtain a printed copy of thereport may write to the Company Secretary at the Registered Office of the Company.

Employee Stock Option Plan ("ESOP")

The Members at their Annual General Meeting held on August 14 2001 approved grant ofESOPs to the employees / directors of the Company and its subsidiaries up to 7.5% of theissued and paid-up capital of the Company from time to time. This said limit was enhancedand approved up to 12.5% of the issued and paid-up capital of the Company from time totime by the Members at their Annual General Meeting held on August 18 2011. Thisextended limit is an all-inclusive limit applicable to the stock options granted in thepast and in force and those that will be granted by the Company under this authorization.

Pursuant to ESOP scheme approved by the Members of the Company on August 14 2001 theBoard of Directors on March 4 2002 approved the Employees Stock Option Scheme("Scheme 2002") for issue of 4753600 options to the employees and directors ofthe Company and its subsidiaries. According to the Scheme 2002 the Company has granted4548920 options prior to the IPO and 619000 options at various dates after the IPO(including the grants of options out of options forfeited earlier). On August 25 2010the Board of Directors approved the Employees Stock Option Plan 2010 Scheme ("Scheme2010") for issue of 618000 options to the employees and directors of the Company andits subsidiaries. According to the Scheme 2010 the Company has granted 638000 options(including the grants of options out of options forfeited earlier).

Pursuant to ESOP scheme approved by the Members of the Company in their meeting held onAugust 18 2011 the Board of Directors approved the Employees Stock Option Plan 2011Scheme ("Scheme 2011"). Accordingly the Company has granted 1950500 optionsunder the Scheme 2011. Nomination and Remuneration Committee in their meeting held onAugust 7 2014 approved Oracle Financial Services Software Limited Stock Plan 2014("OFSS Stock Plan 2014"). This plan enables issue of deeply discounted optionsat the face value and referred to as OFSS Stock Units ("OSUs") for convenience.Accordingly the Company granted 156795 Stock Options and 457601 OSUs under OFSS StockPlan 2014. The issuance terms of OSUs are the same as for Stock Options employees mayelect to receive 1 OSU in lieu of 4 awarded Stock Options at their respective exerciseprice.

As per the Scheme 2002 Scheme 2010 and Scheme 2011 each of 20% of the total optionsgranted will vest on completion of 12 24 36 48 and 60 months from the date ofgrant and is subject to continued employment of the employee or directorship of thedirector with the Company or its subsidiaries. Options have an exercise period of 10 yearsfrom the date of grant. The employee pays the exercise price upon exercise of options.

In respect of the OFSS Stock Plan 2014 each of 25% of the total stock options / OSUsgranted will vest on completion of 12 24 36 and 48 months from the date of grantand is subject to continued employment of the employee with the Company or itssubsidiaries. Options / OSUs have exercise period of 10 years from the date of grant. Theemployee pays the exercise price upon exercise of options/OSUs.

All the above mentioned Schemes of the Company is in compliance with SEBI (Share BasedEmployee Benefits) Regulations 2014. Applicable disclosures relating to Employees StockOptions Schemes pursuant to SEBI (Share Based Employee Benefits) Regulations 2014 areplaced on the website of the Company at www.oracle.com/financialservices

The details of the options / OSUs granted under the Scheme 2002 Scheme 2010 Scheme2011 and OFSS Stock Plan 2014 to eligible employees / directors from time to time aregiven below:

Particulars Scheme 2002 Scheme 2010 Scheme 2011 OFSS Stock Plan 2014 OFSS Stock Plan 2014 Total
(Stock Options) (OSUs)
Pricing Formula

At the market price as on the date of grant

Rs 5
Variation of terms of options/ OSUs None None None None None
Number of options/OSUs granted till March 31 2017 5167920 638000 1950500 156795 457601 8370816
Number of options/OSUs lapsed and forfeited (620725) (281442) (412630) (17063) (33634) (1365494)
Number of options/OSUs exercised (4535195) (299883) (677072) (773) (28389) (5541312)
Total number of options in force as on March 31 2017 12000 56675 860798 138959 395578 1464010

The details of Options / OSUs granted to Directors and Senior Managerial Personnelunder OFSS Stock Plan 2014 during the financial year ended March 31 2017 are as follows:

Particulars Number of OSUs
(OFSS Stock Plan 2014)
i. Directors:
Mr. Chaitanya Kamat 25000
ii. Senior Managerial Personnel:
Mr. Arvind Gulhati 5000
Mr. Edwin Moses 2000
Mr. Gregory Chapple 2500
Mr. M Ravikumar 1875
Mr. Mahesh Rao 2000
Mr. Makarand Padalkar 10000
Mr. Mudit Govil 625
Mr. Mustafa Moonim 2500
Mr. Onkarnath Banerjee 500
Mr. Prajakt Deshpande 3000
Mr. Sanjay Deshpande 1500
Mr. Vikram Gupta 4750
Mr. Vinayak Hampihallikar 2250
iii. Any other employee who receives grant in any one year of Options/OSUs amounting to 5% or more of Options/OSUs granted during the year Nil
iv. Identified employees who were granted Options/OSUs during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant Nil
v. Diluted Earnings Per Share (EPS) pursuant to the issue of shares on exercise of option calculated in accordance with Indian Accounting Standard 33 ‘Earnings Per Share' issued by the Institute of Chartered Accountants of India Rs 151.06

All stock options were granted at market price on the date of grant and OSUs weregranted at the face value of the equity shares.

The compensation cost arising on account of stock options and OSUs is calculated usingthe fair value method. The reported profit is after considering the cost of employee stockcompensation ( Rs 780.37 million) using fair value method on stock options/OSUs.

A summary of the activities in the Company's Scheme 2002 Scheme 2010 and Scheme 2011for the year ended March 31 2017 are as follows:

Particulars Year ended March 31 2017

Scheme 2002

Scheme 2010

Scheme 2011

Shares arising from options Weighted average exercise price Shares arising from options Weighted average exercise price Shares arising from options Weighted average exercise price
( Rs ) ( Rs ) ( Rs )
Outstanding at beginning of year 23000 1835 95344 2062 1119925 2882
Granted
Exercised (5000) 1290 (30869) 2088 (185197) 2660
Forfeited (7800) 2050 (73930) 2970
Lapsed (6000) 1290
Outstanding at end of the year 12000 2333 56675 2050 860798 2922
Vested options 12000 56675 559948
Unvested options 300850
Options vested during the year 4000 290200
Options forfeited / lapsed during the year 6000 7800 73930

A summary of the activities in the Company's OFSS Stock Plan 2014 are as follows:

Particulars Year ended March 31 2017
OFSS Stock Plan 2014
Shares arising from OSUs Weighted average exercise price ( Rs ) Shares arising from Options Weighted average exercise price ( Rs )
Outstanding at beginning of year 293116 5 93245 3539
Granted 156523 5 61250 3393
Exercised (28389) 5 (773) 3241
Forfeited (25672) 5 (14763) 3632
Outstanding at end of the year 395578 5 138959 3466
Vested OSUs / Options 75607 33660
Unvested OSUs / Options 319971 105299
OSUs / Options vested during the year 69326 20691
OSUs / Options forfeited / lapsed during the year 25672 5 14763

The weighted average share price for the year over which stock options/OSUs wereexercised was Rs 3407. Money realized by exercise of options/OSUs during the financialyear 2016-17 was Rs 589.42 million. The Company has recovered perquisite tax on theoptions/OSUs exercised by the employees during the year. The weighted average fair valueof Stock options/OSUs granted during the year was Rs 993 and Rs 3372 respectivelycalculated as per the Black Scholes valuation model as stated in 26 (b) in the notes toaccounts of the standalone financials.

The details of options unvested and options vested and exercisable as on March 31 2017are as follows:

Exercise prices ( Rs ) Number of options/OSUs Weighted average exercise price ( Rs ) Weighted average remaining contractual life (Years)
Options /OSUs unvested 5 319971 5 8.8
3077 204100 3077 6.5
3127 96750 3127 5.9
3241 26049 3241 8.0
3393 56425 3393 9.2
3987 22825 3987 8.6
Options /OSUs vested and exercisable 5 75607 5 8.2
1930 130788 1930 4.7
2050 56675 2050 3.4
2333 12000 2333 3.6
3077 192205 3077 6.5
3127 236955 3127 5.9
3241 26060 3241 8.0
3987 7600 3987 8.6
1464010 2147 6.8

Employee Stock Purchase Scheme ("ESPS")

The Company had adopted the ESPS administered through a Trust with the name i-flexEmployee Stock Option Trust ("the Trust") to provide equity basedincentives to key employees of the Company. i-flex Solutions Trustee Company Limited isthe sole Trustee of this Trust.

No allocation of shares to the employees have been made through the Trust since 2005and all selected employees under the Trust have exercised their right of purchase ofshares prior to March 31 2014. In this regard the Trustee Company had filed a petitionin the Honorable Bombay High Court to seek directions for utilization of the remainingunallocated shares along with the other assets held by the Trust for the benefit of theemployees of the Company. As per the order of the Honorable Bombay High Court dated August1 2016 the trust funds would be utilized for the benefit of the employees.

As at March 31 2017 the Trust is holding 166142 equity shares (March 31 2016 -166142 equity shares) of Oracle Financial Services Software Limited.

Human resources

Your Company maintains a healthy and productive environment and offers clean andergonomic workspace. Human Resources are key assets of your Company and your Companyinvests continuously in imparting latest technology skills together with a range of softskills to help them excel in their roles. Your Company has a strong performance managementsystem together with a formal talent management processes to nurture employee careersgroom future leaders and create a high performance workforce.

Your Company follows global best HR practices. Your Company's total manpower at the endof March 31 2017 was 8818 as compared to 8733 as on March 31 2016 (including employeesof subsidiaries).

During the financial year two complaints were filed under Section 22 of the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. Thesewere resolved per process. There was no complaint outstanding as at the end of financialyear.

Corporate social responsibility

The Company has constituted a Corporate Social Responsibility Committee and hasformulated the Corporate Social Responsibility ("CSR") Policy. The CSR Policy isin line with the provisions listed in Section 135 and Schedule VII of the Companies Act2013. The policy is available on the Company's website at:http://www.oracle.com/us/industries/financial-services/ofss-social-responsibility-2437852.pdf

Pursuant to Rule 8 of Companies (Corporate Social Responsibility) Rules 2014 a reporton the CSR activities for the financial year ended March 31 2017 is annexed as Annexure 4to this report.

Internal financial controls

The Board has adopted adequate policies and procedures in terms of Internal FinancialControls commensurate with the size scale and complexity of the Company's operations.Such policies and procedures ensure orderly and efficient conduct of business includingadherence to the Company's policies safeguarding of its assets prevention and detectionof frauds and errors accuracy and completeness of the accounting records and timelypreparation of reliable financial information.

The scope and authority of the Business Assessment & Audit team ("BAA")function is defined in the Internal Audit Charter. The Internal Audit function reports tothe Chairperson of the Audit Committee.

The BAA monitors and evaluates the efficacy and adequacy of internal control system ofthe Company its compliance with risk management system accounting procedures andpolicies at all locations of the Company and its subsidiaries. Based on the report of BAAthe Company undertakes corrective actions in their respective areas thereby strengtheningthe controls. Significant audit observations and corrective actions thereon are presentedby the BAA to the Audit Committee.

Directors' responsibility statement

As required under clause (c) of sub-section 3 of Section 134 of the Companies Act2013 for the financial year ended on March 31 2017 the Directors hereby confirm that:

a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along 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 this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

d) the directors had prepared the annual accounts on a going concern basis; and

e) the directors had laid down internal financial controls followed by the Company andthat such internal financial controls are adequate and were operating effectively.

f) the directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

Auditors

M/s. S. R. Batliboi & Associates LLP Chartered Accountants (Firm Registrationno.101049W/E300004) were appointed as the Statutory Auditors of the Company by theMembers at their 25th Annual General Meeting held on September 12 2014 to hold officetill the conclusion of the ensuing 28th Annual General Meeting to be held in the year 2017subject to annual ratification by Members at every Annual General Meeting.

Pursuant to Section 139 of the Companies Act 2013 ("the Act") and the rulesmade thereunder the Board of Directors of the Company on recommendation of the AuditCommittee has proposed the appointment of M/s. Mukund M Chitale & Co. CharteredAccountants (ICAI Firm Registration No. 106655W) as the Statutory Auditors of theCompany to hold office from the conclusion of the ensuing 28th Annual General Meeting tobe held in the year 2017 till the conclusion of the 33rd Annual General Meeting to be heldin the year 2022 subject to the approval of the Members of the Company and subject tothe annual ratification by Members at every Annual General Meeting to be held in the years2018 to 2021. The Company has received from M/s. Mukund M Chitale & Co. writtenconsent that they satisfy the criteria provided under Section 141 of the Act and that theappointment if made shall be in accordance with the applicable provisions of the Act andrules framed thereunder. Accordingly a resolution proposing the appointment of M/s.Mukund M Chitale & Co. as the Statutory Auditors of the Company for a term of fiveconsecutive years forms part of the Notice convening the 28th Annual General Meeting.

Auditors' report

With regard to the Auditors' comment in the CARO report concerning delays in payment ofsome foreign income taxes the Company is continuously evaluating and accruingtowards any material tax exposures in the books of account taking a conservative approachand payments are made based on the advice of the tax experts.

The Company also assesses withholding of foreign payroll tax implications on salariesand travel related reimbursements paid to its employees posted outside India andaccordingly makes accruals in the books of account. The Company is in the process offiling the returns for Payroll Tax in such jurisdiction for which the provision is made inthe books.

Conservation of energy technology absorption and foreign exchange earnings and outgo

The particulars as prescribed under sub-section (1)(e) of Section 134 of the CompaniesAct 2013 read with Companies (Disclosure of Particulars in the Report of Board ofDirectors) Rules 1988 the relevant data pertaining to conservation of energy technologyabsorption and foreign exchange earnings and outgo are furnished hereunder:

Conservation of energy

The Company strives to conserve the energy and use energy efficient computers. TheCompany also deploys sophisticated office automation and management equipment whichoptimizes energy consumption.

Technology absorption

The Company regularly strives to utilize newer technologies with the view to conservethe energy and create an environmentally friendly work environment. The initiatives takenby the Company are summarized below:

Network: Efficient networks are essential to support our global business and theCompany continues to invest in upgrades and modernization of the networks therebyincreases uptime of the network infrastructure increase capacity and enable greatercollaboration. Your Company regularly carries out a refresh of network devices across theCompany to deploy modern and energy efficient machines. This has brought about significantsavings in power strengthened operating effectiveness and security. Virtual presence:Your Company has made significant investments in providing a near virtual workingenvironment to its employees. This enhances communication across the globe minimizingtravel increasing efficiencies from a support perspective as well by making self serviceoperations easier and effective.

All these planned initiatives lead to a more secure and efficient operatingenvironment with the utilization of current cutting edge technology ensuring consistentand superior support to the business.

Foreign exchange earnings and outgo:

(Amounts in Rs million)
Foreign Exchange Earnings (including dividend received from foreign subsidiaries) 37743.78
Foreign Exchange Outgo (including capital goods & other expenditure) 9404.71
Net equity dividend remitted in foreign exchange 6305.12

Activities relating to exports; initiatives taken to increase exports; development ofnew export markets for products and services; and export plans:

Your Company has established an extensive global presence across leading marketsthrough its sales and marketing network. The Company will continue to focus on tappingvarious potential markets available globally. Experienced sales and marketing specialistsfocus on building strong international business presence to develop new export markets foryour Company.

Prospects

A new organizational paradigm is emerging where banks need to move past traditionallydefined boundaries. Today they have to work in a hyper connected ecosystem; one that iscontinually enriched by fintechs and other non-traditional players underpinned by digitalacceleration.

While fintechs enter the industry with innovative products and services and target themost lucrative business segments through their nimble footed offerings banks have theirtraditional strengths namely strong regulatory knowledge strength of balance sheet andmultiple avenues to access capital and most importantly customer's trust. Partnering withfintechs and collaborating with this extended ecosystem of third party players allowsfinancial institutions to integrate their services and deliver solutions that are superiorin terms of cost speed and convenience.

Banks are now investing in infrastructure that is flexible and agile enough to workwith these new norms and the operational challenges that come with this complex network ofhyper connected systems. Digitization and connected devices continue to evolve and exudetheir influence on virtually all aspects of the business. To lock step with thistransition financial institutions are increasingly looking to develop end-to-end digitalengagement strategies and comprehensive digital operating models that address the needs ofsuppliers employees and partners just as much as customers.

Financial institutions are reshaping their businesses and operating models tocollaborate compete and grow. Cloud adoption is gaining ground within the financialservices industry. The most common strategies use a mix of private public or hybridcloud environments. Organizations are finding that using cloud-based platform offerings todevelop and deploy applications can eliminate the cost and complexity of managing theunderlying application platforms.

To achieve success in this environment it is essential for organizations to realigntheir IT strategy to deliver capabilities of exceptional digital experience enhanceddigital engagement and a responsive back-end. Combining the power of analytics and bigdata banks can gain operational and customer insights mitigate risks and comply withregulations.

Your Company's portfolio of solutions is well equipped to address these very needs andthe Company is in a good position to help financial institutions leverage technologyshifts and find new ways of delivering value.

Employee particulars

The information required under Section 197 of the Companies Act 2013 read with rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) AmendmentRules 2016 is given below: Following guidelines have been used while preparing thisstatement. For statistically relevant computation of median value of employeeremuneration employees who have served the entire 12 months in the corresponding fiscalyear were considered. The expression "median" means the numerical valueseparating the higher half of a population from the lower half and the median of a finitelist of numbers is found by arranging all the observations from lowest value to highestvalue and picking the middle one; and if there is an even number of observations themedian is the average of the two middle values. The remuneration used for the analysis inthis section excludes the (perquisite) value of the difference between the fair marketvalue and the exercise price on the date of exercise of options to make the comparisonsrelevant.

(i) The ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the financial year:

Name of the Director* Ratio to median remuneration
Non-Executive Directors
Mr. S Venkatachalam 3
Mr. Richard Jackson 2
Mr. Sridhar Srinivasan 2
Executive Director
Mr. Chaitanya Kamat@ 44

* The details mentioned above are of only those Directors to whom the remuneration hasbeen paid.

@ Excludes the (perquisite) value towards difference between the fair marketvalue and the exercise price on the date of exercise of options.

(ii) The percentage increase in remuneration of each director chief executive officerchief financial officer and company secretary in the financial year:

Name and Title Percentage increase of remuneration in
FY 2017 as compared to FY 2016
Mr. S Venkatachalam 0%
Mr. Richard Jackson 0%
Mr. Sridhar Srinivasan* NA
Mr. Chaitanya Kamat@ 47%
Mr. Makarand Padalkar Chief Financial Officer@ 0%
Mr. Onkarnath Banerjee Company Secretary*@ NA

* Comparison is not applicable as the previous financial year was a partial period.

@ Excludes the (perquisite) value towards difference between the fair marketvalue and the exercise price on the date of exercise of options.

(iii) The percentage increase in the Median Remuneration of Employees in fiscal 2017as compared to fiscal 2016:

12%

(iv) The number of permanent employees on the rolls of the Company:

7093 as on March 31 2017

(v) Average percentile increase already made in the salaries of employees other thanthe managerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration:

During the financial year 2016-17 the average percentile change in the remuneration ofemployees other than the managerial personnel was an increase of 12%. The Averagepercentile change in the remuneration of KMP was an increase of 35%.

(vi) Affirmation that the remuneration is as per the remuneration policy of theCompany:

The Company affirms remuneration is as per the remuneration policy of the Company.

The statement containing particulars of employees as required under Section 197(12) ofthe Companies Act 2013 read with Rule 5(2) of the Companies (Appointment and Remunerationof Managerial Personnel) Amendment Rules 2016 is provided in a separate annexure formingpart of this report. Further the report and the accounts are being sent to the Membersexcluding the aforesaid annexure. In terms of Section 136 of the Companies Act 2013 thesaid annexure is open for inspection at the Registered Office of the Company. Anyshareholder interested in obtaining a copy of the same may write to the Company Secretary.

Acknowledgements

Your Directors gratefully acknowledge the continued support received by the Companyfrom its customers members vendors and bankers during the year. Your Directors also wishto thank the Government of India and its various agencies Department of Electronics theSoftware Technology Parks - Bengaluru Chennai Mumbai and Pune Special Economic Zoneauthorities at SEEPZ and Cochin the Customs and Excise Department Ministry of CommerceMinistry of Finance Ministry of External Affairs Ministry of Corporate AffairsDepartment of Telecommunication the Reserve Bank of India the State Governments ofMaharashtra Karnataka Haryana and Tamil Nadu and other local Government Bodies fortheir support and look forward to their continued support in the future.

Your Directors also place on record their appreciation for the excellent contributionmade by employees of the Company through their commitment co-operation and diligence witha view to achieving consistent growth for the Company.

For and on behalf of the Board

S Venkatachalam

Chairperson

DIN: 00257819

July 12 2017