Your Directors are pleased to present their 21st Annual Report of the company alongwith the audited financial statements for the financial year ended March 31 2017.
|Particulars ||Year ended |
| ||31st March 2017 ||31st March 2016 |
|Income from operations ||1629.78 ||1424.12 |
|Other Income ||27.00 ||16.04 |
|Total Income ||1656.78 ||1440.16 |
|Total Expenditure ||1470.75 ||1268.07 |
|Profit before depreciation interest and tax ||186.03 ||172.09 |
|Depreciation ||74.94 ||71.25 |
|Interest ||- ||- |
|Profit before tax ||111.09 ||100.84 |
|Provision for Tax ||18.68 ||19.92 |
|Deferred Tax Asset / (liability) for the year ||46.69 ||27.57 |
|MAT credit entitlement ||-11.31 ||-14.96 |
|Net Profit ||57.04 ||68.31 |
In view of the inadequate profit for the year under review your Directors regret theirinability to recommend any dividend for the said year.
TRANSFER TO RESERVES
The entire balance available in the Profit and Loss Account is retained in it as notransfer from it to reserves is contemplated.
There was no change in the share capital of your company during the year under report.
VARIATIONS IN NET WORTH
The Net worth of the Company as at the Financial Year ending on March 31 2017 isRs.10.85 Crores as compared to Rs.10.28 Crores as at the end of previous financial yearended on March 31 2016.
LISTING STATUS OF THE COMPANY
Your Directors are pleased to inform that the equity shares of your company have sincebeen listed on the BSE Limited and the trading thereon commenced on October 13 2016.
MANAGEMENT DISCUSSION AND ANALYSIS
To avoid repetition in the Directors' Report and the Management Discussion and AnalysisReport the information under these reports is furnished below as a composite summary ofthe performance of the various aspects of the business of your company.
IT INDUSTRY REVIEW
The Indian IT industry rose at a healthy pace from 2010 to 2016 and has evolved frombeing a pure-play IT service provider to offering end-to-end execution capabilities.Indian IT service companies have expanded their service mix to areas like systemsintegration network management packaged software implementation and areas of productsand technological services.
As the IT companies intensify their focus on the digital technology space revenue fromthe Indian IT industry is expected to increase steadily in both exports and domesticsegments. However pressure on billing rates and rising wages in the hunt for high qualityresources is likely to hit the profit margins. The IT industry's business models arechanging from providing commoditized services to catering advanced requirements. Growingcompetition has forced Indian IT vendors to focus more on high-value services and toexpand into newer geographies.
The annual national budget for 2017-18 saw the continuation of the governments pushinto improvement of service delivery via increased digitalization.
During the year your company earned a revenue of Rs.1629.78 Lakhs as againstRs.1424.12 Lakhs in the previous year which was higher by 14%. Earnings before interesttax depreciation and amortization (EBITDA) was Rs.186.03 Lakhs against Rs.172.09 Lakhs inthe previous year. Profit after tax (PAT) for the year was Rs.57.04 Lakhs as againstRs.68.31 Lakhs in the previous year.
SUBSIDIARIES JOINT VENTURES OR ASSOCIATE COMPANIES
The company has no subsidiaries joint ventures or associate companies. During theFinancial Year no company ceased as Subsidiary joint venture or associate of thecompany.
OPPORTUNITIES AND THREATS
The IT Industry is constantly evolving with new technologies and rapid automation. Thekey to success is to be ahead of the game by identifying technologies that are going tohave the maximum impact in the future build capabilities to be future ready reducecosts and enhance efficiency through automation and innovation. We will look at garneringopportunities available in the industry especially in Social Computing MobilityAnalytics & Cloud to further catalyze your company's growth.
Your company believes that its focus on niche areas gives it strength and competitiveadvantage to position itself as a leading IT services and solutions provider.
With the rapidly changing world Information Technology has become an integral part ofevery industry with socio economic business and technological trends. India is nowbecoming home to a new breed of startup companies focusing on high growth areas such asmobility e-commerce and other vertical specific solutions creating new markets anddriving innovation. The continued reduction in the unit cost of hardware the explosion ofnetwork bandwidth advanced software technologies and technology enabled services arefueling the rapid digitization of business processes and information. Traditional businessmodels are being replaced with digital and software based business models. IT Sector iswitnessing a rapid evolution attracting new customer segments and offering aconsiderably wider spectrum of solutions. It will create a market that will serve astechnology differentiator for customers shifting from cost to innovation. The Indian ITsector continues to be one of the largest employers in the country.
The IT sector continues to impact India's economic growth through job creation foreignexchange earnings exports and positions India as a global partner in InformationTechnology. The future looks exciting and positive as the IT industry is evolvingdramatically in terms of scale and complexity. The sector will leverage its collaborationinnovation technology shifts and build a transformational agenda for India.
Taking an overall view of the above your Board is cautiously optimistic about thefuture outlook for your company.
Your company is focusing more on its core business objective such as revenue growthprofitability and asset efficiency. The company's strategy for long term growth willcontinue to be strengthened with existing clients relationships through a customer centricapproach and by further expanding its market in to newer businesses and services.
New areas such as mobile social cloud and analytics are increasingly drivingtechnology spending which will emerge as mainstay as this decade progresses. Changingeconomic business conditions evolving consumer preferences rapid technologicalinnovation and adoption and globalization are creating an increasingly competitive marketenvironment that is driving companies to transform the manner in which they presentlyoperate.
Your Company is engaged in the business of providing IT services consultingtechnology and next generation services. It provides business and technology solutions andtechnology related services to corporations and has made decent progress in the recentyears in consolidating its business in all service areas including new service lines andin acquiring new clients in Cloud and other new age technologies. The business from newclients acquired last year is expected to increase and add significant value and bettermargins.
Your company continues to offer a wide range of technology related services throughit's innovate delivery center and talented professionals with a sharp customers' specificfocus. The focus is more on optimization and productivity within the existing employeesalong with their skill enhancement and enrichment.
Your Company attaches utmost importance to the assessment of internal risks and themanagement thereof in all its dealings. The Company is constantly on the lookout foridentifying opportunities to enhance its enterprise value and keeping the need to minimizethe risks associated with such efforts every proposal of significant nature is screenedand evaluated for the risks involved and then approved at different levels in theorganisation before implementation.
Sagarsoft (India) Limited has identified a suitable approach and framework for riskmanagement which meets its business legal and regulatory requirements. The management hasdecided to adopt the same framework for entire organization. It has a Security ManagementGroup with representatives from all functional team and a representative of the seniormanagement team leads the group. Its steering committee meets at least once in 6 months toidentify the risks throughout the organization.
Based on severity level of the risk corrective action is identified and implementedwith prior approval from the risk owners and Top Management wherever applicable. Controlsare identified in the Risk Assessment and Risk Treatment. The first step in riskassessment procedure is to identify the list of information and critical informationassets in each function. After identification these information assets are identifiedwith the Owner and they are classified based on the functions. The steering committee orCISO meets and reviews the implementation status once in every 2 months. To conduct thereview at least one representative from each function is present.
INTERNAL CONTROL SYSTEM AND ITS ADEQUACY
The Board of Directors are satisfied with the adequacy of the internal control systemin force in all its major areas of operations of the Company. The Company has an externalfirm of Chartered Accountants as Internal Auditors to observe the Internal Controlswhether the work flows of organization is being done through the approved policies of theCompany and similar matters. Internal Auditors present its report to the Audit Committee.The audit committee assists the board of directors in monitoring the integrity of thefinancial statements and the reservations if any expressed by the company's auditorsincluding the financial internal and secretarial auditors and based on their inputs theboard is of the opinion that the company's internal controls are adequate and effective.
HUMAN RESOURCE AND EMPLOYEES- HR POLICY
Your company continues to enjoy cordial relationship with all its personnel at alllevels. Its workforce which also has women employees have opportunity to improve theirskills for career advancement and assessing leadership roles.
Your company is organizing training programmes wherever required for the employeesconcerned to improve their skill. Employees are also encouraged to participate in theseminars organized by the external agencies related to the areas of their operations.
Your company continues to focus on attracting and retaining competent personnel andproviding a holistic environment where they get opportunities to grow and realize theirfull potential. Your company is committed to providing all its employees with a healthyand safe work environment.
Regarding the Sexual Harassment of Women at the work place (Prevention Prohibition& Redressal) Act 2013 the company has an Internal Complaints Committee. However nocomplaints were received or disposed off during the year under the above Act.
AWARDS AND RECOGNITIONS
Your company has been appraised at CMMI Level 3.
Your company has maintained ISO/IEC 27001:2013 Certification for Information SecurityManagement System (ISMS) for its Software Development & Software Support services andsupport functions that include System Administration Human Resource & Training andAdministration & Facilities.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134 (5) of the Companies Act 2013 the Board of Directors to thebest of their knowledge and ability confirm that: (i) In the preparation of the annualaccounts the applicable accounting standards have been followed along with properexplanation relating to material departures; (ii) They have selected such accountingpolicies and applied them consistently and made judgement and estimates that werereasonable and prudent so as to give a true and fair view of the state of affairs of theCompany at the end of the financial year and of the profit of the company for the period;(iii) They have 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; (iv) They have prepared the annual accounts on a going concern basis; (v)They have laid down internal financial controls to be followed by the Company and suchinternal financial controls are adequate and operating effectively; (vi) They have devisedproper systems to ensure compliance with the provisions of all applicable laws and thatsuch systems were adequate and operating effectively.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
In accordance with the provisions of Section 152 of the Companies Act 2013 ShriM.Jagadeesh and Shri K.Pradeep Kumar Reddy will be retiring by rotation at the ensuingAnnual General Meeting and being eligible offer themselves for re-appointment.Accordingly resolutions seeking the approval of the members for the said re-appointmenthave been incorporated in the notice of the annual general meeting.
Except Shri S.Sreekanth Reddy who is a director in Sagar Cements Limited and SagarCements (R) Limited whose transactions with the company have been reported under therelated parties disclosure under notes to the accounts and Shri.N.Hari Mohan andShri.K.Prasad to the extent of shares held by them none of the other non-executivedirectors has had any pecuniary relationship or transactions with the company other thanthe receipt of sitting fee for the meetings of the Board and Committees thereof attendedby them.
INDEPENDENT DIRECTORS DECLARATION
The company has received the necessary declaration from each Independent Director inaccordance with Section 149 (7) of the Companies Act 2013 that he meets the criteria ofindependence as laid out in sub-section (6) of Section 149 of the Companies Act 2013.
MEETING OF INDEPENDENT DIRECTORS
The Independent Directors met on 06th February 2017 without the attendance ofNon-Independent Directors and members of the Management. The Independent Directorsreviewed the performance of Non-Independent Directors and the Board as a whole; theperformance of the Chairman of the Company taking into account the views of ExecutiveDirectors and Non-Executive Directors and assessed the quality quantity and timeliness offlow of information between the Company Management and the Board that is necessary for theBoard to effectively and reasonably perform their duties.
NUMBER OF MEETINGS OF THE BOARD
Four Board meetings were held during the financial year 2016-17 and the gap between twoconsecutive meetings did not exceed one hundred and twenty days. These meetings were heldon 28th May 2016 05th August 2016 02nd November 2016 and on 06th February 2017.Attendance of directors during financial year 2016-2017
|Name of the Director ||Number of board meetings during the year 2016-17 |
| ||Held ||Attended |
|Shri. S.Sreekanth Reddy ||4 ||2 |
|Shri. M.Jagadeesh ||4 ||4 |
|Shri. K.Pradeep Kumar Reddy ||4 ||4 |
|Shri. N.Hari Mohan ||4 ||4 |
|Shri. K.Rakesh Rao ||4 ||1 |
|Shri. K.Satish Chander Reddy ||4 ||1 |
|Shri. K.Prasad ||4 ||4 |
|Shri. K.Ganesh ||4 ||4 |
|Smt. K.Neelima Kaushik ||4 ||4 |
SUB COMMITTEES OF THE BOARD
The Board has Audit Committee Nomination and Remuneration Committee and Stake HoldersRelationship Committee.
The Company has an Audit Committee at the Board level with power and role that are inaccordance with Section 177 of the Companies Act 2013 and with Listing Regulations. TheAudit Committee oversees the accounting auditing and overall financial reporting processof the Company. The Audit Committee acts as a link between the Management the StatutoryAuditors Internal Auditors and the Board of Directors to oversee the financial reportingprocess of the Company.
Composition of Audit Committee
(1) Shri K.Prasad - Chairman (2) Shri M.Jagadesh - Member (3) Shri K.Ganesh - Member
The Audit Committee which met four time during the year 2016-17 held its meetings on28th May 2016 05th August 2016 02nd November 2016 and 06th February 2017.
Attendance of members during financial year 2016-2017
|Name of the Member ||Number of Audit Committee meetings during the year 2016-17 |
| ||Held ||Attended |
|Shri K.Prasad ||4 ||4 |
|Shri M.Jagadeesh ||4 ||4 |
|Shri K.Ganesh ||4 ||4 |
NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee has been entrusted with role of formulatingcriteria for determining the qualifications positive attributes and independence of theDirectors as well as identifying persons who may be appointed at senior management levelsand also devising a policy on remuneration of Directors Key Managerial Personnel andother senior employees. The Committee has the power and role that are in accordance withSection 177 of the Companies Act 2013 and with Listing Regulations.
Composition of Committee
(1) Shri K.Prasad - Chairman (2) Shri N.Hari Mohan - Member (3) Shri K.Ganesh Member
The need for convening a meeting of the committee was not felt during the year 2016-17.
STAKEHOLDERS RELATIONSHIP COMMITTEE
Stakeholders' Relationship Committee ensures quick redressal of the complaints of thestakeholders and oversees the process of share transfer. The Committee also monitorsredressal of Shareholders'/Investors' complaints/ grievances. In addition the Committeealso monitors other issues including status of Dematerialisation/ Rematerialisation ofshares issued by the Company.
Composition of Committee
(1) Shri K.Prasad - Chairman (2) Shri N.Hari Mohan - Member (3) Shri K.Rakesh Rao -Member
The need for convening a meeting of the committee was not felt during the year 2016-17.
POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND OTHER DETAILS
Under Section 178 (3) of the Companies Act 2013 the Nomination and RemunerationCommittee of the board has adopted a policy for nomination remuneration and other relatedmatters for directors and senior management personnel.
The Board of directors have carried out an evaluation of its own performance and of itscommittees as well as its individual directors on the basis of criteria such ascomposition of the Board & committees experience & competencies performance ofspecific duties & obligations contribution at the meetings and otherwise independentjudgment governance issues and functioning etc.
M/s. C.Ramachandram & Co. Chartered Accountants the statutory auditors of thecompany will hold office till the conclusion of the 21st Annual General Meeting of thecompany. In accordance with the provisions of Section 139 of the Companies Act 2013 andthe rules made thereunder the Board on the recommendation of the Audit Committee hasappointed M/s.Lakshmi & Associates Chartered Accountants as the statutory auditors ofthe Company for a term of five consecutive years i.e. from the conclusion of the 21stAnnual General Meeting of the Company till the conclusion of the 26th Annual GeneralMeeting to be held in the year 2022 and the said appointment is subject to furtherapproval of shareholders.
AUDITORS' REPORT AND SECRETARIAL AUDITORS' REPORT
The auditors' report does not contain any qualifications reservations or any adverseremarks.
SECRETARIAL AUDITORS' REPORT
In accordance with Section 204 (1) of the Companies Act 2013 the report furnished bythe Secretarial Auditors who carried out the secretarial audit of the company under thesaid Section is given in the Annexure-1 which forms part of this report. The said reportdoes not contain any qualifications reservations or adverse remarks.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
The particulars of loans guarantees and investments have been disclosed in thefinancial statements.
TRANSACTIONS WITH RELATED PARTIES
None of the transactions with related parties falls under the scope of Section 188 (1)of the Act. Information on transactions with related parties pursuant to Section 134 (3)(h) of the Act read with rule 8 (2) of the Companies (Accounts) Rules 2014 are given inAnnexure-2 in Form AOC-2 and which forms part of this report.
All related party transactions entered into during the financial year were on arm'slength basis and in the ordinary course of business. There were no materially significantrelated party transactions entered into by the company with the promoters key managementpersonnel or other designated persons that may have potential conflict with the interestsof the company at large. All related party transactions had prior approval of the AuditCommittee and were later ratified by the Board.
EXTRACT OF ANNUAL RETURN
As provided under Section 92 (3) of the Act an extract of annual return is given inAnnexure-3 in the prescribed Form MGT-9 which forms part of this report.
CORPORATE SOCIAL RESPONSIBILITY
Provisions of Section 135 of the Companies Act 2013 relating to Corporate SocialResponsibility are presently not applicable to the Company as it is not covered under theparameters mentioned in the said section.
CHANGE IN THE NATURE OF BUSINESS
There is no change in the nature of business of the Company.
MATERIAL CHANGES AND COMMITMENTS
There are no Significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company's operations in future.
PARTICULARS OF EMPLOYEES
The information required under Section 197 of the Act read with Rule 5 (1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules are given below.
a. The ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the financial year:
|Particulars ||Ratio to Median Remuneration |
|Non-Executive Directors* ||- |
|Executive Directors || |
|Shri. M.Jagadeesh Managing Director ||3.58 |
|Shri. K.Pradeep Kumar Reddy ||5.97 |
|Executive Director & CFO || |
*Non-Executive Directors are not paid any remuneration other than sitting fee.
b. The percentage increase in remuneration of each director chief executive officerchief financial officer company secretary in the financial year:
|Director Chief Executive Officer Chief Financial Officer and Company Secretary ||% increase in remuneration in the financial year |
|Shri. S.Sreekanth Reddy || |
|Shri. K.Satish Chander Reddy || |
|Shri.K.Prasad ||These Directors were not paid any Remuneration other than sitting fee. |
|Shri.N.Hari Mohan || |
|Shri.K.Rakesh Rao || |
|Shri.K.Ganesh || |
|Smt.Neelima Kaushik || |
|Shri. M.Jagadeesh Managing Director ||Nil |
|Shri. K.Pradeep Kumar Reddy ||Nil |
|Executive Director & CFO. || |
|Shri.J.Raja Reddy Company Secretary ||15 |
c. The percentage increase in the median remuneration of employees in the financialyear: 23.83%.
d. The number of permanent employees on the rolls of Company: 141.
e. The explanation on the relationship between average increase in remuneration andCompany performance:
On an average employees received an annual increase of around 10% in India.
In order to ensure that remuneration reflects Company performance the performance ofthe company is also one of the parameters for fixing the remuneration to the employees.
f. Comparison of the remuneration of the key managerial personnel against theperformance of the Company:
|Aggregate remuneration of key managerial personnel (KMP) ||80.39 |
|in FY17 (Lakhs) || |
|Revenue (Lakhs) ||1656.78 |
|Remuneration of KMPs (as % of revenue) ||4.85 |
|Profit before Tax (PBT) (Lakhs) ||111.09 |
|Remuneration of KMP (as % of PBT) ||72.36 |
g. Variations in the market capitalization of the company price earnings ratio as atthe closing date of the current financial year and previous financial year:
|Particulars ||March 31 2017 ||March 31 2016 ||% Change |
|Market capitalization (in Cr)* ||18.93 ||Not Listed ||- |
|Price Earnings Ratio* ||33.06 ||- ||- |
*The equity shares of the company were listed on BSE Ltd with effect from 13th October2016
h. Percentage increase over decrease in the market quotations of the shares of thecompany comparison to the rate at which the company came out with the last public offer:
|Particulars ||March 31 2017 ||October 13 2016* ||% Change |
|Market Price in BSE ||34.05 ||12.50 ||172.40 |
*The equity shares of the company were listed on BSE Ltd with effect from 13th October2016 i. Average percentage 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:
The average annual increase was around 12% for personnel other than managerialpersonnel.
Increase in the managerial remuneration for the year was Nil.
j. Comparison of each remuneration of the key managerial personnel against theperformance of the Company:
|Particulars ||MD ||ED & CFO ||CS |
|Remuneration in FY17 (Lakhs) ||24.00 ||40.00 ||16.39 |
|Revenue (Lakhs) || ||1656.78 || |
|Remuneration as % of revenue ||1.45 ||2.41 ||0.99 |
|Profit before Tax (PBT) (Lakhs) || ||111.09 || |
|Remuneration (as % of PBT) ||21.60 ||36.01 ||14.75 |
k. The key parameters for any variable component of remuneration availed by thedirectors: Nil. l. The ratio of the remuneration of the highest paid director to that ofthe employees who are not directors but receive remuneration in excess of the highest paiddirector during the year: None. m. Affirmation that the remuneration is as per theremuneration policy of the Company: The Company affirms that the remuneration is as perthe remuneration policy of the Company.
There are no employees drawing remuneration in excess of the limits set out in the Rule5 (2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014.
The company has formulated a Whistle Blower Policy to provide Vigil Mechanism foremployees of the company to report genuine concerns. The provisions of this policy are inline with the provisions of the Section 177 (9) of the Act.
DEPOSITS FROM PUBLIC
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.
All the properties of the Company have been adequately insured.
Industrial relations continued to be cordial throughout the year under review.
As stipulated vide regulation 15(2) of the SEBI (LODR) Regulations 2015 therequirement of furnishing report on corporate governance is not applicable to your companyas its paid up capital and networth is below Rs.10.00 Crores and Rs.25.00 croresrespectively.
INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY
Your Company has put in place adequate internal financial controls with reference tothe financial statements. The Internal Audit of the Company is regularly carried out by anexternal firm of chartered accountants to review the internal control systems andprocesses. The internal Audit Reports along with recommendations contained therein andtheir implementations are periodically reviewed by Audit Committee of the Board.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
Information with respect to conservation of energy technology absorption foreignexchange earnings and outgo pursuant to Section 134(3)(m) of the Companies Act 2013 readwith rule 8 of the Companies (Accounts) Rules 2014:
(a) Conservation of Energy
The Company makes conscious efforts to reduce its energy consumption though its natureof operations are not energy-intensive. Some of the measures undertaken by the Company ona continuous basis during the year are stated below:
(i) Steps taken or impact on conservation of energy:
i. Rationalization of usage of electrical equipments air-conditioning systemoffice illumination desktops.
ii. Regular monitoring of temperature inside the buildings and controlling theair-conditioning System.
(ii) Steps taken for utilising alternate sources of energy: Usage of energy efficientillumination fixtures. (iii) Capital investment on energy conservation equipments: Nil (a)Technology absorption Adoption and Innovation: Nil (b) Foreign Exchange Earnings andOutgo:
Details of foreign exchange earnings and outgo as per the Companies Act 2013 aregiven below.
|Foreign Exchange Earning and Outgo ||2016-17 ||2015-16 |
|Foreign Exchange earned ||1504.07 ||1229.96 |
|Foreign Exchange outflow ||14.47 ||13.82 |
Statements in these reports describing company's projections statements expectationsand hopes are forward looking. Though these expectations etc. are based on reasonableassumption the actual results might differ.
Your Board take this opportunity to express the gratitude to all the Investors clients/ customers Vendors Bankers Regulatory and Government Authorities and Businessassociates for their continues support and cooperation extended to the Company. Your Boardalso takes this opportunity to place on record its appreciation of the contributions madeby its employees at all levels and last but not least of the continued confidence reposedby you in the Management.
| ||For and on behalf of the Board |
| ||Sd/- |
|Hyderabad ||S.Sreekanth Reddy |
|August 02 2017 ||Chairman |