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Subex Ltd.

BSE: 532348 Sector: IT
NSE: SUBEX ISIN Code: INE754A01014
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VOLUME 318835
52-Week high 12.40
52-Week low 7.70
P/E 15.71
Mkt Cap.(Rs cr) 486
Buy Price 0.00
Buy Qty 0.00
Sell Price 8.64
Sell Qty 9695.00
OPEN 9.00
CLOSE 8.90
VOLUME 318835
52-Week high 12.40
52-Week low 7.70
P/E 15.71
Mkt Cap.(Rs cr) 486
Buy Price 0.00
Buy Qty 0.00
Sell Price 8.64
Sell Qty 9695.00

Subex Ltd. (SUBEX) - Director Report

Company director report

Your Directors have pleasure in presenting the 23rd Annual Report of the Company on thebusiness and operations together with the audited results for the year ended March 312017.

1. FINANCIAL RESULTS

Amount in Rs.Lakhs

Consolidated Standalone
Particulars 2016-17 2015-16 2016-17 2015-16
Total Revenue 35733.15 32245.77 32440.62 29582.30
Other Income 1091.03 116.46 1038.24 41.84
Profit Before Interest Exceptional Items & Taxes (EBIT) 9505.50 6399.03 5451.37 4764.98
Finance costs 2040.08 6151.60 1505.47 5101.63
Finance Income 62.55 66.19 215.46 254.38
Profit/(Loss) before Exceptional items & tax 7527.97 313.62 4161.36 (82.27)
Exceptional Items (10890.00) (6469.44) (4591.06) (20381.04)
Loss before tax (3362.03) (6155.82) (429.70) (20463.31)
Tax expenses 960.84 1273.07 253.80 534.38
Loss after tax (4322.87) (7428.89) (683.50) (20997.69)
Other comprehensive income
(i) to be reclassified to profit or loss in subsequent periods (1343.39) (1828.23)
(ii) not to be reclassified to profit or loss in subsequent periods (32.30) (5.04) (33.16) (5.04)
Total comprehensive income for the year (5698.56) (9262.16) (716.66) (21002.73)

2. RESULTS OF OPERATIONS

During the financial year ended March 31 2017 the total revenue on a standalone basiswas H32440.62 Lakhs as against the revenue for the previous year which was H29582.30Lakhs. The Company has during the year under review incurred a loss of H683.50 Lakhs asagainst loss of H20997.69 Lakhs in the previous year.

On a consolidated basis the total revenue stood at H35733.15 Lakhs as againstH32245.77 Lakhs during the previous year. The loss for the financial year 2016-17 isH4322.87 Lakhs as against a loss of H7428.89 Lakhs in the previous year.

With respect to the stand alone financials as at March 31 2017 the Company hadassessed the carrying value of it's investment in its subsidiary viz. Subex AmericasInc. of H7005.74 Lakhs (March 31 2016: H12495.74 Lakhs). Based on future operationalplan projected cash flows and valuation carried out by an external valuer the Companyhas made an impairment provision of H6070.00 Lakhs (March 31 2016: H5490.00 Lakhs)towards the carrying value of its investment in the said subsidiary. The management is ofthe view that the carrying value of the aforesaid investment in in the said subsidiary ofH935.74 Lakhs as at March 31 2017 is appropriate. Also during the current year theCompany has made provision for impairment of H100.00 Lakhs (March 31 2016: HNil) towardsthe carrying value of its investment in Subex Technologies Limited.

As at March 31 2017 the Company has assessed the carrying value of it's investment inits wholly owned subsidiary viz. Subex (UK) Limited of H64738.68 Lakhs. Considering thefuture operational plan projected cash flows and the valuation carried out by an externalvaluer the management is of the view that the carrying value of its aforesaid investmentin Subex (UK)

Limited as at March 31 2017 is appropriate.

With respect to the consolidated financials as at March 31 2017 the Company assessedthe carrying value of goodwill relating to its investment in the subsidiary viz. SubexAmericas Inc. amounting to H9736.00 Lakhs (March 31 2016: H18606.00 Lakhs). Based onfuture operational plan projected cash flows and valuation carried out by an externalvaluer the Company has made an impairment provision of H6010.00 Lakhs (March 31 2016:H8870.00 Lakhs) towards the carrying value of goodwill relating to its investment in thesaid subsidiary. The management is of the view that the carrying value of goodwillrelating to its investment in the said subsidiary of H3726.00 Lakhs as at March 31 2017is appropriate.

As at March 31 2017 the Company assessed the carrying value of goodwill relating toits investment in the subsidiary viz. Subex (UK) Limited amounting to H67036.22 Lakhs(March 31 2016: H67036.22 Lakhs). Based on future operational plan projected cash flowsand valuation carried out by an external valuer the Company has made an impairmentprovision of H4880.00 Lakhs (March 31 2016: HNil) towards the carrying value of goodwillrelating to its investment in the said subsidiary. The management is of the view that thecarrying value of goodwill relating to its investment in the said subsidiary of H62156.22Lakhs as at March 31 2017 is appropriate.

3. DIVIDEND

The Directors have not proposed any dividend to be paid for the financial year 2016-17.

4. SHARE CAPITAL

As at March 31 2017 and as at the date of this report the authorised issuedsubscribed and paid-up capital of the Company is as stated below:

Share Capital As on April 1 2016 Increase during the year As on March 31 2017 Increase after March 31 2017 As on the date of the report-June 05 2017
(in Rs.) (in Rs.) (in Rs.) (in Rs.)
Authorised
At the beginning of the year:
Equity Shares @ H10 each 5450400000 Nil 5450400000 430000000# 5880400000
Preference Shares @ H98 each 19600000 Nil 19600000 Nil 19600000
Issued
Equity Shares @ H10 each 5028116460 40962900* 5069079360 550949990# 5620029350
Preference Shares @ H98 each Nil Nil Nil Nil Nil
Subscribed
Equity Shares @ H10 each 5028116460 40962900* 5069079360 550949990 5620029350
Preference Shares @ H98 each Nil Nil Nil Nil Nil
Fully Paid-up
Equity Shares @ H10 each 5028116460 40962900* 5069079360 550949990 5620029350
Preference Shares @ H98 each Nil Nil Nil Nil Nil

* On the conversion of FCCB III -US$ 950000 into equity shares of

# Subsequent to the Balance Sheet date the Company allotted 55094999 equity shareson a preferential basis. Accordingly the Authorized share capital was increased toH5900000000.

To strengthen the long-term capital structure of the Company 55094999 equity shareswere allotted on a preferential basis to the following allottees on the 15th of May 2017.The allotment of shares was made at H14 each (including a premium of H4 per share).

Sl. No. Investors No. of shares
1. QVT Singapore Fund Pte. Ltd 27531428
2. Tonbridge (Mauritius) Limited 17916321
3. Leeds (Mauritius) Limited 9647250
Total 55094999

The shares were issued in accordance with the provisions of SEBI (Issue of Capital andDisclosure Requirements) Regulations 2009 and rank pari passu with the existingshares of the company. The relevant date for determining the price was March 30 2017.Shareholders' approval to the aforementioned matters were obtained through Postal Ballotthe voting period for which was open from March 30 2017 to April 29 2017. The specialresolutions were passed with a requisite majority. As on the date of this reportapplication for listing has been made to the Stock Exchanges.

5. BUSINESS

Your Company is a leading global provider of Business and Operations Support Systems(B/OSS) that empowers communications service providers (CSPs) to achieve competitiveadvantage through Business and CAPEX Optimisation - thereby enabling them to improve theiroperational efficiency to deliver enhanced service experiences to subscribers.

The Company pioneered the concept of a Revenue Operations Center (ROCR) a centralizedapproach that sustains profitable growth and financialhealth through coordinatedoperational control-brings together business intelligence domain knowledge and workflowsupport. Subex's product portfolio powers the ROC with its best-in-class solutions such asrevenue assurance fraud management asset assurance capacity management data integritymanagement route optimization and partner settlement. Through its ROC Insights advancedanalytics service Subex provides actionable insights delivered through consumablestoryboards to help CSPs make the best use of their data. Subex also offers a scalableManaged Services program with 35 + customers.

Subex has received numerous awards jointly with its customers. The recent awardsinclude:

• Pipeline Innovation Award 2017 in the "Innovations in ManagedServices" & in the "Innovations in Security & Assurance" category.

• Global Telecoms Business Innovation Award 2017 with STC Saudi Arabia under the"Enterprise Service Innovation" category.

• BSS & OSS Award 2016 with Telefonica Chile for "Best Fraud PreventionProject"

• Global Telecoms Business Innovation Award 2016 with BTC Botswana

• Pipeline Innovation Award 2016 in Security and Assurance.

• Telecoms Awards 2015 for "Advances in BSS/OSS category"

• Featured by Frost and Sullivan as one of the "10 companies to watch outfor" in 2015

• Carriers World Award 2015 for best Security/Fraud solution.

• Global Telecoms Business Innovation Award 2015 with Mobily.

• Finance Transformation Best-In Class Financial Solutions Services 2016 by CIMA

Subex's customers include 39 of top 50 operators* and 7 of the world's 10 largest#telecom companies worldwide. The Company has more than 300 installations across 90+countries *Telecom Operators 500 2015 #The World's Largest Telecom Companies 2015 Forbes.

SEZ III

During the year the Company has received the approval from SEZ authorities for settingup a new SEZ unit and is in the process of completing all the statutory formalities forcommencing the operations from the new unit.

Further details on the business of the Company is provided in the Management Discussionand Analysis section of the Annual Report.

6. SUBSIDIARIES

SUBEX TECHNOLOGIES LIMITED

For the year ended March 31 2017 Subex Technologies Limited earned a net profitofH54.44 Lakhs as against a net loss of H0.46 Lakhs last year.

SUBEX (UK) LIMITED

For the year ended March 31 2017 the Standalone revenue of Subex (UK) Limited wasH17618.54 Lakhs as against H16978.67 Lakhs last year and the net profit wasH1858.90Lakhs as against a net loss of H5115.44 Lakhs last year.

Subex (Asia Pacific) Pte. Limited is a wholly owned subsidiary of Subex (UK) Limited.For the year ended March 31 2017 the standalone revenue of Subex (Asia Pacific) Pte.Limited was H2555.14 Lakhs as against H2014.51 Lakhs last year and the wasnet profitH892.01 Lakhs as against a net profit of H6.44

Lakhs last year.

Subex Inc.is a wholly owned subsidiary of Subex (UK) Limited. For the year ended March31 2017 the standalone revenue of Subex Inc. was H10694.48 Lakhs as against H10611.84Lakhs last year and the net profit wasH116.78 lakhs as against a net loss of H109.09Lakhs last year.

SUBEX AMERICAS INC.

For the year ended March 31 2017 the standalone revenue of Subex Americas Inc. wasH3186.49 Lakhs as against H2536.94

lakhs last year and Net profit wasH3011.66 Lakhs as against a profit ofH17822.93Lakhs last year.

Subex Azure Holdings Inc. is a wholly owned subsidiary of Subex Americas Inc. Therewere no transactions during the year under review.

As on March 31 2017 Subex Limited holds 100 common shares (92.59%) in the capital ofSubex Americas Inc. and Subex (UK) Limited holds 8 common shares (7.41%) in the capital ofSubex Americas Inc.

SUBEX MIDDLE EAST (FZE)

For the year ended March 31 2017 the standalone income of Subex Middle East (FZE) isH1706.16 Lakhs as against H118.70 Lakhs last year and a profit ofH35.36 Lakhs as againsta profit of H12.07 lakhs last year.

7. FINANCE

FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBs)

During the year the Company had the following outstanding FCCB's:

(amount in US$ million)

Particulars US$ 180000000 2.00% coupon convertible bonds "FCCB I" US$ 98700000 5.00% convertible unsecured bonds "FCCB II" US$ 127721000 5.70% secured convertible bonds "FCCB III"
Issue of FCCB I on 8 March 2007 180.00
Restructuring of bonds during 2009-10 (141.00) 141.00
Discount @ 30% (42.30)
Balance as on 2 November 2009 39.00 98.70
Conversion to equity in 2009-10 and 2010-11 (43.90)
Balance on 31st March 2011 39.00 54.80
Restructuring of bonds during 2012-13 (38.00) (53.40) 91.40
Premium 36.32
Balance on 6th July 2012 1.00 1.40 127.72
Mandatory conversion to equity shares on July 17 2012 (36.32)
Balance after mandatory conversion 1.00 1.40 91.40
Conversion to equity upto 31st March 2016 (86.85)
Balance as on 31 March 2016 1.00 1.40 4.55
Conversion during 2016-17 (0.95)
Redemption on 6 March 2017 (1.00) (1.40)
Balance as on 31 March 2017 3.60

PUBLIC DEPOSITS

Your Company has not accepted any deposits from the public.

EMPLOYEE STOCK OPTIONS SCHEMES

Your Company has introduced various Stock Option plans for its employees. Details ofthese are given below.

EMPLOYEE STOCK OPTION PLAN-2005 (ESOP-III)

Under this scheme an initial corpus of 500000 options was created for grant to theeligible employees with each option convertible into one fully paid-up equity share ofH10/-. This scheme was formulated in accordance with the Securities and Exchange Board ofIndia (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999.The corpus of the scheme was further enhanced by 1500000 options during the financialthe requisite in-principle approvals from the stock exchanges for the purpose of listingof equity shares arising out of exercise of options granted under the scheme. TheCompensation Committee grants options to the eligible employees in accordance with theprovisions of the scheme. The options are granted at a price which is not less than 85%of the average of the closing price of the equity shares during the 15 trading dayspreceding the date of grant on the stock exchange where there is highest trading volumeduring this period. Unless otherwise resolved the options granted vest over a period of 1to 4 years and can be exercised over a period of 3 years from the date of vesting.

During the year 2016-17 52611 options were terminated under the ESOP 2005 Scheme.

The tenure for grant of stock options under ESOP 2005 scheme has expired and theCompany is only administering the outstanding stock options issued under the scheme.

EMPLOYEE STOCK OPTION PLAN-2008 (ESOP-IV)

During 2008-09 your Company instituted the Employee Stock Option Plan-2008 videapproval of shareholders through the postal ballot mechanism. A corpus of 2000000options has been created for grant to the eligible employees under the scheme. The Schemewas formulated in accordance with the Securities and Exchange Board of India (EmployeeStock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999. The Company hasobtained the requisite in-principle approvals from the stock exchanges for the purpose oflisting of equity shares arising out of exercise of options granted under the scheme. TheCompensation Committee grants options to the eligible employees in accordance with theprovisions of the scheme. The options are granted at a price which is not less than 85%of the average of the closing price of the equity shares during the 15 trading dayspreceding the date of grant on the stock exchange where there is highest trading volumeduring this period. Unless otherwise resolved the options granted vests over a period of1 to 4 years and can be exercised over a period of 3 years from the date of vesting.

During the year 2016-17 102199 options were terminated under the ESOP 2008 Scheme.

Additional information regarding the employee stock options as at March 31 2017 isgiven as "Annexure A" to this report.

8. PARTICULARS OF LOANS GUARANTEES OR

INVESTMENTS UNDER SECTION 186 year2007-08.TheCompany has obtained There are noLoans Guarantees or Investments covered under Section 186 of the Companies Act 2013.Refer note 35(b)(iii) in standalone financial statements.

9. MATERIAL CHANGES AND COMMITMENTS BETWEEN THE END OF FINANCIAL YEAR AND DATE OF THEREPORT

The Company allotted 55094999 equity shares at H14 each (face value H10 each) on apreferential basis to the following allottees on May 15 2017 to strengthen the long-termcapital structure of the Company.

Sl. No. Investors No. of shares
1. QVT Singapore Fund Pte. Ltd 27531428
2. Tonbridge (Mauritius) Limited 17916321
3. Leeds (Mauritius) Limited 9647250
Total 55094999

The shares were issued in accordance with the provisions of SEBI (Issue of Capital andDisclosure Requirements) Regulations 2009 and rank pari- passu with the existingshares of the company. With respect to the transactions of the subsidiaries of theCompany the loan of US$ 12 Million (H7782.00 Lakhs Previous Year : H7484.05 Lakhs)availed by Subex Americas Inc. and guaranteed by Subex (UK) Limited was repaid on May 152017 to the respective lenders.

At the meeting of the Board of Subex Limited held on 25 May 2017 the Board decided toacquire the Data Integrity Management (‘DIM') Asset Assurance (‘AA') andCapacity Management (‘CM') software products owned by the Company's subsidiary SubexAmericas Inc. ("SAI") (including all related intellectual property rightsknow-how rights title and interest) for a consideration of US$ 9.4 million. Theconsideration amount is within the range specified by an independent valuer as the fairvalue of the software assets.

10. CORPORATE GOVERNANCE

Your Company strongly believes that the spirit of Corporate Governance goes beyond thestatutory form. Sound Corporate Governance is a key driver of sustainable corporate growthand long-term value creation for the stakeholders and protection of their interests. YourCompany endeavors to meet the growing aspirations of all stakeholders includingshareholders employees and customers. Your Company is committed to maintaining thehighest level of transparency accountability and equity in its operations. Your Companyalways strives to follow the path of good governance through a broad framework of variousprocesses. Your Company has complied with the conditions of Corporate Governance asstipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 as amended from time to time. The Auditor's to the same is annexed herewith as "AnnexureB". In addition your Company has documented its internal policies in line withthe Corporate Governance guidelines. The Management Discussion & Analysis of thefinancial has been provided as a part of this report.

11. DIRECTORS

As per Section 152 of the Companies Act 2013 at least two-third of the Directorsshall be subject to retirement by rotation. One-third of such Directors must retire fromoffice at each Annual General Meeting of the shareholders and a retiring Director iseligible for re-election. Accordingly Mr. Surjeet Singh retires by rotation and beingeligible has offered to be re-appointed at the ensuing Annual General Meeting.

Mr. Surjeet Singh was re-appointed as the Managing Director & CEO of the Company atthe Board Meeting held on August 9 2016 for a period of one year from October 5 2016 toOctober 4 2017. In accordance with the provisions of Sections 196 197 203 read withSchedule V and other applicable provisions of the Companies Act 2013 the saidre-appointment as Managing Director & CEO was placed before the Members for theirapproval at the 22nd Annual General Meeting conducted on September 12 2016 for the year2015-16. Pursuant to the recommendations of the Nomination and Remuneration Committee theBoard at its meeting held on March 24 2017 appointed Ms. Poornima Prabhu as an AdditionalIndependent Director for a tenure of five years subject to the approval of theshareholders at the 23rd Annual General Meeting. Detailed profile of Ms. Poornima Prabhuis given in the Corporate Governance section of this report. The Company has received anotice from a shareholder proposing the appointment of Ms. Poornima Prabhu. During theyear Mr. Sanjeev Aga and Ms. Priyanka Roy Independent Directors resigned from withBoard with effect from October 27 2016 and March 10 2017 respectively. Pursuant to therecommendations of the Nomination and Remuneration Committee the Board at its meetingheld on May 25 2017 appointed Mr. Vinod Kumar Padmanabhan Chief Operating Officer of theCompany as an Additional Director and Whole-Time Director. He will hold office as anAdditional Director upto the 23rd Annual General Meeting of the Company. The Company hasreceived a notice from a shareholder proposing the appointment of Mr. Vinod KumarPadmanabhan as Director. His appointment as Whole-Time Director for a tenure of threeyears on compliance with respect is subject to the approval of the shareholders at theensuing 23rd Annual General Meeting. Pursuant to the recommendations of the Nomination andRemuneration Committee the Board at its meeting held on May position oftheCompany 252017 appointed Mr. Ashwin Chalapathy Chief Technology Officer and Head of ServiceDelivery of the Company as an Additional Director and Whole-Time Director. He will holdoffice as an Additional Director upto the 23 rd Annual General Meeting of the Company. TheCompany has received a notice from a shareholder proposing the appointment of Mr. AshwinChalapathy as Director. His appointment as Whole-Time Director for a tenure of three yearsis subject to the approval of the shareholders at the ensuing 23rd Annual General Meeting.The details regarding the familiarization program for Independent Directors is availableon the website of your Company under the link http://www.subex.com/corporate-governance./

BOARD MEETINGS

During the year 7 Board Meetings were convened and held. The intervening gap betweenthe meetings was within the period prescribed under the Companies Act 2013 and The SEBI(LODR) Regulations 2015. The dates on which meetings were held are as follows:

1. May 24 2016

2. August 09 2016 tion of the appointment of M/s

3. September 12 2016

4. November 10 2016

5. December 06 2016

6. February 03 2017

7. March 24 2017

The details of the attendance of the Directors is provided in the Corporate GovernanceReport.

PERFORMANCE EVALUATION

Pursuant to the provisions of the Companies Act 2013 and Regulation 17 (10) of the SEBI(LODR) Regulations 2015 the Board at its meeting held on February 03 2017 carried out anannual performance evaluation of its own performance the Directors individually as wellas the evaluation of the working of its committees. The manner in which the evaluation hasbeen carried out has been explained in the Corporate Governance Report.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION POLICY OF THE COMPANY

The Policy on Appointment of Directors and the Remuneration Policy of the Company formsa part of this report in "Annexure F". and the Details / Disclosures ofRatio of Remuneration to each Director to the median employee's remuneration as "AnnexureH".

12. AUDIT COMMITTEE

The Audit Committee presently has 4 Directors as its members viz. Mr. Anil SinghviChairman & Independent Director Ms. Nisha Dutt Independent Director Ms. PoornimaPrabhu Independent Director and Mr. Surjeet Singh Managing Director & CEO. The roleterms of reference the authority and power of the Audit Committee are in conformity withthe provisions of the Companies Act 2013 and Regulation 18 of the SEBI (LODR)Regulations 2015. Further details of the Audit Committee have been provided in the reporton Corporate Governance forming part of this Annual Report.

13. AUDITORS

STATUTORY AUDITORS

M/s. S. R. Batliboi & Associates LLP Chartered Accountants Bangalore (FirmRegistration Number 101049W/E300004) the Statutory Auditors of the Company were appointedfor a term of 5 years in the AGM held on 19th June 2015. The Board places

. thesaidproposalforthe S. R. Batliboi & Associates LLP Chartered Accountants for2017-18 before the shareholders of the Company at the ensuing Annual General Meeting.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s. V Sreedharan & Associates a firm of Company Secretaries in practice toundertake the Secretarial Audit of the Company. The report of the Secretarial Audit isannexed herewith as "Annexure C". The Secretarial Auditors have given anunqualified report for the financial year 2016-17.

14. PARTICULARS OF EMPLOYEES

The particulars of employees required under Section 197 of the Companies Act 2013 readwith Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 isenclosed hereto in "Annexure D".

15. CONSERVATION OF ENERGY

The operations of your Company are not energy-intensive. However significant measuresare taken to reduce energy consumption by using energy-efficient computers and by thepurchase of energy-efficient equipment. Your Company constantly evaluates new technologiesand invests to make its infrastructure more . Currently your Company efficient energy-usesCFL fittings and electronic ballasts to reduce the power consumption of fluorescent tubes.Air conditioners with energy efficient screw compressors for central air conditioning andair conditioners with split air conditioning for localized areas are used.

The organization consistently follows and implements some of the best practicesimpacting the environment. Initiatives are in place towards optimizing electricityconsumption through a structured reduction in overall carbon foot print.

TECHNOLOGY ABSORPTION ADOPTION AND INNOVATION

Your Company has a strong R&D Division responsible for developing technologies forits products in the telecom domain. The telecommunications domain in which your Companyoperates is subject to rapid technological changes introduction of new services andintense competition. Your Company has developed inherent skills to keep pace with thesechanges. Since software products are the significant line of business of your Company theCompany incurs expenditure on product related Research & Development on a continuousbasis. These expenses are charged to revenue under the respective heads and are notsegregated and accounted separately.

FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year 2016-17 total foreign exchange inflow and outflow is as follows: i)Foreign Exchange earnings H30681.48 Lakhs (Previous Year H27794.14 Lakhs) ii) ForeignExchange outgo H14558.23 Lakhs (Previous Year H11497.22 Lakhs) Note: The foreignexchange outgo is inclusive of the inter-CompanychargesandthePreviousYear's restatedaccordingly.

16. CORPORATE SOCIAL RESPONSIBILITY

To enable the Company to take required measures to make a meaningful contribution tosociety and other stakeholders it has constituted the Corporate Social ResponsibilityCommittee (CSR Committee) comprising of the following Directors

Composition Category
Mr. Anil Singhvi (Chairman) Independent Director
Mr. Surjeet Singh Managing Director & CEO
Ms. Nisha Dutt Independent Director

Pursuant to CSR Policy adopted by the Board the Company proposes to undertake suchactivities as may be useful and contributive in nature

SUBEX CHARITABLE TRUST

Subex Charitable Trust (SCT) extends the outlook of Subex as a corporate entity intocommunity service. SCT was set up to provide for welfare activities for under privilegedand the needy in the society. SCT is managed by trustees elected amongst the employees ofthe Company. During the year it has provided active support for education of economicallychallenged meritorious students conducted blood donation camps donated clothes and byway of payment of the toystochildrenprovided financial water and electricity bills of aCentre which provides vocational training to destitute girls. SCT has tied up with PreranaResource Centre for providing Vocational Training to visually impaired and disabled orphanteenage girls. The total budget for this 1 year long program is H360000. As part of thisprogram 25 blind and disabled girls are provided vocational training and employment. Agist of activities undertaken by the Trust has been provided as a separate section in thisAnnual Report as "Annexure I ".

17. IMPLEMENTATION OF RISK MANAGEMENT POLICY

The Company has developed and adopted a Risk Management Policy. This policy identifiesall perceived risk which might impact the operations and on a more serious level alsothreaten the existence of the Company. Risks are assessed department wise such asfinancial risks information technology related risks legal risks accounting fraud etc.The Management also ensures that the Company is taking appropriate measures to achieveprudent balance between risk and reward in both ongoing and new business activities.

18. HUMAN RESOURCE MANAGEMENT

Detailed report on Human Resource management is given in the Management Discussion andAnalysis section of the annual report.

19. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. In accordance with the provision of Section 134(5) of theCompanies Act 2013 and as per the provisions of the SEBI (LODR) Regulations 2015 theCompany has in consultation with a reputed independent consultancy firm that specializesin advising corporates on internal financial controls strengthened the existing financialcontrols of the Company.

Such internal financial controls were found to be adequate for a Company of this size.The controls are largely operating effectively since there has not been identification ofany material weakness in the Company. The Directors have in the Directors ResponsibilityStatement under paragraph (e) confirmed the same to this effect. The Company has policiesand procedures in place for ensuring proper and efficient conduct of its business thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and timely preparations reliablefinancial information. The Company has adopted accounting policies which are in line withIndian Accounting Standards ("IndAS"). Pursuant to the provisions of the Section134(5)(f) of the Act the Company during the year devised proper systems to ensurecompliance with the provisions of all applicable laws. Each department of the organizationensured that it had complied with the applicable laws and furnished its report to the Headof department who then along with the Company Secretary discussed on the compliance statusof the department. Any matter that required attention was immediately dealt with. TheCompany Secretary reported to the Audit Committee and the Board on the overall compliancestatus of the Company. In effect such compliance system was largely found to be adequateand operating effectively. The Directors have in the Directors Responsibility Statementunder paragraph (f) also confirmed same to this effect.

The Internal Auditors monitor and evaluate the efficacy and adequacy of internalcontrol system in the Company its compliance with operating systems accountingprocedures and policies at all locations of the Company and its subsidiaries. Based on thereport of Internal Auditors process owners undertake corrective action in theirrespective areas and thereby strengthen the controls. Significant audit observations andcorrective actions thereon are presented to the Audit Committee of the Board.

Subex has been certified for ISO 9001:2008 (Quality Management System) and ISO27001:2013 (Information Security Management System). The Company being in the IT spaceconducts internal audits of Information Security Quality Management System twice a yearcovering projects and functional groups. Internal audits of such nature are conductedacross all locations of Bangalore UK and the US regions. A consolidated summary isprepared and strengths and weakness across projects functional groups is shared with allauditee. Reports are shared to the auditee to identify corrective and preventive actions.The corrective and preventive actions are reviewed by the internal auditors and closedbased on the adequacy of evidences provided by the auditee.

20. VIGIL MECHANISM/ WHISTLE BLOWER POLICY

The Company has implemented a vigil mechanism policy to deal with instance of fraud andmismanagement if any. The policy also provides for adequate safeguards againstvictimization of persons who use such mechanism and makes provision for direct access tothe chairperson of the Audit Committee in all cases. The details of the policy are postedon the website of the Company under the link http://www.subex.com/corporate-governance/.There were no complaints during the year 2016-17.

21. POLICY ON SEXUAL HARRASSMENT OF WOMEN AT WORK PLACE

The Company has zero tolerance towards sexual harassment at the workplace and towardsthis end has adopted a policy in line with the provisions of Sexual Harassment of Womenat Workplace (Prevention Prohibition and Redressal) Act 2013 and the Rules thereunder.All employees (permanent contractual temporary trainees) are covered under the saidpolicy. An the Internal Complaints Committee has also been set up to redress complaintsreceived on sexual harassment.

During the financial year under review the Company has not received any complaints ofsexual harassment from any of the women employees of the Company.

22. DECLARATION FROM INDEPENDENT DIRECTORS

All Independent Directors have given declarations under Section 149 (7) to the effectthat they meet the criteria of independence as laid down under Section 149(6) of theCompanies Act 2013.

23. RELATED PARTY TRANSACTIONS

All Related party transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. There were nomaterially significant related party transactions made by the Company with PromotersDirectors Key Managerial Personnel or other designated persons which may have apotentialconflictwith the interest of the Company at large.

All related party transactions are placed before the Audit Committee and the Board forapproval. Prior omnibus approval of the Audit committee is obtained for transactions whichare of a foreseen and repetitive nature. A statement giving details of all related partytransactions entered into pursuant to the omnibus approval so granted are placed beforethe Audit Committee and the Board of Directors for their review on a quarterly basis. TheCompany has entered into sub-contracting arrangement with its subsidiaries based ontransfer pricing methodology for development and enhancement of RMS products as well asmarketing of its products by the subsidiaries across locations. The Company also hassimultaneously entered into marketing arrangements with its subsidiaries wherein there isa cross charge done by the subsidiaries towards its efforts for the same.

The Policy on Related party transactions as approved by the Board is uploaded on theCompany's website under the link http://www.subex.com/corporate-governance.

None of the Directors has any pecuniary relationships of transactions vis--visthe Company.

Particulars of Contracts or Arrangements with Related parties referred to in Section188(1) in Form AOC- 2 is enclosed to this report in "Annexure G".

24. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

materialThere ordersare nopassedsignificant by the

Regulators/Courts which would impact the going concern status of the Company and itsfuture operations.

25. EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as "Annexure E".

26. LISTING WITH STOCK EXCHANGES

The Company confirmsthat it has paid the Annual Listing Fees for the year 2016-17 tothe National Stock Exchange of India Ltd (‘NSE') and BSE Ltd (‘BSE') where theCompany's shares are listed.

27. DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provision of Section 134(3)(Rs.) of the Companies Act 2013 theBoard of Directors affirms:

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) That the accounting policies have been selected and applied consistently and it hasmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at March 31 2017 and of the profit/ lossof the Company for the year ended on that date;

c) That proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provision of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.;

d) That the accounts for the year ended March 31 2017 have been prepared on a goingconcern basis;

e) That internal financial controls have been laid down to be followed by the Companyand such internal financial controls were adequate and were operating effectively;

f) That systems to ensure compliance with the provisions of all applicable laws were inplace and such systems were adequate and operating effectively.

29. APPRECIATION/ACKNOWLEDGEMENTS

Your Directors thank the clients vendors investors and bankers for their continuedsupport during the year. We place on record our appreciation for the co-operation andassistance provided by the Central and State Government authorities particularly SEZauthorities Customs and Central Excise authorities Registrar of Companies Karnatakathe Income Tax department Reserve Bank of India and various authorities under theGovernment of Karnataka.

Your Directors also wish to place on record their deep appreciation to Subexians at alllevels for their hard work solidarity cooperation and support as they are instrumentalin your Company scaling new heights year after year.

For Subex Limited
Surjeet Singh Anil Singhvi
Managing Director & CEO Chairman & Independent Director
DIN : 05278780 DIN:00239589
Place: California USA Place: Mumbai India
Date: June 5 2017 Date: June 5 2017

Annexure A

Additional Information as at March 31 2017 as per Securities and Exchange Board ofIndia (Share Based Employee Benefits) Regulations 2014.

Sl.No Particulars ESOP 2005 ESOP 2008
1. Net options granted as on March 31 2017 104807 28301
Options granted during the year
2. Pricing formula As mentioned earlier in the report As mentioned earlier in the report
3. Options vested but not exercised as on March 31 2017 92368 28581
4. Options exercised as on March 31 2017 12439 0
Options exercised during the year
5. Money realized by exercise of options during the year
6. The total number of shares arising as a result of exercise of options during the year ended March 31 2017
7. Options lapsed/cancelled/ surrendered as on March 31 2017 5734111 2305236
Options lapsed/cancelled/ surrendered during the year 52611 102199
8. Variation of terms of options None None
9. No. of employees covered 192 26
10. Employee wise details of options granted during the year under review to:
(i) Key managerial personnel
(ii) other employee receiving a grant in the year of option amounting to 5% or more of options granted during that year
(iii) identified employees who were granted option during the year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant;
11. Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 ‘Earnings per share' (0.13) (0.13)
12. Where the Company has calculated the employee compensation cost using the intrinsic value of the stock options the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options.
The impact of this difference on profits and on EPS of the Company is:
13. Weighted-average exercise prices and weighted-average fair values of options separately for options whose exercise price either equals or exceeds or is less than the market price of the stock.(As per note 36 of the Standalone financials) H 22.99 H28.44
14. Description of the method used during the year to estimate the fair values of options including the following weighted-average information :
i. risk-free interest rate
ii. expected life Refer note 36 of the Standalone financials statements.
iii. expected volatility
iv. expected dividends
v. market price on grant date

For Subex Limited

Surjeet Singh Anil Singhvi
Managing Director & CEO Chairman & Independent Director
DIN : 05278780 DIN:00239589
Place: California USA Place: Mumbai India
Date: June 5 2017 Date: June 5 2017