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Tera Software Ltd.

BSE: 533982 Sector: IT
NSE: TERASOFT ISIN Code: INE482B01010
BSE 00:00 | 25 Apr 52.40 2.45
(4.90%)
OPEN

52.00

HIGH

52.40

LOW

52.00

NSE 00:00 | 25 Apr 52.70 2.50
(4.98%)
OPEN

52.70

HIGH

52.70

LOW

52.70

OPEN 52.00
PREVIOUS CLOSE 49.95
VOLUME 8211
52-Week high 107.40
52-Week low 36.00
P/E 119.09
Mkt Cap.(Rs cr) 66
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 52.00
CLOSE 49.95
VOLUME 8211
52-Week high 107.40
52-Week low 36.00
P/E 119.09
Mkt Cap.(Rs cr) 66
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Tera Software Ltd. (TERASOFT) - Director Report

Company director report

Dear Shareholders

Your Directors have pleasure in presenting the 23"1 Annual Report onthe business and operations of the Company and Financial Results for the year ended 31s'March 2017.

I. Financial Highlights:

During the year under review performance of your company is asunder:

(Rs in Lakhs)

PARTICULARS YEAR ENDED 31.03.2017 YEAR ENDED 31.03.2016
Gross Income 25614.82 17515.69
Expenditure 23114.11 15372.19
Profit before Finance Cost depreciation & tax 2500.71 2143.50
Less : Finance Cost 583.78 697.81
Depreciation 236.13 269.85
Profit before tax 1680.80 1175.84
Less : Provision for Current tax 637.87 303.78
Tax Expense relating to earlier years (4.87) 9.75
Deferred tax (56.96) 90.58
Profit for the year 1104.76 771.73

II. OPERATIONS

The Company has achieved a turnover of Rs. 25614.82 lakhs for the year ended 31stMarch 2017 as against Rs. 17515.69 lakhs in F.Y. 2015-16. Your Company has registered anet profit of 1104.76 lakhs as compared to previous year's net profit of Rs. 771.73lakhs.

III. MATERIALCHANGES&COMMITMENTS:

The Company during the year has become an empanelled vendor with Andhra Pradesh StateFiber Net Limited (APSFL) for delivering the Last Mile Internet Services to the GovernmentInstitutions in the state of Andhra Pradesh.

The Company during the year has also become an empanelled vendor with Andhra PradeshState Fiber Net Limited (APSFL) for supply of Customer Premises Equipment (CPE) forproviding Triple Play Services (Internet Cable & Telephone Services).

IV. DIVIDEND:

Your Directors have not recommended the payment of dividend for the F.Y. 2016-17. Themanagement has taken this decision to conserve resources for the investment in the ongoingand new Projects and also to improve long term shareholder value by retaining earnings forgrowth & business expansion and also be prepared to invest in new businessopportunities/projects.

V. FIXED DEPOSITS:

Your company has not accepted any deposits and as such no amount of principal orinterest is outstanding as on 31s' March 2017.

VI. SHARE CAPITAL:

During the year under review the Company has not issued any shares either withdifferential voting rights nor employee stock options or sweat equity shares and does nothave any scheme to fund its employees to purchase the shares of the Company.

VII. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

Management's Discussion and Analysis Report as stipulated under Regulation 34 read withSchedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 isannexed hereto as "Annexure-I" and forms part of Annual Report.

VIII. CORPORATE GOVERNANCE:

The Company endeavors to maximize the wealth of the shareholders by managing theaffairs of the Company with a pre-eminent level of accountability transparency andintegrity. A report on Corporate Governance pursuant to the provisions of CorporateGovernance Code stipulated under SEBI (LODR) Regulations 2015 is annexed and forms partof the annual report. The Auditors' Certificate regarding compliance of conditions ofcorporate governance is enclosed as "Annexure - II".

IX. BOARD & COMMITTEE MEETING:

The Board of Directors met Five (5) times during the year. The Board has constituted anAudit Committee with all Independent Directors namely Sri R.S.Bakkannavar (Chairman) DrT.Hanuman Chowdary and Sri Koteswara Rao SSR as Members. There have not been any instancesduring the year where recommendations of the Audit Committee were not accepted by theBoard.

Details of the composition of the Board and its Committees and of the Meetings held andattendance of the Directors at such Meetings are provided in the Corporate GovernanceReport. The intervening gap between the Meetings was within the limits prescribed underthe Act and the SEBI(LODR)Regulations2015.

X. DIRECTORS & KEY MANAGERIAL PERSONNEL:

A. RETIREMENT BY ROTATION

Pursuant to Section 152 of Companies Act 2013 and rules framed thereunder Smt. PavanaDevi (DIN: 00107698) Director will retire at the ensuing Annual General Meeting and beingeligible offers herself for re-appointment. The Board recommends her re-appointment.

B. CHANGES IN KEY MANAGERIAL PERSONNEL

Sri. K. Rama Rao (DIN: 00108659) ceased to be Whole Time-Director with effect from 31stMarch 2017. Your directors place on record their appreciation and gratitude to him forhis valuable contributions during his tenure as director.

C. DECLARATION BY INDEPENDENT DIRECTORS

All the Independent Directors of the Company have given declarations stating that theymeet the criteria of independence as provided under Section 149(6) of Companies Act 2013.In the opinion of the Board they fulfill the conditions of independence as specified inthe Act and the rules made thereunder and are independent of the management.

D. PERFORMANCE EVALUATION

The annual evaluation framework for assessing the performance of Directors comprises ofthe following key areas:

• Composition of Board & Committees

• Attendance for the meetings participation and independence during the meetings

• Experience Competencies Knowledge & Proficiency

• Role and accountability of the Board.

Separate exercise was carried out to evaluate the performance of individual Directorsincluding the Board & Chairman who were evaluated on parameters such as attendancecontribution at the meetings and independent judgment etc. The evaluation of theIndependent Directors and that of the Chairman was carried out by the entire Board and theevaluation of Non- Independent Directors was carried out by the Independent Directors. Aseparate meeting of Independent Directors was also held during the year wherein theperformance of Chairman Board and Executive Directors was evaluated. A member of theCommittee and the Board does not participate in the discussion of his/her evaluation.

E. NOMINATION & REMUNERATION POLICY

The Company has adopted a Remuneration Policy for the Directors Key ManagerialPersonnel and other employees pursuant to the provisions of the Act and SEBI(ListingObligations & Disclosure Requirements) Regulations 2015

The Nomination and Remuneration Committee has considered the following factors whileformulating the Policy:

i The level and composition of remuneration is reasonable and sufficient to attractretain and motivate directors required to run the Company successfully;

ii Relationship of remuneration to performance is clear and meets appropriateperformance benchmarks;

lii Remuneration to Directors Key Managerial Personnel and Senior Management involvesa balance between fixed and incentive pay reflecting short and long-term performanceobjectives appropriate to the working of the Company and its goals.

It is affirmed that the remuneration paid to Directors Key Managerial Personnel andall other employees is as per the Remuneration Policy of the Company. Details of theRemuneration Policy are given in the Corporate Governance Report.

XI. AUDITORS & AUDITORS REPORT:

i. STATUTORY AUDITORS:

The Statutory Auditors of the Company M/s. Narven Associates Chartered Accountantshave been appointed as statutory auditors of the company on 30th September2014 for a period of three years. Hence on the completion of the said term and pursuantto the provisions of Section 139 142 and other applicable provisions if any of theCompanies Act 2013 and the Companies (Audit & Auditors) Rules 2014. It is proposedto appoint M/s. Mullapudi & Co. Chartered Accountants (Firm Reg no: 006707S)Hyderabad in the ensuing Annual General Meeting as Statutory Auditors of the Company forone term of five consecutive years i.e. from F.Y. 2017-2018 to F.Y. 2021-2022 subject toratification of such appointment every year by the members at every Annual GeneralMeeting. They have confirmed their eligibility under Section 141 of the Companies Act2013 and the Rules framed thereunder.

The Statutory Auditors' Report by M/s. Narven Associates Chartered Accountants doesnot contain any reservation qualification or adverse remark.

ii. SECRETARIAL AUDITORS:

During the year the Company has appointed M/s. C.V. Reddy K & AssociatesPractising Company Secretaries as Secretarial Auditor. The Secretarial Audit report forthe financial year 2016-17 is annexed herewith as "Annexure-lll" to this Report.The Secretarial Audit Report does not contain any reservation qualification or adverseremark.

XII. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS UNDER SECTION 186:

The Company has not made any loan given guarantee or provided security or investmentspursuant to the provisions of Section 186 of Companies Act 2013.

XIII. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGSANDOUTGO

The details of conservation of energy technology absorption foreign exchange earningsand outgo are as follows:

A) Conservation of energy:

The operations of the Company are not energy intensive and every effort has been madeto ensure the optimal use of energy avoid waste and conserve energy by using energyefficient computers and equipment with latest technologies.

(B) Technology absorption:

The Company is constantly upgrading its technological excellence with emergingtechnologies. It has not incurred any expenditure on Research and Development.

(C) Foreign exchange earnings and Outgo:

Foreign Exchange Earnings duringthe year: Nil Foreign Exchange outgo: Rs. 101494605

XIV. 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 2014 are givenbelow:

a. The ratio of the remuneration of each director to the median remuneration of theemployees of the Company forthefinancialyear:

Name Designation Ratio to Median Remuneration
Mr. T. Gopichand Vice-Chairman & Managing Director 957
Mr. K. Rama Rao Whole-Time Director 232

b. The percentage increase in remuneration in each Director Chief Financial OfficerCompany Secretary in the financial year:

Name Designation Ratio to Median Remuneration
Mr. Vijaya Bhaskar Chief Financial Officer Nil
Mr. Pa van Pise Company Secretary Nil

c. The percentage increase in the median remuneration of employees in the financialyear: Nil

d. The number of permanent employees on the rolls of the Company as on 31" March2017:1253

e. The relationship between average increase in remuneration and company performance ismainly governed by the marked trend.

f. Comparison on the remuneration of the Key Managerial Personnel against theperformance of the Company was in line with Business Results.

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 31s' March 2017 31st March 2016 % Change
Market

Capitalization

(Rs.crores)

127.25 104.03 23.22
Price Earnings Ratio 11.57 13.30 -1.73

h. Percentage increase or decrease in the market quotations of the shares of theCompany in comparison to the rate at which the company came out with the last publicoffer:

Particulars 31st March 2017 IPO price % Change
Market Price (BSE) 101.70 10 917%
Market Price (NSE) 101.50 10 915%

i. Average percentile increase already made in the salaries of employees other than themanagerial personnel in the financial year 2016-17: Nil

j. The Key parameters for any variable component of remuneration availed by thedirectors:

The payment of sitting fees to the non-executive directors of the Company is wellwithin the applicable provisions of the Act. The said sitting fees is determined by theboard of directors based on the recommendations made by the Nomination and RemunerationCommittee and is paid amongst nonexecutive directors based on their attendance andcontribution at the board and certain committee meetings.

k. The ratio of the remuneration of the highest paid director to that of the employeeswho are not directors but receive remuneration in excess of the highest paid directorduring the year: None

l. Affirmation that the remuneration is as per the remuneration policy of the Company:

The company affirms that the remuneration is as per its remuneration policy.

XV CORPORATE SOCIAL RESPONSIBILITY

The Corporate Social Responsibility Committee formed pursuant to section 135 ofCompanies Act 2013 has approved a spend of rupees 1428787/- towards CSR activities.However the approved amount could not be spent as the company is in the process ofidentifying the appropriate areas. The Company's core interest is in rural developmentprojects and is in the process of analyzing the options available for implementation

XVI HUMAN RESOURCES

'Human Resources' are recognized as a key pillar of any successful organization and sois for Tera Software Limited. The company puts constant efforts in recruiting and trainingthe employees and ensures to bring out the best of them. The company adopts a HR policyand ensures that all the employees are aware of such policies. The needs of the employeesare addressed with high importance and efforts are made to provide a healthy environment.Besides ail these the company places high emphasis on professional etiquette andintegrity.

XVII. RISK MANAGEMENT

The provisions related to the Risk Management Committee as stated in SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 are not applicable to theCompany. However the Company has a Risk Management Committee and Risk ManagementFramework to identify evaluate mitigate and monitor the risk management in the Company.The Committee is responsible for reviewing risk management plan and ensuring itseffectiveness. The audit committee has additional oversight in the area of financial riskand controls.

XVIII. INTERNAL FINANCIAL CONTROLS

The Company has an Internal Control System to commensurate with the size and scale ofits operations. The scope of the internal audit is decided by the Audit Committee and theBoard. To maintain its objectivity and independence the Board has appointed an internalauditor who reports to the Audit Committee and the Board on a periodic basis. Theinternal auditor monitors and evaluates the efficacy and adequacy of internal controlsystems in the company its compliance with operating systems accounting procedures andpolicies Audit observations and actions taken thereof are presented to the AuditCommittee.

XIV. VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Company has implemented a vigil mechanism policy to deal with instance of fraud andmismanagement if any. It provides for the directors and employees to report genuineconcerns and provides adequate safeguards against victimization of persons who use suchmechanism. The Policy on vigil mechanism may be accessed on the Company's website at thelink: http://terasoftware.com/investors/vigil-blower- policy/. There were no complaintsreceived during the financial year 2016-17.

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

No significant material orders have been passed by the Regulators or Courts orTribunals which would impact the going concern status of the Company and its futureoperations.

XI. LISTING OF SHARES ON STOCK EXCHANGES:

The Equity Shares of your Company are listed on the Bombay Stock Exchange Limitedandalso on National Stock Exchange Limited with effect from 29'" December 2016. TheAnnual listing fee of both the stock exchanges has been paid.

XXII. EXTRACT OF ANNUAL RETURN:

The extract of the Annual Return inform MGT9forthe financial year 2016-17 is annexedherewith as "Annexure-IV"

XXIII. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

Particulars of contracts or arrangements with related parties referred to in Section188(1) of the Companies Act 2013 is prescribed in form AOC-2 and is appended as"Annexure V" to the Board's report.

There are no materially significant related party transactions made by the Company withPromoters Directors Key Managerial Personnel or other designated persons which may havea potential conflict with the interest of the Company at large

All Related Party Transactions have been placed before the Audit Committee for theirapproval and to the Board as and when required. In certain cases prior omnibus approvalofthe Audit Committee is obtained on a yearly basis. The transactions entered intopursuant to the omnibus approval so granted are reviewed by the audit committee on aquarterly basis. The policy on Related Party Transactions as approved by the Board isuploaded on the Company's website.

XXIV. SEXUAL HARASSMENT

Your Company always believes and endeavors to provide safe and healthy environmentwhich is free from discrimination and harassment including sexual harassment. During theyear there were no complaints filed pursuant to the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and the Rules made thereunder

XXV. DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to the provisions of Section 134(5) of the Companies Act 2013 the Board ofDirectors to the best of their knowledge and ability confirm that:

a) In the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;

b) We have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year and of the profitof the Company for that period;

c) We have taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities;

d) The annual accounts have been prepared on a going concern basis; and

e) The Company had laid down internal financial controls to be followed by the Companyand such internal financial controls are adequate and operating effectively.

f) We have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGMENT:

Your Directors place on record their gratitude to the Central State Governments andCompany's Bankers for the assistance co-operation and encouragement they extended to theCompany. The Directors would also like to thank the Shareholders Customers Employeesdealers suppliers and all other stakeholders for their continued support and confidencein its management.

For and on behalf of the Board of Directors

Sd/- Sd/-
Date : 22.05.2017 (Koteswara Rao SSR) (T. Gopichand)
Place: Hyderabad Chairman Vice Chairman and
DIN:00964290 Managing Director
DIN:00107886