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Apollo Micro Systems Ltd.

BSE: 540879 Sector: IT
NSE: APOLLO ISIN Code: INE713T01010
BSE 10:26 | 25 Jan 129.10 -4.10
(-3.08%)
OPEN

134.20

HIGH

135.00

LOW

124.85

NSE 10:14 | 25 Jan 128.90 -4.65
(-3.48%)
OPEN

134.50

HIGH

135.60

LOW

124.15

OPEN 134.20
PREVIOUS CLOSE 133.20
VOLUME 4241
52-Week high 155.20
52-Week low 40.00
P/E 21.70
Mkt Cap.(Rs cr) 268
Buy Price 129.05
Buy Qty 52.00
Sell Price 129.45
Sell Qty 22.00
OPEN 134.20
CLOSE 133.20
VOLUME 4241
52-Week high 155.20
52-Week low 40.00
P/E 21.70
Mkt Cap.(Rs cr) 268
Buy Price 129.05
Buy Qty 52.00
Sell Price 129.45
Sell Qty 22.00

Apollo Micro Systems Ltd. (APOLLO) - Director Report

Company director report

To the Members

APOLLO MICRO SYSTEMS LIMITED

The Directors are pleased to present you the 22nd Annual Report on the business andoperations of the Company together with the Audited Financial Statements for the financialyear ended March 31 2019.

Financial Results and Operations

The summary of financial performance for the Financial Year ended March 31 2019 andthe corresponding figures for the Financial Year ended

March 31 2018 are as under:
(Figures in Rs.)
For the financial year ended
Particulars
March 31 2019 March 31 2018
Revenue from Operations 2629753243 2204613913
Other Income 32263837 15279316
Total Revenue 2662017081 2219893229
Cost of materials Consumed 1951750782 2039012710
Changes in inventories of finished goods WIP stock- in –trade 35800179 (436178739)
Employee Benefit Expenses 70216057 63975210
Profit Before Interest Depreciation &Tax 604250063 553084048
Financial charges 132172583 120737974
Depreciation 61950838 64984581
Other Expenses 87697087 45588451
Profit or Loss Before exceptional and extraordinary items and tax 322429555 321773041
Exceptional Items 0.00 (12192105)
Profit or Loss Before tax 322429555 309580936
Tax Expenses: 62958384 65114874
a) Current Tax
b) Earlier Tax Adjustments (4568371) 0.00
c) Deferred Tax (27145724) 52800862
Total Tax Expense 31244289 117915736
Net Profit or Loss After Tax 291185266 191665200
Earnings Per Share (Basic) 14.03 12.46
Earnings Per Share (Diluted) 14.02 12.08

(Previous year figures have been regrouped wherever necessary to confirm to the currentyear's presentation)

The financial statements for the year ended March 31 2019 and March 31 2018 have beenprepared as per the Ind AS (Indian Accounting Standards).

Performance Review & The State of Company's Affairs

During the year under review your company reported the top line growth of 19.28% overthe previous year. The Revenue from operations amounted to H2629753243 as againstH2204613913 in the previous year. The Earnings Before Interest Depreciation & Tax(EBIDTA) increased by 4.29% to H516552976.5 as against H495303492.2 reported inprevious year. The Profit Before Tax for the year under review is H322429555 whichincreased by 4.15% as against H309580936 reported in Previous Year. The Net Profit forthe year under review amounted to H291185266 against H191665200 in the previousyear. During the year under review the Earning per Share of the company is H14.03 (Basic)and H14.02 (Diluted).

Business Outlook

The continuing vulnerability in threats across borders and within homeland is adriving force across world for developing sophisticated weapons and artificialintelligence built solutions to address the unforeseen challenges which cannot bemitigated by forces alone. Indian sub-continent is no exception to this with its longestBorder on ground and in waters. The constant requirement to enhance security within thecountry with state of the art technologies has taken a greater push in the recent past.Several flag ship programmes related to safe city smart city programmes rolled out toprotect critical and strategic infrastructure of the country has taken greater importance.This resulted in potential growth in Home Land Security Business in the country. TheIndian Government has also set targets to achieve export of Defence equipment to variousfriendly countries and there has been notable progress towards this in past few yearswhich is again a boost for the Public and Private Defence Industries.

Your company has been working on niche technologies for past several decades and hasbeen instrumental in supply and integration of critical weapon system electronics for bothOn-Board and Ground Support equipment. Your company has not worked merely as a supplierbut as a strategic partner in the success of strategic programmes of the country. Toenhance the capacity & capabilities we have augmented our facility with latestmachinery to achieve shorter around time in production and strengthened the Design &Development team by addition of programme managers in senior levels and engineers inworking team.

Keeping in view of the growing market size in Defense & Home land Security we haveentered in strategic alliance with global companies and integrate our solutions to offer aturnkey solutions to customers. Company continues to enhance its vision of being a globalcompany with Indigenous technology. We believe that continuing to be an IndigenousTechnology developer we continue to enter more strategic alliances with globally renownedcompanies to address the push of Make in India and be a part of the global supply chainfrom India. Our company's outlook for selective acquisitions to consolidate technologicalpresence in the existing sectors is still in pursuit which would give a value addition toour existing offerings.

Credit Rating

Your Company has been rated by ICRA Limited ("ICRA"). ICRA has assigned LongTerm Rating of "[ICRA] BBB-" (pronounced ICRA triple B minus) from [ICRA]BBB (pronounced ICRA triple B) and the short term rating of "[ICRA] A3" (pronouncedICRA A three) from [ICRA A3+] (pronounced ICRA A three plus) to H142 Crores Line ofCredit of the Company. The outlook on Long Term Rating has been revised to ‘Negative'from ‘Stable'.

Utilisation of IPO Proceeds

As per the prospectus the funds raised through Initial Public Offering("IPO") of H156 Crore in January 2018 are required to be fully utilised as perthe Objects of the Issue i.e. for Working Capital Requirement and General CorporatePurpose by the Financial Year Ending 2019.

The IPO proceeds have been fully utilised by the Company towards stated objects.

Share Capital

(a) Changes in Capital structure of the Company

During the period under review there has been no change in the Capital Structure ofthe Company and the Company has not issued any sweat equity shares or bonus shares orequity shares with differential rights.

(b) Status of Shares

As the members are aware the Company's shares are compulsorily tradable in electronicform. Out of the total paid up capital representing 20763886 equity shares thefollowing equity shares of the Company are in dematerialised and physical form as on March31 2019:

Capital Details No. of Shares % of Total issued Capital
1. Held in dematerialised form in CDSL 2780577 13.39
2. Held in dematerialised form in NSDL 17963301 86.51
3. Physical 20008 0.10
Total 20763886 100.00

Note: Pursuant to the amendment in Regulation 40 of SEBI (LODR) Regulations 2015dated June 8 2018 & SEBI date extension circular dated Dec 03 2018 has mandatedthat transfer of securities would be carried out in dematerialised form only effectiveApril 01 2019. So it is requested to all the Members holding the shares in physical formto dematerialise the same for giving effect to any transfer of Company's securities.

Extract of The Annual Return [Section 134 (3) (A) & Section 92(3)]:

The Extract of Annual Return is prepared in Form MGT-9 as per the provisions of the Actand Rule 12 of Companies (Management and Administration) Rules 2014 and the same isannexed to the Board's Report as Annexure-I

Number of Meetings of The Board of Directors [Section 134 (3) (B)]:

During the year under review four meetings of the Board of Directors of the Companywere held on May 29 2018; August 09 2018; November 01 2018 and; January 31 2019. Theattendance of Directors for the above meetings are given in the Corporate GovernanceReport that forms part of this Annual Report. The maximum interval between any twomeetings did not exceed 120 days.

In terms of requirements of Schedule IV of the Act a separate meeting of IndependentDirectors was also held on January 31 2019 to a) Review of performance of the Board andCommittees as a whole;

b) Review of performance of the Chairperson of the Company taking into account theviews of Executive Directors and Non-Executive Directors;

c) Assessment of the quality quantity and timeliness of flow of information betweenthe Company management and the Board that is necessary for the Board to effectively andreasonably perform their duties.

Director's Responsibility Statement [Section 134 (3) (C) & 134(5)]:

Pursuant to Section 134(5) of the Companies Act 2013 (the "Act") Directorsof your Company hereby state and confirm that:

(a) in the preparation of the annual accounts for the period ended March 31 2019 theapplicable accounting standards had been followed along with proper explanation relatingto material departures;

(b) the directors have 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 of the company for that period;

(c) the directors have 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 have prepared the annual accounts on a going concern basis;

(e) the directors have laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively; and

(f ) the directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

Details of Frauds Reported by Auditors Under Section 143(12) other Than Those Which areReportable to The Central Government [Section 134 (3) (CA)]:

During the year under review Statutory Auditor and Secretarial Auditor have notreported any incident of fraud under sub section 12 of section 143 of the Act.

Statement on Declaration Given by Independent Directors [Section 134 (3)(D)]:

The Company has received and taken on record the declarations received from theIndependent Directors of the Company confirming their Independence in accordance with theSection 149(6) of the Act and sub regulation (8) and (9) of regulation 25 of SEBI (LODR)Regulations 2015. In opinion of the Board they fulfill the conditions specified in theAct and the Rules made there under for the appointment as Independent Directors and areindependent of the management.

Familiarisation Programme

In compliance with the requirements of the SEBI (LODR) Regulations 2015 the Companyhas put in place a familiarisation programme for the Independent Directors to familiarisethem with their roles rights and responsibilities as Independent Directors the workingof the Company nature of the industry in which the Company operates business model andso on. The same is also available on the Company website at www. apollo-micro.com underthe Section "Investors".

Committees of The Board

The Board of Directors has constituted various mandatory and non-mandatory Committeesto deal with specific areas and activities which concern the Company and requires a closerreview. The Committees are formed with approval of the Board and function under theirrespective Charters. These Committees play an important role in the overall management ofday-to-day affairs and governance of the Company. The Board Committees meet at regularintervals and take necessary steps to perform its duties entrusted by the Board. TheMinutes of the Committee Meetings are placed before the Board for noting. The Boardcurrently has the following Committees:

(a) Audit Committee:

The Audit Committee was constituted by our Board in accordance with Section 177 of theAct and Regulation 18 of the SEBI (LODR) Regulations 2015. The composition quorum termsof reference functions powers roles and scope are in accordance with Section 177 of theAct and the provisions of Regulation 18 of the SEBI (LODR) Regulations 2015. All themembers of the committee are financially literate and Ms. Karunasree Samudrala CharteredAccountant the Chairman of the Committee is an Independent Director and possessesfinancial expertise.

The details regarding composition terms of references powers functions scopemeetings and attendance of members are included in Corporate Governance Report which formspart of the Annual Report.

(b) Corporate Social Responsibility (CSR) Committee

The Company believes in undertaking business in such a way that it leads to overalldevelopment of all stake holders and society. The Company considers social responsibilityas an integral part of its business activities and endeavours to utilize allocable CSRbudget for the benefit of society.

The CSR Committee has been constituted as required under the provisions of section 135of the Act.

The Committee formulated and recommended to the Board the CSR Policy. On therecommendations of the CSR Committee the Board approved and adopted the CSR Policy of theCompany. The Corporate Social Responsibility Policy is posted under the Investors sectionof the Company's website at: http://www.apollo-micro.com/investorfirelations/CSR-Policy.pdf.

As per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules 2014annual report on CSR is prepared and the same is enclosed as Annexure-II to thisReport.

During the year under review the total CSR Expenditure amounts to H7400000/- whichfulfils the Company's CSR obligation for the previous Financial Years 2017-18 2016-17 and2015-16. Out of the above expenditure H44757.79/- is toward the FY 2018-19. Further theunspent CSR obligation for the FY 2018-19 will be duly spent by the Company. The Companyis searching for the new avenues or projects in the direction of Company's CSR Policy sothat the benefits of such an initiative can reach to the downtrodden people of thesociety.

The details regarding composition objectives powers functions scope meetings andattendance of members are included in Corporate Governance Report which forms part of theAnnual Report.

(c) Stakeholder's Relationship Committee

Stakeholder's Relationship Committee has been constituted by the Board in accordancewith Section 178 (5) of the Companies Act 2013.

The details regarding composition terms of references powers functions scopemeetings attendance of members and the status of complaints received during the year areincluded in Corporate Governance Report which forms part of the Annual Report.

(d) Nomination and Remuneration Committee

The Nomination and Remuneration Committee has been constituted by the Board inaccordance with section 178 of Act and Regulation 19 of SEBI (LODR) Regulations 2015.

The details regarding composition terms of references powers functions scopemeetings and attendance of members are included in Corporate Governance Report which formspart of the Annual Report.

Policy on Remuneration of Directors KMPs and other employees

The Policy of the Company on remuneration of Directors KMPs Senior Management andother employees including criteria for determining qualifications positive attributesindependence of a Director and other matters provided under sub-section (3) of section 178is made available on the Company's website www.apollo-micro.com under the section"Investors". The website link is http://apollo-micro.com/wp-content/uploads/2017/09/REMUNERATION_POLICY.pdf.

(e) Risk Management Committee

The Risk Management Committee was constituted pursuant to resolution of the Boardwhich has been entrusted with the responsibility to assist the Board in overseeing andapproving the Company's enterprise wide risk management framework.

The details regarding composition terms of references powers functions scopemeetings and attendance of members are included in Corporate Governance Report which formspart of the Annual Report.

(f) Executive Committee

During the Financial Year 2018-19 the Board constituted the Executive Committee ofDirectors and Chief Financial Officer (CFO) under the provisions of Section 179(3) of theAct and rules made there under in order to have the timely and expeditious execution ofroutine financial matters.

The details regarding composition terms of references powers responsibilitiesscope meetings and attendance of members are included in Corporate Governance Reportwhich forms part of the Annual Report.

Explanations or Comments by The Board on Every Qualification Reservation or AdverseRemark or Disclaimer Made [Section 134 (3) (F)]:

By the Auditor in their Report: has no qualification or adverse remarks By CompanySecretary in Practice in Secretarial Audit Report: has no qualification or adverse remarks

Particulars of Loans Guarantees or Investments Under Section 186 [Section 134 (3)(G)]:

During the period under review the Company has not given any loans or guarantees toany person or other bodies corporate or acquired securities of any other body corporate asreferred to in Section 186 of the Act and the Companies (Meetings of Board and its Powers)Rules 2014. Further the company has not made any investment during the period underreview.

Subsidiaries and Associates [Rule 8(5)(iv) of Companies (Accounts) Rules 2014]

During the period under review Company does not have subsidiaries/ jointventures/Associate Companies.

Particulars of Contracts or Arrangements with Related Parties [Section 134 (3) (H)]:

All related party transactions entered into by the Company during the financial yearwere in the ordinary course of business and on arm's length basis and in compliance withthe applicable provisions of the Act and the SEBI (LODR) Regulations 2015. During thefinancial year under review none of the transactions entered into with related partieswere material as defined under the Act and SEBI (LODR) Regulations 2015.

The particulars of contract or arrangements entered into by the Company during thefinancial year 2018-19 with related parties referred to in sub-section (1) of section 188of the Act including certain arms length transactions under third proviso thereto has beendisclosed in Form No. AOC -2 attached to the Board's report as Annexure-III. ThePolicy on Related Party Transactions as approved by the Board is uploaded on the Company'swebsite www.apollo-micro.com under the Section "Investors".

Reserves [Section 134 (3) (J)]:

During the Year under review the Board of Directors has not recommended transfer ofany amount of profit to any reserves. Hence the amount of profit for the financial yearunder review has been carried forward to the Statement of Profit and Loss.

Dividend [Section 134 (3) (K)]:

During the year under review on November 01 2018 pursuant to the provisions ofSection 123 of the Act and Companies (Declaration and Payment of Dividend) Rules 2014 theBoard in its meeting had declared the Interim Dividend at the rate of 10% i.e. H1/-perEquity Share of H10/- each (Face Value) for the FY 2018-19. The Interim Dividend entailsthe total payout of H25031964 (including Dividend Distribution Tax of H4268078).Interim Dividend was duly paid to the members whose name appears in the Company's Registerof Members and to those persons whose names appear as Beneficial Owners as per the detailsfurnished by National Securities Depository Limited (NSDL) and Central Depository Services(India) Ltd. (CDSL) on the record date November 16 2018 as fixed. The dividend pay-outwas in accordance with the Company's Dividend Distribution Policy.

The details with respect to unpaid/ unclaimed Interim Dividend for the Financial Year2018-19 are available on the Company's website www.apollo-micro.com under theSection "Investors". The website link ishttp://apollo-micro.com/wp-content/uploads/2019/03/apollo-IEPF-2_18-19_2019-WEBSITE.pdf

Dividend Distribution Policy

Pursuant to Regulation 43A of the SEBI (LODR) Regulations 2015 mandates top 500 ListedCompanies based on their market capitalization to formulate Dividend Distribution Policy.As per Regulation 43A of SEBI (LODR) Regulations 2015 your company has voluntarilyadopted Dividend Distribution policy.

Accordingly the policy was adopted to set out parameters and circumstances that willbe taken into account by the Board in determining the distribution of dividend to theshareholders. The Policy is also available on the Company's website under the web linkhttp://apollo-micro.com/investors. The Policy is also annexed herewith as Annexure-IVto the Board's Report.

Material Changes and Commitments if any [Section 134 (3) (L)]:

There were no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year of the company to whichthe financial statements relate and the date of this report.

Conservation of Energy Technical Absorption and Foreign Exchange Earnings and Outgo[Section 134 (3) (M)]:

A. Conservation of Energy

The operations of the company are not energy intensive. Adequate measures are taken toconserve and reduce the energy consumption like usage of LED Lights and power savingcentralized air conditioners.

Research & Development

During the year under review we have strengthened the size of our R&D team whoworked on extremely complex SONAR systems development along with the development and upgradation of various avionics packages. We believed and continue to believe that presenttechnological development is with the basis of our future repository of technology. Wealso laid foundation by developing innovative technologies for Home Land Securitysolutions which would undergo field trials and will be path breaking solution competingwith the global vendors to address security of critical infrastructure of Indiansub-continent. In Fiscal 2019 we have spent H103358300.00 towards our R&Dactivities.

B. Technical Absorption

The Company works on in house Technology.

C. Foreign Exchange Earnings and Outgo:

Foreign Exchange outgo and earnings

Particulars Year ended March 31 2019 Year ended March 31 2018
Value of imported raw- materials on CIF basis Rs. 181679070/- Rs. 146128193/-
Earnings in foreign currency:
FOB Value of Exports -- --
For Services rendered -- --

Annual Evaluation on Performance [Section 134(3) (P)]:

Pursuant to the captioned requirements an annual evaluation had been carried out andthe Board is pleased to report that the result thereof show that the Company iswell-equipped in the management as well as the governance aspects. In a separate meetingof Independent Directors held on January 31 2019 performance of Non-Independent Directorsand performance of the Board as a whole was evaluated. The Independent Directors weresatisfied with the overall functioning of the Board its various committees andperformance of other Non-Executive and Executive Directors.

Employee Stok Options Scheme [Rule 12(9) of Companies (Share Capital and Debentures)Rules 2014]:

During the year under review on recommendation of Nomination and RemunerationCommittee the Board has approved the Apollo Employee Stock Option Scheme 2018 (ESOS-2018)in order to attract reward motivate and retain its employees who have shown high levelsof individual performance and for the unusual efforts put in by them to improve thefinancial performance of the Company which ultimately contributes to the success of theCompany and subsequently approved by members of the Company by way of passing specialresolution . The implementation of Apollo Employee Stock Option Scheme 2018 will bethrough trust route and secondary acquisition of the equity shares of the Company by thetrust as set up in accordance with the provisions of the Act and Securities and ExchangeBoard of India (Share Based Employee Benefits) Regulations 2014.

The disclosures as stipulated under the Act and SEBI (Share Based Employee Benefits)Regulations 2014 as on March 31 2019 with regard to the Apollo Employee Stock OptionScheme 2018 (ESOS-2018) are annexed to this Report as Annexure-V.

Change in the Nature of Business [Rule 8(5)(Ii) of Companies (Accounts) Rules 2014]

There is no change in the nature of the business of the Company during the financialyear under review.

Change in the Directors or Key Managerial Personnel [Rule 8(5)(Iii) of Companies(Accounts) Rules 2014]

Directors

The composition of the Board is in conformity with Regulation 17 of the SEBI (LODR)Regulations 2015 and Section 149 of the Act. There is an optimum combination of Executiveand Non-Executive Directors. As on March 31 2019 the Company has 6 (six) Directors. Outof the 6 (six) Directors 3 (three) are Executive Directors 2(two) Non-Executive-Independent Directors and 1 (one) Non- Executive Non Independent Director.

Appointments

During the year under review Mrs. Karunasree Samudrala (DIN: 06960974) was inducted onthe Board of the Company with effect from May 29 2018 as an Additional Non ExecutiveIndependent Director and subsequently her appointment was regularised by the Members ofthe Company by passing an Ordinary Resolution in 21st Annual General Meeting of theCompany held.

Resignation

During the year under review Mr. Srinivas Pagadala (DIN: 02669528) Non ExecutiveIndependent Director resigned and ceased to be a Director of the Company with effect fromAugust 02 2018. Further he also ceases to be chairman or member from all the Boardcommittees he holds.

Retire by rotation

Further Mrs. Sri Lakshmi Reddy Vangeti retires by rotation at the ensuing AnnualGeneral Meeting and being eligible offers herself for reappointment.

Additional information on reappointment of Mrs. Sri Lakshmi Reddy Vangeti as directorand as required under regulation 36 of the SEBI (LODR) Regulations 2015 is given in theNotice convening the forthcoming AGM.

Key Managerial Persons (KMP)

During the year under review there was no change in the Key Managerial Persons of theCompany.

Deposits [Rule 8(5) (V) of Companies (Accounts) Rules 2014]

The Company has not accepted any deposits within the meaning of Section 73 of the Actread with the Companies (Acceptance of Deposits) Rules 2014. There are no unpaid orunclaimed deposits as the Company has never accepted deposits within the meaning of theAct and the rules made there under.

Significant and Material Orders [Rule 8(5) (Vii) of Companies (Accounts) Rules 2014]

The Company hasn't received any significant and material orders that impact the goingconcern status and company's operations in future

Internal Financial Controls [Rule 8(5)(Viii) of Companies (Accounts) Rules 2014]

The Company has kept in place adequate financial controls to check and control anydefects and frauds in the Company. Adequate internal control systems commensurate with thenature of the Company's business its size and complexity of its operations are in placeand have been operating satisfactorily. Internal control systems comprising policies andprocedures are designed to ensure reliability of financial reporting timely feedback onachievement of operational and strategic goals compliance with policies procedureapplicable laws and regulations and that all assets and resources are acquiredeconomically used efficiently and adequately protected.

The Board of Directors of the Company have adopted various policies like Related PartyTransactions Policy Vigil Mechanism Policy and such other procedures for ensuring theorderly and efficient conduct of its business for safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information.

Particulars of Employees

Disclosures under section 197(12) of the Act read with Rule 5(1) and 5(2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 respectivelyis annexed to the Board's report as Annexure-VI.

Auditors and Audit Report:

(a) Statutory Auditors & their Reports

M/s. S T Mohite & Co. (FRN 011410S) Hyderabad were appointed as Statutory Auditorsof the Company in the adjourned Annual General Meeting held on August 26 2017 for aperiod of 5 Years and holds office until the conclusion of the 25th Annual General Meetingto be held in the calendar year 2022 (subject to ratification by the shareholders at eachAnnual General Meeting) on such remuneration as may be determined by the Board. Pursuantto notification dated May 7 2018 issued by the Ministry of Corporate Affairs New Delhirequirement to place the matter relating ratification to appointment of Auditors bymembers at every Annual General Meeting is omitted.

Further M/s. S T Mohite & Co. have confirmed their eligibility for theirappointment as Statutory Auditors and the same are within the limits as specified insection 141 of the Act and have also confirmed that they are not disqualified fromcontinuing as Auditors of the Company.

The Notes on financial statement referred to in the Auditors' Report areself-explanatory and do not call for any further comments.

The statutory auditors' report is forming the part of this report. The notes onfinancial statements referred to in the Auditors' Report are self-explanatory and do notcall for any further comments. There are no specifications reservations adverse remarkson disclosure by the statutory auditors in their report. They have not reported anyincident of fraud to the Board of the Company during the year under review.

(b) Internal Auditors

As per the provisions of Section 138 of the Act and the rules made there under theBoard of Directors had appointed M/s Surya Pavan & Co Chartered AccountantsVijaywada (ICAI Firm Registration No. 015612S) as Internal Auditor to conduct theinternal audit of the Company for the Financial Year 2018-19.

The Internal Audit Report for the Financial Year 2018- 19 issued by M/s Surya Pavan& Co Chartered Accountants Vijaywada is submitted which is self-explanatory and donot call for any further explanation of the Board.

Further on the recommendation of audit committee the Board of Directors of theCompany has approved the re- appointment of aforesaid audit firm as internal auditors forthe Financial Year 2019-20.

(c) Cost Auditors

As per Cost Audit applicability cost compliance is not applicable for FY 2018-19 asthe Company is small scale industry under MSME. Hence the maintenance of cost records asspecified by the Central Government under sub section (1) of section 148 of the Act is notrequired.

(d) Secretarial Auditors

As per the provisions of Section 204 of the Act and the rules made there under theBoard of Directors had appointed Mr. Venkatesh Reddy Datla Practicing Company SecretaryHyderabad (Membership No: 36504; CP No: 14074) as Secretarial Auditor to conduct theSecretarial audit of the Company for the Financial Year 2018-19.

The Secretarial Audit Report pursuant to the provisions of Section 204 read withSection 134(3) of the Act issued by Mr. Venkatesh Reddy Datla Practicing CompanySecretary in Form MR-3 for the financial year 2018-19 is annexed to the Board's Report asAnnexure-VII

Further the Board has approved the re- appointment of Mr. Venkatesh Reddy DatlaPracticing Company Secretary Hyderabad (Membership No: 36504; CP No: 14074) as theSecretarial Auditor of the Company for the Financial Year 2019-20.

Management Discussion and Analysis

The Management Discussion and Analysis Report for the year under review as stipulatedunder the SEBI (LODR) Regulations 2015 is presented in a separate section forming part ofthis Annual Report.

Report on Corporate Governance

The Company has complied with the Corporate Governance requirements under the Act andas stipulated under the SEBI (LODR) Regulations 2015. A separate section titled‘Corporate Governance Report' Annexure-VIII under the SEBI (LODR) Regulations2015 along with a Corporate Governance certificate from the Practicing Company Secretaryin the Annexure-IX and CFO Certificate in the Annexure-X forms the part ofthis report.

Internal Control Systems and Their Adequacy:

The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. To maintain its objectivity and independence the InternalAudit Functions reports to the Board. Based on the report of internal audit functionprocess owners undertake corrective action in their respective areas and therebystrengthen the controls.

Vigil Mechanism:

The Company's Board of Directors pursuant to the provisions of Section 177(9) of theAct read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules 2014 hasframed ‘Whistle Blower Policy' for Directors and employees of the Company. The policyis to provide a mechanism which ensures adequate safeguards to employees and Directorsfrom any victimisation on raising of concerns of any violations of legal or regulatoryrequirements incorrect or misrepresentation of any financial statements and reports andso on. The employees of the Company have the right/option to report theirconcern/grievance to the Chairman of the Audit Committee. The Company is committed toadhere to the highest standards of ethical moral and legal conduct of businessoperations. The Whistle Blower Policy is hosted on the Company's websitewww.apollo-micro.com

Investors Education and Protection Fund (IEPF)

Pursuant to section 124 of the Act Dividends that are unclaimed for a period of sevenyears are required to be transferred to the IEPF established by the Government of India.During the year under review there was no outstanding amount of unclaimed dividends whichwas liable to be transfer to the IEPF.

Human Relations:

The Company continues to have cordial and harmonious relationship with its employeesand thank all employees for their cooperation and the contribution towards harmoniousrelationship and progress of the company.

Policy on Sexual Harassment:

Your Company is committed to provide work environment that ensures every employee istreated with dignity and respect and afforded equitable treatment. The Company is alsocommitted to promoting a work environment that is conducive to the professional growth ofits employees and encourages equality of opportunity and will not tolerate any form ofsexual harassment and to take all necessary steps to ensure that its employees are notsubjected to any form of harassment.

Thus in order to create a safe and conducive work environment the Company has in placea policy for prevention of sexual harassment in accordance with the requirements of theSexual Harassment of women at workplace (prevention Prohibition & Redressal) Act2013. Further the Company has complied with provisions relating to constitution ofInternal Complaints Committee under Sexual Harassment of women at workplace (PreventionProhibition & Redressal) Act 2013. The Committee has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtrainees temporary) are covered under this policy. The Company did not receive anycomplaint during the period under review.

Acknowledgements:

The Board thanks all customers bankers investors shareholders vendors and otherstakeholders for their continued support and patronage during the year under review. TheBoard also places on records its sincere appreciation to the employees of the Company fortheir efforts hard work and dedication which enabled the Company to achieve the targetsand recognition.

Place: Hyderabad Date: August 14 2019

For and on behalf of the Board APOLLO MICRO SYSTEMS LIMITED

Sd/- Sd/-
Karunakar Reddy Baddam Krishna Sai Kumar Addepalli
Managing Director Whole Time Director (Operations)
DIN: 00790139 DIN: 03601692

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