To the Members
The Board of Directors of your Company take pleasure in presenting the 23rd AnnualReport on the business and operations of your Company and the Audited Financial Accountsfor the year ended 31st March 2018.
FINANCIAL RESULTS 2017-18
During the year under review your Company has achieved a turnover of Rs.1425.81 lakhsas against Rs.1161.77 lakhs in the previous year. There is a net Profit of Rs.108.29 lakhsas against the net profit of Rs.36.17 lakhs in the previous year.
The global revenues for the Company including the business done by the Wholly OwnedSubsidiary for the year under review is Rs.3042 lakhs as compared to Rs.3234 lakhs in theprevious year. The drop in global revenue is due to lower business done by the subsidiary.
STATE OF AFFAIRS OF THE COMPANY
In the financial year 2017-18 despite challenging business environment your companycontinued the growth momentum and achieved a growth of 23% in the total revenue and thenet profit has increased significantly to Rs 108.29 lakhs.
The contribution of business from various Geographical areas were:
North America contributed to 75% and Rest of the World 25% of the business.
During the year under review Business from Offshore Software Services is Rs.1302.11lakhs as against Rs.1077.71 lakhs in the previous year. The increase has been at 21% ascompared to previous year. There has been a steady growth in the offshore component of thebusiness.
The global market for IT services is expected to expand and corporations areincreasingly using offshore service providers to meet their IT service needs. Thisincreases the addressable market for offshore software services providers like us. Thecompany has been growing positively in the offshore software services business and thismomentum is likely to continue this year.
Our client retention and client satisfaction levels have been growing steadily. We havereceived many client appreciations and significant amount of repeat business. In additionto North America our business and customer base from Australia Africa and Europe is alsoexpanding as planned.
Out-sourced Product development (OPD) market space continues to be the focus area forthe Company as we have achieved significant success. The performance in Cloud practice hasbeen very good and it is expected to grow at the same pace. Apart from strengthening thepresence in the markets the company operates now plans are in place to penetrate intonewer geographies globally.
We expect a positive growth this year and the Company should perform better in theensuing FY 2018-19.
Your company has a strict quality assurance and control programs to ensure that highlevel of Quality service is delivered to the customers. Matured and proven qualitymanagement systems are in place based on the requirements of ISO 9001:2015 standards.
Your Directors recommended a dividend of Rs. 0.50 per equity share (i.e. 5% on eachequity share having Face value of Rs. 10 each) subject to the approval by theshareholders at the ensuing Annual General Meeting. The total dividend payout will be ofRs.30.39 lakhs inclusive of tax amount of Rs.5.14 lakhs. During the previous year ended2016-2017 your Company has paid a dividend of Rs.25.25 lakhs.
As per Companies ( Accounting Standards) Amendment Rules 2016 dividend and taxthereon will be recognized as liability on approval of shareholders at the ensuing AnnualGeneral Meeting.
The dividend if approved by the shareholders will be paid to those members whosenames appear in the Register of Members as on the date of the Annual General Meeting
TRANSFER TO RESERVES
No amount has been transferred to the general reserve.
After giving enough opportunities and sending various reminder notices requesting theshareholders holding partly paid shares to pay the allotment money due your Directors attheir meeting held on 11th November 2015 has forfeited 9800 equity shares in the capitalof the Company for non-payment of allotment money of Rs.5/-per share in compliance withthe provisions of the Listing Agreement Articles of Association of the Company read withRegulation 29 of Schedule I of Table A of the Companies Act 1956 and Regulation 28 ofTable F of the Companies Act 2013. Notices if such forfeiture were also given to thedefaulting Equity Shareholders. The BSE has approved the forfeiture of equity shares.
MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANYOCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATEAND THE DATE OF THE REPORT
No material changes and commitments affecting the financial position of the Companyoccurred between the end of the financial year to which these financial statements relateand on the date of this report.
The trading in the Equity Shares of your Company is under compulsory dematerializationmode. As on 31st March 2018 Equity Shares representing 91.21% of the equity sharecapital are in dematerialized form. As the depository system offers numerous advantagesmembers are requested to take advantage of the same and avail of the facility ofdematerialization of the Companys shares.
LISTING OF SHARES
The Equity Shares of your Company continue to remain listed with BSE Limited. Thelisting fees for the year 2018-19 have been paid to the Stock Exchange. The Shares of thecompanies are compulsorily tradable in dematerialized form.
The assets of the Company are adequately insured against fire and such other risks asare considered necessary by the Management.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company prepared in accordance with theapplicable Accounting Standards forms a part of this Annual Report.
At CG-VAK Corporate Governance is not just a legal obligation the frame work ensuresthat all the disclosures and informations provided are precise and time bound.Transparency Accountability Integrity and Independence are the bottom-line of ourGovernance. The Company will continue to uphold the true spirit of Corporate Governanceand implement best governance practices.
A detailed report on Corporate Governance pursuant to the requirements of SEBI (LODR)is available as a separate section in this Annual Report. The Auditors report onCorporate Governance confirming the compliance of conditions of Corporate Governance asstipulated is annexed as a part of this report.
MANAGEMENT DISCUSSION AND ANALYSIS
Pursuant to Regulation 34 of SEBI (LODR) Regulations 2015 the Management Discussionand Analysis Report for the year under review is presented in a separate section formingpart of this Annual Report.
NUMBER OF MEETINGS OF THE BOARD
The board met Four times during the financial yearthe details of which are given inthe Corporate Governance Report that forms part of this Annual Report. The intervening gapbetween any two meetings was within the periods prescribed by the Companies Act 2013.
The Audit committee comprises of Independent Directors namely Mr.S.Muthukumar(Chairman) Mr.S.Mohan and Mr.A.Sankar as other Members. All the recommendations made bythe Audit Committee were accepted by the Board.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
As per the requirement of Section 134 (3)(m) of the Companies Act 2013 read with Rule8 (3) of the Companies (Accounts) Rules 2014 the information regarding conservation ofenergy technology absorption and foreign exchange earnings and outgo are given below.
Particulars of Energy Conservation Technology Absorption and Foreign Exchange Earningsand Outgo as required under Companies (Accounts) Rules 2014: A) CONSERVATION OF ENERGYYour Company uses electrical energy for its equipment such as air-conditioners computerterminals lighting and utilities at work places. As an ongoing process the companycontinued to undertake various measures to conserve energy B) TECHNOLOGY ABSORPTION
a) Research & Development
The nature of the business of software development involves inbuilt constant Researchand Development as a part of its process of manufacturing (development). The Company isdeveloping applications engines re-usable codes and libraries as a part of its R&Dactivities.
b) Technology Absorption
The Company has not absorbed technology from outside.
c) Information regarding imported technology (Imported during last three years)
|Details of Technology imported ||Technology imported from ||Year of Import ||Status Implementation/absorption |
|NIL ||NA ||NA ||NA |
|C) FOREIGN EXCHANGE EARNING AND OUTGO ||(Rs.) |
|Foreign Exchange Earnings ||142581031 |
|Foreign Exchange Outgo ||852522 |
|Foreign Travel ||408978 |
|Others ||443544 |
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
In term of the provisions of Section 197(12) of Act read with rules 5(2) and 5(3) ofthe Companies (Appointment and Remuneration of Managerial personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of the limits set out in the said rules are provided in the Annual Report.
Disclosures pertaining to remuneration and other details as required under section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are provided in the Annexure -1.
STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THECOMPANY
The Company has adopted a Risk Management Policy for identifying and managing risk atthe strategic operational and tactical level. The Risk Management policy has been placedon the website of the Company. At present the Company has not identified any element ofrisk which may threaten the existence of the Company.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIESACT 2013
There were no loans and guarantees given or investments made by the Company underSection 186 of the Companies Act 2013 during the year under review.
EXPLANATION OR COMMENTS ON QUALIFICATIONS RESERVATIONS OR ADVERSE REMARKS ORDISCLAIMERS MADE BY THE AUDITORS AND THE PRACTICING COMPANY SECRETARY IN THEIR REPORTS
There were no qualifications reservations or adverse remarks made either by theStatutory Auditors or by the Practicing Company Secretary in their respective reports.Your Directors have provided explanation in Annexure - 2 for the matter of emphasis in theAuditor's Report.
CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES
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 are no materiallysignificant related party transactions made by the Company with Promoters Directors KeyManagerial Personnel or other designated persons which may have a potential conflict withthe interest of the Company at large. All Related Party Transactions are placed before theAudit Committee as also in the Board for approval.
The disclosure on related party is annexed herewith as Annexure - 3.
POLICY ON DIRECTOR'S APPOINTMENT AND REMUNERATION
The current Policy is to have an appropriate mix of executive and independent directorsto maintain the Independence of the Board and separate its functions of the governance andmanagement. As on 31st March 2018the Board consists of 7 members two of whom areexecutive or whole time directors one of whom is Non executive Women Director and Fourare independent directors. The Board periodically evaluates the need for change in itscomposition and size.
The policy of the Company on Directors' appointment and remuneration includingCriteria for determining Qualification positive attributes independence of a directorand other matters provided under sub-section(3) of Section 178 of the Companies Act2013adopted by the Board is appended as Annexure-4 to the Board's Report. We affirm that theremuneration paid to the Directors is as per the terms laid out in the nomination andremuneration policy of the company.
WHOLLY OWNED SUBSIDIARY: CG-VAK SOFTWARE USA INC.
As on 31st March 2018 your Company has only one wholly owned subsidiary. YourCompany's Wholly Owned Subsidiary at USA CG-VAK Software USA Inc. has made a SalesTurnover of US$ 2.53 million during this year compared to the US$ 3.22 million during theprevious year. There has been a drop of revenue by 21% over the previous financial year.The drop is mainly due to the difficulty in obtaining visas for the engineers to travel tothe USA and work in the subsidiary.
During the year the Board of Directors reviewed the affairs of the wholly ownedsubsidiary. In accordance with Section 129(3) of the Companies Act 2013 we have preparedconsolidated financial statements of the Company and the wholly owned subsidiary whichforms part of the Annual Report. Further a statement containing the silent features ofthe financial statement of our wholly owned subsidiary in the prescribed format AOC-1 isappended as Annexure-5 to the Board's Report. The statement also provides the details ofperformance financial positions of the wholly owned subsidiary.
In accordance with Section 136 of the Companies Act 2013 the audited financialstatement including the Consolidated Financial Statements and related information of theCompany and the wholly owned subsidiary are available on our website. These documents willalso be available for inspection during the business hours at our Registered Office.
EXTRACT OF ANNUAL RETURN
In accordance with section 134(3)(a) of the Companies Act2013an extract of annualreturn in the prescribed format is appended as Annexure -6 to Board's Report.
DIRECTOR'S RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 134(3) (C)OF THECOMPANIES ACT 2013
In accordance with the provisions of Section 134(3)(c) of the Companies Act 2013 theDirectors would like to state that:
1 In preparation of annual accounts for the financial year ended 31st March 2018 theapplicable accounting standards have been followed.
2 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 and loss of the Company for that period.
3 The Directors have taken proper and sufficient care towards the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities.
4 The Directors have prepared the annual accounts on a going concern basis.
5 The Directors have laid down internal financial controlswhich are adequate and areoperating effectively.
6 The Directors have devised proper systems to ensure compliance with the provisions ofall applicable laws and such systems are adequate and operating effectively.
SIGNIFICANT AND MATERIAL ORDERS
The Joint Director Directorate of Enforcement vide their order dated 04.12.2017imposed a Penalty amounting to Rs. 1400000/- on the Company for certain procedurallapses under FEMA 1999. The Company had paid the said penalty amount on 11th January2018. The said penalty was paid by the Company in order to buy peace with the department.
SEBI - SECURITIES APPELLATE TRIBUNAL ORDER
During the financial year (2014-15) SEBI Securities Appellate Tribunal had upheld theorders of the SEBI Adjudicating Officer dated 17th December 2013 and imposed a penalty ofRs.300000 lakhs on the Company for delayed disclosure/reporting of purchase of sharesunder the SEBI PIT regulations. The Company had paid the penalty amount on 08th May 2014.
During the year your Company has not accepted/renewed any Deposits.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
As per the provisions of the Companies Act 2013 Mr. G. Suresh retires from office byrotation and being eligible offer himself for re-appointment at the ensuing AnnualGeneral Meeting of the Company.
Pursuant to provisions of Section 203 of the Companies Act 2013 Mr.C.GanapathyExecutive Chairman Mr.G.Suresh Managing Director & CEO Mr.P.S.Subramanian ChiefFinancial Officer and Mr. Harcharan. J Company Secretary and Compliance Officer are theKey Managerial Personnels of the Company.
Brief particulars of Directors eligible for reappointment in terms of SEBI(ListingObligations and Disclosure Requirements) Regulations 2015 and the Secretarial Standardsare annexed to the Notice dated 28thMay 2018 convening the 23rd Annual General Meeting.
DECLARATION BY INDEPENDENT DIRECTORS
The company has received necessary declaration from each independent Director undersection 149(7) of the Companies Act 2013 that they meets the criteria of independencelaid down in Section 149(6) of the Companies Act 2013 and SEBI (LODR) Regulations.
The evaluation framework for assessing the performance of Directors comprises of thefollowing key areas:
1. Attendance of Board Meeting and Board Committee Meetings
2. Quality of Contribution to Board deliberations
3. Strategic perspectives or inputs regarding future growth of Company and itsperformance
4. Providing perspectives and feedback going beyond information provided by themanagement
5. Commitment to shareholders and other stakeholder interests
The evaluation involves self-evaluation by the Board Members and subsequent assessmentby the Board of Directors. A member of the Board will not participate in the discussion ofhis/ her evaluation.
VIGIL MECHANISM/WHISTLE BLOWER POLICY
The Company has adopted a Whistle Blower Policy as a mechanism for employees to reportto the management concern about unethical behaviour actual or suspected fraud orviolation of the company's code of conduct and it affirms that no personnel have beendenied access to the Audit Committee. A copy of Whistle Blower Policy has been placed atour website at www.cgvak.com for reference.
Statutory Auditors M/s. N. C. Rajan & Co Chartered Accountants were appointed tohold office for a term of five consecutive years ie from the conclusion of 21st AGM tillthe conclusion of 26th AGM subject to ratification of their appointment by the Members atevery Annual General Meeting. The Statutory Auditors have confirmed their eligibility andwillingness to continue in office. Pursuant to Companies (Amendment) Act 2017 the Boardrecommends their appointment for the remaining period of their current term from theconclusion of this Annual General Meeting to the conclusion of 26th Annual General Meetingof the Company and would not be subject to ratification at every subsequent AGM.
Mrs.Manimekala V Raj Practising Company Secretary was appointed to conduct thesecretarial audit of the company for financial year 2018-19 as required under Section 204of the Companies Act2013 and Rules made there under. The secretarial audit report for FY2017-18 forms part of the Annual Report as Annexure- 7 to the Board's Report.
INTERNAL FINANCIAL CONTROLS
The Company has in place adequate internal financial controls with reference toFinancial Statements. Such controls were tested during the financial year and no materialweakness in the design or operation was observed.
DISCLOSURE AS REQUIRED UNDER SECTION 22 OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE(PREVENTION PROHIBITION AND REDRESSAL) ACT 2013.
The Company has in this place an Anti Sexual Harassment Policy in line with therequirements of the sexual harassment of women at workplace (prevention prohibitionredressal) Act 2013. The Internal Complaints Committee ("ICC") has been setupto redress the complaints received regarding sexual harassment. All employees are coveredunder this policy.
The following are the complaints received and disposed off during the financial year2017-18:
|A. No. of complaints received ||0 |
|B. No. of complaints disposed off ||0 |
The Directors of your Company would like to take this opportunity to thank one and allassociated with it enabling it to scale greater heights and emerge as a recognizedsoftware solutions vendor in the industry. The faith and confidence shown on your Companyby banks global clients government authorities and shareholders has propelled ourenthusiasm and strengthen our determination to achieve our vision.
Finally your Directors would like to express their sincere thanks to the dedication andcommitted hard work of the employees working in India USA and at various client locationsto reach our corporate vision.
| ||(By Order of the Board) |
| ||For CG-VAK SOFTWARE AND EXPORTS LIMITED |
|Place: Coimbatore ||C.Ganapathy |
|Date : 28 May 2018 ||Chairman |
| ||DIN 00735840 |