Directors of your Company take great pleasure in presenting the 19th Annual Report onthe business and operations of your Company and the Audited Financial Statements for thefinancial year ended March 31 2020.
Pursuant to the notification dated February 16 2015 issued by the Ministry ofCorporate Affairs the Company has adopted the Indian Accounting Standards ("IndAS") notified under the Companies (Indian Accounting Standards) Rules 2015 w.e.f.April 1 2016. The performance of the Company for the FY2019-20 is summarised below:
| || || || ||( Rs in Million) |
|Particulars || |
| ||FY2019-20 ||FY2018-19 ||FY2019-20 ||FY2018-19 |
|Total Income ||41074.57 ||38301.64 ||9707.12 ||8300.29 |
|Profit Before Interest and Depreciation ||6377.31 ||5393.54 ||2982.53 ||2487.37 |
|Interest and Finance Charges (net) ||583.21 ||290.00 ||156.77 ||15.45 |
|Depreciation/ Amortization ||1852.00 ||744.35 ||705.84 ||243.19 |
|Profit Before Tax ||3942.10 ||4359.19 ||2119.92 ||2228.73 |
|Share in net (loss) of associate ||0.01 ||(0.01) ||- ||- |
|Profit from ordinary activities before tax and after share in net loss ||3942.11 ||4359.18 ||2119.92 ||2228.73 |
|Provision for Taxation (including Deferred Tax Charge/ Credit) ||545.26 ||581.41 ||299.77 ||238.52 |
|Net Profit After Tax ||3396.85 ||3777.77 ||1820.15 ||1990.21 |
|Profit attributable to: || || || || |
|Owners of the Company ||3396.86 ||3777.86 ||1820.15 ||1990.21 |
|Non-controlling Interest ||(0.01) ||(0.09) ||- ||- |
|Total ||3396.85 ||3777.77 ||1820.15 ||1990.21 |
|Balance in Profit & Loss Account ||13004.03 ||10493.72 ||14170.47 ||13447.81 |
|Closing Balance in Profit & Loss Account ||12076.46 ||13004.03 ||11886.49 ||14170.47 |
|Earning Per Share ( Rs ) - Basic ||4.90 ||5.48 ||2.63 ||2.89 |
|Earning Per Share ( Rs ) - Diluted ||4.89 ||5.45 ||2.62 ||2.87 |
RESULT OF OPERATIONS:
The consolidated total income increased from Rs 38301.64 Million to Rs 41074.57Million an increase of 7.24% over the previous financial year. The consolidated NetProfit After Tax decreased from Rs 3777.77 Million to Rs 3396.85 Million a decrease of10.08% over the previous financial year. The detailed analysis of the consolidated resultsform as part of the Management Discussion and Analysis Report provided separately as partof the Annual Report.
The standalone total income increased from Rs 8300.29 Million to Rs 9707.12 Millionan increase of 16.95% over the previous financial year. The standalone Profit After Taxdecreased from Rs 1990.21 Million to Rs 1820.15 Million a decrease of 8.54% over theprevious financial year.
INCREASE IN SHARE CAPITAL:
During the year your Company issued/ allotted 2761750 equity shares of the facevalue of Rs 10/- each on the exercise of stock options under Firstsource SolutionsEmployee Stock Option Scheme 2003 (ESOS 2003). Consequently the outstanding issuedsubscribed and paid up capital of the Company has increased from 691065030 shares to693826780 shares of Rs 10/- each aggregating to Rs 6938.27 Million as on March 312020.
GLOBAL OPERATION CENTERS:
The Company on a consolidated basis have 36 global operation centers as on March 312020. The centers are located across the US the UK India and the Philippines. 11 of theCompany's operation centers are located in 7 cities in India 17 in the US 6 in the UKand 2 in the Philippines.
During the year the Company incurred capital expenditure of Rs 903 Million mainlytowards refurbishment and maintenance of operation centers technology upgrade and settingup of new operations centers.
The Company follows global best practices for process excellence and the qualityframework is based on COPC principles. The Company uses innovative techniques like Speech& Text Analytics Robotic Process Automation and Intelligent Action Board to driveimprovements across. Also as part of the Quality Management System the Company hasembraced ISO 9001:2008. The Company continues to follow process improvement methodologieslike Six Sigma Lean and Kaizen.
AWARDS AND ACCOLADES:
The Company received the following awards and accolades during the year:
'Best Complaint Handling' and 'Best Complaint Handling Team of the Year -Financial Services' at the UK Complaints Handling (UKCH) Awards 2020;
'Technology-Enabled Project of the Year' and 'Customer Experience Provider ofthe Year' at the Global Sourcing Association (GSA) UK Awards 2019;
Winner of 'Best Use of Technology in HR' at Employee Engagement Summit MumbaiIndia;
Gold Award for 'Best Use of Customer Insight' at the UK Customer ExperienceAward (CXA '19);
'Outsourced Contact Centre of the Year' recognition at the Contact CentreNetwork Northern Ireland (CCNNI) Awards 2019;
Winner in 'Creating an Impact: Business Skills' category at the India InnovationAwards at Perspectives 2019;
'Best Outsourcing Partnership' at the North East Contact Centre Awards 2019.
CONSOLIDATED FINANCIAL STATEMENTS:
In accordance with Section 129(3) of the Companies Act 2013 and in view ofnotification issued by the Ministry of Corporate Affairs on Ind-AS the Company hasprepared consolidated financial statements of the Company and all its subsidiaries as perInd-AS which forms part of this Annual Report.
The Board approved and declared an interim dividend on February 17 2020 at the rate of25% i.e. Rs 2.50 per share of Rs 10/- each.
The interim dividend for FY2019-20 (including dividend distribution tax) aggregated toRs 2091 Million.
TRANSFER TO RESERVE:
The Board of Directors of the Company (hereinafter referred to as the"Board") have not recommended transfer of any amount of profit to reservesduring the year under review other than as mentioned above. Hence the remaining amount ofprofit for the financial year under review has been carried forward to the Statement ofProfit & Loss.
On a consolidated basis the Company has 21203 employees as of March 31 2020.
PARTICULARS OF THE EMPLOYEES AND RELATED DISCLOSURES:
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 ("Act") read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 form part of thisReport and are annexed as Annexure I.
The statement containing particulars of employees as required under Section197(12) ofthe Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is provided in a separate annexure forming part of thisReport. Further the Report and the accounts are being sent to the members excluding theaforesaid annexure. In terms of Section 136 of the Act the said annexure is open forinspection at the Registered Office of the Company. Any shareholder interested inobtaining a copy of the same may write to the Company Secretary.
During the year under review your Company has not accepted any deposits under Section73 of the Act and as such no amount on account of principal or interest on publicdeposits was outstanding as of March 31 2020.
PARTICULARS OF LOANS INVESTMENTS GUARANTEES AND SECURITIES:
Particulars of loans given investments made guarantees given and securities providedalong with the purpose for which the loan or guarantee or security is proposed to beutilized by the recipient are provided in the notes to the standalone financialstatements. (Please refer to Note No. 6 & 29 to the standalone financial statements).
During the year under review CARE has upgraded rating of the Company as mentionedherein below:
|Long/ Short term Bank Facilities - ||CARE A+:Stable/CARE A1+ |
|Fund/ Fund Based Facilities ||(Single A plus; Outlook:Stable/A |
| ||One plus) |
|Short Term Bank Facilities - Non Fund ||CARE A1+ |
|Based Facilities ||(A One plus) |
CORPORATE SOCIAL RESPONSIBILITY INITIATIVES:
The Company seeks to be a good corporate citizen in all aspects of its operations andactivities. We commit to operating in an economically socially and environmentallyresponsible manner whilst balancing the interests of diverse stakeholders. Our CSR Policyis governed and guided by our Group's corporate vision to enable inclusive growth and ouraspiration to be India's leading business group serving multiple market segments for ourcustomers shareholders employees and community. The Company seeks to undertakeprogrammes in the areas of Healthcare Education Environment Arts & CulturePromotion of Sports as well as support initiatives towards Gender Equality and Empowermentof Women.
The Board constituted a Corporate Social Responsibility (CSR) Committee pursuant toSection 135 of the Act consisting of Mr. Shashwat Goenka (Chairman) Mr. RajeshSubramaniam (ceased to be Managing Director & CEO w.e.f. August 1 2019) Mr. VipulKhanna (appointed as Managing Director & CEO w.e.f. August 2 2019) Mr. SubrataTalukdar and Mr. Pradip Roy (Independent Director) as its members. The CSR Committee meetsat least once in a year. During the year under review the Committee met twice. Thedetails of CSR Committee and its meetings are given in Report on Corporate Governanceforming part of the Annual Report. The CSR Committee has framed and formulated a CSRPolicy indicating the activities to be undertaken by the Company in accordance withSchedule VII of the Act and the Companies (Corporate Social Responsibility Policy) Rules2014 issued under the Act. The same has also been approved by the Board. The CSR policy isavailable on the website of the Company at the link https://www.firstsource.com/wp-content/uploads/2020/06/CSR-Policy-2020-V1.pdf.
The Annual Report on CSR Activities as stipulated under the Act and the SEBI (LODR)Regulations 2015 forms an integral part of this Report and is appended as Annexure II.The details of focus areas of engagement as mentioned in the CSR Policy of the Company arementioned in the said Annual Report on CSR Activities.
The CSR activities as per the provisions of the Act may also be undertaken by theCompany through a registered trust. Accordingly "RP - Sanjiv Goenka Group CSRTrust" ("CSR Trust") was formed along with other Group Companies to pursueCSR activities as mentioned in the CSR Policy of the Company. During the year the Companyhas spent an amount of Rs 40.52 Million on CSR activities as mentioned in the CSR Policy.Out of the said amount majority of the amount has been contributed by the Company towardsthe corpus of the CSR Trust which would be spent by the CSR Trust on the focus areas asmentioned in the CSR Policy of the Company.
The CSR at the Company is a platform for giving back to the communities in which welive and work. The Company looks to engage employees in focus areas where possible throughprogrammes such as employee volunteering payroll giving participating in fundraisingevents partnering with NGO's and response to disasters.
In wake of the COVID-19 outbreak Firstsourcers procured personal hygiene kitsfor 200+ Govt. school students including toiletries for the school (Hand sanitizerAntiseptic liquid Disinfectant Band-Aids Soaps Tooth paste & brush comb) worth Rs0.22 Million;
Daan Utsav celebrated in the first week of October witnessed donation drivesfor food stationary for children and other household items to the tune of Rs 0.73Million. In addition meals and tiffin boxes were distributed amongst all the housekeepingstaff and security guards across India offices;
Firstsourcers sponsored a fundraising event (Kalpataru - A Musical) for 'Lightof Life Trust' for Rs 0.20 Million;
Firstsourcers donated Rs 0.20 Million to 'Foundation for Excellence' assistingScholarship opportunities for the underprivileged;
Firstsourcers from the Bangalore office visited 'Swanthana' an NGO that housesgirls with multiple disabilities. The team spent time with them and donated day-to-daypersonal care items groceries utensils and bed sheets contributed by their colleagues;
Firstsourcers in Gandhinagar visited 'Pragati Foundation' for intellectuallydisabled children and donated learning aids worth Rs 0.01 Million;
Bangalore office volunteered to support and spend time with the cancer patientsat 'Karunashraya' a hospice trust which is a joint venture of the Indian Cancer Societyand Rotary Bangalore. Firstsourcers also donated tiffin boxes and food to the housekeeping staff as a token of appreciation for their service;
Gandhinagar office witnessed volunteering at the 'Rahelba Vrudhashram-NirmadSeva Trust' in support of the elderly. They also donated groceries a washingmachine and other food items;
Trichy office visited 'Kangaru Karunai Illam' old age home and donated groceriesand other essentials worth Rs 0.01 Million;
Vijaywada office visited 'Amma' old age home and donated groceries and otheressentials worth Rs 0.01 Million;
Bangalore office in partnership with 'Cheshire Homes' launched a book donationand Employee Volunteering drive and donated books stationaries school bags waterbottles and other school supplies for 40 school going girls. Firstsourcers donated acomplete day's meals for 150 Orphans in Bangalore;
Firstsourcers from Mumbai office in collaboration with 'Oasis' an NGO workingto prevent human trafficking and other forms of violence against women and childrendonated groceries and other supplies to assist each person to flourish in the context oftheir community;
Gandhinagar enjoyed a grand Raksha Bandhan a festival celebratingbrother-sister relationships by reaching out to the police officers and offering smalltokens of appreciation;
Bangalore office volunteered and donated books sweaters football &crickets sets plates tiffin boxes washing machines groceries toiletries stationaryboard games crafts & sweets to various NGOs like 'The Baale Mane Trust' 'BrahmiEducational and Cultural Trust' 'Ashwini Charitable Trust' & 'Miracle MannaMinistry'. These non-profits work in the space of child empowerment;
Gandhinagar office donated laptops for computer labs and food to a nearby Govt.school 'Ratanpur Primary School & Aanganwadi' that supports children;
Gandhinagar office donated groceries and Public Address systems to the 'ServiceAssociation for the Blind';
Firstsourcers in Bangalore sponsored education for 3rd and 4th standard childrenalongwith one day's meals for all the beneficiaries at Rohi Foundation an NGO working forthe better future of below poverty line families and their children. Amount spent was Rs0.09 Million;
Firstsourcers helped setup an IVRS worth Rs 0.28 Million to manage the influxof global calls for INALI Foundation- an NGO working to provide affordable syntheticlimbs.
Firstsourcers donated food items bottled water and hygiene kits for theevacuees from the Taal Volcano Eruption;
Cebu office employees participated in the annual blood donation campaign on sitein partnership with the 'Philippine Red Cross Cebu Chapter';
Visually impaired massage therapists were invited to offer their services to topperforming employees in Cebu Skyrise 1.
'Firstsourcers at Derry office participated in Community Gardening. They went toa local nursery and completed some outside work;
Derry office celebrated 'Hugs for Hope' as an effort to inspire random acts ofkindness and emotional support for individuals and families in treatment and recoveryrelated to mental health issues;
Firstsourcers celebrated the 'World Penguin day' on April 25 2019 as a way ofhonoring the unique bird on the planet. They also raised awareness of this flightless birdwhose existent is becoming a threat every day;
Firstsourcers celebrated 'Sober October' as a fundraising initiative thatencourages people to give up alcohol for the month of October;
Derry office witnessed participation in a 'Sponsored Walk for Cancer Care' and a'Charity Football Match';
Firstourcers celebrated 'Bric a Brac Sale' and 'Easter Egg Raffle';
Firstsourcers celebrated 'The World Suicide Prevention Day' on September 10.With the "40 seconds of action" campaign being launched by the WHOFirstsourcers spread awareness of the scale of suicide around the world and the role thateach of us can play to help prevent it;
Belfast office celebrated 'Lets Fight Cancer Day';
Firstsourcers celebrated 'Movember' that involved the growing of moustachesduring the month of November to raise awareness of men's health issues such as prostatecancer testicular cancer and men's suicide;
Derry office raised funds for local children's ward to support children infoster care;
Belfast office donated to the PIPS (Public Initiative for Prevention of Suicideand Self-Harm) Charity;
Firstsourcers celebrated Chirstmas through the spirit of giving. 'Kindship Care'initiative encouraged giving out family hampers for the underprivileged;
Firstsourcers participated in 'Dementia and Alzheimer's Awareness Week' in thethird week of May 2019;
Firstsourcers celebrated the 'Armed Forces Day' on June 25 to pay specialtribute to the men and women of the Armed Forces.
Louisville office witnessed a blood donation drive where 16 units of blood weredonated to the Red Cross;
Fort Scott office raised funds for Breast Cancer Awareness through a silentauction;
Firstsourcers in Amherst participated in donation for the 'Global Fund forWomen' celebrating the cause of gender equality;
Fundraising drive helped donate USD 2100 to St. Jude Children's Hospital aleading hospital that specializes in childhood cancer and pediatric diseases;
Firstsourcers at Louisville & Illinois donated USD 225 alongwith food topublic food shelters- 'Ms Carley's Food Pantry' &'Dare to Care'. Some also volunteeredat the pantry of the food bank;
Firstsourcers raised USD 1595 for 'Breast Cancer Awareness';
Amherst and Buffalo offices organized bike rides & walks in collaborationwith 'The Susan G. Komen Race' and 'Ride For Roswell' to raise awareness for breastcancer. Over 100 Firstsourcers participated in these events;
Our leadership visited Long-Term Care Facility 'Highlands Health & Rehab' topass out Holiday Cards;
Louisville office donated coats hats gloves socks toiletries to the homelessand underprivileged in an attempt to help the less fortunate stay clean and warm;
Louisville donated 770 lbs of food to NGO "Dare to Care".
Firstsource's modes of CSR delivery also extends into
(i) "Employee Welfare" with interventions aimed at our own employees'engagement and retention; and (ii) "Payroll Giving" where employees volunteer todeduct a small part of their salary every month which accumulates and can then bedonated to a cause of their choice. Please find below update on the same:
Firstsourcers contributed Rs 0.11 Million towards PM CARES Fund in India. Thisis an ongoing activity aimed at combating the COVID-19 outbreak;
Firstsourcers across several centres in India contributed over Rs 0.50 Millionas part of payroll giving for Daan Utsav;
As part of the 'Give India' Payroll Giving Program Firstsourcers contributed Rs1.48 Million towards various charities;
Firstsourcers in Manila donated PHP 0.02 Million through payroll giving as partof Volcano evacuee aid to the DSWD (Department of Social Welfare and Development) inAlabang;
Cebu office conducted it's annual 'Dream in a Bag' event wherein Firstsourcersdonated a portion of their salaries to purchase school supplies for students of BudlaanIntegrated School Cebu;
Firstsourcers in Louisville raised USD 700 through payroll giving which wentinto donating candy and money for children at the 'Norton's Children Hospital';
Derry Cardiff offices raised GBP 4812.75 through payroll giving to supportBreast cancer patients and underprivileged children;
Firstsourcers in Fort Scott and Rockford offices participated in employeeengagement initiatives such as pumpkin craft trunk decoration holiday dinner veteransin the office international men's day and Halloween costume contest;
In an attempt to boost morale the Laport office in the USA organisedactivities to promote teamwork and knowledge sharing;
Firstsourcers in UK celebrated Wellbeing week in April to promote an overallawareness for the various aspects of wellbeing of its employees including socialphysical emotional financial career community and environment;
Derry office in UK had fun participating in an obstacle course named 'Hard AsOak Challenge'. This was organised in collaboration with The Foyle Search and Rescue anNGO working to provide humanitarian aid;
Derry office in UK partnered with 'Foyle Search and Rescue' to organise awaterside half marathon for Firstsourcers.
The Company has implemented a comprehensive and fully integrated 'Enterprise RiskManagement' framework in order to anticipate identify measure manage mitigate monitorand report the principal risks and uncertainties that can impact its ability to achieveits strategic business objectives.
The Enterprise Risk Management drives a common integrated view of risks and optimalrisk mitigation responses. This integration is enabled by alignment of Risk Management andInternal Audit methodologies and processes in order to maximize enterprise value of theCompany and ensure high value creation for our stakeholders over a time.
The details of the 'Enterprise Risk Management' framework with details of the principalrisks and the plans to mitigate the same are given in the 'Risk Management Report' sectionof the 'Management Discussion and Analysis Report' which forms part of this Annual Report.
Further in view of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 ("Listing Regulations") effective April 1 2019 the Board constituted aRisk Management Committee on February 4 2019 to monitor & mitigate the Risk.
INTERNAL FINANCIAL CONTROLS:
The Company has in place adequate internal financial controls with reference tofinancial statements. Such internal financial controls over financial reporting areoperating effectively and the Statutory Auditor has also expressed their opinion on thesame in the Annexures to the Auditors Report.
WHISTLE BLOWER POLICY:
The Company has a Whistle Blower Policy (the "WB Policy") with a view toprovide vigil mechanism to Directors Employees and other Stakeholders to discloseinstances of wrongdoing in the workplace and report instances of unethical behavioractual or suspected fraud or violation of the Company's code of conduct or ethics policy.The WB Policy also states that this mechanism provides for adequate safeguards againstvictimization of Director(s)/ Employees who avail of the mechanism and also provides fordirect access to the Chairperson of the Audit Committee in exceptional cases. The WBPolicy has been posted on the website of the Company and the details of the same areprovided in the 'Report on Corporate Governance' forming part of this Annual Report.
The WB Policy is available on the website of the Company at https://www.firstsource.com/wp-content/uploads/2020/03/WHISTLE- BLOWER-POLICY-2020-v5-2.pdf.
PREVENTION OF SEXUAL HARRASSMENT POLICY:
The Company has a 'Prevention of Sexual Harassment Policy' in force in compliance withthe requirements of Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. The objective of this Policy is to ensure a safe secure andcongenial work environment where employees deliver their best without any inhibitionthreat or fear. The Company has Zero Tolerance to any form of harassment especially if itis sexual in nature. The complaints filed under the Policy are reported to the AuditCommittee at its quarterly meetings with details of action taken thereon.
BOARD OF DIRECTORS:
During the year under review the following are the changes in the Board of Directors:
Mr. Pradip Kumar Khaitan (DIN 00004821) retires by rotation and being eligiblehas offered himself for re-appointment at the ensuing Annual General Meeting("AGM").
Appointment of Mr. Vipul Khanna (DIN 00889710) as a Managing Director & CEOof the Company w.e.f. August 2 2019 for a period of five (5) years not liable to retireby rotation.
Mr. Rajesh Subramaniam (DIN 02617781) ceased to be the Managing Director &CEO on account of expiration of his term on August 1 2019 by efflux of time The Boardplaces on record its appreciation towards valuable contribution made by him during histenure as a Managing Director & CEO of the Company.
Mr. V. K. Sharma (DIN 02051084) ceased to be an Independent Director on accountof completion of his term on November 13 2019 by efflux of time. The Board places onrecord its appreciation towards valuable contribution made by him during his tenure as aDirector of the Company.
Re-appointment of Ms. Grace Koshie (DIN 06765216) as an Independent Director onthe Board of the Company for a term of three (3) consecutive years subject to Member'sapproval at the 19th Annual General Meeting.
All the Independent Directors of the Company have given declarations that they meet thecriteria of independence as laid down under Section 149(6) of the Act.
Board and Audit Committee Meetings:
During the FY2019-20 the following four (4) Board Meetings and Audit CommitteeMeetings were held:
May 6 2019
August 2 2019
November 6 2019
February 4 2020.
Time gap between any two meetings was not more than one hundred twenty (120) days.
The full details of the said meetings are given in the 'Report on Corporate Governance'forming part of this Annual Report.
The Familiarisation Programmes for Independent Directors:
The Company has put in place a system to familiarise its Independent Directors with theCompany their roles rights & responsibilities in the Company nature of the industryin which the Company operates business model of the Company etc. The details of suchfamiliarisation programmes are put up on the website of the Company at the below link:https://www.firstsource.com/wp-content/uploads/2020/06/Policy-on-familiarisation-of-Independent-Directors.pdf.
(i) Performance Evaluation of the Independent Directors and Other Individual Directors:
The Company has framed a policy for Appointment of Directors and Senior Management andEvaluation of Directors' Performance ("Board Evaluation Policy"). The saidpolicy sets out criteria for performance evaluation of Independent Directors otherNon-Executive Directors and the Executive Directors.
Pursuant to the provisions of the Act and the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations") the Board carries out the performance evaluation of all the Directors(including Independent Directors) on the basis of recommendation of the Nomination &Remuneration Committee and the criteria mentioned in the Board Evaluation Policy. TheBoard decided that the performance evaluation of Directors should be done by the entireBoard of Directors excluding the Director being evaluated and unanimously agreed on thefollowing assessment criteria for evaluation of Directors' performance:
Attendance and active participation in the Meetings;
Bringing one's own experience to bear on the items for discussion;
Governance covering Awareness and Observance; and
Value addition to the business aspects of the Company.
(ii) Performance Evaluation of Executive Director:
The performance of the Managing Director & CEO is evaluated on the basis ofachievement of performance targets/ criteria given to him by the Board from time to time.
(iii) Performance Evaluation by the Board of its own performance and its Committees:
The performance of the Board is evaluated by the Board in the overall context ofunderstanding by the Board of the Company's principle and values philosophy and missionstatement strategic and business plans and demonstrating this through its action onimportant matters the effectiveness of the Board and the respective Committees inproviding guidance to the Management of the Company and keeping them informed opencommunication the constructive participation of members and prompt decision making levelof attendance in the Board meetings constructive participation in the discussion on theAgenda items monitoring cash flow profitability income & expenses productivity& other financial indicators so as to ensure that the Company achieves its plannedresults effective discharge of the functions and roles of the Board etc.
The performance of the Committees is evaluated by the members of the respectiveCommittees on the basis of the Committee effectively performing the responsibility asoutlined in its Charter Committee meetings held at appropriate frequency length of themeetings being appropriate open communication & constructive participation of membersand prompt decision-making etc.
POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION:
The criteria for Directors' appointment and for determining qualification positiveattributes and independence of a Director as mentioned in the 'Policy for Appointment ofDirectors and Senior Management and Evaluation of Directors' Performance' in terms ofSection 178(3) of the Act is mentioned below:
Appointment criteria and qualifications:
The Nomination & Remuneration Committee shall identify and ascertain theintegrity qualifications expertise and experience of the person for appointment asDirector Key Managerial Personnel ("KMP") or at Senior Management level andrecommend the same to the Board for appointment if found suitable;
A person should possess adequate qualifications expertise and experience forthe position he/ she is considered for appointment. The Committee has discretion to decidewhether qualifications expertise and experience possessed by a person are sufficient/satisfactory for the concerned position; and
The Company shall not appoint or continue the employment of any person asManaging Director/ Whole-Time Director who has attained the age of seventy years providedthat the term of the person holding this position may be extended beyond the age ofseventy years with the approval of shareholders by passing a special resolution based onthe explanatory statement annexed to the notice or such motion indicating thejustification for extension of appointment beyond seventy years.
Meeting of Independent Directors:
There should be atleast one meeting of Independent Directors in a year without theattendance of non-independent Directors and members of the Management.
The Independent Directors in the meeting:
Review the performance of non-independent Directors including Managing Director& CEO and the Board as a whole;
Review the performance of the Chairperson of the Company taking into accountthe views of Executive Directors and NonExecutive Directors; and
Assess the quality quantity and timeliness of the flow of information betweenthe Company's Management and the Board that is necessary for the Board to effectively andreasonably perform its duties.
The Board on the recommendation of the Nomination & Remuneration Committee frameda Remuneration Policy for Non-Executive Directors (including Independent Directors) and aRemuneration Policy for Key Managerial Personnel and other Employees of the Company. Thedetails of Remuneration Policy for Non-Executive Directors and Independent Directors areprovided as Annexure IIIA and details of Remuneration Policy for Key Managerial Personneland Other employees of the Company are provided as Annexure IIIB to this Report.
COMMITTEES OF THE BOARD:
A detailed note on the Board and its Committees is provided in the 'Report on CorporateGovernance' forming part of this Annual Report. The composition of the major Committee/(s)is as follows:
As on March 31 2020 the Audit Committee comprised of three (3) Independent Directorsviz. Ms. Grace Koshie (Chairperson) Mr. Pradip Roy Mr. Sunil Mitra and one (1) Non -Independent Director Mr. Subrata Talukdar.
Nomination & Remuneration Committee:
As on March 31 2020 the Nomination & Remuneration Committee comprised of two (2)Independent Directors viz. Mr. Pradip Roy (Chairman) Mr. Pratip Chaudhuri and one (1)Non-Independent Director Mr. Subrata Talukdar.
Corporate Social Responsibility Committee:
As on March 31 2020 Corporate Social Responsibility Committee comprised of four (4)members viz Mr. Shashwat Goenka (Chairman) Mr. Vipul Khanna (appointed as a member w.e.f.August 2 2019) Mr. Subrata Talukdar and one (1) Independent Director Mr. Pradip Roy.
Stakeholders Relationship Committee:
As on March 31 2020 Stakeholders Relationship Committee comprised of three (3)members viz. Mr. Subrata Talukdar (Chairman) Mr. Vipul Khanna (appointed as a memberw.e.f. August 2 2019) and one (1) Independent Director Mr. Pradip Roy.
As on March 31 2020 Investment Committee comprised of three (3) members viz. Mr.Shashwat Goenka (Chairman) Mr. Vipul Khanna (appointed as a member w.e.f. August 2 2019)and one (1) Non-Independent Director Mr. Subrata Talukdar.
As on March 31 2020 Strategy Committee comprised of three (3) members viz. Mr.Shashwat Goenka (Chairman) Mr. Vipul Khanna (appointed as a member w.e.f. August 2 2019)and one (1) NonIndependent Director Mr. Subrata Talukdar.
Risk Management Committee:
As on March 31 2020 Risk Management Committee comprised of five (5) members viz. Mr.Shashwat Goenka (Chairman) Mr. Vipul Khanna (appointed as a member w.e.f. August 22019) one (1) Independent Director Ms. Grace Koshie Mr. Dinesh Jain and Mr. Arun TyagiOfficials of the Company.
RELATED PARTY TRANSACTIONS:
All the contracts/ arrangements/ transactions that were entered into by the Companyduring the financial year with related parties were on an arm's length basis and in theordinary course of business. During the year the Company had not entered into anycontract/ arrangement/ transaction with related parties which could be consideredmaterial requiring approval of the Board/ shareholders in accordance with the policy ofthe Company on materiality of related party transactions. Prior omnibus approval isobtained for related party transactions which are of repetitive nature and entered in theordinary course of business and at arm's length. All Related Party Transactions are placedbefore the Audit Committee for approval.
The policy on Related Party Transactions as approved by the Board is available on thewebsite of the Company at the below link:https://www.firstsource.com/wp-content/uploads/2020/06/FSL-Related-Party-Transactions-Policy.pdf.
Details of Related Party Transactions are given at Note No. 25 to the StandaloneFinancial Statements. None of the Directors of the Company has any pecuniary relationshipsor transactions vis-avis the Company.
EMPLOYEES STOCK OPTION SCHEME:
The Company grants share-based benefits to eligible employees with a view to attractingand retaining the best talent encouraging employees to align individual performances withCompany objectives and promoting increased participation by them. With a view to providean opportunity to the employees of the Company to share the growth of the Company and tocreate long term wealth the Company has an Employee Stock Option Scheme (ESOS) viz. theFirstsource Solutions Employee Stock Option Scheme 2003 (ESOS 2003). The Scheme isapplicable to all eligible employees and Directors of the Company and its SubsidiaryCompanies. The Scheme is in compliance with Securities and Exchange Board of India (ShareBased Employee Benefits) Regulations 2014 as amended.
FIRSTSOURCE SOLUTIONS LIMITED EMPLOYEE STOCK OPTION PLAN 2019 ("ESOP 2019PLAN"):
The Company has established the ESOP 2019 Plan pursuant to approval of shareholders atthe Annual General Meeting on August 2 2019 to allow our employees to acquire greaterproprietary stake in our success and growth and to encourage our employees to continuetheir association with us. The ESOP 2019 Plan is in compliance with Securities andExchange Board of India (Share Based Employee Benefits) Regulations 2014 (SEBI (SBEB)Regulations) as amended.
As per the ESOP 2019 Plan the Nomination & Remuneration Committee will issue stockoptions to the identified eligible employees/ director(s) of the Company and itsSubsidiaries at an exercise price which will be the face value of the Shares or any higherprice which may be decided by the Nomination & Remuneration Committee considering theprevailing market conditions and the norms as prescribed by SEBI and other relevantregulatory authorities. Further the stock options under the said plan would vest & beexercisable in tranches as determined by the Nomination & Remuneration Committee basisthe power given to the Nomination & Remuneration Committee in line with the ESOP 2019Plan.
LONG TERM INCENTIVE STRUCTURE GRANTS UNDER ESOP 2019 PLAN:
In continuation of the Company's philosophy of aligning employee interests withshareholder value creation and in line with global practices the Nomination &Remuneration Committee of the Board of Directors has approved the Long Term IncentiveStructure ("LTI") in the form of ESOP grants which will be granted to identifiedeligible employees as per ESOP 2019 Plan. This unique plan is a combination of tenure andperformance based ESOPs aligned to shareholder value creation which will deepen employeeownership in the Company.
A) Tenure based Structure (ESOP Structure):
Options in this structure will be granted to identified eligible employees basis thebelow criteria:
1. Drives ownership of employees in Company's fortunes for better engagement andretention;
2. Seen as part of the total compensation package in line with competition/ marketpractice;
3. Quantum of grants is based on the performance and potential of the individualemployee.
Vesting Schedule in the given structure is:
|Period within which options will vest unto the participant ||% of options that will vest |
|End of 12 months from the date of grant of options ||25% |
|At the end of every quarter after year 1 till end of year 4 from date of grant ||6.25% |
B) Performance based Structure (PSU Structure):
Option in this structure is granted to identified eligible employees - Functional andBusiness heads basis the below criteria:
1. Attainment of options can range between 0% and 150% of tranche eligible for vestingfor the respective performance measurement period. Each tranche is separate. Performanceand vesting in one performance period has no bearing on performance and vesting in anotherperformance period;
2. Subject to terms and conditions of the scheme the performance-based component ofthe grant is measured basis the Performance targets as agreed annually by the Management.
Vesting Schedule in the given structure is:
|Period within which options will vest unto the participant ||% of options that will vest |
|End of 12 months from the date of grant of options ||25% |
|At the end of every year after year 1 till end of year 4 from date of grant ||25% |
Under both the above structures grants will be issued at face value of the shares orany higher price which may be decided by the Nomination & Remuneration Committee andwill have an exercise period up to ten years as per the ESOP 2019 Plan and as determinedby the Nomination & Remuneration Committee.
Under the ESOP 2019 Plan as on March 31 2020 the Nomination & RemunerationCommittee has approved grant of 10784204 options which are a mix of tenure based andperformance based structure options to its senior leadership team and employees.
FIRSTSOURCE EMPLOYEE BENEFIT TRUST UNDER ESOP 2019 PLAN:
The ESOP 2019 Plan shall be implemented through the Trust which will be administeredunder the guidance advice and direction of the Nomination & Remuneration Committee inaccordance with the provisions of the Companies Act 2013 and SEBI (SBEB) Regulations.
The Board of Directors has facilitated setting up of Employee welfare trust viz"Firstsource Employee Benefit Trust" ("ESOP trust") to implement theESOP 2019 Plan which has been formed by the Company. The Company shall provide financialassistance to the Trust for secondary acquisition of equity shares of the Company for thepurpose of implementation of ESOP 2019 Plan. The terms and conditions for the financialassistance provided shall be in compliance with the Companies Act 2013 read withCompanies (Share Capital and Debenture) Rules 2014 and SEBI (SBEB) Regulations.
During the year ended March 31 2020 the Trust has purchased 3156000 equity sharesthrough secondary acquisition.
GRANTS TO THE MANAGING DIRECTOR & CEO (MD & CEO) UNDER ESOP 2019 PLAN:
In view of the Shareholder's approval via postal ballot on January 11 2020 through aspecial resolution wherein it was approved that the MD & CEO shall be entitled toparticipate in the equity based Long Term Incentive Structure under ESOP 2019 Plan of theCompany. Accordingly the Nomination & Remuneration Committee of Board of Directors ofthe Company on February 28 2020 has approved the grant of 10066204 options under ESOPPlan 2019 at the face value of Rs 10/- of the shares to Mr. Vipul Khanna MD & CEOwhich are a mix of tenure based and performance based structures. The brief details ofthese grants are mentioned herein below:
A. Grants under Tenure Based Structure :
|No. of Stock Options ||Vesting Date ||Vesting Conditions |
|1186624 ||October 1 2021 ||Continued employment |
|719966 ||October 1 2023 ||Continued employment |
B. Grants under Performance Based Structure:
|No. of Stock Options ||Vesting Date ||Vesting Conditions |
|8159614 ||October 1 2023 ||Achievement of Profits Before Tax ** |
** Performance period may be further defined in consultation with the Nomination &Remuneration Committee
GRANT OF OPTIONS EXCEEDING 1% OF ISSUED CAPITAL TO MANAGING DIRECTOR & CEO (MD& CEO) UNDER ESOP 2019 PLAN:
The Nomination & Remuneration Committee of Board of Directors of the Company onFebruary 28 2020 has granted 10066204 options (as per the table above) to MD & CEOunder ESOP 2019 Plan which are in excess of 1% of the issued capital (excludingoutstanding warrants and conversions) as on that date subject to the approval ofshareholders. These options are to be exercised by the MD & CEO within a period of one(1) year from the date of vesting.
As on March 31 2020 your Company has 14 subsidiaries and 1 Associate Company:
Domestic Subsidiary: (1)
1. Firstsource Process Management Services Limited (Formerly known as Anunta TechInfrastructure Services Limited) [Wholly Owned Subsidiary ("WOS") of theCompany] International Subsidiaries: (13)
2. Firstsource Solutions UK Limited UK (WOS of the Company)
3. Firstsource Solutions S.A. Argentina (Subsidiary of Firstsource Solutions UKLimited)
4. Firstsource BPO Ireland Limited (WOS of Firstsource Solutions UK Limited)
5. Firstsource Group USA Inc. USA (Subsidiary of the Company)
6. Firstsource Business Process Services LLC USA (WOS of Firstsource Group USA Inc)
7. Firstsource Advantage LLC USA (WOS of Firstsource Business Process Services LLC)
8. One Advantage LLC USA (WOS of Firstsource Business Process Services LLC)
9. MedAssist Holding LLC USA (WOS of Firstsource Group USA Inc)
10. Firstsource Solutions USA LLC USA (WOS of MedAssist Holding LLC)
11. Firstsource Transaction Services LLC USA (WOS of Firstsource Solutions USA LLC)
12. Sourcepoint Inc. (Formerly Known as ISGN Solutions Inc.) (WOS of Firstsource GroupUSA Inc)
13. Sourcepoint Fulfillment Services Inc. (Formerly Known as ISGN FulfillmentServices Inc. (WOS of Sourcepoint Inc.)
14. Firstsource Dialog Solutions (Private) Limited (Subsidiary of the Company)
Associate Company: (1)
1. Nanobi Data and Analytics Private Limited
1. During the year under review ISGN Fulfillment Agency LLC wholly owned subsidiaryof Sourcepoint Fulfillment Services Inc. got wound up and dissolved w.e.f. June 242019.
2. During the year under review the Company transferred its entire investment/ownership in Firstsource BPO Ireland Limited wholly owned subsidiary of the Company toFirstsource Solutions UK Limited (FS UK) wholly owned subsidiary of the Company andconsequent to transfer of investment/ ownership Firstsource BPO Ireland Limited will bethe wholly owned step-down subsidiary of the Company.
3. During the year under review the Company restructured its global holding structureof Firstsource Group USA Inc. (FG USA) wholly owned subsidiary of the Company theCompany now directly holds 85% in FG USA and rest 15% through its wholly owned subsidiaryFirstsource Solutions UK Limited. Overall holding of the Company remains unchanged.
The Company has no other joint venture Company. No company has ceased to be a jointventure or associate during the FY2019-20.
Report on the Performance and Financial Position of Subsidiaries:
A report on the performance and financial position of each of the subsidiaries as perthe Act in the prescribed format AOC - 1 is annexed to the consolidated financialstatement and hence not repeated here for the sake of brevity. The Company has a policy onmaterial subsidiaries pursuant to Regulation 16(1)(c)of the Listing Regulations. The sameis available on the website of the Companyviz:https://www.firstsource.com/wp-content/uploads/2020/06/FSL-Material-Subsidiary-Policy.pdf.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
Management Discussion and Analysis Report for the year as stipulated under Regulation34(3) of the Listing Regulations is separately given and forms part of this Annual Report.
BUSINESS RESPONSIBILITY REPORT:
Business Responsibility Report for the year as stipulated under Regulation 34(3) of theListing Regulations is separately given and forms part of this Annual Report.
REPORT ON CORPORATE GOVERNANCE:
The adherence to the corporate governance practices by the Company not only justifiesthe legal obedience of the laws but dwells deeper conforming to the ethical leadership andstability. It is the sense of good governance that our leaders portray which tricklesdown to the wider Management and is further maintained across the entire functioning ofthe Company.
The Company is committed to maintain the highest standards of corporate governance andadheres to the corporate governance requirements set out by SEBI.
The report on Corporate Governance as stipulated under provisions of Chapter IV &Schedule V of the Listing Regulations is separately given and forms part of this AnnualReport. The requisite certificate from a Practicing Company Secretary confirmingcompliance of the conditions of corporate governance is attached to the Report onCorporate Governance.
EXTRACT OF ANNUAL RETURN:
The details forming part of the extract of the Annual Return in Form MGT- 9 is annexedherewith as Annexure IV and the same is available on the Company's website athttps://www.firstsource. com/investor-relations/.
STATUTORY DISCLOURES OF PARTICULARS:
A) Conservation of Energy:
The Company continues to make progress towards energy conservation across all itsoperation centers by adopting efficient Air-conditioning management system usage ofEnergy efficient LED and efficient power back-up system . The Company is continuouslymonitoring earlier initiatives of reducing energy consumption within data center/(s) andacross its' operation centers. The Company similar to its previous year's initiatives ofGREEN IT continued to replace the normal Desktops and old Thin clients with MiniDesktops/ Zero thin-clients in US Geography as the power consumption of mini desktop &Zero thin-clients was 2.5 times less than the power consumed by normal desktops and nearly5 times less during standby mode. Scripts have been deployed where possible to shut downthe Desktops/ Thin clients which are not being used for more than 1 hour which helpsconserve energy.
B) Absorption of Technology:
The Company has been adopting Digital Technologies which can benefit its businesses toimprove user experience operational efficiency in a cost effective manner. During thecourse of the year the Company has adopted multi-cloud and hybrid- cloud platforms(combination of many cloud platforms). These include migrations of various enterprisegrade applications server workload and telephony infrastructure to multi-cloud platformsacross geographies and businesses. The Company has also invested significantly in a cloudbased Next Generation Cyber-Security solution covering the entire horizon of EndpointsServers and Network security integrated with Cisco Threat Response and Threatintelligence. The security solution provides complete protection to endpoints servers indata center and also Company's cloud platform. The Company also developed Chat-Botsolutions as an integral part of its applications which enhanced user experience of itsclients and business users.
C) Foreign Exchange Earnings and Outgo Activities relating to exports initiativestaken to increase exports development of new export markets for services and exportplans:
The Company's income is diversified across a range of geographies and industries.During the year 81.96% of the Company's standalone total revenues were derived fromexports. The Company provides BPO services mostly to clients in North America UK and AsiaPacific region. The Company has established direct marketing network around the world toboost its exports.
FOREIGN EXCHANGE EARNED AND USED:
The Company's Foreign Exchange Earnings and Outgo during the year were as under:
| || |
(Standalone figures in Rs Million)
|Particulars ||FY2020 ||FY2019 |
|Foreign Exchange Earnings ||7703.35 ||6483.44 |
|Foreign Exchange Outgo (including capital goods and imports) ||69.54 ||186.49 |
| || || |
Pursuant to the provisions of Section 204 of the Act read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company obtainedSecretarial Audit Report from Rathi & Associates Company Secretaries in Practice forthe FY2019-20. The Secretarial Audit Report is annexed to this Report as Annexure V.
ANNUAL SECRETARIAL COMPLIANCE REPORT:
SEBI vide its Circular No. CIR/CFD/CMD1/27/2019 dated February 8 2019 read withRegulation 24(A) of the Listing Regulations directed listed entities to conduct AnnualSecretarial Compliance Audit from a Practicing Company Secretary of all applicable SEBIRegulations and circulars/ guidelines issued thereunder. The said Secretarial Compliancereport is in addition to the Secretarial Audit Report by Practicing Company Secretariesunder Form MR - 3 and is required to be submitted to Stock Exchanges within 60 days of theend of the financial year or as per the extended timelines by the Government from time totime. The Company has engaged the services of Rathi & Associates (CP No. 3030)Practicing Company Secretary for providing this certification.
STATUTORY AUDITORS AND AUDITORS' REPORT:
M/s. Deloitte Haskins & Sells LLP Chartered Accountants bearing RegistrationNumber: 117366W/W-100018 were appointed as the Statutory Auditors of the Company by themembers at their 16th Annual General Meeting (AGM) for a term of consecutive five (5)years i.e. till the conclusion of 21st AGM.
The Notes on financial statements referred to in the Auditors' Report areself-explanatory and do not call for any further comments. The Auditors' Report does notcontain any qualification reservation or adverse remark.
Your Directors state that no disclosure or reporting is required in respect of thefollowing matters as there were no transactions on these matters during the FY2019-20:
Issue of equity shares with differential rights as to dividend voting orotherwise;
Issue of shares to employees of the Company under any scheme save and exceptEmployees Stock Option Schemes as referred to in this Report;
No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and the Company's operations in future.
Further your Directors would like to mention that the Managing Director & CEOreceived USD 118.37 Million as remuneration during the year from Firstsource Group USAInc. subsidiary of the Company.
The disclosure pursuant to Securities and Exchange Board of India (Share Based EmployeeBenefits) Regulations 2014 read with Circular No. CIB/CFD/Policy/CELL/2 2015 dated June16 2015 will be placed on the website of the Company.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to the requirement under Section 134(3) (c) and 134(5) of the Companies Act2013 Directors of your Company state and confirm that:
1. In the preparation of the annual accounts for the FY2019-20 the applicable Ind-ASaccounting standards have been followed and there are no material departures from thesame;
2. The Directors had 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 as at March 31 2020 and of the profit ofthe Company for year ended on that date;
3. The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safe-guarding theassets of the Company and for preventing and detecting fraud and other irregularities;
4. The Directors had prepared the annual accounts on a going concern basis;
5. The Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
6. The Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
The Board wishes to place on record its sincere appreciation for the support andco-operation extended by all the customers vendors bankers and business associates. TheBoard also expresses its gratitude to the Ministry of Telecommunications Collector ofCustoms and Excise Director of Special Economic Zone Ministry of Labour Ministry ofCorporate Affairs and various Governmental departments and organisations for their helpand cooperation.
Further the Board places on record its appreciation to all the employees for theirdedicated service. The Board appreciates and values the contributions made by every memberacross the world and is confident that with their continued support the Company willachieve its objectives and emerge stronger in the coming years.
For and on behalf of the Board of Directors
| ||Dr. Sanjiv Goenka |
| ||Chairman |
|Mumbai || |
|May 26 2020 || |