The Directors are pleased to present their Twenty Sixth Annual Report on the businessand operations of Hexaware Technologies Limited (hereafter referred to as the Group'or The Company') together with audited financial statements for the financial yearended December 31 2018.
The financial statements are prepared in accordance with Indian Accounting Standards(Ind AS'). In accordance with the notification issued by Ministry Corporate Affairsthe Group had adopted Ind AS with effect from January 1 2017.
|Consolidated Operations: || ||(USD million) |
| ||FY 2018 ||FY 2017 |
|Income from Operations ||677.67 ||607.49 |
|EBITDA before ESOP/ RSU cost ||112.12 ||106.41 |
|EBITDA after ESOP/ RSU cost ||106.65 ||101.02 |
|Profit from Operations * ||97.14 ||91.26 |
|Profit before Tax ||105.67 ||98.75 |
|Profit after Tax including share in profit of associate ||84.86 ||77.03 |
|Total Customers ||224 ||221 |
|Average account size ||3.03 ||2.75 |
| || ||(Rs. million) |
| ||FY 2018 ||FY 2017 |
|Income from Operations ||46477.62 ||39420.14 |
|EBITDA before ESOP/RSU cost ||7711.93 ||6901.14 |
|EBITDA after ESOP/RSU cost ||7338.19 ||6551.64 |
|Profit from Operation * ||6687.64 ||5918.87 |
|Add: Exchange Rate Gain (net) ||471.45 ||449.62 |
|Add: Other Income ||105.48 ||35.82 |
|Less: Interest ||(0.42) ||(1.19) |
|Profit before share in profit of associate ||7264.15 ||6403.12 |
|Add: Share in profit of associate ||1.66 ||2.70 |
|Profit before Tax ||7265.81 ||6405.82 |
|Less: Provision for Taxation ||1431.18 ||1410.56 |
|Profit after Tax ||5834.63 ||4995.26 |
|Other Comprehensive Income (OCI) ||122.22 ||91.86 |
|Total Comprehensive Income ||5956.85 ||5087.12 |
* excludes Exchange Rate Difference Interest Other Income and Provision forTaxation
|India Operations: || ||(Rs. million) |
| ||FY 2018 ||FY 2017 |
|Income from Operations ||17940.25 ||15241.07 |
|EBITDA after ESOP/RSU cost ||5470.42 ||4894.66 |
|Profit from Operations * ||4976.35 ||4401.30 |
|Add: Exchange Rate Gain (net) ||516.82 ||537.40 |
|Add: Other Income ||24.95 ||29.16 |
|Less: Interest ||(0.28) ||(0.62) |
|Profit before Tax ||5517.84 ||4967.24 |
|Less: Provision for Taxation ||988.25 ||857.64 |
|Profit after Tax ||4529.59 ||4109.60 |
|Add: Balance brought forward from previous year ||7948.96 ||4886.20 |
|Other Comprehensive Income (OCI) ||33.00 ||84.53 |
|Add: Transfer from Special Economic Zone Reinvestment Reserve ||297.25 ||487.22 |
|Balance available for appropriation ||12808.80 ||9567.55 |
|Appropriation || || |
|Interim dividend including tax on dividend ||2506.03 ||1428.09 |
|Transfer to Special Economic Zone Reinvestment Reserve ||749.63 ||178.35 |
|Expense on buyback of shares ||- ||12.15 |
|Balance carried to Balance Sheet ||9553.14 ||7948.96 |
Results of Operations
a) Consolidated Operations:
Income from operations increased to ' 46477.62 million in 2018 from ' 39420.14million in 2017 growth of 17.9%. The growth in Dollar terms was 11.6% reaching USD677.67 million in 2018 from USD 607.49 million in 2017. Revenue in constant currency wasUSD 677.41 million in 2018 growth of 11.5%. Growth was driven largely by volume increaseaided by higher onsite mix.
EBITDA after RSU costs increased to USD 106.65 million in 2018 compared to USD 101.02million in 2017 growth of 5.6%. In INR terms it saw growth of 12.0% and increased to '7338.19 million in 2018 compared to ' 6551.64 million in 2017.
Profit from Operations (profit before Exchange rate difference Interest Other incomeand Provision for taxation) was at ' 6687.64 million in 2018 as against ' 5918.87 millionin 2017 growth of 13.0%.
Profit before tax grew 13.4% to ' 7265.81 million in 2018 compared to ' 6405.82million in 2017.
Profit after tax stood at ' 5834.63 million in 2018 as compared to a profit of '4995.26 million in 2017 growth of 16.8%. PAT margins in INR terms were at 12.6% in 2018compared to 12.7% in 2017.
Material changes from end of financial year till date of report
There are 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 the report.
Company's major achievements in 2018
The Company to maintain its growth momentum of double digit growth with year-on-yeargrowth both in revenue and profits.
In 2018 growth in revenue over 2017 was 17.9% in INR terms and 11.6% in USDterms.
EBITDA after ESOP/RSU cost grew 12.0% in INR terms during the year 2018.4 Profitfor the year grew at 10.2% in USD terms and 16.8% in INR terms.
Diluted EPS grew by 16.6% in 2018 over 2017.
4 Return on net-worth continues to be above 26.5%.
Over the past few years the focus has been on adding and growing clients withmeaningful revenue base. This has led to revenue growth being higher than growth in numberof accounts leading to increased revenue per client. In 2018 the Company added 1 clientto the $20-$30 million category 11 in the $5-$10 million category. Significant expansionin the $5-$20 million revenue category was a real highlight for the Company. Overall theCompany added 11 clients in the > $1M category.
Revenue from top 5 customers has increased by 5% from next 5 increased by 3% and fromnext 10 increased by 13%. The Company is poised to see the shaping of pyramid.
b) India operations:
In the year 2018 the revenue of the standalone legal entity increased by 17.7% to '17940.25 million in comparison with revenue of ' 15241.07 million in the previous year.The net profit after tax was ' 4529.59 million as compared to ' 4109.60 million in 2017showing growth of 10.2%.
The paid-up Share Capital of the Company as on December 31 2018 was ' 594.72 millioncomprising of 297360989 Equity Shares of ' 2/- each. During the year 557232 shares wereexercised under different ESOP schemes.
The market capitalization of the Company as on December 31 2018 was at ' 98991.47million (USD 1418.72 million). The market capitalization is calculated on the basis ofclosing prices of ' 332.90 on The National Stock Exchange and the closing exchange rate of1 USD = ' 69.7750 as at December 31 2018.
Other equity (Reserve and surplus and other comprehensive income)
The Standalone total other equity increased to ' 16776.08 million as compared to '14823.34 million as of FY 2017 increased of ' 1952.74 million.
The Consolidated other equity increased to ' 23323.93 million as compared to '19479.14 million as of FY 2017 increased of ' 3844.79 million.
The Securities premium reserve balances stood at ' 3635.69 million.
The balance of the Retained earnings after the appropriations for the year is ' 9553.14million.
Forex Mark-To-Market: The year-end cash flow hedging reserve (net of tax) stood at aloss of ' 14.86 million as compared to a gain of ' 465.83 million in the previous yearrecognised in accordance with the hedge accounting provision of IndAS 109 FinancialInstruments.
The Company recorded ' 991.75 million in Employee stock named as Share optionsoutstanding a reserve being amortisation of compensation cost of RSUs granted to theemployees of the Group.
There was no transfer to General reserve during the year. The general reserve balanceas at the end of the year is ' 2117.71 million
During the year 2018 the Company paid ' 2506.03 million in aggregate by way of fourinterim dividends on equity shares Q4 2017 - ' 1.00 (50%) Q1 2018 - ' 1.00 (50%) Q22018 - ' 2.50 (125%) Q3 2018 - ' 2.50 (125%) totalling to ' 7.00 per share (350%).
The Board of Directors at its meeting held on January 30 2019 declared interimdividend of ' 2.50 (125%) for the Q4 2018 with this the total dividend declared for theyear 2018 aggregated to ' 8.50 (425%) per share.
The Board of Directors have not recommended payment of any final dividend and interimdividends as aforesaid be considered as final.
The break-up of dividend paid is as under:
| ||Q1 ||Q2 ||Q3 ||Q4 ||Total |
|Dividend ||296.84 ||296.85 ||742.14 ||743.4 ||2079.23 |
|Tax ||60.43 ||61.02 ||152.55 ||152.80 ||426.80 |
|Total ||357.27 ||357.87 ||894.68 ||896.21 ||2506.03 |
In accordance with Regulation 43A of the Listing Regulations the Company hasformulated a Dividend Distribution Policy' and details of the same have beenuploaded on the Company's website at http:// hexaware.com/investors/
Particulars of loan guarantee or investments
Loan guarantees and investments covered under section 186 of the Companies Act 2013form part of the notes to the financial statements provided in this Annual Report. Pleaserefer note no. 6A 6B 8A 8B and note no. 23 of Standalone Financial Statements.
Subsidiaries and associates
During the year 2018 the Company has made an initial investment in the wholly ownedSubsidiary as given below:
|Sr. No. ||Name of Company ||' in Million |
|1 ||Hexaware Information Technology (Shanghai) Limited ||3.71 |
During the year the Company has closed two Subsidiary Companies M/s. HexawareTechnologies Do Brazil Limited w.e.f July 24 2018 and Step down subsidiary M/s. DigitechTechnologies Inc w.e.f September 27 2018.
In accordance with Section 129(3) of the Companies Act 2013 consolidated financialstatement of the Company and all its subsidiaries forms part of the Annual Report.Further a statement containing the salient features of the financial statement of oursubsidiaries in the prescribed format AOC - 1 is appended as Annexure 1 to theBoard's report. The statement also provides the details of performance financialpositions of each of the subsidiaries.
In accordance with Section 136 of the Companies Act 2013 the audited financialstatements including the consolidated financial statements and related information of theCompany and audited financial statements of each of its subsidiaries are available on ourwebsite www.hexaware.com. These documents will also be available for inspectionduring business hours at the registered office of the Company.
The cash generated from operations in 2018 was ' 5487.03 million. The Company hasinvested ' 608.68 million in property plant and equipment and intangible assets mainlyfor new development centre in Chennai and Pune. During the year the Company paid dividendincluding dividend tax of ' 2506.03 million.
The Company has received ' 4.24 million from issue of shares. As of December 31 2018the cash position of the Company was ' 8340.64 million including the restricted bankbalance and Mutual Fund investments (cash equivalent) equivalent to USD 119.54 million .The total cash & bank balance was at ' 8050.55 million equivalent to USD 115.38million.
Business Strategy - The details on Business Strategy are provided on page 1 12 13& 14 of the Annual report.
India based Global Delivery Centres (GDC)
The Company has two Offshore Development Centers (ODCs) at Millennium Business Park inMahape Navi Mumbai. One of these is the registered office of the Company. Both theseODC's houses around 1100 employees.
The Company's BPS arm operates out of two service centers in the same complex witharound 1800 employees providing BPS services to its global clients in shift mode.
The Company has also taken premises on long-term lease for its IT and BPS operation inthe SEZ facility named Loma IT Park Ghansoli Navi Mumbai with seating capacity of 1850employees including for BPS operations. There are around 1400 employees working from thiscenter.
There are around 4800 IT professional employees working from the Company's 27acrecampus in Chennai. This campus houses employee-friendly amenities like recreation centerlibrary and gymnasium facilities - offering plenty of avenues for relaxation andrejuvenation as well as knowledge enhancement through Hexavarsity - the Company's inhouseLearning and Development University.
The Company's Chennai "green campus" conforms to ecofriendly norms andregulations like optimal use of solar energy use of eco- friendly building materials anda judicious spread of landscaped spaces around seating facilities across various levels.
The said green campus also houses state of the art customer experience center.
Currently seating capacity is expanded to 5500 seats in Phase 1. The Phase 2 will add3300 seats.
The BPS arm also operates out of another two facilities in Chennai of which one is inSEZ with seating capacity of 1739. The combined strength of around 830 employees operatesfrom the facilities.
In Pune the Company has own SEZ campus at Hinjewadi. The first phase of this campushas seating capacity of 1900 seats. Around 650 IT and BPS employees are currentlyoperating from this campus.
The Company owns 20 acres of land in MIHAN SEZ Nagpur a tier II city. This facilityis currently operational with around 807 BPS employees and has seating capacity toaccommodate 1104 professionals in different shifts.
This facility in India's IT capital of Bengaluru has capacity of 50 seats. Thisfacility is currently operational with around 27 employees.
Hexaware BPS arm has a facility in Coimbatore with seating capacity of 256 employeesand around 196 BPS employees are working from this facility for providing BPS services toits global clients in shift mode.
The Company has opened New Delivery Centre at Noida. It has seating capacity of 32employees. This delivery Centre is in operation at its 100% capacity.
Overseas Global Delivery Centres New Jersey (USA):
The Company has GDC at New Jersey USA with seating capacity of 64 employees andcurrently 40 IT Professional Employees are working from this delivery center.
Alpharetta GA (USA):
The Company has GDC at Alpharetta in the state of Georgia USA with seating capacity of166 employees and currently 83 IT Professional Employees are working from this deliverycenter.
Dunwoody GA (USA):
The Company has GDC at Dunwoody in the state of Georgia USA with seating capacity of211 and currently 191 IT Professional employees are working from this delivery centre.
Reston Virginia (USA):
The company has delivery centre at Sunrise Valley in the state of Virginia with seatingcapacity of 70 and currently 35 IT Professional employees are working from this deliverycentre.
The Company has GDC at Amsterdam with seating capacity of 12 and currently 08 ITProfessional employees are working from this delivery centre.
The Company has a strong presence in Mexico with a nearshore Delivery Centre atSaltillo with employee's seating capacity of 487. While Mexico offers cost competitivenesscompared to the United States of America the country also provides immense benefits inthe form of same time zone enables immediate response and access to a vast talent pooland an untapped emerging market. The Company intends to leverage its near shore DeliveryCentre to cater to several global clients as an addition to the other existing options ofcontinuing operations in the USA or in the Company's locations in India. Currently around427 IT and BPS professional employees are working from this delivery centre.
The Company also has Global Delivery Centre at Monterrey Mexico with seating capacityof 54 and currently 30 IT professional employees are working from this delivery centre
The Company has a center in Russia for its BPS operation which has a seating capacityof 156 employees. Currently around 120 employees are working from this location forproviding BPS services to a Global Client.
The Company has center in Guangzhou and Shanghai China for its BPS operations with asmall office.
Human Resource Capital
Human Resource Capital and the value that it creates form a big part of Hexaware'sgrowth story. The industry today is changing rapidly with many disruptive business modelsnecessitating a need for human capital to adapt in an agile manner. Automation anddigitization have become buzzwords today. The focus of the Company has been to leveragedigital re-imagination to drive growth and efficiency of its business models products andservices business processes as well as the workplace. This helps the Company to deliver asuperior experience to every key stakeholder viz. customers employees investors and thecommunity at large.
Exceeding customers' expectations requires a high level of focus competence andtechnical expertise. The Company strengthened its recruitment efforts through continuedemployee referrals job fairs social media & campus recruitment drives. Over the lastyear the Company has added 2500 employees taking the total strength to 16205 as atDecember 31 2018 from 13705 at the end of the previous year. The Company is focusedtowards attracting and retaining high calibre employees through comprehensive Hiring andon-going Deployment processes. Gender Diversity is more evident now with a healthy 31.05%of our workforce being women.
The Company takes pride in its continued focus on employee retention. In its sustainedefforts to make Hexaware a Great Place to Work the focus has been on furtheringemployees' career aspirations. The Company believes that its workforce lives its brand andto that end the HR team is always working on initiatives that helps build an engagingorganization. Today the youthfulness and the agility in its talent reflects the new brandidentity of Hexaware.
To sustain its Human Capital Strategy the Company has identified and consolidatedstrong performance indicators. This has led to an increased focus on accountability andownership from all.
Hexaware conducted the EMPPOWER survey an employee engagement survey in collaborationwith Great Place to Work. Hexaware has invested in building a better workplace and thesurvey analysis will help the Company to precisely measure the underlying level of trustwithin the Company and help it to take steps to improve the work environment through thequalitative and quantitative data that the Company has collected.
The EMPPOWER survey closed with a good response and resulted in an increase in theoverall rating to 3.74 from 3.66 in 2017. The rating on the overriding question alsoincreased to 3.86 from 3.79 in 2017.
The Company is committed to remain focused on its journey to be in the ranked list ofGreat Places to Work and this year's rating will further boost the chances and help theCompany make measurable and impactful changes for employee engagement and welfare.
Talent Management - Asset Development
The Company believes that great talent is the biggest source of competitive advantage.Keeping its talent pool at the centre of all the management strategies is prime focus ofthe Company. And the senior leadership team is clear in its expectations from the vastreservoir of talent that the Company has.
The Company's focus is to develop a strong internal pipeline of talent and to provide aplatform for talented individuals to shine innovate and create value for our clients. Thecompany focusses on Talent Management through interventions at every step of the wayright from Hiring to Retention.
The Company believes that appreciation propels people to give their best at work andthe robust Rewards & Recognition portal of the Company bears testimony to that.Managers are continuously encouraged to ingrain a culture of appreciation and nominatedeserving employees for awards such as Spot/ Ace/Star Best Debutant and Best Team etc.Winners are guaranteed global recognition in the Hexaware world creating a memorableemployee experience that is paramount to our Rewards & Recognition strategy. TheCompany has also linked this system to the Performance Management System.
To help smoothen the process of Performance Management and to familiarize the peoplewith the nuances of its tool the Company has regular connect sessions and specificlearning modules designed by the HR team. The Performance Management System has an inbuiltstructured and streamlined process to objectively evaluate one's performance againstpre-defined goals. The new dynamic Project End Feedback system ensures that consultantsget feedback for every project that they work on and are aware of their areas ofimprovement.
The Company focuses on holistic employee development. In its quest for consistency andexcellence the Company rewards its top performers and one of its exclusive clubscontinues to be the High Performers Club (HPC) program the membership to which isrestricted only to consistent top achievers.
Another popular initiative that helps the Company tap into the collective intelligenceof its talent is Brainbox. This is a platform for the consultants to post ingenious ideasthat go a long way in helping the customers save time and money.
Employee Engagement is a binding force that helps the Company work globally. TheCompany understands the need for employees to connect with the Hexaware world on a globalplatform and the internal social networking tool Facebook@ Work helps to collaboratebrainstorm provide real-time feedback and communicate with the leaders directly. The FunWork activities throughout the year helps the consultants to relax rewind and rejuvenatethemselves. These activities run by the different Funsters groups along with unit picnicsproject lunches ODC based fun initiatives are all geared towards team bonding andstrengthening the common goal of working together as one Hexaware despite being spread outin various locations worldwide.
Hexaware's structured talent development programs through various initiatives such asChallenger Catapult Distinguished Engineers and other learning and development programsfully help in leveraging talents of the employees.
Hexaware's Talent Management approach is to bring about transformation and growthopportunities for its consultants keeping in mind the evolving industry trends and peoplepractices pivots on a culture that embraces and nurtures talent rewards top performanceand focusses on Customer delight.
Detailed Description of key HR initiatives are given on page 26 & 27 of the AnnualReport.
Information Security is considered an enabler of business assurance at the board leveltoday and hence its governance and management are of paramount importance to the Company.Beyond compliance being the expectation of the customers in today's competitive businessmanaging dynamic landscapes of threats and vulnerabilities is key to information securityassurance. The business operations of the Company being aligned with the technologyadoption of cloud virtualization innovation Artificial Intelligence Robotics MachineLearning Deep Learning Digital Transformation and more along with industry bestpractices of security being a core strength. Substantial investment by the Company insecurity through latest tools systems and devices provides competitive advantage as wellas Nextgen and Hybrid security cover to business operations of the Company. Informationsecurity management through Confidentiality Integrity and High Availability are beingtime tested by external certification audits and assessments throughout the year as perISO and Industry standards. The governance review of Information security managementencompasses all measures recommended and expected by the international standards legaland regulatory requirements and also the customer contracts. Initiatives on Threatintelligence risk hunting and automated discovery of vulnerabilities have strengthenedthe security and minimized the risk during the year elapsed. External assessment andexpert guidance on GDPR compliance adoption of latest frameworks and strategies tostrengthen the security program were also highlights of the recent past as part of thecontinuous improvement strategy of the Company. Cyber Security resilience to managevarious technical man-made natural and perceived scenarios are part of Company'sbusiness continuity management program. Role based security education and timely awarenesson emerging security challenges are important features of security trainings imparted tothe employees contractors and associated resources.
The Company has sustained its commitment to the highest levels of qualitybest-in-class service management robust information security practices and maturebusiness continuity processes that have collectively helped achieve significant milestonesduring the year. While sustaining existing external benchmarks and certifications theCompany has added new certifications and further enhanced its programs and initiatives.
The Company continues to adhere to international quality standard certifications suchas ISO 9001-2015 ISO 27001:2013 ISO 20000-1:2011 CMMI - DEV & SVC Version 1.3 -Level 5 ISAE3402 and SSAE16 SOC-2 Type II.
The Company commissioned a survey on customer delight for 2018 by Feedback Insights anindependent market research firm to capture customer expectations and measure customerexperience. On a scale of -100 to 100 the Company scored the highest score of 74.4 asagainst an industry score ranging from 53.6 to 74.4. There is significant improvementacross key business metrics as well as in the overall score of 53.0 achieved in fiscal2015.
Benefits to customers:
"Brain Box" is the platform to encourage the employees to bring theirideas value addition to the customers and systematically mange the ideation process.
The Company harnesses the power of knowledge gained by its employees working on theircustomer accounts by encouraging them to create value addition ideas. In the year 2018 61%of the employees have proudly participated in this initiative and have posted over 3888ideas proposing value additions under categories like bring automation / productivityimprovement financial savings and accelerate the time to market the customer's productsand services. 2676 of these ideas have been successfully delivered generatingsaving of over USD 71.15 million and around 1496386 hours of effort savedlast year which is being approved by esteemed customers of the Company. The Brain Boxplatform has promoted the culture of deep expertise value creation attitudeextraordinary proficiency in the customer's business function technical engineeringknowledge sharing and problem solving approach thereby identifying and delivering valuesto the customers at no extra cost to them. Through a structured governance and rewardsprogram the company suitably rewards its employees' passion and best values adds onquarterly basis which is personally driven by the CEO which made more and more employeesbecoming part of this CVA culture.
The customers / clients have benefited as a result of the fewer defects reduction incycle time and improved delivery capabilities. Hexaware has provided value-additionsthrough improvement in the performance of the systems that have been outsourced areduction in the problems and failures and improved stability. This has resulted in highlevels of customer satisfaction and repeat business. Implementing the processes hastrained the organization and people to be methodical and process-driven. The Company hasintroduced and improved upon best-of-breed industry practices and standards and therebyimproved our delivery capability. Focus on quality has led to lower costs and improvedefficiency within the organization.
The customers have benefited as a result of the high quality of delivery and supportstringent information security practices and flexible and proactive approach. TheCompany's understanding of customer's business and technology landscape enables it toprovide comprehensive multi-service solutions along with cost reduction for the customer.This has resulted in high levels of customer delight and repeat business. Implementing thebest in class processes and providing training on it has enabled the organization andpeople to be methodical and process driven. The usage of latest technologies and industrybest practices has improved delivery capability and added business value. Focus on qualityand automation has resulted in cost reduction and improved productivity within theorganization.
Company focused on Corporate Governance
The composition of the Board of Directors of the Company represents an optimumcombination of professionalism knowledge and experience. The Board comprises of ten (10)Directors of these nine Directors are Non-Executive and six amongst them are IndependentDirectors. Directors being eminent professionals in their respective fields with richexperience in policy-making and strategy formulation. All the major committees of theBoard are headed by Independent Directors and the Company has followed CadburyCommittee's and Kotak Committee's recommendation of having two different individuals asChairman & CEO for several years. The Company was the winner of the prestigious GoldenPeacock Award for excellence in Corporate Governance for the year 2011 2015 and 2018 andwon the Special Commendation in the year 2009 and 2013.
In compliance with Regulation 34 of the Listing Regulations a separate report onCorporate Governance alongwith a certificate from the Auditors on its compliance isattached and forms part of this Report.
The risk management framework in the current business environment is changingdynamically with the dimensions of Cyber security Information Security BusinessContinuity and Data Privacy in the risk charts of most of the organizations. Systematicand proactive identification of risks and mitigation thereof enables effective or quickdecision-making and boosts the performance of the organization.
To identity and mitigate the risk the Company has well defined Enterprise-wide RiskManagement (ERM) framework in place. The primary objective of ERM function is to implementa framework that augments risk response decisions and reduce surprises. ERM programmeinvolves risk identification assessment and risk mitigation planning for strategicoperational and financial and compliance related risks across various levels of theorganization.
A separate section on Risk identification and mitigation is discussed in detail in theManagement Discussion and Analysis section of this Annual Report.
In today's environment Company's Business Assets Directors & Officers Employeesare exposed to financial risks mainly arising out of claims from customers third partiesregulators employees as well as stakeholders. In order to mitigate the financial impactthat can emanate from such unforeseen risks the company sufficiently insures itself undervarious policies like Workers Compensation and Employers Liability Commercial GeneralLiability Errors & Omissions Cyber Liability Crime Employment Practices LiabilityDirectors & Officers Liability Property Insurance to name a few. Given the evolvingnature of the business and the associated risks individual policy needs and coverage arereviewed on an ongoing basis and changes are effected as deemed prudent. Additionally theCompany has also taken Insurance for employees and their dependents to safeguard thefinancial interests of the employees and their families in case of unforeseen events likehospitalization accident and death.
INTERNAL FINANCIAL CONTROL SYSTEMS
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The Management has laid down proper and adequate system forinternal financial controls to be followed to ensure safeguarding of its assets theprevention and detection of frauds and errors adherence to the Company's policies theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial disclosures. This ensures that all transactions are authorisedrecorded and reported correctly and assets are safeguarded and protected against loss fromunauthorized use or disposition. In addition there are operational controls.
The internal auditor monitors and evaluates the efficacy and adequacy of internalcontrol system in the Company its compliance with operating systems accountingprocedures and policies at all locations of the Company and its subsidiaries.
The Company appointed PWC as its Internal Auditor for the year ended December 31 2018.The Internal Auditors findings are discussed with the process owners and suitablecorrective actions are taken as per the directions of Audit Committee on an ongoing basisto improve efficiency in operations. During the year the Company continued to implementsuggestions and recommendations by the internal auditors and the audit committee toimprove the control environment.
Further details on internal financial control are included in the Management Discussionand Analysis section which form part of this report. Report of statutory auditor on theinternal financial control is also included in this report on page 161.
The multi-faceted learning and development process at Hexavarsity enriches and empowersindividuals by making them multi-talented and agile to business requirements.
The goal at Hexavarsity is to develop an empowered and multi-skilled workforce withmarket relevant skills. This is enabled for all functions and levels in the organizationusing an experiential learning methodology backed by state-of-the- art learning managementsystems assessment frameworks technologies and tools.
The mission is 'to create an environment that motivates learning and empowersemployees to grow and succeed in their chosen career path relevant to the business.
The company is constantly focused on delivering industry leading solutions for itscustomers. Hexavarsity plays a vital role in this helping the employees transform into adynamic and multi-skilled workforce that is ready to handle the next big wave oftechnology evolution. Ensuring that the workforce is obsolescence proof also ensures thatthe Company meets employee aspirations to stay cutting edge and minimize attrition due tothis reason.
Mission: To enable employees to upgrade their skills to perform roles relevant to themarket.
Hexavarsity launched an industry leading transformational program called"Evolve" during the year. Evolve is focused on creating a multi-skilledconsultant suitable for a Role as its customers require to provide them with the verybest in service and quality. An assessment driven framework that tests technicalfunctional and soft skills and application of these skills in the work environment makesthis program exceptional and powerful.
Benefits of the program
Helps employees own their career progression the way they have visualized it
Upskill them towards aspirational roles and be aligned to roles that are ingreat demand
Acquire multiple and much sought-after skills Fresher Training Program (FTP)
Hexaware's Fresher Training Program (FTP) is designed to nurture the concepts ofLearning to Learn' and Learn by Doing' which encourages and helps build everyFresher's ability to become more resourceful and self-reliant and help prepare them forbusiness demands and challenges. The FTP Foundation is a Full Stack Developer trainingfollowed by a Technology focused training. A robust and comprehensive assessment mechanismis followed in the program to ensure retention of knowledge and test practical applicationof concepts and successful trainees are assigned to projects. During the year 540freshers successfully completed the program and were allotted to projects.
During the year Hexavarsity also conducted a training program for Senior ManagementTrainees and Management Trainees. This program covers technology and Vertical orientationleadership programs and behavioral training. A total of 10 Senior Management Trainees and8 Management Trainees successfully completed their training and were inducted into yourorganization.
During the year HexaVarsity also launched a blue chip Behavioral Assessment that helpsin creation of a balanced and effective team leveraging complementary strengths ofindividuals. This assessment also helps us in hiring the right talent for senior roles inthe organization.
The company also continues to invest on external certifications for its consultants.
Related party transactions
During the financial year 2018 the Company has entered into transactions with relatedparties as defined under Section 2(76) of the Companies Act 2013 read with Companies(Specification of Definitions Details) Rules 2014 all of which were in the ordinarycourse of business and on arm's length basis and in accordance with the provisions of theCompanies Act 2013 read with the rules issued thereunder and the Listing Regulations.
There are no materially significant related party transactions made by the Company withits promoters Directors Key Managerial Personnel or other designated persons which mayhave a potential conflict with the interest of the Company at large.
All Related Party Transactions are placed before the Audit Committee and Board.
Policy on dealing with related party transaction is available on the website of theCompany. http://hexaware.com/investors/
The details as required to be provided under Section 134(3) (h) of Companies Act 2013are disclosed in form AOC-2 as Annexure 2 and forms part of this Annual Report.
Policy on determining material subsidiaries of the Company is available on the websiteof the Company http://hexaware. com/investors/
Employee Stock Option Plans (ESOP)
The Company has set up various employee stock option plans/restricted stock unit plansfrom time to time to attract and retain talent motivate incentivize and reward employeesof the Company and employees of Subsidiary Companies. The Nomination and RemunerationCommittee of the Board administers these plans. The stock option plans are in compliancewith Securities and Exchange Board of India (Share Based Employee Benefits) Regulations2014 ("Employee Benefits Regulations").
During the year 2018 following were the exercises made by employees and grants made toemployees/director under ESOP plan: 557232 options were exercised and the Companyallotted 557232 equity shares of ' 2/- each to the employees/director on such exercise.These shares have been listed on the BSE Limited and National Stock Exchange of IndiaLimited. 613725 Restricted Stock Units (RSUs) were granted under 2015 scheme during theyear 2018 as explained below:
February 07 2018 - 69000 RSUs.
May 2 2018 - 300000 RSUs.
July 24 2018 - 109739 RSUs granted to Mr. R Srikrishna CEO & ExecutiveDirector and 79986 to other employees
October 24 2018 - 55000 RSUs.
Details of the shares issued under Employee Stock Option Plan (ESOP) and also thedisclosures in compliance with Rule 12 of Companies (Share Capital and Debentures) Rules2014 and Securities and Exchange Board of India (Share Based Employee Benefits)Regulations 2014 are available on the website of the company at the following link : http://hexaware.com/investors/ No employee was issued Stock Option during the year equal toor exceeding 1% of the issued capital of the Company at the time of Grant.
During the year under review the Company did not accept or invite any deposits fromthe public.
Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo
The information relating to Conservation of Energy Technology Absorption ForeignExchange Earnings and Outgo required under Section 134(3) (m) of the Companies Act 2013read with Companies (Accounts) Rules 2014 is annexed and forms part of the report.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
A detailed analysis of the Company's performance is disclosed in the ManagementDiscussion and Analysis Report which forms part of this Annual Report.
Investor Education and Protection Fund (IEPF)
Details of unclaimed Dividend and Shares transferred to IEPF during 2018 are given inCorporate Governance Report.
Directors' Responsibility Statement
Pursuant to Section 134 (3) (c) and (5) of the Companies Act 2013 the Directorsconfirm the following:
(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed and there were no 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 the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;
(d) the directors have prepared the annual accounts on a going concern basis; and
(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.
(f) the directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
Directors and Key Managerial Personnel
Mr. P R Chandrasekar having DIN 02251080 was reappointed as an Independent Non -Executive Director of the Company for three years w.e.f January 1 2019 on existing termsand conditions including remuneration.
Mr. Vikash Kumar Jain has been appointed as the Chief Financial Officer of the Companyw.e.f. October 25 2018.
Erstwhile CFO Mr. Rajesh Kanani retired from the Company from close of Business hourson December 31 2018.
In accordance with the provisions of Companies Act 2013 Mr. Kosmas KalliarekosDirector of the Company retires by rotation at this Annual General Meeting and beingeligible; offers himself for re-appointment at the Annual General Meeting.
The information of Directors seeking appointment / reappointment at the Annual GeneralMeeting to be given to the shareholders as per regulation 36 of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 and Secretarial Standards on GeneralMeetings is being provided in Corporate Governance Report.
Number of Meetings of the Board
Seven Meetings of the Board were held during the year. For details of the meetings ofthe Board you may refer to the corporate governance report which forms part of thisAnnual report.
Declaration by Independent directors
The Independent Directors have submitted a declaration that each of them meets thecriteria of independence as provided in Section 149(6) of the Companies Act 2013 andthere has been no change in the circumstances which may affect their status as independentdirector during the year.
The Companies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 mandates evaluation of performance of Independent DirectorsNonIndependent Directors and Chairperson. The Companies Act 2013 states that a formalannual evaluation needs to be made by the Board of its own performance and that of itscommittees and individual Directors. The Schedule IV to the Companies Act 2013 statesthat the performance evaluation of independent Directors shall be done by the entire boardof Directors excluding the director being evaluated.
The performance of the Board was evaluated by the Board after seeking inputs from allthe directors on the basis of the criteria such as the Board composition and structureeffectiveness of board processes information and functioning etc.
The performance of the committees was evaluated by the board after seeking inputs fromthe committee members on the basis of the criteria such as the composition of committeeseffectiveness of committee meetings etc.
The Chairman of the Board / the Nomination and Remuneration Committee ("NRC")review the performance of the individual directors on the basis of the criteria approvedby the Board.
In a separate meeting of Independent Directors held on December 20 2018 performanceof Non-Independent directors performance of the Board as a whole and performance of theChairman was evaluated.
Training of Independent Directors
To familiarize the Independents Directors with the strategy operations and functionsof the Company the Executive Director and Senior Managerial personnel make presentationsat the Board Meetings about Company's operations markets financial results humanresources and on other important aspects.
The terms and conditions of the appointment of every Independent Director is availableon the website of the Company at: http://hexaware.com/investors/
The familiarization policy of the Independent Directors is available on website of theCompany at http://hexaware. com/investors/
Committees of the Board
The Board of Directors has following committees:
1. Audit Governance & Compliance Committee
2. Nomination & Remuneration Committee
3. Stakeholders Relationship Committee
4. Corporate Social Responsibility Committee
5. Strategy and Risk Committee
The details of the composition of the committee and attendance of the meetings ofCommittees of the Board are provided in the Corporate Governance report.
Compliance of Secretarial Standards
The Company complies with all applicable secretarial standards.
Policy on directors and Key Managerial Personnel appointment and remuneration and otherdetails
The Company's policy on Directors and Key Managerial Personnel appointment andremuneration and other matters provided in Section 178(3) of the Act has been disclosed inthe corporate governance report.
Whistle blower policy
The Company has established a vigil mechanism/framed a whistle blower policy. Thepolicy enables the employees and other stakeholders to report to the management instancesof unethical behaviour actual or suspected fraud or violation of the Company's code ofconduct or ethics policy. This policy is reviewed annually by the Audit Committee to checkthe effectiveness of the policy. No personnel has been denied access to the AuditCommittee. The provisions of this policy are in line with the provisions of Section 177(9) of Companies Act 2013. The policy is available on the website of the company at :http://hexaware.com/investors/
The Board of Directors at its meeting held on February 8 2018 appointed BSR & Co.LLP Chartered Accountants Mumbai ("BSR & Co. LLP") with Registration no.101248W/ W-100022 as Statutory Auditors for a period of 5 years to hold office till theconclusion of 30th Annual General Meeting which was confirmed by the members at the 25thAnnual General Meeting held on May 03 2018.
Vide notification dated May 7 2018 issued by Ministry of Corporate Affairs therequirement of seeking ratification of appointment of statutory auditors by members ateach AGM has been done away with. Accordingly no such item has been considered in noticeof the 26th AGM.
There are no qualifications reservations or adverse remarks made by the statutoryauditors in their audit reports on the financial statements for the year ended December31 2018.
Internal Audit for the year ended December 31 2018 was done by PricewaterhousecoopersPrivate Limited and Internal Audit report in accordance with internal audit program forthe year was placed before the Audit Committee.
M/s. Makarand M Joshi & Co. Practising Company Secretary was appointed to conductthe Secretarial Audit of the Company for the year ended December 31 2018 as per theprovisions of Section 204 of the Companies Act 2013 read with rules made thereunder. TheSecretarial Audit report for the year ended December 31 2018 is annexed to Board's reportas Annexure 3. There are no qualifications reservations or adverse remarks made bySecretarial Auditor in his report.
Reporting of frauds by auditors
During the year under review neither the statutory auditors nor the secretarialauditor has reported to the Audit committee under Section 143 (12) of the Companies Act2013 any instances of fraud committed against the Company by its officers or employeesthe details of which would need to be mentioned in the Board's report.
The Company is not required to maintain cost records as specified under sub-section (1)of section 148 of the Companies Act 2013
Significant/Material Orders Passed by the Regulators
There are no significant material orders passed by the Regulators or Courts orTribunals impacting the going concern status of your Company and its operations in future.
Corporate Social Responsibility
Pursuant to the provisions of Section 135 of the Companies Act 2013 the Company spent' 90.46 Million towards CSR activities for the year ended December 31 2018 which is morethan the prescribed limit under section 135 of the Companies Act 2013. The composition ofcontents of the CSR policy and initiatives taken by the Company on Corporate SocialResponsibility during year ended on December 31 2018 as per the format prescribed in theCompanies (Corporate Social Responsibility Policy) Rules 2014 is annexed as Annexure 4to this Report and CSR policy of the Company is available on the website at www.hexaware.com. The Composition of CSR Committee is given in the Corporate GovernanceReport.
Extract of annual return
As provided under Section 92(3) of the Act the extract of annual return in theprescribed Form MGT-9 is available on the website at www.hexaware.com and is alsoannexed as Annexure 5 to this report.
The company has received an order from the Company Law Board under section 2 (41) ofthe Companies Act 2013 for continuing January to December as its financial year. Hencethe Company will maintain its financial year from January 1 to December 31.
Particulars of Directors and Employees
The table containing names and other particulars of Directors in accordance with theprovisions of Section 197(12) of the Companies Act 2013 read with rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is enclosedas Annexure 6 to the Board Report.
The statement containing particulars of employees as required under Section 197(12) ofthe Act read with Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is provided in a separate annexure forming part of this report.Further the report and the accounts are being sent to the members excluding the aforesaidannexure. In terms of Section 136 of the Act the said annexure is open for inspection atthe Registered Office of the Company. Any shareholder interested in obtaining a copy ofthe same may write to the Company Secretary.
Disclosure as required under Section 22 of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013
The Company as an organization is committed to provide a healthy environment to all theemployees and thus does not tolerate any discrimination and/or harassment in any form. TheCompany has in place a Prevention of Sexual Harassment (POSH) policy in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. Frequent communication of this policy is done through variousprograms and at regular intervals to the employees.
The Company has setup an Internal Complaints Committee (ICC) both at the registeredoffice and at every location where it operates in India in accordance with the Act and hasrepresentation of men and women and is chaired by senior lady member and has an externalwomen representation.
Awareness programs are conducted during induction for sensitizing the employees withthe provisions of the Act.
The following is the summary of the complaints received and disposed of during thefinancial year 2018:
a) No.of complaintsreceivedduringthe year: 02
b) No.of complaintsdisposedoff: 02
c) No.of complaintspending: NIL
The Company started a sustainability initiative with the aim of going green andminimizing the impact on the environment. Like the previous years this year too theCompany is publishing only the statutory disclosures in the print version of the AnnualReport. Additional information is available on our website www.hexaware.com.
Electronic copies of the Annual Report 2018 and Notice of the 26th Annual GeneralMeeting are being sent to all members whose email addresses are registered with theCompany / Depository Participant(s). For members who have not registered their emailaddresses physical copies of the Annual Report 2018 and the Notice of the 26th AnnualGeneral Meeting are being sent in the permitted mode. Members requiring physical copiescan send a request to the Company.
The Company provides e-voting facility to all its members to enable them to cast theirvotes electronically on all resolutions set forth in the Notice. This is pursuant to theSection 108 of the Companies Act 2013 and Rule 20 of the Companies (Management andAdministration) Amendment Rules 2014 as amended from time to time.
Business Responsibility Report: The Business Responsibility Report' (BRR) ofthe Company for the year 2018 forms part of this Annual Report as required underRegulation 34(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.
The Directors place on record their sincere appreciation of the customers Governmentof India and of other countries vendors bankers and Technology Partners for the supportextended. The Directors are also deeply touched by the efforts sincerity and loyaltydisplayed by the employees
without whom the growth of the Company is unattainable. The Directors wish to thank theinvestors and shareholders for placing immense faith in them. The Directors seek and lookforward to the same support during the future years of growth.
|For and on behalf of the Board of Directors |
|Date: March 12 2019 ||Atul K. Nishar |
|Place: Mumbai ||Chairman |