To the Members
Your Directors hereby present their report of the business and operations of yourCompany along with the audited financial statements for the financial year ended March31 2019 as under :-
|Particulars || |
| ||For the year ended 31 March 2019 ||For the year ended 31 March 2018 ||For the year ended 31 March 2019 ||For the year ended 31 March 2018 |
|Revenues ||2363.77 ||2851.34 ||6187.37 ||6625.94 |
|Expenditure ||2828.42 ||3115.95 ||5990.21 ||5665.14 |
|Finance cost ||373.25 ||322.83 ||614.83 ||519.87 |
|Depreciation ||98.37 ||65.89 ||375.76 ||431.16 |
|Operating profit / (loss) ||(936.27) ||(653.33) ||(793.43) ||9.77 |
|Profit before tax ||77.66 ||(544.20) ||70.52 ||108.91 |
|Less: Taxes ||36.50 ||(60.23) ||37.10 ||(60.23) |
|Profit after tax Earnings per share (equity shares par value ' 10 each) ||41.15 ||(493.97 ||33.42 ||169.14 |
|Basic (') ||0.09 ||(1.05) ||0.08 ||0.45 |
|Diluted (') ||0.09 ||(1.05) ||0.08 ||0.45 |
During the financial year ended 31 March 2019 your company recorded consolidatedrevenues of ' 6187.37 as compared to ' 6625.94 Lakhs for the financial year ended 31March 2018. The consolidated profit was ' 33.42 Lakhs during the current year as comparedto ' 169.14 Lakhs in the previous year.
Further during the year under review there were no changes in nature of business ofthe company.
On account of inadequacy of profits during the financial year ended 31 March 2019 theBoard of Directors of the company do not recommend any dividend.
The paid-up equity share capital as on 31 March 2019 was '4426.73 lakhs comprising of'44267293 equity shares of ' 10 each. During the year under review the company has notissued shares with differential voting rights nor granted stock options or sweat equity.
Material changes from end of financial year to date of this report
Except as disclosed elsewhere in this report there have been no material changes andcommitments affecting the financial position of the Company which occurred between theend of the financial year to which the financial statements relate and the date of thisreport.
Directors and Key Managerial Personnel
The company has received the necessary declaration from all the Independent Directorsin accordance with Section 149 (7) of the Companies Act 2013 that they meet the criteriaof independence as laid out in sub-section (6) of Section 149 of the Companies Act 2013and Regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("SEBI Listing Regulations"). There has been no change in thecircumstances affecting their status as an Independent Director during the year.
During the year under review Ms. Uma Garimella Independent Director of the Companytendered her resignation with effect from 18th April 2018.
In accordance with the provisions of the Companies Act 2013 and in terms of theMemorandum and Articles of Association of the company Mr. GV Kumar [DIN-00059107] and Mr.D Sudhakar Reddy [DIN-00047707] directors of your company retire by rotation at theensuing AGM and are eligible for reappointment.
The Board of Directors met four (4) times during the financial year. The provisions ofCompanies Act 2013 and Regulation 17(2) of SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 Secretarial Standard - 1 issued by Institute of CompanySecretaries of India were adhered to in respect of meeting of Board of Directors of thecompany.
Compliance with Secretarial Standards
During the year under review the provisions of Secretarial Standard - 1 (BoardMeetings) and 2 (General Meetings) issued by the Institute of Company Secretaries of India(ICSI) were adhered while conducting the respective Meetings.
Nomination & Remuneration Policy
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The Remuneration Policy is available on the website of the company and theterms of reference are given separately in the Corporate Governance Report.
Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations& Disclosure Requirements) Regulations 2015 the Board has carried out an annualperformance evaluation of its own performance the directors individually as well as theevaluation of the working of its committees. The
manner in which the evaluation has been carried out has been detailed out in theCorporate Governance Report.
Directors' Responsibility Statement
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofsection 134(3)(c) of the Companies Act 2013:
i. in the preparation of the annual financial statements for the year ended 31 March2019 the applicable accounting standards had been followed along with proper explanationsrelating to material departures;
ii. 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 the end of the financial year andof the profit / loss of the company for the year;
iii. the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
iv. the directors had prepared the annual accounts on a "going concernbasis";
v. 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
vi. the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
During the previous financial year after the Shareholders' approval through the postalballot dated 22nd March 2016 for the same the company entered into a Joint DevelopmentAgreement with M/S. Darshita Infrastructure Ltd (A Salarpuria Sattva Group Company) &obtained necessary Statutory approvals from TSIIC and other regulatory authorities forsetting up a large IT facility at its property at Nanakramguda (which was registered inthe company's favour in May 2015 by TSIIC through a conditional sale deed). Block 1 of thesaid IT facility was completed on time and the same has been rented out during the lastquarter of financial year 2018 as declared by the company vide its disclosure to theStock Exchanges on 14 Feb 2019.
A detailed discussion on the performance of the company industry structure threatsopportunities risks future outlook and strategy is given separately in the Management'sDiscussion and Analysis section which forms a part of this annual report.
Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo
In terms of Section 134(3)(m) of the Companies Act 2013 and the rules framedthereunder your Directors furnish the required details below:
(a) Conservation of Energy: Your Company uses electric energy for all its equipment'ssuch as air conditioners computer terminals lighting and utilities in the work premises.All possible measures have been taken to conserve energy:
V through periodic energy audits to identify potential areas for saving
V by incorporating energy-efficient equipment
V through automation i.e. using timers automatic level controllers etc.
(b) Research and Development (R&D): At the end of each year management and theBoard jointly develop a list of major risks that company plans to prioritize in the nextyear. Key areas of Risk Management for the year 2019-20 include Data Security and PrivacyTechnology obsolescence Service Delivery retention and development of Human ResourcesBusiness competition Delayed Payments from Key customers & resultant Cash flowproblems and Foreign exchange fluctuations
(c) Technology Absorption: In our quest to offer all our products in cloud environmentYour company continued to re-architect and design multiple components and technologies toenable porting of the services on to cloud. With our intend to offer all flagship productsin cloud our products require higher configurability auto scaling and data securityframeworks. Your company has made significant progress in this regard during last year.
(d) Foreign exchange earnings and outgo: The details of foreign exchange earnings andoutgo are given in note no. 29 and 28 of the Notes forming part of the standalonefinancial statements of the company.
Your company's quality management system (QMS) has its foundation on decades ofexperience and industry best practices that are aligned with international standardquality models and certifications. This assures that the company maintainsconfidentiality integrity availability of corporate and client information.
ISO 9001:2015 - Quality Management System
QMS enhancing customer satisfaction.
Your company is certified for ISO 9001:2015 by BSI India. Our products & solutionstherefore ensure customer satisfaction.
ISO 27001:2013 - Information Security Management System
Information security management system enhancing Confidentiality Availability andIntegrity.
Although the company has long been following the principle of risk minimisation as isthe norm in every industry it has now become a compulsion.
Therefore in accordance with Section 134(3)(n) of the Companies Act 2013 andRegulation 17(9) SEBI (Listing Obligations & Disclosure Requirements) Regulations2015 the Board members formally adopted steps for framing implementing and monitoring therisk management policy for the company.
A disciplined approach to risk is important in a diversified organization like ours inorder to ensure that we are executing according to our strategic objectives and that weonly accept risk for which we are adequately compensated. We evaluate risk at theindividual transaction level and evaluate aggregated risk
at the customer industry geographic and collateral-type levels where appropriate.
At the end of each year management and the Board jointly develop a list of major risksthat company plans to prioritize in the next year. Key areas of Risk Management for theyear 201920 include Data Security and Privacy Technology obsolescence Service Deliveryretention and development of Human Resources Business competition Delayed Payments fromKey customers & resultant Cash flow problems and Foreign exchange fluctuations
The main objective of Your Company's risk management policy is to ensure sustainablebusiness growth with stability and to promote a pro-active approach in reportingevaluating and resolving risks associated with the business. In order to achieve the keyobjective the policy establishes a structured and disciplined approach to RiskManagement in order to guide decisions on risk related issues.
The risk governance structure is led by the Audit/Risk Compliance Committee chaired byMr. Anil Kumar Sood. This committee is responsible for the effective management of therisks facing the Company. The Committee meets on a quarterly basis and reports to theBoard. As a matter of policy these risks are assessed and steps as appropriate are takento mitigate the same.
Internal Control Systems and Their Adequacy
The company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The scope and authority of the Internal Audit (IA) functionis defined in the Internal Audit Charter. To maintain its objectivity and independencethe Internal Audit function reports to the Chairman of the Audit/Risk Compliance Committeeof the Board.
The Internal Audit monitors and evaluates the efficacy and adequacy of internal controlsystem in the company its compliance with operating systems accounting procedures andpolicies at all locations of the company and its subsidiaries. Based on the report ofinternal audit function process owners undertake corrective action in their respectiveareas and thereby strengthen the controls. Significant audit observations and correctiveactions thereon are presented to the Audit/Risk Compliance Committee of the Board.
Vigil Mechanism / Whistle Blower Policy
In order to ensure that the activities of the company and its employees are conductedin a fair and transparent manner by adoption of highest standards of professionalismhonesty integrity and ethical behaviour the company has adopted a vigil mechanismpolicy. This policy is explained in corporate governance report and also posted on thewebsite of the company.
Related Party Transactions
All related party transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. There are no materiallysignificant related party transactions made by the company with the promoters directorskey managerial personnel or other designated persons which may have a potential conflictwith the interest of the company at large.
All related party transactions are placed before the Audit/Risk Compliance Committee asalso the Board for approval.
The Board of Directors of the company has on the recommendation of the Audit/RiskCompliance Committee adopted a policy to regulate transactions between the company andits related parties in compliance with the applicable provisions of the Companies Act2013 the Rules framed thereunder and Regulation 23 of SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015. This Policy was considered and approved by theBoard and has been uploaded on the website of the company.
Enhancing Shareholder Value
Enhancing Shareholder Value is the common thread that runs through everything we do asa company from innovating new products and broadening our existing portfolio tosuccessful restructuring efforts and improving our working capital.
Throughout our history delivering value to our shareholders has been and will continueto be uppermost in our minds as we manage our business. However in the last few yearsdue to declining revenues and performance the company has been unable to declaredividends. Your company is also committed to creating value for all its stakeholders byensuring that its corporate actions positively impact the stock price and creation ofShareholder Value.
Corporate Social Responsibility
The provisions for corporate social responsibility ("CSR") under theCompanies Act 2013 are not applicable to the company for the current financial year.However your company has been over the years pursuing as part of its corporatephilosophy an unwritten CSR policy voluntarily which goes much beyond mere philanthropicgestures and integrates interest welfare and aspirations of the community with those ofthe company itself in an environment of partnership for inclusive development.
A report on Corporate Governance including the relevant Auditors' Certificate regardingcompliance with the conditions of Corporate Governance as stipulated in Regulation 34(3)and Schedule V of SEBI (Listing Obligations & Disclosure Requirements) Regulations2015 is annexed. Management's Discussion and Analysis is also annexed.
Particulars of Loans Guarantees & Investments
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in note no. 3 10 and 26 of the Notes formingpart of the standalone financial statements of the company.
The statement pursuant to Section 129 of the Companies Act 2013 in respect ofsubsidiaries is attached as Annexure-1. The annual accounts of these subsidiaries and therelated detailed information will be made available to any member of the company seekingsuch information at any point of time and are also available for inspection by any memberof the company at the registered office of the company. The company shall furnish a copyof annual accounts of subsidiaries to any member on demand.
Consolidated Financial Statements
The consolidated financial statements of the company prepared in accordance with theprescribed Accounting Standards form part of this Annual Report pursuant to the Regulation34(2) of SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015.
The company has not accepted any deposits from the public and as such there are nooutstanding deposits in terms of the Companies (Acceptance of Deposits) Rules 2014.
Particulars of Employees
There are no employees falling within the provisions of section 134(3)(q) of theCompanies Act 2013 read with Rule 5(2) and 5(3) of The Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014.
Employee Stock Option Scheme
The company has not issued any employee stock option during the year under review.
Extract of Annual Return
The details forming part of the extract of the Annual Return in form MGT-9 has beengiven in the Annexure-2 appended hereto and forms part of this report.
Except as specified and explained below there are no other qualificationsreservations or adverse remarks or disclaimers in the Auditors' Report. Observations madein the Auditors' Report are self-explanatory and therefore do not call for any furthercomments under Section 134(1) of the Companies Act 2013.
Members at its 17th Annual General Meeting held on July 28 2017 appointed M/s. N. C.Rajagopal & Co. [Firm Registration No.003398S] Chartered Accountants to hold officeas auditors of the company till the conclusion of the 22nd Annual General Meeting to beheld in the year 2022. The requirement of annual ratification of auditor's appointment atthe AGM has been omitted pursuant to Companies (Amendment ) Act 2017 notified on May 72018
The Statutory Auditors have confirmed that they satisfy the independence criteriarequired under Companies Act 2013 Code of Ethics issued by institute of CharteredAccountants of India.
Mr. R Balasubramanian (FCA-220677) Chartered Accountants perform the duties ofinternal auditors of the company and their reports are reviewed by the audit committeefrom time to time.
Pursuant to the provisions of Sections 204 of the Companies Act 2013 and the rulesframed thereunder the company has appointed M/s. M Damodaran & Associates (COP-5081/FCS-5837) Practicing Company Secretaries to undertake the Secretarial Audit of thecompany. The Secretarial Auditors' Report in the prescribed format for the year ended 31March 2019 is annexed to this Directors' Report and forms part of the Annual Report(Annexure-3). There are no qualifications or adverse remarks made by the secretarialauditor.
Human Resources Development
Your Company recognises the importance of human resources and has created a performancedriven environment where innovation is encouraged performance is recognised and employeesare motivated to realise their potential. Your Company reinforced the best HR practices toattract develop and retain talented employees. Your Company has framed a strongstructured and systematic recognition programs which motivates the employees toflourish.
Your Company fosters a culture of open communication that empowers employees toarticulate their thoughts and feelings freely exchange ideas and contribute toorganisational growth. Regular HR connect session helps the company understand the pulseon the ground and take necessary steps to keep the workforce engaged and motivated. Anumber of initiatives have been taken up that serve as effective platform for employees toconnect and interact and share their goals and aspirations. Employees also receivefeedback on technical behavioral other professional and personal areas on a regularbasis.
Disclosure as required under Section 22 of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013
Your company has in place an Anti-Sexual Harassment Policy in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. The Internal Complaints Committee ("ICC") has been set upto redress the complaints received regarding sexual harassment. All employees are coveredunder this policy. During the year under review the ICC has not received any complaints.
Listing with Stock Exchanges
Your company's equity shares are listed on BSE  and NSE [MEGASOFT]. Necessarystock exchange regulations are complied with from time to time.
Your Directors wish to place on record their appreciation of the valuable co-operationextended to the Company by its Customers bankers and various authorities of the State andCentral Government. They thank the Distributors Dealers Consignment Agents suppliersand other business associates of your Company for their continued support. Your Board alsotakes this opportunity to place on record its appreciation of the contributions made byits employees at all levels and last but not least of the continued confidence reposed byyou in the Management.
| ||For and on behalf of the Board of Directors of |
| ||Megasoft Limited |
|GV Kumar ||D Sudhakar Reddy |
|Managing Director ||Executive Director |
|Place : Hyderabad || |
|Date : 28 May 2019 || |