To The Members
Your Directors have pleasure to present their Report of your Company on the businessand operations for the year ended 31 March 2022.
| || || || || |
(Rs. in Lakhs)
| ||Standalone ||Consolidated |
|Particulars ||For the year ended 31 March 2022 ||For the year ended 31 March 2021 ||For the year ended 31 March 2022 ||For the year ended 31 March 2021 |
|Revenues ||1410.80 ||1646.60 ||5239.61 ||5940.22 |
|Expenditure ||3257.32 ||1577.99 ||7071.56 ||5530.07 |
|Finance cost ||205.81 ||273.69 ||294.49 ||548.96 |
|Depreciation ||339.37 ||343.30 ||361.42 ||363.04 |
|Operating profit/ (loss) ||(2391.70) ||(548.38) ||(2487.86) ||(501.85) |
|Profit before Exceptional items and Tax ||278.50 ||138.03 ||182.34 ||184.55 |
|Exceptional Items ||341.87 ||0 ||341.87 ||0 |
|Profit before tax ||620.37 ||138.03 ||524.21 ||184.55 |
|Less: Taxes ||62.14 ||(0.85) ||62.08 ||(0.26) |
|Profit after tax ||558.23 ||138.88 ||462.13 ||184.81 |
|Other Comprehensive Income/ (Loss) ||(12.64) ||(6.66) ||(12.64) ||(6.66) |
|Total Comprehensive Income ||545.59 ||132.22 ||449.49 ||178.15 |
|Earnings per share (equity shares par value Rs. 10 each) || || || || |
|Basic (Rs.) ||0.89 ||0.31 ||0.74 ||0.42 |
|Diluted (Rs.) ||0.89 ||0.31 ||0.74 ||0.42 |
During the financial year ended 31 March 2022 your company recorded consolidatedrevenues of Rs. 5239.61 lakhs as compared to Rs.5940.22 lakhs for the financial yearended 31 March 2021. The consolidated profit was Rs. 449.49 lakhs during the current yearas compared to Rs. 178.15 lakhs in the previous year.
Further during the year under review there were no changes in the nature of businessof the company. However during the year your company had undertaken a corporaterestructuring exercise leading to changes in the Memorandum of Association defining thenew areas of business that your Company intends to pursue including PharmaceuticalsDefense Manufacturing etc.
Transfer to Reserves in terms of Section 134(3) (j) of the Companies Act 2013
For the financial year ended on 31st March 2022 the Company transferred Rs.55823239.62./- to Reserves & Surplus.
On account of inadequacy of profits during the financial year ended 31 March 2022 theBoard of Directors of the company have not recommended dividend.
Transfer of Unclaimed Dividend to Investor Education and Protection Fund
The provisions of Section 125(2) of the Companies Act 2013 do not apply as there wasno dividend declared and paid last year.
The paid-up equity share capital as on 31 March 2022 was Rs. 7377.00 lakhs comprising73770041 equity shares of Rs.10 each. During the year under review the company hasissued and allotted 29502748 equity shares on rights basis. Apart from this Company hasnot granted stock options or sweat equity shares or bonus shares. The Company has notbought back any of its securities during the year under review.
Public Announcement to the shareholders on the Open Offer for Acquisition of EquityShares by Sri Power Generation (India) Private Limited
During the year Sri Power Generation (India) Private Limited made an open offer andmade a detailed public statement to the public shareholders of Megasoft Limited foracquisition upto 29508017 Fully paid-up equity shares of Rs. 10/- each at an OfferPrice of Rs. 16.70/- per share.
On 16th November 2021 Sri Power Generation (India) Private Limited intimated to theStock Exchanges regarding acquisition of 13116104 additional equity shares representing17.78% of the then paid-up share capital of the Company through open offer. Further on18th November 2021 Sri Power Generation (India) Private Limited intimated the StockExchanges that they are classified as promoters of the Company pursuant to open offer. Ason date Sri Power Generation (India) Private Limited is holding 43.77% of equity shares ofthe Company.
Directors and Key Managerial Personnel
The company has received declarations from all the independent directors of the companyconfirming that they meet the criteria of independence as prescribed under section 149(6)of the Companies Act 2013 and Schedule IV of the Companies Act 2013 and Regulation16(1)(b) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations2015.
During the year under review the following changes were effected in the composition ofthe Board of Directors of the Company:
Mr. G V Kumar Managing Director & CEO of the Company tendered hisresignation with effect from 10th December 2021.
Mr. Sunil Kumar Kalidindi has been appointed as an Additional Director(Executive & CEO) of the Company with effect from 10th December 2021
Mr. Upendar Mekala Reddy Independent Director of the Company tendered hisresignation with effect from 10th December2021
Mr. Suryanarayana Raju Nandyala has been appointed as an Additional Director ofthe Company with effect from 24th December 2021
the designation of Ms. Leona Ambuja was changed from Independent Director toNon-Executive Director with effect from 01st April2022
In accordance with the provisions of the Companies Act 2013 approval of members isbeing sought at the ensuing Annual General Meeting ('AGM') of your Company for appointmentof Mr. Suryanarayana Raju Nandyala (DIN-01581731) as Independent Director (Non-Executive)of the Company.
In accordance with the provisions of the Companies Act 2013 and in terms of theMemorandum of Association and Articles of Association of the Company Mr. Sunil KumarKalidindi [DIN-02344343] Director of your Company retire by rotation at the ensuing AGMand eligible offers for reappointment.
The Board of Directors met Nine (9) 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 The Institute ofCompany Secretaries of India were adhered to in respect of meeting of Board of Directorsof the company.
Compliance with Secretarial Standards
During the year under review the provisions of Secretarial Standard-1 (Board Meetings)and 2 (General Meetings) issued by the Institute of Company Secretaries of India (ICSI)were adhered to 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 beencarried out has been detailed out in the Corporate Governance Report.
Performance Evaluation Criteria for Independent Directors
The performance evaluation criteria for independent directors are determined by theNomination and Remuneration Committee. An indicative list of factors on which evaluationwas carried out includes participation and contribution by a director commitmenteffective deployment of knowledge and expertise integrity experience (including theproficiency) and maintenance of confidentiality and Independence of behavior and judgment.
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 March2022 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 of the company for the year;
(iii) the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the company and for preventing and detecting fraud and other irregularities;
(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 financial year 2021-2022 your company came up with and concluded a RightsIssue the proceeds of which were used to pay the aggregate outstanding borrowings of thecompany on a consolidated basis. Also during the year the company concluded and signed aLease Agreement for the third and the Final Block (Block 3) for its share for which thecompany started receiving rentals as declared by the company vide its disclosure to theStock Exchange on 3rd January 2022. Apart from this during the previous financial yearthe company transferred/sold all its holdings in its two wholly owned overseassubsidiaries XIUS Holding Corp USA and Megasoft Consultants SDN.BHD Malaysia to M/sNelatop Systems Private Limited ultimately wholly owned Indian Subsidiary of the company.
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's such as air conditionerscomputer terminals lighting and utilities in the work premises. All possible measureshave been taken to conserve energy:
? through periodic energy audits to identify potential areas for saving
? by incorporating energy-efficient equipment
? through automation i.e. using timers automatic level controllers etc.
(b) Research and Development (R&D):
At the end of each year management and the Board jointly develop a list of major risksthat the company plans to prioritize in the next year. Key areas of Risk management forthe year 2022-23 include Liquidity intellectual property risk Data Security and privacyretention and development of Human resources Business competition Delayed payments fromkey customers & resultant Cash flow problems and Foreign exchange fluctuations .
(c) Foreign exchange earnings and outgo:
The details of foreign exchange earnings and outgo are given in note no. 34 and 35 ofthe Notes forming part of the standalone financial statements of the company.
Particulars of Contracts or Arrangements made with Related Parties under section188
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 Committeeas also 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.
The details of the Related Party transactions on arm's length basis has been providedin Annexure -1 appended hereto and forms part of this report.
Particulars of Loans Investments & Guarantee
Details of Loans Investments and Guarantees covered under the provisions of Section186 of the Companies Act 2013 are given in note no. 3 5 and 32 of the Notes forming partof the standalone financial statements of the company.
Although the company has long been following the principle of risk minimization 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 industrygeographic and collateral-type levels where appropriate.
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 governancestructure is led by the Audit/Risk Compliance Committee chaired by Mr. Anil Kumar Sood.
This committee is responsible for the effective management of the risks facing theCompany. The Committee meets on a quarterly basis and reports to the Board. As a matter ofpolicy these risks are assessed and steps as appropriate are taken to 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.
Internal financial control with reference to the financial statements
The Company has in place adequate internal financial controls with reference tofinancial statements. During the year no material weakness in the design or operation wasobserved.
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 behavior the company has adopted a vigil mechanism policy.This policy is explained in corporate governance report and also posted on the website ofthe company which can be accessed at http://www.megasoft.com/corporate-governance.html.
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.
Subsidiaries Associates and Joint Venture Companies
During the year under review the following subsidiaries have been incorporated:
1. Velapan Systems Private Limited incorporated on 10th March 2022
2. Nelatop Systems Private Limited incorporated on 14th March 2022
Performance and Financial Position of each of the Subsidiaries Associates and JointVenture Companies included in the Consolidated Financial Statement
The Consolidated Financial Statements relates to the Company Nelatop Systems PrivateLimited (includes XIUS Holding Corp and its subsidiaries and Megasoft Consultants Sdn Bhd)and Velapan Systems Private Limited. The Financial Statements of the Subsidiaries coveredin the Consolidation process are drawn upto the same reporting date as that of the Companyi.e. 31st March 2022. The Financial Statements of the Company and itsSubsidiaries have been combined on a line-by-line basis by adding together like-items ofassets liabilities income and expenses after eliminating intra-group balancesintra-group transactions and resulting unrealized profits or losses unless cost cannot berecovered. The statement pursuant to Section 129 of the Companies Act 2013 in respect ofsubsidiaries is attached as Annexure-2.
The Board of Directors in its meeting held on 19th March 2022 had decidedthat the non-value adding / loss making products division/ IT business of the Companyhaving negative net worth shall be held in a separate entity for further strategicevaluation and assessment on the way forward for this division. Accordingly the companyhas transferred/Sold all its holdings in its two wholly owned overseas subsidiaries XIUSHolding Corp USA and Megasoft Consultants SDN BHD Malaysia to its Ultimately Whollyowned Indian Subsidiary M/s Nelatop systems Pvt Ltd ("NSPL") on 28th March2022.
The Company has neither raised nor renewed any Deposits as on March 31 2022 orreceived any other monies construed to attract the provisions of Section 73 of theCompanies Act 2013 read with the Companies (Acceptance of Deposits) Rules 2014 asamended from time to time.
The Annual Return pursuant to the provisions of Section 92(3) of Companies Act 2013read with Rule 12 of the Companies (Management and administration) Rules 2014 can beaccessed at http:// www.megasoft.com/annual-return.html
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. AppointedM/s. N.C. Rajagopal & Co. [Firm Registration No.003398S] Chartered Accountants tohold office as auditors of the company till the conclusion of the 22nd AnnualGeneral Meeting to be held in the year 2022.
In accordance with the provisions of Section 139 of the Companies Act 2013 the Boardof Directors on the recommendation of the Audit Committee has proposed to re-appoint M/s.N.C. Rajagopal & Co. Chartered Accountants (Firm Registration No. 003398S) asStatutory Auditors for second term of five consecutive financial years from ensuing 22ndAGM till the conclusion of 27th AGM of the Company.
Further the Company received the consent thereto along with a declaration from M/s.N.C. Rajagopal & Co. Chartered Accountants (Firm Registration No. 003398S) to theeffect that if they will be appointed it would be in accordance with the provisions ofSection 141 of the Companies Act 2013 and the rules framed thereunder for appointment asStatutory Auditors of the Company Further M/s. N.C. Rajagopal & Co. CharteredAccountants (Firm Registration No.003398S) have confirmed that they hold a validcertificate issued by the Peer review Board of the Institute of Chartered Accountants ofIndia (ICAI) as required under the SEBI(Listing Obligations Disclosure Requirements)2015.
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 LLP(COP-5081/FCS-5837) to undertake the Secretarial Audit of the company. The SecretarialAuditors' Report in the prescribed format for the year ended 31 March 2022 is annexed tothis Directors' Report and forms part of the Annual Report (Annexure-3).
Details in respect of frauds reported by Auditors other than those which are reportableto the Central Government
During the year under review the Statutory Auditors of the Company have not reportedany frauds to the Audit Committee or to the Board of Directors as prescribed under Section143(12) of the Companies Act 2013 and rules made thereunder.
Details of Significant & material orders passed by the Regulators or Courts orTribunal impacting the going concern status and company's operations in future
During the financial year under review there were no significant or material ordersissued impacting the going concern status of the Company.
Update on COVID-19
Note on the COVID-19 has been provided in note number 42 and note number 44 to notes tothe Consolidated & Standalone financial statements.
Material changes from end of financial year to date of this report
The Board of Directors in its meeting held on 4th May 2022 have alsoapproved the Divestment of 100% Equity stake / investment held in its ultimately whollyowned subsidiary viz. Nelatop Systems Private Limited ("NSPL") for an aggregateconsideration of INR 5.50 Cr subject to requisite shareholders approval of the Companyunder SEBI LODR. The Board of Directors in its meeting held on 4th May2022also approved Sale of its Indian software product division housed within the Company byway of slump sale for an aggregate consideration of INR 1 Cr. subject to requisiteshareholders approval of the Company under applicable law.
Except as disclosed elsewhere in this report there have been no other material changesand commitments which can affect the financial position of the Company occurred betweenthe end of the financial year of the Company and date of this report.
Human Resources Development
People are the key assets for any organization. Your company has a robust HumanResource system and well-structured policies for the holistic development of this asset.The company believes in having cordial relationship with employees and it strives toprovide them with a professionally rewarding and enriching work environment. The companypossesses an effective performance management system that focuses on employee developmentmeasuring key result areas competencies and training needs.
Your Company provides necessary induction training and proper guidance to meet theoperational needs of the organization from time to time.
Apart from the Medical Insurance and Life Insurance for the benefit of the employeesand their families the company organizes health awareness program and webinar for thewellbeing of the employee. On several cultural occasions your company conducts teambuilding activities and events to build team spirit and keep the employees motivated. Yourcompany has career progression policy for employee growth. Your Company strongly believesthat happy and a satisfied employee will lead the Company to success.
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.
Disclosure as per Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) 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.
Corporate Social Responsibility
The Company is not required to constitute a Corporate Social Responsibility Committeeas it does not fall within purview of Section 135(1) of the Companies Act 2013 and henceit is not required to formulate policy on corporate social responsibility.
The details of application made or any proceeding pending under the Insolvency andBankruptcy Code 2016 during the year along with their status as at the end of thefinancial year.
During the financial year no application was made by or against the Company or anyproceeding is pending under the Insolvency and Bankruptcy Code 2016 (31 of 2016).
Disclosure about the difference between the amount of the valuation executed at thetime of one time settlement and the valuation done while taking loan from the Banks orFinancial Institutions along with the reasons thereof.
During the year ended no such settlements and valuation done while taking loan from theBanks or Financial Institutions.
Listing with Stock Exchanges
Your company's equity shares are listed on BSE  and NSE [MEGASOFT].
Necessary stock exchange regulations are complied with from time to time.
Your directors place on record their appreciation of the customers bankers Governmentof India and of other countries Government of Telangana Government of Tamil NaduRegistrar and Share Transfer Agent vendors and technology partners for the supportextended. Your directors also wish to place on record their appreciation of thecontribution made by employees at all levels without whom the growth of the company isunattainable. Your directors seek and look forward to the same support during future yearsof growth.
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For and on behalf of Board of Directors of Megasoft Limited
| ||Sunil Kumar Kalidindi ||Anil Kumar Sood |
| ||Executive Director & CEO ||Director |
|Place: Hyderabad || || |
|Date: 30th May 2022 || || |