|BSE: 532819||Sector: IT|
|NSE: MINDTREE||ISIN Code: INE018I01017|
|BSE 10:11 | 21 Aug||1047.00||
|NSE 09:59 | 21 Aug||1049.85||
|Mkt Cap.(Rs cr)||17,191|
|Mkt Cap.(Rs cr)||17190.69|
Mindtree Ltd. (MINDTREE) - Director Report
Company director report
Your Directors have immense pleasure in presenting Nineteenth Board'sReport of Mindtree Limited ("Mindtree") or ("Company") together withthe audited consolidated and standalone financialstatements for the year ended March 312018. The consolidated performance of the Company has been referred to wherever required.
Financial Performance ` in million
Your Company's financial statements for the year ended March 31 2018are the financial statements under the Companies (Indian Accounting Standards) Rules 2015and Companies (Indian Accounting Standards) Amendment Rules 2016 as applicable. Thestandalone numbers for all the comparative periods have been restated to give impact tothe Amalgamation of subsidiaries with your Company resulting in a common control businesscombination (refer to Note 32 of the standalone financial statements).
On consolidated basis revenue for the year was ` 54628 millionsignifying a growth of 4.3% in Rupee terms. Your Company had 338 active customers as onMarch 31 2018 of which 118 customers had revenues in excess of US$ 1 million 38customers had revenues in excess of US$ 5 million 17 customers had revenues in excess ofUS$ 10 million 4 customers had revenues in excess of US$ 25 million 1 customer hadrevenues in excess of US$ 50 million and 1 customer had revenues in excess of US$ 100million.
EBITDA margins have dropped marginally by 0.1% from 13.7% in theprevious year to 13.6% in the current year. Total employee benefit expense have increasedby 4.4%. Employee benefits expense as a percentage to revenue has remained the same at65.2%. The increase is in line with increase in revenue and increase in head count (March31 2018: 17723; March 31 2017: 16470). Other expenses increased due to increase intravel expenses and subcontractor expenses.
Our e ective tax rate is at 23.2% when compared to 24.6% in theprevious year. PAT has grown by 36.2% and as a percentage of revenue has increased from8.0% to 10.4% in the current year mainly on account of increase in revenue other incomeand foreign exchange gain in the current year as compared to forex loss in the previousyear.
On standalone basis revenue for the year was ` 53250 millionsignifying a growth of 5.7% in Rupee terms. EBITDA margins have increased marginally from14.5% in the previous year to 14.6%. The growth in revenue (5.7%) was higher than thegrowth in employee benefits expense (4.7%). Other expenses increased due to increase intravel expenses and subcontractor expenses.
Our e ective tax rate is at 21.3% when compared to 23.7% in theprevious year. PAT has increased by 40.1% to ` 6249 million as compared to ` 4460million in the previous year mainly on account of increase in revenue other income andforeign exchange gain in the current year as compared to forex loss in the previous year.
Buyback of Equity Shares
Pursuant to the approval of the Board of Directors on June 28 2017your Company completed the Buyback of 4224000 Equity Shares of
` 10/- each at a price of ` 625/- per Equity Share amounting to ` 2640million representing 2.51% of the total issued and paid-up equity share capital of theCompany.The Buyback was undertaken by the Company to return surplus funds to the EquityShareholders and thereby enhancing the overall returns to Shareholders. The shares werebought back on a proportionate basis from those Shareholders who were Shareholders of theCompany as on July 11 2017 the record date for the buyback under the tender o er routein accordance with the provisions contained in SEBI (Buyback Regulations) 1998 asamended and the Companies Act 2013 and the applicable Rules thereof. In accordance withthe Companies Act 2013 the Company has created a Capital Redemption Reserve of Rs. 42million equal to the nominal value of the shares bought back.
Your Company allotted 124765 Equity Shares of `10/- each to variousemployees ("Mindtree Minds") on exercise of stock options under various EmployeeStock Option Plans (ESOPs)/ Mindtree Employee Restricted Stock Purchase Plan 2012(ESPS/ERSP 2012) during Financial Year 2017-18. Further 4224000 Equity Shares of `10/-each were bought back during the year. Consequently the paid-up equity share capital haschanged from ` 1680255460/- as on March 31 2017 to `1639263110/- as on March 312018.
Making Mindtree a Great Place to Work
In pursuit to our technology transformation journey we are progressingextensively as early adaptors of Automation the current technology wave. Two major focusareas Industrialization of Automation and Extension of Automation Services have beenidentified. To list out a few of our solutions in Automation Advanced Learning Engine(ALEN) Mindflow CodeMill and MACI. MACI is an internal chat bot created on People Hubour intranet to address queries of Mindtree Minds. More than 6530 Mindtree Minds haveinteracted with MACI and 100000+ queries have been addressed. We stand out to be a leaderin Automation and are ensuring to leverage the benefits of Automation for our own internalprocesses and systems.
Exhibiting outstanding work to our customers has been our key driver tomaking Mindtree a memorable Company. Our annual client experience survey results have beenthe best we have earned so far.
337 respondents across 127 Mindtree Clients have provided detailedfeedback and our clients rank us highly in our four key metrics of Advocacy SatisfactionLoyalty and Value for Money. There are many factors contributing to these positive resultsbut the single largest determinant is our Delivery Excellence.
At Mindtree we firmly believe in the power of inclusiveness and havebeen encouraging e ective action for advancing and recognizing women across Mindtree.While women formed 16% of our talent pool in 2004 today that number is at 30%. We believethat our strong focus in this area
- via policy guidance strategic push in talent acquisition specialsupport mechanisms for women engagement forums career tracks coaching and mentoring forgrowth have enabled us to reach this position today.
The total number of Mindtree Minds including subsidiaries as on March31 2018 was 17723 as against 16470 as on March 31 2017.
Business Responsibility Report
At Mindtree fulfilment of environmental social and governanceresponsibility is an integral part of its operations. The Business Responsibility Reportcomprehensively covers your Company's philosophy on Corporate Social Responsibility andsustainability initiatives pertaining to the conservation of environment conducting greenawareness events its commitment towards society enhancing primary education etc. TheBusiness Responsibility Report which is in line with SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 (hereinafter "LODR Regulations") isattached hereto in this Annual Report. The Business Responsibility Report is alsoavailable on the Company's website: https://www.mindtree.com/about-us/investors.
Your Company has been rated by India Ratings and Research PrivateLimited (Ind-Ra a Fitch Group Company) for its Banking facilities. It has re-affirmedthehighest credit rating for your Company's Short Term facilities with A1+ rating. For LongTerm bank facilities it has also re-affirmed Long Term Issuer Rating of IND AA'with a Stable outlook to your Company. The affirmation reflects your company's continuedstrong credit profile liquidity position strong corporate governance flexibility andconservative financial policies.
Mergers and Amalgamations
During the year your Company received the Order of the Hon'bleNational Company Law Tribunal ("Hon'ble NCLT") approving the Scheme ofAmalgamation of Discoverture Solutions LLC and Relational Solutions Inc. the wholly ownedsubsidiaries with your Company. The Order was filed with the Registrar of Companies onJune 7 2017 which being the e ective date of Amalgamation.
Your Company's Board of Directors approved the Amalgamation of Magnet360 LLC the wholly owned subsidiary of Mindtree Limited with the Company on October 062017. The Hon'ble NCLT Bengaluru Bench of Karnataka vide its Order dated December 142017 had directed a meeting of Unsecured Creditors and Equity Shareholders of yourCompany on Wednesday January 31 2018 at 10.00 AM and 11.00 AM respectively for thepurpose of approving the Scheme of Amalgamation of Magnet 360 LLC with Mindtree Limitedunder Sections 230 to 232 read with Section 234 and other applicable provisions of theCompanies Act 2013. The Unsecured Creditors have approved the Scheme of Amalgamationunanimously and the Shareholders have approved the same with requisite majority asprescribed under applicable laws and in accordance with the Order of the Hon'ble NCLT.Subsequently your Company has filed a petition with the Hon'ble NCLT and the final Orderapproving the Scheme of Amalgamation is awaited.
Your Directors have declared the following interim dividends during theyear:
(i) The Board of Directors on October 25 2017 declared a firstinterim dividend of ` 2/- per equity share of face value of ` 10/- each and a specialdividend (interim) of ` 2/- per equity share of face value of ` 10/- each on account ofcompletion of 10 years of Initial Public O ering (IPO). The above dividends were paid tothe Shareholders on November 7 2017; (ii) The Board on January 17 2018 declared asecond interim dividend of ` 2/- per equity share of face value of ` 10/- each to theShareholders which was paid on January 30 2018; (iii) The Board on April 18 2018declared an interim dividend of ` 2/- per equity share of face value of ` 10/- each tothe Shareholders which will be paid on or before May 10 2018.
Further your Directors have also recommended a final dividend of `3/- per equity share of face value of ` 10/- each for the Financial Year ended March 312018 which is payable on obtaining the Shareholders' approval at the Nineteenth AnnualGeneral Meeting. The final dividend if approved will be paid on or before July 31 2018.
The dividend payout amount for the current year inclusive of tax ondividend will be ` 1742 million as compared to ` 2005 million in the previous year.
Your Company has formulated Dividend Policy in accordance with LODRRegulations for bringing transparency in the matter of declaration of dividend and toprotect the interest of investors. The Dividend Policy is available on the website of theCompany: https://www.mindtree.com/dividend-policy Your Company intends to maintain similaror better levels of dividend payout over the next few years. However the actual dividendpayout in each year will be subject to the investment requirements of the annual operatingplan for the year and any other strategic priorities identified by the Company.
Your Company had four direct subsidiaries and three step downsubsidiaries as on March 31 2018. The Board of Directors at its meeting held on January19 2017 have approved the proposal to transfer the business and net assets of its whollyowned subsidiary Bluefin Solutions Limited (Bluefin) to your Company against thecancellation and extinguishment of the Company's investment in Bluefin. The same wascompleted during the year. Further the dormant step down subsidiaries Reside LLCNumerical Truth LLC and M360 Investments LLC were liquidated during the year. Inaccordance with Section 129 (3) of the Companies Act 2013 a separate statementcontaining salient features of the financialstatement of the subsidiaries of the Companyin Form AOC-1 is given in Annexure 1. In accordance with Section 136 (1) of the CompaniesAct 2013 the annual report of your Company containing inter alia financial statementsincluding consolidated financial statements has been placed on our website:https://www.mindtree.com/about-us/investors. Further the financial statements of thesubsidiaries have also been placed on ourwebsite:https://www.mindtree.com/about-us/investors. The Company will make availablephysical copies of these documents upon written request by any Shareholder of the Company.
Awards and Recognitions
During the year under review your Company received the followingawards and recognitions:
Named as a leader in Continuous Testing Services in the Digital spaceby Forrester Research Inc.;
Positioned as leader in Application Testing Services by InformationServices Group (ISG);
Named as a Rising Star' for Application Development Services byISG;
Named as a "Rising Star" in Public Cloud InfrastructureConsulting and Implementation Services Public Cloud Infrastructure Managed Services andPublic Cloud SAP Services by ISG;
Mindtree's SAP Practice wins the SAP Gold Quality Award in UnitedKingdom for workforce planning using SAP Business Planning & Consolidation suite;
Positioned as a leader in the Zinnov Zones for Product EngineeringServices 2017;
Named among the Large System Integrators for Agile and DevOps servicesby Gartner;
SAFA Best presented Annual Report Award for 2016 for the Communicationand Information Technology Sector for transparency accountability and governance in ourAnnual Report by South Asian Federation of Accountants;
Winner of Golden Peacock Award of "Special Commendation inCorporate Governance - 2017" awarded by the Golden Peacock Awards SecretariatInstitute of Directors;
Winner of the Silver Shield for the Annual Report including thefinancial statements for the year ended March 31 2017 by the Institute of CharteredAccountants of India (ICAI).
At Mindtree we firmly believe that our brand represents our identityvalues and beliefs. We function on the principles of Collaborative Spirit UnrelentingDedication and Expert Thinking and have therefore consciously and deliberatelyincorporated these elements into our branding and logo. Mindtree's brand voice is brightconfident and active which reflects our forward thinking confidence strength andpassion. These themes are woven across all our collaterals in a unique and personalizedway fostered by our fresh design thinking. Every year Mindtree elevates its brand bywielding the right mix of Public Relations Social Media Advertisement and DigitalMarketing. This year we have embarked upon executing our new digital strategyMindtree 3.0' which has been instrumental in strengthening our digital leadershipand deepening our engagements. We have also launched a brand new website which is areiteration of the fact that digital is in our DNA. The website being a key asset to drivesales and engagement has been designed to provide optimal user experience across alldigital devices with intuitive navigation and streamlined menus. In addition with ameticulously planned social media strategy we have doubled our follower base with focusedadvertisement campaigns.
Your Company has an e ective Investor Relations Program("IR") through which the company continuously interacts with the investmentcommunity across various channels (Periodic Earnings Calls Annual Investor / Analyst DayIndividual Meetings Video-conferences Participation in sell-side conferences One on Oneinteractions through Non-Deal Roadshows). Your Company ensures that critical informationabout the Company is available to all the investors by uploading all such information onthe Company's website under the Investors section. Your Company also sends regular emailupdates to analysts and investors on upcoming events like earnings calls declaration ofquarterly and annual earnings with financial statements.
Your Company is receptive to the needs of the investment communitythrough periodic IR Perception Studies conducted by an independent agency and also byseeking direct feedback from the analysts and investors. Your company strives to adoptemerging best practices in IR and building a relationship of mutual understanding withinvestor/analysts.
In the beginning of the year your Company had 2229340 sq. ft ofspace consisting of 17768 seats spread across various locations in India apart fromMindtree Kalinga Training and residential facility for 500 campus minds measuring about302000 sq. ft . Following are the key changes made during the year: Bhubaneswar: YourCompany has not added any new seats during the year under review. However Company hastaken up construction of Software Development Block Building measuring about 180000sq.ft which is nearing completion. One floor consisting of about 400 seats will be readyfor occupation by May 2018. Rest of 800 seats will be made ready for occupation as andwhen business requires the same. Hyderabad: Your Company has signed up for leasingadditional space and about 650 seats are likely to be ready for occupation by October2018. Your Company has sufficient capacity to meet its growth needs over short and mediumterms. Your Company has prioritized adopting sustainable best practices in accordance withLEED green building design for creating & maintaining workplace infrastructureprojects.
You will be happy to know thatEastcampusofyourCompanylocatedWhitefieldBengaluru and also Mindtree Kalinga Campuslocated at
Bhubaneswar have been certified as PLATINUM rated facilities by IndiaGreen Building Council. In addition East Campus of Mindtree at Whitefield has wonprestigious EMERSON CUP for innovative and energy efficient HVAC design.
Your Company is in the process of installation of 550KW solar powerplant at Mindtree Kalinga Bhubaneswar. This is likely to be commissioned by June 2018.When completed this will meet about 30% of power requirement of the campus.
These achievements stand testimony to your company's strong commitmenttowards sustainable best practices.
Your Company has not accepted any Deposits during the Financial Year2017-18 and as such no principal or interest were outstanding as on March 31 2018 as perthe provisions of Companies Act 2013 and the Rules framed thereunder.
Board of Directors
At the year ended March 31 2018 the Board of Directors comprised ofthree Executive and Promoter Directors one Non-Executive and Promoter Director and fiveIndependent Directors including two Women Directors.
As per the Articles of Association of the Company one third of theDirectors are liable to retire by rotation at the Annual General Meeting of the Companyevery year. Mr. N S Parthasarathy Executive Vice Chairman retires by rotation and beingeligible o ers himself for reappointment at the ensuing Nineteenth Annual GeneralMeeting.
Dr. Albert Hieronimus and Prof. Pankaj Chandra Non-Executive andIndependent Directors of the Company have retired from the Board on April 01 2017 andApril 01 2018 respectively due to the completion of their tenure.
Mr. V G Siddhartha Non-Executive Director resigned from the Board onMarch 9 2018 due to pre-occupation with his primary businesses. There were no otherchanges in Key Managerial Personnel (KMP) during the year.
Criteria for the appointment of Directors
The Nomination and Remuneration Committee (NRC) is responsible fordeveloping competency requirements for the Board based on Industry and Strategy of theCompany. The Board composition analysis reflects in depth understanding of the Company'sstrategies environment operations financial conditions compliance requirements etc.
In terms of Section 178(3) (4) of the Companies Act 2013 and LODRRegulations NRC has formulated criteria for determining qualifications positiveattributes and Independence of Directors which are as follows: a. Qualifications: TheBoard nomination process encourages diversity of thought experience knowledge age andgender. It also ensures that the Board has an appropriate blend of functional and industryexpertise personal professional or business standing. b. Expertise: The person to bechosen as a Director shall have relevant expertise in the fields of informationtechnology sales finance taxation law governance and general management. c. PositiveAttributes: Apart from the duties of Directors as prescribed in the Companies Act 2013Directors are expected to demonstrate high standards of integrity ethical behavior andindependent judgement. The Directors are also expected to abide by the applicable code ofconduct. d. Independence: The Committee satisfies itself with regard to the criteria forindependence of the Directors as required under applicable statutes in order to enable theBoard to discharge its function and duties e ectively. e. Reappointment: In case ofreappointment of Non-Executive and Independent Directors the NRC and the Board takes intoconsideration the performance evaluation of the Director and his/her engagement level.
Your Company's remuneration policy framed by NRC is focused onrecruiting retaining and motivating high talented individuals. It is driven by thesuccess and performance of the individual employees and the Company. Your Companyendeavors to attract retain develop and motivate a high performance workforce. YourCompany follows a compensation mix of fixed pay benefits and performance based variablepay. Individual performance pay is determined by business performance of the Company. TheCompany pays remuneration by way of salary benefits perquisites and allowances (fixedcomponent) and performance incentives commission (variable component) to its ChairmanManaging Director and other Executive Directors. Annual increments are decided by NRCwithin the salary scale approved by the Board and Shareholders.
Details of remuneration to Directors
The information relating to remuneration of Directors as required underSection 197(12) of the Companies Act 2013 is given in Annexure 3.
Declaration of Independence by Independent Directors
The Company has received necessary declaration from each IndependentDirector of the Company under Section 149(7) of the Companies Act 2013 and LODRRegulations confirming that they meet the criteria of independence as laid down inSection 149(6) of the Companies Act 2013 and that of LODR Regulations.
The Board has carried out annual evaluation of performance through anexternal agency in line with the applicable provisions of the Companies Act 2013 and LODRRegulations of the following in detail: (i) The Board as a whole; (ii) The Functioning ofAudit Committee Nomination and Remuneration Committee Risk Management CommitteeStakeholders' Relationship Committee and Corporate Social Responsibility Committee; (iii)Individual Directors including that of Independent Directors;
(iv) Chairman of the Board
The participants in the process were Board Members Company Secretaryand People Function representatives. The Board evaluation was conducted throughquestionnaires having qualitative parameters and one on one sessions with Directors todeep dive into Directors' responses to the questionnaires. The questionnaires were framedin line with the guidance note issued by SEBI on January 05 2017. The performance of theBoard was evaluated after seeking inputs from all the Directors on the basis of criteriasuch as Board composition
Board mechanism Board information dynamics Board member engagementand development roles and responsibilities of Mindtree Board engagement withstakeholders and regulatorsetc.
The performance of the Committees were evaluated after seeking inputsfrom the Committee members on the criteria such as understanding the terms of referenceCommittee composition Independence contribution to Board decisions etc.
The performance of the individual Directors was evaluated after seekinginputs from all the Directors other than the one who is being evaluated. The evaluationwas based on the criteria such as Directors' understanding on the Company's missionCompany's market position qualification and experience of the Director Directors'commitment preparation at the meetings etc.
N=JUSTIFY>The performance of the Board Chairman was evaluated after seekinginputs from all the Directors on the basis of the criteria such as commitment positiveand appropriate relationship with CEO/Board members promotion of e ective relationshipand communication etc.
The Board evaluation report was submitted to the Board Chairperson andthe Chairperson of Nomination and Remuneration Committee. The Board Chairperson discussedthe results of evaluation of the individual Directors separately with them in detail. Theevaluation report highlighted that Mindtree is already at the forefront of many globalgood practices on board processes and governance. The report also suggested the areaswhere we need to focus on strengthening few processes. The outcome of the evaluation ofthe Board Committee and that of Chairperson were discussed at NRC and at the Boardmeeting in detail.
Number of meetings of the Board
The Board of Directors of the Company met seven times during theFinancial Year 2017-18. The details of Board Meetings are provided in the CorporateGovernance Report. The gap intervening between two meetings of the board is within thestipulated time frame prescribed in the Companies Act 2013 and LODR Regulations.
The following are the details of the Board Committees during theFinancial Year 2017-18:
1 Audit Committee;
2 Nomination and Remuneration Committee;
3 Stakeholders' Relationship Committee;
4 Corporate Social Responsibility Committee;
5 Risk Management Committee and
6 Administrative Committee
The composition of each of the above Committees their respective rolesand responsibilities are provided in detail in the Corporate Governance Report.
Vigil Mechanism / Whistle Blower Policy
The Company's vigil mechanism allows Directors and employees to reporttheir concerns anonymously about unethical behavior actual/ suspected fraud violation ofCode of Conduct/business ethics. The vigil mechanism provides adequate safeguards againstvictimization of Directors and Employees who avail this mechanism. All employees andDirectors have access to the Chairperson of the Audit Committee. The Company hasestablished a Whistle Blower Policy. The details of the Whistle Blower Policy and theCommittee which oversees the compliance are explained in detail in the CorporateGovernance Report.
Related Party Transactions
All related party transactions were entered into with the priorapproval of the Audit Committee. During the Financial Year 2017-18 all the transactionswith related parties were entered into at arm's length and in the ordinary course ofbusiness. None of such related party transactions required the approval of the Board ofDirectors or the Shareholders as per Companies Act 2013 or LODR Regulations. Furtherthere were no materially significant related party transactions that may have potentialconflict of interests of the Company at large.
The policy for determining material related party transactions asapproved by the Board is uploaded on the Company's website and can be accessed athttp://www.mindtree.com/policy-for-determining-material-related-party-transactions. Thedetails of the related party transactions as required under the Companies Act 2013 andrules made thereunder are attached in Form AOC-2 as Annexure 5.
Employee Stock Option Plans and Employee Stock Purchase Scheme
Your Company believes that granting ESOPs will result in wealthcreation and retention of employees attracting new talents and inculcating the feeling ofemployee ownership as they are responsible for the management growth and prospects ofyour Company.
During the year your Company has granted Restricted Stock Units underEmployee Stock Purchase Scheme namely Mindtree Employee Restricted Stock Purchase Plan2012 (ESPS or ERSP 2012). The Employee Stock Option Plans and ESPS or ERSP 2012 are incompliance with SEBI (Share Based Employee Benefits) Regulations 2014 ("EmployeeBenefit Regulations") and there has been no material changes to these Plans duringthe Financial Year 2017-18. The summary information of various Employee Stock Option Plans(ESOPs) and ESPS or ERSP 2012 of the Company is provided under Notes to Accounts underStandalone Financial Statements of this Annual Report. The Company has recordedcompensation cost for all grants using the fair value- based method of accounting in linewith prescribed SEBI guidelines. Refer to Notes to accounts of Standalone FinancialStatements of this Annual Report for details on accounting policy. Disclosure on ESOPs orESPS or ERSP 2012 details of options granted shares allotted on exercise etc. asrequired under Employee Benefits Regulations read with SEBI circular no.CIR/CFD/POLICYCELL/2/2015 dated June 16 2015 are available on the Company's website:https://www.mindtree.com/about-us/investors. No employee was granted options (under ESOPsor ESPS/ERSP 2012) during the year equal to or exceeding 1% of the issued capital.
Details of unclaimed shares
The details of unclaimed shares as required under LODR Regulations isprovided in Annexure 2.
Your Company maintains sufficientcash to meet its operations andstrategic objectives. Cash and investments (net of short term borrowings) have increasedfrom ` 7390 million as on March 31 2017 to ` 7430 million as on March 31 2018. Thefunds have been invested with banks highly rated financial institutions and debt schemesof mutual funds.
No material litigation was outstanding as on March 31 2018. Details oflitigation on tax matters are disclosed in the financial statements.
At Mindtree Corporate Governance is not a mere legal obligation. YourCompany provides utmost importance to best Governance practices and are designed to act inthe best interest of its stakeholders. The Fundamentals of the Governance at Mindtreeincludes transparency accountability integrity and Independence. A detailed report onCorporate Governance is available as a separate section in this Annual Report. Auditors'Certificate on Corporate Governance obtained from Deloitte Haskins & Sells CharteredAccountants (Firm Registration No.008072S) for compliance with LODR Regulations isprovided as Annexure 9 and is a part of this Report.
Transfer of Dividend to Investor Education and Protection Fund (IEPF)
Pursuant to the applicable provisions of the Companies Act 2013 readwith Investor Education and Protection Fund Authority (Accounting Audit Transfer andRefund) Rules 2016 as amended Dividends that are unpaid/ unclaimed for a period ofseven years are required to be transferred to the Investor Education and Protection Fundadministered by the Central Government. The balance lying with the unpaid/unclaimeddividend accounts have been transferred to the account of IEPF authority on attainment ofthe said 7 years in accordance with the above provisions. The Company had transferredunpaid dividend amounts within the statutory period to the IEPF. During the Financial Year2017-18 unpaid or unclaimed dividend of ` 554450/- (Rupees Five Lakhs Fifty FourThousand Four Hundred and Fifty only) was transferred to the IEPF. The details of theconsolidated unclaimed/unpaid dividend details drawn up to the date of Eighteenth AnnualGeneral Meeting on July 18 2017 as required under the Companies Act 2013 and rules madethereunder has been uploaded on the Company's website:http://www.mindtree.com/about-us/investors/unpaid-dividend-information
Attention is drawn that the unclaimed/ unpaid dividend for theFinancial Years 2010-11 (Final) and 2011-12 (Interim) is due for transfer to IEPF duringAugust 2018 and November 2018. In view of this the Members of the Company who have notyet encashed their dividend warrant(s) or those who have not claimed their dividendamounts may write to the Company/ Company's Registrar and Share Transfer Agent LinkIntime India Private Limited.
Transfer of Shares in favor of Investor Education and Protection Fund(IEPF) Authority
Pursuant to the applicable provisions of the Companies Act 2013 readwith the Investor Education and Protection Fund Authority (Accounting Audit Transfer andRefund) Rules 2016 the shares on which dividends have not been claimed for 7 consecutiveyears were required to be transferred in favor of IEPF authority.
Accordingly the Company through individual notices and a newspapernotice in Business Standard and Kannada Prabha requested concerned Shareholders to encashtheir unclaimed dividend warrants on or before the dates mentioned in those notices inorder to circumvent their shares being transferred in favor of IEPF Suspense account. Postthe above due dates mentioned in those notices the Company had transferred 9900 sharesin favor of IEPF Authority during the Financial Year 2017-18.
Auditors a) Statutory Auditors:
Your Company at its Sixteenth Annual General Meeting held on June 222015 has appointed M/s. Deloitte Haskins & Sells Chartered Accountants (FirmRegistration No. 008072S) as Statutory Auditors of the Company up to the conclusion of theTwenty First Annual General Meeting at a remuneration as may be fixed by the Board ofDirectors and Audit Committee in consultation with the Auditors thereof. b) SecretarialAuditor:
Pursuant to the provisions of Section 204 of the Companies Act 2013and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014Secretarial Audit has been carried out by Mr. G Shanker Prasad Practising CompanySecretary.
Auditor's Report and Secretarial Audit Report
The Auditor's report and Secretarial Audit Report do not contain anyqualificationsreservations or adverse remarks. Report of the Secretarial Auditor isannexed as Annexure 8 and is a part of this report.
Particulars of Employees
Information as required under the provisions of Rules 5(2) & 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 areset out in Annexure 3 to the Directors' Report. As per the proviso to Rule 5(3) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 theparticulars of employees posted and working outside India not being Directors or theirrelatives drawing the salary in excess of the prescribed limits under the above Rulesneed not be included in the statement but such particulars shall be furnished to theRegistrar of Companies. Accordingly the statement included in this report does notcontain the particulars of employees who are posted and working outside India. If anyMember is interested in obtaining a copy thereof such Member may write to the Company inthis regard.
Conservation of Energy Technology Absorption Foreign ExchangeEarnings and Outflow
Pursuant to the provisions of Section 134(3)(m) of the Companies Act2013 read with Rule 8 of the Companies (Accounts) Rules 2014 the details ofConservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo areattached as Annexure 6 to this report.
Directors' Responsibility Statement
Your Company's Directors make the following statement in terms ofsub-section (5) of Section 134 of the Companies Act 2013 which is to the best of theirknowledge and belief and according to the information and explanations obtained by them:I. The financial statements have been prepared in conformity with the applicableAccounting Standards and requirements of theCompanies Act 2013 to the extent applicableto company; on the historical cost convention; as a going concern and on the accrualbasis. There are no material departures in the adoption of the applicable AccountingStandards.
II. The Board of Directors have selected such accounting policies andapplied them consistently and made judgments and estimates that are reasonable and prudentso as to give a true and fair view of the state of a airs of the Company at the end of thefinancial year and of the profit of the Company for that period.
III. The Board of Directors have taken proper and sufficient care forthe maintenance of adequate accounting records in accordance with the provisions of theCompanies Act 2013 for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities. IV. The Board of Directors have laid downinternal financial controls to be followed by the Company and that suchinternalfinancialcontrols are adequate and were operating e ectively.
V. The Board of Directors have devised proper systems to ensurecompliance with the provisions of all applicable laws and that such systems were adequateand operating e ectively.
VI. The financial statements have been audited by M/s. Deloitte Haskins& Sells Chartered Accountants the Company's Auditors. VII. The Audit Committee meetsperiodically with the Internal Auditors and the Statutory Auditors to review the manner inwhich the Auditors are discharging their responsibilities and to discuss audit internalcontrol and financial reporting issues.
VIII. To ensure complete independence the Statutory Auditors and theInternal Auditors have full and free access to the Members of the Audit Committee todiscuss any matter of substance.
Management Discussion and Analysis Report
Management Discussion and Analysis Report as required under LODRRegulations is disclosed separately in this Annual Report.
Sustainability and Corporate Social Responsibility Initiatives
Sustainability framework at Mindtree is based on triple-bottom linepeople planet and profit.
Sustainability is ingrained into our vision of making societiesflourish. While sustainability makes smart business sense in terms of resourceconservation our technological competencies give us an opportunity to solve larger issuesof sustainable development. Mindtree is increasingly involved in taking theseopportunities forward. Our priorities are set by pressing sustainability issues in theglobal and national contexts issues that touch us deeply and our capabilities to executeideas. Our short term goals are satisfactorily bearing fruit in terms of resourceefficiencies and our medium term plans for clean energy have progressed well. As part ofits Corporate Social Responsibility (CSR) initiatives Your Company has undertaken severalprojects in accordance with Schedule VII of the Companies Act 2013. Mindtree implementsits CSR initiatives via three channels:
- Directly by Mindtree;
- Through Mindtree Foundation;
- Through "Individual Social Responsibility" programsundertaken by Mindtree Minds and supported by Mindtree as appropriate.
Further Mindtree's CSR primarily focuses on programs that:
- Benefit the di erently abled;
- Promote education;
- Create sustainable livelihood opportunities.
The Annual Report on CSR activities is annexed herewith as Annexure 7.
Quality Initiatives and Certifications
Your Company continues its journey of delivering value to its clientsthrough investments in quality programs. Your Company has adopted several externalbenchmarks and certifications. Your Company is certified under various standards to meetclients' requirements and enhancing valuable delivery and following is the summary ofcertifications held by your company.
Code of Conduct for Prevention of Insider Trading in Mindtreesecurities
Your Company has formulated Code of Conduct for Prevention of InsiderTrading in Mindtree Securities ("Code") in accordance with SEBI (Prohibition ofInsider Trading) Regulations 2015. The objective of this Code is to protect the interestof Shareholders at large to prevent misuse of any price sensitive information and toprevent any insider trading activity by dealing in shares of the Company by its DirectorsDesignated
Persons and other Mindtree Minds. Mr. Jagannathan Chakravarthi CFOcontinues to act as Compliance Officer under the Code.
Internal Control Systems and Adequacy of Internal Financial Controls
The Company has an Internal Control System commensurate with the sizescale and complexity of its operations. The Audit committee defines the scope andauthority of the Internal Auditor. The Audit Committee comprises of professionallyqualified Directors who interact with the statutory auditors internal auditors andmanagement in dealing with matters within its terms of reference. The Company has a properand adequate system of internal controls. Adequate internal controls ensures transactionsare authorized recorded and reported correctly and assets are safeguarded and protectedagainst loss from unauthorized use or disposition. In addition there are operationalcontrols and fraud risk controls covering the entire spectrum of internal financialcontrols. An extensive program of internal audits and management reviews supplements theprocess of internal financial control framework. Documented policies guidelines andprocedures are in place for e ective management of internal financial controls.
To maintain its objectivity and independence the internal auditorreports to the Chairman of the Audit Committee of the Board. The internal auditor monitorsand evaluates the efficacy and adequacy of internal control system in the Company itscompliance with operating systems accounting procedures and policies at all locations ofthe Company and its subsidiaries. Based on the report of internal auditor process ownersundertake corrective action in their respective areas and thereby strengthen the controls.Significant audit observations and proposed to fix the observations are presented to theAudit Committee of the Board.
The internal financial control framework design ensures that thefinancial and other records are reliable for preparing financial and other statements. Inaddition the Company has identified and documented the key risks and controls for eachprocess that has a relationship to the financial operations and reporting. At regularintervals internal teams test identified key controls. The internal auditors also performan independent check of e ectivenessofkeycontrolsinidentifiedareas of internal financialcontrol reporting.
Disclosure as required under Section 22 of Sexual Harassment of Womenat Workplace (Prevention Prohibition and Redressal) Act 2013
Your Company is committed to provide a work environment that ensuresevery Mindtree Mind is treated with dignity and respect. The Company is also committed topromote equality at work and an environment that is conducive to the professional growthfor all employees and encourages equal opportunity. Your Company does not tolerate anyform of sexual harassment and is committed to take all necessary steps to ensure that itsemployees are not subjected to any form of harassment including sexual harassment.
The Company has in place a Prevention of Sexual Harassment (POSH)policy in line with the requirements of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013. Mindtree has constituted a POSHCommittee at various locations. This Committee governs and regulates the behavior ofMindtree Minds in all matters regarding Sexual Harassment. The POSH Committee at variouslocations handles all complaints arising out of respective locations of the Company.Frequent communication of this policy is done in assimilation programs and at regularintervals to Mindtree Minds. Following are some of the awareness programs imparted totrain Mindtree Minds and Internal committee:
Every Mindtree Mind is supposed to undergo mandatory e-learning moduleon "Prevention of Sexual Harassment" at workplace.
Every new employee is trained on Prevention of Sexual Harassment duringinduction program.
Policy of "Prevention of Sexual Harassment" at workplace isavailable on intranet for Mindtree Minds to access as and when required. Mindtree hassetup an Internal Complaints Committee (ICC) both at the head office / corporate officeand at every location where it operates in India. ICC has equal representation of men andwomen and is chaired by senior lady mind and has an external women representation. TheInternal Complaints Committee is trained by external agencies. ICC investigates andprovides its recommendations to the management and it acts upon such recommendations.
Penal consequences of Sexual Harassment ("SH") and theconstitution of the ICC is displayed at conspicuous places.
The following are the summary of the complaints received and disposed oduring the Financial Year 2017-18:
In India a) No. of SH complaints received: 1 b) No. of SH complaintsdisposed o : 1
Rest of the World a) No. of SH complaints received: 0 b) No. of SHcomplaints disposed o : 0
Any other material changes and commitments
Any material changes and commitments a ecting the financial position ofthe Company occurred between April 1 2018 and the date of signing this report have beenreported in the financial statements.
Audit Committee Recommendation
During the year all recommendations of the Audit Committee wereaccepted by the Board. The Composition of the Audit Committee is as described in theCorporate Governance Report.
Extract of Annual Return
The details forming part of extract of the Annual Return in form MGT-9is annexed herewith as Annexure 4.
Significant & Material Orders passed by Regulators or Courts
There are no significant and material orders passed by Regulators orCourts during the year under review.
Particulars of Loans Guarantees and Investments u/s 186
Disclosure on details of loans guarantees and investments pursuant tothe provisions of Section 186 of the Companies Act 2013 and LODR Regulations areprovided in the financial statements.
Risk Management Policy
Enterprise Risk Management (ERM) program is a strategic disciplinewhich supports the Mindtree's objective to support sustainable growth and generating valuefor its customers investors employees and other stakeholders. ERM encompasses areas oforganizational exposure to risk (financial strategic operational and compliance). ERMalso provides a structured process for management of risks quantitative or qualitative innature.
This is achieved by deploying an e ective risk management frameworkwhich helps proactively identifying prioritize and mitigate risks. The Enterprise RiskManagement (ERM) framework at Mindtree is designed by incorporating elements of leadingrisk management standards such as:
COSO; Enterprise Risk Management- Framework by Treadway Commission
ISO 31000: 2009 by ISO
IRM Risk Management Standard
The Company affirms that the annual listing fees for the year 2018-19to both National Stock (Bombay Stock Exchange) has been paid.
The Board places on record their deep sense of appreciation to all theMindtree Minds support sta for adopting to the values of the Company viz.Collaborative Spirit Unrelenting Dedication and Expert Thinking for making Mindtree anexpertise led organization and the Company's customers for letting us deliver theCompany's Mission statement to engineer meaningful technology solutions to help thebusinesses and societies flourish. The Board also immensely thank all the Departments ofCentral and State Governments Tax Authorities Reserve Bank of India Ministry ofCorporate A airs Securities and Exchange Board of India Stock Exchanges and othergovernmental/ Semi-governmental bodies and look forward to their continued support in allfuture endeavors . The Board also would like to thank our Shareholders investorsvendors service providers bankers and academic institutions and all other stakeholdersfor their continued and consistent support to the Company during the year.
Place: Bengaluru Date: April 18 2018