Your Directors have pleasure in presenting the Nineteenth Annual Report together withthe Audited Financial Statements (both Consolidated& Standalone) of the Company forthe year ended 31 March 2018..
1. Summary of Financial Results
(Rs. In Lakhs)
| ||Year ended 31 March 2018 ||Year ended 31 March 2017 |
| ||Standalone ||Consolidated ||Standalone ||Consolidated |
|Income from operations ||4555.86 ||6017.24 ||1668.84 ||3761.27 |
|Other Income ||134.30 ||46.92 ||190.30 ||183.07 |
|Total Revenue ||4690.16 ||6064.16 ||1859.14 ||3944.34 |
|Profit before Interest Depreciation and Tax ||(452.80) ||(507.17) ||81.30 ||197.56 |
|Less: Interest ||529.55 ||533.20 ||176.15 ||193.48 |
|Less: Depreciation ||209.83 ||219.64 ||15.98 ||25.40 |
|Profit before tax ||(1192.18) ||(1260.01) ||(110.83) ||(21.32) |
|Less: Provision for tax ||- ||3.48 ||- ||12.10 |
|Profit after tax ||(1192.18) ||(1263.49) ||(110.83) ||(33.42) |
|Less: Pre-Acquisition (+) Profit / (-) Loss ||- ||- ||- ||(151.00) |
|Net Profit / (Loss)for the year ||(1192.18) ||(1263.49) ||(110.83) ||117.58 |
On consolidated basis the Income from operations grew to Rs. 6017.24 lakhsf rom Rs.3761.27 lakhs registering a growth of 60% year on year. The consolidated Earnings beforeInterest Depreciation and tax expenses (EBIDTA) stood at Rs. (507.17) lakhs while that ofprevious year EBIDTA stood at Rs. 197.56 Lakhs.
Net Loss before tax for the year ended 31 March 2018 is at Rs. 1260.01 lakhs as againsta Net loss of Rs. 21.32 lakhs in the previous year ended 31 March 2017. The increase inloss is mainly on account of higher interest and depreciation & amortization expensesand few of the onetime cost incurred during the year.
On a standalone basis Income from operations for the year ended 31 March 2018 stood atRs. 4555.86 lakhs as against Rs. 1668.84 lakhs for the preceding year increase inrevenue from operations is around 173%. Standalone Net Loss for the year ended 31 March2018 is Rs. 1192.18 lakhs as against Net Loss of Rs. 110.83 lakhs for the year ended 31March 2017.
2. Performance Review
Your Company MosChip Semiconductor Technology Limited (MosChip India) is a fablessmodel semiconductor and Internet of Things (IoT) focused company. It specializes inproduct design and development services ranging from Chip Design to Systems Development.It works with Defense Labs as well as globally acclaimed chip design companies in theareas of Chip (SOC) design and development for Aerospace Defence Consumer and Industrialapplications and IoT Products and Services across various industries.
The Performance review of the Company and its subsidiaries for the year is detailed in Annexure-Aunder Management Discussion & Analysis' annexed hereto pursuant to theprovisions SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015
3. Subsidiaries Joint Ventures and Associate Companies
During the financial year ended 31 March 2018 three subsidiaries of your companynamely ElitePlus Semiconductor Technologies Private Limited Orange SemiconductorsPrivate Limited and TexoTech Solutions Private Limited ceased to exist as a result ofAmalgamation with the Company in terms of the order dated February 02 2018 as passed bythe Hon'ble Regional Director South East Region. Consequently the results of these 3companies are forming part of stand-alone results of MosChip. Presently the Company hasthree direct subsidiaries namely
01) MosChip Semiconductor Technology USA 02) Maven Systems Private Limited Pune 03)MosChip Global Pte Ltd
There are no associate companies or joint venture companies within the meaning ofSection 2(6) of the Companies Act 2013. There has been no material change in the natureof the business of the subsidiary.
During the year the Board of Directors reviewed the affairs of the subsidiaries. Inaccordance with Section 129(3) of the Companies Act 2013 a statement containing salientfeatures of the financial statements of the subsidiary companies in Form AOC-1 is enclosedas Annexure-B of the Board's Report.
Further pursuant to the provisions of Section 136 of the Act the financial statementsof the Company and its subsidiaries (standalone and consolidated) along with relevantdocuments are available on the website of the Company.
4. Dividend& Transfers to Reserves
In view of the losses (Standalone& Consolidated) your directors have notrecommended any dividend for the year under review. As a result there is no appropriationof any amount to the reserves of the Company during the year under review.
5. Share Capital
(a) Increase in Paid-up Share Capital
During the year under review your Company issued and allotted Equity Shares asfollows:
i. On 22.05.2017 81500 Equity Shares were allotted at a price of Rs.5.98 on exerciseof ESOP's Scheme.
ii. On 16.09.2017 362500 Equity Shares were allotted at a price of Rs.5.98 onexercise of ESOP's Scheme.
iii. On 06.02.2018 6264300 Equity Shares were allotted pursuant to conversion ofEqual Number of warrants on preferential basis at a price of Rs.21.80 .
Consequent to the above the subscribed and paid-up equity share capital of yourCompany as on March 31 2018 stood at Rs.263153630/- comprising of 131576815 EquityShares of Rs.02 /- each.
(b) Buy Back of Securities
The Company has not bought back any of its securities during the year under review.
(c) Sweat Equity
The Company has not issued any Sweat Equity Shares during the year under review.
(d) Bonus Shares
The Company has not issued any bonus shares during the year under review.
(e) Dematerialization of Shares
97.43 % of the company's paid up Equity Share Capital is in dematerialized form ason 31stMarch 2018 and balance 2.57% isin physical form. The Company's Registrarsare Karvy Computershare Pvt. Ltd. Karvy Selenium Tower B Plot No. 31 & 32Financial District Gachibowli Hyderabad Telangana- 500 032.
6. Major events occurring after the balance sheet date
(a) Material changes and commitments if any affecting the financial position of theCompany occurred between the end of the financial year to which this Financial Statementsrelate and the date of the report
There have been no material changes and commitments affecting the financial positionof the Company which occurred during the period between the end of the financial year towhich the financial statements relate and the date of this report excepting that the Boardof Directors in their meeting held on July 23 2018 decided to acquire subject toregulatory and other approvals the following companies
FirstPass Semiconductors Pvt. Ltd Hyderabad;-Partly by Cash and Partly by issue ofyour company shares to the residual shareholders of that company by way of amalgamationwith MosChip.
Gigacom Semiconductor Pvt. Ltd Visakhapatnam; - By issue of your company shares to theshareholders of that company by way of amalgamation with Moschip
Institute of Silicon Systems Pvt. LtdHyderabad;- Cash acquisition of 100% shareholdingby Moschip
Gigacom Semiconductor LLC California USA. Preferential issue of your company sharesto their unitholders.
(b) Change in the Nature of Business:
There is no change in the nature of business of the Company.
(c) Details of significant and material orders passed by the regulators/ courts/tribunals impacting the going concern status and the Company's operations in future
There are no significant material orders passed by the Regulators/ Courts which wouldimpact the going concern status of the Company and its future operations.
7. Directors and Key Managerial Personnel
(a) Inductions Changes & Cessations in Directorships
Mr. K. Ramachandra Reddy (DIN: 00042172) resigned from the position of Whole-timeDirector & CEO on 06.04.2017 and re-designated as Non-Executive Director of theCompany. The Board in its Meeting dated 06.04.2017 placed on record its appreciation forthe Services assistance and guidance provided by Mr. K. Ramachandra Reddy sinceincorporation of the Company as a Whole Time Director & CEO.
Mr. K. V. Ramana (DIN: 00255421) resigned from the position of Independent Director on24.08.2017. The Board in its Meeting dated 24.08.2017 placed on record its appreciationfor the Services assistance and guidance provided by Mr. K. V. Ramana.
Mr. Seetha Ramam Voleti (DIN: 07332440) resigned from the position of Whole-timeDirector & CFO on 16.01.2018 and re-designated as Non-Executive Director of theCompany. Subsequently on 27.04.2018 Mr. Seetha Ramam Voleti resigned from the Board ofDirectors of your Company. The Board placed on record its appreciation for the Servicesassistance and guidance provided by Mr. Seetha Ramam Voleti.
Mr. Damodar Rao Gummadapu (DIN: 07027779) resigned from the position of Non-ExecutiveDirector on 06.04.2017 and appointed as CEO of the Company w.e.f. 06.04.2017. Further Mr.Damodar Rao Gummadapu resigned from the position of CEO of the Company on 27.04.2018 andthe Board has appointed him as Additional Director w.e.f. 27.04.2018 in the category ofNon-Executive Non-Independent Director.
On recommendation of the Nomination and Remuneration Committee the Board has appointedMr. Camillo Martino (DIN: 07785530) as Additional Director with effect from 06.04.2017 andhis appointment was regularized in 18 AGM held on 29.09.2017.
On recommendation of the Nomination and Remuneration Committee the Board has appointedMr. Raja Praturi (DIN: 01819707) as Additional Director in the Independent Category witheffect from 29.09.2017 who has since been re-designated as Non-Executive Director of theCompany On 13.08.2018.
On recommendation of the Nomination and Remuneration Committee the Board has appointedMr. Singa Rao Gottipati (DIN: 07730448) as Additional Director in the Non-ExecutiveNon-Independent Category with effect from 29.09.2017. Further on recommendation of theNomination and Remuneration Committee the Board has appointed Mr. Singa Rao Gottipati(DIN: 07730448) as an Executive Director and Manager of the Company with effect from27.04.2018. This appointment was approved by the shareholders through postal ballotresults declared on 05 June 2018. However on 23 July 2018 Mr. Singa Rao Gottipati hasresigned as a Director of your company.
On recommendation of the Nomination and Remuneration Committee the Board has appointedMr. K. Pradeep Chandra (DIN: 05345536) as Additional Director in the Independent Categorywith effect from 27.04.2018.
On recommendation of the nominations and Remuneration Committee the Board hasappointed Mr. D. G. Prasad (DIN: 00160408) as Additional Directors in the IndependentCategory with effect from 28.05.2018.
Approval of members by way of ordinary resolution is required for regularization ofappointment of Mr. Raja Praturi Mr. K. Pradeep Chandra Mr. D. G. Prasad and Mr. DamodarRao Gummadapu at the ensuing Annual General Meeting scheduled to be held on September 292018.
Directors retiring by rotation:
Pursuant to the requirements of the Companies Act 2013 and Articles of Association ofthe Company Mr. K. Ramachandra Reddy Director retires by rotation at the ensuing AnnualGeneral Meeting and being eligible offers himself for re-appointment.
(b) Key Managerial Personnel
Pursuant to the provisions of Section 203 of the Companies Act 2013 the KeyManagerial Personnel of the Company as on 01.04.2017were
Mr. K. Ramachandra Reddy Chief Executive Officer. Mr. Seetha Ramam Voleti ChiefFinancial Officer Mr. CS Suresh Bachalakura Company Secretary Changes in the keymanagerial personnel during the year are as below:
On 06.04.2017 Mr. K. Ramachandra Reddy resigned from the position of Chief ExecutiveOfficer and the Board has appointed Mr. Damodar Rao Gummadapu as Chief Executive Officerwith effect from 06.04.2017.
On 16.01.2018 Mr. Seetha Ramam Voleti resigned from the position of Chief FinancialOfficer. On recommendation of the Nominations and Remuneration Committee the Board hasappointed Mr. Jayaram Susarla as Chief Financial Officer of the Company with effect from28.05.2018.
On 27.04.2018 Mr. Damodar Rao Gummadapu resigned from the position of Chief ExecutiveOfficer.
On recommendation of the Nominations and Remuneration Committee the Board hasappointed Mr. Venkata Sudhakar Simhadri as Chief Executive Officer of the Company w.e.f.23.07.2018.
(c) Independent Directors
It may be recalled that the Members at the Eighteenth Annual General Meeting held on29.09.2017 reappointed Mr. G. Prasad and Ms. Poornima Shenoy as Independent Directors ofthe Company for a further period of 5 years and Mr. Camillo Martino was appointed as anIndependent Director of the Company to hold office for a period of 5 years.
As detailed earlier Mr. K. Pradeep Chandra and Mr. D. G. Prasad were appointed asAdditional Directors in the category of Independent and possess appropriate balance ofskills expertise and knowledge and are qualified for appointment as IndependentDirectors.
Independent Directors Declaration:
All Independent Directors have submitted a declaration that each of them meets thecriteria of independence as provided in Section 149(6) of the Act and there has been nochange in the circumstances which may affect their status as an independent directorduring the year.
(d) Familiarization programme for Independent Directors
At the time of appointment the Company conducts familiarization programmes for anIndependent Director through meetings with key officials of the Company. During thesemeetings presentations are made on the roles and responsibilities duties and obligationsof the Director Company's business Company's strategy financial reporting governanceand compliances and other related matters.
(e) Board evaluation
The Board of Directors has carried out an annual evaluation of its own performanceBoard Committees and individual directors pursuant to the provisions of the Act and thecorporate governance requirements as prescribed by Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 ("SEBI ListingRegulations").
The performance of the Board was evaluated by the Board after seeking inputs from allthe directors on the basis of the criteria such as the Board composition and structureeffectiveness of board processes information and functioning etc.
The performance of the committees was evaluated by the Board after seeking inputs fromthe committee members on the basis of the criteria such as the composition of committeeseffectiveness of committee meetings etc.
The Board and the Nomination and Remuneration Committee ("NRC") reviewed theperformance of the individual directors on the basis of the criteria such as thecontribution of the individual director to the Board and committee meetings likepreparedness on the issues to be discussed meaningful and constructive contribution andinputs in meetings etc. In addition the Chairman was also evaluated on the key aspectsof his role.
In a separate meeting of independent Directors performance of non-independentdirectors performance of the board as a whole and performance of the Chairman wasevaluated taking into account the views of executive directors and non-executivedirectors. The same was discussed in the board meeting that followed the meeting of theindependent Directors at which the performance of the Board its committees andindividual directors was also discussed.
(f) Audit Committee
The Composition of the Audit Committee is provided in the Corporate Governance Reportforming part of this report. All the recommendations made by the Audit Committee wereaccepted by the Board.
(g) Nomination and Remuneration Committee:
Details pertaining to composition of the Nomination and Remuneration Committee areincluded in the Report on Corporate Governance.
The Company's Nomination and Remuneration Policy was prepared in conformity with therequirements of the provisions of Section 178(3) of the Act.
The Policy on directors' appointment and remuneration including criteria fordetermining qualifications positive attributes independence of a director and othermatters provided under Section 178(3) for payment of remuneration to Directors and policycontaining guiding principles for payment of remuneration to Senior Management KeyManagerial Personnel and other employees including Non-executive Directors has beenuploaded on the website of the Companyathttps://moschip.com/wp-content/uploads/2017/07/Nomination-remuneration-Policy.pdf.
Remuneration ratio of the Directors / Key Managerial Personnel (KMP) / Employees:
The information required pursuant to Section 197 read with Rule 5 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed herewith as Annexure-Cto this report.
(h) ESOP plans
During the year under report the company has eight schemes in operation as mentionedbelow for granting stock options to the employees and directors of the company and itswholly owned subsidiary in accordance with SEBI (Share Based Employee Benefits)Regulations 2014.
(a) MosChip Stock Option Plan 2001 (b) MosChip Stock Option Plan 2002 (c) MosChip StockOption Plan 2004 (d) MosChip Stock Option Plan 2005(MI) (e) MosChip Stock Option Plan2005(WOS) (f) MosChip Stock Option Plan 2008 (g) MosChip Stock Option Plan 2008(ALR) (h)MosChip Stock Option Plan 2008(Director)
During the year the company has not issued stock options. A statement with all thedetails of outstanding employee stock option plans is annexed herewith as Annexure-Dto this report.
8. Corporate Social Responsibility (CSR) Initiatives:
Section 135 of the Companies Act 2013 provides the threshold limit for applicabilityof the CSR to a Company i.e. (a) Networth of the Company to be Rs.500 crore or more; or(b) turnover of the company to be Rs.1000 crore or more; or (c) net profit of the companyto be Rs.5 crore or more. As the Company does not fall under any of the threshold limitsgiven above the provisions of Section 135 are not applicable to the Company.
9. Internal control systems and their adequacy:
The Company maintains appropriate systems of internal control including monitoringprocedures to ensure that all assets are safeguarded against loss from unauthorized useor disposition. Company policies guidelines and procedures provide for adequate checksand balances and are meant to ensure that all transactions are authorized recorded andreported correctly.
The internal audit is conducted by an external firm of Chartered Accountants appointedby the Board of Directors to review effectiveness and efficiency of these systems andprocedures to ensure that all assets are protected against loss and that the financial andoperational information is accurate and complete in all respects. The Audit Committee ofthe Board of Directors approves and reviews audit plans for the year based on internalrisk assessment. Audits are conducted on an on-going basis and significant deviations arebrought to the notice of the Audit Committee.
10. Vigil Mechanism / Whistle Blower Policy
In pursuant to the provisions of Section 177(9) & (10) of the Companies Act 2013a Vigil Mechanism Whistle Blower Policy in line with listing regulations for directors andemployees to report genuine concerns has been established. The Vigil Mechanism / WhistleBlower Policy has been uploaded on the website of the Company athttps://moschip.com/investor-relations/policies-documents/WhistleBlowerPolicy-document.pdf
11. Public Deposits
The Company has not accepted any deposits from public and as such no amount on accountof principal or interest on deposits from public was outstanding as on the date of thebalance sheet.
12. Statutory Auditors and Auditors' Report
M/s. S. T. Mohite & Co. Chartered Accountants (Firm Registration No. 011410S) wereappointed as the Statutory Auditors of the Company to hold office from the conclusion ofthe 18 Annual General Meeting (AGM) held on September 29 2017 until the conclusion of thefifth consecutive AGM of the Company to be held in the year 2022.
The requirement to place the matter relating to appointment of Auditors forratification by members at every Annual General Meeting is done away with videNotification dated May 7 2018 issued by the Ministry of Corporate Affairs New Delhi.Accordingly no resolution is proposed for ratification of appointment of Auditors whowere appointed in the Annual General Meeting held on September 29 2017.
The Notes on Financial Statements referred to in the Auditors Report areself-explanatory and do not call for any further comments.
The Report of the Statutory Auditors for the year ended 31stMarch 2018 forming part ofthe Annual Report does not contain any qualification reservation observation adverseremark or disclaimer. The Statutory Auditors have not reported any incident of fraud tothe Audit Committee of the Company in the year under review.
13. Secretarial Audit
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Board of Directors has appointedM/s. BSS& Associates Company Secretaries for conducting Secretarial Audit of theCompany for the financial year 2017-2018. The Secretarial Audit Report is annexed herewithas Annexure-E.
14. Conservation of energy research and development technology absorption foreignexchange earnings and outgo
Information required under Section 134(3)(m) of the Act read with Rule 8(3) of theCompanies (Accounts) Rules 2014 with respect to conservation of energy technologyabsorption and foreign exchange earnings/outgo is included in Annexure -F.
15. Related Party Transactions:
Related party transactions that were entered during the financial year were on an arm'slength basis and were in the ordinary course of business. There were no materiallysignificant related party transactions with the Company's Promoters Directors Managementor their relatives which could have had a potential conflict with the interests of theCompany. All Related Party Transactions are placed before the Audit Committee and beforethe Board for approval. Prior omnibus approval of the Audit Committee was obtained for thetransactions which are of a foreseeable and repetitive nature. The particulars ofcontracts or arrangements with related parties referred to in section 188(1) andapplicable rules of the Companies Act 2013 in Form AOC-2 is provided as Annexure-Gto this Annual Report.
The Board of Directors of the Company has on the recommendation of the AuditCommittee adopted a policy to regulate transactions between the Company and its RelatedParties in compliance with the applicable provisions of the Companies Act 2013 theRules thereunder and the Listing Agreement. This Policy was considered and approved by theBoard has been uploaded on the website of the Company athttps://moschip.com/investor-relations/policies-documents/PolicyOnRelatedPartyTransactions-document.pdf
16. Extract of Annual Return:
As required by Section 92(3) of the Act read with Rule 12(1) of the Companies(Management and Administration) Rules 2014 extract of the Annual Return in Form MGT-9 isavailable on the Company's website at www.moschip.com/investor-relations/MGT-9.
17. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Pursuant to Section 186 of Companies Act 2013 and Schedule V of the ListingRegulations disclosure on particulars relating to Loans Advances Guarantees andInvestments are provided as part of the financial statements.
18. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(5) the Companies Act 2013 and based upon representations fromthe Management the Board to the best of its knowledge and belief states that:
a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
b) 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 at the end of the financial year and ofthe profit and loss of the company for that period;
c) The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;
d) The Directors had prepared annual accounts on a going concern basis; and
e) The Directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and operating effectively;
f) The directors had devised proper systems to ensure compliance by the Company withthe provisions of all applicable laws and that such systems were adequate and operatingeffectively.
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company the work performed by the internal statutoryand secretarial auditors and external consultants including the audit of internalfinancial controls over financial reporting by the statutory auditors and the reviewsperformed by management and the relevant board committees including the audit committeethe Board is of the opinion that the Company's internal financial controls were adequateand effective during the financial year 2017-2018.
19. CORPORATE GOVERNANCE AND SHAREHOLDERS INFORMATION
The Company is committed to good corporate governance in line with the provisions ofSEBI (LODR) Regulations 2015 and Provisions Rules and Regulations of the Companies Act2013. The Company is in compliance with the provisions on corporate governance specifiedin the Listing Agreement with BSE. A certificate of compliance from Mr. Sompally Srikantha Practicing Company Secretary and the report on Corporate Governance form part of thisDirectors' Report as Annexure-H.
20. Company's Policy on Prohibition Prevention and Redressal of Sexual Harassment ofWomen at Workplace
The Company prohibits any form of sexual harassment and any such incidence isimmediately investigated and appropriate action taken in the matter against the offendingemployee(s) based on the nature and the seriousness of the offence. The Company has apolicy on Prohibition Prevention and Redressal of Sexual Harassment of Women at Workplace(the Policy) and matters connected therewith or incidental thereto covering all theaspects as contained under the "The Sexual Harassment of Women at Workplace(Prohibition Prevention and Redressal) Act 2013" notified by the Government ofIndia vide Gazette Notification dated 23 April 2013.
There was no case of sexual harassment reported during the year under review.
21. Development and Implementation of a Risk Management Policy:
The Company has been addressing various risks impacting the Company and the policy ofthe Company on risk management is provided elsewhere in this Annual Report underManagement Discussion and Analysis in
Annexures forming part of this report
|Annexures ||Particulars |
|A ||Management Discussion & Analysis |
|B ||Form AOC 1 (Report on Subsidiary companies) |
|C ||Remuneration related disclosures per Section 197 |
|D ||Statement on outstanding ESOP Plans |
|E ||Secretarial Audit Report |
|F ||Energy Conservation Particulars |
|G ||Form AOC 2 (Related Party disclosures) |
|H ||Report on Corporate Governance |
The Board of Directors appreciates the cooperation understanding and support by allits stake holders namely the Bankers State and Central Government Local authorities andits employees received during the year.
This Report will be incomplete without a specific appreciation for the Members of theCompany who have shown immense confidence and understanding in the Company's well-being.
| ||For and on behalf of the Board of Directors |
|Place: Hyderabad ||K. Pradeep Chandra |
|Date: 3 September 2018 ||Chairman |