The Board of Directors ("Board") is pleased to present the Sixteenth AnnualReport and the Audited Financial Statement of the Company for the financial period ended31 March 2017 (15 months period commencing from January 1 2016 to March 31 2017).
A. FINANCIAL RESULTS
The highlights of standalone and consolidated financial results of the Company for thefinancial period ended 31 March 2017 and 31 December 2015 prepared as per Indian GAAP areas under:
| || || |
(INR in Lakhs)
|PARTICULARS ||STANDALONE ||CONSOLIDATED |
| ||For the Financial period ended 31 Mar 2017 (15 months period) ||For the Financial year ended 31 Dec 2015 (12 months period) ||For the Financial period ended 31 Mar 2017 (15 months period) ||For the Financial year ended 31 Dec 2015 (12 months period) |
|Total Income ||10976 ||13293 ||32117 ||29469 |
|Total Expenditure ||11301 ||10576 ||29881 ||25167 |
|Profit before Interest Depreciation and Tax ||(325) ||2717 ||2236 ||4302 |
|Depreciation & Amortization ||280 ||389 ||305 ||420 |
|Finance Costs ||15 ||19 ||15 ||19 |
|Exceptional Items Gain/(Loss) ||- ||- ||- ||- |
|Profit / (Loss) before Tax ||(620) ||2309 ||1916 ||3863 |
|Income Tax (including deferred tax) ||47 ||945 ||156 ||943 |
|Net Profit / (Loss) after Tax ||(667) ||1364 ||1760 ||2920 |
|Earnings/(Loss) per share Rs. ||(0.60) ||1.22 ||1.58 ||2.62 |
B. REVIEW OF OPERATIONS
During the financial period ended 31 March 2017 the consolidated income of the Companywas Rs 32117 Lakhs as against Rs. 29469 Lakhs during the previous year ended 31 December2015 (12 months period). At a standalone level the total income of the Company for thefinancial period ended 31 March 2017 amounted to Rs. 10976 Lakhs compared to Rs. 13293Lakhs during the previous year ended 31 December 2015 (12 months period).
C. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the financial period ended 31 March 2017as stipulated under Regulation 34(2)(e) of the SEBI (Listing Obligation and DisclosureRequirements) Regulations 2015 ("Listing Regulations") is presented in aseparate section and forms an integral part of this Report.
The Board does not recommend a dividend per equity share.
E. TRANSFER TO RESERVES
During the financial period under review the Company is not required to transfer anyamount to the General Reserve.
Your company has 3 (three) subsidiaries and 2 (two) step down subsidiaries for thefinancial period ended 31 March 2017.
During the financial period ended 31 March 2017 under review there have been nomaterial changes in the business of the subsidiaries. In terms of Section 129(3) of theCompanies Act 2013 (Act') the Company has prepared a statement containingthe salient features of the Financial Statement of subsidiaries in the prescribed FormAOC-1 which is attached to the Financial Statements of the Company.
The Financial Statements of Subsidiary Companies are kept open for inspection by theshareholders at the Registered Office of your Company during business hours on all daysexcept Saturdays Sundays and public holidays upto the date of the Annual General Meeting(AGM') as required under Section 136 of the Act. Any member desirous of obtaining acopy of the said financial statements may write to the Company at its Registered Office.The financial statement including the consolidated financial statement and all otherdocuments required to be attached with this report have been uploaded on to the website ofyour Company viz. http:// www.xchanging.com/investor-relations/xsl-content.
G. RELATED PARTY TRANSACTIONS
All Related Party Transactions were placed before the Audit Committee for approval asper the Related Party Transactions Policy of the Company as approved by the Board. Thepolicy is also uploaded on to the website of the company and can be accessed through thelink http:// www.xchanging.com/investor-relations/xsl-content. All related partytransactions that were entered into during the financial year were on an arm'slength basis' and were in the ordinary course of business.
Particulars of contracts or arrangements with related parties in the prescribed FormAOC-2 is provided as Annexure - I to this Boards' Report.
i) Statutory Auditors and Auditors' Report
The Shareholders of the Company in the 15th AGM of the Company had appointed M/sDeloitte Haskins & Sells LLP Chartered Accountants (Firm Registration No. 117366WW -1000180) ("Deloitte") as the Statutory Auditors of the Company to hold officefrom the conclusion of the 15th AGM till the conclusion of the 16th AGM of the Company andare eligible for reappointment. Pursuant to provisions of section 139 of the Act and theRules made there under the Board upon the recommendation of Audit Committee proposes toreappoint Deloitte as Statutory Auditors of the Company from the conclusion of ensuing 16thAnnual General Meeting till the conclusion of the 20th annual general meeting subject toratification in every annual general meeting till 20th annual general meeting.They have furnished a certificate confirming the eligibility under section 141 of the Actand Rules made there under.
The Auditors' Report does not contain any qualification reservation or adverse remark.
ii) Secretarial Auditor
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Company has appointed Mr. AnkushAgarwal (M/s. Ankush Agarwal & Associates Company Secretaries) to undertake theSecretarial Audit of the Company. Accordingly in terms of provisions of Section 204(1) ofthe Act a Secretarial Audit Report given by the Secretarial Auditor of the Company inprescribed Form MR-3 is provided as Annexure - II. The Secretarial Audit Reportdoes not contain any qualification reservation or adverse remark.
I. PARTICULARS OF LOANS GUARANTEES INVESTMENTS AND SECURITIES
Details of loan Guarantee and Investment covered under Section 186 of the Act areprovided in the notes to financial statements.
J. PUBLIC DEPOSITS
Your Company has neither invited nor accepted any deposits from public within themeaning of Section 73 of the Act read with Companies (Acceptance of Deposits) Rules 2014during the period under review.
i) Key Managerial Personnel (KMP)
The following have been designated as the Key Managerial Personnel of the Companypursuant to Sections 2(51) and 203 of the Act read with the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014:
a) Mr. Srikrishna Madhavan Executive Director and Chief Executive Officer (11.11.2016onwards)
b) Mr. Alok Kumar Sinha Executive Director and Chief Executive Officer (till10.11.2016)
c) Mr. Vinod Goel Chief Financial Officer (till 15.06.2016)
d) Mr. Rajeev Kachhal Chief Financial Officer (27.06.2016 to 09.01.2017)
e) Mr. Suresh Akella Chief Financial Officer (29.05.2017 onwards)
f) Mr. Mayank Jain - Company Secretary (26.02.2016 onwards)
ii) Employees' Stock Option Plan (ESOP)
ESOP scheme has been lapsed and consummated during the previous year ended 31 December2015 and therefore during the period under review no ESOP scheme exists in the Company.
iii) Particulars of Employees and Related Disclosures
The statement of Disclosure of Remuneration under Section 197 of the Act and Rule 5(1)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014("Rules") is appended as Annexure-III to the Report. The information asper Rule 5(2) of the Rules forms part of this Report. However as per first proviso toSection 136(1) of the Act and second proviso of Rule 5(2) of the Rules the Report andFinancial Statements are being sent to the Members of the Company excluding the statementof particulars of employees under Rule 5(2) of the Rules. Any Member interested inobtaining a copy of the said statement may write to the Company Secretary at theRegistered Office of the Company.
L. BOARD AND COMMITTEES
The Board at their meeting held on 06 June 2016 based on the recommendation of theNomination and Remuneration Committee and subject to the approval of its Membersappointed Mr. Srinivasa Raghavan Venkatavaradhan as an Additional Director andNon-Executive Director of the Company w.e.f. 06 June 2016. Thereafter at the AnnualGeneral Meeting ("AGM") of the Company held on 27 June 2016 he wasappointed as Non-Executive Director liable to retire by rotation.
Mr. David Bauernfeind Mr. Alok Kumar Sinha and Ms. Gopika Pant stepped down from theBoard of Directors with effect from 27 May 2016 10 November 2016 and 29 May 2017respectively. Mr. Srikrishna Madhavan has been appointed as Managing Director (AdditionalDirector) Chief Executive Officer and Chairman of the Board with effect from 11 November2016. The appointment of Mr. Srikrishna Madhavan as Managing Director based on therecommendation of the Nomination and Remuneration Committee is recommended for yourapproval in the ensuing Annual General Meeting.
The appointment of Ms. Rekha Murthy as Independent Director based on therecommendation of the Nomination and Remuneration Committee is recommended for yourapproval in the ensuing Annual General Meeting.
As per Section 152 of the Act Mr. Srinivasa Raghavan Venkatavaradhan retires byrotation and further being eligible offers himself for reappointment at the ensuing AGM.The Board recommend his re-appointment.
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Act and Regulation 16 of ListingRegulations.
ii) Board Evaluation
Pursuant to the provisions of Section 134(3)(p) of the Act and Regulation 4 of ListingRegulations the Board has carried out an annual performance evaluation of its ownperformance and the evaluation of the working of its Committees. The manner in which theevaluation has been carried out has been explained in the Corporate Governance Report.
iii) Remuneration Policy
The Remuneration Policy as approved by the Board on the recommendation of theNomination and Remuneration Committee is available athttp://www.xchanging.com/investor-relations/ xsl-content.
iv) Board/Committee Composition and Meetings
A calendar of meetings is prepared and circulated in advance to the Directors.Thedetails of composition of Board and Committee and their meetings held during the year aregiven in the Corporate Governance Report. The intervening gap between the meetings waswithin the period prescribed under the Act and the Listing Regulations.
v) Familiarization Programme and Separate Meeting of Independent Director's
During the financial period ended 31 March 2017 two separate meetings of theIndependent Directors of the Company were held on 10 November 2016 and 14 December 2016respectively without the attendance of Non-Independent Directors and the Management team.
During their meeting held on 10 November 2016 the Independent Directors discussed thematters specified in Schedule IV of the Act and Regulation 25 of the Listing Regulations.At their meeting held on 14 December 2016 the Committee of Independent Directors hadgiven their recommendation for mandatory open Offer to the Shareholders of the Company.
The Nomination and Remuneration Committee of the Company at its meeting held on 27February 2015 had approved a familiarization programme for Independent Directors of theCompany. The Familiarization programme for Independent Directors is available at http://www.xchanging.com/investor-relations/xsl-content.
vi) Audit Committee
This Committee comprises the following Directors viz. Mr. Ashok Kumar Ramanathan(Chairman of the Committee) Mr. Srinivasa Raghavan Venkatavaradhan Mr. Henry D SouzaMs. Rekha Murthy (29th May 2017 onwords) and Ms. Gopika Pant (till 29thMay 2017). The Company Secretary acts as the Secretary to the Committee.
All the recommendations of the Audit Committee were accepted by the Board.
vii) Directors' Responsibility Statement
Pursuant to section 134(5) of the Act your Directors based on the representationsreceived from the Management and after due enquiry confirms that:
a) in the preparation of the annual accounts for the financial period ended 31 March2017 the applicable accounting standards have been followed along with proper explanationrelating to material departures;
b) the Directors have selected accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at 31 March 2017 and of the profit of theCompany for the financial period ended on that date;
c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safe guarding theassets of the Company and for preventing and detecting fraud and irregularities;
d) the Directors have prepared the annual accounts on a going concern basis;
e) the Directors have laid down adequate Internal Financial Controls to be followed bythe Company and such Internal Financial Controls were adequate and operating effectivelyduring the financial period ended 31 March 2017; and
f) the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively throughout the financial period ended 31 March 2017.
i) Corporate Governance
The Company is committed to uphold the highest standards of Corporate Governance and toadhere to the requirements set out by the Securities and Exchange Board of India. Adetailed report on Corporate Governance along with the Certificate of Mr. Ankush Agarwal(M/s Ankush Agarwal & Associates Company Secretaries) confirming compliance withconditions of Corporate Governance as stipulated under Schedule V of the ListingRegulations forms an integral part of this Report.
ii) Vigil Mechanism / Whistle Blower Policy
The Company has established a whistle-blower policy and also established a mechanismfor directors and employees to report their concerns. The details of the same areexplained in the Corporate Governance Report.
iii) Risk Management
The Company has a Risk Management process which provides an integrated approach formanaging the risks in various aspects of the business. The detailed framework is providedin the management discussion and analysis report.
iv) Internal Financial Controls
Your Company has in place adequate internal financial controls with reference to thefinancial statements.
v) Disclosure under the Sexual Harassment of Women at the Work Place (PreventionProhibition and Redressal) Act 2013
The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013. The Internal Complaints Committee ("ICC") has been set up to redressthe complaints received regarding sexual harassment. All employees are covered under thispolicy.
The following is the summary of the complaints received and disposed off during thefinancial period ended 31 March 2017:
|a) No. of complaints received: ||NIL |
|b) No. of complaints disposed off: ||NIL |
N. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
The Corporate Social Responsibility Committee had formulated and recommended aCorporate Social Responsibility Policy to the Board of the Company which was subsequentlyadopted and implemented by the Company. The web-link to the CSR Policy is available athttp://www.xchanging.com/investor-relations/xsl-content.
The detailed Annual Report on CSR activities is annexed herewith and marked as Annexure- IV.
O. CONSERVATION OF ENERGY RESEARCH AND DEVELOPMENT TECHNOLOGY ABSORPTION FOREIGNEXCHANGE EARNINGS AND OUTGO
The information as per Section 134(3)(m) of the Act read with Rule 8 of the Companies(Accounts) Rules 2014 regarding Conservation of Energy Research & DevelopmentTechnology Absorption and Foreign Exchange Earning and Outgo is annexed herewith as Annexure- V.
P. OTHER CHANGES
i) Share Capital
There was no change in the paid-up share capital of the Company. As on 31 March 2017the paid-up capital of the Company was Rs. 1114037160. This comprises 111403716equity shares of Rs. 10/- each fully paid-up.
ii) Change of Financial Year
The Board of Directors of the Company in their meeting held on 11 August 2016 haveextended the current financial year of the Company up to a period of 15 months i.e. 01January 2016 to 31 March 2017. Subsequently each financial year of the Company shallcommence on 1st April and end on 31st March every year.
iii) Delisting of Equity Shares and Mandatory Open Offer
The brief details of Delisting of Equity Shares and Mandatory Open Offer are givenherein below:
a) Xchanging Limited (Formerly known as "Xchanging Plc") the ultimate parentcompany of the Company had received a binding offer ("Overseas Offer") from CSCComputer Sciences International Operations Limited for acquisition of the entire sharecapital of Xchanging Limited. Considering the fact that any change in the control at theultimate parent entity will trigger an open offer accordingly CSC Computer SciencesInternational Operations Limited ("Acquirer") along with Computer SciencesCorporation ("CSC") CSC Technologies India Private Limited ("CSCIndia") and Computer Sciences Corporation India Private Limited ("CSC IPL")(CSC CSC India and CSC IPL are collectively referred to as "PACs") in terms ofprovisions of Regulation 3 4 and 5(1) of Securities and Exchange Board of India(Substantial Acquisition of Shares and Takeovers) Regulations 2011 ("SEBI (SAST)Regulations 2015") had made a public announcement for open offer to acquire upto25% of public shareholding in the Company at Rs. 37.63 per share on 15 December 2015 andcorrigendum on 28 January 2016;
b) On 05 May 2016 CSC has announced the completion of acquisition of XchangingLimited being the ultimate parent company of the Company. As a result Acquirer alongwith PACs indirectly controls 75% voting rights of the Company;
c) The Board of Directors at their Meeting held on 06 June 2016 approved the delistingproposal made by Acquirer along with PACs and recommended to the shareholders of theCompany for their approval as a Special Resolution through Postal Ballot in terms ofprovisions of SEBI (Delisting of Equity Shares) Regulations 2009 ("DelistingRegulations"). Accordingly Notice of Postal Ballot were sent to shareholders(via E-mails and Registered Post) and simultaneously published in newspapers on 25 June2016;
d) The Postal Ballot process was completed on 25 July 2016 and thereupon scrutinizersubmitted his report on 27 July 2016 on Postal Ballot wherein inter-alia confirmed thatthe special resolution for delisting of Company's Equity Shares from BSE & NSE hadbeen approved under Companies Act 2013 and Delisting Regulations;
e) The Company had received in-principle approvals from the BSE and NSE on 05 August2016 for the delisting of the equity shares from the respective Stock Exchanges;
f) Based on the approval received the letter of offer was dispatched to theshareholders by 10 August 2016 for tendering shares in delisting offer. The tenderingperiod started on 19 August 2016 & closed on 25 August 2016;
g) The discovered price of Rs. 109/- per equity share was identified on the closure ofthe tendering period and the same was rejected by Acquirer along with PACs pursuant towhich the Delisting Offer was deemed to have failed in terms of regulation 19(1) of theDelisting Regulations. Acquirer along with PACs resumed the mandatory Open Offer in termsof regulation 5A of SEBI (SAST) Regulations 2015;
h) Draft letter offer was dispatched to the shareholders by 9 September 2016;
i) All shares tendered in the Delisting offer were withdrawn by 22 September 2016;
j) Observation letter was received from SEBI on 30 November 2016;
k) The tendering period commenced on 19 December 2016 & closed on 30 December 2016;
l) During this period 4201162 shares have been tendered and acquirer along with PACshas paid the consideration by 06 January 2017 at Rs. 41.01 per share to the shareholderswho had tendered shares in the mandatory open offer;
m) Accordingly the process of mandatory Open Offer had been completed and the MerchantBanker to the Offer has published the post Open Offer advertisement on 09 January 2017 innewspapers.
iv) Overseas Merger
DXC Technology Company was formed from the merger of Computer Sciences Corporation andEnterprises Services business of Hewlett Packard Enterprises on April 3 2017 in USA. DXCTechnology Company is the ultimate beneficiary owner of the Company.
v) Statutory Disclosures
None of the Directors of your Company are disqualified as per provision of Section164(2) of the Act. The Directors of the Company have made necessary disclosures asrequired under various provisions of the Act and the Listing Regulations.
vi) Extract of Annual Return
Pursuant to Sub-section 3(a) of Section 134 and Sub-section (3) of Section 92 of theAct read with Rule 12(1) of the Companies (Management and Administration) Rules 2014 anextract of the Annual Return as on 31 March 2017 in Form MGT - 9 is attached herewith as Annexure- VI and forms a part of this Report.
Your Directors would like to express their sincere appreciation for the co-operationand assistance received from the Company's Bankers Regulatory Bodies and Stakeholdersincluding other business associates who have extended their valuable sustained support andencouragement during the year under review.
Your Directors also wish to place on record their deep sense of gratitude andappreciation for the commitment displayed by executives officers and staff at all levelsof the Company resulting in the successful performance of the Company during the yearunder review. We look forward to your continued support in the future.
| ||For and on behalf of the Board of Directors |
|Srinivasa Raghavan ||Srikrishna Madhavan |
|Venkatavaradhan || |
|Non-Executive Director ||Executive Director & Chief Executive Officer |
|Place : Bangalore ||Place : Bangalore |
|Date : 29 May 2017 ||Date : 29 May 2017 |