FOR THE FINANCIAL YEAR 2014-15
Your Directors present the Twenty Second Annual Report (the "Report") of the Company along with the Audited Financial Statements for the year ended March 31, 2015.
STATE OF THE COMPANYS AFFAIRS
Financial Performance of the Company on Standalone and Consolidated basis:
|Rs in crores|
|Year ended March 31, 2015||Year ended March 31, 2014||Year ended March 31, 2015||Year ended March 31,2014|
|Profit/(Loss) before exceptional items and tax||(343.56)||(417.92)||(263.35)||(355.73)|
|Profit / (Loss) before tax||(1,034.18)||(453.77)||(936.52)||(355.73)|
|Deferred Tax Expense||-||(17.67)||(3.03)||(18.45)|
|Tax Expense from earlier years||23.57||4.12||28.40||3.81|
|Profit/(Loss) after tax||(1,057.75)||(440.22)||(976.06)||(357.06)|
|Profit/(Loss) for the period||(1,057.75)||(440.22)||(976.27)||(357.56)|
|Earnings Per Share (Basic in Rupees) (Before exceptional items||(6.39)||(7.15)||(5.29)||(6.33)|
|Earnings per share (Basic in Rupees) (After exceptional items||(18.25)||(7.78)||(16.85)||(6.33)|
TRANSFER TO RESERVES
There is no amount proposed to be transferred to general reserve this year due to unavailability of profits.
The Board of Directors regrets its inability to recommend any dividend (equity or preference) for the year ended March 31, 2015 due to non-availability of profits..
Your Company has a comprehensive set of IP based software solutions (20+), coupled with a wide range of IT Services to address the dynamic requirements of a variety of industry verticals including Banking, Insurance, Capital Markets, Asset & Wealth Management (BFSI). The Company also provides solutions for other verticals such as Government, Manufacturing, Distribution, Telecom and Healthcare.
The business activities of the Company are broadly divided into two categories viz: IT Solutions and Transaction Services. IT Solutions business comprises of software products and IT enabled services while the transaction services comprise of BPO and KPO services. The Company has good product portfolio and has dominant presence in fast growing emerging economies. The Product Business of the Company has wide base with more than 800 active customers who are satisfactorily using the Companys products.
The contribution to the revenue for the year from IT Solutions was 95% and that of Transaction Services was 5%.
Your Company has presence in 50 countries and seven geographies, viz. South Asia, Asia Pacific (APAC), China, Middle East and Africa (MEA), Kingdom of Saudi Arabia (KSA), Western Europe (WE) and North America (US). Your Company has marketing network around the world, including North America, Western Europe, Middle East and Africa and Asia Pacific.
The business of your Company is largely divided into Emerging Markets and Developed Markets. The share of the Emerging Markets to total revenue of the Company is about 62%, while that of Developed Markets is about 38%.
For detailed operations and business performance and analysis, kindly refer the Management Discussion & Analysis which forms a part of this Report.
SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES
In terms of the CDR package, the Company was given a mandate to identify its non core business/ assets for sale and utilize the proceeds to deleverage its balance sheet. The Master Restructuring Agreement (MRA) signed with the Lenders had also identified certain such assets. Therefore, as per this mandate, the following subsidiaries were divested during the year:
i. In August 2014, Professional Access Limited (US) was hived off along with the entire business of Professional Access Software Development Private Limited (India) to Zensar Technologies Limited (including its affiliates).
ii. In December 2014, 3i Infotech (Western Europe) Limited and 3i Infotech (Flagship - UK) Limited were sold to Objectway UK Limited.
On July 29, 2014, Locuz Inc. was incorporated as a step down subsidiary to tap business opportunities in the U.S. region.
Later, in February 2015, the name of one of the Companys step-down subsidiaries, 3i Infotech Outsourcing Services Limited was changed to "IFRS Cloud Solutions Limited" and its main objects were amended to include "providing solutions on implementation of International Financial Reporting Standards (IFRS) on the cloud platform".
As on March 31, 2015, the number of subsidiaries was reduced to 25 (twenty five) from 27 (twenty seven) at the beginning of the year.
As per the first proviso to Section 129(3) of the Companies Act, 2013 (the "Act") read with Rule 5 of Companies (Accounts) Rules, 2014, the statement containing salient features of the financial statements of subsidiaries/associate companies/joint ventures in the prescribed Form AOC-1 is attached to the consolidated financial statements.
Pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries are available on the website of the Company.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186
Particulars of loans, guarantees or investments granted/made during the year are given under the notes to standalone financial statements forming part of the Annual Report.
CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All contracts / arrangements / transactions entered into by the Company during the financial year with related parties were in the ordinary course of business and on an arms length basis. During the year, the Company has not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on related party transactions. The said policy can be viewed on the Companys website by accessing the following link: http://www.3i-infotech.com/content/investors/investors.asp under "Corporate Governance"
Details regarding related party disclosure are given under the notes to standalone financial statements which form part of the Annual Report.
REPORT ON CORPORATE GOVERNANCE
The Corporate Governance Report is appended herewith as Annexure I to this Report.
EXTRACT OF ANNUAL RETURN
In terms of the requirements of Section 92 (3) of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014, an extract of the Annual Return in the prescribed form MGT- 9 is attached herewith as Annexure II and forms part of this Report.
a) Preference Capital:
The Company has not allotted any preference shares during the year and therefore as on March 31, 2015, the preference share capital remains unchanged at 65,00,00,000/- (13,00,00,000 Preference Shares of 5/- each). All the preference shares are held by IDBI Trusteeship Services Limited (ICICI Strategic Investments Fund).
b) Paid-up Equity Capital:
1) ESOS allotments:
The Company has not allotted any shares under the Employees Stock Option Schemes (ESOS) during the year.
2) Allotments against conversion of Foreign Currency Convertible Bonds (FCCBs):
During the year, the Company had received conversion notices from FCCB holders against which 2,96,61,822 Equity Shares of face value of 10/- each were allotted by the Company at a premium of 6.50/- per share.
3) Allotments of Equity Shares under the Corporate Debt Restructuring (CDR) Package:
On December 9, 2014, 14,44,747 Equity Shares of face value 10/- each at a premium of 9.74/- per Equity Share were allotted to a CDR Lender towards sacrifice as agreed under the CDR Package.
As a result of the aforesaid allotments, the paid-up equity share capital of the Company stands at 6,03,75,09,470 as on March 31, 2015.
The Company has neither issued equity shares with differential rights as to dividend, voting or otherwise nor any shares (including sweat equity shares) to the employees of the Company under any Scheme.
EMPLOYEES STOCK OPTION SCHEMES
As per SEBI Circular (CIR/CFD/POLICY CELL/2/2015) dated June 16, 2015 relating to requirements specified under the SEBI (Share Based Employee Benefits) Regulations 2014, details of the Employee Stock Option Schemes (ESOS) of the Company are given in Annexure III to this Report.
During the year, the Company has not invited/accepted any deposit under Section 73 of the Act.
DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)
Effective September 1,2014, IDBI Bank Limited, the Lender and Monitoring Institution under CDR, nominated Mr. Shantanu Prasad as Director on the Board of the Company. Mr. Shantanu Prasad replaced Mr. N. S. Venkatesh, who was a nominee director representing IDBI Bank then. Further, Dr. Ashok Jhunjhunwala, Non-Executive Independent Director also stepped down as Director of the Company with effect from September 15, 2014.
Dr. Shashank Desai and Ms. Sarojini Dikhale were appointed as Additional Directors with effect from November 3, 2014 and July 28, 2015 respectively. It is proposed to appoint Dr. Shashank Desai and Ms. Sarojini Dikhale as Independent Directors for a period of 5 years effective September 23, 2015 at the ensuing Annual General Meeting of the Company.
Pursuant to the provisions of Section 149 of the Act, which came into effect from April 1, 2014, Mr. Hoshang N. Sinor and Mr. Ashok Shah were appointed as Independent Directors at the Annual General Meeting (AGM) of the Company held on September 16, 2014 to hold office for a period effective April 1, 2014 to September 30, 2015. The terms and conditions of appointment of Independent Directors are as per Schedule IV of the Act. They had submitted a declaration that each one of them meets the criteria of independence as provided under Section 149 (6) of the Act and there has been no change in the circumstances which may affect their status as Independent Director.
Mr. Hoshang N. Sinor, who has been on the Board for over 12 years, retires on September 30, 2015. In spirit of the provisions of the corporate governance, he does not offer himself for appointment as Independent Director for a fresh term thereafter. It is proposed to appoint Mr. Ashok Shah as Independent Director on the Board of the Company for a period of 5 years to hold office up to September 30, 2020.
During the year, with effect from November 11,2014, Mr. Charanjit Attra, Executive Director and Chief Financial Officer, was redesignated as Executive Director - New Business Initiatives, Strategy and Finance, while Mr. Padmanabhan Iyer was appointed as the Chief Financial Officer of the Company on November 11, 2014.
Subsequently, he has resigned from the Board with effect from May 28, 2015 in order to pursue opportunities in other professional areas.
As per the provisions of Section 152 of the Act, Mr. Madhivanan Balakrishnan is liable to retire by rotation at this AGM and being eligible, seeks re-appointment. The Board of Directors recommends these appointments.
As on the date of this Report, the Board of the Company consists of 7 Directors, out of which four are Independent Directors, two are Nominee Directors and one is an Executive Director.
None of the Independent Directors have had any pecuniary relationship or transactions with the Company during Financial Year 2014-15, except to the extent of their directorship. None of the Directors or KMP of the Company is related inter-se.
Five meetings of the Board of Directors were held during the year. The details of the same are given on page no. 9 of the Annual Report.
Mr. Ninad Kelkar, Company Secretary, is the Compliance Officer of the Company and also one of the KMPs of the Company.
As on date of this Report, the Board has four committees-
i. Audit Committee
ii. Nomination and Remuneration Committee
iii. Stakeholders Relationship Committee
iv. Corporate Social Responsibility Committee
The Company also has an internal committee comprising of the Head-HR and the Compliance Officer of the Company to address the functioning of the vigil mechanism as mandated by the Act and assist the Audit Committee thereunder.
The detailed information regarding the committees of the Board, including composition of the Audit Committee, has been given in the Corporate Governance Report which forms an integral part of the Annual Report.
CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the Act and Accounting Standard (AS) - 21 on Consolidated Financial Statements read with (AS) - 23 on Accounting for Investments in Associates and (AS) - 27 on Financial Reporting of Interests in Joint Ventures, the audited consolidated financial statements presented by the Company include the financial results of its subsidiary companies, associates and joint ventures and form part of the Annual Report.
M/s. Lodha & Co., Chartered Accountants were appointed as the Statutory Auditors of the Company at the previous AGM held on September 16, 2014 till the conclusion of the Twenty Fourth AGM of the Company to be held in the year 2017. As per the provisions of Section 139 of the Act, the appointment of Auditor is subject to ratification by members at every AGM. Accordingly, the ratification of the appointment of Auditor has been taken up as an item in the Notice of the forthcoming AGM for the approval of Members.
CONSERVATION OF ENERGY
Although the operations of the Company are not energy intensive, the management is highly conscious of the criticality of the conservation of energy at all operational levels. The requirement of disclosure of particulars with respect to conservation of energy as prescribed in Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, is not applicable to the Company and hence are not provided.
TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION
The Company continues to use the latest technologies for improving the productivity and quality of its services and products.
During the year, your Company has taken the following technology initiatives:
Information Security Awareness programmes;
Strengthened its IPRs through technology innovation and appropriate security controls;
Improved utilization and delivery productivity by use of LEAN IT techniques for project delivery and
Partnerships with major technology providers and publishers for win-win relationships and go-to-market strategies.
RESEARCH AND DEVELOPMENT (R & D)
The solutions offered by the Company for various market segments are continuously developed and upgraded through the Global Development Centers (GDCs).
The GDCs function as the product research and development facility of the Company and focus on developing and expanding the Companys products and IPRs. Besides this, the Company is also in the process of upgrading its varied product lines to standard and latest technological platforms.
With a focus to further enhance the Companys software products, i.e. its Intellectual Property, based on market needs, the GDCs work in line with the Companys strategy for growth.
Expenditure on R & D
|Rs in crores|
|Total R&D expenditure as a percentage of total standalone revenue||1.44%||4.13%|
FOREIGN EXCHANGE EARNINGS AND OUTGO
a) Activities relating to exports, initiatives taken to increase exports, development of new export markets for products and services and export plans More than 19.60% of the revenue of the Company is derived from exports.
b) Foreign Export earnings and expenditure
During the year 2014-15, the expenditure in foreign currencies amounted to Rs 111.19 crores on account of cost of outsourced services and bought out items, travelling and other expenses and interest. During the same period, the Company earned an amount equivalent to Rs 78.55 crores in foreign currencies as income from its operations abroad (excluding income form Dubai Branch).
The Company has continued to improve the quality of Human Resource. The key facet has been better levels of productivity as compared to earlier years which has contributed in operating financial parameters showing a strong uplift. Regular interactions and career enhancements by way of bigger roles to talented employees have helped in strengthening the confidence of the employees in the tough financial scenario of the Company. The talent pipeline is looking healthy though attrition and retention remains a challenge for the industry and more so for the Company.
Your Company will continue to focus and build the human potential which would help in improving operating parameters in the coming year.
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules is provided in a separate annexure forming part of this Report. Having regard to the provisions of the first proviso to Section 136(1) of the Act, the Annual Report excluding the aforesaid information is being sent to the members of the Company. In terms of Section 136, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.
Disclosures pertaining to the remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annual Report as Annexure IV.
Prevention of Sexual Harassment at Workplace
The Company has in place a Policy aiming at prevention of Sexual Harassment at all Companys workplaces in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules thereunder. All employees (permanent, contractual, temporary, trainees) are covered under this Policy. An internal Complaint Committee has been set up in the Company to consider and redress complaints received with respect to sexual harassment. During the year under review, the Complaint Committee has not received any grievances or complaints of the nature covered under the said Act.
The Companys policy relating to appointment and remuneration of Directors, KMPs and other employees, including criteria for determining qualifications, positive attributes and independence of a director are covered under the Corporate Governance Report, which forms a part of this Report.
It is a practice of the Board of Directors to annually evaluate its own performance and that of its committees and individual directors. Details of the process of Board evaluation are also covered under the Corporate Governance Report.
The Company is committed to providing innovative and high quality products and services that meet or exceed customer expectations.
Maintaining a quality focus on continuous improvement to our Products, Process and Services
Process adherence and governance ensuring lower Defect & On Time delivery
The Companys Quality Management System (QMS) addresses process required for entire Software Development Cycle (SDLC) and Project Management Life Cycle (PMLC) supported with industry standard templates and guidelines to ensure disciplined project execution, there by transforming business from taking corrective & preventive measures to the state of predicting outcomes. This framework is designed based on the CMMi Process framework to enhance productivity and to reduce inefficiencies.
The Company has achieved CMMi Level 3 certification to meet the Companys commitment towards quality & business process.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Owing to the losses incurred during the year, the Company has not been able to contribute monetarily towards CSR activities. However, the Company has taken many initiatives to sensitise and encourage its employees to participate in CSR activities at an individual level in order to keep alive in them the noble spirit of giving back to the society.
The Company has reaffirmed its concurrence with the concept of CSR through formulation of a specific policy on CSR and constitution of a CSR Committee, details of which are covered under the Corporate Governance Report.
AUDITORS REPORT AND SECRETARIAL AUDITORS REPORT
The auditors report does not contain any qualifications, reservations or adverse remarks. The Company appointed a Woman Director on the Board on July 28, 2015 i.e. after the completion of the audit period. The report of the secretarial auditor, which is annexed herewith as Annexure V in accordance with Section 204 of the Act, is qualified to that extent.
Disclosures required under Clause 49 of the Listing Agreement entered into with the Stock Exchanges are shown under the Corporate Governance Report (CGR). The CGR along with auditors certificate thereon and the Management Discussion and Analysis form part of this Report.
The Company will continue to technologically upgrade its products and concentrate on the Software Products, IT Services and IT enabled Services for its growth. The business outlook and the initiatives proposed by the management to address its financial risks have been discussed in detail in the Management Discussion and Analysis which forms a part of this Report.
FORWARD LOOKING STATEMENTS
This Report along with its annexures and Management Discussion & Analysis contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words anticipate, believe, estimate, expect, intend, will and other similar expressions as they relate to the Company and/or its businesses are intended to identify such forward looking statements. The Company undertakes no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.
DIRECTORS RESPONSIBILITY STATEMENT
As required under Section 134(5) of the Companies Act, 2013, your Directors hereby confirm that:
a) i n preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;
b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the loss of the Company for the financial year ended on that date;
c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual accounts on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively and
f) t hey have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.
Based on the reviews of internal, statutory and secretarial auditors, external consultants, the management and respective committees of the Board, the Board is of the opinion that the Companys system of internal financial controls was adequate and the operating effectiveness of such controls was satisfactory during the financial year 2014-15.
The Directors are thankful to the Members for their confidence and continued support. The Directors are grateful to the Central and State Government, Stock Exchanges, Securities & Exchange Board of India, Reserve Bank of India, Customs and other government authorities, Lenders, CDR Cell, FCCB holders and last but not the least, its trusted clients for their continued support.
The Directors would like to express their gratitude for the unstinted support and guidance received from alliance partners and vendors.
The Directors would also like to express their sincere thanks and appreciation to all the employees for their commendable team work and professionalism.
|For and on behalf of the Board|
|Hoshang N. Sinor||Madhivanan Balakrishnan|
|Chairman||Managing Director & Global CEO|
July 28, 2015 at Navi Mumbai