Allsec Technologies Ltd Directors Report.

The Directors take pleasure in presenting to you the 20th Annual Report of the Company covering the financial year ended 31st March 2019.

FINANCIAL HIGHLIGHTS

Pursuant to the notification dated 16th February 2015 issued by the Ministry of Corporate Affairs, the Company has adopted the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules 2015 with effect from 1st April 2017. The performance of the Company for the financial year 2018-19 is summarized below:

(IN R In Lakhs)

STANDALONE

CONSOLIDATED

YEAR ENDED

YEAR ENDED

31-Mar-19 31-Mar-18 F/(A) 31-Mar-19 31-Mar-18 F/(A)
INCOME FROM SERVICES 15,317 12,878 19% 26,116 32,496 (20%)
TOTAL COSTS 12,310 10,568 (17%) 22,153 26,392 16%
OPERATING MARGIN 3,007 2,310 30% 3,963 6,104 (35%)
OTHER INCOME 680 518 31% 675 727 (7%)
EBIDTA 3,687 2,828 30% 4,638 6,831 (32%)
EBIDTA (%) 24% 22% 18% 21%
DEPRECIATION 408 328 (24%) 526 450 (17%)
INTEREST EXP /(INCOME) (43) 22 295% (18) 22 182%
PROFIT/(LOSS) BEFORE TAX & EXCEPTIONAL ITEM 3,322 2,478 34% 4,130 6,359 (35%)
EXCEPTIONAL ITEM 1,307 - 1,247
PROFIT/(LOSS) BEFORE TAX 2,015 2,478 (19%) 2,883 6,359 (55%)
PROFIT/(LOSS) AFTER TAX 951 2,899 (67%) 1,567 5,953 (74%)

* F/(A) means Favorable / (Adverse)

Business Outlook

The Company in India primarily operates two business segments namely the Human Resources Operations (HRO) business that caters to the payroll and other HR service we provide to our clients and the Customer Lifecycle Management (CLM) business which provides the voice and non-voice services to domestic and international clients. Globally, the Company has a CLM and HRO business in Manila and Anti Money Laundering (AML) business in the US.

Our HRO division continued its growth momentum and in line with the focus on expanding its footprint globally. The division now services more than 30 countries in Asia, Middle-East and Africa. Your Company has been chosen as the preferred vendor in Middle East and India by a global leader in Beverages and Foods business. Allsec bouquet of services includes, Outsourced payroll services, Expense Claims management, HRO services including (Onboarding, Info Store, Employee movements, Rewards Letter generation, Attendance and Leave and Exit), Statutory compliance services (payroll compliance including PF, ESI, PT and LWF, Labour law compliance, Contract labour compliance and Factory compliance). The Company is currently focussing on setting up sales teams in the Middle East and South East Asia to leverage sales operations in these areas. The Statutory services has huge potential for significant growth in the coming years. Allsecs digital technology delivery platform using RPA, digitization of Registers and Returns will enable the Company to increase the statutory services business vertical in India.

The CLM - Domestic business continued with improved volumes and margins as compared to previous year. Our strategy of identifying processes that have better margins and also strengthening relationships with existing clients by way of client farming and relationship nurturing has helped us in growing this business. We witnessed growth in BFS (Banking & Financial Services) and E-commerce space while also adding businesses from Insurance industry and emerging industries like Early Education Products for Children. Our Noida centre has further increased its existing share of business by ramping up in other North Indian languages.

The CLM - International business in India has remained stable over the last year. The Company continues to pursue opportunities to increase volumes in this business especially in the non-voice segment and has maintained a sharp focus on expanding its Finance and Accounts Outsourcing offering especially in the Accounts Receivable space.

The Operational financial performance of your Company continued to improve during this year. Profit before Tax and Exceptional Item (PBTE) stood at INR 3,322 Lakhs as compared to INR 2,478 Lakhs in the previous year. During the year, the Company had a one time impairment charge of INR 1,307 Lakhs which resulted in lower Profit before tax of INR 2,015 Lakhs as against INR 2,478 Lakhs in previous year. Your Company has reported Net profit after tax for the current year at INR 951 Lakhs as compared to Net profit after tax of INR 2,899 lakhs for the previous year. Detailed analysis of the Standalone results forms part of the Management Discussion and Analysis (MD&A) report provided separately as part of the Annual Report.

Consolidated Revenues for the year stands at INR 26,116 lakhs as compared to INR 32,496 in the previous year. Consolidated Profit before Tax and Exceptional Item decreased to INR 4,130 lakhs from INR 6,359 INR in the previous year. The reduction is attributable primarily to the US business with reduction in volumes in the AML business. Net profit after tax stood at INR 1,567 lakhs down from INR 5,953 lakhs in previous year.

The Company has delivery centers in India at Chennai, Bengaluru & NCR locations. In the international front Allsec has centers in Manila (Philippines) and Dallas (United States of America).

Dividend

The Board of Directors of your Company does not recommend any dividend for the year.

Deposits

Your Company has not accepted any deposit from the public during the period under review and did not have any outstanding deposits.

Directors

Pursuant to the Public Announcement dated 17th April 2019 made by Conneqt Business Solutions Limited (“Acquirer”) along with Quess Corp Limited (“Person Acting in Concert”/PAC”) , the Detailed Public Statement (“DPS” ) in leading News papers dated 25th April 2019 and the Acquisition process as per the SEBI (SAST) Regulations 2011, the Board of Directors has constituted a “Committee of Independent Directors for Open Offer” to provide written recommendations to the Open Offer. A note on the material developments and changes due to the Acquisition process is detailed as in this report.

Key Managerial personnel

The Key Managerial Personnel of Allsec Technologies Limited upto the report date are mentioned below:

1. Mr. R. Jagadish - Chief Executive Officer

2. Mr. P. Raghunath - Chief Financial Officer

3. Mr. Gagan Preet Singh - Company Secretary Employees

The information relating to Employees to be given under Section 197(12) of the Companies Act, 2013 is given in Annexure G.

Corporate Governance

Your Company is fully compliant with the requirements under SEBI (LODR) Regulations, 2015. The report on Corporate Governance as per Regulation 34(3) read with Schedule V of the listing Regulations is given in Annexure A.

Certificate from Auditors confirming the compliance of conditions of Corporate Governance is included in Annexure B. CEO / CFO certification is attached in Annexure I.

In terms of Regulation 34 of SEBI (LODR) Regulations, 2015, the Management Discussion and Analysis report is given in Annexure - C.

Subsidiary Companies

The Company has three subsidiaries as at year end namely Allsec Tech Inc., USA, Allsectech Manila Inc., Philippines and Retreat Capital Management Inc., USA.

The Consolidated Financial Statements of the Company and its subsidiaries are prepared in accordance with Indian Accounting Standards and forms an integral part of this Annual Report.

The Annual Accounts of the said subsidiaries and the related detailed information will be made available to the investors of the Company seeking such information at any point of time. Performance and financial position of subsidiaries included in consolidated financial statements of the Company in format AOC-1 is provided in Annexure E.

The Company monitors performance of subsidiary companies (list of subsidiary companies has been provided in the financial statements), inter-alia, by the following means:

a) The Company does not have any material unlisted Indian subsidiary, and hence, is not required to nominate an Independent Director of the Company on the Board of any subsidiary.

b) The Audit Committee reviews the financial statements, in particular, the investments made by the subsidiary companies on a quarterly basis.

c) Your Company has formulated a Policy on Material Subsidiary as required under SEBI (LODR) Regulations, 2015 and the policy is hosted on the website of the Company under the web link https:// www.allsectech.com/investor-information.

Compliance under Companies Act, 2013

Pursuant to Section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, your Company complied with the compliance requirements and the detail of compliances under Companies Act, 2013 are enumerated in this report.

Extract of Annual Return

An Extract of the Annual Return in form MGT-9 as of 31st March 2019, pursuant to the sub section (3) of Section 92 of the Companies Act 2013 and forming part of the report is placed in the Companys website under the web link https://www.allsectech.com/investor-information.

Board Meetings held during the year

During the year, 4 meetings of the Board of Directors were held. The details of the meetings are furnished in the Corporate Governance Report which is attached as Annexure-A to this Report.

Committees of the Board

The Board of Directors have 4 committees, 1. Audit Committee 2. Nomination and Remuneration Committee 3. Corporate Social Responsibility & 4. Stakeholder Relationship Committee. The Details of the composition and meetings are furnished in the Corporate Governance Report which is attached as Annexure -A to this report.

Directors Responsibility Statement

The Board of Directors acknowledges the responsibility of ensuring compliance with the provisions of Section 134(3)(c) of the 2013 Act. To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements:

Your Directors confirm the following that:

a. In preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.

b. The Directors had 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 at the end of the financial year and of the profit or loss of the Company for that period.

c. The Directors had 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. The Directors had prepared the annual accounts on a going concern basis.

e. Proper internal financial controls were in place and that the financial controls were adequate and were operating effectively.

f. Proper systems were in place so as to ensure compliance with the provisions of all applicable laws and were adequate and operating effectively.

Independent Directors and Board Evaluation

The Independent Directors of the Company have declared that they meet the criteria of Independence in terms of Section 149(6) of the Companies Act, 2013, Regulation 25 of the SEBI (LODR) Regulations, 2015.

Pursuant to Section 134(3) of the Companies Act, 2013 & Rule (8) of the Companies (Accounts) Rules, 2014 and the listing Regulations, a structured Questionnaire was prepared considering the various aspects of Board Committees functioning and composition of Board Committees and used to evaluate the performance of the Board. The Independent Directors considered / evaluated the performance of the Non-independent Directors at a meeting without the Non-independent Directors.

The Board members subsequently evaluated performance of the Board, the Committees and Independent Directors as per the criteria and questionnaire developed for the purpose and the Board of Directors expressed their satisfaction with the evaluation process.

Familiarisation Programme

Your Company follows an orientation and familiarization program through various reports / codes / internal policies for all the Directors with a view to update them on the Companys policies and procedures on a regular basis. Periodic presentations are made at the Board Meetings on business and performance, long term strategy initiatives and risks involved. The details about the familiarization program have been posted in the website of the Company under the web link https://www . allsectech.com/investor-information.

Remuneration Policy

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Companys policy on appointment and remuneration including criteria for determining qualifications, positive attributes, and independence are provided in the Corporate Governance Report forming part as an Annexure-A to this Report.

Related Party Transactions

The Company has formulated a policy on Related Party Transactions as approved by the Board and the same is uploaded on the Companys website https://www. allsectech.com/investor-information.

All the Related Party Transactions that were entered into by the Company during the financial year 2018-19, were on an arms length basis and were in the ordinary course of business. All repetitive Related Party Transactions are placed before the Audit Committee and are within the Omnibus Approval limits obtained in accordance with the requirements of the SEBI (LODR) Regulation 2015. The transactions entered into pursuant to such approval are placed periodically before the Audit Committee.

There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel which may have a potential conflict with the interest of the Company at large. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company otherwise than disclosed in the Corporate Governance Report, forming part of this report.

Details of the transaction are provided in Form AOC-2 which is attached as Annexure - F to this Report.

Vigil Mechanism / Whistle Blower Policy

In accordance with the requirements of the Companies Act 2013, your Company has established a Vigil Mechanism / Whistle Blower Policy for Directors and Employees to report genuine concerns. The said Policy meets the requirement of the Vigil Mechanism framework under the 2013 Act, and the members can view the details of the policy on https://www.allsectech. com/investor-information. No member has been denied access to Vigil Mechanism and no complaints have been received during the year.

Corporate Social Responsibility

The Board of Directors of your Company has constituted the CSR Committee to help the Company to frame, monitor and execute the CSR activities.

As per Section 135 of the Companies Act 2013, the Board of every Company referred to in sub-section (1), shall ensure that the Company spends, in every financial year, at least 2% of the average net profits of the Company made during the three immediately preceding financial years.

As per Computations made under Section 198 of the Companies Act, 2013, the Company must contribute approximately INR 37 lakhs as CSR Contribution. During the financial year 2018-19, the Company has formulated a CSR policy and the CSR committee had a meeting on 26th March 2019 which approved the contributions made and proposed to the tune of INR 38 Lakhs to promote various educational institutions identified and which falls under the categories prescribed in Schedule VII of the Companies Act 2013 under (ii) promoting education, including special education and employment enhancing vocational skills specially among children, women, elderly and the differently abled and livelihood enhancement project.

The report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules 2014 is annexed in Annexure - H and forms an integral part of the this Report. The policy has been uploaded on the Companys website at the Link https:// www.allsectech.com/investor-information.

Particulars of loans, guarantees or investments under Section 186 of the Companies Act, 2013

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Notes to the financial statements forming an integral Part of the Annual Report.

Internal Financial Control and Adequacy

The Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial disclosures. The Internal Audit is entrusted to M/s. Srinivasan & Shankar Chartered Accountants and the main scope of the Audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the Industry.

Auditors

As required under SEBI (LODR) Regulations 2015, the Statutory Auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

Comments on Auditors report

There are no qualifications, reservations or adverse remarks or disclaimers made by the Statutory Auditors and Company Secretary in Practice in their reports respectively. The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.

Material changes and commitments affecting the financial position of the Company which have occurred between March 31, 2019 and May 17, 2019 (date of the Report)

Pursuant to a Public Announcement dated April 17, 2019, Conneqt Business Solutions Limited (“Acquirer”) along with Quess Corp Limited (“Person Acting in Concert” / “PAC”) informed of their proposal to purchase 39,61,940 number of shares from First Carlyle Ventures Mauritius Carlyle and 53,87,155 number of shares from the Promoters of the Company.

Subsequent to above, the Acquirer and the PAC also proposed an Open Offer (“Offer”) for acquisition of upto 39,61,965 fully paid equity shares of face value of Rs. 10/- each representing 26% of the Voting Share Capital of the Company from the Public Shareholders of the Company in accordance with SEBI (SAST) Regulations, 2011.

The Acquirer published a Detailed Public Statement (“DPS”) in leading newspapers to draw the attention of the public shareholders of the Company detailing the process involved in the Open Offer and a synopsis of the Share Purchase agreements entered into with First Carlyle Ventures Mauritius and the Promoters of the Company.

Subsequently, the Acquirer has submitted a Draft Letter of Offer with SEBI for its review and Approval as per the requirements of SEBI (SAST) Regulations, 2011 as amended from time to time.

The Board of Directors of the Company has also constituted a ‘Committee of Independent Directors for Open Offer to give its written reasoned recommendations on the open offer to the shareholders of the Company. The members of the Committee are as stated below.

S.No Directors Name Designation
1 Mr. T. Anantha Narayanan Chairman
2 Mr. C. Jayaram Member
3 Mr. D. Padmanabhan Member

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. P. Sriram (CP No. 3310), a Company Secretary in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is given as an Annexure - D and forms part of this Report.

Names of Companies which have ceased / become Subsidiaries / Joint Ventures / Associates

During the year there is no change in the status of any subsidiary.

Quality & Information Security

The Company has a robust Quality Management and Information Security Management system in place to identify potential risks, areas for improvement and further to have smooth business operations. Periodic Management Review meetings are conducted to review these.

ISO 9001 certification at Chennai that was upgraded to latest version i.e. ISO 9001:2015 from ISO 9001:2008 last year which enhanced the strength of our QMS to a new level continues to be in practice and is renewed this year. ISO 27001:2013 certification has been renewed at Chennai, Manila and Bengaluru facilities. Our facility in Noida is included in Scope of ISO 27001:2013 certification this year and this center is also certified now. Every Allsec service delivery location across globe is ISO 27001:2013 certified.

Existing PCI DSS compliance certifications at Chennai, Manila and Irving facilities are renewed this year. Further, existing SSAE 18 / ISAE 3402 which is a graduated version of SAS 70 Type II certification for the HRO business has been renewed. Frequency of SSAE 18 / ISAE 3402 audits is now 2 annually instead of 1 to fulfill the requirements of various clients.

General Data Protection Regulation (GDPR) is a regulation in EU law on data protection & privacy for EU / UK citizens or those residing in EU / UK region. It also addresses the requirements to be fulfilled for export of personal data from EU to outside the EU. This act is applicable to the entities which can be located anywhere in the world who collect or process personally identifiable information (PII) of EU citizens or those residing in EU. We deployed this framework and accomplished GDPR compliance (adequacy) in a comprehensive validation audit conducted by an external agency. This has not only fulfilled few clients and legal requirements but is also a value addition to Organizations information security frameworks.

Disclosure as per Securities and Exchange Board of India (Employees Stock option Scheme and Employee Stock Purchase Scheme) Guidelines, 2011

The options granted under the scheme have lapsed.

Conservation of energy, technology absorption, foreign exchange earnings and outgo

Since your Company is in the Information Technology Enabled Services (ITES) business, the provisions relating to conservation of energy and technology absorptions are not applicable.

The details of the earnings and expenditure in foreign currency are given below:

Particulars INR in Lakhs
Earnings in Foreign Currency 4,560
Expenditure in Foreign Currency 169

Environment, Health & Safety

The Company is conscious of the importance of environmentally clean and safe operations. The Companys policy requires conduct of operations in such a manner so as to ensure safety of all concerned, compliances of environmental regulations and preservation of natural resources.

In order to comply with provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules framed thereunder, the Company has formulated and implemented a policy on prevention, prohibition and redressal of complaints related to sexual harassment of women at the workplace. All women employees either permanent, temporary or contractual are covered under the above policy. The said policy has been uploaded on the internal portal of the Company for information of all employees. An Internal Complaint Committee (ICC) has been set up in compliance with the said Act. During the year the committee has not received any complaints.

Investor Services

Your Company will constantly endeavor to give the best possible services to the investors. Towards this end, the following are some of the initiatives taken by the Company:

The investor Information section of the Website of the Company (www.allsectech.com), furnishes important financial details and other data of frequent reference by the investors as per the Regulation 46 of SEBI (LODR) Regulations, 2015. The Company also has a Stakeholders Relationship Committee to address shareholders grievances if any and resolve them as & when they are reported. The Company has provided an exclusive email id: investorcontact@allsectech.com for the investors to facilitate the redressal of the queries and complaints of the investors.

The Company has appointed M/s. Karvy Fintech Private limtied as Registrars & Share Transfer Agents for attending to issues relating to Physical shares and routine services requests.

Shareholders can also address any unresolved issues or information requests by postal mail to - Company Secretary, Allsec Technologies Ltd, 46B, Velachery Main Road, Velachery, Chennai 600042.

Shareholders are requested to update their email addresses with their respective depository participants so that the Company can provide better services at all times.

Acknowledgement

Your Directors wish to place on record their appreciation for the excellent support and co-operation given by customers, shareholders, service providers and Government Agencies.

Your Directors also record their appreciation and gratitude to Financial Institution and Bankers for their continued support and timely assistance in meeting the Companys resource requirements. Your Directors acknowledge the dedicated services rendered by all the employees of the Company.

For and on behalf of the Board of Directors

Chennai A. Saravanan R. Jagadish
May 17, 2019 Director Director
DIN : 00033683 DIN : 00033589