CG VAK Software & Exports Ltd Directors Report.

To the Members,

The Board of Directors of your Company take pleasure in presenting the 23rd Annual Report on the business and operations of your Company and the Audited Financial Accounts for the year ended 31st March 2018.

FINANCIAL RESULTS 2017-18

During the year under review, your Company has achieved a turnover of Rs.1425.81 lakhs as against Rs.1161.77 lakhs in the previous year. There is a net Profit of Rs.108.29 lakhs as against the net profit of Rs.36.17 lakhs in the previous year.

GLOBAL REVENUE

The global revenues for the Company including the business done by the Wholly Owned Subsidiary for the year under review is Rs.3042 lakhs as compared to Rs.3234 lakhs in the previous year. The drop in global revenue is due to lower business done by the subsidiary.

STATE OF AFFAIRS OF THE COMPANY

In the financial year 2017-18, despite challenging business environment, your company continued the growth momentum and achieved a growth of 23% in the total revenue and the net profit has increased significantly to Rs 108.29 lakhs.

The contribution of business from various Geographical areas were:

North America contributed to 75% and Rest of the World 25% of the business.

During the year under review Business from Offshore Software Services is Rs.1302.11 lakhs as against Rs.1077.71 lakhs in the previous year. The increase has been at 21% as compared to previous year. There has been a steady growth in the offshore component of the business.

FUTURE PLANS

The global market for IT services is expected to expand and corporations are increasingly using offshore service providers to meet their IT service needs. This increases the addressable market for offshore software services providers like us. The company has been growing positively in the offshore software services business and this momentum is likely to continue this year.

Our client retention and client satisfaction levels have been growing steadily. We have received many client appreciations and significant amount of repeat business. In addition to North America, our business and customer base from Australia, Africa and Europe is also expanding as planned.

Out-sourced Product development (OPD) market space continues to be the focus area for the Company as we have achieved significant success. The performance in Cloud practice has been very good and it is expected to grow at the same pace. Apart from strengthening the presence in the markets the company operates now, plans are in place to penetrate into newer geographies globally.

We expect a positive growth this year and the Company should perform better in the ensuing FY 2018-19.

QUALITY

Your company has a strict quality assurance and control programs to ensure that high level of Quality service is delivered to the customers. Matured and proven quality management systems are in place based on the requirements of ISO 9001:2015 standards.

DIVIDEND

Your Directors recommended a dividend of Rs. 0.50 per equity share (i.e. 5% on each equity share having Face value of Rs. 10 each), subject to the approval by the shareholders at the ensuing Annual General Meeting. The total dividend payout will be of Rs.30.39 lakhs inclusive of tax amount of Rs.5.14 lakhs. During the previous year ended 2016-2017, your Company has paid a dividend of Rs.25.25 lakhs.

As per Companies ( Accounting Standards) Amendment Rules, 2016, dividend and tax thereon will be recognized as liability on approval of shareholders at the ensuing Annual General Meeting.

The dividend, if approved by the shareholders, will be paid to those members whose names appear in the Register of Members as on the date of the Annual General Meeting

TRANSFER TO RESERVES

No amount has been transferred to the general reserve.

FORFEITURE

After giving enough opportunities and sending various reminder notices requesting the shareholders holding partly paid shares to pay the allotment money due, your Directors at their meeting held on 11th November, 2015 has forfeited 9800 equity shares in the capital of the Company for non-payment of allotment money of Rs.5/-per share in compliance with the provisions of the Listing Agreement, Articles of Association of the Company read with Regulation 29 of Schedule I of Table A of the Companies Act, 1956 and Regulation 28 of Table F of the Companies Act, 2013. Notices if such forfeiture were also given to the defaulting Equity Shareholders. The BSE has approved the forfeiture of equity shares.

MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT

No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which these financial statements relate and on the date of this report.

DEPOSITORY SYSTEM

The trading in the Equity Shares of your Company is under compulsory dematerialization mode. As on 31st March, 2018, Equity Shares representing 91.21% of the equity share capital are in dematerialized form. As the depository system offers numerous advantages, members are requested to take advantage of the same and avail of the facility of dematerialization of the Company’s shares.

LISTING OF SHARES

The Equity Shares of your Company continue to remain listed with BSE Limited. The listing fees for the year 2018-19 have been paid to the Stock Exchange. The Shares of the companies are compulsorily tradable in dematerialized form.

INSURANCE

The assets of the Company are adequately insured against fire and such other risks, as are considered necessary by the Management.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company prepared in accordance with the applicable Accounting Standards forms a part of this Annual Report.

CORPORATE GOVERNANCE

At CG-VAK, Corporate Governance is not just a legal obligation, the frame work ensures that all the disclosures and information’s provided are precise and time bound. Transparency, Accountability, Integrity and Independence are the bottom-line of our Governance. The Company will continue to uphold the true spirit of Corporate Governance and implement best governance practices.

A detailed report on Corporate Governance, pursuant to the requirements of SEBI (LODR) is available as a separate section in this Annual Report. The Auditor’s report on Corporate Governance, confirming the compliance of conditions of Corporate Governance as stipulated is annexed as a part of this report.

MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Regulation 34 of SEBI (LODR), Regulations 2015, the Management Discussion and Analysis Report for the year under review is presented in a separate section forming part of this Annual Report.

NUMBER OF MEETINGS OF THE BOARD

The board met Four times during the financial year,the details of which are given in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the periods prescribed by the Companies Act, 2013.

AUDIT COMMITTEE

The Audit committee comprises of Independent Directors namely Mr.S.Muthukumar (Chairman), Mr.S.Mohan and Mr.A.Sankar as other Members. All the recommendations made by the Audit Committee were accepted by the Board.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

As per the requirement of Section 134 (3)(m) of the Companies Act, 2013, read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, the information regarding conservation of energy, technology absorption and foreign exchange earnings and outgo are given below.

Particulars of Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo as required under Companies (Accounts) Rules, 2014: A) CONSERVATION OF ENERGY Your Company uses electrical energy for its equipment such as air-conditioners, computer terminals, lighting and utilities at work places. As an ongoing process, the company continued to undertake various measures to conserve energy B) TECHNOLOGY ABSORPTION

a) Research & Development

The nature of the business of software development involves inbuilt, constant Research and Development as a part of its process of manufacturing (development). The Company is developing applications engines, re-usable codes and libraries as a part of its R&D activities.

b) Technology Absorption

The Company has not absorbed technology from outside.

c) Information regarding imported technology (Imported during last three years)

Details of Technology imported Technology imported from Year of Import Status Implementation/absorption
NIL NA NA NA

 

C) FOREIGN EXCHANGE EARNING AND OUTGO (Rs.)
Foreign Exchange Earnings 14,25,81,031
Foreign Exchange Outgo 8,52,522
Foreign Travel 4,08,978
Others 4,43,544

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

In term of the provisions of Section 197(12) of 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 are provided in the Annual Report.

Disclosures pertaining to 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 Annexure -1.

STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY

The Company has adopted a Risk Management Policy for identifying and managing risk at the strategic, operational and tactical level. The Risk Management policy has been placed on the website of the Company. At present the Company has not identified any element of risk which may threaten the existence of the Company.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

There were no loans and guarantees given or investments made by the Company under Section 186 of the Companies Act, 2013 during the year under review.

EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE BY THE AUDITORS AND THE PRACTICING COMPANY SECRETARY IN THEIR REPORTS

There were no qualifications, reservations or adverse remarks made either by the Statutory Auditors or by the Practicing Company Secretary in their respective reports. Your Directors have provided explanation in Annexure - 2 for the matter of emphasis in the Auditors Report.

CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

All related party transactions that were entered into during the financial year were on an arms length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. All Related Party Transactions are placed before the Audit Committee as also in the Board for approval.

The disclosure on related party is annexed herewith as Annexure - 3.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

The current Policy is to have an appropriate mix of executive and independent directors to maintain the Independence of the Board and separate its functions of the governance and management. As on 31st March, 2018,the Board consists of 7 members, two of whom are executive or whole time directors, one of whom is Non executive Women Director and Four are independent directors. The Board periodically evaluates the need for change in its composition and size.

The policy of the Company on Directors appointment and remuneration, including Criteria for determining Qualification, positive attributes, independence of a director and other matters provided under sub-section(3) of Section 178 of the Companies Act,2013 adopted by the Board, is appended as Annexure-4 to the Boards Report. We affirm that the remuneration paid to the Directors is as per the terms laid out in the nomination and remuneration policy of the company.

WHOLLY OWNED SUBSIDIARY: CG-VAK SOFTWARE USA INC.

As on 31st March, 2018, your Company has only one wholly owned subsidiary. Your Companys Wholly Owned Subsidiary at USA, CG-VAK Software USA Inc. has made a Sales Turnover of US$ 2.53 million during this year, compared to the US$ 3.22 million during the previous year. There has been a drop of revenue by 21% over the previous financial year. The drop is mainly due to the difficulty in obtaining visas for the engineers to travel to the USA and work in the subsidiary.

During the year, the Board of Directors reviewed the affairs of the wholly owned subsidiary. In accordance with Section 129(3) of the Companies Act, 2013, we have prepared consolidated financial statements of the Company and the wholly owned subsidiary, which forms part of the Annual Report. Further, a statement containing the silent features of the financial statement of our wholly owned subsidiary in the prescribed format AOC-1 is appended as Annexure-5 to the Boards Report. The statement also provides the details of performance, financial positions of the wholly owned subsidiary.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statement, including the Consolidated Financial Statements and related information of the Company and the wholly owned subsidiary are available on our website. These documents will also be available for inspection during the business hours at our Registered Office.

EXTRACT OF ANNUAL RETURN

In accordance with section 134(3)(a) of the Companies Act,2013,an extract of annual return in the prescribed format is appended as Annexure -6 to Boards Report.

DIRECTORS RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 134(3) (C)OF THE COMPANIES ACT, 2013

In accordance with the provisions of Section 134(3)(c) of the Companies Act, 2013, the Directors would like to state that:

1 In preparation of annual accounts for the financial year ended 31st March, 2018, the applicable accounting standards have been followed.

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

3 The Directors have taken proper and sufficient care towards the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4 The Directors have prepared the annual accounts on a going concern basis.

5 The Directors have laid down internal financial controls,which are adequate and are operating effectively.

6 The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

SIGNIFICANT AND MATERIAL ORDERS

The Joint Director, Directorate of Enforcement vide their order dated 04.12.2017, imposed a Penalty amounting to Rs. 14,00,000/- on the Company for certain procedural lapses under FEMA, 1999. The Company had paid the said penalty amount on 11th January, 2018. The said penalty was paid by the Company in order to buy peace with the department.

SEBI - SECURITIES APPELLATE TRIBUNAL ORDER

During the financial year (2014-15), SEBI Securities Appellate Tribunal had upheld the orders of the SEBI Adjudicating Officer dated 17th December, 2013 and imposed a penalty of Rs.3,00,000 lakhs on the Company for delayed disclosure/reporting of purchase of shares under the SEBI PIT regulations. The Company had paid the penalty amount on 08th May, 2014.

PUBLIC DEPOSIT

During the year, your Company has not accepted/renewed any Deposits.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

As per the provisions of the Companies Act, 2013, Mr. G. Suresh retires from office by rotation, and being eligible offer himself for re-appointment at the ensuing Annual General Meeting of the Company.

Pursuant to provisions of Section 203 of the Companies Act, 2013, Mr.C.Ganapathy, Executive Chairman, Mr.G.Suresh, Managing Director & CEO, Mr.P.S.Subramanian, Chief Financial Officer and Mr. Harcharan. J, Company Secretary and Compliance Officer are the Key Managerial Personnels of the Company.

Brief particulars of Directors eligible for reappointment in terms of SEBI(Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Secretarial Standards are annexed to the Notice dated 28thMay, 2018 convening the 23rd Annual General Meeting.

DECLARATION BY INDEPENDENT DIRECTORS

The company has received necessary declaration from each independent Director under section 149(7) of the Companies Act, 2013 that they meets the criteria of independence laid down in Section 149(6) of the Companies Act 2013 and SEBI (LODR) Regulations.

BOARD EVALUATION

The evaluation framework for assessing the performance of Directors comprises of the following key areas:

1. Attendance of Board Meeting and Board Committee Meetings

2. Quality of Contribution to Board deliberations

3. Strategic perspectives or inputs regarding future growth of Company and its performance

4. Providing perspectives and feedback going beyond information provided by the management

5. Commitment to shareholders and other stakeholder interests

The evaluation involves self-evaluation by the Board Members and subsequent assessment by the Board of Directors. A member of the Board will not participate in the discussion of his/ her evaluation.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Company has adopted a Whistle Blower Policy as a mechanism for employees to report to the management concern about unethical behaviour, actual or suspected fraud or violation of the companys code of conduct and it affirms that no personnel have been denied access to the Audit Committee. A copy of Whistle Blower Policy has been placed at our website at www.cgvak.com for reference.

AUDITORS

Statutory Auditors, M/s. N. C. Rajan & Co, Chartered Accountants were appointed to hold office for a term of five consecutive years ie, from the conclusion of 21st AGM till the conclusion of 26th AGM, subject to ratification of their appointment by the Members at every Annual General Meeting. The Statutory Auditors have confirmed their eligibility and willingness to continue in office. Pursuant to Companies (Amendment) Act, 2017, the Board recommends their appointment for the remaining period of their current term from the conclusion of this Annual General Meeting to the conclusion of 26th Annual General Meeting of the Company and would not be subject to ratification at every subsequent AGM.

SECRETARIAL AUDITOR

Mrs.Manimekala V Raj, Practising Company Secretary was appointed to conduct the secretarial audit of the company for financial year 2018-19, as required under Section 204 of the Companies Act,2013 and Rules made there under. The secretarial audit report for FY 2017-18 forms part of the Annual Report as Annexure- 7 to the Boards Report.

INTERNAL FINANCIAL CONTROLS

The Company has in place adequate internal financial controls with reference to Financial Statements. Such controls were tested during the financial year and no material weakness in the design or operation was observed.

DISCLOSURE AS REQUIRED UNDER SECTION 22 OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013.

The Company has in this place an Anti Sexual Harassment Policy in line with the requirements of the sexual harassment of women at workplace (prevention, prohibition, redressal) Act, 2013. The Internal Complaints Committee ("ICC") has been setup to redress the complaints received regarding sexual harassment. All employees are covered under this policy.

The following are the complaints received and disposed off during the financial year 2017-18:

A. No. of complaints received 0
B. No. of complaints disposed off 0

ACKNOWLEDGEMENT

The Directors of your Company would like to take this opportunity to thank one and all associated with it enabling it to scale greater heights and emerge as a recognized software solutions vendor in the industry. The faith and confidence shown on your Company by banks, global clients, government authorities and shareholders has propelled our enthusiasm and strengthen our determination to achieve our vision.

Finally your Directors would like to express their sincere thanks to the dedication and committed hard work of the employees working in India, USA and at various client locations to reach our corporate vision.

(By Order of the Board)
For CG-VAK SOFTWARE AND EXPORTS LIMITED
Place: Coimbatore C.Ganapathy
Date : 28 May, 2018 Chairman
DIN 00735840