Cranes Software International Ltd Directors Report.

Dear Member,

The Board of Directors hereby submits the report of the business and operations of your Company along with the audited financial statements, for the financial year ended March 31, 2019. The consolidated performance of the Company and its subsidiaries has been referred to wherever required.

1. MACRO - ECONOMIC SCENARIO:

Indias economy continues to show good signs of GDP growth and the business environment appears positive, than ever before, with a string of initiatives taken up by Central Government, with respect to ease of doing business, which is expected to help the Company directly, in expanding its market within the country and abroad.

2. CONSOLIDATED / STANDALONE FINANCIAL PERFORMANCE:

The consolidated annual revenue from operations has registered a decrease of about 48% compared with the previous year and the Company has posted profit from operations before tax of Rs. 854.84 million as compared to loss of Rs. 882.33 million in the previous year.

The standalone annual revenue from operations has registered an increase by about 40% compared with the previous year. The profit for the period before tax stands at Rs. 918.08 million as compared with loss of Rs. 820.19 million in the previous year.

Financial highlights (consolidated & standalone)

(Rs. in Crore)

Particulars Consolidated Standalone
2018-19 2017-18 2018-19 2017-18
Total Income 136.09 263.38 118.14 84.40
Total expenses 50.61 351.62 26.33 166.50
Profit / (Loss) before extraordinary items & tax 85.48 (88.23) 91.81 (82.02)
Exceptional Items - - - -
Profit / (Loss) before tax 85.48 (88.23) 91.81 (82.02)
Tax expense/(income) 106.28 (9.98) 107.09 (6.82)
Profit / (Loss) for the period (20.79) (78.28) (15.28) (75.20)

3. NEW INITIATIVES AND CORPORATE ACTION:

In the year under review, the Company has enhanced its position in the areas of Business Intelligence, Engineering Services and Vocational Training. The Company continues to improve operational effectiveness, optimize costs and increase market reach across all businesses. These initiatives have positively impacted the current year business revenues and improved operating margins.

4. DIVIDEND:

Your directors do not recommend any dividend in the absence of distributable surplus.

5. RESERVES:

During the financial year under review your Company has not transferred any fund to the General Reserve.

6. SHARE CAPITAL:

During the financial year under review your there were no changes in the Capital Structure of your Company.

7. LISTING/DELISTING:

The equity shares of the Company are listed at BSE Limited ("BSE").

The equity shares of the Company were also listed on National Stock Exchange of India Limited ("NSE") but suspended from trading on NSE.

Pursuant to approval of the Board of Directors at its meeting held on July 10, 2018, the Company had filed application for voluntary delisting of Companys equity shares from the NSE on July 19, 2018 in terms of regulation 6 and 7 of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 ("SEBI Delisting Regulations") which was approved by NSE vide its circular no. NSE/LIST/55769 dated July 31, 2018 pursuant to which NSE has withdrawn (delisted) the admission to dealing in securities of the Company w.e.f. August 8, 2018.

The Equity Shares of the Company will continue to remain listed on BSE having nationwide terminals and the shareholders of the Company shall continue to avail the benefits of listing and trading on BSE.

8. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING FINANCIAL POSITION OF THE COMPANY, WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT: CHANGE IN THE NATURE OF BUSINESS, IF ANY:

There were no changes in the nature of business of the Company during the financial year ended March 31,2019.

9. PUBLIC DEPOSITS:

The Company has not accepted or invited any deposits falling within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014 during the year under review.

10. DETAILS OF DIRECTORS / KEY MANAGERIAL PERSONNEL:

The Board of Directors of the Company is duly constituted and details of the same are given below:

10.1. PROMOTER GROUP (EXECUTIVE DIRECTORS):

Asif Khader Mueed Khader

10.2. NON- EXECUTIVE DIRECTORS:

Richard Holden Gall Peter Ryser Akthar Begum

In terms of the provisions of section 203 of the Companies Act, 2013, Mr. Asif Khader, Managing Director, Mr. Mueed Khader, Whole-time Director and Mr. P. Phaneendra, Company Secretary are the Key Managerial Personnel of your Company.

10.3. RETIRE BY ROTATION:

Mr. Mueed Khader (DIN: 00106674) Wholetime Director of the Company, retires by rotation at the ensuing Annual General Meeting of the Company and being eligible offers, himself for re-appointment. The Board of Directors recommended his appointment for consideration of the members at the forthcoming Annual General Meeting.

10.4. INDUCTIONS:

Mr. Asif Khader was appointed as the Chief Financial Officer of the Company with effect from May 30, 2019.

10.5. RESIGNATIONS AND RETIREMENTS:

Mr. MukkaramJan, resigned as Member of the Board with effect from May 30, 2018.

10.6. REAPPOINTMENT OF INDEPENDENT DIRECTOR:

Pursuant to the provisions of Section 149 of the Companies Act 2013 the tenure of 5 years will be completing by September 28, 2019, of Mr. Richard Holden Gall, (DIN: 00906340) as Independent Director of the Company. He being eligible for re-appointment has given his consent to be reappointed as the Independent Director of the Company for another term of 5 years beginning from September 29, 2019 and ending September 28, 2024, his appointment shall be considered in the ensuing Annual General Meeting.

Keeping in view the vast experience, expertise and knowledge, it would be in the interest of the Company that Mr. Richard Holden Gall be re-appointed as an Independent Director of the Company to hold office for a second term of 5 (five) consecutive years.

10.7. KEY MANAGERIAL PERSONNEL:

In terms of the provisions of section 203 of the Companies Act, 2013, Mr. Asif Khader, Managing Director, Mr. Mueed Khader, Whole-time Director and Mr. P. Phaneendra, Company Secretary are the Key Managerial Personnel of your Company.

Further, Mr. Asif Khader was appointed as the Chief Financial Officer of the Company with effect from May 30, 2019.

11. DECLARATION BY INDEPENDENT DIRECTORS:

The Company has received necessary declaration from each Independent Director under Section 149(7) of the Companies Act, 2013 that he/she meets the criteria of Independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

12. NUMBER OF MEETINGS OF THE BOARD:

The Board met 5 times during the financial year. The meeting details are provided in the Corporate Governance report that forms part of this Annual report. The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Companies Act, 2013.

13. COMMITTEES OF THE BOARD:

As on March 31, 2019, the Board had four committees: the audit committee, the nomination and remuneration committee, corporate social responsibility committee and stakeholders relationship committee.

A detailed note on the composition of the Board and its committees is provided in the Corporate Governance report.

14. FORMAL ANNUAL EVALUATION OF THE BOARD:

The guidelines for evaluating and assessing the performance of the directors are being modified due to the expansion of the board. Generally, such assessment would include the decision making abilities of individual directors, strategic and value addition contributions at the meetings, charting your companys policy and growth and introducing risk management policies.

As per listing regulations, the directors have to carry out an annual performance evaluation of the Board, independent directors, whole-time and non-whole-time directors, committees of the Board and chairman of the Board. Necessary guidelines are being re-framed in this regard.

15. VIGIL MECHANISM AND WHISTLE BLOWER:

Pursuant to provisions of section 177 (9) of the Companies Act, 2013, the Company has established a "Vigil mechanism" incorporating Whistle Blower Policy in terms of the Listing Obligations and Disclosure Requirements, 2015 for employees and Directors of the Company, for expressing the genuine concerns of unethical behavior, frauds or violation of the codes of conduct by way of direct access to the Chairman of the Audit Committee in exceptional cases. The Company has also provided adequate safeguards against victimization of employees and Directors who express their concerns.

16. INTERNAL FINANCIAL CONTROL & ADEQUACY:

Your Company has in place adequate internal control systems commensurate with the size of its operations to ensure sound management of operations, safe keeping of its assets including in tangible assets and utilization of resources. However, further steps as may be advised will be implemented, if found, necessary.

17. CORPORATE SOCIAL RESPONSIBILITY (CSR):

The provisions of Section 135 of the Act read with Companies (Corporate Social Responsibility Policy) Rules, 2014 are not applicable to the Company and therefore no report is attached under this head.

18. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORK PLACE – PREVENTION PROHIBITION AND REDRESSAL ACT, 2013:

The Company has zero tolerance towards sexual harassment at workplace and during the year under review, your Board has constituted an Internal Complaints Committee to consider and redress complaints of sexual harassment & also adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed thereunder.

19. CORPORATE GOVERNANCE

Our corporate governance practices are a reflection of our value system encompassing our culture, policies and relationships with our stakeholders. Integrity and Transparency are key to our corporate governance practices to ensure that we gain and retain the trust of our stakeholders at all times. Corporate governance is about maximizing shareholder value legally, ethically and sustainably. We also endeavor to enhance long term shareholder value and respect minority rights in all our business decisions.

Our Corporate governance report for fiscal 2019 forms part of this Annual Report and the Independent Chartered Accountant Certificate of Compliance is attached to this report as per Annexure – I & II.

20. MANAGEMENT DISCUSSION & ANALYSIS REPORT:

In terms of the provisions of regulation 34(2) of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 the Management Discussion and Analysis report is set out separately and forms an integral part of this report as per Annexure – III.

21. EXTRACT OF ANNUAL RETURN:

As required under the provisions of section 92(3) of the Companies Act, 2013 read with the Companies (Management and administration) Rules, 2014, an extract of the Annual Return of your Company in prescribed form MGT-9, for the fiscal year ended March 31, 2019 is annexed to and forms part of this report as per

Annexure – IV.

22. PARTICULARS OF EMPLOYEES:

The ratio of the median remuneration of the employees to the remuneration of the each of the whole-time directors is 1:3.5.

The Company had 47 employees as on March 31, 2019. The percentage increase in remuneration, ration of remuneration of each director and key managerial personnel (KMP) (as required under Companies Act, 2013) to the median of employees remuneration and the list of top 10 employees in terms of remuneration drawn as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms a part of this Boards Report. Disclosures pertaining to remuneration and other details as required under section 197(12) of the act read with companies (appointment and remuneration of managerial personnel) Rules, 2014 are attached to this report as per Annexure - V.

23. HEALTH, SAFETY AND ENVIRONMENT:

Your Board is committed to highest standards of providing healthy environment for safety of its employees and your Board reviews the same from time to time.

24. PARTICULARS OF LOANS, GUARANTEE & INVESTMENT:

Details of loans, guarantees and investments under the provisions of section 186 are given in notes to financial statements.

25. DIRECTORS RESPONSIBILITY STATEMENT:

The financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on accrual basis except for certain financial instruments, which are measured at fair values, the provisions of the Companies Act, 2013 (to the extent notified) and guidelines issued by SEBI. The Ind AS are prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. Accounting policies have been consistently applied except where a newly-issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

The directors confirm that:

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

They have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and are 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 of the company for that period.

They have taken proper and sufficient care towards the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the company and preventing and detecting fraud and other irregularities.

They have prepared the annual accounts on a going concern basis.

They have laid down the internal financial controls to be followed by the Company and that they are adequate and were operating effectively.

They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

26. STATUTORY AUDITORS:

The present auditors M/s. Sethia Prabhad Hegde & Co, were appointed at the 32nd Annual General Meeting of your company to hold office for a period of 5 years i.e. till the conclusion of the 37th Annual General Meeting. The requirement for annual ratification of auditors appointment at the AGM has been omitted pursuant to Companies (Amendment) Act, 2017 notified on May 7, 2018 During the year, the Statutory Auditors have confirmed that they satisfy the Independence criteria required under Companies Act, 2013 and Code of ethics issued by Institute of Chartered Accountants of India.

27. SECRETARIAL AUDITOR:

As required under Section 204 of the Companies Act, 2013 and Rules thereunder, the Board appointed Mr. Krishnaswamy G. S., Practicing Company Secretary, as Secretarial Auditor of the Company for fiscal 2019.

28. COST RECORDS AND COST AUDIT:

Maintenance of cost records and requirement of cost audit as prescribed under the provisions of Section 148(1) of the Companies Act, 2013 are not applicable for the business activities carried out by the Company.

29. AUDITORS QUALIFICATIONS AND BOARDS REPLY:

The Statutory auditors have qualified their report on various matters pertaining to the Company and the Board has replied to these qualifications. A detailed list containing the audit qualifications and the Boards replies thereto have been provided as an annexure to this report, marked Annexure - VI.

30. SECRETARIAL AUDITOR AND BOARDS REPLY TO SECRETARIAL AUDIT QUALIFICATIONS:

Secretarial audit report in prescribed Form MR-3 attached to this report marked Annexure -VII. A detailed list containing the Secretarial audit qualifications and the Boards replies thereto have been provided as an annexure to this report, marked Annexure - VIIA

31. RELATED PARTY TRANSACTIONS:

During the year under report, your Company has entered into related party transactions, which were on arms length basis and in the ordinary course of business. Certain material transactions as defined under section 188 of the Companies Act, 2013 read with the companies (Meetings of Board and its powers) Rules, 2014 are reported. All these transactions were previously approved by the audit committee and are being reviewed on a regular basis. Further, details of contracts and arrangements with related parties for the fiscal year ended March 31, 2019 are provided under note no. 40 to the audited financial statements and details pertaining to related party transactions are provided in Annexure-VIII.

32. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

Even though the operations of your Company are not energy-intensive, adequate measures have been taken to reduce energy consumption by using efficient equipment. Since it is a software Company, primarily dealing with scientific and engineering software products and product related projects, energy cost forms a very small part of total cost and its impact on total cost is not material.

33. RESEARCH & DEVELOPMENT ACTIVITIES:

The Management of your Company has been committed to building a strong R&D culture from day one and has set clear R&D goals. In order to achieve these goals, the Company has focused on furthering the efficacies of R&D activities as well as building synergies among multiple-impact technologies.

34. SUBSIDIARIES, JOINT VENTURES & ASSOCIATES:

Current Subsidiaries, Joint venture & Associates have been listed in Annexure-IV (part III). Any substantial or material business related changes that have taken place in the subsidiary companies during the year is reflected in the Balance Sheet reported by your company and discussed in a Management Discussion and Analysis report in Annexure-III.

35. SECRETARIAL STANDARDS:

The Directors state that applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to ‘Meetings of the Board of Directors and ‘General Meetings, respectively, have been duly followed by the Company.

36. REPORTING OF FRAUD BY AUDITORS:

During the year under review, the statutory auditors have not reported under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Boards report.

37. RISK MANAGEMENT:

Your directors have entrusted the risk management functions to the audit and remuneration committee as the number of directors on the Board is five only. Your Company will take steps to expand its Board, if advised and found warranted, in the future.

38. GREEN INITIATIVE:

Electronic copies of the Annual Report 2018-19 and the Notice of the AGM are sent to all the members whose email addresses are registered with the Company. For members who have not registered their email addresses, physical copies are sent in the permitted mode.

39. ACKNOWLEDGEMENTS:

Your Directors would like to express their sincere appreciation for the assistance and co-operation received from Financial Institutions, Government Authorities, customers, vendors and members during the year under review.

Your Directors wish to place on record their deep sense of appreciation for the committed services by the Companys executives, staff and workers.

for and on behalf of the Board of Directors
Sd/- Sd/-
Date: Bengaluru Asif Khader Mueed Khader
Place: August 14, 2019 Managing Director Wholetime Director
DIN: 00104893 DIN: 00106674

ANNEXURE V

Statement of Particulars of employees pursuant to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

Sl. No. Name Designation/Nature of Duties Remuneration Received Qualification Experience in years Age in years Date of commencement of employment Last employment held
[Rs.]
1 2 3 4 5 6 7 8 9

Notes;

None of the employees earned salay more than prescribed amount during the year.

ANNEXURE VI

BOARDS REPLY TO AUDITORS QUALIFICATIONS

Auditors Opinion Management Response
1 Redemption of Foreign currency convertible bond amounting to Rs. 29,085 lakhs (42 million Euros) to the holders of the bonds have fallen due during April 2011 and is yet to be redeemed as on the date of Balance Sheet. On a petition filed by the Foreign currency convertible bond holders, The Honble High Court of Karnataka issued a winding up order against the company, which indicates the existence of material uncertainty that may cast significant doubt on the companys ability to continue as a going concern. The company has obtained a stay against the operation of the winding up order issued by the Honble High Court of Karnataka. However, the accounts have been prepared on a going concern basis. The Company has continued to engage with the FCCB holders by way of sincere and diligent efforts aimed at reaching a mutually-beneficial settlement which protects the business and valuable interests of its stakeholders. The company also continues its active defense of the High Court winding-up proceeding and has recently obtained deferrals in support of a favorable legal and negotiated resolution.
2 3.2 Term loans and working capital loans availed by the company from various banks amounting to Rs. 57,768.91 lakhs, remain unpaid and are overdue since 2009. The lenders have filed cases before the Debt Recovery Tribunal (DRT) / Honble Courts, etc for recovery of dues. These proceedings are in various stages of disposal before the "DRT" and the respective Honble Courts. Winding up petition has been filed by Bank of India against the company, before the Honble High Court of Karnataka for non- payment of principal and the accrued interest thereon. The Company is actively defending its position in these cases. It is also in advanced settlement negotiations with both secured and unsecured lenders and while reaching settlement with some, expects to reach favourable settlements with others in due course.
3 In our opinion the securities provided to Banks are not adequate to cover the amounts outstanding to them as on the date of Balance Sheet.
4 Attention of the members is invited to note 6 of the Financial Statements regarding recognition of deferred tax credit on account of unabsorbed losses and allowances aggregating to Rs.25,130.43 lakhs (year ended March 31, 2018 Rs. 35,199.48 lakhs). The Company has made significant changes to its business strategy and improvements in its solutions and product offerings. Hence, the Company is confident that we will have future taxable income to take advantage of the deferred tax credit as a ‘recognized asset.
This does not satisfy the virtual certainty test for recognition of deferred tax credit as laid down in IND AS-12.
5 Reference is drawn to note no. 5 of the Financial Statements regarding the amounts classified under "Fixed Assets" including "Intangible Assets Under Development" amounting to Rs. 5,042.44 lakhs. (year ended March 31, 2018 Rs. 5,042.44 lakhs) No evidence has been produced before us for testing its impairment and in the absence of the same, we are unable to express any opinion on the impairment to such asset. In our opinion, such test of impairment as on the date of Balance Sheet is mandatory, especially in view of the higher degree of the obsolescence of software which is stated to be under various stages of development, though no further developments have been carried out during the recent years. As detailed in the annexed Management Discussion and Analysis, the Company has made substantial progress to its Products and Solutions across all subsidiaries. The impact of this change is reflective in our consolidated revenue growth. The Company has engaged an external consultant to re-evaluated the IP assets and the effect, if any, will be reflected in the financial statement.
6 In the light of the above, the appropriateness of the ‘Going Concern concept based on which the accounts have been prepared is inter alia dependent on the Companys ability to infuse requisite funds for meeting its obligations, rescheduling of debt and resuming normal operations. During the year under review, the management has put its efforts toward resumption of normal operations. Hence, we are highly confident that the concept of ‘Going Concern continues to apply without doubt.
7 We draw attention to Note No. 8 and Note No. 9 of the financial statements regarding the investments (including receivables) made in wholly owned subsidiaries. As explained by the management, it being a long term and strategic investment, there is a reasonable certainty that there will be no diminution in the value of the investment and is confident of recovery of receivables and therefore no provisioning has been considered necessary. The Management is of the view, that there is no diminution in the value of the investment provided to its subsidiaries, as there are valuable IPs in these subsidiaries and their value will be unlocked as and when the company is able to resume its normal business operations. The investments, being the nature of long term, are strategic to the future growth of the company and the Management is confident to recover the receivables as and when Business stabilizes in these subsidiaries.

ANNEXURE-VIIA

BOARDS REPLY TO SECRETARIAL AUDITORS QUALIFICATIONS

Auditors Opinion Management Response
1. Section 12: The status of the Company as on date of signing this report is Active Non- Compliant. However the Company is being advised to take necessary action in this regard and immediately file Form INC 22A; The Management has taken note of the same and will take necessary steps to quantify the issue.
2. Section 82: Form CHG-4s for Satisfaction of Charge has not been filed with the Registrar of Companies, Karnataka for which the Company has repaid the Loan amount to the respective Charge holders;
3. Section 117: Form MGT-14s are not filed for various transactions during the financial year as required under the provisions of the Companies Act, 2013; The Management will take necessary actions and initiate for filing of the respective forms with the Authorities as required by the law and follow the due process.
4. Section 121: Form MGT-15s pertaining to Report on Annual General Meeting for the financial year 2016-17 & 2017-2018 is not filed by the Company;
5 Section 152(6): Retirement of Directors by rotation was not carried out at the previous Annual General Meeting;
6. Section 197 (Schedule V): As informed by the management, provision was made for payment of remuneration to Executive Directors although the Company had defaulted in repayment of its debts; The Management has taken note of the same and will take necessary steps to quantify the issue.
7. Section 203: Appointment of Chief Financial Officer. However the company has appointed the said Key Managerial Personnel, before the date of signing this report; The Company has appointed Mr. Asif Khader as the Chief Financial Officer of the Company and necessary filing towards his appointment shall be done shortly.

ANNEXURE VIII

FORM NO. AOC -2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014.

1. Details of contracts or arrangements or transactions not at Arms length basis.

SL. No. Particulars Details
a) Name (s) of the related party & nature of relationship NIL
b) Nature of contracts/arrangements/transaction NIL
c) Duration of the contracts/arrangements/transaction NIL
d) Salient terms of the contracts or arrangements or transaction including the value, if any NIL
e) Justification for entering into such contracts or arrangements or transactions NIL
f) Date(s) of approval by the Board NIL
g) Amount paid as advances, if any NIL
h) Date on which the special resolution was passed in General meeting as required under first proviso to section 188 NIL

2. Details of material contracts or arrangements or transactions at Arms length basis.

SL. No. Particulars Details
a) Name (s) of the related party & nature of relationship 1. Systat Software Inc., U.S.
2. Systat Software GmbH, Germany
3. Systat Software UK Ltd.
b) Nature of contracts/arrangements/transaction Export of Software
c) Duration of the contracts/arrangements/transaction Ongoing
d) Salient terms of the contracts or arrangements or transaction including the value, if any NIL
e) Date(s) of approval by the Board, if any NIL
f) Amount paid as advances, if any NIL

 

for and on behalf of the Board of Directors
Sd/- Sd/-
Date: Bengaluru Asif Khader Mueed Khader
Place: August 14, 2019 Managing Director Wholetime Director
DIN: 00104893 DIN: 00106674