Photon Capital Advisors Ltd Management Discussions.

Industry structure and developments:

Except some regulatory changes made by the RBI, there have been no substantial changes in the NBFC industry as a whole.

Opportunities and threats:

While the Indian economy, as always, has several opportunities due to under penetration of consumption in most sectors, it faces temporary headwinds due to demonetization and GST implementation. Both these factors might have great positive effects in the future but are likely to impede economic growth in the near future. Your company is evaluating the potential adverse impact of these factors and protecting the portfolio from them.

Segment–wise or product-wise performance:

Since the Company does not operate in multiple sectors/segments, the segment wise performances of the financials are not applicable.

Outlook:

The near term outlook remains cloudy because of various measures that the government has taken to improve overall functioning of the economy. However, in the long term, given favourable demographics and under penetration of various sectors, the investment outlook remains very bright. Excessive valuations in pubic markets are also a matter of concern.

Risks and concerns:

Your Company has continued to minimize risks from external factors and has constantly preferred and adopted methods and systems in its economic activities with low element of risk. In the current and future years, your company will further strengthen and bolster its efforts to minimize or negate all risk factors. However, external factors of foreign currencies and impact of global slowdown, currency corrections of other large growing economies do cause concern to all enterprises and your company does consider this as a concern. Nevertheless, such factors will be dealt with caution and adequate foresight.

Internal financial control systems and their adequacy:

The Company has an Internal Control System commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit (IA) function is defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

Material developments in Human Resources / Industrial Relations front, including number of people employed:

No new employees have been employed during the financial year under review. The company has not made significant development in human resources.

DIVIDEND:

Your Directors wish to plough back the profits for operations of the Company in order to increase the Shareholders value and regret for not recommending any dividend for the financial year under review. The Directors hope to pay dividend in the coming years.

BOARD OF DIRECTORS:

During the financial year under review, there is no change in constitution of Board of Directors of Company. As per the provisions of section 152 of the Companies Act, 2013, Mrs. Suchitra Nandury, who retires by rotation at the ensuing Annual General Meeting and being eligible offer herself for re-appointment. The board recommends her re- appointment.

BOARD MEETINGS:

Four (04) meetings of the Board of Directors were held during the financial year and the details are given in paragraph 2 (d) of Corporate Governance report attached to this Annual Report.

EXTRACT OF ANNUAL RETURN:

Pursuant to section 92(3) of the Companies Act, 2013 (‘the Act) and rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of annual return in form MGT-9 is enclosed as Annexure II.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:

The company has not granted any loans or given any guarantees or made any investments covered under the provisions of Section 186 of the Companies Act, 2013.

RELATED PARTY TRANSACTIONS:

All transactions entered into with Related Parties as defined under the Companies Act, 2013 and regulation 23 of SEBI (LODR) Regulations, 2015, during the financial year were in the ordinary course of business and on an arms length pricing basis. There were no materially significant transactions with related parties during the financial year which were in conflict with the interest of the Company. Suitable disclosure as required by the Accounting Standards has been made in the notes to the financial statements. The details of related party transactions for the FY 2016-17 is enclosed as

Annexure-III

CORPORATE SOCIAL RESPONSIBILITY:

In terms of Section 135 of the companies Act, 2013, every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any of the three immediately preceding financial years shall constitute CSR Committee and formulate a Corporate Social Responsibility (CSR) Policy. Since, the Company does not fall under the said criteria during any of the three immediately preceding financial years, the provisions of Sec 135 of the Companies Act, 2013, Schedule VII and the rules made thereunder are not applicable to the Company.

Accordingly, a report on CSR activities as per rule 9 of the Companies (Corporate Social Responsibility) Rules, 2014 is not applicable.

CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION & FOREIGN EXCHANGE EARNINGS AND OUT GO:

The required information as per section 134(3)(m) of the Companies Act 2013, is provided hereunder:

CONSERVATION OF ENERGY:

The Company has been continuously making efforts to reduce energy consumption. The management is striving to achieve cost reduction by economical usage of energy and to bring a general awareness about energy conservation among employees.

(i) The steps taken or impact on conservation of energy:

The company does not fall in those list of industries which consumes high energy resources, However the company making efforts to reduce the energy consumption.

(ii) The steps taken by the company for utilizing alternate source of energy:

Not applicable

(iii) The capital investment on energy conservation equipment:

No capital investment made as the company is consuming very less energy.

TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS AND OUT GO:

There was no technology absorption and no foreign exchange earnings or outgo, during the year under review. Hence, the information as required under Section 134(3)(m) of the Companies Act, 2013 read with The Companies (Accounts) Rules, 2014 is to be regarded as Nil.

The Company has not entered into any technology transfer agreement.

PARTICULARS OF EMPLOYEES:

The Company has not employed any individual whose remuneration exceeds the limits prescribed under the provisions of Section 197 of the Companies Act, 2013, read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

STATUTORY AUDITORS:

Subject to approval of the members at the ensuring AGM, the Board of Directors at their meeting held on 30.05.2017 have approved the appointment of M/s. M. Anandam & Co, Chartered Accountants, Hyderabad, as statutory auditors of Company, in place of M/s. K. Vijayaraghavan & Associates, LLP, chartered Accountants, the retiring auditors, whose tenure is expiring at the ensuring AGM, for a period of five financial years from the FY 2017-18 to FY 2021-22. Accordingly, the Board has recommended the appointment for approval of members at the ensuring Annual General Meeting under sec 139 of the Companies Act. 2013 and the rules made thereunder.

INTERNAL AUDITORS:

Pursuant to section 138 of the Companies Act, 2013, the Board in its meeting held on 30.05.2016 has appointed M/s. M. Anandam & Co, Chartered Accountants, Hyderabad, as Internal Auditors of the company for the financial year 2016-17.

SECRETARIAL AUDITOR:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed M/s. SGP & Associates, Company Secretaries, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company and the Report on the Secretarial Audit for the financial year 2016-17 is enclosed herewith as Annexure IV.

DETAILS FRAUDS REPORTED BY AUDITORS U/S 143:

The auditors have not reported any frauds pursuant to sec.143 (12) of the Companies Act, 2013. Hence, the information to be provided pursuant to Section 134 (3) (ca) of the Companies Act, 2013, may be treated as NIL.

CONSOLIDATED FINANCIAL STATEMENTS:

The consolidated financial statements of the Company prepared in accordance with relevant Accounting Standards issued by the Institute of Chartered Accountants of India form part of this Annual Report.

CORPORATE GOVERNANCE:

As a listed company, necessary measures have been taken to comply with the listing obligatory Disclosure Requirements (LODR Regulations) with the BSE Ltd, Mumbai. A report on Corporate Governance, along with a certificate of compliance from the Auditors, forms part of this Report as Annexure- V.

STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS:

Pursuant to section 134 (3) (d) of the Companies Act, 2013, a statement shall be made on declaration given by Independent Directors under sec 149 (6) of the companies Act, 2013 in the Board report.

The Board has received declarations from the Independent Directors, as required under Sec 149 (7) of the Companies Act, 2013 stating the fulfilment of criteria mentioned in the sub section (6) of Sec 149 of the Companies Act, 2013 and the rules made thereunder and recorded the same in the board meeting held on 30.05.2017.

NOMINATION AND REMUNERATION POLICY CRITERIA FOR SELECTION AND REMUNERATION OF DIRECTORS, KMP AND EMPLOYEES:

The Nomination and Remuneration Committee of the Board, comprises two Independent Non-Executive Directors namely Mr. Narasimha Rao Joga, Mr. V.R. Shankara and one Non-Independent Non-Executive Director, namely Mrs. Suchitra Nandury.

The key features of the Nomination and Remuneration Policy as framed by the Nomination and Remuneration Committee of the company are set out below:

Selection criteria for Directors:

The Company shall consider the following aspects while appointing a person as a Director on the Board of the Company:

Skills and Experience: The candidate shall have appropriate skills and experience in one or more fields of finance, law, management, sales, marketing, administration, public administrative services, research, corporate governance, technical operations or any other discipline related to the Companys business.

Age Limit: The candidate should have completed the age of twenty-one (21) years and should not have attained the age of seventy (70) years for appointment as Managing Director or Whole Time Director.

Conflict of Interest: The candidate should not hold Directorship in any competitor company, and should not have any conflict of interest with the Company.

Directorship: The number of companies in which the candidate holds Directorship should not exceed the number prescribed under the Act.

Independence: The candidate proposed to be appointed as Independent Director, should not have any direct or indirect material pecuniary relationship with the Company and must satisfy the requirements imposed under the Act.

The policy provides that while appointing a Director to the Board, due consideration will be given to approvals of the Board and/or shareholders of the Company in accordance with the Act.

Remuneration for Directors, KMP and other Employees:

The policy provides that the remuneration of Directors, KMP and other employees shall be based on the following key principles:

• Pay for performance: Remuneration of Executive Directors, KMP and other employees is a balance between fixed and incentive pay reflecting short and long term performance objectives appropriate to the working of the Company and its goal. The remuneration of Non-Executive Directors shall be decided by the Board based on the profits of the Company and industry benchmarks.

• Balanced rewards to create sustainable value: The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate the Directors and employees of the Company and encourage behaviour that is aligned to sustainable value creation.

• Competitive compensation: Total target compensation and benefits are comparable to peer companies in the industry and commensurate to the qualifications and experience of the concerned individual.

• Business Ethics: Strong governance processes and stringent risk management policies are adhered to, in order to safeguard our stakeholders interest.

REPLIES TO THE QUALIFICATIONS OF THE AUDITORS UNDER 134 (3) (f):

Since no qualifications have been reported in the Audit report, the Board of Directors need not give any replies in the Annual report.

TRANSFER TO RESERVES:

During the financial year under review, no amount has been transferred to the reserves.

MATERIAL CHANGES AND COMMITMENTS OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT AFFECTING THE FINANCIAL POSITION OF THE COMPANY:

The Company has invested an amount of Rs. 8,00,00,000/- in the capital of Calypso Technologies Inc., partnership firm, as a Partner. The investment made is within the powers of Board of Directors of the Company.

DETAILS OF DEPOSITS UNDER CHAPTER V:

The company has not accepted deposits from the members/public falling within the meaning of section 73 and/or Sec 76 of the companies Act, 2013 and the companies (Acceptance of Deposits) Rule,2014. Accordingly, furnishing of the details of deposits which are not in compliance with the requirements of Chapter V of the Companies Act, 2013 does not arise.

FORMAL ANNUAL EVALUATION MADE BY THE BOARD OF ITS OWN PERFORMANCE AND OF ITS COMMITTEES AND INDIVIDUAL DIRECTORS:

Keeping in view the various provisions of the Companies Act, 2013 and LODR Regulations dealing with powers, duties and functions of the Board of the Company, your Company has adopted criteria for evaluating the performance of its Board, Committees and other Directors including Independent Directors applicable from the financial year 2016-17. The said criteria contemplates evaluation of Directors based on their performance as directors apart from their specific role as independent, non-executive and executive directors as mentioned below: a. Executive Directors, being evaluated as Directors as mentioned above, will also be evaluated on the basis of targets / criteria given to executive Directors by the board from time to time as well as per their terms of appointment.

b. Independent Directors, being evaluated as a Director, will also be evaluated on meeting their obligations connected with their independence criteria as well as adherence with the requirements of professional conduct, roles, functions and duties specifically applicable to Independent Directors as contained in Schedule IV to the Companies Act, 2013.

The criteria also specifies that the Board would evaluate each committees performance based on the mandate on which the committee has been constituted and the contributions made by each member of the said committee in effective discharge of the responsibilities of the said committee. The Board of Directors of your company has made annual evaluation of its performance, its committees and directors for the financial year 2016-17 based on afore stated criteria.

DISCLOSURES: Audit Committee:

The Audit Committee comprises three members namely J. Narasimha Rao (Chairman & Independent Director), Mr. V.R. Shankara (Independent Director) and Mrs. Suchitra Nandury (Non Independent Director). All the recommendations made by the Audit Committee were taken on note by the Board.

Vigil Mechanism:

The Vigil Mechanism of the Company, which also incorporates a whistle blower policy in terms of the SEBI (LODR) Regulations, 2015, includes Vigilance and Ethics officer, Senior executive of the Company. Protected disclosures can be made by a whistle blower through an e-mail, or telephone or a letter to the officer or to the Chairman of the Audit Committee. The Policy on vigil mechanism and whistle blower policy may be accessed on the Companys website at the link: http:// www.pcalindia.com

DETAILS PERTAINING TO REMUNERATION AS REQUIRED UNDER SECTION 197(12) OF THE COMPANIES ACT, 2013 READ WITH RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 (i) The percentage increase in remuneration of each Director, Chief Financial Officer and Company Secretary during the financial year 2016-17 and ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2016-17, are as under:

Sl No Name of Director/KMP and Designation Remuneration of Director/KMP for financial year 2016-17 % increase in Remuneration in the Financial Year 2016-17 Ratio of remuneration of each Director to median remuneration of employees
1. Mr. Tejaswy Nandury, Whole Time Director Nil Nil Nil
2. Mr. Narasimha Rao Joga, Director Nil Nil Nil
3. Mr. V.R. Shankara, Director Nil Nil Nil
4. Mrs. Sobha Rani Nandury, Director Nil Nil Nil
5. Mrs. Suchitra Nandury, Director Nil Nil Nil
6. Mr. DM Basha, Company Secretary 1,80,000 Nil -
7. Mr. K Sreedhar Babu, Chief Financial Officer 9,07,500 9.09 -

(ii) The median remuneration of employees of the Company during the financial year was Rs. 1,65,597/-

(iii) In the financial year, there was a decrease of 1.96% in the median remuneration of employees;

(iv) There were 5 (Five) permanent employees on the rolls of Company as on March 31, 2017;

(v) Average percentage increase made in the salaries of employees other than the managerial personnel in the last financial year i.e. 2016-17 was 6.17 % whereas the increase in the managerial remuneration for the same financial year was 8.71 % and it is hereby affirmed that the remuneration paid is as per the Remuneration Policy for Directors, Key Managerial Personnel and other Employees.

GENERAL :

Your Directors state that no disclosure or reporting is required in respect of the following items, as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of Employee stock option Scheme

4. Issue of shares (including sweat equity shares) to employees of the Company under any scheme.

5. Whole-time Directors of the Company did not receive any remuneration or commission from any of its subsidiaries.

6. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Companys operations in future.

Your Directors further state that during the financial year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to the provisions of Sec 134(3)(c) of the Companies Act, 2013 the Board of Directors of your Company hereby certifies and confirms that:

a. In the preparation of the standalone and consolidated Annual financial statements, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b. The Directors have selected such accounting policies and applied them consistently and made judgements 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 of the Company for that financial year;

c. The Directors 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. The Directors have prepared the Annual financial statements on a going concern basis.

e. The directors, has laid down internal financial control to be followed by the company and that such internal financial controls are adequate and operating effectively;

f. The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGEMENTS:

Your Directors gratefully acknowledge the support and co-operation extended by all the shareholders, customers, bankers, mutual funds, share brokers to your company during the financial year and look forward to their continued support. Your Directors also place on record their appreciation of the dedication and commitment displayed by the employees of the company.

//On behalf of the Board//
For PHOTON CAPITAL ADVISORS LIMITED
Sd/- Sd/-
V R SHANKARA TEJASWY NANDURY
Place: Hyderabad DIRECTOR WHOLE-TIME DIRECTOR
Date : 10.08.2017 (DIN:00041705) (DIN: 00041571)