r systems international ltd share price Directors report

Dear Shareholders,

Your directors take great pleasure in presenting the Twenty Ninth Annual Report on the business and operations of R Systems International Limited ("R Systems" or the "Company") together with the audited financial statements of accounts for the year ended December 31, 2022.

1. Financial Results a) Standalone financial results of R Systems

( in million)

Particulars	Financial Year ended
	31.12.2022	31.12.2021
Revenue from Operations	8,138.90	5,775.01
Profit before depreciation, exceptional items and tax	1,536.32	1,505.42
Less: Depreciation and amortisation expense	195.83	146.49
Profit before tax	1,340.49	1,358.93
Less: Current tax	296.55	245.27
Less: Deferred tax (credit)/expense	(83.17)	(43.81)
Profit after tax	1,127.11	1,157.47
Other comprehensive income/(Loss)	4.37	0.71
Total comprehensive income for the year	1,131.48	1,158.18
Statement of change in Retained Earnings
Opening Balance	3,416.65	3,104.05
Add: Profit for the current year	1,127.11	1,157.47
Less: Buy-back of Shares (including tax)	-	168.10
Less: Dividend paid	768.97	677.66
Add: Other comprehensive income/(Loss)	4.37	0.89
Closing Balance	3,779.16	3,416.65
EPS-Basic	9.53	9.70

b) Consolidated financial results of R Systems and its Subsidiaries

( in million)

Particulars	Financial Year ended
	31.12.2022	31.12.2021
Revenue from Operations	15,158.31	11,556.39
Profit before depreciation, exceptional items and tax	2,051.35	1,977.65
Less: Depreciation and amortisation expense	349.78	276.93
Profit before tax	1,701.57	1,700.72
Less: Current tax	387.19	327.63
Less: Deferred tax (credit)/expense	(82.43)	(41.27)
Profit after tax	1,396.81	1,414.36
Other comprehensive income/(Loss)	223.89	(32.19)
Total comprehensive income for the year	1,620.70	1,382.17
Statement of change in Retained Earnings
Opening Balance	4,164.18	3,594.69
Add: Profit for the current year	1,396.81	1,414.36
Less : Buy-back of Shares (including tax)	-	168.10
Less : Dividend paid	768.97	677.66
Add: Other Comprehensive Income/(Loss)	4.37	0.89
Closing Balance	4,796.39	4,164.18
EPS-Basic	11.81	11.85

2. Results of Operations Standalone Accounts

•Revenue from Operations during the year 2022 was 8,138.90 mn. as compared to 5,775.01 mn. during the year 2021, an increase of 40.93%.

•Profit after tax was 1,127.11 mn. during the year 2022 as compared to 1,157.47 mn. during 2021, a decrease of 2.62%.

•Basic earnings per share (of face value of 1/- each) was 9.53 for the year 2022 as compared to 9.70 for the year 2021, a decrease of 1.75%.

Consolidated Accounts

•Revenue from Operations during the year 2022 was

15,158.31 mn. as compared to 11,556.39 mn. during the year 2021, an increase of 31.17%.

•Profit after tax was 1,396.81 mn. during the year 2022 as compared to 1,414.36 mn. during the year 2021, a decrease of 1.24%.

•Basic earnings per share (of face value of 1/- each) was 11.81 for the year 2022 as compared to 11.85 for the year 2021, a decrease of 0.34%.

The state of affairs of the Company is presented as part of Management Discussion and Analysis Report forming part of this report.

3. Appropriations and Reserves Dividend

During the year 2022, the Board of Directors declared an interim dividend namely, Interim Dividend 2022 of 6.50 per equity share i.e. 650% of face value of 1/- each at its meeting held on June 01, 2022. The said interim dividend was paid to shareholders on June 30, 2022. The Board of Directors has not recommended any final dividend for the financial year ended December 31, 2022.

Transfer to Reserves

In order to augment resources, your Directors do not propose to transfer any amount to reserves.

4.Business

R Systems is a leading provider of technology, artificial intelligence, analytics and knowledge services. We partner with customers to enable or elevate their digital transformation with our diversified digital offerings. Our technology offerings include product engineering, cloud enablement, QA testing, Internet of Things (IoT), and digital platforms and solutions.

AI/ Analytics services include advanced analytics, data monetization and modernization, machine learning/ artificial intelligence, business analytics, intelligent automation and modern data management. R Systems’ design services include UX engineering, visual design, mobile user experience and experience re-engineering. Our knowledge service offerings cover revenue cycle management, back office service, technical support, and customer care using multi-lingual capabilities and global delivery platform.

R Systems services and solutions span over five major business verticals i.e. Technology, Telecom, Healthcare & Life Science, Finance & Insurance and Retail & e-commerce. R Systems maintains seventeen development and service centres to serve customers in North America, Europe, and APAC. There were no changes in the nature of the Company’s business and generally in the classes of business in which the Company has an interest and in the business carried on by the subsidiaries during the year under review. For details of Company’s subsidiaries please refer note number 11 relating to subsidiaries.

The sign of a global slowdown has resulted some softness in the demand environment which may affect growth momentum in near term. However, businesses have to accelerate their digital transformation to address the fast changing technology landscape. We are cautiously optimistic and continue to invest in newer technologies and sales and marketing initiatives to drive profitable growth through innovation.

5.Quality

R Systems has continuously invested in processes, people, training, information systems, quality standards, frameworks, tools and methodologies to mitigate the risks associated with execution of projects. Adoption of quality models and practices such as the Capability Maturity Model Integration (CMMI) and People Capability Maturity Model (PCMM) practices for processes have ensured that risks are identified and mitigated at various levels in the planning and execution process. R Systems journey on various quality standards/models is as follows:

During the year 2022, Noida IT as well as Knowledge Services Division were recertified for ISO 9001:2015. As of the date of this report, Noida IT division is CMMI level 5 (Ver.1.3), PCMM Level 5, ISO 9001:2015, ISO 27001:2013 certified and HIPAA compliant. Noida Knowledge Services (KS) Division is PCMM Level 5, ISO 27001:2013, ISO 9001:2015 certified and HIPAA compliant. Apart from this, KS division is also PCI-DSS (ver.3.2.1) certified (for IT Infrastructure along with the projects/ process/ applications in scope).

To maintain and strengthen competitive strengths, R Systems continues to make investments for enhancing its competencies around latest technologies for flawless execution and consistent delivery of state of art product and solutions for our customers.

The product engineering offerings include services along the entire software lifecycle that includes technology consulting, architecture, design and development, professional services, testing, maintenance, customer care and technical support. R Systems expects that its technology focus, investment in processes, talent and methodologies will enable it to distinguish itself from competition as it seeks to provide services to technology/ product companies.

6.Directors & Key Managerial Personnel’s (KMP)

During the year under review, Lt. Gen. Baldev Singh (Retd.) was re-appointed as director, liable to retire by rotation, at the Annual General Meeting held on June 20, 2022.

There was no change in KMP(s) of the Company during the financial year ended on December 31, 2022. In terms of Section 152 of the Act, Mr. Avirag Jain, Director & Chief Technology Officer, being liable to retire by rotation, shall retire at the ensuing AGM and being eligible for re-appointment, offers himself for reappointment.

The brief profile of Mr. Avirag Jain forms part of the Corporate Governance Report. No director of the Company is disqualified as per the provisions of Section 164(2) of the Companies Act, 2013.

The directors of R Systems have made necessary disclosures, as required under various provisions of the Companies Act, 2013 (Hereinafter referred as the "Act") and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Hereinafter referred as "Listing Regulations").

On the basis of the declarations submitted by the Independent Directors of the Company, the Board of Directors has opined that all the Independent Directors of the Company fulfil the required criteria as defined under Section 149(6) of the Act and the Listing Regulations. Further, the Board of Directors is of the opinion that the Independent Directors of the Company possess requisite qualifications, experience and expertise and they hold highest standards of integrity.

7.Liquidity and Borrowings - Consolidated Financial Statement

The consolidated cash and cash equivalents as at December 31, 2022 were 2,062.30 mn. as against

2,043.68 mn. as on December 31, 2021. Net cash generated from operating activities was 963.86 for the year ended December 31, 2022 compared to 873.15 mn. for the year ended December 31, 2021. Cash used in investing activities was 213.71 mn. for the year ended December 31, 2022 and mainly comprised of purchase of fixed assets of 358.96 mn, as offset by proceeds from investment in term deposit with bank 115.60 mn. Cash used in financing activities was 864.00 mn. for the year ended December 31, 2022. Interim Dividend paid during the year was 768.97 mn.

R Systems’ policy is to maintain sufficient liquidity to fund the anticipated capital expenditures, operational expenses and investments for strategic initiatives.

R Systems has a credit facility (fund based as well as non-fund based) from the Axis Bank Limited and ICICI Bank Limited. As at December 31, 2022, the total credit balance was nil under fund based line of credit. Further, borrowings as on December 31, 2022 comprises of loan for motor vehicles purchased amounting to 20.44 mn.

8.Changes in the Capital Structure

During the year under review, there was no change in the capital structure of the Company. The share capital structure of the Company is as follows: Amount in

Sr. No.	Particulars	As on December	As on December
		31, 2022	31, 2021
1.	Authorised Share Capital:
	Equity Shares of 1/- each	206,000,000	206,000,000
	Issued, Subscribed and
2.	Paid-Up Capital:
	Equity Shares of 1/- each	118,303,445	118,303,445

9.Takeover Offer and Voluntary Delisting of Shares

On November 16, 2022, BCP Asia II Topco II Pte. Ltd. ("Acquirer") has entered into a Share Purchase Agreement ("SPA") with the Promoter and Promoter Group of the Company to acquire up to 61,129,969 Equity Shares, representing 51.67% of the Voting Share Capital, from the Promoter and Promoter Group of the Company, subject to the terms and conditions set out in the SPA, including fulfilment of customary closing conditions.

Consequently, A public announcement was made on November 16, 2022 by Kotak Mahindra Capital Company Limited, the manager to the Offer, for and on behalf of the Acquirer along with Blackstone Capital Partners Asia II L.P. ("PAC"), making a composite offer for acquisition of up to 57,173,476 fully paid-up equity shares of face value of 1/- representing 48.33% of the Voting Share Capital ("Offer") in accordance with the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and subsequent amendments thereto ("SEBI (SAST) Regulations") and the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations 2021 and subsequent Amendments thereto ("SEBI Delisting Regulations") from the Public Shareholders and consequently to delist the equity shares of the Company from National Stock Exchange of India Limited and BSE Limited ("Stock Exchanges") where shares of the Company are presently listed. The Detailed Public Statement was published on November 23, 2022 in compliance with applicable provisions of SEBI (SAST) Regulations and SEBI Delisting Regulations.

The Board of Directors of the Company at its meeting held on November 25, 2022 has approved the voluntary delisting of equity shares of the Company from the Stock Exchanges. The Shareholders of the Company have also approved the voluntary delisting of equity shares of the Company from Stock Exchanges with the requisite majority on December 31, 2022.

The applications for approvals of relevant statutory authorities have been filed. In-principle approval from Stock Exchanges and Observations from SEBI are awaited as on the date of this report.

10. Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars as prescribed under Section 134 (1) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 for the year ended December 31, 2022 are as follows:

A. Conservation of Energy

Though your Company does not have energy intensive operation, every endeavor has been made to ensure the optimal usage of energy, avoid wastage and conserve energy.

R Systems constantly evaluates new technologies and makes appropriate investments to be energy efficient. During the year ended December 31, 2022, R Systems adopted various energy conservation options/ technologies and took measures to reduce energy consumption by using energy efficient equipment and devices, replacing existing CFL fittings with LEDs fittings to reduce power consumption, timely preventive maintenance of all major and minor equipment. The air is conditioned with energy efficient compressors for central air conditioning and with split air conditioning for localized areas. The Company is endeavoring to convert its Diesel generators to GAS based generators. Please also refer the Business Responsibility and Sustainability Report for details of Energy consumption.

R Systems is always in search of innovative and efficient energy conservation technologies and applies them prudently. Being in the software industry, R Systems’s operations are not energy intensive and energy costs constitute a very small portion of the total cost, therefore, the financial impact of these measures is not material.

B. Technology absorption

1.Efforts made towards technology absorption

The Company has established centre of excellence in specific digital technologies like Cloud, Mobility, IOT, Analytics, Intelligent Process Automation (IPA) etc. to strengthen competencies and enhance offerings across focused verticals i.e. Technology, Telecom, Healthcare & Life Science, Finance & Insurance and Retail & e-Commerce.

2.Benefits derived as a result of the above efforts

Our investment in digital technologies is helping us to enhance market reach and support our revenue growth.

3.Technology imported during the last 3 years.

Not applicable, as no technology has been imported by the Company.

4.Expenditure incurred on Research and development

Driven by our core value of innovation, we believe that innovation is not just a practice but an essential component embedded within R Systems organizational DNA. We are now operating in a digital world. Digital transformation is one of our core areas where R Systems partner with businesses to make them competitive and successful in today’s hyper-changing environment. Over the year ended December 31, 2022, your Company has invested in research and development around all leading digital technologies. Further, R Systems has also strengthened its proprietary solutions and frameworks optimizing the integration with digital technologies.

C. Foreign Exchange Earnings and Outgo (Accrual Basis)

A significant percentage of R Systems revenues are generated from exports. The development and service centre in Noida is registered with the Software Technology Park of India as 100% Export Oriented Undertaking. All efforts of the Company are geared to increase the business of software exports in different products and markets. We have made investments in sales and marketing activities in various growing markets.

The total foreign exchange used and earned by R Systems during the year as compared with the previous year is as follows:

( in Millions)

 

	Particulars	Financial Year ended
		31.12.2022	31.12.2021
(a)	Earnings (Accrual Basis)	7,892.20	5,770.20
(b)	Expenditure (Accrual Basis)	862.42	695.83
(c)	CIF value of imports	48.74	64.27

 

11. Subsidiaries

As on December 31, 2022, R Systems has twenty-six subsidiaries. The name and country of incorporation of those subsidiaries are as follows:

S. No.	Name of the Subsidiaries	Country of Incorporation
1.	R Systems, Inc.,	U.S.A.
2.	R Systems Technologies Ltd.	U.S.A.
3.	RSYS Technologies Ltd.	Canada
4.	R Systems Consulting Services Limited	Singapore
5.	R Systems Consulting Services (M) Sdn. Bhd.#	Malaysia
6.	R Systems Consulting Services (HongKong) Limited#	Hong Kong
7.	R Systems Consulting Services (Thailand) Co. Ltd.#	Thailand
8.	R Systems Consulting Services Kabushiki Kaisha#	Japan
S. No.	Name of the Subsidiaries	Country of Incorporation
9.	R Systems Consulting Services (Shanghai) Co., Ltd.#	People’s Republic of China
10.	R Systems Consulting Services Company Limited#	Vietnam
11.	R Systems Computaris International Limited	U.K.
12.	R Systems Computaris S.R.L.@	Moldova
13.	R Systems Computaris Malaysia Sdn. Bhd.@	Malaysia
14.	R Systems Computaris Poland Sp. Z o.o.@	Poland
15.	R Systems Computaris Europe S.R.L.@	Romania
16.	R Systems Computaris Philippines Pte. Ltd. Inc.@	Philippines
17.	R Systems Computaris Suisse S?rl@	Switzerland
18.	R Systems (Singapore) Pte. Ltd	Singapore
19.	R Systems IBIZCS Pte. Ltd.*	Singapore
20.	IBIZ Consulting Services Pte. Ltd.^	Singapore
21.	R Systems IBIZCS Sdn. Bhd. ^	Malaysia
22.	PT RSystems IBIZCS International^	Indonesia
23.	IBIZ Consulting Services Limited^	Hong Kong
24.	IBIZ Consulting Services (Shanghai) Co., Ltd.%	People’s Republic of China
25.	IBIZ Consulting (Thailand) Co. Ltd.^	Thailand
26.	IBIZ Consultancy Services India Private Limited$	India

# wholly owned subsidiaries of R Systems Consulting Services Limited, Singapore being 99.75% subsidiary of R Systems (The shareholding held by R Systems International Limited and R Systems (Singapore) Pte. Ltd. is 69.37% and 30.38%, respectively).

 

@ wholly owned subsidiaries of R Systems Computaris International Limited being 100% subsidiary of R Systems. * wholly owned subsidiary of R Systems (Singapore) Pte Ltd. being 100% subsidiary of R Systems.

^ whollyownedsubsidiariesofRSystemsIBIZCSPte.Ltd.being 100% Subsidiary of R Systems (Singapore) Pte. Limited.

% wholly owned subsidiary of IBIZ Consulting Services Limited - Hong Kong being 100% Subsidiary of R Systems IBIZCS Pte. Ltd.

$Under Voluntary Liquidation.

On October 17, 2022, R Systems Consulting Services Limited, Singapore, incorporated a wholly-owned subsidiary in Vietnam named R Systems Consulting Services Company Limited.

During the year under review, IBIZ Consultancy Services India Private Limited, wholly owned subsidiary of the Company, has gone into Voluntary Liquidation under Section 59 of Insolvency and Bankruptcy Code, 2016 read with Insolvency and Bankruptcy Board of India (Voluntary Liquidation) Regulations, 2017. Ms. Gunjan Mittal has been appointed as a liquidator of IBIZ India to implement the said liquidation. Subsequent to the year ended December 31, 2022, the petition for approving the voluntary liquidation has been filed with the Hon’ble National Company Law Tribunal, New Delhi.

As on date of this report, all the subsidiaries of the Company except IBIZ Consultancy Services India Private Limited are incorporated and based outside India. In addition to provide services to various international clients these subsidiaries also help to generate revenues for R Systems.

During the year, no other corporate restructuring activity was done by the Company, except as stated in this report.

The Board of Directors of the Company regularly reviews the affairs of these subsidiaries. Policy for determining material subsidiaries of the Company is available on the website of the Company at https://www.rsystems.com/ investors-info/corporate-governance/.

During the year 2022, the Company had three material Subsidiaries, namely R Systems, Inc., R Systems (Singapore) Pte. Ltd., Singapore and R Systems Computaris Europe S.R.L., all incorporated and based outside India.

A statement containing the salient features of the financial statements of our subsidiaries in the prescribed Form AOC-1 is attached at the end of consolidated financial statements of the Company. The statement also provides the details of performance, financial position of each of the subsidiaries.

Further, the audited annual accounts and related detailed information of our subsidiaries, wherever applicable, will be made available to shareholders seeking such information at any point of time. The annual accounts of the subsidiary companies will also be available for inspection by the shareholders at Registered Office of R Systems i.e. GF-1-A, 6, Devika Tower, Nehru Place, New Delhi-110019 and Corporate Office of R Systems i.e. C-40, Sector 59, Noida (U.P.)–201307 and Registered Offices of the subsidiary companies concerned during business hours. The same will also be hosted on R Systems’ website i.e. www.rsystems.com.

12. Particulars of employees

The details 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 annexed as Annexure A and forms part of this report.

Further, as required under the provisions of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the name and other particulars of employees are set out in Annexure B and forms part of this report.

13. Directors’ responsibility statement

Pursuant to the requirement of Section 134 (3) (c) read with Section 134(5) of the Companies Act, 2013 with respect to directors’ responsibility statement, your Board of Directors, to the best of its knowledge and ability, hereby confirm that:

1) in the preparation of the annual accounts for the financial year ended December 31, 2022, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

2) 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 and loss of the Company for that period;

3) the directors had taken proper and sufficient care for 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 for the financial year ended December 31, 2022 on a going concern basis;

5) the directors, have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively;

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

14. Auditors and Audit Report

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, [Firm’s Registration No. 117366W/W-100018], were re-appointed as the Statutory Auditors of your Company in the Annual General Meeting held on June 20, 2022 for a term of five years until the conclusion of the 33^rd Annual General Meeting of the Company.

The Auditors have issued an unmodified opinion on the Financial Statements, both standalone and consolidated, for the financial year ended December 31, 2022. During the year 2022, the statutory auditors have not reported any matter under Section 143(12) of the Act. The said Auditors’ Report(s) for the financial year ended December 31, 2022 on the financial statements of the Company forms part of this Annual Report.

15. Audit committee

R Systems has a qualified and independent Audit Committee. During the year under review, there was no change in the composition of the Audit Committee. The constitution of the Committee is in compliance with the provisions of the Act and the Listing Regulations.

Detailed description of the Audit Committee has been given in Corporate Governance Report. The terms of reference and role of the Committee are as per the rules set out in the Listing Regulations and Section 177 of the Act and rules made thereunder and includes such other functions as may be assigned to it by the Board from time to time.

The Committee has adequate powers to play an effective role as required under the provisions of the Act and Listing Regulations. During the year under review, the Board of Directors of the Company had accepted all the recommendations of the Audit Committee.

16. Prevention and prohibition of sexual harassment of women at work place

Respect for Human Rights is a fundamental value of R Systems International Limited. At R Systems, it is our desire to promote a healthy and congenial working environment irrespective of gender, caste, creed or social class of the employees.

We value every individual and are committed to protect the dignity and respect of every individual. The Company has always endeavored for providing a better and safe environment free of sexual harassment at all its work places. Consequent to the enactment of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder, the Management of R Systems International Limited has constituted an Internal Complaints Committee ("ICC") to deal with any complaints or issues that may arise, in the nature of sexual harassment of women employees. The Company has also prepared and implemented Policy for Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace. During the year ended December 31, 2022, no case of sexual harassment of women was reported to ICC.

17. Corporate Governance

As required under the Listing Regulations, the detailed report on corporate governance is given as Annexure C to this report and the certificate obtained from

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, [Firm’s Registration No. 117366W/ W-100018], Statutory Auditors of the Company, regarding compliance of the conditions of corporate governance as stipulated in the Listing Regulations is annexed as Annexure D to this report.

18. Customer relations

R Systems recognizes that the customers have a choice of service providers and the directors would like to place on record their gratitude on behalf of the Company for the business provided by them. The Company’s quality policy mandates that the voice of the customer is obtained on a regular basis. We constantly review the feedback and incorporate its impact into our delivery systems and communications.

19. Stakeholder’s relations

R Systems is inspired by its customers and its employees and transforms that inspiration and customers’ needs into value for all stakeholders. We thank all R Systems employees worldwide for their hard work, commitment, dedication and discipline that enables the Company to accomplish its customer commitments and commitments to all its stakeholders. R Systems conducts regular employee satisfaction surveys. R Systems is constantly validating key employee data with industry and peer group business. These practices have helped the Company to achieve many of its business goals and have been recognised in many industry surveys over the last few years. The open door policy of our senior management team ensures that the feedback loop is completed promptly. We thank our shareholders for their continuous support and confidence in R Systems. We are aware of our responsibilities to our shareholders to provide full visibility of operations, corporate governance and creating superior shareholder value and we promise to fulfill the same.

20. Management discussion and analysis report

In terms of the Listing Regulations, Management Discussion and Analysis Report is given as Annexure E to this report.

21. Business Responsibility and Sustainability Report

The Business Responsibility Report of the Company for the financial year ended December 31, 2022 as required under Regulation 34(2)(f) of the Listing Regulations forms part of this Report as Annexure F.

22. Secretarial Auditor and Secretarial Audit Report

M/s. Sanjay Grover & Associates, Company Secretaries, was appointed by the Board of Directors of the Company to carry out the Secretarial Audit under the provision of Section 204 of the Act for the financial year ended December 31, 2022. The Secretarial Audit report for financial year ended December 31, 2022 is enclosed as Annexure G.

Further, the Secretarial auditors’ report being self-explanatory, does not call for any further comments by the Board of Directors as there are no qualifications, reservation or adverse remark or disclaimer made in the auditreportforthefinancialyearendedDecember31,2022.

23. Vigil Mechanism/ Whistle Blower Policy

In order to provide a mechanism to employees of the company to disclose any unethical and improper practices or any other alleged wrongful conduct in the Company and to prohibit managerial personnel from taking any adverse action against those employees, the Company has laid down a Vigil Mechanism also known as Whistle Blower Policy to deal with instances of fraud and mismanagement, if any. The details of the Vigil Mechanism or Whistle Blower Policy is explained in the Corporate Governance Report and also posted on the website of the Company.

24. Criteria for selection of candidates for Membership on the Board of Directors and the Remuneration Policy

As per the provisions of Section 178 of the Act and other relevant provisions and on the recommendation of the Nomination and Remuneration Committee, the Board has framed a criteria for selection of Directors, a policy for remuneration of Directors, Key Managerial Personnel, Senior Management Personnel and other employees. The Criteria for selection of candidates for Membership on the Board of Directors and the remuneration policy are stated in the Corporate Governance Report.

25. Meetings of the Board

The Board of the Company and its Committees meet at regular intervals to discuss, decide and supervise the various business policies, business strategy, Company’s performance and other statutory matters. During the year under review, the Board has met eight times. The details of the meeting of the Board and its Committees are given in the Corporate Governance Report. The intervening gap between two Board Meetings did not exceed 120 days.

26. Committees of the Board

The Board of Company has constituted the following Committees to focus on specific areas and take informed decisions in the best interests of the Company within authority delegated to each of the Committees:

(a) Audit Committee

(b) Nomination and Remuneration Committee (c) Stakeholders Relationship Committee (d) Corporate Social Responsibility Committee (e) Risk Management Committee (f) Compensation Committee

The details of composition of the said Committee(s), their terms of reference, meetings held and attendance of the Committee members during the financial year 2022 are provided in the Corporate Governance Report.

27. Board Evaluation

Pursuant to the provisions of the Act and the Listing Regulations, the Board has carried out an annual performance evaluation of its own performance, its committees and the individual directors. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

28. Particulars of Loans, Guarantees or investments

During the year under review, the Company has not given any loan, Guarantee or made any investment which falls under Section 186 of the Companies Act, 2013. Further details of loan, guarantees and investments are provided in the notes to accounts of the financial statements.

29. Related Party Disclosure

All the related party transactions entered during the year were in the ordinary course of business and on arm’s length basis and in compliance with the applicable provisions of the Act and Listing Regulations. There are no materially significant related party transactions made by the Company with its Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict of interest with the Company at large. All the related party transactions are presented to the Audit Committee and the Board, as required. Omnibus approval is obtained for the transactions which are repetitive in nature.

A statement of all related party transactions is presented before the Audit Committee on quarterly basis, specifying the terms & conditions of the transactions. The policy on Related Party Transactions, as approved by the Board is uploaded on the Company’s website at the web link as mentioned in the Corporate Governance Report. Details of particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Act in form AOC-2 has been enclosed herewith as Annexure H.

30. Risk Management

In view of growing level of operations of the Company and in terms of the Listing Regulations, the Board of Directors of the Company constituted the Risk Management Committee to identify elements of risk in different areas of operations, comprising of the members of the Board of Directors of the Company.

The Company has developed and implemented a comprehensive Risk Management Policy including Cyber security for identification, assessment and monitoring of key risks that could negatively impact the Company’s goals and objectives. This policy is periodically reviewed and enhanced under the oversight of the Risk Management Committee of the Board.

31. Annual Return

The Annual Return of the Company as on December 31, 2022 in Form MGT - 7 in accordance with Section 92(3) of the Act read with the Companies (Management and Administration) Rules, 2014, is available on the website of the Company at https://www.rsystems.com/investors-info/ annual-reports/.

32. Corporate Social Responsibility

In compliance with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has constituted a Corporate Social Responsibility Committee (‘CSR Committee’). During the year under review, there was no change in the composition of the CSR Committee.

The detailed terms of reference of the CSR Committee has been provided in the Corporate Governance Report. In pursuit of the responsibilities entrusted to the CSR Committee, a policy on Corporate Social Responsibility has been prepared and adopted by the Board which is available at the website of the Company at following link: https://www.rsystems.com/investors-info/ corporate-governance/.

Annual Report on CSR activities of the Company in format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014 is enclosed as Annexure I and forms part of this report.

33. Dividend Distribution Policy

The Board of Directors of the Company had approved the dividend distribution policy in line with Regulation 43A of the Listing Regulations. The Policy broadly specify the external and internal factors including financial parameters that shall be considered while declaring dividend and the circumstances under which the shareholders of the Company may or may not expect dividend and how the retained earnings shall be utilized, etc. The Dividend Distribution policy is available on the Company’s website at https://www.rsystems.com/wp-content/uploads/2021/05/ Dividend-Distribution-Policy.pdf.

34. Internal Control System and Internal Financial Controls

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Internal Auditors and the management monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Audit observations of Internal Auditors and corrective actions thereon are presented to the Audit Committee. To maintain its objectivity and independence, the Internal Auditor reports to the Audit

Committee. The Board of your Company has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively.

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, the statutory auditors of the Company, has audited the financial statements for the financial year ended December 31, 2022 and has issued unmodified opinion on theadequacyandoperatingeffectivenessoftheCompany’s internal financial controls over financial reporting.

35. Other Disclosures

During the financial year under review:

• the Company has complied with the applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to ‘Meetings of the Board of Directors’ and ‘General Meetings’, respectively.

• the Company does not have any stock option plan in force.

• the Company has neither invited nor accepted any deposits from the public within the purview of the Act and the Rules made thereunder, and accordingly no amount on account of principal or interest on public deposits was outstanding as on December 31, 2022.

• the Company has not issued shares with differential voting rights and sweat equity shares.

• no disclosure is required under Section 67 (3) (c) of the Act in respect of voting rights not exercised directly by employees of the Company, as the provisions of the said section are not applicable. • the Company is not required to maintain Cost records under Section 148(1) of the Act.

• no significant or material orders were passed by the regulators or courts or tribunals which could impact the going concern status of the Company and its future operations.

• no material changes and commitments have occurred after the close of the year till the date of this report which may affect the financial position of the Company except as mentioned in this report elsewhere.

• details of unclaimed dividends and equity shares transferred to the Investor Education and Protection Fund Authority during the year 2022 have been provided as part of the Corporate Governance report.

36. Acknowledgments

Your directors once again take this opportunity to thank the employees, investors, clients, vendors, banks,

business associates, regulatory authorities including

Stock Exchanges, Software Technology Park of India, the

Central Government, State Government of Delhi, Uttar

Pradesh, Tamil Nadu for the business support, valuable

assistance and co-operation continuously extended to

R Systems. Your directors gratefully acknowledge the

trust and confidence and look forward for their continued

support in the future.

Disclosures pursuant to Section 197(12) of the Companies Act, 2013 and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

A. The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year:

Sr. No.	Name of the Director	Category	Ratio of the remuneration to the median remuneration of the employees
1.	Dr. Satinder Singh Rekhi	Promoter & Executive Director	40.27
2.	Lt. Gen. Baldev Singh (Retd.)	Executive Director	9.63
3.	Mr. Avirag Jain	Executive Director	10.00
4.	Mrs. Ruchica Gupta	Non-Executive Independent Director	NA
5.	Mr. Kapil Dhameja	Non-Executive Independent Director	NA
6.	Mr. Aditya Wadhwa	Non-Executive Independent Director	NA

B. The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year:

Sr. No.	Name of the Director/CFO/ CEO CS/Manager	Category	% increase in remuneration in the financial year
1.	Dr. Satinder Singh Rekhi	Promoter & Executive Director	37.82%
2.	Lt. Gen. Baldev Singh (Retd.)	Executive Director	38.15%
3.	Mr. Avirag Jain	Executive Director	41.56%
4.	Mrs. Ruchica Gupta	Non-Executive Independent Director	NA
5.	Mr. Kapil Dhameja	Non-Executive Independent Director	NA
6.	Mr. Aditya Wadhwa	Non-Executive Independent Director	NA
7.	Mr. Nand Sardana	Chief Financial Officer	50.57%
8.	Mr. Bhasker Dubey	Company Secretary & Compliance Officer	28.29%

C. Percentage increase in the median remuneration of employees in the financial year:

The percentage increase in the median remuneration of the employees in the financial year was 14.64%.

D. Number of permanent employees on the rolls of company:

Number of permanent employees on the rolls of R Systems International Limited as at December 31, 2022 was 3,260 (on Standalone basis).

E. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

Average increase in remuneration for employees is 10% to 12% (approx.). The average increase in overall managerial remuneration is 39.59%. These increases are a function of the Company’s market competitiveness within its comparator group and reflects the Company’s reward philosophy as well as the result of the benchmarking exercise.

F. Affirmation that the remuneration is as per the remuneration policy of the company:

The Company affirms that the remuneration is as per the remuneration policy of the Company.

32ANNEXURE ‘B’ TO THE DIRECTORS’ REPORT

Information as per 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 for the year ended December 31, 2022

Name of the Top 10 employees and employees drawing a remuneration of 1.02 crore or above per annum or drawing average remuneration of 8.5 lakhs or above per month.*

a. Employed throughout the year

S. No	Name	Designation / nature of duties	Qualification	Age (Years)	Date of Joining	Experience (Years)	Gross Remuneration ()	Previous employment & designation
1	Mandeep Singh Sodhi$	Chief Operating Officer - R Systems USA Operations	Bachelors degree in Electronics Engineering from Marathwada University and MBA from University of California, Davis	55	May 14, 1993	30	85,283,103%	Sark Synertek Senior Marketing Engineer
2	Dr. Satinder Singh Rekhi	Managing Director & Chief Executive Officer	Bachelor of Technology from IIT, Kharagpur; MBA California State University, Sacramento; Senior Management programs from University of Berkeley and Harvard Business School	72	May 14, 1993	40	58,061,967%	Digital Information Systems Corporation Senior Management Personnel
3	Ramneet Singh Rekhi^	President - R Systems	MBA in Finance & Strategy from Carnegie Mellon University, Tepper School of business, and Masters of Arts in Economics from New York University.	39	July 1, 2020	11	16,919,632%	R Systems, Inc., USA Vice President
4.	Avirag Jain	Director & Chief Technology Officer	Graduate in Science and an MBA in Finance and International business and Postgraduate diploma in Cyber Law	57	September 15, 1997	33	14,409,928	Modi Olivetti/PM – Project Manager
5	Lt. Gen. Baldev Singh (Retd.) &	President & Sr. Executive Director	Masters in Military Sciences- Madras University	82	September 1, 1997	56	13,883,166	Indian Army
6	Nand Sardana	Chief Financial Officer	FCA, FCS, ACMA, CPA-USA and LLB	57	September 13, 2011	33	12,221,979	Gujrat Hydrocarbons & Power SEZ Ltd. - Head Corporate & Company Secretary

b. Employed part of the year

S. No	Name	Designation / nature of duties	Qualification	Age (Years)	Date of Joining	Experience (Years)	Gross Remuneration ()	Previous employment & designation
			Nil

$Mr. Mandeep Singh Sodhi is related to Lt. Gen. Baldev Singh (Retd.), President & Sr. Executive Director of the Company.

^Mr. Ramneet Singh Rekhi is related to Dr. Satinder Singh Rekhi, Managing Director & Chief Executive Officer.

&Lt. Gen. Baldev Singh (Retd.) is related to Dr. Satinder Singh Rekhi, Managing Director & Chief Executive Officer of the Company.

* Particulars of employees posted and working outside India, not being directors or their relatives, drawing more than Rupees One Crore and Two Lakh per annum or Rupees Eight Lakh and Fifty Thousand per month, as the case may be, have not been included in the above statement. Any shareholder interested in obtaining full statement may write to the Company Secretary.

%Employed at USA Branch of the Company, therefore, the remuneration in USD has been converted into INR using USD / INR exchange rates.

Notes:

1.None of the employee owns more than 2% of the outstanding shares of the Company as on December 31, 2022 except Dr. Satinder Singh Rekhi, Managing Director & Chief Executive Officer of the Company, who holds 7,403,456 equity shares in the Company being 6.26% of the total paid- up equity share capital of the Company in his own name and 11,702,623 equity shares being 9.89% of the total paid- up equity share capital of the Company jointly with Mrs. Harpreet Rekhi (as a Trustee of The Satinder and Harpreet Rekhi Family Trust) and Mr. Ramneet Singh Rekhi, President- Digital of the Company, who holds 16,236,331 equity shares in the Company being 13.72% of the total paid- up equity share capital of the Company.

2.Nature of employment is contractual in all the above cases.