R Systems International Ltd Management Discussions.

Overview

The consolidated financial statements of the Group have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016, as applicable.The management accepts responsibility for the integrity and objectivity oft hese financial statements, as well as for various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, so that the financial statements reflect in a true and fair manner the form and substance of transactions, and reasonably present the state of affairs, profits and cash flows for the year.

A. Industry Structure and Developments

The pace of technology disruption has reached new levels in 2018. Society, in general, and industry and government, in particular, are actively embracing digital technologies.

Cutting edge technologies such as artificial intelligence (Al), Internet of things (loT), machine learning (ML), big data analytics and robotic process automation (RPA) are providing newer opportunities like developing new products and service lines, improving efficiency, productivity, and competence levels. As per IDC Spending guide, worldwide Spending on Digital Transformation (DX) will be nearly $2 Trillion in 2022 as organizations commit to DX.

B. Company Overview

R Systems International Limited (the Company) and its subsidiaries (collectively referred to as"R Systems") is a global technology, Al/analytics services and knowledge services leader. The parent Company is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956, with its Registered Office at New Delhi and has following subsidiaries:

Name of subsidiary Year of incorporation Location Subsidiary since Holding
R Systems (Singapore) Pte Limited # 1997 Singapore September 19,2000 100%
R Systems, Inc. 1993 USA January 2, 2001 100%
R Systems Technologies Limited 1996 USA April 1,2002 100%
ECnet Limited* # 1996 Singapore January 8, 2004 99.75%
Computaris International Limited # 2006 UK January 26, 2011 100%
RSYSTechnologies Ltd. 2012 Canada October 29, 2012 100%

The shareholding by the Company and R Systems (Singapore) Pte Limited is 69.37% and 30.38%, respectively.

 # the aforesaid subsidiary have following subsidiary:

(a) ECnet Limited, Singapore, has the following wholly-owned subsidiaries:

Name Holding Country of incorporation
ECnet (M) Sdn. Bhd. 100% Malaysia
ECnet Systems (Thailand) Co. Ltd. 100% Thailand
ECnet (Shanghai) Co. Ltd. 100% Peoples Republic of China
ECnet (Hong Kong) Ltd. 100% Hong Kong
ECnet, Inc. (liquidated on January 28, 2019) 100% USA
ECnet Kabushiki Kaisha 100% Japan

(b) Computaris International Limited, UK, has the following wholly-owned subsidiaries:

Name Holding Country of incorporation
Computaris Romania SRL 100% Romania
Computaris Polska sp z.o.o. 100% Poland
Computaris USA Inc. (liquidated on October 22, 2018) 100% USA
ICS Computaris International Sri 100% Moldova
Computaris Malaysia Sdn. Bhd. 100% Malaysia
Computaris Philippines Pte Ltd. Inc. 100% Philippines
Computaris Suisse Sari (Incorporated on April 27, 2018) 100% Switzerland

(c) IBIZ Consulting Pte. Ltd., Singapore (formerly known as IBIZCS Group Pte Limited, Singapore), is a wholly- owned subsidiary of R Systems (Singapore) Pte Limited, Singapore w.e.f. April 30, 2015 and has following wholly owned subsidiaries:

Name Holding Country of incorporation
IBIZ Consulting Services Pte Ltd 100% Singapore
IBIZ Consulting Services Sdn. Bhd. 100% Malaysia
PT. IBIZCS Indonesia 100% Indonesia
IBIZ Consultancy Services India Private Limited 100% India
IBIZ Consulting Service Limited (IBIZ HK) 100% Flong Kong
IBIZ Consulting Service Shanghai Co., Ltd 100% by IBIZ HK Peoples Republic of China

(d) Subsequent to the year-end, R Systems Inc. has acquired 100% interest in Innovizant LLC.

C. Opportunities and Threats

IDC predicts that, by 2020, 30% of G2000 companies will have allocated capital budget equal to at least 10% of revenue to fuel their digital strategies. This commitment to funding digital transformation will continue to drive spending well into the next decade.

R Systems has transformed itself from a product engineering company to a niche digital enterprise to navigate its customers in their successful digital transformation. Further, the recent acquisition of Innovizant LLC will strengthen our offering and competencies in advanced analytics, data engineering, and digital connected systems. Digital will continue to fuel R Systems growth in coming years.

Every opportunity comes up with inherent risk and challenges, however, over the years, R Systems has learnt to reckon with as well as address such risks and challenges including threats from competitors including their disruptive tactics, new technologies, intensifying demand for global talent, retention of employees and stringent governing norms regarding restrictions on outsourcing services. At R Systems, these threat and uncertainties are managed proactively through our risk mitigation processes and strategies.

D. Segment-wise and Product-wise Performance

Detailed information about segment-wise and product-wise performance has been given in the Consolidated Financial Statements and Standalone Financial Statements.

E. Performance and Outlook

R Systems reported consolidated revenue of Rs. 6,998.89 mn during the year 2018 as against revenue of Rs. 5,926.38 mn for the year 2017.The revenuegrew by 18.10%duringtheyear2018.

Consolidated profit after tax during the year 2018 was Rs. 510.45 mn as against net profit for year 2017 of Rs. 225.34 mn.

The basic earnings per share (based on consolidated financial statement) during the year 2018 was Rs. 4.14 per share as against Rs. 1.83 per share in 2017 of paid-up value of Re. 1 each.

R Systems maintainsa strong financial position with shareholder funds of Rs. 3,229.03 mn. and cash and bank balance including bank deposits and liquid funds of Rs. 1,998.41 mn as of December 31, 2018 to invest for future growth of business.

F. Risk and Concerns

At R Systems, risk management is a dynamic process with an attempt to constantly identify all the emerging risks and propose solutions to manage these. This is further explained in detail in Risk Management Report.

G. Internal Control Systems and Their Adequacy

Internal control systems are a set of policies, processes and procedures put in place to help achieve the strategic objectives of an organization. The Company has an Internal Control System commensurate with the size, scale and complexity of its operations. This has been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance of corporate policies.

The CEO/CFO certification provided in this report places responsibility on the CEO and CFO to continuously ensure adequacy of our internal control systems and procedures.

Deloitte Haskins & Sells LLP, the statutory auditors of the Company, have audited the financial statements included in this annual report and have issued a unmodified opinion on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting.

H. Material Development in Human Resources / Industrial Relations Front, including Number of People Employed

Our employees are most precious assets and we value their commitment in building R Systems. In the IT and ITES industry attracting, developing, deploying and retaining talent is critical. R Systems has also defined and implemented a People Management Initiative which is in line with industry best practicesand People CMM. It effectively manages the employee life cycle so that the individuals are committed, have pride and show pro-activeness on the job.

R Systems concluded year 2018 with 2,753 associates including 374 sales and support associates.

I. Discussion on financial performance with respect to operational performance.

Financial Position as at December 31,2018 1. Property, plant and equipment (PPE) and Intangible Assets

PPE includes land, building, lease hold improvement computer hardware, furniture & fixture, vehicle, office and electrical equipment etc., Intangible assets covering Goodwill on consolidation, computer software, non-compete and customer contracts.

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Property, plant and equipment (net) 306.91 300.38 248.27 258.45
Capital work in progress 16.18 0.58 15.73 -
Goodwill on Consolidation 89.93 84.05 - -
Other intangible assets (net) 27.64 52.82 1.69 4.44
Total 440.66 437.83 265.69 262.89

Details of additions during the year in Property, plant and equipment (PPE) and Intangible Assets:

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Total addition to gross block- Property, plant and equipment 104.85 104.90 59.40 79.14
Total addition to gross block- Intangible assets 6.93 11.36 0.57 6.67

The additions in gross block - Property, plant and equipment were mainly on account of purchases of computer hardware, plant & machinery, office equipments, vehicles, furniture & fittings, leasehold improvements etc.

2. Investment Property

Investment Property represents the land and building in Pune given on rent. Investment Property value as at December 31,2018 was Rs. 23.31 mn as against Rs. 24.78 mn as at December 31, 2017.

3. Non-current Investment

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017 I
Investment in subsidiaries - - 995.36 942.22
Other investment 0.03 0.03 0.03 0.03
8% Redeemable Debentures in Indus Software Technologies Private Limited - 87.55 - 87.55
Total 0.03 87.58 995.39 1,029.80

4. Other non-current financial assets

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Security deposits 31.07 23.91 18.53 10.78
Margin money deposits 52.61 58.56 45.20 44.96
Bank deposits to be matured after 12 months from reporting date 17.37 " " "
Interest accrued on fixed deposits 1.58 1.64 1.57 1.64
Staff advance 0.29 0.68 0.29 0.68
Total 102.92 84.79 65.59 58.06

5. Deferred Tax Liability / Assets (net)

Deferred tax reflects the timing differences between financials and tax books arising mainly from provision for gratuity, compensated absence, doubtful debts and advances (results into deferred tax assets) and differences in book base and tax base of PPE (results into deferred tax liability).

Deferred tax assets and deferred tax liabilities across various tax jurisdictions cannot be offset against each other therefore has been presented separately.

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Deferred Tax Assets (net) 67.46 58.51 56.90 58.42
Deferred Tax Liability (net) 0.25 0.26 - -

6. Income tax assets / Liability

Income tax assets represent excess of tax paid over liability. It has been classified as non-current tax assets in financial statement. Income tax liability represents excess of tax liability over advance tax. It has been classified as current tax liability in financial statement as the Company is required to settle the same within 12 month from reporting date.

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Income tax assets (net) 56.95 39.99 24.54 22.51
Income tax liability (net) 52.01 47.40 18.35 36.19

Income tax assets / liabilities across various tax jurisdictions cannot be offset against each other therefore has been presented separately. 7. Other non-current assets

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Capital advances 40.64 0.03 40.64 0.03
Prepaid expenses 9.46 12.52 7.32 12.41
Total 50.10 12.55 47.96 12.44

Increase represents advance given to vendor for procurement of capital assets for SEZ Unit expansion.

8. Current Investment

(Rs. in million)

Particulars 2018 2017
Investment in Liquid Mutual Fund 199.50 49.31
8% Redeemable Debentures in Indus Software Technologies Private Limited - 87.57
Total 199.50 136.88

9. Trade receivables

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Trade receivables (gross) 1,417.30 1,253.96 639.32 575.96
Less: Allowance for doubtful debts (expected credit loss allowance) 51.85 46.32 18.19 6.77
Trade receivables (net) 1,365.45 1,207.64 621.13 569.19

10. Cash and Rank Balance

Cash and cash equivalents comprises of cash at bank, cash in hand and short term deposits with an original maturity period of three months or less.

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Cash and cash equivalents
Cash on hand 1.15 0.75 0.45 0.12
Balances with scheduled banks 228.75 334.05 223.95 328.69
Balances with other banks 611.27 594.22 75.79 19.87
Cash and cash equivalents (A) 841.17 929.02 300.19 348.68
Other bank balances
Deposit with original maturity of more than 3 months but less than 12 months 515.75 579.18 172.10 389.21
Balances in unclaimed dividend account# 2.95 2.43 2.95 2.43
Other bank balances (B) 518.70 581.61 175.05 391.64
Total Cash and Bank Balance (A+B) 1,359.87 1,510.63 475.24 740.32

# the Company can utilise these balances for respective dividend.

For detailed movement in cash and bank balance, please refer the Consolidated and Standalone Cash Flow Statement.

11. Other current financial assets

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Staff advance 6.87 6.42 2.81 2.62
Advance to related parties - - 1.04 10.48
Unbilled revenue 205.77 149.50 110.10 48.06
Securities deposit 1.68 2.22 0.68 2.00
Bank deposits with original maturity of more than 12 months 369.06 8.26 352.10 8.26
Mark-to-market gain on derivative instruments 22.59 16.33 22.59 16.33
Interest accrued 7.88 8.59 5.02 8.27
Other 4.47 3.29 0.51 0.31
Total 618.32 194.61 494.85 96.33

Increase in bankdeposits represents cash generated from operations which was invested in term deposit based on treasury management.

Unbilled revenue constitutes amounts not billed to customers at year end which is expected to be billed in due course in accordance with the contract with the respective customers.

12. Other current assets

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Balances with indirect tax authorities 24.62 18.39 24.62 18.60
VAT recoverable 4.52 12.91 - -
Prepaid expenses 101.82 82.17 62.74 51.44
Advance to vendors 7.21 1.03 0.43 0.17
Tour and travel advance 11.93 5.32 11.93 5.30
Total 150.10 119.82 99.72 75.51

13. Share Capital

(Rs. in million)

Particulars

As at December 31,

2018 2017
Authorised share capital 206.00 200.00
Issued, subscribed and paid up capital 123.95 123.87
Add: Shares Issued under ESOP Scheme, 2007 0.04 0.08
123.99 123.95
Less: advance to R Systems employee welfare trust 0.74 0.74
Total Share Capital 123.25 123.21

Pursuant to scheme of amalgamation, the Authorised Capital of GM Solutions Private Limited has been merged into the authorised capital of R Systems International Limited.

During the year ended December 31, 2018, the Company has issued 37,500 (previous year 82,500) equity shares fully paid-up equity shares of Re. 1 each under ESOP Scheme, 2007.

Detailed information about the movements in ESOP plan has been given in Note no. 11 of notes to the Consolidated Financial Statements.

14. Other Equity

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Reserve and Surplus
Securities premium account 278.24 275.95 278.24 275.95
Stock options outstanding 2.92 3.39 2.92 3.39
General Reserve 158.73 158.73 158.73 158.73
Capital Reserve 0.03 0.03 - -
Retained earnings 2,432.21 2,007.25 2,124.85 1,900.20
Other Comprehensive Income
Re-measurement of defined benefit plans 7.54 8.04 7.54 8.04
Foreign currency translation reserve 226.11 132.06 - -
Total Other Equity 3,105.78 2,585.45 2,572.28 2,346.31

During the year ended December 31, 2018, an interim dividend of Re. 0.60 per equity share of Re. 1 each has been paid.

15. Non-controlling Interest

During the year, there is no change in the non-controlling interest in the Consolidated Financial Statement.

16. Borrowings (non-current portion)

(Rs. in million)

Particulars 2018 2017
Term loan for Motor Vehicles 9.36 9.58
Financial Lease Obligation 10.61 10.78
Less:
Current maturities of term loan for motor vehicles 3.86 4.33
Current maturities of financial lease obligation 0.20 0.18
Total 15.91 15.85

17. Other non-current financial liabilities

Other non-current financial liabilities include security deposit payable after 12 months from reporting date. Security Deposit amounts to Rs. 2.96 mn as at December 31, 2018 as against Rs. 2.23 mn as at December 31,2017.

18. Provision (Long term)

Long-term provisions represent the provision towards the gratuity liability due after 12 months from the reporting date based on actuarial valuation. The provision amounts to Rs. 109.60 mn as at December 31, 2018 as against Rs. 91.18 mn as at December 31, 2017.

19. Other non-current liabilities

Other non-current liabilities consist of deferred grant from government which will be recognised 12 months from the reporting date based on grant period.The deferred grant from government amounts to Rs.0.04 mn as at December 31,2018 as against Rs.0.29 mn as at December 31, 2017.

20. Trade Payables

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Trade Payable 270.02 340.05 46.73 43.32

21. Other current financial liabilities

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Current maturities of term loans for motor vehicles 3.86 4.33 3.86 4.33
Current maturity of Finance lease obligation 0.20 0.18 0.20 0.18
Payable to subsidiary company 16.36 14.17
Security deposits received 9.48 9.63 9.48 9.63
Investor education and protection fund (not due) - Unclaimed dividend 2.95 2.43 2.95 2.43
Employee benefits payable 167.03 119.10 112.15 102.51
Capital creditors 2.08 0.27 2.08 0.27
Deferred payment compensation for business acquisition 22.29 45.47 ~ "
Other financial liabilities 4.92 3.85 3.41 3.37
Total 212.81 185.26 150.49 136.89

22. Provision (Short term)

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Provision for employee benefits
-Gratuity 4.80 3.59 4.80 3.59
- Compensated absence 137.83 135.98 80.89 82.64
Total 142.63 139.57 85.69 86.23

23. Other current liabilities

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Statutory dues payable
Tax deducted at source / Wit holding tax payable 22.11 15.96 14.22 10.31
PF/401 K/other payables 37.07 25.72 14.20 11.44
GST / Service tax / VAT payable 22.53 20.34 3.35 2.20
Others 0.23 0.20 0.23 0.20
Unearned revenues 316.64 321.18 212.56 181.35
Rent received in advance - 0.22 - 0.22
Deferred grant from Government 0.83 1.24 - -
Total 399.41 384.86 244.56 205.72

25. Liquidity

The consolidated cash and cash equivalent as at December 31, 2018 were Rs. 841.17 mn as against Rs. 929.02 mn as on December 31, 2017.

Net cash generated from operating activities were Rs. 311.22 mn for the year ended December 31,2018 compared to Rs. 365.24 mn for the year ended December 31, 2017.

Cash used in investing activities were Rs. 350.45 mn for the year ended December 31,2018 comprised of Investment in long term deposit with bank Rs. 293.84 mn (net), purchase of fixed assets of Rs. 165.87 mn and Investment in liquid mutual fund Rs. 140 mn as offset by proceeds from redemption of debenture Rs. 175.12 mn, interest income Rs. 64.62 mn, rental income from investment property Rs. 6.56 mn and sale of fixed assets Rs. 2.96 mn..

Cash used in financing activities were Rs. 87.86 mn for the year ended December 31, 2018 mainly consist of Rs. 85.49 mn on account of payment of dividend (including CDT).

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

Analysis and Discussions of Operating Performance for the Year Ended December 31,2018

The following section discusses in detail the composition of different items in the Consolidated and Standalone Statement of Profit and Loss Account.

Consolidated Statement of Profit and Loss for the year:

(Rs. in million)

Particulars 2018 % of Total Income 2017 % of Total Income Change %
Income
Revenue from operations 6,998.89 97.32 5,926.38 97.34 18.10
Other income 192.49 2.68 161.87 2.66 18.92
Total income 7,191.38 100.00 6,088.25 100.00 18.12
Expenses
Employee benefits expense 4,743.85 65.97 4,173.15 68.54 13.68
Finance costs 2.65 0.04 3.98 0.07 (33.42)
Depreciation and amortisation expense 135.48 1.88 134.80 2.21 0.50
Other expenses 1,682.58 23.40 1,422.88 23.37 18.25
Total expenses 6,564.56 91.28 5,734.81 94.19 14.47
Profit before tax 626.82 8.72 353.44 5.81 77.35
Tax expense 116.37 1.62 128.10 2.10 (9.16)
Net profit after tax 510.45 7.10 225.34 3.70 126.52
Other comprehensive income / (loss) 93.55 1.30 (6.40) (0.11)
Total comprehensive income 604.00 8.40 218.94 3.60 175.87

Standalone Statement of Profit and Loss for the year:

(Rs. in million)

Particulars 2018 % of Total Income 2017 % of Total Income Change %
Income
Revenue from operations 3,172.13 97.32 2,637.53 95.07 20.27
Other income 87.28 2.68 136.76 4.93 (36.18)
Total income 3,259.41 100.00 2,774.29 100.00 17.49
Expenses
Employee benefits expense 2,169.18 66.55 1,868.36 67.35 16.10
Finance costs 2.32 0.07 3.65 0.13 (36.44)
Depreciation and amortisation expense 73.01 2.24 73.74 2.66 (0.99)
Other expenses 609.46 18.70 486.05 17.52 25.39
Total expenses 2,853.97 87.56 2,431.80 87.65 17.36
Profit before tax 405.44 12.44 342.49 12.35 18.38
Tax expense 95.30 2.92 114.41 4.12 (16.70)
Net profit after tax 310.14 9.52 228.08 8.22 35.98
Other comprehensive income / (loss) (0.50) (0.02) 8.04 0.29
Total comprehensive income 309.64 9.50 236.12 8.51 31.14

1. Revenue

1.1 Revenue from Operations

R Systems derives revenue primarily from Information Technology services and Business Process Outsourcing services. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

1.1.1 Based on Consolidated Financial Statement

(Rs. in million)

Particulars Year ended December 31, 2018 % Year ended December 31, 2017 % change %
Information technology services 6,286.48 89.82 5,461.70 92.16 15.10
Business process outsourcing services 712.41 10.18 464.68 7.84 53.31
Total 6,998.89 100.00 5,926.38 100.00 18.10

1.1.2 Based on Standalone Financial Statement

(Rs. in million)

Particulars Year ended December 31, 2018 % Year ended December 31, 2017 % change %
Information technology services 2,436.54 76.81 2,153.30 81.64 13.15
Business process outsourcing services 735.59 23.19 484.23 18.36 51.91
Total 3,172.13 100.00 2,637.53 100.00 20.27

1.1.3 Consolidated Revenue by Geography

R Systems earns income from five principal geographic territories, namely the United States of America, Europe, South East Asian countries ("SEAC"), India and others. A significant proportion ofthe revenues were derived from clients located in the United States of America. The geographic break-down is given below:

1.1.4 Consolidated Revenue by Client Concentration

The breakdown of R Systems consolidated revenue on the basis of client concentration for the year ended December 31, 2018 and 2017 is as follows:

1.2 Other Income

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Interest income 64.06 61.10 57.81 60.52
Rental income from investment property 6.78 6.85 6.78 6.85
Foreign exchange fluctuation (net) 9.38 56.71 11.83 64.82
Profit on sale / discarding of PPE (net) 0.67 0.36 0.01 0.32
Liability no longer required written back 64.77 7.69 - 2.53
Fair value adjustment on deferred payment compensation for business acquisition 26.10 6.37 - -
Miscellaneous income 10.53 21.48 0.65 0.41
Net gain arising on financial assets measured at FVTPL 10.20 1.31 10.20 1.31
Total other income 192.49 161.87 87.28 136.76

2. Expenditures

2.1 Personnel Expenses

Personnel expenses primarily consist of salaries, bonus, commissions, provision for compensated absence, gratuity benefits, contribution towards provident and other funds, employee share based payments expense and staff welfare expenses.

2.1.1 Based on Consolidated Financial Statement:

(Rs. in million)

Particulars 2018 % of Total Income 2017 % of Total Income Change %
Salaries, wages and bonus 4,285.26 59.59 3,735.30 61.35 14.72
Gratuity expenses 36.50 0.51 24.91 0.41 46.53
Contribution to provident and other funds 227.63 3.17 252.48 4.15 (9.84)
Employees share based payments expense 1.40 0.02 2.64 0.04 (47.01)
Staff welfare expenses 193.06 2.68 157.82 2.59 22.33
Total 4,743.85 65.97 4,173.15 68.54 13.68

2.1.2 Based on Standalone Financial Statement:

(Rs. in million)

Particulars 2018 % of Total Income 2017 % of Total Income Change %
Salaries, wages and bonus 1,991.49 61.10 1,724.27 62.15 15.50
Gratuity expenses 36.50 1.12 24.91 0.90 46.53
Contribution to provident and other funds 76.72 2.35 67.76 2.44 13.22
Employees share based payments expense 1.40 0.04 2.64 0.10 (46.97)
Staff welfare expenses 63.07 1.94 48.78 1.76 29.29
Total 2,169.18 66.55 1,868.36 67.35 16.10

2.2 Finance cost

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Interest expense on borrowings 2.40 2.73 2.07 2.40
Interest expense on financial instruments measured at amortised cost 0.25 0.46 0.25 0.46
Interest under income tax - 0.79 - 0.79
Total 2.65 3.98 2.32 3.65

2.3 Depreciation and Amortisation Expense

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Depreciation and Amortisation (Rs. in Mn) 135.48 134.80 73.01 73.74
% of Total income 1.88 2.21 2.24 2.66

2.4 Operational and other expenses

Operational and other expenses includes power and fuel, expenses on traveling and conveyance, rent of premises, equipment rental, commission, communication, legal and professional expenses including sub-contractors costs, cost of third party items, audit fees, provision for doubtful debts (net), advance written off, contributions towards corporate social responsibility and other miscellaneous items.

2.4.1 Based on Consolidated Financial Statement:

(Rs. in million)

Particulars 2018 % of Total Income 2017 % of Total Income Change %
Power and fuel 46.86 0.65 44.83 0.74 4.53
Rent - premises 120.82 1.68 108.60 1.78 11.25
Repair and maintenance 123.52 1.72 101.63 1.67 21.54
Commission 9.46 0.13 7.13 0.12 32.68
Travelling and conveyance 294.55 4.10 235.82 3.87 24.90
Communication costs 79.10 1.10 74.85 1.23 5.68
Legal and professional fees 664.53 9.24 530.58 8.71 25.25
Cost of third party items 136.24 1.89 156.66 2.57 (13.03)
Auditors remuneration 5.15 0.07 3.70 0.06 39.19
Provision for doubtful debts (net) 24.75 0.34 9.64 0.16 156.74
Advances written off 13.45 0.19 - - 100.00
Contribution towards corporate social responsibility 3.96 0.06 2.46 0.04 60.98
Miscellaneous expenses 160.19 2.23 146.98 2.41 8.99
Total 1,682.58 23.40 1,422.88 23.37 18.25

2.4.2. Based on Standalone Financial Statement:

(Rs. in million)

Particulars 2018 % of Total Income 2017 % of Total Income Change %
Power and fuel 40.53 1.24 40.80 1.47 (0.66)
Rent - premises 33.06 1.01 31.94 1.15 3.51
Repair and maintenance 101.09 3.10 81.19 2.93 24.51
Commission 26.06 0.80 14.19 0.51 83.65
Travelling and conveyance 180.83 5.55 140.26 5.06 28.92
Communication costs 59.24 1.82 56.91 2.05 4.09
Legal and professional fees 78.42 2.41 54.64 1.97 43.52
Auditors remuneration 5.15 0.16 3.70 0.13 39.19
Provision for doubtful debts (net) 15.70 0.48 6.69 0.24 134.68
Contribution towards corporate social responsibility 3.96 0.12 2.46 0.09 60.98
Miscellaneous expenses 65.42 2.01 53.27 1.92 22.81
Total 609.46 18.70 486.05 17.52 25.39

2.5 Tax expense

Tax expense comprises current tax and deferred tax.

(Rs. in million)

Particulars

Consolidated

Standalone

2018 2017 2018 2017
Profit Before Tax 626.82 353.44 405.44 342.49
Current tax 124.22 149.89 99.35 133.41
MAT credit entitlement - (5.84) - (5.84)
Deferred tax charge / (credit) (7.85) (15.95) (4.05) (13.16)
Total Tax Expense 116.37 128.10 95.30 114.41
Effective Tax Rate (%) 18.57 36.24 23.51 33.41

Decrease in effective tax rate is due to increase in profit from SEZ unit where the Company enjoys tax holiday period along with higher contribution from USA & Singapore entities where the respective subsidiaries has past losses.

J. Key financial ratios

Ratio

Consolidated

Standalone

2018 2017 Variance 2018 2017 Variance
Debtors Turnover (in days) 67 68 -1.3% 68 70 -1.9%
Inventory Turnover NA NA - NA NA -
Interest Cove rage @ 164.90 49.13 235.6% 138.14 57.36 140.8%
Current Ratio 3.43 2.89 18.7% 3.46 3.18 8.8%
Debt Equity Ratio@ 0.00 0.00 -18.0% 0.00 0.00 -10.5%
Operating Profit Margin # 6.2% 3.3% 89.2% 10.1% 7.9% 27.3%
Net Profit Margin # 7.3% 3.8% 91.8% 9.8% 8.6% 13.1%
Return on Net worth# 15.8% 8.3% 90.0% 11.5% 9.2% 24.6%

@ Interest coverage ratio and debt equity ratio does not have any impact on the Company as the overall debt is quite minimal.

# Increase in operating profit, net profit margins and return on net worth is mainly on account of increase in revenue, efficiency in operations as coupled with rupee depreciation.

Note:

Debtors Turnover = AverageTrade Receivables / Billed Revenue*360;

Interest Coverage = Operating profit / Finance cost

Operating profit = Profit before tax (PBT) less Finance cost and other income

Current Ratio = Current Assets / Current Liabilities

Debt Equity Ratio = Long term Borrowings / Net worth

Operating Profit Margin = Operating profit / Revenue

Net Profit Margin = Profit aftertax (PAT) / Revenue

Return on Net worth = Profit after tax (PAT) / Net Worth.

On behalf of the Board
For R Systems International Limited
Sd/- Sd/-
Satinder Singh Rekhi Lt. Gen. Baldev Singh (Retd.)
(DIN:00006955) (DIN:00006966)
(Managing Director) (President & Senior Executive Director)
Place: Singapore Place :NOIDA(U.P.)
Date: May02,2019 Date: May 02,2019