Tanla Platforms Ltd Management Discussions.

Overview

We are a leading cloud communications provider enabling businesses to communicate with their customers, stakeholders and intended recipients. Our cloud-based platforms provide ease of connectivity to enterprises and aggregators with a plug- and-play approach that shrinks delivery times of their end-user communications and continues to provide quality of services that have enabled us rise into leadership status in the cloud communication segment of telecom business.

Our revenues flow from two main sources - platforms and enterprises.

Our platforms are deployed with all major telecom operators in India providing us access to the entire subscriber base of the operators.

We serve enterprise customers spread across a diverse spectrum of businesses including but not limited to BFSI, social media, e-commerce, government sector and aggregators based on multi-year contracts with an automatic renewal clause, unless specified otherwise. The longevity of the contract represents the depth of the business relationship with the customers and their delight with the level and quality of our services.

We continue to add to the bouquet of our services by strategic organic growth (acquisition of Karix and Gamooga in FY 2019-20) and by launching advanced software platforms based on cutting edge technologies like blockchain and distributed ledger technology.

Revenues

We receive Platform revenues from telecom operators in the form of revenue share measured at fixed value/percentage of the transaction rate applicable to each individual communication processed on their network by our customers.

We receive Enterprise revenues from enterprises for use of our platform at an agreed rate per communication, calculated on monthly basis, for the aggregate number of communications processed in a month.

The record of the number of communications to be billed in our business, is captured by the analytics module of the platform and requires the explicit/implicit acceptance as per the terms of agreement with the customer before a valid invoice can be raised.

Revenue is a function of the complexity and functionality of the communication services availed, is the subject matter of a rate card, and mail confirmations shared with the customer through an authorised representative.

For prepaid services, revenue is recognised for the volume of communications provided over the accounting period with the balance carried over as a deferred revenue in the balance sheet as at the end of the accounting period.

We also generate revenues through sales of our products to marquee customers to augment future business relationships. Product revenue is recognized on delivery and successful acceptance test at customer premises.

The revenues and costs for the previous year are not directly comparable as they do not include enterprise revenues, as acquisition of Karix and Unicel was completed in FY 2020

Cost of Services and Gross Margin

Our cost of services for platforms business consists of hosting charges paid to data centres and bandwidth charges paid to telecom operators.

Cost of services for enterprise business comprise of transaction fees paid to third-party telecommunications providers/ telecom operators.

Gross margin % is the business revenue minus the cost of services expressed as a percentage of the business revenue.

Operating Expenses

Operating expenses include, costs related to network operations, costs to maintain data centres, including co-location fees for the right to install our servers in data centres owned by third parties, related utilities and maintenance costs, personnel costs including share-based compensation expenses and customer care costs.

Our research and development efforts are focused on developing new and innovative products and expanded features for our existing platforms and services. Research and development expenses consist primarily of revenue cost such as personnel costs for employees involved in development projects, including share-based compensation expenses, purchase of software tools, product certification, costs incurred for patents and copyrights, and capital costs such as augmentation of hardware and software for innovations and intended for research and development. We expense research and development costs which are revenue in nature as incurred and capitalise costs of an enduring nature, upto the point the products start generating revenue.

Sales and marketing expenses are one of the largest component of our operating expenses and consist primarily of personnel costs for employees directly associated with our sales and marketing activities including share-based compensation expenses, internet advertising fees, travel expenses, marketing and promotional expenses.

General and administrative expenses comprise of employee costs including share-based compensation expenses, expenses incurred for day-to-day operations of our business such as rents of facilities, power and fuel charges for operating our facilities at various locations, internet and communication costs, and professional service fees.

Earnings Before Interest Tax Depreciation & Amortisation (EBITDA)

EBITDA % is the absolute gross margin minus operating expenses expressed as a percentage of the business revenue.

Depreciation and amortisation expenses comprise of the cost of wear and tear on servers and other tangible assets and equipment, provided over the useful life of the assets in accordance with Ind-AS 16: Property, Plant and Equipment and amortisation of intangible assets over their estimated useful life and impairment costs of goodwill, if any, in accordance with Ind-AS 38: Intangible Assets.

Other Income

Other income represents income generated from non-business transactions such as interest received on fixed deposits placed with banks from surplus funds and margin monies for bank guarantees, gains on investments in liquid mutual funds, interest on income tax refunds on completion of assessments and write back of liabilities no longer required.

Profit Before Tax

PBT % is the absolute Earnings Before Interest Tax Depreciation & Amortisation (EBITDA) plus other income, minus depreciation and amortisation expenses and finance cost expressed as a percentage of the business revenue.

Tax, more clearly, net taxes on income, comprise of current tax, deferred tax and tax credit, if any.

Current tax is calculated at the applicable rate on the taxable income arrived at in accordance with the tax laws of the respective geography.

Deferred taxes arise on account of timing differences in the allowability of deduction of expenses such as depreciation under income tax and companies act. Deferred taxes are measured at the tax rates that are expected to apply to the period when the asset / liability is realized. Deferred Tax assets are recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

Tax credits arise on account of tax provisions which allow for availing a credit of tax paid in a certain accounting period against tax dues of subsequent accounting periods. Tax credits are allowed subject to conditions to be fulfilled and are usually available for finite periods.

Key Business Metrics

In addition to financial measures such as total revenues, gross margin, profit before and after tax, we regularly review a number of key business metrics to evaluate growth trends, measure our performance and make strategic decisions.

For the year ended March 31,2020, majority of our revenues were generated in India. However, we expect the percentage of our revenues derived outside India to grow as we continue to expand internationally.

Results of Operations

The following tables set forth selected consolidated statements of operations data and such data as a percentage of total revenues:

Particulars

FY 2019-20

FY 2018-19

Growth %

INR in Crore % of Revenue INR in Crore % of Revenue
Revenues
Overseas 453.50 23.3% 186.42 18.6% 143
Domestic 1,489.34 76.7% 817.55 81.4% 82
Total Revenue 1,942.84 100.0% 1,003.96 100.0% 94
Direct Expenses
Cost of Services 1,551.72 79.9% 860.66 85.7% 80
Gross Margin 391.12 20.1% 143.30 14.3% 173

Revenues, Cost of Services & Gross Margin

FY20 revenues at INR 1942.8 Cr, grew by 94% from INR 1004.0 Cr in FY19. As explained earlier, while the numbers are not directly comparable, the increase is a combined result of the Karix and Gamooga acquisitions and acquisition of new customers and revenue from additional offerings to our existing customer base. Overseas revenue has shown a significant jump of 143% as Karix has substantial overseas business, which is now handled by Tanla Singapore.

FY20 Cost of services at INR 1551.7 Cr, grew by 80% from INR 860.6 Cr in FY19, a result of higher consolidated business volumes.

FY20 Gross Margin at INR 391.1 Cr, grew by 173% from INR 143.3 Cr in FY19 due to a combination of business growth and better margin realisations due to cost synergies of the consolidated entity.

EBITDA

Particulars (INR in Cr) FY 2020 % of Revenue FY 2019 % of Revenue Increase/ (Decrease) %
Gross Margin 391.1 20.1% 143.3 14.3% 173
Operating Expenses 206.1 10.6% 46.6 4.6% 342
EBITDA 185.0 9.5% 96.7 9.6% 91

The absolute increase in Gross Margin was offset by a substantial increase in operating expenses primarily employee benefits, other expenses and provision for bad debts. While this resulted in EBITDA margins remaining even, EBITDA in absolute terms doubled in line with revenue growth.

The above figure of EBITDA is not adjusted for One-off cost of Rs. 55.3 Cr comprising of employee share based expense of Rs. 41.1 Cr, Acquisition cost of Rs. 7.9 Cr, Marketing cost of Rs. 2.6 Cr and Provision for loss on investment in liquid Funds of Rs. 3.7 Cr

Research & Development Expenses

Particulars (INR in Cr) FY 2020 % of Revenue FY 2019 % of Revenue Increase/ (Decrease) %
R & D Expenses - Capex 30.3 1.6% 5.8 0.6% 426
R & D Expenses - Revenue 0.4 0.0% 0.2 0.0% 71
Total 30.7 1.6% 6.0 0.6% 412

Research and development expenses at INR 30.7 Cr for FY 2020 increased by 412% as compared to INR 6.0 Cr in FY 2019, comprising primarily of Capex increase of INR 24.5 Cr registering a growth over FY 2019 of 426%. We being a platforms- based software company, innovate by new developing new platforms for the cloud communications segment by deploying hardware and software as and when necessary. Trubloq, our homegrown blockchain-based Distributed Ledger Technology platform is a prime example of the level of innovations that we make to stay ahead of the market. These platforms are based on cutting edge technologies that we employ for new offerings both to the existing and proposed clientele.

Selling & Marketing Expenses

Particulars (INR in Cr) FY 2020 % of Revenue FY 2019 % of Revenue Increase/ (Decrease) %
Employee Cost 63.3 3.3% 21.2 2.1% 199
Advertisement and Marketing expenses 5.3 0.3% 1.0 0.1% 441
Travel 6.4 0.3% 2.6 0.3% 144
Total 74.9 3.9% 24.8 2.5% 202

Sales and marketing expenses increased by INR 50.1 Cr, or 202%, during FY 2020 as compared to FY 2019, primarily due to increase in employee cost of INR 42.1 Cr, result of the one-off share-based compensation of INR 29.3 Cr awarded to employees in sales and marketing departments in recognition of their performance and to encourage their continued contribution to organisational goals. Advertising and marketing costs increased by INR 4.3 Cr up by 441% and travelling expenses increased by INR 3.8 Cr, registering a growth of 144% over FY 2020, to support higher volumes of business. The increases in sales and marketing cost is in line with our growth strategy to acquire new customers with a focus on larger customers, and to establish brand recognition to achieve greater penetration into domestic and international enterprise markets.

General & Administration Expenses

Particulars (INR in Cr) FY 2020 % of Revenue FY 2019 % of Revenue Increase/ (Decrease) %
Connectivity & related expenses 8.2 0.4% 2.7 0.1% 203
Provision for bad debts 19.6 1.0% 0.3 0.0% 7388
Other expenses 64.2 3.3% 8.3 0.4% 672
Employee Cost 45.6 2.3% 22.9 2.3% 99
Total 137.6 7.1% 34.2 1.8% 302

Employee Cost

Particulars (INR in Cr) FY 2020 % of Revenue FY 2019 % of Revenue Increase/ (Decrease) %
Salaries, incentives & allowances 40.3 2.1% 15.9 1.6% 153
Employee stock options cost 0.3 0.0% 5.0 0.5% -93
Contributions to provident fund & other funds 2.0 0.1% 1.0 0.1% 110
Staff welfare expenses 3.0 0.2% 1.0 0.1% 206
Total 45.6 2.3% 22.9 2.3% 99

General and administrative expenses in absolute terms increased by INR 22.7 Cr or 99%, during FY 2020 as compared to FY 2019, primarily due to increases in salaries and allowances of INR 24.3 Cr due to the increased headcount postacquisitions, while the ratio of personnel cost to revenues remained even. Professional fees increased to INR 15.9 Cr in FY 2020 against INR 3.6 Cr during FY 2019, costs incurred for acquisition of Karix and Gamooga, comprising professional fees paid to consultants for financial, legal and statutory advice increased by INR 3.5 Cr from INR 3.4 Cr in FY 2019, provision for doubtful debts increased to INR 19.6 Cr in FY 2020 against INR 0.3 Cr in FY 2019. Provision for doubtful debts is made on a conservative basis and is a result of a granular sifting of slow-moving and doubtful accounts aged 120 days and more from invoice date and for FY 2020 stands @ 1.01% of revenue. Slow-moving and doubtful debts are assessed for possibility of recovery, closely followed up at all levels before legal action is initiated, on assessment that the chances of recovery are slim and all other alternatives have been exhausted.

Other expenses also increased by INR 6.3 Cr during FY 2020 as compared to FY 2019, due to one-off costs namely Mobile World Congress (MWC) participation related cost of INR 2.6 Cr and Provision for loss of investment in liquid funds of INR 3.7 Cr. The provision for loss of investment in liquid funds was reversed in Q1 FY 2021 on realisation of principal along with a profit thereon of INR 1.78 Cr on 13th July 2020.

Finance Cost

Particulars (INR in Cr) FY 2020 % of Revenue FY 2019 % of Revenue
Finance Cost 6.4 0.3% 0.3 0.0%

At acquisition in April 2019, Karix carried term loan of INR 59.9 Cr, as part of its long-term liabilities. The term loan was repaid in March 2020 and would not entail interest going forward. Finance cost of INR 6.4 Cr comprised primarily interest on term loan and commission paid for obtaining Bank Guarantees for Government customers.

Depreciation & amortization

Particulars (INR in Cr) FY 2020 % of Revenue FY 2019 % of Revenue Increase/ (Decrease) %
Depreciation & Amortization 377.8 19.4% 73.2 7.3% 416

Depreciation

As per The Telecom Commercial Communications Customer Preference Regulations, 2018 (TCCCPR,2018) that were announced on July 19, 2018, by Telecom Regulatory Authority of India (TRAI), Commercial communication (voice and text) should be provided using block chain technology. This move to new technology and cloudification of services has resulted in the need for re-assessment of useful life of technology assets, leading to additional provision of accelerated depreciation. Management has assessed the net book value of such assets as on March 31, 2019 at INR 305.6 Cr and provided accelerated depreciation on such assets as and when the related platforms were moved to cloud during the financial year FY 2020.

Impairment of Goodwill and Amortisation of Intangible Assets

As per the Share Purchase Agreement (SPA) entered into between Tanla and the shareholders of Karix and its WOS Unicel, Tanla acquired Karix and Unicel for a purchase consideration of INR 236.97 Cr on April 10, 2019. The implied enterprise value of Karix as on that date was arrived at as INR 291.18 Cr after adjusting the purchase consideration paid for cash and bank balance taken over of INR 38.41 Cr, borrowings taken over INR 84.6 Cr and income tax refund received of INR 8.02 Cr (which was paid by Tanla to the sellers of Unicel in accordance with SPA), considering the numbers as at March 31,2019. No significant difference was considered between the balance sheet as at March 31,2020 and as at April 10, 2019.

A Big4 consulting firm was assigned with the task of identifying the Purchase Price Allocation and based on their analysis in line with Ind-AS 103, Business Combinations, the fair value of intangible assets were identified and valued as follows:

Particulars (INR in Cr) Karix Gamooga Total Useful Life in years Impairment / Amortisation Net Carrying value as at March 31,2020
(i) Goodwill 158.4 24.9 183.3 - 48.7 134.6
(ii) Intangible Assets:
Customer Relationships 54.5 7.6 62.1 5 11.5 50.6
Brand 10.2 0.7 10.9 3 3.5 7.4
Technology 4.3 6.9 11.2 5 3.1 8.1
Non-Compete 0.8 4.3 5.1 2 0.6 4.5

For FY20, Intangible assets on acquisition of Karix have been amortised by an amount of INR 16.8 Cr and on acquisition of Gamooga by INR 1.9 Cr.

Management, with the help of an independent consultant, also made an assessment of the impact of COVID-19 on the Companys operations, financial performance and position as at and for the year ended March 31,2020, basis which the Company has reduced the carrying value of investments in subsidiaries by INR 48.73 Cr and consequent impairment of goodwill in the consolidated results. The actual impact of COVID-19 on the Companys financial statements may differ from that estimated as at the date of approval of these financial statements.

Other Income

Particulars (INR in Cr) Mar ‘20 % of Revenue Mar ‘19 % of Revenue Increase/ (Decrease) %
Interest income 9.3 0.5% 2.6 0.3% 265
Gain on liquid funds 1.8 0.1% 7.4 0.7% -76
Miscellaneous income 1.3 0.1% 0.7 0.1% 95
Total 12.4 0.6% 10.6 1.1% 17

Other income increased by 17% primarily due to increase in Interest income of INR 3.24 Cr on Income Tax refunds on completion of assessments for FY 2016-17. This was partially offset by the decrease in Gain on liquid funds by 76%. During FY 2019, funds for Karix and Gamooga acquisitions were carried in the form of liquid funds yielding average returns of 7 to 7.5% per annum. Post the cash payout for acquisition of Karix and Gamooga and to mitigate the credit risk, strategy was changed to investing in Fixed Deposits with a reputed private bank and a nationalised bank as an alternative to liquid funds. These FDs currently yield average annual returns of 2.5 to 3%. Miscellaneous income increased by 95% due to write back of creditor balances of earlier years as the liabilities are no longer required to be met.

Financial Position

Equity and Liabilities comprise the liabilities side of the Balance Sheet.

Equity comprises of Shareholders Funds represented by Share capital and Reserves and Surplus. Tanla has an Authorised Share Capital of INR 20.00 Cr represented by one class of equity shares of INR 1/- each.

Reserves and surplus primarily comprise of securities premium received from allotment of equity shares issued at a premium, retained earnings being accumulated profits or losses carried forward net of dividend, general reserve, capital reserve, unallotted balance of employee stock options, money received against share warrants issued to promoters, and foreign currency translation reserve being the net gain or loss on reinstated of foreign currency assets or liabilities into reporting currency at the currency conversion rates applicable as at the date of the balance sheet.

Liabilities comprise Non-current and Current Liabilities

Non-current Liabilities represent liabilities with maturity or payment date of more than 1 year as on the balance sheet. All other liabilities are Current Liabilities.

Assets side of the Balance sheet comprises

Property, plant and equipment, being the fixed assets used in conducting the business,

Intangible Assets namely customer relationships, brand, technology and non-compete agreements entered into with erstwhile promoters and key management personnel,

Goodwill arising on consolidation of financials of the group,

Other non-current assets namely Earnest Money and Rental Deposits having maturity of more than 1 year, Deferred Tax Assets expected to reverse after 1 year from the balance sheet date, advance tax and tax deducted at source with revenue authorities pending completion of assessments and due after 1 year from the balance sheet date,

Cash and Cash Equivalents being balances held in current accounts with banks and fixed deposits having maturity of 1 year or less, held with banks as on the date of the balance sheet and,

Current Assets being trade receivables, loans and advances, accrued income and, balances with revenue authorities pending assessment and due to be received or adjusted within 1 year from the balance sheet date

Financial Position INR in Cr
Particulars As at March 2020 As at March 2019
Equity and Liabilities
Shareholders funds 701.73 725.54
Borrowings - 59.88
Non-current liabilities 15.31 0.28
Current liabilities 482.64 321.17
Total 1,199.69 1,106.88
Assets
Property, plant and equipment 35.91 349.71
Intangible Assets 95.14 5.76
Goodwill on Consolidation 134.56 -
Other non-current assets 156.66 38.88
Trade receivables 325.77 307.83
Cash and bank balances 200.57 228.79
Current Assets 251.08 175.90
Total 1,199.69 1,106.88

Equity Share Capital

As on March 31,2020, our paid-up share capital was INR 14.59 Cr up from INR 11.56 Cr as of March 31, 2019. During FY20, a total of 3,03,44,872 fully paid-up equity shares of INR 1/- each were allotted as follows :

Banyan Investments Private Ltd - 2,19,99,824 shares on acquisition of Karix and Unicel Promoters of Gamooga - 21,19,688 shares on acquisition of Gamooga Employee Stock Purchase Scheme - 60,00,000 shares to employees of Karix Employee Stock Option Scheme - 2,25,360 to employees of TSL and TCPL

Reserves and Surplus

Particulars (INR in Cr) As at March 2020 As at March 2019 Increase/ (Decrease) %
Capital Reserve 7.0 7.0 0%
Share Premium 644.5 476.1 3536%
General Reserve 25.5 25.5 0%
Retained Earnings (16.4) 200.9 -10815%
Foreign Currency Translation Reserve 15.9 (5.9) -36888%
Total 676.4 703.6 -386%

Share premium as at March 31st 2020 increased by INR 168.4 Cr by virtue of issue of equity shares face value of Re. 1/- at a premium. The details of shares allotted during FY 2020 are provided above.

Retained earnings decreased by INR 217.3 Cr primarily on account of accelerated depreciation of INR 305.6 Cr provided on redundant technology assets on moving operations to cloud and to be in line with regulatory changes to move to block chain technology. Additionally, impairment of goodwill on management assessment of the impact of Covid-19, for an amount of INR 48.7 Cr also impacted retained earnings.

During Q2 of FY 2021, Tanla Solutions Limited, with a view to reward shareholders, offered to buyback 1,90,12,345 equity shares of INR 1/- each at a premium of INR 80/- per share. On the close of the offer on July 14, 2020, 1,66,92,752 shares representing 88% of the offer, were submitted by 3908 shareholders in response to the offer. The value of the buyback including the Tax thereon was INR 164.7 Cr. As a result of the buyback, the share capital of the company as on July 31, 2020 (close of the buyback and tax remittance) stood at INR 13.56 Cr.

Non-Current Liabilities

Particulars (INR in Cr) FY 2020 FY 2019 % Change
Financial liabilities
(i) Borrowings - 46.9 -100%
(ii) Lease liabilities 4.3 - 0%
(iii) Other financial liabilities 0.2 0.2 21%
Provisions 6.4 - 0%
Other non-current liabilities 4.3 0.1 4744%
Total 15.3 47.2

Debt (Borrowings)

Tanla as a group became debt free as at March 31,2020 with the repayment of Karix Mobile Term Loan of INR 59.88 Cr to HDFC Bank.

Lease Liabilities

Ind-AS 116 on Lease Accounting provides for recognition of the asset and liability in respect of leased assets in the books of lessee. This Accounting Standard is applicable from FY 2020 and hence the asset/liability in respect of leased office premises of the group companies has been quantified and disclosed under Non-Current and Current Assets/Liabilities for values accountable within 1 year and after one year.

Other Financial Liabilities

The figure of INR 0.2 Cr represents amount held in Unclaimed Dividend Current Accounts with banks in respect of dividend warrants not encashed by shareholders over the years due to various reasons. The company has a registrar and the secretarial team overseeing this liability which is transferred to the Central Governments IEPF account at expiry of 7 years from the declaration of the dividend.

Provisions

INR 6.4 Cr represents primarily, the liability in respect of Gratuity - INR 4.6 Cr and Leave Encashment INR 1.8 Cr payable to employees on retirement, resignation or superannuation, quantified and charged to expenses at the end of each accounting period. The company has availed a policy with Life Insurance Corporation of India to cover the liability as and when a claim arises.

Other Non-current Liabilities

INR 4.3 Cr represents the long-term security deposits collected from customers, repayable on termination or non-renewal of the contract. These deposits carry no interest and are not repayable on demand and are solely for the purpose of securing receivables. The figures for the previous year are not directly comparable as they do not include the acquired subsidiaries.

Current Liabilities

Particulars (INR in Cr) FY 2020 FY 2019 % Change
Borrowings - 13.0 -100%
Trade Payables 280.6 202.3 39%
Lease Liabilities 1.0 - 0%
Outstanding expenses 168.7 97.1 74%
Statutory Liabilities 20.1 16.8 20%
Short term provisions 0.9 - 0%
Liabilities for current tax (net) 11.3 4.9 130%
Total 482.6 334.1

Borrowings

As explained earlier the total component of borrowings has been repaid as at March 31,2020.

Creditor Days

FY 2020 Days payables outstanding (DPO) stood at 66 days against 86 days in FY 2019. This is an indicator of timely payment to creditors, to maintain a good credit rating and to negotiate better pricing, for which, as a group we have endeavoured to pay vendors on time.

Lease Liabilities

As explained under Non-current Liabilities.

Outstanding Expenses

Outstanding expenses primarily consist of Cost of Services not yet billed on the company and accounted for the purpose of matching revenue and cost. Increase of INR 71.6 Cr or 74% is on account of the acquisition.

Statutory Liabilities

Represent payables to revenue authorities of Tax Deducted at Source, GST, Provident Fund, Profession Tax and Employees State Insurance as at March 31, 2020. Increase of 20% over FY 2020 is on account of higher business volumes and increased payroll expenses.

Provision for Current Tax

INR 11.3 Cr represents the consolidated tax payable for current year profits. For FY 2020, tax payable of INR 10.75 Cr arose on account of profit in Karix and net taxable income at the company level. This was as per regular income tax and the company has sufficient balance of Tax Deducted At Source, hence there was no immediate cash outflow. With the merger of Karix and Unicel with Tanla Corporation Private Limited as per NCLT order dated July 14, 2020, the tax provision was reversed in Q1 of FY 2021, as the merged entity has goodwill deduction and tax liability does not arise.

Assets

Property, Plant and Equipment

Particulars (INR in Cr) Net block as at March 2020 Net block as at March 2019
Office building - Land 7.7 7.7
Buildings 3.8 12.3
Leasehold Improvements - 0.8
Furniture & fixtures 0.4 1.6
Computers & Software 17.2 31.0
Platforms and Deployments* - 305.7
Office Equipment 0.4 1.5
Vehicles 0.6 0.4
Air-conditioners 0.3 0.5
Total 30.3 361.4

Platforms are disclosed as a part of Intangible Assets in line with Ind-AS 38 disclosure requirements. The break-up of Intangible Assets as at March 31,2020 is given below:

Particulars of Asset (INR in Cr)

Net block

As at March 31, 2020 As at March 31, 2019
Platforms under development 13.3 -
Platforms 11.3 -
Customer Relationships 50.6 -
Trade name 7.4 -
Technology 8.0 -
Non-Compete fee 4.5 -
Total 81.8 -

Net block of Property, plant and Equipment has decreased primarily on account of accelerated depreciation on redundant technology assets. As at March 31,2020, net block of property stood at INR 30.3 Cr comprising primarily of corporate office building and appurtenant land of INR 11.5 Cr, computers and software representing servers, stacks, switches, software and peripheral devices of INR 17.2 Cr and other assets comprising furniture, office equipment and vehicles of INR 1.6 Cr.

Particulars (INR in Cr) Mar ‘20 % of Revenue Mar ‘19 % of Revenue
Goodwill on Consolidation 134.6 6.9% - -

Goodwill on consolidation as at March 31,2020 after providing for impairment loss of INR 48.73 Cr, stands at INR 134.6 Cr as compared to Nil during FY 2019.

Other Non-Current Assets

Particulars (INR in Cr) FY 2020 FY 2019 % Change
Right-of-use Lease assets 5.0 - 0%
Financial assets - - 0%
(i) Investments - 1.7 -100%
(ii) Loans and advances 3.9 - 0%
(iii) Other financial assets 0.6 - 0%
Deferred tax assets (net) 56.7 16.8 237%
Other non-current assets 90.4 20.4 344%
Total 156.7 38.9

Right-of-use Lease assets represents the capitalised value of leased assets disclosed in the Balance Sheet pursuant to Ind-AS 116, applicable from FY 2020.

Investments, Loans and Advances and Other financial assets under non-current assets represent assets created in the normal course of business such as Earnest Money Deposits and fixed deposits maturing after March 31,2021.

Deferred tax Assets arise on tax cover available for future years on assets where timing differences exist on depreciation between the tax regime and reported financials. These are classified under other non-current assets as the reversal of the timing differences are expected to occur after March 31,2021. Deferred Tax assets have increased by INR 39.9 Cr or 237% over FY 2019 as a result of the accelerated depreciation provided on redundant technology assets while the same is available for deduction for tax computations after March 31,2021.

Other non-current assets of INR 90.4 Cr as at March 31,2020 represent primarily, advance income tax and tax deducted at source of the group companies, by customers, which are available as tax credits against taxes due, if any.

Particulars (INR in Cr) FY 2020 FY 2019 % Change
Cash & Cash equivalents 200.6 228.8 -12%
Other financial assets incl. Accrued Income 204.7 135.8 51%
Other current assets 46 .4 40.1 16%
Total 451.7 404.7

Cash & Cash Equivalents at INR 200.6 Cr decreased marginally by 12% from INR 228.8 Cr in FY 2020. The movement is more clearly explained in the section on cash flow analysis.

Other financial assets comprise of unbilled revenue (accrued income) as at end of financial year, which is reversed in the first quarter of the next financial year, when the billing is completed and recognised as sale. Interest accrued on fixed deposits and not yet credited to the deposit account by banks is recognised under other financial assets. Other financial assets have increased by 51% as compared to previous year on increased business volumes.

Other current assets of INR 46.4 Cr as at March 31,2020 represent primarily, advance income tax and tax deducted at source of the group companies of INR 29.9 Cr deducted by customers, which are available as tax credits against taxes due, if any. On completion of the tax assessments, the tax credit after adjustment of taxes due is refunded to the assessee. As a result of the concerted efforts of the company and the tax auditors, a total of INR 50.0 Cr was received as tax refund during Q1 and Q2 of FY 2021 on completion of income tax assessments for FY 2017-18 and FY 2018-19 inclusive of interest of INR 3.8 Cr. The number for previous year is not directly comparable. In addition INR 9.0 Cr in the form of GST input credit is available for group companies as at March 31,2020 to discharge future GST liability without affecting cash flows. Advances for services and prepaid expenses amounting to INR 7.5 Cr constitute the remaining component of other current assets.

Other Current Assets of INR 46.4 Cr as at March 31,2020, registered a 16% increase over FY 2019

Trade Receivables

Particulars (INR in Cr) FY 2020 % of Revenue FY 2019 % of Revenue
Trade Receivables 325.8 16.8% 307.8 30.7%

Debtor Days

FY 2020 Days sales outstanding (DSO) stood at 61 days against 112 days in FY 2019. This is a result of close monitoring of collections and spreading the importance of collections as a key metric across the organisation. Incentives to sales teams are linked, in no less measure, to collections targets, as to sales targets.

Summarised Cash Flow Statement

Particulars (INR in Cr) FY 2020 FY 2019
Net cash provided by/(used in)
Operating activities 239.2 (30.4)
Investing activities (126.3) (53.7)
Financing activities (67.3) 73.7
Net increase in cash and cash equivalents 45.6 (10.5)
Cash and cash equivalents at the beginning of year 155.0 165.5
Cash and cash equivalents closing balance 200.6 155.0

INR 235.3 Cr was generated from operating activities during FY 2020 which when adjusted for working capital changes resulted in cash from operating activities of INR 239.2 Cr.

Cash component of purchase consideration for acquisition of Karix & Unicel and Gamooga totalling INR 142.8 Cr, offset by net realisation of investments in liquid funds of INR 5.4 Cr and other income of INR 11.1 Cr resulted in net outflow on investing activities of INR 126.3 Cr.

Out of the remaining funds term loan repayment of INR 59.9 Cr, dividend payment of INR 6.1 Cr and payment of lease liabilities including interest thereon totalled INR 2.7 Cr offset by inflow from issue of shares aggregating INR 1.4 Cr resulted in net outflow on financing activities of INR 67.3 Cr.

Thus the net increase in cash & cash equivalents for the year of INR 45.5 Cr along with opening cash of INR 155 Cr ensured that the Company has a comfortable closing cash and cash equivalents figure of INR 200.6 Cr.

Risk Management:

The risk-related information outlined in this section may not be exhaustive. The discussion may contain statements that are forward-looking in nature. Our business is subject to uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. If any of the risks materializes, our business, financial conditions or prospects could be materially and adversely affected. Our business, operating results, financial performance or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. Readers are advised to refer to the discussion of risk factors and related disclosures in our regulatory filings and exercise their own judgment in assessing risks associated with the Company.

Risk Management Committee comprises of 4 Directors, the committee is chaired by Mr. Sanjay Kapoor and the Committee identifies, evaluates and suggests mitigation of identified strategic, operational and external environment risk in consultation with the Audit Committee. The Management and the respective CXOs are responsible for managing the day-to-day risks management, while the periodic audits conducted by internal auditors, platform audit partners, help highlight and address the unnoticed and probable risks in various functions. Thus, the Management, CXOs, auditors under the supervision and advisory of Board and its committees identify, analyse, assess, minimize, monitor and govern a possible threat and its incidence.

Risk is inherent in every business, it includes financial, strategic, operational regulatory, legal, compliance, reputational and cyber security. Q4 FY1920 has witnessed the most un-prepared risk in the form COVID-19, a pandemic which impacted businesses globally and resulted in inherent risks resulting from managing to survive the pandemic.

Financial Risk:

Acquisition of Karix Mobile Private Limited in April 2019 necessitated an outflow of Rs. 112 Cr paid in cash as purchase consideration followed by a outflow of Rs.32 Crs paid as purchase consideration for acquisition of Gamooga Softtech Private Limited in Nov 2019, mounting operational costs (CAPEX details), on-boarding of reputed audit firms and other consultants to advise on regulatory and legal compliances, cost of law suits for recovery of unpaid invoices are major areas of expenditure.

Tanla was able to sustain the financial costs without resorting to long-term borrowings from Banks/financial institutions due to efficient planning and cash management system. We shall endeavour to plan the costs diligently and spread the risk of investment which is dependent on our ability to collect in time from our customers, efficiently plan our taxes and future corporate and business expansions.

Business & Operational Risk:

Ability to scale, retain existing customers and win new customers are the driving forces for increase in volume of transactions. The Sales teams ability to expand and retain is driven by the ability to penetrate with new age solutions and quick turn around of market expectations. Last leg end-user reach, and global delivery are the key elements for commercial communication, hence, global connectivity and unified communication platform are vital for global expansion. Geopolitical, environmental,

international economic conditions, regulatory environment are few factors that determine the business expansions in global markets apart from operational efficiency of the teams and technology and commercial edge over competitors.

With acquisition of Karix, volume of business increased as a result the initial quarters after acquisition of Karix and Gamooga were burdened with huge operation costs due to multiple platforms, huge hardware infrastructure, multi locational deployments, manpower costs to maintain and support the operations, data centre expenditure. The revenues were thus dependent on the efficiency of the hardware and premises hosting the hardware apart from the applications and platforms. Periodic upgradation of applications and tailor-made customer friendly solutions resulted in increased engineering support.

Timely decision to move away from on-premises deployment to cloud based deployments addressed the dependency on various intermediaries such as hardware suppliers, availability of support at data centres etc., resulting in minimising unplanned downtime of the operations. Our engineering and product teams ideate and develop applications and products to address specific customer requirements apart from suggesting alternative options, this approach of the teams has opened up new business opportunities. Success of these ideas depends on the regulatory, political and economic conditions prevailing in the targeted geographies. Provision of customized solutions to retain customers might be cost intensive resulting in narrowing or negating the margins. Ability to provide market driven solutions depends on the engineering teams capability to adapt newer technologies and deliver timely solutions.

Regulatory, Compliance & Legal risks:

Being a consumer communication specialist, the regulatory environment governing the business of Tanla is dynamic, stringent and complicated. The TCCPR, 2018, necessitated migration of the A2P consumer communication to a DLT platform, Tanla was the first company to develop and launch the DLT Platform in Feb 2019, but the regulations governing the A2P consumer communication underwent interpretation changes requiring constant changes to the platform, thereby delaying the commercial launch.

There are multitude of other regulations and laws determining the applicable compliances applicable to the Company, nonadherence to any of these applicable regulations would result in penalties.

Internal teams are trained, and external consultants are appointed to ensure timely compliance of applicable regulations, a periodic review of the compliances is also reported to the Board of Directors along with non-compliances or deviations if any, to enable corrective actions.

Enterprise business has a clientele of thousand plus retail customers from various sectors ranging from a small retailer to a bank and an airlines company. Due care in taken in drafting the customer agreements to ensure appropriate protection in case of non-adherence of applicable regulations by the customers, and non-payment of dues as per agreed payment terms. Non-payment of invoices by the customers is a business phenomenon, we initiate appropriate legal steps to recover unpaid dues, which usually take a long time to recover.

Employee risk:

We being enterprise focussed business, employ big numbers in our Sales teams to be able to reach out to the last customer possible, employees to the Sales teams are chosen from top business schools in the country. These hand-picked freshers are provided with product training to help deliver the expected numbers in the form of customer addition and revenue. Engineering teams are equipped with students chosen from prestigious engineering schools in the country and are provided required training.

Business expansion and growth is dependent on these teams, attrition in these teams would impact our growth plans. Impact of COVID-19 pandemic: The onset of the prevailing pandemic in Q4FY19 brought in a huge change in the operating model of businesses, operations moved from offices to homes, employees had to be trained to be aware of the possible cyber-attacks, to be aware of possible pilferage of data and to be vigilant and educated about conducting themselves with responsibility and in the interest of business. While all precautions have been put in place to ensure secured logging to the networks cyber security is a threat we operate with. As the safety of the employees has always been paramount, an additional monetary assistance in addition to the employees health insurance has been announced to enable the employee meet unexpected medical expenses in case of testing positive to the COVID 19 virus. All the employees have been asked to work from home since early March and the office premises are equipped with sanitization stations to provide safe workplaces.

Adequacy of Internal Controls:

The Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Companys policies, safeguarding of its assets, prevention and detection of fraud, error reporting mechanisms, accuracy and completeness of the accounting records, and timely preparation of reliable financial disclosures. Based on the framework of internal financial controls and compliance systems established and maintained by the Company, including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by management and the relevant board committees, including the audit committee, the Companys internal financial controls were adequate and effective during FY 2020.

Human Resources Update:

Human Resources at Tanla is driven by 6 core values, which inspire us and guide our priorities and behaviours, both internally and externally.

Passion

We are passionate about what we do, how we do and who we do it for.

Result- Oriented

We are highly performance-minded; we judge ourselves by results delivered.

Wellness

We take care of ourselves first, so we can produce better results for our customers.

Transparent & Trust

We deal openly with all our stake holders; our communications in every form are clear and transparent.

Customer Success

We are obsessed with our customers success through our services Give Back

We give back 1% of our Peoples time, 1% of Products and 1% of Profits to the society.

Our core values drive our actions in ways that are relevant and beneficial to people and organizations, helping them to realize their true potential, bringing the Human Resources experience to life.

HR at a Glance Covid Update

The Covid 19 pandemic has impacted every aspect of our lives: our social interactions, our family, our communities and most importantly the way we work. At Tanla, our top priority is focused on ensuring health, safety and well-being of our people and their families.

• We have set up a Covid Fund to assist our employees over and above the existing Mediclaim Insurance, should they or their immediate family contract the disease.

• Over INR 3 Million has been disbursed to date from the Covid Fund in ensuring the well-being of our employees and their families.

• We have seamlessly enabled work from home for all employees.

• @Home and connected sessions are conducted regularly with employees to break the monotony of WFH and to keep them abreast with the Organisation updates.

• We tied up with a reputed fitness organisation to ensure wellness programs for all employees.

• Regular updates and notices are sent by the Covid Task Force of every location.

Annual Appraisal

In line with our values we believe that Appraisal systems aid us in improving the organisational efficiency by ensuring that individuals perform to the best of their ability, develop their potential, and are appropriately rewarded, in turn leading to improved organisational performance. Despite the pandemic and the industry trend of “no increments”, we have successfully completed the annual appraisal cycle for FY2020 including promotions and increments above the industry benchmark.

One Team

The acquisition of Karix and Gamooga has strengthened our vision to be a dominant Global player within our landscape of cloud-based communication. We have consolidated all the three companies and have created a value-based organisation obsessed with customer success. We pride ourselves in being an agile and innovative solution-driven organisation.

People Metrics

• FY 19-20 Manpower No: 432

• FY 19-20 Attrition: 24%

Boards Report

Dear Members,

The Board of Directors are pleased to present the twenty fourth report of Tanla Solutions Limited (hereinafter referred as “Tanla” or “the Company”) on the Companys business and operations together with the audited financial statements (both standalone and consolidated) for the financial year ended March 31,2020.

Summary of Financial Results:

The summary of standalone & consolidated financial results for the current year in comparison to the previous year is as follows:

Standalone

Consolidated

Particulars FY 2019-20 FY 2018-19 FY 2019-20 FY 2018-19
Revenue from Operations 1,06,037.06 80,940.88 1,94,283.97 1,00,396.47
Other Income 913.58 956.0 1,236.46 1,061.10
Total Income 1,06,950.64 81,896.92 1,95,520.43 1,01,457.57
Expenses
Operating expenses 93,987.98 73,124.83 1,76,423.23 90,756.44
Depreciation 32,070.52 6,808.30 37,779.58 7,322.76
Total Expenses 1,26,058.50 79,933.13 2,14,202.81 98,079.20
Profit before Tax -23,981 1,963.78 -23,724.56 3,347.41
Less: Provision for Tax including Deferred Tax -4,088.79 256.20 2,608 365.30
Profit After Tax -19,892.21 1,707.58 -21,116.56 2,982.11
Other Comprehensive Income 163.26 433.87 992.67 119.57
Total Comprehensive Income -19,728.95 2,141.45 -20,123.90 3,101.68
Attributable to:
Shareholders of the Company -19,728.95 2,141.45 -20,123.90 3,101.68
Non-controlling interests - - - -
Retained earnings - opening balance 17786.25 16,484.6 20085.16 8,570.1
Add: Profit/(Loss) for the period (19892.19) 1,707.6 (21116.57) 2,982.1
Less: Dividend and dividend tax (606.61) (405.9) (606.61) (405.9)
Retained earnings - closing balance (2712.55) 17,786.3 (1638.02) 11,146.3
Earnings per Share (EPS)
Basic & Diluted -13.92 1.48 -14.77 2.58

Standalone Performance

The standalone revenue from operations stood at Rs. 1,06,037.06 Lakhs and grew up by 31.08% YoY during FY 2019-20 as against Rs 80,940.88 Lakhs in the previous FY 2018-19. There is loss of Rs (19,892.21) Lakhs during FY 2019-20 as against profit of Rs 1,707.58 Lakhs in the previous FY 2018-19.

Consolidated Performance

The consolidated revenue from operations stood at Rs 1,94,283.97 Lakhs and grew up by 93.52 % YoY during FY 2019-20 as against Rs 1,00,396.47 Lakhs in the previous FY 2018-19. There is loss of Rs (21,116.56) Lakhs during FY 2019-20 as against profit of Rs 2,982.11 Lakhs in the previous FY 2018-19.

COVID-19

The spread of COVID-19 has disrupted lives, livelihoods, communities and businesses worldwide and forced the government to take certain strict measures such as complete lock down of all the economic as well as social activities.

In a quick response to COVID-19 pandemic and considering the importance of the health and well being of its employees and their families, the management of the Company had immediately switched to work from home for all the employees.

However, operations of the Company were not affected as the Companys operations are fully manageable remotely and with minimal human intervention from remote locations. All our customers were serviced as usual. The Company adopted work from home policy during the entire duration of lock-down and supported the business requirements without any failure.

Operating remotely and work from home, by our customers, has resulted in an increase in the customer ask for support round the clock, alternative business solutions to support their customer needs, thereby resulting in extended working hours of teams.

Dividend:

The Board of Directors does not recommended any dividend for the FY 2019-20.

Transfer to Reserves:

The Board does not propose to transfer any profits to the reserves for the FY 2019-20.

State of Companys affairs and future outlook:

Tanla is a Hyderabad, India-based Company, established in 1999. It is a global leader in its domain as one of the largest Cloud Communication providers, handling over 200 billion business communications annually. Tanla is innovating the way the world communicates, continuously raising the bar through enhanced speed, ease, and simplicity of Cloud Communication solutions, adopting cutting-edge technologies like Blockchain, Artificial Intelligence, Machine Learning to meet the discerning needs of a diverse clientele, from enterprises to carriers across geographies. Tanla has always adopted new technologies and has many patents to its name including worlds first blockchain based commercial communication stack “Trubloq” to address the growing concerns for spam and fraud. Tanla is working with all leading Telcos in India creating Indias first Telecom Blockchain Network.

Tanla is listed on leading Indian Stock Exchanges i.e. BSE Limited and National Stock Exchange Limited (NSE: TANLA & BSE: 532790).

Particulars of Loans, Guarantees or Investments:

Particulars of loans, guarantees and investments covered under section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report.

Material Changes and Commitments:

Subsequent to the end of the financial year March 31,2020, the Board of Directors at their meeting held on April 22, 2020, approved the Buyback of not exceeding 1,90,12,345 Equity Shares (representing 12.49 % of the total number of Equity Shares in the existing total paid-up equity capital of the Company and 16.44 % and 13.02 % of the total number of Equity Shares in the total paid-up equity capital as of March 31,2019, and March 31,2020, respectively) at a price of Rs. 81/- (Rupees Eighty one only) per Equity Share, payable in cash for an aggregate maximum amount of Rs. 154,00,00,000/- (Rupees One Hundred Fifty Four Crores Only), excluding transaction costs.

The Buyback was approved by the shareholders of the Company by way of Postal Ballot on May 23, 2020. The Buyback opening date was Wednesday, July 1,2020 and the Buyback closing date was Tuesday, July 14, 2020. The total number of Equity Shares bought back pursuant to the Buyback was 1,66,92,752 Equity Shares at a price of Rs. 81/- (Rupees Eighty One Only) per Equity Share. The amount utilized in the Buyback towards purchase consideration was Rs. 135,21,12,912/- (Rupees One Hundred and Thirty Five Crores Twenty One Lakhs Twelve Thousand Nine Hundred and Twelve only) and Buyback tax was Rs. 29,48,56,520/- (Rupees Twenty Nine Crores Forty Eight Lakhs Fifty Six Thousand Five Hundred and Twenty only).

The Company has allotted 62,85,858 equity shares to the Promoters i.e Mr. D. Uday Kumar Reddy and Ms. D. Tanuja Reddy by way of conversion of warrants on April 03, 2020.

Apart from the abovementioned, there are no material changes and commitments affecting the financial position of the Company between the end of the financial year of the Company to which the financial statements relate and the date of the report.

Management Discussion & Analysis:

The Management Discussion and Analysis Report highlighting the industry structure and developments, opportunities and threats, outlook, risks and concerns etc. is furnished separately and forms part of this Annual Report, as per the requirements of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

Directors Responsibility Statement:

Pursuant to Section 134 (5) of the Companies Act, 2013, your Directors confirm that to the best of their knowledge and belief and according to the information and explanation obtained by them,

i. In the preparation of the annual accounts for the financial year ended March 31st, 2020, the accounting standards have been followed along with proper explanation relating to material departures;

ii. Such accounting policies as mentioned in the notes to the financial statements have been selected and applied consistently and judgments and estimates that are reasonable and prudent made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2019-20 and of the statement of profit and loss of the Company for that period;

iii. Proper and sufficient care has been taken 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;

iv. The annual accounts for the FY2019-20 have been prepared on a going concern basis;

v. That the Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively;

vi. That systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and effectively mentioned under various heads of the departments which were in then reporting to the Chairman & Managing Director.

Change in the nature of business, if any:

There is no change in the nature of business of the Company or any of its subsidiaries or joint venture, during the year under review.

Subsidiary, Associate & Joint Venture (JV) Companies

Tanla Corporation Private Limited (“TCPL”) a wholly owned subsidiary of Tanla Solutions Limited based at Hyderabad,India is engaged in telecommunication services including voice mail, audio text, video text, unified messaging services, voice to text and text to voice conversion services.

The petition was filed on September 30, 2019 with the Hyderabad bench of Honble National Company Law Tribunal (“NCLT”) in respect of the scheme of merger of Karix Mobile Private Limited and Unicel Technologies Private Limited (‘Unicel) with Tanla Corporation Private Limited , Whollyowned Subsidiary Company of Tanla Solutions Limited (hereinafter referred as “the Scheme”), the Honble NCLT pronounced its order on June 30, 2020, approving the Scheme.

Pursuant to the order of the Honble NCLT, Karix Mobile Private Limited and Unicel Technologies Private Limited merged into Tanla Corporation Private Limited.

Further, pursuant to the order of the Honble NCLT and subsequent to the approval of the Registrar of Companies, Ministry of Corporate Affairs, the name of Tanla Corporation Private Limited has been changed to Karix Mobile Private Limited w.e.f. August 19, 2020.

Tanla Mobile Asia Pacific Pte Limited, Singapore (“Tanla Singapore” or “TMAP”), a wholly owned subsidiary of Tanla based at Singapore, provides aggregator and offshore development services to clients in telecommunications and offshore service sectors.

Capitalsiri Investments Private Limited (“Capitalsiri”) a wholly owned subsidiary of Tanla Solutions Limited based at Hyderabad, India was incorporated to carry on NBFC activity and the Company has hence surrendered its NBFC license and is under the process of liquidation.

Karix Mobile Private Limited (“Karix”) a step-down subsidiary of Tanla Solutions Limited is engaged in the business of Cloud Communications. The Company was acquired by Tanla Solutions Limited on April 10, 2019.

However, the shares of Karix held by Tanla Solutions Limited were transferred to Tanla Corporation Private Limited and it became the whollyowned subsidiary of Tanla Corporation Private Limited w.e.f. August 30, 2019.

Unicel Technologies Private Limited (“Unicel”) a wholly owned subsidiary of Karix, and Step-Down Subsidiary of TCPL is engaged in the business of providing wireless applications hosting services designed to help businesses deliver Internet and other content and web applications to users with wireless devices.

Gamooga Softtech Private Limited (“Gamooga”) a wholly owned subsidiary of Tanla Solutions Limited based at Hyderabad, India was acquired by Tanla on October 24, 2019 and is engaged in chat and marketing automation products.

Tanla Digital Labs Private Limited (“TDLPL”) a wholly owned subsidiary of Tanla Solutions Limited based at Hyderabad, India was incorporated on December 18, 2019, and is engaged in information technology related services.

TZ Mobile Private Limited (“TZ Mobile”) a joint venture of Tanla with Zed Worldwide (ZWW), Spain is under liquidation w.e.f. June 18, 2019

Jengatron Gaming Private Limited (“Jengatron”) an associate company of Tanla, provides a skill based mobile gaming platform.

Deposits:

Your Company has not accepted any deposit from the public under Chapter V of the Act or under the corresponding provisions of Section 73 and 74 of the Companies Act, 2013, and no amount of principal or interest was outstanding as on the date of the Balance Sheet.

Share Capital:

The paid-up equity share capital of the Company as on March 31,2020 stood at Rs 14,59,71,699/- divided into 14,59,71,699 equity shares of Re 1/- each. The details of the share capital are as follows:

Particulars

As at March 31, 2020

As at March 31, 2019

Number of shares Rs. Number of shares Rs.
SHARE CAPITAL
(a) Authorised Equity shares of Re. 1/- each 20,00,00,000 20,00,00,000 20,00,00,000 20,00,00,000
(b) Issued Subscribed and fully paid up:
Equity Shares of Re.1/- each fully paid-up *14,59,71,699 14,59,71,699 11,56,26,827 11,56,26,827
14,59,71,699 14,59,71,699 11,56,26,827 11,56,26,827

* The Paid up capital post adjustment for Buyback of 1,66,92,752 equity shares and allotment of 2,22,795 equity shares under ESOP 2015 stands at Rs. 13,57,87,600.

(i) Reconciliation of the shares outstanding at the beginning and at the end of the reporting period:

Particulars

As at March 31, 2020

As at March 31, 2019

Equity Shares No. of Shares Rs. No. of Shares Rs.
Shares outstanding at the beginning of the year 11,56,26,827 11,56,26,827 11,24,21,952 11,24,21,952
Add: Issued and allotted during the year 3,03,44,872 3,03,44,872 32,04,875 32,04,875
Less: Shares bought back during the year
Shares outstanding at the end of the year *14,59,71,699 14,59,71,699 11,56,26,827 11,56,26,827

* The Paid up capital post adjustment for Buyback of 1,66,92,752 equity shares and allotment of 2,22,795 equity shares under ESOP 2015 stands at Rs. 13,57,87,600.

The Company has one class of equity shares of Re. 1/- each fully paid-up. Each shareholder is eligible for one vote per every equity share held. As on April 01,2019 the paid-up equity share capital of the Company was Rs. 11,56,26,827/-.

During the year under review:

• The Company has issued and allotted 2,19,99,824 equity shares under Preferential Allotment on April 10, 2019.

• The Company has issued and allotted 21,19,688 equity shares under Preferential Allotment on October 24, 2019.

• Under ESPS 2018 Scheme, 60,00,000 equity shares were allotted to the respective allottees in tranches.

• Under ESOP 2015 Scheme, 2,25,360 equity shares were allotted to the respective allottees in tranches.

As on March 31, 2020, the paid-up share capital of the Company was Rs. 14,59,71,699 /-.

Subsequent to the end of the financial year ended March 31,2020:

• The Company has allotted 62,85,858 equity shares by way of conversion of warrants on April 03, 2020.

• The Board of Directors at their meeting held on April 22, 2020, approved the Buyback of not exceeding 1,90,12,345 Equity Shares at a price of Rs. 81/- (Rupees Eighty one only) per Equity Share. The total number of Equity Shares bought back pursuant to the Buyback was 1,66,92,752 Equity Shares at a price of Rs. 81/- (Rupees Eighty One Only) per Equity Share.

• Allotment of 2,22,795 Equity Shares under ESOP 2015.

Disclosure under Regulation 32 (7A) of SEBI (LODR) Regulations 2015:

During the year under review, the Company has fully utilized the amount raised by way of conversion of 16,65,000 warrants on March 29, 2019 issued through Preferential Allotment.

Consolidated Financial Results:

During the year, the Board of Directors reviewed the affairs of the Subsidiaries/JVs. In accordance with Sub Section (3) of Section 129 of the Companies Act, 2013, your Company has prepared the consolidated financial statements of the Company, which forms part of this annual report.

As per the provisions of Section 136 of the Companies Act, 2013 the Company has placed separate audited financial statements of its Subsidiaries/JVs on its website www.tanla.com/investors.html. The annual accounts of the Subsidiary Companies/JVs and the related detailed information shall be made available to members seeking such information at any point of time.

The statement containing the salient features of the Subsidiaries & JVs as per sub-sections (3) of section 129 read rule 5 of Companies (Accounts) Rules, 2014 and under Rule 8 of Companies (Accounts) Rules, 2014 of the Companies Act 2013 in Form AOC -1 is herewith annexed as Annexure-1 to this report.

Related Party Transactions:

All related party transactions that were entered into during the financial year were on an arms length basis and in the ordinary course of business. There were no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

None of the Directors had any pecuniary relationship or transactions with the Company, other than to the extent of their shareholding and except the payments made to them in the form of remuneration/sitting fee.

In accordance with Section 134(3)(h) of the Companies Act, 2013 and Rule 8(2) of the Companies(Accounts) Rules, 2014, the particulars of contract or arrangement entered into, if any, by the Company with related parties referred to in Section 188(1) in Form AOC-2 is attached as “Annexure - 2".

Particulars of Employees:

Disclosure pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is provided as Annexure - 3 of this Report.

In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 including the amendments thereto, a statement

showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in Annexure - 4 to this report.

Extract of the Annual Return:

Pursuant to the provisions of Section 134(3) (a) of the Companies Act, 2013 and rules framed there under and as per the MCA circular dated August 28, 2020, an extract of the Annual Return in form MGT-9 in the prescribed format can be accessed at the website of the Company i.e. www.tanla.com/investors.html

Corporate Governance:

The Board of Directors of your Company believes that strong corporate governance is an important instrument of investors protection as it ensures complete transparency in Companys matters.

The report on Corporate Governance for the year ended March 31, 2020, pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, forms part of this annual report.

A Compliance certificate on Corporate Governance for the FY 2019-20, from a Practicing Company Secretary confirming compliance with the conditions of Corporate Governance is attached to the report on Corporate Governance.

Business Responsibility Report (BRR)

The SEBI (Listing Regulations) 2015 mandated the inclusion of the BRR as part of the Annual Report for the top 1,000 listed entities based on market capitalization. In compliance with the Listing Regulations, BRR disclosures is appended as Annexure - 5 to this Report.

Directors and Key Managerial Personnel:

Appointments:

During the financial year ended March 31, 2020:

Mr. D. Uday Kumar Reddy was appointed as Chairman and Managing Director of the Company by the Board of Directors w.e.f. October 01,2019 for a period of 5 years. The shareholders approved his appointment as Chairman and Managing Director in the 23rd AGM held on September 30, 2019.

Ms. Amrita Gangotra was appointed as an Additional Director under the category of Independent Director by the Board of Directors w.e.f. July 31,2019 for a period of 5 years. The shareholders approved her appointment as an Independent Director in the 23rd AGM held on September 30, 2019.

Mr. Sanjay Baweja was appointed as an Additional Director under the category of Independent Director by the Board of Directors w.e.f. August 30, 2019 for a period of 3 years. The shareholders approved his appointment as an Independent Director in the 23rd AGM held on September 30, 2019.

Mr. Rohit Bhasin was appointed as an Additional Director under the category of Independent Director by the Board of Directors w.e.f. August 30, 2019 for a period of 3 years. The shareholders approved his appointment as an Independent Director in the 23rd AGM held on September 30, 2019.

Mr. Sanjay Kapoor was appointed as an Additional Director under the category of Non-Executive Director by the Board of Directors w.e.f. August 30, 2019 for period of 3 years. The shareholders approved his appointment as Non Executive Director in the 23rd AGM held on September 30, 2019.

Dr. AG Ravindranath Reddy was appointed as an Independent Director of the Company for a second term of 1 (one) year from conclusion of 22nd AGM till the conclusion of this 23rd AGM of the Company. He was re-designated as Non Executive Director by the shareholders at the 23rd AGM held on September 30, 2019.

Subsequent to the end of the financial year March 31, 2020:

Mr. Rahul Khanna (DIN:07997083) was appointed as an Additional Director under the category of Independent Director by the Board of Directors w.e.f. July 17, 2020 for a period of 5 (five) years subject to the approval of the shareholders. The notice convening the AGM sets out the details of his appointment.

Mr. Deepak Stayaprakash Goyal (DIN: 01755263) was appointed as an Additional Director under the category of Executive Director by the Board of Directors w.e.f. July 17, 2020 for a period of 5 (five) years subject to the approval of the shareholders. The notice convening the AGM sets out the details of his appointment.

Reappointments:

Pursuant to the provisions of section 152 of the Companies Act, 2013 and in terms of Article 97 of the Articles of Association of the Company, Dr. AG Ravindranath Reddy, Director retires by rotation and being eligible, offers himself for reappointment at the ensuing annual general meeting. The Board recommends his reappointment.

Resignations:

Ms. Kalpana Kunda, Independent Director, resigned as member of the Board w.e.f September 30, 2019 due to personal obligations and other professional commitments.

Mr. Ram Narain Agarwal, Independent Director, resigned as member of the Board w.e.f September 30, 2019 due to personal obligations and other professional commitments.

Declaration from Independent Directors:

The Independent Directors have submitted the declaration of independence stating that they meet the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013 and Regulation 16 & 25 of the SEBI (Listing Regulations) 2015, the Independent Directors have also confirmed that they have complied with the Companys code of conduct.

Familiarization Programme for Independent Directors:

In terms of Clause 25(7) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, details of the familiarization programme of the Independent Directors are available on the website of the Company i.e. www.tanla.com/ investors.html

A separate meeting of the Independent Directors was held on March 7, 2020.

Board Meetings:

The Board of Directors of the Company duly met 11 (eleven) times during the financial year. The intervening gap between any two consecutive Board Meetings was within the period prescribed under the provisions of the Companies Act, 2013.

The details of Board meetings and the attendance of the Directors are provided in the Corporate Governance Report. Committees of the Board of Directors:

We have in place all the Committees of the Board which are required to be constituted under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A detailed note on the Board and its Committees is provided under the Corporate Governance Report section in this Boards Report.

Secretarial Standards:

The Company has complied with the applicable provisions of the Secretarial Standards issued by the Institute of Company Secretaries of India and notified by Ministry of Corporate Affairs.

Internal Financial Control and their adequacy:

The Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Companys policies, safeguarding of its assets, prevention and detection of fraud, error reporting mechanisms, accuracy and completeness of the accounting records, and timely preparation of reliable financial disclosures.

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by management and the relevant board committees, including the audit committee, the Board is of the opinion that the Companys internal financial controls were adequate and effective during FY 2020. Please refer note on the Internal control systems and adequacy” in the Management Discussion and Analysis report.

Whistle Blower Policy/Vigil Mechanism:

Pursuant to the requirement of the Companies Act, 2013 and of Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has a Whistle Blower Policy and has established the necessary Vigil Mechanism for directors and employees to report concerns about unethical behavior. The said Policy provides for adequate safeguard against victimization of directors/employees who avail of such mechanism and provides access to the Chairman of Audit Committee in exceptional cases. No person has been denied access to the Chairman of the Audit Committee. The Whistle Blower Policy has been placed on website of the Company and web link thereto is www.tanla.com/investors.html

During the year, there were no whistle blower complaints received by the Company.

Board Evaluation:

The parameters and the process for evaluation of the performance of the Board and its Committees have been explained in the Corporate Governance Report.

Nomination and Remuneration Policy:

Pursuant to the provisions of Section 178(3) of the Companies Act, 2013, and Regulation 19 of the Listing Regulations, the NRC has formulated a policy relating to the nomination and remuneration for the Directors, Key Managerial Personnel (KMP). The current policy is to have an appropriate mix of Executive, Non - Executive and Independent Directors to maintain the independence of the Board and separate its functions of governance and management.

The policy of the Company on directors appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out in the Nomination & Remuneration policy of the Company. The Nomination & Remuneration policy is adopted by the Board and is placed on the Companys website at www.tanla.com/investors.html

Risk Management:

The Company follows a comprehensive system of Risk Management. Your Company has adopted a procedure for assessment and minimization of probable risks. It ensures that all the risks are timely defined and mitigated in accordance with the well-structured risk management process.

During the year, the Risk management team reviewed the elements of risk and the steps taken to mitigate the risks and in the opinion of the Board there are no major elements of risk, which has the potential of threatening the existence of the Company. A report on risk management is prepared by the management and forms part of this annual report.

Corporate Social Responsibility:

The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company as adopted by the Board and the initiatives undertaken by the Company on CSR activities during the year under review are set out in “Annexure - 6” of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. For other details regarding the CSR Committee, please refer to the Corporate Governance Report, which is a part of this report.

The CSR Policy is available on the website of the Company i.e www.tanla.com/investors.html

AUDITORS AND AUDITORS REPORT:

Statutory Auditors:

At the 23rd AGM of the Company, the members approved appointment of M/s. MSKA & Associates, Chartered Accountants, Firm Registration number 105047W as Statutory Auditors of the Company for a period of 5 years from the conclusion of that AGM till the conclusion of 28thAGM. The requirement to place the matter relating to appointment of auditors for ratification by members at every AGM has been done away by the Companies (Amendment) Act, 2017 with effect from May 7, 2018. Accordingly, no resolution is being proposed for ratification of appointment of statutory auditors at the ensuing AGM.

The Auditors Report for FY2019-20 does not contain any qualification, reservation or adverse remark. The Report is enclosed with the financial statements in this Annual Report.

Internal Auditors:

The Company has appointed Deloitte Haskin and Sells as Internal Auditors for FY 2019-20 to audit specific locations and processes. It reports to the Audit Committee about the adequacy and effectiveness of the internal control system of your Company. The recommendations of the internal audit team on improvements in the operating procedures and control systems are also presented to the Audit Committee and the business to use these as tools for strengthening the operating procedures.

Secretarial Auditors:

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 had appointed Ms. Madhu Lakhlan, Practicing Company Secretary as Secretarial Auditors to conduct Secretarial audit of the Company for the FY 2019-20. The Secretarial Audit Report issued by Ms. Madhu Lakhlan, Practicing Company Secretaries in form MR-3 is enclosed as Annexure - 7 to this Annual Report.

The Report does not contain any qualification, reservation, disclaimer or adverse remark.

Cost Audit:

Pursuant to Section 148(1) of the Companies Act, 2013, Cost Audit is not required for the Company for the financial year ended March 31,2020.

Significant and material orders passed by the Courts/Regulators:

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

Rating:

CARE ratings has upgraded the ratings from CARE A- to CARE A (for long term facilities) and from CARE A2+ to CARE A1(for short term facilities).

Dun & Bradstreet maintained the same rating as 5a3 Dun & Bradstreet.

Insurance:

All the properties and insurable interests of the Company including buildings are fully insured.

Human Capital:

Employees are our most valuable assets and key to the success of your Company. We are committed to hiring and retaining the best talent. We always strive towards collaborative, transparent and participative organization culture, and rewarding individual contribution and innovation.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo:

The particulars as prescribed under Sub-section (3)(m) of Section 134 of the Act, read with the Companies (Accounts) Rules, 2014, are enclosed as Annexure - 8 to this Report.

Employee Stock Option Scheme (ESOP) & Employee Share Purchase Scheme (ESPS):

Nomination and Remuneration Committee of the Board of Directors of the Company, inter alia, administers and monitors the Employees Stock Option Plan of the Company in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (“SEBI Regulations”). There was no change in the ESOP scheme and ESPS scheme of the Company during the year.

The Company has an operative Employees Stock Option Scheme Plan 2015-16 (ESOP 2015) which provides for grant of Stock Options to eligible employees of the Company and Employee Share Purchase Scheme 2018 (ESPS 2018) for the employees of the Company and its Subsidiaries.

ESOP 2015 was approved by the shareholders in their 19th AGM held on September 16, 2015.

ESPS 2018 was approved by the shareholders in their EGM held on September 17th, 2018.

The details of ESOP and ESPS pursuant to Section 62 of the Companies Act, 2013 read with Rules made thereunder and SEBI (Share Based Employee Benefits) Regulations, 2014 as amended and erstwhile SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are provided in Annexure - 9 to this Report.

The disclosure as required under Regulation 14 of SEBI Circular CIR/CFD/POLICYCELL/2/2015 dated 16th June, 2015 is also available on the website of the Company and can be accessed at www.tanla.com/investors.html.

Sexual Harassment of Women at Workplace

Pursuant to the provisions of “The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013” (“POSH Act”) the Company has framed a Policy on Prohibition, Prevention and Redressal of Sexual Harassment of Women at Workplace and matters connected therewith or incidental thereto. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The Company has always provided a safe and harassment free workplace for every individual working in its premises through various policies and practices. The company always endeavours to create and provide an environment that is free from discrimination and harassment including sexual harassment. The Company has been actively involved in ensuring that the associates are aware of the provisions of the POSH Act and rights thereunder. In the year under review, the Company has not received any such complaint from any employee.

Acknowledgement:

The Board of Directors take this opportunity to place on record their appreciation to all the Stakeholders of the Company, viz., customers, investors, banks, regulators, suppliers and other business associates for the support received from them during the year under review. The Directors also wish to place on record their deep sense of gratitude and appreciation for all the employees for their commitment and contribution towards achieving the goals of the Company.

On behalf of the Board of Directors of
Tanla Solutions Limited
Sd/-
D. Uday Kumar Reddy
Date: September 01,2020 Chairman & Managing Director
Place: Hyderabad (DIN:00003382)