Tera Software Ltd Directors Report.

Dear Shareholders,

The Directors presents the 25th Annual Report on the business and operations of the Company and audited Financial Results for the year ended 31st March, 2019.

Financial Highlights: (Rs. In Lakhs)
PARTICULARS Year Ended 31.03.2019 Year Ended 31.03.2018
Gross Income 17894.71 14795.03
Expenditure 16334.45 13591.65
Profit before Finance Cost, Depreciation & Tax 1560.26 1203.38
Less : Finance Cost 709.30 718.89
Depreciation 254.69 254.19
Profit Before Tax (PBT) 596.27 230.30
Less : Current tax 269.15 89.13
Tax Expense relating to earlier years - (12.00)
Deferred tax (40.54) (4.43)
Profit for the year (PAT) 367.66 157.60

1. COMPANYS PERFORMANCE

The Company has achieved a turnover of Rs. 178.95 Crore for the year ended 31s March, 2019 as against Rs. 147.95 Crore in FY. 2017-18. The Company has registered a net profit of Rs. 3.67 Crore as compares to previous years net profit of Rs. 1.57 Crore.

2. MATERIAL CHANGES & COMMITMENTS:

Commemorating the 25th year of Tera Software Limited, your directors take pride to share with you that the Company has won projects more than Rupees 1200 Crores during the year. Your directors antipicipate a huge success and a positive outlook for the coming years, too. As your Company is emerging strong where it can successfully implement and execute projects and create milestones in future. A detailed review of all the projects is given in Management Discussion and Analysis.

3. DIVIDEND:

Your Directors have not recommended dividend for the F.Y. 2018-19. The management has taken this decision to conserve resources for the investment in the on going and new projects and also to improve long term shareholder value by retaining earnings for growth and business expansion.

4. TRANSFER TO RESERVES:

During the current Financial Year, no funds were transferred to General Reserves.

5. FIXED DEPOSITS:

During the year under review, your Company has neither invited nor accepted any fixed deposits from the public.

6. SHARE CAPITAL:

There was no public issue, rights issue, bonus issue or preferential issue etc. during the year. During the year under review, the Company has not issued any shares either with differential voting rights nor employee stock options or sweat equity shares.

7. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

Managements Discussion and Analysis Report as stipulated under Regulation 34 read with Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed hereto as "Annexure-A" and forms part of Annual Report.

8. CORPORATE GOVERNANCE:

As in the past, your Company continues to follow best Corporate Governance policies. A report on Corporate Governance pursuant to the provisions of Corporate Governance Code stipulated under SEBI (LODR) Regulations, 2015 is annexed as "Annexure B" and forms part of the annual report. The Auditors Certificate regarding compliance of conditions of Corporate Governance is enclosed. A Certificate from the Practicing Company Secretary confirming compliance with the conditions of the Corporate Governance is also enclosed with this report.

9. BOARD & COMMITTEE MEETING:

The Board of Directors met Four (4) times during the year. The Audit Committee is constituted by all Independent Directors viz. Mr. R.S. Bakkannavar (Chairman), Dr. T. Hanuman Chowdary and Mr. Koteswara Rao SSR as Members. During the year there were no instances of rejecting the recommendations of the Audit Committee by the Board.

Details of the composition of the Board and its Committees and of the Meetings held and attendance of the Directors at such Meetings, are provided in the Corporate Governance Report. The intervening gap between the Meetings was within the limits prescribed under the Act and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

10. DlRECTORS & KEY MANAGERIAL PERSONNEL:

A. RETIREMENT BY ROTATION

Pursuant to Section 152 of Companies Act, 2013, Mrs. Pavana Devi Tummala (DIN: 00107698), Director will retire at the ensuing Annual General Meeting and being eligible, offers herself for re-appointment. The Board recommends her re-appointment.

B. CHANGES IN KEY MANAGERIAL PERSONNEL During the year, Mr. Vijay Bhaskar resigned from the post of Chief Financial Officer on September 19,2018 and Mr. Oduru Babu Reddy was appointed in his place on February 14, 2019. Also, Mrs. B. Sowmya, resigned as Company Secretary of the Company and subsequently Mrs. Shabnam Siddiqui was appointed as Company Secretary with effect from 13th November, 2018.

C. DECLARATION BY INDEPENDENT DIRECTORS

All the Independent Directors of the Company have given declarations stating that they meet the criteria of independence as provided under Section 149(6) of Companies Act, 2013 and under Regulation 16(l)(b) of SEBI (LODR) Regulations, 2015. In the opinion of the Board, they fulfill the conditions of independence as specified in the Act and the rules made thereunder and are Independent of the management.

D. PERFORMANCE EVALUATION

Schedule IV of the Companies Act, 2013 states that the performance evaluation of Independent directors shall be done by the entire Board of Directors, excluding the director being evaluated. Nomination & Remuneration Policy of the Company envisages criteria for evaluation of performance of Independent Directors and the Board of Directors. Accordingly, a separate exercise was carried out to evaluate the performance of individual Directors including the Board & Chairman, who were evaluated on parameters such as attendance, contribution at the meetings and Independent judgment, experience, competency etc. The evaluation of the Independent Directors and that of the Chairman was carried out by the entire Board and the evaluation of Non- Independent Directors was carried out by the Independent Directors. A separate meeting of Independent Directors was also held during the year wherein the performance of Chairman, Board and Executive Director was evaluated.

E. NOMINATION & REMUNERATION POLICY

The Company has a Nomination & Remuneration Policy for the Directors, Key Managerial Personnel and Senior Management, pursuant to the provisions of the Act and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

Following are the major functions of Nomination & Remuneration Committee under the policy:

I. the criteria for determining qualifications, positive attributes and independence of a director, the remuneration of the directors, key managerial personnel and other employees;

II. criteria for evaluation of performance of Independent directors and the Board of directors;

III. devising a policy on diversity of Board of directors;

IV. recommend to the Board, remuneration, in whatever form, payable to senior management etc.

It is affirmed that the remuneration paid to Directors, Key Managerial Personnel and all other employees is as per the Remuneration Policy of the Company. Details of the Remuneration Policy are given in the Corporate Governance Report.

11. AUDITORS & AUDITORS REPORT:

i, STATUTORY AUDITORS:

M/s. Mullapudi & Co., Chartered Accountants, (Firm Reg no: 006707S) Hyderabad, have been appointed as Statutory Auditors of the Company on 23rd September, 2017 for a period of five years i.e. to hold office until the conclusion of 28th Annual General Meeting to be held in the year 2022.The Independent Auditors report doesnt contain any reservation, qualification or adverse remark.

ii. SECRETARIAL AUDITORS:

The Company has appointed M/s. C.V. Reddy K & Associates, Practising Company Secretaries as Secretaria I Auditor. The Secretarial Audit report for the Financial Year 2018-19 in Form No MR-3 is annexed herewith as "Annexure D" to this Report. The Secretarial Audit Report does not contain any reservation, qualification or adverse remark.

12. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186:

The Company has not made any loan, given guarantee or provided security or made investments pursuant to the provisions of Section 186 of Companies Act, 2013.

13. CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as follows:

A) Conservation of energy:

The operations of the Company are not energy intensive and every effort has been made to ensure the optimal use of energy, avoid waste and conserve energy by using energy efficient computers and equipment with latest technologies.

(B) Technology absorption:

The Company is constantly upgrading its technological excellence with emerging technologies. It has not incurred any expenditure on Research and Development.

(C) Foreign exchange earnings and Outgo:

Foreign Exchange Earnings during the year: NIL Foreign Exchange outgo: INR 14.47 Crores

14. PARTICULARS OF EMPLOYEES

The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:

a. The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the Financial Year :

Name Designation Ratio to Median Remuneration
Mr. T. Gopichand Vice-Chairman & Managing Director 82.03

b. The percentage increase in remuneration in each Director, Chief Financial Officer, Company Secretary in the Financial Year : Nil

c. The percentage increase in the median remuneration of employees in the Financial Year : Nil

d. The number of permanent employees on the rolls of the Company as on 31st March, 2019:1295

e. Average percentile increase made in the salaries of employees other than the managerial personnel in the last Financial Year :

Average percentage increase made in the salaries of employees other than the managerial personnel in the last Financial Year i.e. 2018-19 was 4.29%. Justification: Increase in remuneration is decided based on the individual performance, inflation, prevailing industry trends and benchmarks. The remuneration of NonExecutive Directors consists of sitting fees only.

f. Affirmation that the remuneration is as per the remuneration policy of the Company:

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

15. CORPORATE SOCIAL RESPONSIBILITY

The Companys CSR policy is available on our website: www.terasoftware.com . The Corporate Social Responsibility Committee formed pursuant to section 135 of Companies Act, 2013 approved a budget of Rs. 21 Lacs/- (Rupees Twenty-One Lakhs only)duringtheFinancialYear 2018-19. The Company spent Rs. 4 Lacs on healthcare improvement project. Due to insufficient funds, it was decided to carry forward the balance of CSR Fund and to be spent in the next Financial Year.

16. HUMAN RESOURCES

Your Company recognizes human capital as the most important element to drive its progress. Hence, your Company has devised initiatives that enable training and development of employees across levels and enables their professional and personal growth.

Your Companys human resources management framework is aligned to the business goals and drives key decisions on business processes and introduction of new technology. The HR interventions of the Company focuses on skilling the existing workforce and empowering them to step beyond their defined roles.

17. RISK MANAGEMENT

The provisions related to the Risk Management Committee as stated in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are not applicable to the Company. However, the Company has voluntarily constituted a Risk Management Committee and Risk Management Framework to identify, evaluate, mitigate and monitor the risk management in the Company. The Audit Committee has additional oversight in the area of financial risk and controls.

18. INTERNAL FINANCIAL CONTROLS

The Company has an Internal Financial Control System commensurate with the size and scale of its operations. The scope of the internal audit is decided by the Audit Committee and the Board. To maintain its objectivity and independence, the Board has appointed an internal auditor, who reports to the Audit Committee and the Board on a periodic basis. The internal auditor monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies for various functions of the Company, Audit observations and actions taken there of a represented to the Audit Committee.

19. VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Board of Directors has adopted the Whistle Blower Policy that aims for conducting the affairs in a fair and transparent manner by adopting highest of the company standards of professionalism, honesty, integrity and ethical behaviour. A mechanism has been established for employees to report their concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Managing Director in exceptional cases. The Policy on vigil mechanism may be accessed on the Companys website at the link: http://terasoftware.com/investors/vigil-blower-policy/. There were no complaints received during the year 2018-19.

20. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

No material orders have been passed by the Regulators or Courts or Tribunals against the Company which would impact the going concern status of the Company and its future operations.

21. LISTING OF SHARES ON STOCK EXCHANGES:

The Equity Shares of your Company are listed on the BSE Limited and National Stock Exchange of India Ltd. The Annual Iisting fees of both the stock exchanges have been paid.

22. EXTRACT OF ANNUAL RETURN:

The extract of the Annual Return, in form MGT 9 for the Financial Year 2018-19 is available on the website of the Company at the following link:

www.terasoftware.com/investors/annual-reports-MGT9

23. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

Particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013 is prescribed in form AOC-2 and is appended as "Annexure C" to the Boards report.

There are 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.

All Related Party Transactions have been placed before the Audit Committee for their approval and to the Board, as and when required. In certain cases, prior omnibus approval of the Audit Committee is obtained on a yearly basis. The transactions entered into pursuant to the omnibus approval so granted are reviewed by the audit committee on a quarterly basis. The policy on Related Party Transactions as approved by the Board is uploaded on the Companys website.

24. SEXUAL HARASSMENT

Your Company always believes and endeavors to provide safe and healthy environment, which is free from discrimination and harassment including sexual harassment. During the year, there were no complaints filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder.

25. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to the provisions of Section 134(5) of the Companies Act, 2013 the Board of Directors to the best of their knowledge and ability confirm that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; if any

b) The board has selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the profit of the Company for such period;

C) The board has taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) The annual accounts have been prepared on a going concern basis; and

e) The Company had laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively.

F) The board has devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGMENT:

Your Directors place on record their gratitude to the Central, State Governments and Companys Bankers for the assistance, cooperation and encouragement they extended to the Company. The Directors would also like to thank the Shareholders, Customers, Employees, dealers, suppliers and all other stakeholders for their continued support and confidence in the Companys management.

For and on behalf of the Board of Directors

Sd/ Sd/-
(Koteswara Rao SSR) (T. Gopichand)
Place: Hyderabad Chairman Vice Chairman and Managing Director
Date : 24.05.2019 DIN: 00964290 DIN:00107886