DIRECTORS' REPORT The Directors hereby present the 29th Annual Report and the audited financial statements of the Company for the year ended March 31 2015. 2. Dividend In view of the losses, your Directors have not recommended any dividend for the financial year ended March 31, 2015. 3. Financial Performance The Company, for the year ended March 31, 2015 recorded a gross turnover of Rs. 341.27 Crores as against Rs. 306.23 Crores for the period ended March 31, 2014. The profit before tax is Rs. 2.33 Crores for the period ended March 31, 2015 as against loss before tax of Rs. 144.90 Crores for the previous period. The net loss for period ended March 31, 2015 Rs. 0.38 Crores as against net loss of Rs. 145.08 Crores for the previous period. 4. Operations According to IMF, World Economic Outlook, global growth in 2014 was a modest 3.4 percent, reflecting a pickup in growth in advanced economies relative to the previous year and a slowdown in emerging market and developing economies. Complex forces that affected global activity in 2014 are still shaping the outlook. Growth is projected to be stronger in 2015 relative to 2014 in advanced economies, but weaker in emerging markets, reflecting more subdued prospects for some large emerging market economies and oil exporters. Span of Projects undertaken across the globe Despite the overall challenging market conditions, your Company has been able to sustain and win a significant number of contracts and project wins across verticals and geographies. Some of the prominent wins of varying sizes during the year were: India • Deployed a high performance server solution for a leading global bank • Implemented a comprehensive communication solution including Voice, Video and underlying intelligent network for a leading steel manufacturer • Enhanced the customer service capability of a leading computer peripherals manufacturer with AGC's service wrap around the call management suite • Deployed Call center application services for a MNC Insurance company Nepal • Dynamic services on IVR for the first private mobile operator in the country Bangladesh • Enabled a virtualized environment for the country's second largest cellular service provider USA • Deployed communication systems for a Republic & wealth management bank in the US • Completed a UC solution and professional services implementation for the tenth largest accountancy firm in the US • Implemented a UC system for one of the largest financial services companies in US • Won a large multi OEM services contract in the Midwest and Southeast USA • Implemented a significant enterprise project win in a competitive city government bid in the Southwest and got a customer satisfaction score of 9.5 on a scale of 10 • Got a UC deal from one of the largest banking organizations headquartered in Atlanta, serving a broad range of consumer, commercial, corporate and institutional clients • Wireless and data infrastructure project for a medium player in the gaming industry in the Midwest • UC and contact center deployment with a State / Local entity in the Southeast • Large maintenance and AGC services contract with a large Nationwide manufacturer • Accomplished successful AV design integration and solutioning for a global leader in multichannel customer experience Australia • Deployed a large Unified Communications upgrade across 12 countries and signed an exclusive deal with a large BPO for their infrastructure • Successfully completed a video conferencing project as a fully integrated UC service for an international university with campuses in Melbourne and Vietnam Middle East & Africa • Secured a large contract from a leading University of Ethiopia for a student information system • Implemented the entire data centre with servers, storage & contact centre for one of the biggest car rental companies in Saudi Arabia. • Enhanced AGC's foot print across Africa in Kenya, Ethiopia & Rwanda • Cyber Security solutions (setting up of SOC, database activity monitoring and security information management services) being implemented for three leading banks across Kenya and the Middle East • Won a video conferencing deal from a diversified business conglomerates in Africa • Awarded a large deal of Data Center Virtualization from a leading developer in UAE 5. Awards And Recognitions Recognition from the partner community includes, • ANZ Top Networking Partner from Avaya • ANZ Partner of the Year 2014-15 from Avaya • Partner of the Year - Western Region, India from Juniper • Partner of the Year - Eastern Region, India from HP 6. Value Creation Through Technology Solutions Your Company seeks to differentiate itself by being responsive while delivering superior technology solutions to accelerate our customers' business. To accomplish this, your Company has built a strong and experienced global leadership team to cultivate and grow durable bonds with OEMs and technology partners, who have consistently helped us identify emerging technologies that we integrate for customers globally to guide them with respect to their technology landscape. Focus on your Company's key areas of operations, supply chain efficiency and execution effectiveness have contributed to last mile efficiencies positively impacting the customers' business outcomes. At AGC teams across functions and geos - from Sales to Solution Design specialists to Project Managers, the Alliance (OEM support) team, or backend support across HR, Marketing and Finance that impact customers, are all part of what we call The AGC Value Chain. When internal teams align their processes to enable a hassle free experience for the end customer, when this value chain seeks to create a seamless front-end for the customer, the process of doing business with AGC gets easier, going beyond transactions to create customers-for-life. This spans the following four areas of focus for AGC. The Z-Curve AGC has been one of the early adopters of industry solutions and business-value based selling. A decade ago, while enjoying the market leadership in the Unified Communications (UC) space, AGC repositioned Communication - from merely being a customer service tool (and hence a cost element) to being a business accelerator (and hence a revenue element). By understanding process delays and embedding pertinent UC solutions, AGC was able to devise solutions for market activation, supply chain, field force, retail automation etc., with the underlying philosophy that communication can help loosely-couple business processes, thereby improving agility. While this did help our customers accelerate their business and helped AGC diversify revenue streams, there were technology and market forces at work, more importantly in past few years that led AGC to look beyond UC offerings. We call this the Z-Curve. With mobility / smart phones / devices & consumerisation of IT at the access and virtualisation at the core, technology has been getting increasingly federated. This meant that voice & video communication channels were no longer a wrap-around layer around business processes. Communication was now deeply embedded across an imploding set of touch points interspersed across the entire infrastructure layer and touched both on-premise tech & the data center. Thus AGC's active play in the UC and NI & DC quadrants helped customers accelerate their business. The Cyber Security quadrant provides the required security to the infrastructure. Social media, federation of technology, Internet of Things (IOT) & advent of cloud/utility models also meant an increasing play for AGC in connecting infra with business applications through a basket of service offerings and consumption models. Applications & Services with offerings like SMAC, M2M, UC Apps, AGC GUARDIAN & Managed Services are the fourth quadrant. Becoming the Trusted Advisor With increasing user demands and shrinking budgets, today's CIO do a tight-rope walk more than ever before. AGC continues to work towards becoming a trusted advisor for its customer - a partner who can help sweat the capital already invested, thus improving ROTI (Return on Technology Investment). AGC has taken various initiatives in this direction (Tech Landscaping, Advanced Design Services, Customer Experience Centre, Tech Days, ideation forums like Xcelerate and TechFutures). From International to Global Having increased its footprint across continents, AGC now has formidable presence in India, North America, Australia / New Zealand, Middle East / Africa. AGC has now networked its engineering and design resources and follows a 'Central Kitchen' model out of India for continuous skill building and refresh thanks to the availability of skilled manpower and the potential cost arbitrage. AGC also has a central Solution Design Centre (SDC) based out of Pune in India that architects solutions across geographies. This team has crafted over 6000 technology solutions in the financial year. While AGC builds services-led local partnerships and skills in each geo in a calibrated fashion, its major focus remains on a set of key alliance partners and skills. This helps attract inbound investments and a seat on the global high table with OEMs and customers, slowly but surely transforming AGC into a global brand. Our increasing ability to absorb the service related skills of newer brands reinforces both our solution integration abilities and our competitive advantage. Shaping the Future Your Company enables technology decisions that are consumption-led, software-defined and device-delivered. With traditional models (CapEx), mega trends like all-things-digital, SDX and emerging models (Cloud & Managed Services) as a key enabler for business, AGC helps CIOs deliver business outcomes. AGC is prepared to offer both the traditional as well as the newer models to its customers by building its own Cloud offerings, re-selling Public Clouds and offering Advanced Srvices around building / managing Hybrid Clouds along side its traditional CapEx offerings. 7. Organizational Initiatives At AGC, we place utmost importance on our people and constantly work towards building and maintaining a progressive working environment. HR policies are continuously aligned with the organization's strategy to drive company values and culture to benefit the employee and our business needs. During this year, the Company initiated measures to optimize resource utilization. The Company's employee strength was optimized to promote productivity and growth. Aligned to this agenda, Global Talent Exchange (GTEx) and Internal Job Postings (IJP) have been initiated for fulfilling global resource requirements. This helped support our agenda for individual growth and team development. Other organizational initiatives have been: • World Environment Day - AGC being a responsible corporate citizen celebrated World Environment Day on 5th June globally with the intent to sensitize employees to be environment conscious and support a sustainable green environment. A series of go green initiatives were conducted that included - AGC Recycle Drive, AGC Tree Plantation Drive, AGC Car Pooling Initiative etc. • Outreach - A global all hands communication platform. • Quest - An employee connect initiative in Q& A format with our MD & CEO initiated for all global employees to freely ask questions. The session helped gain meaningful insight across all geos to align all AGCians towards a common purpose. • AGC Annual Day - With AGC entering its 30th year of serving customers in the ICT space; AGCians came together to celebrate a fun-filled day. It was an opportunity to connect with AGC senior leadership, esteemed OEMs / Partners and Customers, and applaud fellow AGCians for their exemplary performance and witness exceptional talent through the AGC Talent show. This facilitated a collaborative work culture and built camaraderie as employees engaged in a range of activities encompassing both celebrations and fun events. • Envision - an ideation meet with MD& CEO, to discuss ideas and brainstorm suggestions, communicate strategic views and future plans and discuss ways to accelerate business; a platform to gather market intelligence, ignite creative thinking, brainstorm and ideate to build new pathways to the market and understand the needs of customers and vendors. • Our Learning and development offerings - have been customized for employees across career levels, skill and domains. Learning expertise has been cultivated in-house, in the form of dedicated internal trainers and lab modules. New learning and development methodologies were launched to maximize individual capability and performance. In FY15, 1861 training mandays were clocked covering 90% unique employees with 363 key OEM certifications. • Talent Engagement - is a key imperative to build employee connect through communication and employee interventions. We have established multiple channels to connect employees with leaders as well as peer groups and enable continuous and transparent communication. • CSR - As a responsible corporate organization, AGC has been consistently working towards adding value to the society through some of its community initiatives such as, 'Recycle Karo Drive' for paper and electronic waste and 'Hastashilp' a carnival of arts and crafts. Our Annual Employee Engagement Survey - is used as a tool to assess employees' attitudes, beliefs and perceptions about AGC, identify key engagement drivers and recognize opportunity areas. The global employee engagement score for FY15 was at 84%, reflecting a highly engaged and motivated workforce. 8. Management's Discussion and Analysis report Management's Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming integral part of the Annual Report. 9. Internal Financial Controls The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were reviewed and no reportable material weakness in the design or operation was observed. 10. Fixed Deposits The Company has not accepted any Fixed Deposits during the year. 11. Subsidiaries In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. However, the financial information of the subsidiaries companies is disclosed in the Annual Report in compliance with the said circular. The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies. During the year, AGCNETWORKS Philippines INC. became subsidiary of the Company through its Singapore Wholly Owned Subsidiary. A statement containing salient features of the financial statements of each of the subsidiaries of the Company in Form No. AOC-1 is presented on page No. 136 of this Annual Report. 12. Particulars of Loans given, investments made, Guarantees given and securities provided Particulars of Loans given, investments made, Guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the notes to financial statements. 13. Statutory Auditors and their report M/s. Walker Chandiok & Co LLP, Chartered Accountants, Mumbai, Statutory Auditors of the Company shall hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. They have confirmed their eligibility to the effect that their re-appointment, if made, would be within the prescribed limits under the Act and that they are not disqualified for re-appointment. The Notes to financial statement referred to in the Auditors' Report are self-explanatory and do not call for any further comments. Following were the reservation/qualifications mentioned in their Audit Report for the financial year ended 31st March, 2015, along with Company's explanation for the same. A. Standalone Audit report As stated in Note 28(d) to the financial statements, during the year the Company has recognized sale of properties having aggregate carrying value of Rs. 1.09 crores and profit on such sale amounting to Rs. 46.04 crores (net of incidental selling expenses amounting to Rs. 3.39 crores) under 'exceptional items'. In our opinion, as the significant risks and rewards for the said property have not been transferred during the year ended 31 March 2015, recognition of such sale is not in accordance with the principles laid under Accounting Standard (AS) 9 Revenue Recognition. Had the Company not recognized such sale, loss after tax for the year ended 31 March 2015 would have been higher by Rs. 46.04 crores; tax expense would have been lower by Rs. 3.27 crores; non-current loans and advances would have been higher by Rs. 3.27 crores and the reserves and surplus, other current assets and other current liabilities as at that date would have been lower by Rs. 42.77 crores, Rs. 50.52 crores and Rs. 3.39 crores, respectively. Further the carrying value of tangible assets as at 31 March 2015 would have been higher by Rs. 1.09 crores B. Consolidated Audit report As stated in Note 26(d) to the financial statements, during the year the Company has recognized sale of properties having aggregate carrying value of Rs. 1.09 crores and profit on such sale amounting to Rs.46.04 crores (net of incidental selling expenses amounting to Rs. 3.39 crores) under 'exceptional items'. In our opinion, as the significant risks and rewards for the said property have not been transferred during the year ended 31 March 2015, recognition of such sale is not in accordance with the principles laid under Accounting Standard (AS) 9 Revenue Recognition. Had the Company not recognized such sale, loss after tax for the year ended 31 March 2015 would have been higher by Rs. 46.04 crores; tax expense would have been lower by Rs. 3.27 crores; non-current loans and advances would have been higher by Rs. 3.27 crores and the reserves and surplus, other current assets and other current liabilities as at that date would have been lower by Rs. 42.77 crores, Rs. 50.52 crores and Rs. 3.39 crores, respectively. Further the carrying value of tangible assets as at 31 March 2015 would have been higher by Rs. 1.09 crores. Management's explanation with reference to A and B above The Company has entered into deeds of assignment during the year to transfer all the rights, title and obligations of its land and building situated at Gandhinagar to another company. Subsequent to the year end, the lender to whom these assets were provided as security has provided its in-principal approval for the said transfer subject to fulfillment of conditions stated therein. The said transfer is pending approval from the relevant government authority and transfer of legal title ,that are considered to be procedural in nature. Company has recognized profit on sale of Fixed Assets of Rs. 46.04 Crores disclosed under the head "Exceptional Item". 14. Secretarial Auditors and their report The Board has appointed Dr. S. K. Jain and Co., Practicing Company Secretaries, to conduct Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed herewith marked as Annexure I to this Report. 15. Corporate Governance The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. The Company has also implemented several best corporate governance practices as prevalent globally. The report on Corporate Governance as stipulated under the Listing Agreement forms an integral part of this Report. The certificate required under clause 49(XI)(A) from Practicing Company Secretaries confirming compliance with the conditions of corporate governance is annexed herewith marked as Annexure II. 16. Number of Board meetings During the F.Y. 2014-15, Seventeen (17) Board meetings were held. Further detail on the same in available in Corporate Governance Report which forms part of this Annual Report. 17. Employees' Stock Option Scheme Pursuant to the shareholders approval dated April 21 2015, the Nomination and Remuneration Committee of the board of directors of the Company granted 1,004,866 stock options equivalent to 3.53% of equity paid-up capital of the Company on 14th May, 2015 as per the terms of ESOP Scheme 2015 approved on April 21 2015. 18. Vigil Mechanism The Vigil Mechanism of the Company in terms of the Listing Agreement is incorporated under whistle blower policy. Protected disclosures can be made by a whistle blower through an e-mail, or a letter to the Ethics Officer or to the Chairman of the Audit Committee. The Policy on vigil mechanism and whistle blower policy may be accessed on the Company's website at the link <http://www.agcnetworks.com/home/policies>. 19. Extract of Annual Return Extract of the Annual Return of the Company in Form No. MGT-9 is annexed herewith as Annexure III of this report. 20. Directors and Key Managerial Personnel In accordance with the provisions of the Act and Articles of Association of the Company, Mr. Neeraj Gupta and Mr. Sanjeev Verma, Directors of the Company retire by rotation at the ensuing Annual General Meeting and being eligible have offered themselves for re-appointment. During the year at 28th Annual General Meeting of the Company, members of the Company appointed Mr. Anil Nair (as Managing Director and Chief Executive Officer), Mr. Manhar Mandaliya (as Independent Director), Mr. Neeraj Gupta (as Non-executive Director), Mr. Sanjeev Verma [as whole time director, who on 19th October, 2014, resigned from his whole-time directorship and continued to be Director (non-executive)] of the Company, and re-appointed Mr. Shuva Mandal and Mr. Sujay Sheth (Independent Directors of the Company). The Board has appointed Dr. (Mrs.) Sujaya Banerjee (as Non-Executive Director of the Company) during the year, and Mr. Jangoo Dalal was appointed as Additional Director (to be designated as Independent Director) by the Board on 27th May, 2015. The Board also approved appointment of Mr. Amal Thakore as Chief Financial Officer of the Company during the year. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and Clause 49 of the Listing Agreement with the Stock Exchanges. The Company has devised a Policy for performance evaluation of Directors, Board and senior management which include various criteria for performance evaluation of the same. The Company has also devised remuneration policy. These policies are annexed to this report as Annexure IV and V respectively. 21. Personnel The Board places on record its appreciation for the hard work and dedicated efforts put in by all the employees. The relations between the management and employees continue to remain cordial on all fronts. In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, 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 the Annual Report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annual Report. Kindly refer Annexure VI of this report. Having regard to the provisions of the first proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request. 22. Particulars required to be furnished by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 (i) Part A pertaining to conservation of energy is not applicable to the Company. (ii) Part B pertaining to particulars relating to technology absorption is as per Annexure VII to this report. 23. Corporate Social Responsibility (CSR) The Corporate Social Responsibility Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy may be accessed on the Company's website at the link <http://www.agcnetworks.com/in/en/> corporate-governance. The Report on CSR activities is annexed herewith marked as Annexure VIII. 24. Risk Management Policy During the year, your Directors have constituted a Risk Management Committee which has been entrusted with the responsibility to assist the Board in (a) Overseeing and approving the Company's enterprise wide risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks. A Group Risk Management Policy was reviewed and approved by the Committee. 25. Contracts and Arrangements with Related Parties All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. Most of these are one time purchase/sales transactions except Loans and Advances transactions which are repayable on demand, and maintenance services transactions which are of the duration of 3 months to 12 months. Your Directors draw attention of the members to Note 32 to the financial statement which sets out related party disclosures. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: <http://www.agcnetworks.com/home/> policies. 26. Directors' Responsibility Statement Your Directors state that: a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; b) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the profit/(loss) of the Company for the year ended on that date; c) the Directors have 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 Directors have prepared the annual accounts on a 'going concern' basis; e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 27. Committees of the Company The details relating to all the Committees constituted by the Company are mentioned in the 'Corporate Governance Report', which forms a part of the Annual Report. 28. Acknowledgements The Board is thankful to the Shareholders and the Bankers of the Company for their continued support. It also takes this opportunity to express gratitude to its various suppliers and its partners for their continued co-operation, support and assistance. Above all, the Board expresses its appreciation to each and every employee for his / her contribution, dedication and sense of commitment to the Company's objectives. For and on behalf of the Board of Directors AGC Networks Limited Anil Nair Neeraj Gupta Managing Director & CEO Director Place : Mumbai Date : June 25, 2015 |