BOARDS’ REPORT Dear Shareholders, A. The Board of Directors (“Board”) is pleased to present the Fifteenth Annual Report and the Audited Financial Statement of the Company for the financial year ended 31 December 2015. B. REVIEW OF OPERATIONS During the year ended 31 December 2015, the consolidated income of the Company was Rs 29,469 Lakhs as against Rs. 31,062 Lakhs during the previous year ended 31 December 2014. At a standalone level, the total income of the Company for the year ended 31 December 2015 amounted to Rs.13,293 Lakhs compared to Rs. 16,372 Lakhs during the previous year ended 31 December 2014. C. MANAGEMENT DISCUSSION AND ANALYSIS REPORT Management Discussion and Analysis Report for the year 2015 as stipulated under Regulation 34(2)(e) of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) is presented in a separate section and forms an integral part of this Report. D. DIVIDEND The Board does not recommend a dividend per equity share. E. TRANSFER TO RESERVES During the year under review, the Company is not required to transfer any amount to the General Reserve. F. SUBSIDIARY Your company has 5 (five) subsidiaries for the financial year ended 31 December 2015. During the year under review, there have been no material changes in the business of the subsidiaries. In terms of Section 129(3) of the Companies Act, 2013 (‘The Act’), the Company has prepared a statement containing the salient features of the Financial Statement of subsidiaries in the prescribed Form AOC-1 which is attached to the Financial Statements of the Company. The Financial Statements of Subsidiary Companies are kept open for inspection by the shareholders at the Registered Office of your Company during business hours on all days except Saturdays, Sundays and public holidays upto the date of the Annual General Meeting (‘AGM’) as required under Section 136 of the Act. Any member desirous of obtaining a copy of the said financial statements may write to the Company at its Registered Office. The financial statement including the consolidated financial statement and all other documents required to be attached with this report have been uploaded on to the website of your Company viz. http:// www.xchanging.com/investor-relations/xsl-content. G. RELATED PARTY TRANSACTIONS All Related Party Transactions were placed before the Audit Committee for approval as per the Related Party Transactions Policy of the Company as approved by the Board. The policy is also uploaded on to the website of the company and can be accessed through the link http:// www.xchanging.com/investor-relations/xsl-content. All related party transactions that were entered into during the financial year were on an ‘arm’s length basis’ and were in the ordinary course of business. Particulars of contracts or arrangements with related parties in the prescribed Form AOC-2, is provided as Annexure - I to this Boards’ Report. H. AUDITORS i) Statutory Auditors and Auditors’ Report The Shareholders of the Company in the 13th AGM of the Company had appointed M/s Price Waterhouse Chartered Accountants LLP (Firm Registration No. 012754N/N500016) (“PwC”) as the Statutory Auditors of the Company to hold office from the conclusion of the 13th AGM till the conclusion of the 18th AGM of the Company subject to ratification of their appointment by the Members at every AGM held after the 13th AGM. Accordingly, it is proposed to ratify the appointment of PwC as Statutory Auditors of the Company from conclusion of the forthcoming AGM till the conclusion of next AGM. The Auditors in the Auditors’ Report dated 26 February 2016 have commented that the backup of the books of accounts and other books and papers are not maintained in electronic mode on servers physically located in India. The Company would like to clarify that the backup storage is maintained centrally outside India and the Company is in the process of evaluating technology options for this requirement. The Auditors’ Report does not contain any qualification, reservation or adverse remark. ii) Secretarial Auditor Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Kumar Bhavesh Kishore (M/s. KBK & Company, Company Secretaries), to undertake the Secretarial Audit of the Company. Accordingly, in terms of provisions of Section 204(1) of the Act, a Secretarial Audit Report given by the Secretarial Auditor of the Company in the prescribed Form MR - 3 is provided as Annexure - II. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. I. PARTICULARS OF LOANS, GUARANTEES, INVESTMENTS AND SECURITIES Details of loan, Guarantee and Investment covered under Section 186 of the Act are provided in the notes to financial statements. J. PUBLIC DEPOSITS Your Company has neither invited nor accepted any deposits from public within the meaning of Section 73 of the Act read with Companies (Acceptance of Deposits) Rules 2014 during the period under review. K. EMPLOYEES i) Key Managerial Personnel (KMP) The following have been designated as the Key Managerial Personnel of the Company pursuant to Sections 2(51) and 203 of the Act read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules, 2014: a) Mr. Alok Kumar Sinha – Executive Director and Chief Executive Officer b) Mr. Vinod Goel – Chief Financial Officer c) Ms. Divya Pant- Company Secretary (27.02.2015 to 14.04.2015) d) Mr. Amit Kumar – Company Secretary (07.08.2015 to 27.10.2015) e) Mr. Mayank Jain - Company Secretary (26.02.2016 onwards) ii) Employees’ Stock Option Plan (ESOP) Details of ESOP are set out in Annexure - III to this Report. iii) Particulars of Employees and Related Disclosures The Company had 4 (four) employees who were in receipt of remuneration as specified under Section197 of the Act read with Rule 5(2)& (3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Disclosures with respect to the remuneration of Directors, KMPs and Employees 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 given in Annexure - IV to this Report. Details of employee remuneration as required under provisions of Section 197 of the Act read with Rule 5(2) & 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are available at the Registered Office of the Company during working hours for 21 days before the Annual General Meeting and shall be made available to any shareholder on request. L. BOARD AND COMMITTEES i) Directors The Board at their meeting held on 07 November 2014, based on the recommendation of the Nomination and Remuneration Committee and subject to the approval of its Members, appointed Mr. Alok Kumar Sinha as an Additional Director and Executive Director of the Company for a period of 3 (three) years w.e.f. 07 November 2014. Thereafter, at the AGM of the Company held on 25 May 2015, he was appointed as Director liable to retire by rotation and an Executive Director and Chief Executive Officer of the Company. The Board at their meeting held on 27 February 2015, based on the recommendation of the Nomination and Remuneration Committee, appointed Ms. Gopika Pant as an Additional Director (Non-Executive and Independent) w.e.f. 02 March 2015. Pursuant to provisions of the Act, Independent Directors are required to be appointed in accordance with Section 149 of the said Act and that the requirement of retirement by rotation shall not be applicable to the Independent Directors. Accordingly, the Board at their meeting held on 27 February 2015, based on the recommendation of the Nomination and Remuneration Committee, appointed Mr. Ashok Kumar Ramanathan, Mr. Henry D Souza and Ms. Gopika Pant as Independent Directors for a term of 5 (five) consecutive years which was subsequently approved by the shareholders of the Company at the AGM held on 25 May 2015. As per Section 152 of the Act, Mr. David Bauernfeind retires by rotation and further being eligible, offers himself for re-appointment at the ensuing AGM. The Board recommend his re-appointment. All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Act and Regulation 16 of the Listing Regulations. ii) Board Evaluation Pursuant to the provisions of Section 134(3)(p) of the Act and Clause 49 of the erstwhile Listing Agreement (now Regulation 4 of Listing Regulations), the Board and Committees of the Board have carried out an annual evaluation of their own performances respectively. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. iii) Remuneration Policy The Remuneration Policy of the Company as approved by the Board on the recommendation of the Nomination and Remuneration Committee is available at http:// www.xchanging.com/investor-relations/xslcontent. iv) Board/Committee Composition and Meetings A calendar of meetings is prepared and circulated in advance to the Directors. The details of composition of Board and Committee and their meetings held during the year are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Act and the Listing Agreement. v) Familiarization Programme and Separate Meeting of Independent Director’s During Financial Year 2015, one separate meeting of the Independent Directors of the Company was held on 15 May 2015 without the attendance of Non-Independent Directors and members of the Management. Along with other matters, Independent Directors discussed the matters specified in Schedule IV of the Act and Clause 49 of the Listing Agreement (now Regulation 25 of the Listing Regulations). The Nomination and Remuneration Committee of the Company in its meeting held on 27 February 2015 has approved a familiarization programme for Independent Directors of the Company. The Familiarization programme for Independent Directors is available at http:// www.xchanging.com/investor-relations/xslcontent. vi) Audit Committee This Committee comprises the following Directors viz. Mr. Ashok Kumar Ramanathan (Chairman of the Committee), Mr. David Bauernfeind, Mr. Henry D Souza and Ms. Gopika Pant. The Company Secretary acts as the Secretary to the Committee. All the recommendations of the Audit Committee were accepted by the Board. vii) Directors’ Responsibility Statement Pursuant to section 134(5) of the Act, your Directors, based on the representations received from the Management and after due enquiry confirms that: a) in the preparation of the annual accounts for the financial year ended 31 December 2015, the applicable accounting standards have been followed; b) the Directors had selected 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 as at 31 December 2015 and of the profit 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 irregularities; d) the Directors have prepared the annual accounts on a going concern basis; e) the Directors have laid down adequate Internal Financial Controls to be followed by the Company and such Internal Financial Controls were operating effectively during the Financial Year ended 31 December 2015; and f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively throughout the Financial Year ended 31 December 2015. M. GOVERNANCE i) Corporate Governance The Company is committed to uphold the highest standards of Corporate Governance and to adhere to the requirements set out by the Securities and Exchange Board of India. A detailed report on Corporate Governance along with the Certificate of Mr. Kumar Bhavesh Kishore (M/s. KBK & Company, Company Secretaries), confirming compliance with conditions of Corporate Governance as stipulated under Schedule V of the Listing Regulations forms an integral part of this Report. ii) Vigil Mechanism / Whistle Blower Policy The Company has established a whistle-blower policy and also established a mechanism for directors and employees to report their concerns. The details of the same are explained in the Corporate Governance Report. iii) Risk Management The Company has a Risk Management process which provides an integrated approach for managing the risks in various aspects of the business. The detailed framework is provided in the management discussion and analysis report. iv) Internal Financial Controls Your Company has in place adequate internal financial controls with reference to the financial statements. v) Disclosure under the Sexual Harassment of Women at the Work Place (Prevention, Prohibition and Redressal) Act, 2013 The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Internal Complaints Committee (“ICC”) has been set up to redress the complaints received regarding sexual harassment. All employees are covered under this policy. The following is the summary of the complaints received and disposed of during the financial year 2015: a) No. of complaints received : Nil b) No. of complaints disposed of : Nil N. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES The Corporate Social Responsibility Committee had formulated and recommended a Corporate Social Responsibility Policy to the Board of the Company which was subsequently adopted and implemented by the Company. The web-link to the CSR Policy is available at http://www.xchanging.com /investorrelations/ xsl-content. The detailed Annual Report on CSR activities is annexed herewith and marked as Annexure - V. O. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The information as per Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 regarding Conservation of Energy, Research & Development, Technology Absorption and Foreign Exchange Earning and Outgo is annexed herewith as Annexure - VI. P. OTHER CHANGES i) Share Capital a) There was no change in the paid-up share capital of the Company. As on 31 December 2015, the paid-up capital of the Company was Rs. 1,114,037,160. This comprises 111,403,716 equity shares of Rs. 10/- each fully paid-up. b) The Board of Directors in the meeting held on 27 February 2015 has approved reduction of share capital by return of Rs. 5/- per share to the shareholders of the Company by reducing the nominal value of the shares from Rs.10/- to Rs. 5/- per share, subject to the approval of the regulatory authorities, shareholders and the High Court of Karnataka. Based upon aforesaid approval of the Board, an application was made to BSE Limited (‘BSE’) and National Stock Exchange of India Limited (‘NSE’) (collectively referred as ‘Stock Exchanges’) on 27 March 2015 and accordingly, the Company obtained No Objection / Observation Letter from the BSE and NSE vide their letters dated 24 June 2015 and 02 July 2015, respectively. However, due to expiry of validity period of the aforesaid Stock Exchange approvals, the Board in its meeting held on 26 February 2016 decided not to proceed with the capital reduction process. c) Xchanging Plc, the ultimate parent company of the Company, has received a binding offer (“Overseas Offer”) from CSC Computer Sciences International Operations Limited along with Computer Sciences Corporation, CSC Technologies India Private Limited and Computer Sciences Corporation India Private Limited (“CSC”) for acquisition of the entire share capital of Xchanging Plc. Considering the fact that any change in the control at the ultimate parent entity will trigger the open offer, accordingly, CSC in terms of provisions of Regulation 3, 4, and 5(1) of SEBI (SAST) Regulations, 2015 had made a public announcement of open offer to acquire 25% of public shareholding in the Company at INR 37.63 per share. This open offer is subject to successful completion of the Overseas Offer. ii) Statutory Disclosures None of the Directors of your Company are disqualified as per provision of Section 164(2) of the Act. The Directors of the Company have made necessary disclosures as required under various provisions of the Act and the Listing Agreement. iii) Significant and Material Orders passed by the Regulators or Courts During the period under review, your Company had received an order dated 20 November 2015 from the Hon’ble Company Law Board, Chennai Bench, wherein permitting the Company to follow a different Financial Year, i.e. 01 January to 31 December, than that is contemplated under Section 2(41) of the Act, i.e. 01 April to 31 March. iv) Extract of Annual Return Pursuant to Sub-section 3(a) of Section 134 and Sub-section (3) of Section 92 of the Act read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of the Annual Return as on 31 December 2015 in Form MGT – 9 is attached herewith as Annexure - VII and forms a part of this Report. ACKNOWLEDGEMENTS: Your Directors would like to express their sincere appreciation for the co-operation and assistance received from the Company’s Bankers, Regulatory Bodies and Stakeholders including other business associates who have extended their valuable sustained support and encouragement during the year under review. Your Directors also wish to place on record their deep sense of gratitude and appreciation for the commitment displayed by executives, officers and staff at all levels of the Company, resulting in the successful performance of the Company during the year under review. We look forward to your continued support in the future. For and on behalf of the Board of Directors, David Bauernfeind Non-Executive Director & Chairman Place : London Date : April 04, 2016 Alok Kumar Sinha xecutive Director & Chief Executive Officer Place : Bangalore Date : April 04, 2016 |