AFFLUENCE

DIRECTORS’ REPORT

To,

The Members,

CMS Info Systems Private Limited

Your Directors have pleasure in presenting the SeventhAnnual Report of the Company along with the Audited Statements of Accounts for the year ended 31st March 2014

1.      FINANCIAL RESULTS:          

                                                                                                                           (Amount in Rupees)

2.      DIVIDEND:

For the financial year from 1st April, 2012 to 31st March, 2014, the Board has declared and company has paid Preference ddividend @ 0.01% on 15,00,000/- Optionally Convertible Cumulative Redeemable Preference Shares (“OCPS”) of Company aggregating to Rs. 30,000/- and the dividend distribution tax of Rs. 5100/- was also paid by the Company.

3.      REVIEW OF OPERATION:

      The year under report was a decent year for the growth of the company and customer traction continued to be good. Your Company showed an improvement in business as compared to the previous year. During the year under review, your Company was able to maintain profitable operations for the Company.

4.      CORPORATE RESTRUCTURING

      The Company, CMS IT Services Private Limited and its shareholders have entered into a scheme of Arrangement (the ‘Scheme’) whereby the IT and the Print Division business of the Company would be demerged and transferred to CMS IT Service Private Limited with effect from January 01, 2015 (Appointed Date), subject to the approval of Honorable High Court of Bombay, Maharashtra. The Scheme was approved by the Board of Directors of both the Companies in the meetings held on September 22, 2014 and is filed with the Honorable High Court of Bombay for the necessary approvals.

5.      SHARE TRANSFER:

      Mr. Ramesh D Grover, registered shareholder of the company expired on 5 March, 2011. Universal Trustees Private Limited (UTPL) being the sole executor of his estate, has filed an application before the Honorable High Court of Bombay, to grant Probate in respect of his will. The company will initiate the Transfer of Late Mr. Ramesh Grover’s Shares upon receiving written request from UTPL, supported by copy of Probate order passed by the Honorable High Court of Bombay along with other necessary documents.

6.      SUBSIDIARY:

During the year under review, the Company has made an Investment to float its new Subsidiary Company with name, CMS IT Services Private Limited. The said Subsidiary was incorporated on 18th September, 2014.  As required under provisions of section 212 of the Companies Act, 1956, the Statement of Holding Company’s Interest in Subsidiary Companies (viz: CMS Securitas Ltd., CMS Marshall Ltd.,Securitrans India Private Limited andCMS IT Services Private Limited) is attached herewith and forms a part of this report.   

7.      DIRECTORS:

Mr. Amit Jain was appointed as an Additional Director of the Company with effect from 8th   August, 2014. As perprovisions of the Section 161 of the Companies Act, 2013 an Additional Director can hold office up to the date of the ensuing Annual General Meeting. Mr. Amit has confirmed his willingness and eligibility to accept the office of Director of the Company, if appointed. The Company has received a notice proposing the appointment of Mr. Amit Jain, for the office of Director of the Company at the ensuing Annual General Meeting of Company. Proposal seeking approval of the Members for the appointment of Mr. Amit Jain as the Directors of the Company is placed before the members for their approval.

8.      AUDITORS:

M/s. S. R. Batliboi & Associates LLP, Chartered Accountants, Statutory Auditors of the Company, retires at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for appointment as statutory auditors of the Company until the conclusion of  Annual General Meeting to be held forthe financial year ended 31-03-2018 (subject to ratification of their appointment by the Members at every Annual General Meeting held after the ensuing Annual General Meeting)pursuant to Section 139of the Companies Act, 2013. 

Your director recommends M/s. S.R. Batliboi & Associates LLP, (Chartered Accountants), Mumbai, to be appointed as Statuary Auditorsof the company at the forthcoming Annual General meeting of company to hold the office from the conclusion of this Annual General Meeting till the conclusion of the Annual General Meeting of the Companyfor the financial year ended 31st March, 2018.

The Company has received confirmation letter cum certificate from M/s. S. R. Batliboi & Associates LLP, under the provision of 139(1) of the Companies Act, 2013 to the effect that their re-appointment, if made, would be in accordance with the provisions of Companies Act, 2013 and the Rules framed there under and that they satisfy the criteria provided in Section 141 of Companies Act, 2013 and they express their willingness to act as Statuary Auditors of the Company for a period form the conclusion of the financial year ended as on 31st March 2018 subject to yearly rectification of the same by the members at every upcoming Annual General Meeting, as per provisions of Companies Act, 2013,

9.      DIRECTORS’ RESPONSIBILITY STATEMENTS:

Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956, with respect to Directors’ Responsibility Statement, it is hereby confirmed:

a)         That in the preparation of the accounts for the financial year ended 31st March 2014,  the applicable accounting standards have been followed along with proper explanations relating to material departures;

b)        That the Directors have 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 the year under review;

c)         That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,1956 for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities;

d)        That the directors have prepared the accounts for the financial year ended 31st March 2014on a going concern basis.

10.  FIXED DEPOSIT:

Your Company has not accepted/invited any deposits from the Public for the year under review within the meaning of Section 58A of the Companies Act, 1956 and the rules made there under.

11.  PARTICULARS OF EMPLOYEES:

Statement of particulars of employees pursuant to the provision of section 217 (2A) of the Companies act, 1956 forming part of the Directors’ Report for the year ended 31st March, 2014, who are in receipt of remuneration of Rs. 5.00 Lacs per month or in aggregate of Rs. 60.00 Lacs per annum or more during the year ended on 31st March, 2014.

12.  MANAGEMENT’S COMMENTS ON AUDITORS REPORT:

The Directors have gone through the Statutory Auditors Report for the year ending 31-03-2014on the annual accounts of the company and the qualifications marked by the auditors in Annexure thereof under CARO provisions and our remarks/ explanations over the same are as follows:

With reference to Auditors Comment on Point v (b) of Annexure to Auditors Report

Boards Explanation: Auditors remarks is self-explanatory.

With reference to Auditors Comment on Point ix (a) of Annexure to Auditors Report

Board Explanation: The slight delay in paying advance income tax which occurred due to reliance by the company on some judicial interpretations. However later on the payment for the same was made by the company.

With reference to Auditors Comment on Point (xxi) of Annexure to Auditors Report

Boards Explanation: - ATM and Cash Management Division of the Company (erstwhile working in the name of CMS Securitas Limited) is providing cash-management services which involve hard cash currency that had always been an area of high risk. However the company is taking appropriate steps for the instances reported to recover the amount from the cash-frauds from employees and third parties, due to which few of the funds has already been recovered to it, and is further taking appropriate steps to ensure that safety and soundness of the cash management system shall be maintained.

13.  CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS/OUTGO:

The requirement of conservation of energy as laid down in Form No. A to the Companies (Disclosure of particulars in the report of the Board of Directors) Rules, 1988 does not apply to your Company.

The information as required about Technology Absorption in Form No. B is annexed hereto.

Foreign Exchange Earnings and Outgo:

                                                                                   (Figures in Indian National Rupees)

14.  Employee Stock Option Plans

During the year ended on March 31, 2014 your Company has granted Stock Options to its employees under the Employee Stock Option Scheme 2010 as per the following details:

The detail of activity under the scheme is as summarised below:

The weighted average remaining contractual life for the stock options outstanding as at March 31, 2014 is   5.03 years ( March 31, 2013: 5.13 years). The range of exercise prices for options outstanding at the end of the year was Rs. 30.75 to Rs. 80.00 (March 31, 2013: Rs.30.75 to Rs. 80.00)

Weighted average fair value of options granted on the date of grant is Rs. 10.00 (March 31, 2013, Rs. 10.00)

The Black and Scholes Options Pricing model has been used for computing the weighted average fair value considering the following inputs:

The Company measures the cost of options using the intrinsic value method. Had the company used the fair value model to determine compensation, its profit after tax and earnings per share as reported would have changed to the amounts indicated below:

CEO Employee Stock option plan 2008

On July 01, 2009, the Chief Executive Officer (‘CEO’) of the Company was granted 7,205,118 Stock Options at Rs.29.70 each being 6% of the Equity Share Capital of the Company pursuant to the CEO Employee Stock option plan 2008 (the ‘CEO ESOP Plan’). Further, the CEO is eligible for additional options amounting to 6% of any new equity shares issued by the Company.

Pursuant to the plan, the options vest immediately and are exercisable, however by virtue of the Call Agreement signed by CMS Info Systems Employees Welfare Trust (the ‘Trust’), Company and CEO, the Trust has a right to repurchase the exercised shares at the exercise price subject to certain performance and service conditions as per the provisions of the employee agreement (the ‘CEO Agreement’) between CMS Computers Limited and the CEO and Call Agreement.

Considering the Trust has the option to repurchase the equity shares in the specific conditions and at the exercise price, the Company considers these ESOPs as Equity Settled Employee Share Based Payment plans and has accounted these options using the intrinsic value method.

This plan was transferred on the same terms and conditions to the Company from CMS Computers Limited with effect from July 01, 2009 (the effective date for the Scheme of Arrangement as explained in note1) as per the provisions of the CEO Agreement. 

Of the total options granted, 4,803,412 and 2,401,706 options are linked to service and performance conditions, respectively for the purpose of repurchase rights.  As at March 31, 2014, repurchase rights in respect of options linked to service conditions has expired. In respect of 2,401,706 options linked to performance condition the Company is in process of finalising the eligibility for repurchase. 

Till March 31, 2014, CEO has not exercised any options. Further, the Company has not granted any additional stock options to the CEO in addition to the above grant.

Employee Stock Option Plans (IT Division)

The Company has granted Stock Options to certain employees of the IT business division as per the IT Division Employee Stock Option Scheme 2013.  Under this plan, stock option holder would be eligible for equity shares in CMS IT Services Private Limited subsequent to demerger IT division and transfer to CMS IT Services Private Limited.

The vesting conditions of the Stock Options are time based to the extent of 2.15% of the equity value of IT Division and performance linked in the range of 1.55% to 5.25% of the equity share capital of IT division. Options would vest not less than one year and not more than five years from the date of grant of such options. The exercise price for the Stock Options granted will be at the fair market value of the equity shares on the date of the grant.

15.  ACKNOWLEDGEMENT:

Your Directors are grateful and pleased to place on record their appreciation for the excellent support, guidance and cooperation extended by various State Governments, other statuary bodies constituted by Central and State government, other Financial Institutions and the Bankers of the company. The Board also expresses its appreciation of the understanding and support extended by the various Business constituents and shareholders of the Company.

Your Directors express their deep appreciation for the devoted contribution made by employees at all levels, who through their competence, hard work, solidarity, cooperation and support have contributed their best efforts for continued progress of the Company. Employee relations continued to remain happy and cordial during the year.

                                                                  For and On behalf of the Board of Directors

OF CMS Info Systems Private Limited

                                                                             Rajiv Kaul                                 Mathew Cyriac

                                                     (Vice Chairman & Whole Time Director)     (Director)

                                                                         DIN: 02581313                              DIN: 01903606                  

Date:  13th October, 2014

Place:  Mumbai

FORM B

(See Rule 2)

Form for disclosure of particulars with respect to absorption

RESEARCH & DEVELOPMENT

TECHNOLOGY ABSORPTION AND INNOVATION

1. DIVIDEND: For the financial year from 1st April, 2012 to 31st March, 2014, the Board has declared and company has paid Preference ddividend @ 0.01% on 15,00,000/- Optionally Convertible Cumulative Redeemable Preference Shares (“OCPS”) of Company aggregating to Rs. 30,000/- and the dividend distribution tax of Rs. 5100/- was also paid by the Company.

The requirement of conservation of energy as laid down in Form No. A to the Companies (Disclosure of particulars in the report of the Board of Directors) Rules, 1988 does not apply to your Company

The information as required about Technology Absorption in Form No. B is annexed hereto. FORM B (See Rule 2) Form for disclosure of particulars with respect to absorption RESEARCH & DEVELOPMENT 1.Specific areas in which R & D carried out by the Company NIL 2.Benefits derived as a result of the above -R & D NA 3.Future Plan of action NIL 4.Expenditure on R & D a) Capital) b) Recurring ) NIL c) Total) d) Total R & D Expenditure as a percentage of total turnover. ) TECHNOLOGY ABSORPTION AND INNOVATION 1.Efforts, in brief, made towards technology absorption, adaptation and innovation Deputation of Companies personnel to its Business Partners work for training in various disciplines. Business Partners Personnel also extend support in different areas. 2.Benefits derived as a result of the above efforts e.g. product improvement, cost reduction, product development, import substitution etc. Improved market value and services 3.In case of imported technology (Imported - during the last 5 years beginning of the financial year) following information may be furnished :No Technology has been imported a)Technology imported -Not Applicable b)Year of Import Not Applicable c)Has Technology been fully absorbed? Not Applicable d)If not fully absorbed, areas where this has not taken place, reasons therefore and future plans of actions Not Applicable

Foreign Exchange Earnings and Outgo: (Figures in Indian National Rupees) Particulars31-03-2014 31-03-2013 EARNINGS (Service and Maintenance charges)8,212,627146,23,409 OUTGO a) Expenditure in Foreign Currency (Advertising, Sales Promotion, Conveyance & Travelling, Legal, Professional and Consultancy fees, Interest, subscription charges and others) (accrual basis)99,95,31588,41,957 b) Value of imports calculated on C.I.F. basis (Traded goods, Stores & Spare Parts and Capital Goods)2,49,59,61,99811,72,56,724

1. PARTICULARS OF EMPLOYEES: Statement of particulars of employees pursuant to the provision of section 217 (2A) of the Companies act, 1956 forming part of the Directors’ Report for the year ended 31st March, 2014, who are in receipt of remuneration of Rs. 5.00 Lacs per month or in aggregate of Rs. 60.00 Lacs per annum or more during the year ended on 31st March, 2014. NameAge in YearsDesignationQualificationDate of Appointment Experience in YearsAnnual Remuneration in Rupees Rajiv Kaul45CEO & Executive Vice ChairmanB.E. & M.B.A01-12-2008183,00,13,804 Anup Neogi53Sr. V.P. & Chief Operating OfficerB. A.& DBM03-03-20113384,12,201 Pankaj Khandelwal43President & CFOCA & LLB08-05-20062268,08,210 Manjunath Rao50Senior V.P.B. Sc02-07-20122767,13,418 Alex Augustine45Sr. VP & Head Human Resources M.A, BSLC 04-02-20102160,30,580

1. DIRECTORS’ RESPONSIBILITY STATEMENTS: Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956, with respect to Directors’ Responsibility Statement, it is hereby confirmed: a) That in the preparation of the accounts for the financial year ended 31st March 2014, the applicable accounting standards have been followed along with proper explanations relating to material departures; b) That the Directors have 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 the year under review; c) That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,1956 for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities; d) That the directors have prepared the accounts for the financial year ended 31st March 2014 on a going concern basis.

1. MANAGEMENT’S COMMENTS ON AUDITORS REPORT: The Directors have gone through the Statutory Auditors Report for the year ending 31-03-2014 on the annual accounts of the company and the qualifications marked by the auditors in Annexure thereof under CARO provisions and our remarks/ explanations over the same are as follows: With reference to Auditors Comment on Point v (b) of Annexure to Auditors Report Boards Explanation: Auditors remarks is self-explanatory. With reference to Auditors Comment on Point ix (a) of Annexure to Auditors Report Board Explanation: The slight delay in paying advance income tax which occurred due to reliance by the company on some judicial interpretations. However later on the payment for the same was made by the company. With reference to Auditors Comment on Point (xxi) of Annexure to Auditors Report Boards Explanation: - ATM and Cash Management Division of the Company (erstwhile working in the name of CMS Securitas Limited) is providing cash-management services which involve hard cash currency that had always been an area of high risk. However the company is taking appropriate steps for the instances reported to recover the amount from the cash-frauds from employees and third parties, due to which few of the funds has already been recovered to it, and is further taking appropriate steps to ensure that safety and soundness of the cash management system shall be maintained.