AFFLUENCE

Directors Report

To,

The Members,

eMudhra Limited

Your directors take pleasure in presenting the 10thAnnual Report on the business and operations of the company and the accounts for the financial year ended March 31, 2018.

1. Financial summary or highlights

The Financial highlights of the standalone financials for the year ended on March 31, 2018 are as follows:

All amounts are in INR unless otherwise specified

The Financial highlights of the consolidated financials for the year ended on March 31, 2018 are as follows:

All amounts are in INR unless otherwise specified

There was no material change or commitment, affecting the financial position of the company between the end of the financial year of the company and the date of the report other than those disclosed in the audited financial statements. There was also no change in nature of business during the year.

During the financial year the company has changed the accounting policy with respect to revenue recognition from the date of transfer of title in the user license to proportionate completeness method. The impact of the same to the profit(loss) are separately disclosed in note no.38 to the audited financial statements. Further the company has incurred digital signature purchase expense of Rs.6,46,46,433 due to change in the CCA policy of direct billing to the end customer. The details of stock purchase are given in note no 37 to the audited financials.

2. Consolidated financial statements

The company has followed the applicable accounting standard while consolidating its 100% subsidiaries by each line item wise. The common transactions between subsidiary companies have been excluded while arriving at consolidated profit or loss.

In terms of section 136 of the Companies Act , 2013 the company has not attached the financial statements of the subsidiary companies. However, the financial information about the subsidiary duly audited by the auditors are disclosed in this annual report. The consolidated financial statements presented by the company, which form part of this annual report are based also on the financial statements of its subsidiary companies.

3. Dividend

Your Directors recommend a dividend of Rs.48,30,000(excluding dividend distribution tax) on Class A preference shares for the period ended March 31, 2018

4. Transfer of unclaimed dividend to investor education and protection fund

The company has paid all the dividends declared by the company to the beneficiaries within 30 days and there is no unpaid dividend

5. Review of Business operations

During the year, the company has faced many challenges particularly with our core business of digital signature sales due to various policy changes by CCA which compelled us to migrate to a completely different sales platform to cater to the needs of the business community.

The Consolidated Financial Statement of the Company represents consolidated financials of eMudhra Limited with its 100% Subsidiaries, eMudhra Mu Ltd (Foreign Subsidiary) and eMudhra Technologies Limited (Previous known as Veda Semantics P Ltd)

The companies vision is of empowering digital transformation with unique mix of enterprise and consumer driven solutions, in digital technology areas, that are aimed at reshaping customer value propositions. Further we are committed to strive to stay relevant with a market-based approach to drive solutions that address our customers needs and enhance their ease of doing any financial or other transactions.

New Initiatives

A. New product lines

In line with the companys vision of staying relevant with a market based approach to drive solutions that address our customers needs the company came out with following new technology products/solutions:

emStream

emStream combines powerful data aggregation features with ability to mine sentiments using a proprietary Natural Language Processing capability. Built for scale, emStream is used across a wide variety of Artificial Intelligence driven use cases which require large volume data processing for actionable insights.

emStream is architected using a modular architecture with three main components - data aggregators, processing engine and visualization. With support for data ingestion across a range of data sources, emSigner's core engine runs on an Apache Spark cluster for Natural Language Processing and Predictive Analytics tasks

emStream allows advanced graphing capabilities by integrating with leading graph computation technologies such as Apache Spark GraphX, SigmaJS to visually represent relationships and calculate graph densities, shortest paths and network centrality.

emSecure

emSecure is an IoT based security platform designed to be deployed on any IoT platform that supports trusted platform modules. Using standard communication protocols, it powers provisioning, deployment and management of keys for embedded devices allowing secure identity, access and authorization management of devices and things.

emSecure addresses large scale security needs in IoT deployments in smart cities leveraging key components of the companys security stack emCA and emAS. emSecure, based on PKI technology, is the only viable alternative addressing IoTsecurity as it enables source identification and secure data exchange.

emBlock

emBlock, is ablockchain based services platform built on top of Ethereum that guarantees transaction immutability and publicly verifiable records at lower cost. This will ensure high security and better efficiency thereby ensuring seamless conduct of international trade , electronic kyc and transactions based on land record.emBlock provides API based utilisation, Access control and easy deployment.

emCA PKI Appliance

emCA PKI appliance is a plug and play solution delivered to your doorstep and installed quickly and easily that can address all your PKI needs. This appliance comes with certificate generation engine,life cycle manager. Validation engine and a lot more as a standard offering. This supports widerange of protocols for integration with Microsoft CA or any other third-party applications and works seamlessly with eMudhras own emSigner to facilitate easy document signing.

emAS- IAM(Identity and access Management)

emAS IAM is the top-of-the-line offering of emAS which allows users to build a trusted network across any number of devices, users and applications through a simple and intuitive dashboard. emAS IAM includes emAS Multifactor authentication engine and supports 15+ factors of authentication. This also supports sophisticated user provisioning/de-provisioning, integration with SIEM, advanced reporting and much more.

emSigner Appliance

emSigner, our flagship signer solution has helped many enterprises, government agencies, and institutions of all types go paperless easily over the past few years. However, we wanted to make ‘going paperless simpler, especially if you prefer that the data reside on your premises

emSigner Appliance is eMudhras Signing appliance with enterprise grade hardware, an in-built HSM module and emSigner software. It also allows plug-and-play deployment with easy integration with third party applications. This will help various any organisation for invoice signing, HR processing, Accounts processing and many of the use cases for which you use emSigner today.

emSigner Appliance comes with eMudhras own signer certificate to ensure legal validity of all the signed documents. For global users, AATL(adobe approved trust list) trusted certificates come as part of the package.

Apart from the above new products and solutions considerable enhancement in existing products were also made based on market needs.

B. Campus Projects

During the year, the company has purchased 2.5 acres of land from Electronics Corporation of Tamil Nadu Limited (ELCOT) at Salem, on a 99 year lease. The company is planning to construct world class data centre to cater its international business operations.

Our dream project of constructing a Digital Signature Campus at Devenahalli, Bangalore has started during the end of March 2018. We have obtained all required sanctions from all the government as well as quasi government bodies during the reporting period. The campus is expected to be completed within a period of 2 years.

C. International Expansion:

During the year under review the company has been successful in created a huge partner network for its enterprise solutions across Middle East, Africa, Far East and Latin America. This network is likely to bring a lot of overseas revenue in the coming years.

D. Global root accreditation

During the year the company completed the procedures for listing its own Rootin trust stores of Microsoft, Firefox, Google, Adobe etc so that the company can issue SSL and other forms of Digital Certificates globally. In this connection the audit for accreditation has been completed and other formalities are being done. The company expects to complete all the procedures and commence operation of this activity by December 2018.

Existing Businesses

A. Digital Signature Certificates and hardware

The digital signature services are our core business offering since inception. The digital signatures are generally issued for a period of 2 years. As the major end user applications started in even year , with the two year life time of the certificates, the demand for Digital Signature Certificates tend to be much higher in even years as compared to odd years . As the recent financial year ended on March 2018 was an odd year, our digital signature issuance during the year was lower than that issued in the previous year 2016-17. However compared to the previous odd year we were able to issue an incremental issuance of 3,50,000 approximately. Our total Digital signature sales was Rs.32,19,26,747 during 2017-18 as against Rs. 34,52,83,785 during the previous year..

During the year, the company has revamped the business model in order to accommodate the government regulation of direct customer billing, and hence renamed the RAs as Controllers and sub RAs as Direct Selling Partners. The company also provided a completely new technology platform to its partners. The total direct selling partners as at March 31, 2018 was 17846 and they are controlled by 247 appointed controllers.

During the year, the company has started selling the crypto tokens through its online portal and thereby the reach has been established to 17846 direct selling partners. However due to this change we were not selling to our erstwhile distributors. While this impacted our salesthe margins were better. During the year under review the Crypto token sales dropped by30% to Rs.10,93,18,478 from Rs.14,19,27,603, during the previous year.

B. Enterprise Solution business (emAs, emCA, emSigner)

The year2017-18 saw phenomenal growth in our Enterprise Solutions Business. Our revenue from this line recorded 51% growth to Rs.26,01,75,858 from Rs.12,79,10,988/- in the Previous year.

C. Big Data Analytics

As indicated in our previous annual report, our alliance with one of the big data analytics company based out on United States of America has resulted in revenue conversion of Rs.2,11,99,496 during the current financial year.

D. Other Services

As indicated in our previous report, PAN is not related to our core business and hence we are billing consultancy charges with effect from July 2017 for monitoring the various business models to one of our associated company. During the financial year, the revenue from Pan services along with PAN consultancy charges dropped to Rs.1,27,81,394from Rs. 4,09,34,245/- during the previous year.

The turnover from the business of online income tax e-filling during the year under review declined to Rs. 77,51,003as compared to a revenue of Rs. 98,83,927 during the previous financial year. The reduction is due to change in the decisions of the company to not to focus on corporate business through HR department (which is loss making) and to only focus on direct retail business which is highly profitable. Another reason for the decline is the Income Tax portal also offering user friendly return filing capabilities on free basis thereby shifting the retail customers to its own portal.

General:

The total revenue of the company on standalone basis for the year ended 31st March 2018 was Rs73,82,83,243showing an overall increase of over 10%, as compared to previous year turnover of Rs. 66,98,36,217, inspite of the year under review being odd year, Aadhar disconnections and change in CCA guidelines which changed the basic way in which DSC is to be sold to end customers.

The Profit before tax and appropriations for the year under review is Rs.9,65,80,080 as compared to a profit of Rs.12,92,95,404 during the previous year showing a decline of 25% as compared to previous year. The main reason for the decline was due to repurchase of digital signature amounting to Rs.6,46,46,433due to change in CCA regulations and the details of the same is provided in note no.37 to the audited financial statements.But for this profit after tax would have jumped by 25%

The Profit after tax and before appropriations in the financial Statement for the year is Rs.8,28,10,032 as compared to profit of Rs 9,37,47,554 during the previous financial year. Further company has made payment of dividend on preference shares of Rs.23,72,201.

The diluted earnings per share on a stand alone basis decreased from Rs.1.40 per equity share with a face value of Rs.5 per share to Rs.1.18 per share, showing a decline of 16%,whereas the basic earnings per share declined by 14% to Rs.1.18 per share from Rs.1.34 per share.

The consolidated income of the company was Rs.76,85,02,405 as against Rs.68,91,82,940 in FY 2017 showing an approximate growth of 12% in consolidated turnover

The consolidated Profit before tax and appropriations for the year under review is Rs.9,29,68,908 as compared to a profit of Rs. Rs.13,5653,311during the previous year showing a decline of 32% as compared to previous year.

The Profit after tax and before appropriations in the consolidated financial Statement for the year is Rs.7,90,00,860 as Compared to a profit of Rs. 10,0105,460 during the previous financial year.

But for the stock repurchase of Rs.6,46,46,433 as indicated above ,consolidated profit before tax and profit after tax during the current year would have been much higher as compared to previous year.

The diluted earnings per share on a consolidated basis decreased to Rs.1.13 per equity share with a face value of Rs.5 per share from Rs.1.50 per share. At the same time the basic earnings per share declined by 21%to Rs.1.13 per share.

6. Material changes and commitment if any affecting the financial position of the company occurred between the end of the financial year to which these financial statements relate and the date of the report

As discussed in our previous report, the company has started billing the end customers with effect from August 2017 in compliance with the guidelines of controller of certifying authorities. Hitherto the company was selling stock to its RA,who were selling to sub-RA, who in turn used to sell to end customers. In view of this order, where no new stock could be sold, as and when the RA/sub-RA bring customers for new sale, a refund towards their stock may have to be given. The impact of the same was Rs.6,46,46,433 and is disclosed on the face of statement of profit and loss and the details of the same are provided in note no.37 to the audited financials of the company This could have a further impact on the statement of profit and loss of the coming years. However there is no other material event which have occurred between the end of the financial year to which these financial statements relate and the date of the report

7. Conservation of energy, technology absorption, foreign exchange earnings and outgo

The provisions of Section 134(m) of the Companies Act, 2013 relating to conservation of energy and technology absorption do not apply to our company.

The disclosure of foreign exchange earnings and outgo, in terms of provisions of Section 134 (3)(m) read with Rule 8 of the Companies (Accounts) Rules,2014 are given hereunder:

8. Details of policy developed and implemented by the company on its corporate social responsibility(CSR) initiatives

The vision of CSR is to be socially and environmentally responsive organisation committed to improve quality of life within and outside. We at eMudhra focus on imparting education for employment by enhancing the vocation skills especially in the information technology area and arranging socio-economic development programs through training and student empowerment programs.

In line with the above decision we have developed our second training centre at our branch office situated Bellandur, Bangalore. The training centre was instrumental in imparting knowledge in information technology sector to the needy section of people in our city. During the financial year, we had trained about 150 plus youths in our city.

The company has spent Rs.15,23,663 against a statutory minimum limit of Rs.15,01,405, which is 2 % of the average profit of the company during the last three financial years, for purchasing computer and associated softwares for the Training Centre.

In the current financial year, the company is planning to further invest in creating additional training facilities along with computers, learning mechanisms etc. and has already earmarked Rs.16,00,000 which fulfils statutory requirement of 2% of average of 3 financial years net profit, for the CSR activities for the financial year 2018-2019.

9. Particulars of loans, guarantees or investments

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the audited financial statements and the same is disclosed in note no. 15 and note no 16 of audited financial statements.

The company has an investment of Rs.17,12,77,622/- in equity shares of 100% subsidiary companies and also has provided a loan of Rs.3,06,74,003/- to the Employees Stock Options Trust.

10. Board of Directors

10.1 Composition

The composition of the board of directors the company is furnished in Annexure A to this report

During the year, Ms. Heera Prabhakar, Director and CFO, of the company has resigned from the board for taking up outside opportunities with effect from August 21,2017 after serving the company for more than 7 years in various capacities and was relived from board responsibilities with immediate effect.

Mr.Meherdaad Battliwala, one of the independent directors of the company, resigned from the board due to ill-health with effect from March 24, 2018 after serving 3 years and the board has approved the same.

Dr. Nandalal L Sarda,an alumniof IIT, Mumbai joined the board in the place of Mr. Meherdaad Battliwala with effect from June 19,2018. His expertise in information technology and related areas will help the company in its future endeavours.

10.2 Number of Board Meetings conducted during the year under review

During the year the board has duly metfive(5)times andthe time gap between any two board meeting did not exceed one hundred and twenty days.The board of directors regularly reviews compliance reports pertaining to all the laws applicable to the company. The details of the Board meetings are provided in section 2 of Annexure A

11. Companys policy relating to directors appointment, payment of remuneration and discharge of their duties

The company appoints directors based on need. They are selected based on merit and their appointment, remuneration and other eligibility parameters are vetted by the Nomination and Remuneration Committee. The nomination and remuneration committee currently consists of Dr N.L.Sarda, chairman, Mr Manoj Kunkalienkar and Mr V.Srinivasan.

12. Declaration by independent directors

All the independent directors of the company have submitted their disclosure to the Board that they fulfil all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of Companies Act, 2013 and the relevant rules.

13. Directors responsibility statement

Pursuant to Section 134(3)(c) of the Companies Act, 2013, the Directors to the best of their knowledge hereby state and confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) the directors had 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 and loss of the company for that period;

c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d) the directors had prepared the annual accounts on a going concern basis

e) 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.

14. Subsidiaries, joint ventures and associate companies

The Company has two 100% subsidiaries, out of which one company is incorporated outside India and other one is incorporated in India. In addition to this the company do have six associates companies, out of which four are incorporated outside India and others are incorporated in India and also have one associated partnership firm in India.

Related Party Transactions

The Board of directors have approved related party transactions, all of them are under arms length basis.The summary of related party transactions is also provided in Note no.35 of the audited financial statements.

15. Deposits

The Company has neither accepted nor renewed any deposits during the year under review.

16. Auditors

1. Statutory Auditor

M/s Manohar Chowdhry and Associates were re-appointed by the shareholders at the SixthAGM (AGM 2014), as Statutory Auditors of the Company for a first term of five consecutive years to hold office until the conclusion of the eleventh AGM (AGM 2019). Their appointment is however, subjectto ratification by members at every AGM in accordance with Section 139 of the Companies Act, 2013 read with applicable rules made thereunder. The Company has received letter from the above auditors consenting for theappointment and confirmation to the effect that their appointment , if ratified, would be within the limits and that they are free from any disqualification specified in Section 141 of the Companies Act, 2013 and the rules made thereunder.

Statutory Auditors report:

The statutory auditors report to the members for the year ended March 31, 2018 does not contain any qualification, reservation, adverseremark or disclaimer. Further auditors have not reported any matter under Section 143 (12) of the Act and therefore no detail is required to be disclosed under Section 134(3)(ca) of the Companies Act,2013.

2. Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr.S P Nagarajan, Company Secretary in practice, to undertake the Secretarial Audit of the Company. The report on the Secretarial Audit carried out for the year 2017-18 is annexed herewith as ‘Annexure -B. The secretarial audit report does not contain any qualification, reservation, adverse remark or disclaimer.

17. Risk Management policy

Risk Management and mitigation is taken care of by the Board and Executive Management by appropriate delegation, reporting and authority structure. Risk Management is also ensured by putting various checks and balances across various functions. It is integrated into management, Board and annual reporting mechanism.

As part of Risk Management, the Company also has put in place an Internal Audit Mechanism commensurate with size of business and nature of its operations.As part of this exercise, the Company continues to engage M/s Suri & Company, Chartered Accountants, as InternalAuditors of the Company. Their scope of work includes review of processes for safeguarding the assets of the Company, review of operational efficiency,effectiveness of systems and processes, and assessing the internal controlstrengths in all areas. Internal Auditors findings are discussed with theprocess owners and suitable corrective actions are taken as per the directionsof Audit Committee on a regular basis to improve efficiency in operations.

18. Credit ratings

During the financial year the companys credit rating was reviewed by M/s Brickwork Ratings (India) P Ltd,who upgraded the Companys rating from BWR BBB-(pronounced as BWR Triple BBBMinus) to BWR BBB (pronounced as BWR Triple B) and the rating outlook is Stable. Brickwork Rating, BWR, believes that the companies risk profile will be maintained over the medium term . The Stable outlook indicates a low likelihood of rating change over the medium term

19. Disclosure as required under rule 5 (2) and 5 (3) of the companies (appointment and remuneration of managerial personnel) rules, 2014.

a) During the financial year, the Company has not employed any person with the aggregate remuneration for Rs. 1,02,00,000 / per annum if employed throughout the year or Rs. 8,50,000 per month if employed for part of the year.

b) During the financial year, the company has employed Mr. Kaushik Srinivasan, who was in receipt of remuneration (Refer note 35 in audited financials) in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.

20. Disclosure of composition of audit committee and providing vigil mechanism

During the year, the Audit Committee of the Board of Directors of the Company comprised of 3 (Three) Members, namely Mr. Meherdaad Battliwala, Chairman, Mr. V Srinivasan

and Mr. Manoj Kunkalienkar.

The above composition of the Audit Committee consists of 2 (two) independent Directors, Mr.Meherdaad Battliwala and Mr. Manoj Kunkalienkar,who form the majority.

The Board accepted the recommendations of the Audit Committee whenever made by the Committee during the year. TheAudit Committee duly met once on November 27,2017, during the financial year under review and all the members were present in the said meeting.

The Company has established a vigil mechanism to oversee, the genuine concerns, if any expressed by the employees. The Company has also provided adequate safeguards against victimization of employees who express their concerns. The Company has also provided direct access to the chairman on reporting issues concerning the interests of co-employees and the Company.

Subsequent to induction of Dr N.L.Sarda on the Board upon resignation of Mr Battliwala, the Audit committee has been reconstituted and consists of Mr Manoj Kunkalienkar, Chairman, Dr N.L.Sarda and Mr V. Srinivasan.

21. Transfer to reserves

In line with section 69of the Companies Act,2013the company has redeemed preference shares worth Rs.4,40,00,000 (2017:Rs.4,50,00,000). In accordance with the Act, an amount of Rs.2,52,07,802(2017: 4,50,00,000) has been transferred from surplus of statement of profit and loss to capital redemption reserves and the balance of Rs.1,87,92,19(2017:NIL) has been transferred from securities premium account to Capital redemption Reserves..

22. Shares

a. Buy back of shares

During the financial year under review the company has redeemed 4,400,000 preference shares at face value of Rs.10 per share.However, there were no buyback of equity shares.

b. Sweat equity

The Company has not issued any Sweat Equity Shares during the year under review.

c. Bonus shares

No Bonus Shares were issued during the year under review.

d. Employment stock option plan

During the year the company has amended theEmudhra Employees Stock Option plan to take effect from November 28,2017 and the same has been approved by the Shareholders of the company in its annual general meeting conducted on December 30,2017. The key amendment relates to vesting of stock options over a four year period instead of the earlier three year period.

Acknowledgements

The Board places on record its appreciation for the continued co-operation and support extended to the Company by its customers which enables the Company to make every effort in understanding their unique needs and deliver maximum customer Satisfaction. We place on record our appreciation of the contribution made by the employees at all levels, whose hard work, co-operation and support helped us face all challenges and deliver results.

We acknowledge the support of our vendors, the regulators, the esteemed league of bankers, financial institutions, rating agencies, government agencies, auditors, legal advisors, consultants, business associates and other stakeholders.

For and on behalf of the board of directors

Annexure-A

1. Composition of the Board of Directors of the company was as follows

2. Attendance of each director at the meeting of board of directors and the annual General Meeting

* Resigned with effect from 24.03.2018

**Resigned with effect from 21.08.2017

FORM NO. MGT 9

EXTRACT OF ANNUAL RETURN

As on financial year ended on 31.03.2018

Pursuant to Section 92 (3) of the Companies Act, 2013 and rule 12(1) of the Company (Management & Administration) Rules, 2014.

I. REGISTRATION & OTHER DETAILS:

II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY (All the business activities contributing 10 % or more of the total turnover of the company shall be stated)

III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES -

All the business activities contributing 10% or more of the total turnover of the company shall be stated:-

VI. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity)

Category-wise Share Holding

B) Shareholding of Promoter-

C) Change in Promoters Shareholding (please specify, if there is no change)

D) Shareholding Pattern of top ten Shareholders:

(Other than Directors, Promoters and Holders of GDRs and ADRs):

E) Shareholding of Directors and Key Managerial Personnel:

V) INDEBTEDNESS -Indebtedness of the Company including interest outstanding/accrued but not due for payment.

VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL-

A. Remuneration to Managing Director, Whole-time Directors and/or Manager:

B. Remuneration to other directors

C. REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MD/MANAGER/WTD

VII. PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES: NOT APPLICABLE

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS