BOARD'S REPORT & MANAGEMENT DISCUSSION AND ANALYSIS Dear Members, Your Directors are pleased to present the Twenty First Annual Report for the financial year ended March 31, 2015 Company Performance Your Company posted a turnover of Rs. 9,325.99 lakh for the year ended 31st March, 2015 as against Rs. 10,278.83 Lakh in 2013-14. Your Company has registered a net profit of Rs.362.44 Lakh, as compared to previous year's net profit of Rs. 202.33 Lakh representing an increase of 179% over the previous year. No Material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company. Dividend: Your Directors have recommended a dividend of Re.0.80/- per equity share i.e. 8% on each equity share having face value of Rs.10/- each, subject to the approval by the shareholders at the ensuing Annual General Meeting. The total dividend payout will be Rs. Rs.120.11 Lakh (including dividend tax). Share Capital The paid up Equity Share Capital as on 31st March, 2015 was 12.51 crores. During the year under review, the Company has not issued any shares. The Company has not issued shares with differential voting rights. It has neither issued employee stock options nor sweat equity shares and does not have any scheme to fund its employees to purchase the shares of the Company. Economic Scenario and Outlook India is set to become the world's fastest-growing major economy by 2016 ahead of China, the International Monetary Fund (IMF) said in its recent latest forecast. India is expected to grow at 6.3 per cent in 2015, and 6.5 per cent in 2016 when it is likely to cross China's projected growth rate, the IMF said in the latest update of its World Economic Outlook. With the introduction of the concept of e-governance, both the Central and State Governments are keen in implementing different projects to keep the activities of the Governments transparent, timely and cost effective. E-governance in India is steadily evolving from basic digitization of government data and processes to actually facilitating delivery of various citizen services on-line. A common vision and strategy is being deliberated and firmed up across all levels of government Central, State and local bodies. This approach has huge potential in garnering cost savings, increasing transparency, and presenting a seamless view of government to citizens. Digital Technologies which include Cloud Computing and Mobile Applications have emerged as catalysts for rapid economic growth and citizen empowerment across the globe. Digital technologies are being increasingly used by us in everyday lives from retail stores to government offices. They help us to connect with each other and also to share information on issues and concerns faced by us. In some cases they also enable resolution of those issues in near real time. Hon'ble Prime Minister vision of a digital India is transforming our nation and creating opportunities for all citizens by harnessing digital technologies. His vision is to empower every citizen with access to digital services, knowledge and information. Vision of Digital India Centered on 3 Key Areas • Digital Infrastructure as a Utility to Every Citizen • Governance & Services on Demand • Digital Empowerment of Citizens A well connected citizen to government eco system has huge potential for both the partners. Citizens will continue to enjoy speedy, transparent and convenient services, whilst the government gets increasingly integrated into the community welfare and more importantly is in a position to focus real time on reallocation of resources where they are needed the most. A social transformation happens when citizens are empowered to help themselves in dealing with various government segments, saving time and money for all concerned and elevating overall levels of satisfaction for common man. Tera Software is positioned to entrench into the following schemes announced by the Government under Digital India initiatives. • Infrastructure as a Utility to Every Citizen • High speed internet as a core utility • Mobile phone & Bank account enabling participation in digital & financial space • Easy access to a Common Service Centre • Services available in real time from online &mobile platform • All citizen entitlements to be available on the cloud • Making financial transactions electronic & cashless • Universal Digital Literacy - Universally accessible digital resources - All documents/ certificates to be available on cloud • Collaborative digital platforms for participative • Process Re-engineering using IT to improve transactions • Use of online repositories e.g. school certificates, voter ID cards, etc. • Integration of services and platforms - UIDAI, Payment Gateway, Mobile Platform, EDI Workflow automation inside government • Technology for Education - e-Education • Technology for Health - e-Healthcare - Online medical consultation- Online medical -Pan-India exchange for patient information • Common Service centers • Aadhaar based Direct Cash (e-Cash) Transfers • Aadhaar based Pension schemes. • Aadhaar based Social Security Benefit Schemes towards Scholarships for Students and Teachers. • Aadhaar based Public Distribution Systems ( PDS) • Permanent enrollment centres for AADHAAR • Automation of VAT and subsequently GST • Power sector Field Management services including Pre-Paid Meters • Online tax/Utility Bill Collection • Healthcare and Education • Smart Cities, Wi-Fi enabled services. The Company has a positive outlook for the coming years and endeavors to achieve a steady business performance in the coming years. Your company anticipates higher percentage of gross profits from the new projects that will be undertaken during the coming years. Corporate Social Responsibility The Company has constituted a Corporate Social Responsibility (CSR) Committee as required under Section 135 of the Companies Act, 2013 at its Board meeting held on 30.05.2014. The Company's average Net profits of last 3 years works out to Rs.804.07 lakhs, and 2% thereof to be spent on CSR works out to Rs.16.08 lakhs. The Company could not spend any amount on CSR activity in view of substantial outstanding receivables from the Government Departments. Human Resources 'Human Resources' are recognized as a key pillar of any successful organization and so is for Tera Software. The company puts constant efforts in recruiting and training the employees and ensures to bring out the best of them. The company adopts a HR policy and ensures that all the employees are aware of personnel policies. The needs of the employees are addressed with high importance and efforts are made to provide a highly challenging and healthy environment. Besides all these, the company places high emphasis on professional etiquette required of every employee. Business Risk Management The Company has adopted a Risk Management Policy in accordance with the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement. It establishes various levels of accountability and overview within the Company, while vesting identified managers with responsibility for each significant risk. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on risk related issues. In today's challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The common risks inter alia are: Regulations, competition, Business risk, Technology obsolescence, Investments, retention of talent and expansion of facilities. Business risk, inter-alia, further includes financial risk, political risk, fidelity risk, legal risk. As a matter of policy, these risks are assessed and steps as appropriate are taken to mitigate the same. Internal Controls Systems and Adequacy Tera Software has an adequate system of internal control to ensure that the resources of the Company are used efficiently and effectively, all assets are safeguarded and protected against loss from unauthorized use or disposition and the transactions are authorised, recorded and reported correctly, financial and other data are reliable for preparing financial information and other data and for maintaining accountability of assets. The internal control is supplemented by extensive programme of internal audits, review by management, documented policies, guidelines and procedures. Vigil Mechanism/ Whistle Blower Policy The Company has adopted a Whistle Blower Policy, to provide a formal mechanism to the Directors and employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct or ethics policy. The Policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. Particulars of Loans, Guarantees or Investments The Company has not made any investment or given any loans or guarantees or provided any security during the year. Fixed Deposits: The Company has not accepted any fixed deposits during the financial year 2014-2015. The Company has repaid the public fixed deposits of Rs.11 Lakh accepted during the year 2013-14. There are no outstanding deposits as on 31.03.2015. Related Party Transactions The Company has not entered into any new Related Party Transactions during the financial year. There were no materially significant Related Party Transactions made by the Company during the year that would have required Shareholder approval under Clause 49 of the Listing Agreement. All the Related Party Transactions of the Company were entered before the commencement of Companies Act, 2013 at arm's length price and requisite approvals were also obtained. Details of the transactions with Related Parties are provided in the accompanying financial statements. The Company has adopted a Policy for Related Party Transactions. The Policy, as approved by the Board, is uploaded on the Company's website. Directors In pursuance of Section 152 of the Companies Act, 2013 and the rules framed there under, Sri K. Rama Rao, Wholetime Director is liable to retire by rotation, at the ensuing Annual General Meeting and being eligible has offered himself for reappointment. During the year under review Sri Koteswara Rao SSR was appointed as the Additional Director (Independent) w.e.f. 07th August, 2014 by the Board and Sri D. Seetharamaiah, an independent Director and Chairman ceased to be the Director of the Company from 30.09.2014. The Board of Directors records its sincere appreciation and recognition of the valuable contribution and services rendered by Sri D. Seetharamaiah during his association with the Company. At the 20th Annual General Meeting of the company held on 30th September, 2014 the Company had appointed Sri Koteswara Rao SSR and the other independent directors, Dr. T .Hanuman Chowdary, Sri R. S. Bakkannavar and Dr.T. V. Lakshmi as independent directors under the Companies Act, 2013 for 5 years term which ends at conclusion of the 25th Annual General Meeting. All the Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149 (6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement entered into with the Stock Exchanges. In the opinion of the Board, they fulfill the conditions of independence as specified in the Act and the Rules made there under and are independent of the management. No Key Managerial Person has been appointed or has retired or resigned during the year. Performance Evaluation Pursuant to the provisions of Section 134 (3) (p), 149(8) and Schedule IV of the Companies Act, 2013 and Clause 49 of the Listing Agreement, annual Performance Evaluation of the Directors as well as of the Audit Committee, Nomination and Remuneration has been carried out. The Performance Evaluation of the Independent Directors was carried out by the entire Board and the Performance Evaluation of the Chairman and Non-Independent Directors was carried out by the Independent Directors. The manner in which the evaluation has been carried out has been explained in Corporate Governance Report. Nomination and Remuneration Policy The Company has adopted the Nomination and Remuneration Policy for the Directors, Key Managerial Personnel and other employees, pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The Nomination and Remuneration Committee has considered the following factors while formulating the Policy: (i) The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully; (ii) Relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and (iii) Remuneration to Directors, Key Managerial Personnel and Senior Management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals. It is affirmed that the remuneration paid to Directors, Key Managerial Personnel and all other employees is as per the Remuneration Policy of the Company. Details of the Remuneration Policy are given in the Corporate Governance Report. Board and Committee Meetings A calendar of Board and Committee Meetings to be held during the year was circulated in advance to the Directors. Five Board Meetings were convened and held during the year. The Board has constituted an Audit Committee with all Independent Directors namely Sri R.S.Bakkannavar (Chairman), Dr.T.Hanuman Chowdary and Sri Koteswara Rao SSR as Members. There have not been any instances during the year when recommendations of the Audit Committee were not accepted by the Board. Details of the composition of the Board and its Committees and of the Meetings held and attendance of the Directors at such Meetings, are provided in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Act and the Listing Agreement. Directors' Responsibility Statement: Pursuant to the provisions of Section 134(5) of the Companies Act, 2013, your Directors to the best of their knowledge and ability confirm as under:: a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; b) We 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 that period; c) We have 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 annual accounts have been prepared on a going concern basis; and e) The Company had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively. f) We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Significant and Material orders passed by the Regulators or Courts No significant material orders have been passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company and its future operations. Auditors Statutory Auditors M/s. Narven Associates, Chartered Accountants have been appointed as statutory auditors of the company at the last Annual General Meeting held on 30.09.2014 for a period of three years subject to ratification by members at every consequent Annual General Meeting. Members are requested to consider the ratification of appointment of Statutory Auditors of the Company at the ensuing AGM and authorize the Board of Directors to fix their remuneration Secretarial Auditors 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 M/s C.V. Reddy K & Associates, Practicing Company Secretaries, to undertake the secretarial audit of the company. The Secretarial Audit Report is annexed herewith as 'Annexure I'. The Auditors' Report and the Secretarial Audit Report for the financial year ended 31st March, 2015 do not contain any qualification, reservation, adverse remark or disclaimer. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as follows: A) Conservation of energy: The operations of the Company are not energy intensive and every effort has been made to ensure the optimal use of energy, avoid waste and conserve energy by using energy efficient computers and equipment with latest technologies. (B) Technology absorption: Your Company is constantly upgrading its technological excellence with emerging technologies. The has not incurred any expenditure on Research and Development. (C) Foreign exchange earnings and Outgo: Foreign Exchange Earnings during the year: Nil Foreign Exchange outgo: Particulars of Employees and related disclosures: The information required pursuant to Section 197 of the Companies Act, 2013 read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company is as follows: (i) & (ii) the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year, the percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year; Due to inadequate profits during the year review Sri T. Gopichand, Vice Chairman & Managing Director was paid minimum remuneration of Rs.84 lakhs only as per the applicable provisions of Companies Act, 2013 read with Schedule V of the said Act as approved by the Members of the Company at the AGM held on 30.09.2014 by special resolution for doubling limits of remuneration payable to managerial personnel specified in Para-A, Section II, Part-II of Schedule V of the Companies Act, 2013 in case of Company having no profit or inadequate profit in any financial year to Sri T. Gopichand, Vice Chairman and Managing Director during the tenure of his appointment with effect from 1st April, 2014, for the remainder of his term up to 31.08.2016. (iii) the percentage increase in the median remuneration of employees in the financial year- 3% to 6%. (iv) the number of permanent employees on the rolls of company as on 31.03.2015 - 864. (v) the explanation on the relationship between average increase in remuneration and company performance; There was no increase in remuneration during the previous year 2013-14 due to average company performance. The average increase of 3% to 6% in remuneration given in the Company was to prevent any significant employee attrition at lower levels. (vi) Comparison of the remuneration of the Key Managerial Personnel against the performance of the company; The increase in remuneration of the Chief Financial Officer and Company Secretary are below the increase in employees' median remuneration. The increase in the remuneration of Mr. T. Gopichand and Mr. K. Rama Rao is as approved by the Board of Directors and the Members. (vii) Variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies. The market capitalization of the Company as at 31st March, 2015 is Rs.40.038 crores, as against Rs.19.581 crores as at 31st March, 2014, an increase of 104% during the year under review. The price earnings ratio of the Company as at 31st March, 2015 is 11.03, as against 9.66 as at 31st March, 2014. Price at the time of initial public offer in the year 2000 was Rs. 10. The market quotation of the Equity Shares of the Company as on 31st March, 2015 was Rs.32 for shares of face value of Rs. 10/- each, representing an increase of 220% over the period. (viii) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration; The percentage increase in the salaries of employees other than the managerial personnel in the last financial year is 3% to 6%. The increment given to each individual employee is based on the employees' potential, experience as also their performance and contribution to the Company's progress over a period of time. The Percentage increase in the salaries of employees its comparison with the percentile increase in the managerial remuneration - for justification please refer point no. (ii) (v) & (vi) above. There are no exceptional circumstances of increase in KMP remuneration. (ix) Comparison of the each remuneration of the Key Managerial Personnel against the performance of the company Same response as in point (v) & (vi) above. (x) The key parameters for any variable component of remuneration availed by the directors; No Director has received any variable component of remuneration. (xi) The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year; None of the employees (who are not directors) receive remuneration in excess of the highest paid director. (xii) Affirmation that the remuneration is as per the Remuneration Policy of the Company: It is affirmed that the remuneration paid to all the Key management Personnel was in accordance with remuneration policy adopted by the Company. The particulars of the employees who are covered by the provisions contained in Rule 5(2) and rule 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are: a) Employed throughout the year Nil b) Employed for part of the year Nil Extract of Annual Return The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure - II". Sexual Harassment During the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. Corporate Governance The Report on Corporate Governance, as required under Clause 49 of the Listing Agreement, forms part of the Annual Report. Acknowledgment: Your Directors place on record their sincere appreciation and thanks for the valuable cooperation and support received from the employees of the Company at all levels, Company's Bankers, Financial Institutions, Central and State Government Authorities, Electronic Corporation of India Limited and Other Government Agencies, clients, consultants, suppliers, and Members of the Company and look forward for the same in greater measure in the coming years. For and on behalf of the Board of Directors Sd/- (T. Gopichand) Vice Chairman and Managing Director Sd/- (K. Rama Rao) Wholetime Director Place : Hyderabad Date : 30.05.2015 |