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Your Directors present the Twenty Seventh Annual Report of your Company together with the Audited Statement of Accounts for the year ended March 31, 2015.
RESULTS OF OPERATIONS AND THE STATE OF COMPANY'S AFFAIRS
• Revenue from operations for the year ended March 31, 2015 was at Rs. 16,103.11 lacs as compared to Rs. 33,471.49 for the year ended March 31, 2014.
• During the year, profit under exceptional items was Rs. 24,282.09 lacs compared to loss of Rs. 41,152.11 lacs in previous year. This includes (a) gain of Rs. 98,789.50 lacs on sale of investments in shares (net of expenses) including shares in MCX, NBHC and MCX–SX (b) provision for other than temporary diminution in the value of investments and loss on account of capital reduction in the investments of subsidiaries Rs. 73,226.82 lacs and (c) provision of Rs. 1,280.59 lacs towards doubtful loans and advances to and trade receivable from subsidiaries.
• Your Company has reported profit before finance cost, depreciation, exceptional items and tax of Rs. 32,896.06 lacs for year ended March 31, 2015, compared to Rs. 29,245.39 lacs in the previous year.
• Your Company has reported net profit after tax of Rs. 44,513.88 lacs for the year ended March 31, 2015 as compared to loss of Rs. 22,854.85 lacs in the previous year.
The consolidated Net Profit for the year ended March 31, 2015 was at Rs. 42,671.68 lacs against Rs. 86,950.75 lacs in the previous year ended March 31, 2014 and Rs. 17,341.47 lacs in the year ended March 31, 2013. Shareholders' funds as at the year ended March 31, 2015 was at Rs. 292,827.18 lacs as against Rs. 256,087.69 lacs as at March 31, 2014 and Rs. 176,289.99 lacs as at March 31, 2013.
BUSINESS OVERVIEW: FISCAL YEAR 2014–15
The year gone by has been challenging for your Company with the several legal cases due to the crisis at NSEL's trading platform. Your Company has the highest regard and faith in the Indian judiciary and continues to provide all assistance to every statutory authority in the country. Your Company is confident that truth will prevail and it will come out of the crisis soon. The crisis at NSEL's trading platform has had an adverse impact due to the various regulators declaring your Company "not fit & proper" to hold shares in an exchange which has been challenged before Hon'ble Bombay High Court and at various forums. Without prejudice to its legal rights and remedies, your Company has taken a decision to exit its investments in Exchange ventures both in India and globally. The exit of its investments in exchanges and low volume on the respective exchange has adversely impacted the revenue from Exchange technology on the one hand, but on the other hand, there is increase in income from disinvestments and thereby increase in cash reserves.
During the year, your Company re–negotiated the technology contract with MCX and Metropolitan Stock Exchange (formerly MCX–SX) and due to low volume on the respective exchange, the revenue of your Company was impacted. However, it is observed that during the past six months, the volume has picked up on the exchanges and recent announcement of making FT 3.0 the de facto 'powered by' technology augurs well for the future.
Without prejudice to its legal rights and remedies, your Company has successfully completed the divestments of its holdings in National Bulk Handling Corporation Limited (NBHC), Multi Commodity Exchange of India Limited (MCX) and Metropolitan Stock Exchange of India Limited (MSEI). In addition, your Company has entered into a definitive agreement to sell its entire stake in Bourse Africa Limited (BAL) and is in the process of selling its entire investment in Indian Energy Exchange Limited (IEX) alongwith an irrevocable, companywide, fully paid up, perpetual, non–encumbered, non–transferable, non–assignable, license of the PowerARMS Software installed in India, for internal use to IEX.
Your Company is going through challenging times as it tries to reinvent itself into a pure play technology Company. Post the crisis at NSEL trading platform, your Company has decided to grow on its core strength – innovation through technology. Your Company continues to be a market leader in the Member Technology business in India through its flagship product ODIN. On the Exchange Technology Business, your Company continues to provide technology to market leaders in its space such as MCX, MCX–SX and I EX etc.
Member Technology Business has witnessed a challenging year in 2014–15 in wake of the crisis at NSEL. However, the business is stabilizing and the Company expects business environment to improve in the coming years. With the upturn in the economy and favorable policy environment, Indian Capital markets are positioned for strong growth in the coming years. Your Company is well positioned to take advantage of the growth in the capital markets through its Member Technology Business.
Without prejudice to its legal rights and remedies, your Company took a strategic decision to exit the exchange/ regulated businesses both in India and around the world in light of the crisis at NSEL's trading platform. Since, the Exchange Technology Business was primarily catering to the exchanges seeded and nurtured by your Company, it became imperative for your company to restructure the business as a pure play technology service provider as it divested its stake in various exchanges. Your Company continues to provide technology to MCX, MCX–SX and IEX etc. in spite of divesting its stake in the respective companies.
Your Company believes that it can become a significant player in this space, given its proven pedigree in this space and relatively few players in the space.
New Vision and change of name:
The Board of Directors of the Company at its meeting held on August 08, 2015 have in–principle approved the change in name of the Company from "Financial Technologies (India) Limited" (FTIL) to "63 moons technologies limited" (63 moons). The said approval by the Board is subject to the approval by the Registrar of Companies, Chennai and the shareholders of the Company.
In the near past, your Company has exited its investments in financial exchanges and now in the revised context, your Company would be more focused on non–financial verticals like e–commerce, digital education, life science, sports and many others.
In November 2014, the Company had announced its founder's vision of "Digital India @ 2025", the engine driving the transformation of FTIL into making FT 3.0 the de facto 'powered by' technology partner of choice to create and develop digital ecology leveraging SMAC (Social Media Analytic and Cloud) technology stack. Hence it is imperative to give the Company a new name and identity that reflects the genesis of its business and the next phase of growth.
Jupiter, revered as the most powerful in ancient civilization is known to have 63 moons. 63 moons will endeavor to partner several emerging new–tech companies/innovations and start–ups in the sectors like e–commerce, digital education, sports, life sciences, and others. It is our endeavor to play a larger role and assume leadership in the digital ecology that will govern the growth of the future. 63 moons reflect the new FTIL.
The Company, as the Applicant/Owner, has already made applications in various classes for registration of Trade Mark "63 moons The new digital ecology".
Further details on the above are covered elsewhere in this report.
In the wake of the crisis at NSEL, your Company has been made a party to several litigations over the last two years. Further, the Ministry of Corporate Affairs issued a draft order dated October 21, 2014 for amalgamation of your Company with NSEL under section 396 of Companies Act, 1956 and also filed a petition with Company Law Board under section 397 of Companies Act, 1956 seeking removal and supersession of the Board of your Company. Your Company has opposed the draft order for merger and has challenged the petition for removal and supersession of the Board in the Company Law Board. Your Company continues to defend itself in various other litigations filed against it. An interim order has been passed by the Company Law Board directing your Company not to sell/alienate or create third party rights in respect of its assets and investments. Your Company has challenged this interim order in the Hon'ble Madras High Court which has suspended the interim order save and except in respect of immovable properties of your Company.
The Economic Offences Wing ("EOW") had issued a letter to your Company inter alia restraining / restricting your Company from dealing with its assets. The Hon'ble Bombay High Court has granted a stay in respect of the direction of EOW in respect of the restraint / restriction on the dealing of assets.
No material changes and commitments have occurred after the close of the financial year till the date of this Report, which significantly affects the financial position of the Company.
Explanation to the Qualifications in Auditor Report
Standalone Financial Statements:
Audit Report on standalone financial statements:–
The Management explanation for qualification made by the Statutory Auditors in their Independent Auditors Report dated May 22, 2015 on the Standalone Financial Statements for the year ended March 31, 2015 is as under:
With respect to qualification regarding Writ Petitions, Public Interest Litigations, Civil Suits which have been filed against the Company in relation to the NSEL event, wherein the Company has been made a party in the Writ Petitions and Civil Suits, these matters are pending before the Hon'ble Bombay High Court for adjudication. The Company has denied all the claims and contentions in its reply. There is no privity of contract between FTIL and the Petitioners. Based on legal advice, the management is of the view that the parties who have filed the WP PIL and Civil Suits would not be able to sustain any claim against the Company. With respect to mention of First Information Reports in the same qualification, which are registered against various parties including the Company with the Economic Offences Wing of the Mumbai Police, Central Bureau of Investigation and MIDC, Police Station, Mumbai District, EOW has filed charge–sheets on January 06, 2014, June 04, 2014 and August 04, 2014 after investigation. It is pertinent to note that so far the Company has not been named in the said charge–sheets. EOW investigation is in progress.
Consolidated Financial Statements:
Audit Report on consolidated financial statements:–
The Management explanation for qualifications made by the Statutory Auditors in their Independent Auditors Report dated May 22, 2015 on the Consolidated Financial Statements for the year ended March 31, 2015 are as under:
1. With respect to item no. 1 which pertains to the Company regarding Writ Petitions, Public Interest Litigations, Civil Suits which have been filed against the Company in relation to the NSEL event, wherein the Company has been made a party in the Writ Petitions and Civil Suits, these matters are pending before the Hon'ble Bombay High Court for adjudication. The Company has denied all the claims and contentions in its reply. There is no privity of contract between FTIL and the Petitioners. Based on legal advice, the management is of the view that the parties who have filed the WP PIL and Civil Suits would not be able to sustain any claim against the Company. With respect to mention of First Information Reports in the same qualification, which are registered against various parties including the Company with the Economic Offences Wing of the Mumbai Police, Central Bureau of Investigation and MIDC, Police Station, Mumbai District, EOW has filed charge–sheets on January 06, 2014, June 04, 2014 and August 04, 2014 after investigation. It is pertinent to note that so far the Company has not been named in the said charge–sheets. EOW investigation is in progress.
2. With respect to item no. 2 which are pertaining to the qualifications made by the Statutory Auditors of a subsidiary viz National Spot Exchange Limited (NSEL) in their Independent Auditors Report on its Consolidated Financial Statements for the year ended March 31, 2015 which has been reproduced by the Statutory Auditors of the Company in their Independent Auditors Report (Auditors Report) dated May 22, 2015 on the Consolidated Financial Statements for the year ended March 31, 2015, the explanation given by the directors' of NSEL and its subsidiary "Indian Bullion Market Association Limited" (IBMA) are as under:
Qualification 2(a) in Auditors Report:
"As stated in note no. 53 of the Consolidated Financial Statements pertaining to the issue of warehousing receipts and as per the explanations given by the Management, investigating agencies are investigating genuineness of the warehouse receipt issued by the Company. Its impact on financial statements, if any, can be ascertained only after investigations are concluded and order obtained from the court. Enforcement Directorate (ED) has applied provision of Prevention of Money Laundering Act, 2002 (PMLA) on defaulting members and the Company. Investigations are in progress as on the date of the Audit Report. In case of any adverse findings against the Company, the same may have an effect on the financial position of one or more financial years." [Refer note 68 of the consolidated financial statements of the FTIL Group]
Investigating agencies are investigating genuineness of the warehouse receipts issued by the Exchange as well as the frauds perpetrated by the erstwhile senior officials of the Exchange. Impact on financials, if any, can be ascertained only after investigations are concluded and orders are obtained from Court.
Qualification 2(b) in Auditors Report:
"As stated in note no. 56 read with note no. 1 to the Consolidated Financial Statements which refers to the matter pertaining to regulatory framework for Spot Exchange and related compliance issues with respect to the Exemption Notification No. S.O. 906(E) dated June 5, 2007 (issued by the Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, Government of India, under section 27 of the Forward Contracts (Regulation) Act, 1952). The doubts have been raised as to alleged non–compliance of two of the conditions specified in the said Exemption Notification. While the Company has responded to Show Cause Notice (SCN) dated April 27, 2012 vide letter dated May 23, 2012 and further correspondences made in August, 2012 and July, 2013, the adjudication thereof is pending from respective authorities and hence the possible consequences arising out of same on the Company are not presently ascertainable. It is further stated that the Ministry of Finance, the Government of India, has withdrawn the aforesaid exemption notification w.e.f. September 19, 2014." [Refer note 73 of the consolidated financial statements of the FTIL Group]
The Government by Gazette Notification SO 2529(E) dated 19 September, 2014 has withdrawn the Gazette Notification SO 906(E) dated 5 June, 2007 (by which NSEL was granted exemption u/s. 27 of the FCR Act, 1952 for trading of forward contracts of one day duration) with immediate effect and consequently the notification SO 228(E) dated 6 February, 2012 and notification SO 2406(E) dated 6 August, 2013 ceased to be in force w.e.f. 19 Sep, 2014, as informed to the NSEL by the FMC vide letter dated 5 November, 2014. As the reply to the said SCN has been given and actions, if any, required due to SCN has been taken, including withdrawal of the exemption itself, NSEL do not foresee any further consequences on the SCN. Further, neither FMC nor DCA has held NSEL guilty of having violated any of the conditions of the exemption notification dated 5 June, 2007, which was the subject matter of the SCN.
Qualification 2(c) in Auditors Report:
'As stated in note no. 60 & 61 to the Consolidated Financial Statements, the Company has been served with notices/ letters/summons from various statutory authorities/ regulators/government departments and some purported aggrieved parties. There are some Writ Petitions, Public Interest Litigations, Civil Suits including in representative capacity filed by and against the Company. Such matters against the Company are either in progress or sub judice before different forums. The Company may have civil/ criminal liability arising out of one or more of the proceedings initiated against the Company." [Refer note 75 and 76 of the consolidated financial statements of the FTIL Group]
Since all matters are sub–judice, impact on financial statement, if any, cannot be ascertained at this stage. NSEL is taking all steps to defend its position and currently unable to quantify the impact, if any.
Qualification 2(d) in Auditors Report:
"As stated in note no. 58 & 59 to the Consolidated Financial Statements the issue of legality of contracts traded on the Spot Exchange, the management has clarified that all the contracts carried out on the Exchange were proper and in consonance with the local applicable laws and that there was no violation thereto. As far as availability of commodities are concerned, it is stated that there were systems and processes in place for deposit of commodities and generation of warehouse receipts and allocation of the same. NSEL believed existence of commodities in warehouse on account of the Depositing member's declarations, invoices submitted by the depositing members, the officials concerned in the NSEL at the relevant time being satisfied that there were commodities deposited, generation of warehouse receipt by the concerned officials. Further, due to various events, arising during FY 2013–14, the Company had appointed an Internal Inquiry Committee (IIC) and also two forensic auditors after July 31, 2013 for verification of certain aspects of accounting, internal controls, propriety of accounting policies etc. Pursuant to findings from investigations related to the Company by aforesaid committee/forensic auditors, material weaknesses were reported in certain areas of internal control system pertaining to Spot Exchange related services. There were instances where the commodities were found missing and there were instances of commodities being available partly or fully. This is part of the investigations by EOW, other investigation agencies." [Refer note 67 and 72 of the consolidated financial statements of the FTIL Group]
All contracts traded on the Exchange platform were proper and in consonance with applicable laws, exemption notifications and there were no violations in this regard. NSEL had obtained a legal opinion on the legality of the contracts traded by the members on the Exchange platform. Since the matters mentioned are under investigation/sub–judice, impact on financial statement, if any, cannot be ascertained at this stage.
Qualification 2(e) in Auditors Report
"As stated in note no. 63 to the Consolidated Financial Statements in respect of effectiveness of internal controls, instances of circumventing of internal controls in some areas of operations on the Spot Exchange and in one of the group company viz. Indian Bullion Market Association Limited ('IBMA'), weakness in effectiveness of internal controls systems and control over financial reporting have been observed. Such instances were unearthed by various investigations carried out by IIC in the month of August 2013 and by a forensic auditor M/s. Grant Thornton India LLP in the month of September 2013 and by another forensic auditor M/s. Chokshi and Chokshi, Chartered Accountants in the month of February 2014.
There were irregularities which have been observed arising out of misuse of powers by ex–MD & CEO along with some senior officials of the Company. As per explanations given by the current management of the Company, some of the controls which were circumvented by the erstwhile management were lack of compliance with Rules, Bye laws and Business Rules of the Exchange by the defaulting members, laxity in terms of exemption from margin requirement to members, oversight over commodities which were stored in the warehouses belonging to certain members etc., the ex–MD & CEO at the relevant time had failed to disclose non–compliance issues to the Board of Directors of the Company. As the final outcomes of such investigations are pending, we are unable to comment on the consequential impact, if any, in respect of the same in the Financial Statements.
As per group company viz. IBMA the holding Company NSEL had appointed Internal Inquiry Committee (IIC) which had examined certain transactions pertaining to SnP and had recommended further inquiry into the matter. As stated in Note no 63 of the Consolidated Financial Statements, in respect of effectiveness of internal controls systems and controls over the financial reporting, following weaknesses were observed in the findings carried out by forensic auditors Grant Thornton India LLP and Chokshi & Chokshi, Chartered Accountants in relation to transactions carried out with one related party SnP were not disclosed and segregation and earmarking of client margin was not done as was required under NSEL's bye laws, which was required of IBMA as an Institutional Trade and Clearing Member (ITCM) of NSEL. The weakness had been identified after the Balance Sheet date by subsequent investigations carried out by forensic auditors in this regards. Since the matter is for separate investigation and pending such investigation, we are unable to comment on the classification of such transaction in the books of accounts of IBMA.
The matters stated above could also have a consequential impact on the measurement and disclosure of information provided under, but not limited to statement of profit and loss, provision for tax, cash flow statement, segment information, and earnings per share for the year ended March 31, 2015 in these Financial Statements." [Refer note 78 of the consolidated financial statements of the FTIL Group]
Since the matters mentioned are under investigation/sub judice, impact on financial statement, if any, cannot be ascertained at this stage.
Qualification 2(f) in Auditors Report
"The trade receivables and other receivables are subject to confirmation and reconciliation. During the course of preparation of Financial Statements of respective Company, letter of confirmations have been sent to various parties by the respective company with a request to confirm the balances as on March 31, 2015. However, few confirmations have been received. The management, however, does not expect any material changes on account of such reconciliation/ non receipt of the confirmation from parties. However the balances between The Company and IBMA in respect of Exchange Operations are subject to reconciliation. In many cases legal notices have been sent to parties; however we are unable to form any opinion on recoverability of the outstanding balances of such parties".
In case of NSEL, majority in value of the trade & other receivables, loans and advances etc. are confirmed and such confirmation are available on record. Some confirmations were received from debtors, which were not in agreement with the balances shown in the books of accounts. Reconciliation process has been undertaken for such accounts. However, the management does not envisage any significant impact of the same on the financials. In case of IBMA, it is following up with the parties who have outstanding receivables and have sent legal notices in all suitable cases. Further legal steps are being explored by the IBMA looking at the materiality aspect of the outstanding amounts. The process of reconciliation is currently underway and the management as per the information currently available does not expect any material impact on the profit and loss statement.
Qualification 2(g) in Auditors Report
"As stated in note no. 41 of notes to accounts, in earlier financial years the IBMA had rendered services to one M/s SnP Designs Pvt. Ltd. (SnP) relating to trade in future commodity contracts. At the end of the year a sum of Rs. 7,747.18 lacs was due and receivable on account of such services from SnP! The Managing Director and majority shareholder of SnP is Mrs. Shalini Sinha, the wife of Mr. Anjani Sinha (then Director and KMP of NSEL as well as IBMA).Such relationship was not informed by Mr. Anjani Sinha. No money has been received from SnP despite of substantial amounts due and outstanding. SnP denied having any liability to pay to the IBMA and the matter is under dispute. It has been informed by management that such transactions were carried out on the instruction issued by erstwhile director of Company Mr. Anjani Sinha who was managing the affairs of company." [Refer note 66(c) of the consolidated financial statements of the FTIL Group]
Post the crisis that ensued at NSEL, NSEL appointed an Internal Enquiry Committee (IIC) to investigate and report on matters in relation to the crisis. IIC also covered trades undertaken by IBMA on future commodity exchanges on behalf of SNP Designs Pvt Ltd (SNP) in terms of an agreement signed between IBMA and SNP. IIC observed that such trades were executed on the directions of erstwhile director and Key Managerial Personnel, Mr. Anjani Sinha and as per the available records, Mr. Anjani Sinha was exclusively dealing with SNP and no efforts were made by him to recover the outstanding from SNP. No funds were received by IBMA during the course of the trades. Board of IBMA did not approve of such trades executed on behalf of SNP. The trades for SNP were executed by Mr. Anjani Sinha without informing the board.
Pursuant to the forensic audit report of Grant Thornton India LLPRs. the IBMA came to know that Mrs. Shalini Sinha, wife of erstwhile director and KMP Mr. Anjani Sinha, was the Managing Director and major shareholder of SNP Designs Pvt. Ltd. The details of such relationship were not disclosed by Mr. Anjani Sinha to the board of directors. SNP had confirmed the balance outstanding to IBMA as on 31st March 2013 and continued transacting with IBMA until July 2013. Later when the demand was raised by the Company, SNP denied owing any liability to IBMA. IBMA had sent a legal notice rebutting their contention in response to their reply. In the wake of such irregularities and on directions received from the holding Company NSEL, Mr. Anjani Sinha was removed from the Board of Directors of IBMA on 23rd October 2013. IBMA is in the process of filing a suit in the Hon'ble Bombay High court under Civil jurisdiction praying inter–alia to pass an order directing SNP to pay the outstanding sum with interest.
Qualification 2(h) in Auditors Report
"As stated in 5 (b) of basis of qualification in Auditors report of IBMA, IBMA has made provision for bad and doubtful debts for Rs.2,049.66 lacs in case of receivables for sale and services entered by the IBMA. As per opinion formed by IBMA's Auditor, the Company should have provided 100% of all its bad and doubtful debts and other receivables. Accordingly, had this provided for entire amount as provision for bad and doubtful debts (including other receivables) the amount of provisions should have been higher by Rs. 4,097.93 lacs"
As detailed in above responses IBMA has taken steps towards recovery of the overdue receivables. IBMA on prudent basis has provided for doubtful debts of Rs.2,049.66 lacs in total for FY 2014–15 being 25% of the outstanding receivables of debtors for FY 2014–15 and believes that such provision is currently reasonable.
Qualification 2(i) in Auditors Report
"The Company may be exposed to liabilities in case of any adverse outcome of these investigations/enquiries or legal cases or any other investigations as referred to in 2(a) to 2(e) above enquires or suits which may arise at a later date. In the light of the above, the outcome of which is not presently known and is uncertain at this stage, we are not able to comment on the impact in respect of the same on these Consolidated Financial Statements. Also, the matters stated above could also have a consequential impact on the measurement and disclosure of information provided, but not limited to, profit/(loss) before tax, provision for tax, cash flow statement, segment information and earnings per share for the year ended March 31, 2015 in these Consolidated Financial Statements".
The consequential impacts of the aforesaid qualifications are dependent on the outcomes of the various investigations/ hearings pending in various Fora, and hence presently not known and is uncertain at this stage.
Comments on the observation made in Secretarial Audit Report:
Observation made in Secretarial Audit Report:
Mr. Miten Mehta (DIN: 06749055), Non–Executive Director of the Company was paid consultancy fee for professional services rendered by him for which the Company is seeking approval of the shareholders pursuant to Section 188 (1)(f) of the Act and a Notice dated 24th July, 2015 for voting by postal ballot on the same has been issued by the Company.
The Company has sought approval of the members through Postal Ballot in terms of Section 188(1)(f) of the Act for the rendering of services of professional nature to the Company by Mr. Miten Mehta pursuant to Section 197(4) of the Act. The Postal Ballot notice as approved by the Board of Directors at its meeting held on July 24, 2015 has been dispatched and the results of the same will be announced on September 1, 2015.
The Company follows a stable dividend payout policy. Your Company has paid consecutive dividends for the past 37 quarters which is in accordance with sustainable dividend payout policy of the Company and linked to its long term growth objectives. During the year under review, your Company paid three interim dividends totaling Rs. 5,529.42. Lacs (Rs. 12 per share on par value of Rs. 2/– per share). The Directors have recommended a final dividend of Rs. 5/– per share, subject to the approval of the members at the ensuing Annual General Meeting. The total dividend –including interim and final – aggregates to Rs. 17/– per share, for the financial year ended 31st March, 2015 (previous year Rs. 8/– per share on par value of Rs. 2/– each). The total appropriation on account of interim and final dividend and tax thereon amounts to Rs. 8,302.38 Lacs. The final dividend, if approved, will be paid to those members whose names appear in the Register of Members as on the date of the Annual General Meeting. The break–up of the dividend payouts are as under:
TRANSFER TO RESERVES
Your Company did not transfer any sum to General Reserve for the year under review.
There was no change in the Share Capital of the Company during the year under review. As on 31st March, 2015, the paid–up equity Share Capital of your Company stood at Rs. 921.57 Lacs comprising of 46,078,537 equity shares of Rs. 2/– each.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of this Annual Report
DETAILS OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES AND THEIR FINANCIAL POSITION
During the year under review the following companies have ceased to be Company's subsidiary, step–down subsidiaries and associate companies:
Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 ("Act"), a statement containing salient features of the financial statements of Company's subsidiaries, associate companies and joint ventures is given in Form AOC–1 as Annexure – I and the same forms part of this report. The statement also provides the details of performance, financial positions of each of the subsidiaries and joint venture company.
The Policy for determining material subsidiaries as approved by the Board may be accessed on the Company's website at the link: www.ftindia.com/investors/corporategovernance/ Material–subsidiary–policy.pdf
The Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by SEBI. The report on Corporate Governance as stipulated by Clause 49 of the Listing Agreement, is annexed hereto, and forms part of this Annual Report. A Certificate from the Auditors of the Company confirming compliance with Corporate Governance norms is annexed to the report on Corporate Governance.
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Reporting as required under Clause 55 of the Listing Agreement with the Stock Exchanges is not applicable to your Company for the financial year ended March 31, 2015.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
In line with the requirements of the Companies Act, 2013 and Equity Listing Agreement, your Company has formulated a Policy on Related Party Transactions which is available on Company's website at www.ftindia.com/ investors/corporategovernance/FTIL–Related–Party–Transactions–Policy.pdf. The Policy is to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.
All arrangements / transactions entered by your Company with its related parties during the year were in ordinary course of business and on an arm's length basis. During the year, your Company did not enter into any arrangement / transaction with related parties which could be considered material, in accordance with Clause 49(VII) of Listing Agreement on Related Party Transactions i.e. transactions exceeding ten percent of the annual consolidated turnover as per the last audited financial statements and accordingly, the disclosure of Related Party Transactions in Form AOC 2 as required under Section 134(3) (h) of the Companies Act, 2013 is not applicable. However as required under Accounting Standard 18, names of Related Parties and details of transactions with them have been included in Note no. 37 to the standalone financial statements provided in the Annual Report and pursuant to Section 188(1)(f) of the Act, approval is sought through Postal Ballot for rendering of services of professional nature to the Company by Mr. Miten Mehta, the same being in the ordinary course of the business and at arm's length and covered under Section 197 (4) of the Act.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Corporate Social Responsibility Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board.
The Company has identified the areas for CSR activities which are in accordance with Schedule VII of the Act, some of which are highlighted as under:
• Health and social welfare
• Environmental Sustainability
• Rural Transformation
The Report on CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure – II and the same forms part of this report. The policy is available on the website of the company at the link: www.ftindia.com/investors/corporategovernance/FTIL– CSR–policy.pdf.
The Board of the Company has formed a risk management committee to monitor the risk management policy for the Company.
The risk management system monitors and identifies risks which are related to the business and overall internal control systems of the Company. The Audit Committee has oversight responsibility in the areas of financial risks and controls. The risk management committee is responsible for reviewing the risk management policy and ensuring its effectiveness.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
Your Company has internal financial control systems, which are commensurate with its size and the nature of its operations. The Internal control system is improved and modified on an on–going basis to meet the changes in business conditions, accounting and statutory requirements. Internal Audit plays a key role to ensure that all assets are safeguarded and protected and that the transactions are authorized, recorded and reported properly. The Internal Auditors independently evaluate the adequacy of internal controls. The findings and recommendations of the Internal Auditors are reviewed by the Audit Committee and followed up till implementation wherever feasible.
During the year under review, Mr. Anil Singhvi and Mr. Berjis Desai were appointed as Additional (Non–Executive – Non–Independent) Directors w.e.f. November 7, 2014. Further, Mr. Sunil Shah and Mr. Miten Mehta were appointed as Additional (Non–Executive – Non–Independent) Directors w.e.f. November 20, 2014.
Ms. Nisha Dutt was appointed as Additional (Non–Executive –Independent) Director w.e.f. November 20, 2014 and it is proposed to appoint Ms. Nisha Dutt as Indpendent Director, not liable to retire by rotation for a period of five years from the date of ensuing Annual General Meeting.
The Company has received notices under Section 160 of the Act along with the requisite deposit proposing appointments of Directors as detailed in the AGM Notice.
Mr. Prashant Desai was appointed as Additional Director w.e.f. November 7, 2014 and designated as Whole–time Director with effect from same date. Further, he was re–desginated as Managing Director and Chief Executive Officer (CEO) of the Company w.e.f. November 21, 2014. Mr. Jigish Sonagara and Mr. Rajendra Mehta were appointed as Additional Directors w.e.f. November 21, 2014. The Board has also appointed them as Whole–time Directors with effect from the same date for a period of three years.
The Company has an on–going Postal Ballot as approved by the Board of Directors at their meeting held on July 24, 2015 under which approval of shareholders is sought inter–alia for the appointment of Mr. Prashant Desai, Mr. Jigish Sonagara and Mr. Rajendra Mehta as Directors. The results of the same will be announced on September 1, 2015.
During the year under review, Mr. Venkat Chary, Justice Rajan J. Kochar (Retd.), Mr. Achudanarayanan Nagarajan and Mr. Rajendran Soundaram were appointed as Independent Directors, not liable to retire by rotation for a period of five years at the annual general meeting of the Company held on September 23, 2014.
The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as laid down under Section 149(6) of the Act and Clause 49 of the Listing Agreement.
Further, during the year Mr. Jignesh Shah, Mr. Dewang Neralla and Mr. Manjay Shah resigned from the Board w.e.f. November 20, 2014, as the Managing Director and Whole–time Directors of the Company, respectively.
The Board has placed on record its appreciation for the invaluable contribution made by Mr. Jignesh Shah during his tenure as the Managing Director of the Company, making the Company a leading technology provider in the financial sector and being globally the second largest company with licensing volumes, Mr. Dewang Neralla, as Whole–time Director, putting his enormous efforts to shape the technology edge of the Company and Mr. Manjay Shah, as Whole–time Director, who has contributed greatly in the overall growth and development of the Company ensuring 80% market share for the Company.
With effect from November 21, 2014, the Board suo–motto appointed Mr. Jignesh Shah as the Chairman Emeritus and Mentor of the Company, a non–board position, for advising and mentoring the Company specially in relation to fulfillment of the Company's vision of FT 3.0 and other strategic matters.
As the Company has grown into a formidable technology player and is in the process of implementing its Founder's vision for 'Digital India @ 2025' as part of FT 3.0, which is transformation of the Company into becoming the de facto 'powered by' technology partner of choice for new digital giants in sectors like retail, education, healthcare, agriculture, environment, infrastructure and space over the next 10 years, on the invitation of the Board, Mr. Jignesh Shah has agreed to act as the Chairman Emeritus and Mentor to the Company to nurture and inspire the Company's future vision of FT 3.0 wearing his creative hat and to guide the implementation thereof. In his new role, Mr. Jignesh Shah will not be involved in the management of the Company.
ONE–TIME INCENTIVE TO EMPLOYEES
Your Company has created national assets like MCX, IEX, SMX, NBHC etc over the last several years. Without prejudice to its legal rights and remedies your Company had to force–exit from these assets and created significant cash reserves. The team played a critical role in the creation of IP and getting the fair value for them through exits. The total divestments till date exceed f 2000 cr. The one time reward was necessary to keep the team motivated for the next phase of growth of the Company. Your Company under the guidance of the Board has rewarded the people responsible for the creation and exit of these assets through a one–time incentive which was capped at 1% of the total divestment. This is a one–time incentive and will not be a recurring expenditure. The salary of the team continues to remain same
KEY MANAGERIAL PERSONNEL
As per the accounting standards and as reported in previous annual reports, Mr. Jignesh Shah, Managing Director, Mr. Dewang Neralla, Whole–time Director and Mr. Manjay Shah, Whole–time Director designated as Key Managerial Personnel ceased to hold office as such w.e.f. November 20, 2014.
The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the non–executive directors and executive directors. One of the key functions of the Board is to monitor and review the board evaluation framework.
In a separate meeting held of Independent Directors, it was agreed that since majority of the Board members are newly inducted, it would be pre–mature to have a review of their performance as only a very short period has elapsed since their induction on the Board.
It was also agreed to have a set of parameters prepared and circulated to all the non–executive Directors for their review and comments and the current methods of evaluation and parameters adopted by the Company for Managing Director/Whole–time Directors would be considered by the Board for their evaluation.
MEETINGS OF THE BOARD
The Board of Directors of the Company met twenty nine times during the financial year. The details of Board Meetings are provided in the Corporate Governance Report, which forms part of this Annual Report.
The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of this Annual Report.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT BY COMPANY
Details of loans, guarantees and investments have been disclosed in the Financial Statements.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are provided in Annexure – III and the same forms part of this Report.
EXTRACT OF ANNUAL RETURN
Extract of Annual return of the Company in form MGT–9 is annexed herewith as Annexure – IV and the same forms part of this Report.
PARTICULAR OF EMPLOYEES AND RELATED DISCLOSURES
In terms of the provisions of Section 197 (12) of the Act, read with Rules 5(1), 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, disclosures pertaining to remuneration and other details and a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules are given in Annexure – V and the same forms part of this report.
WHISTLE BLOWER POLICY / VIGIL MECHANISM
The Company has a whistle blower policy to report genuine concerns or grievances. The Whistle Blower Policy has been posted on the website of the Company at the link: www.ftindia.com/investors/corporategovernance/Whistle– Blower–Policy.pdf.
NOMINATION AND REMUNERATION POLICY
The Board of Directors has framed a policy for selection and appointment of Directors including determining qualifications, independence of a Director, Key Managerial Personnel, Senior Management Personnel and their remuneration as part of its charter and other matters provided under section 178 (3) of the Act. The details of the policy are provided in the Corporate Governance Report, which forms part of this Annual Report.
DISCLOSURE AS PER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013
During the financial year 2014–15, the Company has not received any complaints on sexual harassment and hence no complaints remain pending as of March 31, 2015.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant or material orders passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. The details of litigation including tax matters are disclosed in the notes to the Financial Statements which forms part of this Annual Report.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(5) of the Act, the Board of Directors, to the best of their knowledge and ability, confirm that:
a. in the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanation relating to material departures;
b. 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 that period;
c. the Directors have taken proper and sufficient care to maintain adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d. the Directors have prepared the annual accounts on a going concern basis.
e. the Directors have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and are operating effectively; and
f. the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
EMPLOYEES STOCK OPTION PLAN (ESOP)
The Nomination & Remuneration Committee of the Board of Directors of the Company, inter–alia, administers and monitors the Employees Stock Option Plan of the Company in accordance with the applicable SEBI Guidelines.
The applicable disclosures as required under SEBI Guidelines as on March 31, 2015, with regards to the Employees Stock Option Plan and as per the Act are given in Annexure – VI and the same forms part of this report.
The Company has received a certificate from the Auditors of the Company that the ESOP Schemes have been implemented in accordance with the SEBI Guidelines and the resolution passed by the members. The certificate would be placed at the Annual General Meeting for inspection by members.
Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, M/s. Sharp & Tannan Associates, Chartered Accountants, Mumbai (Regn. No. 109983W) were appointed as the Statutory Auditors of the Company at the Annual General Meeting (AGM) held on September 23, 2014 for a period of five years, subject to ratification of their appointment at every AGM.
The Company has received a confirmation from M/s. Sharp & Tannan Associates to the effect that their appointment, if ratified at the ensuing AGM would be in terms of Sections 139 and 141 of the Act and rules made thereunder. The Board proposes to the members to ratify the said appointment of M/s. Sharp & Tannan Associates.
DETAILS OF FRAUD, IF ANY REPORTED BY THE AUDITORS
There have been no instances of fraud reported by the Auditors under Section 143(12) of the Companies Act, 2013.
Pursuant to the provisions of Section 204 of the Act, the Board has appointed M/s BNP & Associates, Practising Company Secretaries, to conduct Secretarial Audit for the financial year 2014–15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed herewith marked as Annexure – VII and the same forms part of this report. The observations made in the Secretarial Audit Report are mentioned elsewhere in this report.
Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:
• Details relating to deposits covered under Chapter V of the Act.
• Issue of equity shares with differential voting rights as to dividend, voting or otherwise.
• Neither the Managing Director nor the Whole–time Directors of the Company receive any remuneration or commission from any of its subsidiaries.
At Financial Technologies, we strongly believe in open communication at all times, across levels. Varied communication channels, such as Departmental meets, HOD meets, HR Zone (e–HR), FTIL HR Communication and HR4U e–mail facility, have ensured that the HR team is always around the corner and is available to listen to and help human resources. All of our processes are fully automated and online thus ensuring that information is available at fingertips for employees as well as speed in operations. As of 31 st March 2015, FTIL had employee strength of 872.
Our Company went through a major crisis last year. The human resources oriented culture in the Company has helped us to tide over this crisis by keeping the confidence of the employees in the strength of the business verticals intact. This ensured that our attrition did not escalate substantially, and our focus on customers and development remained constant.
One of the cornerstones of our crisis management strategy has been to communicate constantly with our employees over the last one year. Many HR Connect sessions were also held to address the employee concerns and strengthen the bonding across levels. FTIL's confidence in its ability to innovate and technological strength and grow in challenging times was reiterated in open houses/connect sessions.
It is to be noted that 62% of our current employees have worked with the Company for more than 3 years. Our attrition rate even in the year of crisis i.e. 14/15 was 28%, which even though slightly higher than the past few years, is still lower than comparable technology companies across India.
To acknowledge the efforts and commitment of staff in challenging times, a loyalty bonus was announced. The Loyalty Bonus was paid to FTIL staff who has completed minimum 3 years of association/service with Organization as on 31st March 2015. This has helped us to boost the employee confidence in the Organization and also led to enhanced retention of skilled staff
Even during the times of crisis, FTIL's HR department has ensured that their well–established processes continue to be honored and followed i.e. induction, training, performance management etc.
Many employee connect and engagement initiatives like Stepthlon, PUMA Urban Stampede, Stills Photography contest, CSR focused activities like Blood Donation drive, Clothes Donation Drive, Contribution for J&K Flood relief were conducted. This has led to greater employee bonding.
Financial Technologies continues to believe strongly in the ability and quality of its Human Resources, and has already started working on the next phase of FTIL's growth. FTIL treats its employees as integral partners in the organization's existence and growth.
Your Directors place on record their gratitude to the Central Government, State Government, clients, vendors, financial institutions, bankers and business associates for the assistance and co–operation extended to your Company.
Your Directors also wish to place on record their appreciation for the continued support of investors, business associates and the contribution made by the employees at all levels.
For and on behalf of the Board of Directors
Managing Director & CEO
Place: Pawana Nagar, Pune
Date: August 8, 2015