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Updated:15 Nov, 2019, 15:57 PM IST

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Updated:15 Nov, 2019, 16:01 PM IST

Board's Report

Dear Members,

The Directors are pleased to present the Twenty Fifth Annual Report together with the Audited Accounts of the Company for the Financial Year ended March 31, 2016.

Result of Operations

During the year under review, the total revenues from operations (consolidated) increased to Rs. 32,242.91 million, a growth of 7.84% over the previous year. Earnings before interest, tax, depreciation and amortization was Rs. 4,240.15 million on consolidated basis. Net profit after tax (consolidated) increased by 18.78% to Rs. 2,815 million.

In US Dollar terms, revenues from operations for the year on consolidated basis was Rs. 490.31 million as against Rs. 489.03 million during the previous year, a growth of 0.26%. Average realization rate was Rs. 65.76 per US Dollar.

Standalone sales for the financial year 2015–16 grew by 1.29% to reach Rs. 12,618.56 million. Net profit after tax increased by 32.80 % to Rs. 2,019.14 million.

Dividend

The Directors are pleased to inform that in FY2015–16 an interim dividend of Rs. 1.10/– per equity share of face value of Rs. 2/– each (55%) was decleared and paid by passing a circular Board resolution dated March 31, 2016.

Futher, the Board recommends a final dividend of Rs. 1.10/– per equity share of face value of Rs. 2/– each (55%) on the paid–up equity share capital of the Company for the year under review. The total pay–out will amount to Rs. 262.66 million including dividend distribution tax.

Transfer to Reserves

Your Directors propose to transfer Rs. 202.00 million to the General Reserve. An amount of Rs. 7,050.81 million is proposed to be retained in the Profit & Loss Account.

Share Capital

The Company issued and allotted 732,629 equity shares of Rs. 2/– each, to the eligible employees on exercise of options under the Employee Stock Option Schemes of the Company and 104,000 shares have been allotted to KPIT Technologies Employees Welfare Trust during the financial year 2015–16.

Consequently, the outstanding issued, subscribed and paid–up capital of the Company as on March 31, 2016, is Rs. 394.99 million, consisting of 197,498,742 equity shares of Rs. 2/– each.

CRISIL Ratings

For the bank loan limits of Rs. 4,445.50 million, CRISIL has assigned the long term credit rating of AA–/ Negative.

Quality, Information Security and Productivity

We continue to strengthen our commitment to quality by sustaining and increasing the scope of the existing certifications. During the year under review, the Company achieved recertification for ISO 9001:2008 (Quality Management Systems), ISO 20000–1:2011 (Information Technology Service Management) by TUV Nord Cert GmbH for providing software development, product engineering, product support and enabling services. We also continue to maintain certifications for ISO 27001:2013 (Information Security Management Systems) and ISO22301:2012 (Business Continuity Management). The Company continues to maintain the highest maturity level 5 for CMMI–DEV® v1.3 (Development) and the Automotive SPICE® organization maturity level 5 upgraded from v2.5 to v3.0 during the year under review.

Our Customers and the market place are changing at an unprecedented speed and it is imperative to have robust tools and governance mechanisms which can adapt and facilitate change with ease. Keeping this in mind, we have developed Klarity, a platform for aggregating information and data from various tools within the organization to offer consolidated engineering analytics. The Company also continues to strengthen its Business IT delivery through focus on automation levers across SBUs and Practices. The ERP practice harnesses the power of the tools and accelerators developed in–house via a cloud based solution to utilize these individual tools in the form of an end–to–end tool chain.

Our process improvement drive continues to be strengthened by leveraging on workflow optimization, six sigma and lean principles. The Products and Platforms SBU now leverages on Agile methodology for faster time to market as well as cohesive communication amongst the product development stakeholders. We are committed to support the dynamic business needs of our customers through continuous focus on operational and quality excellence.

Institutional Shareholding

As on March 31, 2016, the total Institutional shareholding in the Company was 51.61% of the total share capital.

Information about the Subsidiary Companies

As on March 31, 2016, the Company had 15 subsidiaries, including step–down subsidiaries.

During the year under review, Integrated Industrial Information, Inc. and CPG Solutions, LLC were merged with KPIT Infosystems Incorporated, USA, with effect from January 01, 2016.

In accordance with Section 129(3) of the Companies Act, 2013, (hereinafter referred to as "the Act") the Company has prepared consolidated financial statements of the Company and all its subsidiary companies, which is forming part of this Annual Report. A statement containing salient features of the financial statements of the subsidiary companies in Form AOC–1 is annexed to this Report as "Annexure 1".

In accordance with Section 136(1) of the Act, the Annual Report of the Company, containing the standalone and the consolidated financial statements and all other documents required to be attached thereto have been placed on the website of the Company, www.kpit.com <http://www.kpit.com>. Further, a report on the performance and financial position of each of the subsidiaries has also been placed on the website of the Company. Members interested in obtaining a printed copy of the audited annual accounts of the subsidiary companies may write to the Company Secretary at the Company's Registered Office.

Directors

Pursuant to Section 152 of the Act, Mr. B V R Subbu retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re–appointment. The Board recommends his re–appointment.

During the year, Mr. Dwayne Allen, Alternate Director to Mr. Anant Talaulicar, Independent Director, resigned from the directorship effective March 12, 2016, owing to his other business commitments and pre–occupations.

The Board places on record its appreciation of the valuable services provided by Mr. Dwayne Allen during his tenure as a Director.

Key Managerial Personnel

The following persons have been designated as Key Managerial Personnel of the Company pursuant to Sections 2(51) and 203 of the Act, read with the Rules framed thereunder:

1. Mr. Kishor Patil– Chief Executive Officer (CEO) and Managing Director;

2. Mr. Anil Patwardhan– Chief Financial Officer (CFO);

3. Ms. Sneha Padve– Company Secretary.

Ms. Sneha Padve has been appointed as the Company Secretary and Compliance Officer of the Company, effective July 22, 2015, consequent upon Mr. R. Swaminathan moving into a new business role within the Company and getting relieved from the role of the Company Secretary and Compliance Officer.

Auditors

Pursuant to the provisions of the Act, read with the Companies (Audit and Auditors) Rules, 2014, M/s. B S R & Co. LLP, Chartered Accountants, were appointed as the Statutory Auditors of the Company in the Annual General Meeting held on July 25, 2014 for a period of five years, subject to ratification by the members in every Annual General Meeting. Based on the recommendation of the Audit Committee, the Board recommends ratification of the appointment of B S R & Co. LLP, as the Statutory Auditors of the Company, at the ensuing Annual General Meeting.

The Notes on financial statements referred to in the Auditors' Report are self–explanatory and do not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remark.

The Board of Directors of the Company appointed Dr. K. R. Chandratre, Practicing Company Secretary, as the Secretarial Auditor to conduct audit for the year under review. The Secretarial Auditor's report for the year under review is annexed to this Report as "Annexure 2". The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Corporate Governance

A separate section on Corporate Governance with a detailed compliance report thereon forms a part of this Report. The Auditors' Certificate in respect of compliance with the provisions concerning Corporate Governance, forms a part of this Annual Report, as required under the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as "the SEBI (LODR) Regulations, 2015").

Management Discussion and Analysis

A detailed review of the operations, performance and future outlook of the Company and its business is given in the Management Discussion and Analysis Report, which forms a part of this Report.

Awards & Recognition

KPIT's Smart Electric Bus technology wins the "One Globe Award for Excellence in Research & Development";

KPIT Featured as a "Niche Player" in Gartner's 2015 "Magic Quadrant for Oracle Application Management Services, Worldwide";

KPIT Won "Newcomer of the Year" Award at Annual SAP Hybris Summit;

KPIT's solution for Consul Neowatt Power Solutions wins SAP ACE Award for Customer Excellence in Service;

KPIT was honored for Successful Digital Transformation with 'Jewels of Digital Maestro Award';

KPIT was conferred with the Most Influential Marketing Leaders Awards;

Ms. Vaishali Vaid, VP & Head – Global HR, was honored with the '100 Most Talented Global HR Leaders Award' by CHRO Asia for the second time in a row;

KPIT was honored with the 'Best CSR Practice Award' by the World CSR Congress.

Particulars of Employees

A statement containing the names of every employee employed throughout the financial year and in receipt of remuneration of Rs. 60 lakh or more, or employed for part of the year and in receipt of Rs. 5 lakh or more a month, under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed to this Report as "Annexure 3(a)".

The ratio of the remuneration of each Director to the median employee's remuneration and other details prescribed in Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed to this Report as "Annexure 3(b)".

Employees Stock Option Plans (ESOPs)

Information relating to ESOPs of the Company is annexed to this Report as "Annexure 4". The information is being provided in compliance with Regulation 14 of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company has in place a policy on prevention of sexual harassment and has put in place a redressal mechanism for resolving complaints received with respect to sexual harassment and discriminatory employment practices. No case of sexual harassment and discriminatory employment was reported during the financial year under review.

Fixed Deposits

The Company has not accepted any deposits and as such, no amount of principal or interest was outstanding as on March 31, 2016.

Information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Act, read with Rule 8 of the Companies (Accounts) Rules, 2014

Conservation of Energy

The Company always endeavors to reduce energy consumption and achieve conservation of resources. Some of the initiatives taken by the Company in this connection have been detailed in the previous years' Board's Reports which the Company continues to implement. Apart from those initiatives, the following PAN India measures were undertaken to reduce energy consumption resulting in Pune (30%), Bangalore (15%) and Mumbai (19%) saving over the period of 6 years.

• Replaced 300 CFLs (72W) with energy efficient LED lights (36W), resulting in energy saving of 2,750kwh units per month amounting to Rs. 2.00 lacs;

• Replaced UPS with higher energy efficiency thereby reduction in energy consumption by 10%, for which capital invested was Rs. 34 lacs;

• Mild–concentrated Solar Photovoltaic Technology: We have developed a low–cost and light weight concentrator, which can concentrate up to 3–5 times the light that is incident on it.

Green Initiatives

The following initiatives were undertaken at the Company level to create awareness about importance of environmental protection and reducing pollution:

• 50 trees saplings have been planted within the Company premises in the month of June 2015;

247 Computer Assets and 300 CFL lights sent for recycling in the month of October 2015;

• 1,200 acres of agricultural land under irrigation, benefiting 21,000 people from 7 villages;

Covered 2 villages under Government of Maharashtra's Jalyukta Shivar Abhiyan;

• KPITes spread awareness about the Zero Garbage initiative;

Environment Week Celebration: We have been celebrating the Environment Week on the occasion of the "World Environment Day" for the past six years since 2010;

Conservation of Private Forests in Koyna – Chandoli Corridor in Maharashtra;

Tree Plantation Programs: 1,050 trees planted in Pune & Bangalore.

Occupational Health and Safety Assessment Series (OHSAS)

The following activities were carried out by the Company under OHSAS in 2015–16:

Framework created to move away from a week of health and wellness to annual approach for "Health and Wellness";

• Following choice of work out provided considering the popularity and trendy ways of exercise:

o Introduction of Zumba o Introduction of Yoga

Following health check–ups & diagnostic support to employees and their families:

o Subsidized health check–up package offered for employee + family o Negotiated discounts on expensive tests for employee + family Health awareness vaccination drives to address health hazards such as:

o H1N1 Vaccination drive done for employee + family Initiated hospital tie ups for discounted check–ups for OPD and other tests (addition to diagnostic centers);

• Awareness Communication on "WHO Days";

• Engagement Through Wellness: o Laughter sessions

o Special Pranayama sessions for International Yoga Day

o Tug of War

o Random blood sugar testing on World Diabetes Day

o Dental check–up camps

o Eye check–up camps on campus for employees

o Meditation activity conducted as a mark of

"Healthy Mind" o Balloon blowing activity on the World Heart Day

Technology Absorption

During the year under review, we have taken Smart Enterprise initiative to digitally transform key business processes creating differentiated experiences for everyone interacting with us and also improve people productivity. We have successfully deployed Pivotal Cloud Foundry a KPIT digital platform hosted on Smart Infrastructure. Various productivity mobile apps are made available to employees using the Company's store hosted on Microsoft Intune platform.

Smart Infrastructure consists of software defined Data Centre technologies comprising of integrated self–service software defined compute, network and storage improving agility and governance for IT asset provisioning. This year, we also rolled out KPITube.com, a video gallery for our employees to collaborate and share videos and access live sessions using any smart devices. To take the collaboration experience to next level and allowing employees to participate in audio/video conference from any place, any device, we are rolling out 'WebEx' to global users.

In addition to the above, following are the key initiatives planned in the coming year:

Transforming IT with 'IT as a Service' focusing on business value than technology;

• Implementing context aware smart business applications with mobile first, cloud first, platform enabled architecture;

Digital Engagement Hub: Global integrated Omni–channel Service Desk for all enabling functions.

Research and Development (R&D) Activity

EV bus project

Hon'ble Prime Minister of India Shri Narendra Modi flagged off the Smart Electric Bus, an indigenous technology developed by our Company, at the Indian Parliament on the December 21, 2015. This project was initiated by Shri Nitin Gadkari, Hon'ble Minister of Road Transport and Highways (MoRTH), Government of India.

The Central Institute of Road Transport (CIRT) supported this project to validate and ensure that the electric bus technology is safe, reliable and well suited for Indian road conditions. This initiative is inspired by Shri Nitin Gadkari's call to the industry and research organizations to develop indigenous, innovative and pollution free public transport for India. Our Smart Electric Bus enables clean mobility and is aligned with the Indian government's initiatives of Make in India, Smart Cities and Swachh Bharat.

The indigenously developed electric system, with the intellectual property rights being owned by us, consists of components like motors, lithium ion batteries and a power transmission unit. It is a versatile system and features like range (100 to 200 km), top speed (up to 100 kmph), air conditioning, etc. can be configured as required. This system is being designed to work in all bus formats, i.e. front engine and rear engine, high floor and low floor etc.

Major benefits from this technology would be:

1. Zero emissions

2. Increased passenger comfort

3. Low maintenance

4. Versatile design to meet customer requirement

Replacing one diesel bus with an electric bus can save carbon dioxide emissions up to 48,000 kg a year which is equal to planting 2,400 trees annually. It will also save diesel worth Rs. 10 lacs a year.

Hybrid bus

We received an award from the Indian Automotive Technology and Innovation Awards (IATIA) titled "Technology innovation of the year 2015" for hybrid conversion technology.

Currently, we are running hybrid pilot buses along with some of the transportation undertakings to collect data and results about the performance.

Notes:

1. During the previous year, the Company had set up a state–of–the–art facility for its R & D activities, construction of which is completed as of March 31, 2015. The Company has been granted recognition of this of facility with the Department of Science & Industrial Research which is valid up to March 31, 2018.

2. Out of total R & D expenditure of Rs. 92.34 million, eligible R & D revenue expenditure under Section 35(2AB) of the Income Tax Act, 1961, for the Company is Rs. 78.00 million.

A separate section on R&D activities undertaken by the

Company has also been included in this Annual Report.

Foreign Exchange Earnings and Outgo

Given the global nature of the business of the Company, exports always form its thrust total foreign exchange earnings during the year have been Rs. 9,900.37 million (previous year Rs. 8,783.50 million) and foreign exchange outgo (including imports) has been Rs. 688.24 million (previous year Rs. 589.13 million).

Board Meetings

Six meetings of the Board of Directors were held during the year. More details about the meetings are available in the Report on Corporate Governance, which forms a part of this Annual Report.

Committees of Board

The details regarding Committees of the Board of Directors of the Company are given in the report on Corporate Governance, which forms a part of this Annual Report.

Independence of the Board

The Board of Directors of the Company comprises of optimum number of Independent Directors. Based on the confirmation/disclosures received from the Directors and on evaluation of the relationships disclosed, the following Non–Executive Directors are Independent in terms of Regulation 16(1)(b) of the SEBI (LODR) Regulations, 2015 and Section 149(6) of the Act:

1. Ms. Lila Poonawalla

2. Dr. R. A. Mashelkar

3. Mr. Adi Engineer

4. Prof. Alberto Sangiovanni Vincentelli

5. Mr. Anant Talaulicar

Company's Policy on Directors' appointment and remuneration

Pursuant to the provisions of Section 134(3)(e) of the Act, the policy of the Company on the appointment and remuneration of Directors including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Section 178(3), of the Act is annexed to this Report as "Annexure 5".

Particulars of loans, guarantees or investments under Section 186 of the Act

Particulars of loans, guarantees or investments made during the year under review, pursuant to the provisions of Section 186 of the Act are as below:

Particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act

Pursuant to the provisions of Section 134(3)(h) of the Act, the particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act and prescribed in Form AOC–2 of Companies (Accounts) Rules, 2014, is annexed to this Report as "Annexure 6".

Material changes and commitments affecting the financial position of the Company

There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this Report.

Significant and material orders

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.

Risk Management Policy

A mechanism to identify, assess, monitor and mitigate various risks to key business objectives of the Company is in place. A write–up on enterprise risk management is included elsewhere in this Annual Report.

Internal Control Systems and Adequacy of Internal Financial Controls

The internal control systems of the Company are adequate considering the nature of its business, size and complexity. The Statutory Auditors as well as the Internal Auditors of the Company review the same on periodical basis. Further, significant observations, if any, and action taken reports on the same are considered by Audit Committee at their meeting.

The Act has made it mandatory for the Directors in their Responsibility Statement in the Board's Report to state that "the directors, in the case of a listed 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." The above statement has to be affirmed to by the Statutory Auditors in their Audit Report.

As per explanation provided to Section 134(5)(e) of the Act, "internal financial controls" means "the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information".

Components of internal control define internal control over financial reporting as "a process designed by, or under the supervision of the CEO and CFO" office and effected and approved by the Board of Directors and management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Indian GAAP (IGAAP) and includes those policies and procedures that:

• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets and liabilities of the Company;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IGAAP and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and Directors of the Company; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Audit Committee Recommendations

During the year, all the recommendations of the Audit Committee were accepted by the Board. The composition of the Audit Committee is as mentioned in the Report on Corporate Governance, which forms a part of this Annual Report.

Corporate Social Responsibility (CSR)

The Policy on Corporate Social Responsibility of the Company and the details about the development of CSR Policy and initiatives taken by the Company on CSR during the year as per the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been annexed to this Report as "Annexure 7".

Formal Annual Evaluation by the Board

A separate meeting of the Independent Directors of the Company was held on March 16, 2016, in which a formal evaluation of performance of the Board, Committees and the individual Directors was carried out. The performance evaluation was conducted based on the criteria specified in the Act and Regulation 17 of the SEBI (LODR) Regulations, 2015.

The feedback based on evaluation was discussed with the Chairman of the Board and given to the Directors.

Vigil mechanism

The Company has established a vigil mechanism for Directors and employees to report their genuine concerns. The details of the same are explained in the Report on Corporate Governance. The Policy on Vigil Mechanism may be accessed on the Company's website at the link: http:// www.kpit.com/company/investors/corporate–governance

Extract of Annual Return

The details forming part of the extract of the Annual Return in Form MGT–9 is annexed to this Report as "Annexure 8".

Responsibility Statement of the Board of Directors

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors state that:

i) in the preparation of the annual accounts for the year ended March 31, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

ii) they 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 as at March 31, 2016 and of the profit of the Company for the year ended on that date;

iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) the annual financial statements have been prepared on a going concern basis;

v) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively and

vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

CEO & CFO Certification

Certificate by Mr. Kishor Patil, CEO & Managing Director and Mr. Anil Patwardhan, Chief Financial Officer, pursuant to the provisions of Regulation 17(8) of the SEBI (LODR) Regulations, 2015, for the year under review was placed before the Board of Directors of the Company at its meeting held on April 27, 2016.

A copy of such certificate forms a part of the Report on Corporate Governance.

Acknowledgments

We take this opportunity to thank all the shareholders of the Company for their continued support.

We thank customers, vendors, investors and bankers of the Company for their continued support during the year. We place on record our appreciation of the contribution made by our employees at all levels. Our consistent growth was made possible by their hard work, solidarity, co–operation and support.

We further thank the governments of various countries where we have our operations. We also thank the Government of India, particularly the Ministry of Communication and Information Technology, the Ministry of Commerce, the Ministry of Finance, the Ministry of Corporate Affairs, the Customs and Excise Departments, the Income Tax Department, the Reserve Bank of India, the State Governments, the Software Development Centers (SDCs)/Special Economic Zones (SEZs) – Navi Mumbai, Chennai, Bengaluru, Hyderabad, Noida, Pune and all other government agencies for their support and look forward for their continued support in future.

For and on behalf of the Board of Directors

S. B. (Ravi) Pandit

Chairman & Group CEO

Pune

April 27, 2016

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