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Your Directors present herewith the Eighteenth Annual Report on the business and operations of the Company together with the audited Financial Statements for the year ended 31 March 2015.
PUBLICATION OF RESULTS OF SUBSIDIARY COMPANIES
Section 129 (3) of the Companies Act, 2013, requires the company to attach along with the financial statement, a separate statement containing the salient features of the financial statement of its subsidiaries. The performance and financial position of the subsidiaries and associate of the Company, included in the consolidated financial statement, forms part of the Annual Report and is an integral part of the Directors' Report.
The Balance Sheet, Profit and Loss Account, Report of the Board of Directors and the Report of the Auditors of the subsidiary Companies have not been attached with the Balance Sheet of the Company. If any member so desires, the Company will make available these documents / details upon specific request by the member of the Company.
Your Directors are pleased to recommend payment of a dividend of Rs. 4/– per equity share of Rs. 10/– each during the year subject to the approval of the shareholders. (Previous year Rs. 4 per share of Rs. 10/– each).
3. OPERATING RESULTS AND BUSINESS
During the year under review, total income of the Company was Rs. 144 Crores as compared to Rs. 132 Crores in the previous financial year, i.e. an increase of 9%. On a consolidated basis, total income decreased from Rs. 276 Crores to Rs. 271 Crores, a decline of around 2%.
The net profit after tax on a standalone basis for the year ended 31 March 2015 was Rs. 11.69 Crores as against Rs. 10.38 Crores in the previous year, an increase of around 13%. On a consolidated basis, the net profit after tax for the year ended 31 March 2015 was Rs. 18.17 Crores as compared to Rs. 14.87 Crores for the previous financial year marking an increase of 22% on a year to year basis.
4. DIRECTORS AND KEY MANAGERIAL PERSONNEL
The Board of Directors had, on the recommendation of the Nomination and Remuneration Committee appointed Ms. Kalpana Trivedi as an Additional Director of the Company with effect from 30 March 2015. Her appointment as an Independent Director for a period of 5 years will be subject to the members' approval at the Annual General Meeting.
The erstwhile Chief Financial Officer and Company Secretary Mr. V Sudarshan resigned from the services of the Company effective 31 May 2014. Mr. Aloke Ghosh was appointed the Chief Financial Officer and Company Secretary of the Company effective 2 June 2014.
5. A STATEMENT ON DECLARATION BY INDEPENDENT DIRECTORS
A statement on declaration of Independence required to be made under section 149 of the Companies Act, 2013 has been obtained from each of the Independent Directors confirming their independence.
6. BOARD EVALUATION
Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of the directors individually as well as the evaluation of the working of its Audit, Nomination and Remuneration and other committees. The criteria on the basis of which the evaluation has been carried out has been explained in the Corporate Governance Report.
7. POLICY ON NOMINATION AND REMUNERATION
The Board on the recommendation of the Nomination and Remuneration Committee has framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The highlights of the policy on Nomination and Remuneration is provided as a part of the Directors' Report. The detailed policy is available on the website of the company.
8. MEETINGS OF THE BOARD
The Board of Directors met four (4) times on 14 May 2014, 23 July 2014, 17 October 2014 and 19 January 2015 during the financial year 2014–15.
9. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS
The Company at present has the following subsidiary companies:
A) BLUE STAR INFOTECH AMERICA, INC. (BSIA)
The wholly owned subsidiary of the Company, Blue Star Infotech America, Inc. achieved a total income of US$ 196,35,989 (equivalent of Rs. 120.07 Crores) for the financial year ending 31 March 2015 as compared to US$ 2,21,38,707 (equivalent of Rs. 134.19 Crores) for the previous year. Despite a lower turnover, essentially due to reduction in low and negative margin business, a concerted effort to keep costs under check, the Company reported a net profit of US$ 2,74,867 (equivalent of Rs. 1.68 Crores) this year compared to a net loss of US$ 2,49,867 (equivalent of Rs. 1.50 Crores) for the previous year marking a turnaround in profits after four consecutive years. The performance of the subsidiary is satisfactory and expected to progress in the ensuing year as well.
Your Company made an additional investment of US$ 5,00,000 (equivalent of Rs. 3.04 Crores) at par in the equity of the subsidiary in order to further the growth, operations and business of the Company. With this investment, the paid–up capital of the subsidiary as at year end is US$ 23,50,000 (18,50,000 in the previous year). The investment is in shares of US$ 1 each.
B) BLUE STAR INFOTECH (UK) LTD.
The total income of this wholly owned subsidiary, Blue Star Infotech (UK) Limited was £ 23,92,092 (equivalent of Rs. 23.59 Crores) for the financial year ended 31 March 2015 as compared to £ 23,04,183 (equivalent of Rs. 23 Crores) for the previous year. The company registered a net profit of £ 207,016 (equivalent of Rs. 2.04 Crores) for the financial year ending on 31 March 2015 compared to net profit of £ 2,15,409 (equivalent of Rs. 2.15 Crores) for the previous year. The shrinkage in profits is due to addition of manpower in the sales team. The business is stable.
C) BLUE STAR INFOTECH (SINGAPORE) PTE. LIMITED
The total income of the wholly owned subsidiary, Blue Star Infotech (Singapore) Pte. Limited was SGD 30,75,977 (equivalent of Rs. 14.62 Crores) for the financial year ended 31 March 2015 as compared to SGD 21,67,203 (equivalent of Rs. 10.45 Crores) for the previous year. The subsidiary registered a net profit of SGD 476,804 (equivalent of Rs. 2.27 Crores) for the financial year ending on 31 March 2015 compared to a net profit of SGD 3,46,802 (equivalent of Rs. 1.92 Crores) for the previous year.
Blue Star Infotech Singapore Pte. Ltd. has two wholly owned subsidiaries, one each, in Singapore and Malaysia viz. Blue Star Infostack Solutions Pte. Ltd. and Blue Star Infostack (Malaysia) Sdn. Bhd. which caters to the Banking and Insurance sector. The performance of the subsidiary is satisfactory. Blue Star Infotech Singapore Pte. Ltd. has made an additional investment of RM 500,000 in the equity of Blue Star Infostack (Malaysia) Sdn. Bhd. in order to further the growth, operations and business of the Company. With this investment, the paid–up capital of the subsidiary as at year end is RM 1,000,000.
10. DIRECTORS' RESPONSIBILITY STATEMENT
The Directors would like to inform the members that the Audited Accounts for the financial year ended 31 March 2015 are in full conformity with the requirement of the Companies Act, 2013. The Directors hereby confirm that:
(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis;
(e) the directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively;
11. RESERVATIONS AND/OR QUALIFICATIONS IN THE STATUTORY AUDITORS' REPORT
The Directors would like to inform that there were no qualifications, reservations or adverse remarks made by the Auditors of the Company in their Audit Report.
12. RESERVATIONS AND/OR QUALIFICATIONS IN THE SECRETARIAL AUDITORS' REPORT
Pursuant to the provisions of Section 204of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Jayshree Dagli & Associates, Practising Company
Secretaries to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report provided in the Annual Report forms part of the Directors' Report. The Directors would like to inform that there were no qualifications, reservations or adverse remarks made by the Secretarial Auditors of the Company in their Audit Report.
13. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS
There were no orders passed by any regulators or courts or tribunals which can impact the going concern status and the Company's operations in future. Hence, the company has no information to furnish in this regard.
14. LOANs AND GUARANTEEs UNDER sECTION 186 OF THE COMPANIEs ACT, 2013
Particulars of Loans and Guarantees covered under the provisions of Section 186 of the Companies Act, 2013 forms part of the Directors' Report and is provided in the Annual Report.
15. PARTICULARs OF CONTRACTs AND ARRANGEMENTs UNDER sECTION 188 OF THE COMPANIEs ACT, 2013
The Particulars of the Contracts and arrangements, provided in form AOC 2, forms part of the Annual report and is an integral part of the Directors' Report.
16. PARTICULARS OF EMPLOYEES
Information as per provisions of section 197(12) of the Companies Act 2013, read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and the names of every employee employed throughout the financial year and in receipt of Rs. 60 Lakhs or more, or employed for part of the year and in receipt of Rs. 5 Lakhs or more a month, under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is a part of the Board's Report. However, this information is not being provided as part of the Annual Report but will be available to the shareholders on request to the Company Secretary.
It may be noted that particulars of employees posted and working in a country outside India, not being directors or their relatives, drawing more than Rs. 60 Lakhs per financial year or Rs. 5 Lakhs per month, are not circulated to the members in the Board's report, but such particulars shall be filed with the Registrar of Companies while filing the financial statement and Board Reports:
Particulars shall be made available to any shareholder on a specific request made by them in writing before the date of such Annual General Meeting wherein financial statements for the relevant financial year are proposed to be adopted by shareholders and such particulars shall be made available by the company within three days from the date of receipt of such request from shareholders and in case of request received even after the date of completion of Annual General Meeting, such particulars shall be made available to the shareholders within seven days from the date of receipt of such request.
17. MATERIAL CHANGEs AND COMMITMENTs
There are no material changes and commitments other than what is already stated in the financials which will affect the financial position of the company during the period 31 March 2015 till the date of the report.
18. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
Information as per Section 134(3)(m) of the Companies Act 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, relating to the conservation of energy, technology, absorption, foreign exchange earnings and outgoings respectively, is annexed to and forms part of this report.
19. RISK MANAGEMENT
20. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
The Company was required to spend Rs. 24.83 Lakhs by 31 March 2015 towards charitable and social causes, as part of its commitment to Corporate Social Responsibility. The Board decided to expend these funds in support of the HRD Minister's nationwide campaign of "Swachh Bharat/ Swachh Vidyalaya" to build toilets in schools. Since the process of identifying NGOs specialised in this field has taken more time than anticipated, these funds could not be expended in the financial year 2014–15. The Report on CSR activities is provided in the Annual Report and forms part of the Directors' Report.
The Company invests its surplus funds in debt based broad–based mutual funds or with reputed scheduled banks in liquid funds or short–term deposits, respectively, which are considered safe.
Mr. Sanjay Vaswani, Non–Executive–Promoter Director of the Company is liable to retire by rotation.
In accordance with the provisions of sections 152 of the Companies Act, 2013, Mr. Sanjay Vaswani, Director retires by rotation and, being eligible, offers himself for reappointment at the ensuing Annual General Meeting. The profile of the Director is stated in the explanatory statement to the notice of the Annual General Meeting.
23. EMPLOYEES STOCK OPTION PLAN (ESOP)
Disclosures required to be made under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ESOP and Companies Act, 2013 are given in note 2.1 of the Notes to the Financial Statements, forming part of the Accounts. The diluted EPS on considering unvested ESOPs is Rs. 9.24 per share as on
M/s Walker, Chandiok & Co. LLP, (formerly Walker, Chandiok & Co) Chartered Accountants, (Firm Registration No.: 001076N) Mumbai, have been appointed as the Statutory Auditors of the Company in the Annual General Meeting held on 23 July 2014. The Company has placed the matter relating to their appointment, for ratification of members in the ensuing Annual General Meeting, for the residual portion of their term. A written certificate from the Auditors has been obtained by the Company to the effect that the re–appointment, if made, would be in accordance with the limits specified under section 139 of the Companies Act, 2013 read with section 142 of the Companies Act, 2013.
25. AUDIT COMMITTEE
The Composition of the Audit Committee is covered in the Corporate Governance Report forming part of the Board's Report. The Board has accepted all the recommendations made by the Audit Committee to the Board.
26. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit (IA) function is pre–defined. The internal auditor function is entrusted to an independent firm of Chartered Accountants of repute. To maintain its objectivity and independence, the Internal Auditors report to the Chairman of the Audit Committee of the Board.
The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.
27. WHISTLE BLOWER POLICY
The Company has a vigil mechanism named the Whistle Blower Policy to deal with instances of fraud and mismanagement, if any.
This Policy of the Company allows for disclosure by employees, customers and/or third–party intermediaries of such matters internally, without fear of reprisal, discrimination or adverse employment consequences, and also permits the Company to address such disclosures or complaints by taking appropriate action, including but not limited to, disciplining or terminating the employment and/or services of those responsible.
The Whistle Blower Policy is available on the website of the Company. During the year, no instances of fraud on the Company or by the Company were reported.
28. CORPORATE GOVERNANCE
The Company has complied with the recommendations of the Corporate Governance code as provided in Clause 49 of the Listing Agreement with the stock exchanges. A separate section on Corporate Governance, together with a certificate from the Company's Auditors confirming compliance, is set out separately, forming part of this Report.
29. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The Management Discussion and Analysis Report has been attached to the annual report and forms part of the Directors' Report.
30. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return is annexed to and forms part of the Directors' Report.
31. GREEN INITIATIVE IN CORPORATE GOVERNANCE
Pursuant to the "Green Initiative in Corporate Governance" by the Ministry of Corporate Affairs in allowing paperless compliances, the Company has implemented the policy of sending the Notice with Balance Sheet, Profit and Loss Account, Auditor's Report, Director's Report and Explanatory Statement etc. through email to those shareholders whose email addresses are registered with the Company's Registrar. Out of 12,345 shareholders, 4,424 shareholders (around 36%) have opted for receiving documents in electronic mode as of 31 March 2015.
The Board places on record their sincere acknowledgement of the support from all the stakeholders of the Company viz. Clients, Vendors, Bankers, Employees and other Business Associates etc. for the support received from them during the year.
For and on behalf of the Board of Directors
Chairman and Managing Director
Blue star Infotech Limited
Place : Mumbai
date : 14 May 2015