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Dear NIIT Shareowner,
Your Directors take pleasure in presenting the 33rd Annual Report along with the Audited Financial Statements for the Financial Year ended March 31, 2016.
During the year, your Company's consolidated income from operations was Rs. 10,069 million as against Rs. 9,574 million in the previous year and Net Profit (after Share of Associates' Profit and Minority Interest) Rs. 672 million as against loss of Rs. 1,385 million in the previous year.
The income from operations for the year under review for the Company on a Standalone basis was Rs. 3,815 million as compared to Rs. 3,486 million in the previous year and Net profit of Rs. 1 million as against the loss of Rs. 1,161 million in the previous year.
The growth momentum continued in the Corporate Learning business. In the corporate training market your Company continues to focus on Managed Training Services (MTS). Revenue from Corporate Learning Group (CLG) grew 16% year–on–year, driven by strong momentum in MTS, which was up 12% as compared to the previous year. This was achieved despite headwinds due to sharp decline in commodity prices which impacted decision making in certain sectors including the Energy Sector. NIIT added 7 new global MTS customers in FY16 including 4 in Q4 FY16. As on March 31, 2016 the company had 31 MTS customers, with a revenue visibility of USD 200 million over the balance period of existing contracts. The business achieved EBITDA margin of 12%. Operating profit (EBITDA) was up 17% year–on–year. CLG contributed 56% to the total consolidated revenue of NIIT.
Your Company benefited from the comprehensive business transformation program undertaken by business in previous year which included a review of the entire portfolio of businesses, geographies and products with the objective of exiting low margin and low volume products, capital intensive businesses and sharpen focus on asset – light, high–return and growth–oriented offerings. The Individual Learning business and Skill Building business operations were combined into a single Skills & Careers Group (SNC). This transformation program helped the company to return to growth and achieve positive EBITDA margin in FY16.
This was achieved despite continuing headwinds in the IT sector hiring in India. The company had responded to the headwinds in the business by focusing on growing its Beyond–IT portfolio of offerings. The contribution from Beyond–IT portfolio of courses increased to 40% in FY16 as compared to 33% last year with a 23% increase in revenue as compared to the previous year. The business achieved robust growth in revenue from International markets and in B2B offerings in India as a result of sharper focus and realignment of operations. In addition, new transformation initiatives launched during the year including StackRoute and NIIT.tv received encouraging response from the market.
Overall, the revenue achieved by the Skills & Careers business grew 1% year–on–year versus a decline of 18% in FY15. Significant growth was achieved on a reduced capacity versus last year.
The business had a positive 2% EBITDA margin as compared to negative 5% EBITDA margin in FY15, an improvement of 698 basis points. The Skills & Careers business contributed 33% to NIIT's consolidated revenue.
In the School Learning Business, the company continues to stay away from capital intensive and capex–driven business models. While this impacted the overall revenue and margins, the company continues to improve its liquidity and capital efficiency. The focus for the School Learning Group (SLG) is on growing the asset–light, IP–driven product offerings. In FY16, revenue from SLG declined 25% year–on–year. The business had 2% EBITDA margins for the year and contributed 11% to NIIT's revenues for FY16.
On an overall basis, NIIT achieved revenues of Rs. 10,069 million, a growth of 5% as compared to the previous Financial Year. The strong growth in Corporate Learning and turn around in Skills and Careers Business helped to overcome planned ramp down of revenue from government schools. EBITDA was Rs. 712 million as compared to Rs. 442 million last year (excluding one–time transformation charge in FY15).
The Company continues to focus on an asset light, technology intensive and IP driven business opportunities. In the Corporate Learning Business, the Company expects to continue growth momentum driven by strong demand for outsourcing of training to specialist training companies.The Company has started the new Financial Year with robust pipeline of MTS opportunities.
In the Skills and Careers Business, softness in hiring of IT graduates is expected to continue in the short term and would impact enrolments. However, the increasing trend of digitization across industries and disruption of traditional industries by start–ups is driving demand for Digital skills. NIIT has kicked off a program of Digital transformation of its portfolio of courses to align with increasing demand of such courses. In addition, in the medium to long term, your company plans to transform training delivery from brick and mortar centres to a multi–modal, multi–channel delivery modal involving a greater proportion of delivery online.
NIIT will continue to defocus capex driven business and exit capital intensive government schools. The company believes that there is a large opportunity in the K–12 market and plans to leverage existing operations in the schools to offer comprehensive managed services to schools as well as offer products and services to students outside school through digital channels.
Your Directors have not recommended any Dividend for the year under review.
Transfer to Reserves
Your Company has not transferred any sum to the General Reserve.
Awards and Accolades
During the year, the NIIT Brand received accolades from across the world recognizing and commending various aspects of the Company. Some of them are listed below:
• NIIT has been featured as 'India's Most Trusted Education Brand, 2016' by Brand Trust Report for the fourth consecutive year.
• NIIT has been awarded the 'Best Innovation Brand'
in the Education sector at the ASSOCHAM National Brand Summit & Excellence Awards 2016.
• NIIT has been featured as the 'Most Respected Education Company, 2016' by Business World.
• NIIT.tv – a disruptive innovation by NIIT Limited has been awarded the 'Best online education platform' at the Indian Education Awards 2016 organized by Franchise India, India's leading Franchising publication.
• NIIT Yuva Jyoti has been recognized as the 'Best Institute – Innovation, 2016' by ASSOCHAM.
• NIIT USA received 8 'Brandon Hall Group Excellence Award 2015' jointly with Shell, GE, MetLife, Zurich North America and Westfield Insurance.
• NIIT USA has been ranked among Training lndustry. com's 2016 Top 20 Companies in Content Development – for the sixth consecutive year.
• NIIT USA has been ranked among Training lndustry. com's 2016 Top 20 Companies in Training Outsourcing – for the ninth consecutive year.
• NIIT USA has been ranked among Training lndustry. com's 2015 Top 20 Companies in Gamification –for the second consecutive year.
• NIIT USA has been ranked #22 Gold Learning Elite member in the CLO Learning Elite 2016 list, Chief Learning Officer magazine's prestigious program that honors the best organizations for learning and development.
• NIIT was conferred with two prestigious awards at 'The 5th Indian Education Awards 2015' organized by Franchise India. The company won the coveted Best Vocational Institute for Banking, Finance & Insurance award for NIIT Institute of Finance Banking & Insurance Training Ltd (IFBI). The prestigious Best Innovative Learning Tool award was presented to NIIT Nguru MathLab Plus.
• NIIT Limited has been awarded the 'Franchisor of the Year Award 2015,' under the category 'Vocational & Skill Development Training Institute' by Franchise India, India's leading Franchising publication.
Changes in Capital Structure
Pursuant to the composite Scheme of Arrangement under the provisions of Section 391 and 394 of the Companies Act, 1956 between NIIT Limited, Evolv Services Limited, Scantech Evaluation Services Limited, NIIT Online Learning Limited and MindChampion Learning Systems Limited (Formerly known as Hole–in–the–Wall Education Limited) and their respective shareholders and creditors, which was approved by the Hon'ble Delhi High Court vide its Order pronounced on May 08, 2015 and which became effective from May 23, 2015 on filing the certified copy of High Court Order with the Registrar of Companies, NCT of Delhi and Haryana, and was applicable from April 01, 2014 ("the Appointed Date"), the Authorized Share Capital of the Company was increased to Rs. 1,386,000,000/– comprising of 150,000,000 Equity Shares of Rs. 1/– each, 250,000,000 Equity Shares of Rs. 2/– each, 13,600,000 Equity Shares of Rs. 10/– each, 350,000,000, 8.5% Cumulative Redeemable Preference shares of Rs. 1/– each and 2,500,000 Redeemable Preference Shares of Rs. 100/– each.
During the year, the Company has consolidated 150,000,000 Equity Shares of Rs. 1/– each into 75,000,000 Equity Shares of Rs. 2/– each and sub–divided 13,600,000 Equity Shares of Rs. 10/– each into 68,000,000 Equity Shares of Rs. 2/– each.
During the year under review, the Company has allotted 330,636 Equity Shares under the NIIT Employee Stock Option Scheme 2005.
A report on the performance and financial position of each of the subsidiaries, associates and joint venture companies as per the Companies Act, 2013 is provided as Annexure–A in the prescribed Form AOC–1.
The Annual Financial Statements of the subsidiaries will be made available to the Members of the Company/ Subsidiary Companies seeking such information at any point of time. The Annual Financial Statements of the subsidiaries are also available for inspection for any Member, during the business hours, at the Registered Office of the Company and subsidiary companies and the same can be accessed from the website of the Company i.e. www.niit.com .
Consolidated Financial Statements
In compliance with Regulation 33 of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations") and Section 129(3) of the Companies Act, 2013 read with the relevant rules made thereunder, the Consolidated Financial Statements are prepared in accordance with the Accounting Standard (AS) – 21 on Consolidated Financial Statements, read with AS–23 on Accounting for Investments in Associates and AS–27 on Financial Reporting of Interests in Joint Ventures. The Consolidated Financial Statements together with Auditors' Report thereon form part of the Annual Report.
Transfer of Amounts to Investor Education and Protection Fund
Pursuant to the provisions of Section 205A(5) and 205C of the Companies Act, 1956, relevant amounts which remained unpaid or unclaimed for a period of seven years have been transferred by the Company, from time to time on due dates, to the Investor Education and Protection Fund.
Pursuant to the provisions of Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company as on September 08, 2015 (date of last Annual General Meeting) on the website of the Company <http://www.niit.com/india/training/investors/Pages/> investor–information.aspx
Corporate Social Responsibility (CSR)
In compliance with the requirement of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility) Rules, 2014, as amended from time to time, the Company has constituted a Corporate Social Responsibility Committee ("CSR Committee"). As on the date of this report, following are the members of CSR Committee:
1. Mr. Surendra Singh – Chairperson
2. Mr. Rajendra S Pawar
3. Mr. Vijay K Thadani
4. Mr. Anand Sudarshan
The CSR Policy as approved by the Board of Directors of the Company is available on the Company's website at <http://www.niit.com/authoring/Documents/>
During the year under review, the provisions corresponding to CSR under the Companies Act, 2013 were not applicable on the company. Accordingly, the Company has not made any grant during the Financial Year 2015–16 towards CSR initiatives. The Report on CSR Activities is given in Annexure – B forming part of this Report.
Your Company's philosophy on Corporate Governance envisages the highest level of transparency, accountability and equity in all facets of its operations as well as in all interactions with its Stakeholders including Shareholders, NIITians, Lenders and Regulatory Authorities. Your Company has also implemented several best practices in Corporate Governance, such as "Whistle blower policy" and "Code of Conduct on Ethics".
Your Company has complied with all the requirements relating to Corporate Governance as stipulated in the Listing Regulations. The Report of the Directors on Corporate Governance is given as a separate section titled "Corporate Governance Report". The Certificate from the Practicing Company Secretary confirming the compliance to the conditions of the Corporate Governance stipulated in Para E of Schedule V of Listing Regulations is annexed to the Corporate Governance Report.
Management Discussion and Analysis Report
As required by Regulation 34(e) of the Listing
Regulations, the Management Discussion and Analysis Report is annexed and forms part of this Annual Report.
As per the provisions of Section 152(6) of the Companies Act, 2013, Mr. Rajendra S Pawar will retire by rotation in the ensuing Annual General Meeting and being eligible, has offered himself for re–appointment.
The Company has received declarations from all the Independent Directors confirming that they meet the criteria of Independence as prescribed under Section 149(6) of the Companies Act, 2013 and Regulation 25 of Listing Regulations.
Key Managerial Personnel
As on date of this report, following officials are the 'Key Managerial Personnel' of the Company under the Companies Act, 2013:
1. Mr. Vijay K Thadani – Vice Chairman & Managing Director
2. Mr. P Rajendran – Joint Managing Director
3. Mr. Rahul Keshav Patwardhan – Chief Executive Officer
4. Mr. Rohit Kumar Gupta – Chief Financial Officer
5. Ms. Arpita B Malhotra – Company Secretary
During the year under review, Mr. Mukesh Kumar resigned as Company Secretary of the Company w.e.f. the close of business hours on December 02, 2015. After the end of Financial Year, Ms. Arpita B Malhotra has been appointed as Company Secretary of the Company w.e.f. May 10, 2016.
Meetings of the Board
During the year, Six (6) Board Meetings were convened and held. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and Listing Regulations. For further details, please refer Corporate Governance Report forming part of this Annual Report.
Pursuant to the provisions of the Companies Act, 2013 and Listing Regulations, the Board has carried out the annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination and Remuneration, CSR and Stakeholders' Relationship Committees. A structured evaluation form was administered after taking into consideration inputs received from the Directors, covering various aspects of the Board's functioning such as adequacy of the composition of the Board and its Committees, Board Effectiveness, Key Stakeholders connect, Ethics and Compliances, Evaluation of Company's Performance, Project Management and Internal Control and Audits. A separate exercise was carried out to evaluate the performance of individual Directors including the Chairperson of the Board, who were evaluated on parameters such as level of engagement and contribution, effective participation in Board / Committee Meetings, independence of judgement, safeguarding the interest of the Company and its minority shareholders, providing expert advice to Board and contributing in deliberations while approving related party transactions.
The Board has, on the recommendation of the Nomination & Remuneration Committee, framed the Nomination and Remuneration Policy as stated in the Corporate Governance Report.
Vigil Mechanism / Whistle Blower Policy
Pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013 and Regulation 22 of Listing Regulations, a Vigil Mechanism for Directors and employees to report genuine concerns has been established by the Company. The Whistle Blower Policy is available on the website of the Company at the following link: <http://www.niit.com/authoring/>
Documents/Other%20Disclosures/Whistle%20 Blower%20 Policy.pdf
Directors' Responsibility Statement
As required under Section 134(3)(c) read with 134(5) of the Companies Act, 2013, the Board of Directors of your Company hereby state and confirm:
a) That in the preparation of the Annual Accounts, the applicable Accounting Standards were followed along with proper explanation relating to material departures;
b) That 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) That 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) That the directors had prepared the Annual Accounts on a going concern basis;
e) That 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; and
f) That 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.
Information relating to Conservation of Energy, Technology Absorption, Research and Development, Exports, Foreign exchange earnings and Outgo and other information forming part of the Directors' Report in terms of Section 134(3)(m) of the Companies Act, 2013, and the Rules made thereunder.
a) Conservation of energy
Although the operations of the Company are not energy intensive, the management has been highly conscious of the criticality of conservation of energy at all the operational levels and efforts are made in this direction on a continuous basis. Adequate measures have been taken to reduce energy consumption whenever possible by using energy efficient equipment. The requirement of disclosure of particulars with respect to conservation of energy as prescribed in Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, are not applicable to the Company and hence are not provided.
b) Technology absorption
Your Company believes that in addition to progressive thought, it is imperative to invest in research and development to ascertain future exposure and prepare for challenges. In its endeavor to obtain and deliver the best, your Company has entered into alliances / tie–ups with major global players in the Information Technology industry to harness and tap the latest and the best of technology in its field, upgrade itself in line with the latest technology in the world and deploy / absorb technology wherever feasible, relevant and appropriate.
c) Research and Development
The Company believes that technological obsolescence is a reality. Only progressive research and development will help us to measure up to future challenges and opportunities. We invest in and encourage continuous innovation. During the year under review, expenditure on research and development is not significant in relation to the nature and size of operations of your Company.
d) Foreign exchange earnings and outgo
i) Activities relating to exports, initiatives taken to increase exports, development of new export markets for products and services and export plans.
The Company exports customized learning content to its overseas clients to meet their varying learning needs. The Company develops content in a range of subjects for widely varied audience. The Company will continue to strengthen its presence in USA, Europe, China, Africa, South East Asia etc. with a view to increase exports.
ii) Total foreign exchange earned and used
The details of foreign exchange earnings and outgo are mentioned in Notes Nos. 31 to 34 contained in the Notes forming part of the Annual Financial Statements for the Financial Year ended March 31, 2016.
Auditors and Auditors' Report
M/s Price Waterhouse, Chartered Accountants (Firm Registration Number FRN301112E) were appointed as Statutory Auditors of the Company at the 31st Annual General Meeting of the Company to hold office from the conclusion of the Annual General Meeting held in the year 2014 till the conclusion of the Annual General Meeting scheduled to be held in the year 2017 subject to ratification by members at every consequent Annual General Meeting. Therefore, ratification of appointment of Statutory Auditors is being sought from the members of the Company at the ensuing AGM. There has been no qualification, reservation or adverse remark or disclaimer in their Report.
During the year under review, the Auditors had not reported any matter under Section 143(12) of the Companies Act, 2013, therefore no detail is required to be disclosed under Section 134(3)(ca) of the said Act.
The notes on Financial Statements referred to in the Auditors' Report are self–explanatory and do not require any further comments.
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s Nityanand Singh & Co., Company Secretaries to conduct Secretarial Audit for the Company for the Financial Year 2015–16. The Secretarial Audit Report is annexed herewith as Annexure–C. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.
In terms of Section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audit) Rules, 2014, the Board of Directors of the Company, upon recommendation of the Audit Committee, have appointed M/s. Ramanath Iyer and Co., Cost Accountants, New Delhi as the Cost Auditors of the Company, to carry out the cost audit for the Financial Year 2015–16. The ratification of remuneration payable to Cost Auditors is being sought from the members of the Company at the ensuing AGM.
Extract of Annual Return
The details forming part of the extract of the Annual Return in form MGT–9 in terms of Section 92(3) of the Companies Act, 2013 is annexed herewith as Annexure–D.
Related Party Transactions
All related party transactions that were entered into during the Financial Year were on arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.
The Board of Directors of the Company has, on the recommendation of the Audit Committee, adopted a Related Party Transactions Policy for identifying, reviewing and approving transactions between the Company and Related Parties, in compliance with the applicable provisions of the Companies Act 2013, the Rules thereunder and Listing Regulations. The said Policy is available on the website of the Company at <http://www.niit.com/authoring/Documents/Other%20>
All Related Party Transactions are placed before the Audit Committee and also before the Board for its approval. The details of contracts or arrangements with related parties in form AOC–2 is annexed herewith as Annexure–E.
Particulars of Loans, Guarantees or Investments
Details of Loans, Guarantees or Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Notes to the Financial Statements.
Particulars of Employees
The table containing the names and other particulars of employees in accordance with the 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, is appended as Annexure–F(a) to this Report.
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 enclosed as Annexure–F(b) to this Report.
In terms of the provisions of Section 73 to 76 of the Companies Act, 2013 read with the relevant rules made thereunder, your Company has not accepted any fixed deposits from the public.
Detail of significant and material orders passed by the regulators, courts, tribunals
During the year under review, no significant or material orders were passed by the Regulators or Courts or Tribunals impacting the going concern status and Company's operations in future.
Human Resources and Employee Stock Option Scheme
NIITians are the key resource for your Company. Your Company has been able to create and continuously improve a favorable work environment that encourages innovation and meritocracy at all levels.
Employee relations remained cordial at all the Company's locations. The Directors take this opportunity to record their appreciation for the outstanding contribution of all NIITians.
During the Financial Year 2005–06, your Company had set up NIIT Employee Stock Option Plan 2005 (ESOP–2005) with the objective of attracting and motivating employees by rewarding performance and retaining the best talent. The aim is to develop a sense of ownership among the employees within the organization and to align your Company's stock option scheme with the best practices in the Industry. In accordance with the applicable provisions of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, the particulars of the options granted, vested, exercised and allotted under the ESOP–2005 are appended as Annexure–G and form part of this report.
The Nomination and Remuneration Committee has granted 1,600,000 Employee Stock Options (Grant #12) at Rs. 41.60 per option/share in June 2015, 1,535,000 Employee Stock Options (Grant #13) at Rs. 52.15 per option/share in July 2015, 35,000 Employee Stock Options (Grant #14) at Rs. 75.65 per option/share and 90,000 Employee Stock Options (Grant #15) at Rs. 75.65 per option/share in January 2016 to the eligible employees under ESOP–2005.
Further, none of the employee was granted options equal to or exceeding 1% of the issued capital of the Company.
Your Directors take this opportunity to thank all investors, clients, licensees, technology partners, vendors, financial institutions, banks, regulatory and governmental authorities, media and stock exchanges for their continued support during the year under review. We place on record our appreciation of the contribution made by our employees at all levels.
For and on behalf of the Board
Rajendra S Pawar
Place : New Delhi
Date :May 10, 2016