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REPORT OF THE DIRECTORS
Your Directors are pleased to present the Twenty Sixth Annual Report of your Company along with the Audited Financial Statements for the financial year ended March 31, 2016.
Financial year 2015–16 was the twenty–fifth year for your Company. We are delighted to share that in the 100th Quarter, your Company had the first 100 Million Dollar Quarter.
Your Company is in the business of building software products. Software product development is different from development on IT projects. In IT projects, customers provide well–defined requirements and projects are executed by optimizing time and money (team size). In contrast, when building products, release cycles are fixed first, followed by budget and the requirements evolve to get the most done within the budget and during each cycle time. Over the last 15 years, product development cycles are shrinking and product companies are launching their products for their customers very frequently. Because of cloud and software being delivered as a service, product companies are effectively shipping products as often as several times a day.
With exciting changes that have happened in the technology landscape, many new born digital companies are exploiting new technologies to build compelling products that are setting the standard for user expectations. These products are redefining user experience, experimenting innovative business models and are focusing on extreme personalization. These new companies are challenging incumbent enterprises by disrupting their business models and setting very high user expectations.
Enterprises are becoming software driven businesses as they look at ways to extend the use of technology from just running the business to being an integral part of transforming the business. The product development methodology that your Company has perfected over the last 15 years is very relevant for not just product companies (traditional and new) but also for enterprises who are on the journey of digital transformation to become software driven businesses.
Digital transformation is a continuous process and is a journey and not just the destination. Your Company is very well–placed for growth in these changing market conditions. Your Company has always been a leader in the technology space where your Company has made significant and sustained investments.
Your Company works very closely with market leaders in the technology space and these relationships are helping your Company partner with them and jointly go after newer markets. The product development process and DNA that is deeply ingrained in the Company has become relevant to wide range of customers.
Clearly, the canvas for your Company to operate has extended significantly.
IBM Watson IoT Alliance
Your Company strengthened the existing relationship with IBM by signing–up to support and extend the IBM Continuous Lifecycle Management and Continuous Engineering product suite. Continuous Engineering products are crucial to deploy, upgrade, monitor the billions of software–driven devices that are expected to be deployed in the fast evolving world of internet of things. Your Company has also signed up to be a partner with IBM's Watson IoT team to widely deploy IoT solutions in the market.
As we combine and extend the engineering teams for enhancing the continuous engineering product roadmap, your Company has set up subsidiaries in Mexico and Israel. In addition to centers in Guadalajara, Mexico and in Rehovot, Israel, your Company set up development centers in Ottawa in Canada, Edinburgh in UK and in the US in Raleigh, NC, Costa Mesa, CM, Littleton, MA and Hillsboro, OR.
In October 2015, your Company, through Accelerite, acquired assets of Aepona IoT platform from Intel and in February 2016, the Cloud Platform assets from Citrix. As part of the Aepona acquisition, your Company acquired development centers in Belfast, UK and in Colombo, Sri Lanka.
Product Engineering and Services
The product development DNA is deeply ingrained in your Company. Over the last 25 years, your Company has worked closely with customers to deliver products across all aspects of the product lifecycle. Your Company provides customers product engineering services, joint product development with revenue–share models and sell with and professional services based partnerships. Over the last few years, your Company has worked on converting some of the tactical customer relationships into strategic 360o relationships.
Your Company has successfully established leadership through flexible engagement models, agile processes and partnerships with leading platform providers in Analytics, Big Data, Cloud, Mobile, Machine Learning, and IoT. Your Company also works with many start–ups, device and instrument manufacturers, large ISVs and enterprises. Many of these customers are embarking on the transformation journey with innovative business models and disruptive customer experiences, creating opportunities for your Company.
Extending your Company's enduring relationships with most of the leading software product companies, the platform strategy takes the relationship to the next level. Your Company has partnered with some of the leading companies to work with them to build software jointly for their customers. This strategy with platform partners has been very successful and is the source of steady growth for the last 2 years. It is a natural extension for your Company's product engineering business.
Your Company has successfully become a trusted partner of Platforms like Appian and Sales force. In May 2016, your Company was named the "Appian Regional Partner of the Year" for North American region. Speed and innovation are crucial for digital transformation. To bring speed to innovation, your Company conducted a customer–focused hackathon for its Appian customers and demonstrated an approach of jumpstarting new Appian solution areas by accelerating the first production release.
In partnership with Sales force, your Company launched new solutions for healthcare providers to transform the experience of their customers and members. This solution will improve health care providers' outreach effectiveness and improve core team productivity, communication and collaboration.
Your Company has established Accelerite as the product brand for your Company.
Accelerite is a provider of cloud solutions, endpoint management and mobility to some of largest enterprises in the world.
Accelerite has built a strong product portfolio by acquiring non–strategic assets from your Company's software product development customers. With changing priorities, software product development companies have portfolio of under–leveraged products. Accelerite has perfected the methodology of taking over such products and reinvigorating them. Accelerite has built a reputation in the market as an expert in taking over products, transitioning people, products and contracts seamlessly, and in being able to keep the customers very happy.
Research and Development
Research and Development is important for the future of your Company and your Company encourages all employees to learn, explore and contribute to developments in next generation of technology. Individuals are encouraged to contribute research papers, conduct lecture and participate in research conferences. Teams are encouraged to explore and build new technology prototypes that can be showcased to customers.
Your Company has established expertise in big data analytics, machine learning, block chain, genomics and systems biology and has been working in the areas of high–throughput biological data analysis, retrieval and interpretation in the context of personalized medicine. Your Company has many active collaborations with several research and educational institutions in India and internationally.
Your Company has established Persistent Laboratories, a DSIR recognized R&D center as the hub for cutting–edge research and innovation in biomedical informatics. Your Company has secured two prestigious grants from the Government of India under CSIR–NMITLI and DBT–BIPP schemes.
Your Company collaborated with researchers from IGIB, JNU, IISER–Pune and NCL to develop:
• SanGeniX: DNA sequencing using Next Generation Sequencing (NGS) technology has a tremendous application in the personalized healthcare system, plant breeding in agriculture, and study of microbial diversity for vaccine and antibiotics development.
• eSkIN: Discovery of new pharmaceutical and cosmetic products traditionally require testing in animals to ascertain the efficacy and adverse effects of these products. A large number of animals are sacrificed in this process, and is also very costly and time consuming. Acknowledging this, the European Union has recently banned animal testing for cosmetic products and encouraging the development of alternate methods. We have developed a first of its kind computational platform in the world, eSkIN, which will empower pharmaceutical and cosmetic companies to predict the effects of their products on human skin in a cost and time–efficient manner with reduced animal testing.
To help your Company improve decision making process, focus on growth and to improve operational efficiency, your Company decided to reorganize the business into four profit centers and a corporate operations unit with effect from April 1, 2016. The four profit centers are:
1. Services Unit: The services unit will consist of the traditional product engineering business. The goal of the unit would be to focus on building relationship with customers and deliver compelling software that will help the customers achieve their goals.
2. Digital Unit: The digital unit will focus on the growing demands for digital transformation in the market. Over the last two years, your Company has built an architecture, tools and framework that integrates partner platforms and open source products to deliver enterprises with digital transformation.
3. IBM Alliance: This unit is focused on business that it gets directly and indirectly from IBM and affiliates. IBM is your Company's largest customer.
4. Accelerite: Accelerite is your Company's product business. The Accelerite business is currently focused on end–point client management, Aepona IoT service orchestration and cloud platform products that your Company acquired from Citrix during the year.
In addition to these four profit centers, your Company has also set up the Corporate Operations unit. All the five units are autonomous with complete control over sales and operations and will be led by unit Presidents reporting to the Managing Director / CEO.
Material Events Occurring after Balance Sheet Date
There were no material changes and commitments affecting the financial position of your Company between the end of the financial year and the date of this report.
Your Company continues to maintain adequate amount of liquidity to meet its strategic and growth objectives. Your Company has ensured a balance between earning adequate returns on liquid assets and the need to cover financial and business risks. As at March 31, 2016, your Company, on an unconsolidated basis, had cash and cash equivalents (including investments) amounting to Rs. 7,420.94 Million as against Rs. 7,605.09 Million as at March 31, 2015. The details of cash and cash equivalents (including investments) are as below:
In January 2016, your Directors declared the 1st Interim Dividend of Rs. 5 per share on the paid–up equity share capital out of the net profits of your Company. Total outflow on account of this 1st interim dividend including dividend distribution tax amounted to Rs. 481.44 Million.
Again in March 2016, your Directors declared the 2nd Interim Dividend of Rs. 3 per share on the paid–up equity share capital out of the net profits of your Company during the year under report. Total outflow on account of this 2nd interim dividend including dividend distribution tax amounted to Rs. 288.86 Million.
The Board has recommended nil Final Dividend for the year ended March 31, 2016. Accordingly, the 2 (two) Interim Dividends paid during this Financial Year aggregating to Rs. 8 per share are considered as the Total Dividend for the above Financial Year.
Thus, the effective dividend during the financial year 2015–16 is Rs. 8 per share as against Normal Dividend of Rs. 7.50 per share and Rs. 2.50 per share towards Special Silver Jubilee Dividend for the financial year 2014–15. The total outflow on account of total dividend and dividend distribution tax during this year amounted to Rs. 770.30 Million as compared to Rs. 961.41 Million in the previous year. The payout ratio for this year is 25.9% as compared to normal payout of 24.8% and 33.1% including Special Silver Jubilee Dividend in the previous year.
Out of the interim dividend declared in January 2016, Rs. 0.19 Million was unclaimed as on March 31, 2016 and out of the 2nd interim dividend declared in March 2016, Rs. 0.29 Million was unclaimed as on March 31, 2016.
Transfer to Reserves
Your Company proposes to transfer an amount of Rs. 1,061.84 Million to the General Reserve and an amount of Rs. 822.47 Million is proposed to be retained in the Statement of Profit and Loss after payment of interim dividend and tax thereon. The balance in Profit and Loss Account as at March 31, 2016, is Rs. 6,544.53 Million.
In terms of the provision of Sections 73 and 74 of the Companies Act, 2013 read with the relevant rules, your Company has not accepted any fixed deposits during the year under report.
People are the biggest asset of any organization. Your company puts its employees at the core, aspires to provide personalized care and make their Life at Persistent the most valuable experience of their lifetime. In pursuit of promoting meritocracy and inclusivity, various initiatives were started in your Company.
A special program called Ascent was launched to recognize and nurture high performers. These selected future leaders are groomed via intensive two–year program to climb up the leadership ladder. Leadership programs called Le@p was arranged for mid–management level employees. A distinguished program called Change Makers aims to give exposure to selected employees to key activities across the organization. This group has worked on several initiatives towards fundamental improvements in operational aspects in the organization.
To build inclusive environment, your company involves employees in the policy making process via a forum called 'Policy Council'. It examines various policies especially the ones that impact employees' day–to–day functions. This council has proposed several policy improvements that has resulted in enhanced engagement and ownership.
Prerana, a women forum in your Company has a special focus on gender inclusivity and mentoring women in leadership roles. Lectures by women leaders outside and inside your company were arranged throughout the year to motivate women employees. A special health event – Urjaa, a Surya Namaskar challenge saw very enthusiastic participation by employees across the globe and also resulted in charity contribution.
Various events for employee welfare and engagement like 'Bring Your Kids to Work', 'Children's Carnival', and the annual event, Pulse had enthusiastic participation from employees and their families. Your Company encourages and facilitates coding competitions called hackathons. It sharpens their core technical skills and they also experience the process of collective innovation at speed. One such competition, Semicolon was conducted across all global centers in parallel and had excellent participation.
Persistent Foundation organized many events wherein employees contributed time, money and efforts for the betterment of the society.
Talent Additions during the Year
Your Company continues to attract high caliber quality talent in the industry. During the financial year 2015–16, your Company recruited 3,791 employees on a consolidated basis consisting of regular employees, trainees / interns, consultants, business consultants, contract consultants consisting of (technical and non–technical) professionals.
As on March 31, 2016, your Company employed 9,264 professionals (including trainees and associates) on a consolidated basis spread across 15 countries. The technical strength was 8,604 employees which comprised among others, 5,914 graduates (Engineers and Technicians), 900 post graduates and 20 Ph.D.s. Your Company is going global and there was
a significant increase in the distribution of overseas employees which now constitutes 12.28% of the total work force.
Your Company recruits fresh talent from various engineering colleges in India. During the year under report, your Company added a batch of 705 new graduates through campus. Your Company strongly believes in nurturing 'Industry – Academia' partnerships and has many programs to engage with students such as BE project mentoring, Persistent Day, Internship and sessions through experts of Persistent Computing Institute (PCI).
The attrition rate during the year was 16.43% which was more than 15.47% in the previous year. Continuous Learning and Skill Enablement
At the core of "How" of Digital Transformation, there are two basic principles: cultural shift in how companies think as well as technology skills to compliment the philosophy of speed and innovation. As per survey conducted by a leading consulting firm, 77% companies consider missing digital skill as the key hurdle in their digital transformation strategy. In order to close this skill gap, your Company has taken a tenacious approach towards skill building where it emphasizes full–stack training at large scale. At entry level, the focus is pronounced and every fresher undergoes this skill program. Moreover, your Company emphasize on employee reskilling at every stage of their career life cycle.
A corporate function, Persistent University is established for driving ongoing skills development. It serves as a one–stop learning destination with offerings to enhance technical skills, business communication, management and behavioral skills. Multiple learning methodologies are offered such as in–class trainings, remote trainings, blended trainings, Massive Online Courses, self–learning and assessments for internal certification. Employees can choose from a variety of courses long with combination of learning methodologies and create their own individual learning plan which is in line with the company, project and individual aspirations.
Your Company covered 91% of the employees through at least one training or assessment this year, and 85% employees passed at least one internal certification. Your Company trained about 700 campus hires in the Entry Level Training Program and about 1,000 employees under Full Stack Training this year.
Your Company encourages learning and knowledge enhancements via various means. A weekly series of technology–focused talks, TIP or "Technology Insights from Persistent" was launched this year and received tremendous response from employees across globe. These talks are also available online on youtube channel
Along with company owned premises, your Company also operates from leased facilities at Bengaluru, Hyderabad, Kuala Lumpur (Malaysia), Santa Clara (US), Belfast (UK) and Colombo (Sri Lanka). Your Company also functions from temporary facilities at Guadalajara (Mexico), Rehovot (Israel), Dublin (Ireland), Ottawa (Canada), Edinburgh (Scotland) and Costa Mesa, Littleton, Raleigh, Seattle, Nashua in the US.
Awards and recognitions during the financial year 2015–16
During the financial year 2015–16, your Company continued its tradition of winning various awards and getting new recognitions. Your Company was a proud recipient of the following awards during the year:
1. Won the Aegis Graham Bell Award 2015 for innovation in the Location Based Services (LBS) category
2. Cited as a Leader in the 'Building Enterprise Software' segment three times in succession by Zinnov GSPR 2015 Ratings
3. Won the I.C.O.N.I.C. IDC Insights Award 2015 for FreeBird – Persistent's Converged Engineering Cloud
4. Won the Dataquest Business Technology 2015 Award in Mobility
5. CIO 100 Award by IDG group for the third consecutive year
6. Rated Best Corporate University 2015–16 Award by The Tata Institute of Social Science Leapvault
7. Won 'India's Coding Power House' award thrice in a row at TechGig Code Gladiators
8. Ranked in 'Leadership' zone across all categories in Zinnov Zone Digital Technology Services 2016
9. Won 'Gold' rating in the 'The Asset Corporate Awards 2015' for the sixth consecutive year
10. League of American Communications Professionals (LACP), Florida, USA has announced the Annual Report 2015 as the winner of –
i) Ranked 25th among Top 100 Communications Materials of 2015
ii) Gold for excellence within its Competition Class on the development of its Annual Report
ii) Most Improved Award – Silver Category – for the communications materials across all categories of competition of the past year with the production of its Annual Report
11. Won the Bronze Award from LACP for excellence within its Competition Class on the development of Media Guide 2015–16
12. Won Gold Award at Arogya World Healthy Workplace Awards 2015–16
13. Won Commitment to HR Excellence Award by CII (Confederation of Indian Industry) 2015–16
14. Ms. Shubhangi Kelkar, Chief Learning Officer of your Company was awarded with the 'Chief Learning Officer of the Year 2015–16' by The Tata Institute of Social Science (TISS) Leapvault.
Appointment of statutory auditors
The Members of your Company at the Twenty–Fourth Annual General Meeting of your Company held on July 26, 2014 appointed M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No. 117365W/W–100018) and M/s. Joshi Apte & Co., Chartered Accountants (Firm Registration No. 104370W) as the Joint Statutory Auditors of your Company to hold such office till the conclusion of the Annual General Meeting in the calendar year 2019 and 2017, respectively.
M/s. Deloitte Haskins & Sells LLP and M/s. Joshi Apte & Co. have confirmed their eligibility and willingness to accept office, if the appointment is ratified by the Members of your Company. Further, in terms of the Regulation 33(1)(d) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the "Listing Regulations"), the statutory auditors of your Company are subjected to the Peer Review Process of the Institute of Chartered Accountants of India (ICAI). M/s. Deloitte Haskins & Sells LLP and M/s. Joshi Apte & Co. have confirmed that they hold a valid certificate issued by 'Peer Review Board' of ICAI; and have provided a copy of the said certificate to your Company for reference and records.
The ratification of appointment of Statutory Auditors is subject to the approval of the Members of your Company.
Your Directors propose ratification of appointment of M/s. Deloitte Haskins & Sells LLP and M/s. Joshi Apte & Co. as the Joint Statutory Auditors of your Company.
Secretarial Audit Report
Pursuant to Section 204 of the Companies Act, 2013, the Board of Directors had appointed M/s. SKO & Associates, Practicing Company Secretaries as the Secretarial Auditors of your Company for the financial year 2015–16.
Accordingly, the Secretarial Auditors have given their report, which is annexed hereto as Annexure A. The comments of the Board on the observations of the Secretarial Auditors are given after Annexure A above.
Board and Corporate Governance
The details pertaining to the composition, terms of reference, etc. of the Board of Directors of your Company and the meetings thereof held during the financial year are given in the Report on Corporate Governance section forming part of this Annual Report.
Directors and Key Managerial Personnel
Mr. Thomas (Tom) Kendra was appointed as an Additional Director (Independent Member) on the Board of your Company effective from January 22, 2016. Pursuant to the provisions of Section 161 of the Companies Act, 2013, Mr. Kendra will hold office up to the date of the ensuing AGM. He has confirmed his eligibility and willingness to accept the office of Directorship of your Company, if appointed. Your Company has received a notice under Section 160 of the Companies Act, 2013, proposing appointment of Mr. Kendra as an Independent Director of your Company. A separate proposal seeking approval of the Members for the appointment of Mr. Kendra as an Independent Director of your Company has been incorporated in the Notice of the ensuing Twenty–sixth Annual General Meeting.
In the opinion of your Directors, Mr. Kendra has the requisite qualifications and experience which would be useful to your Company and would enable him to contribute effectively in his capacity as an Independent Director of your Company.
It is, therefore, considered prudent that your Company should continue to avail the services of Mr. Kendra and the Board recommends that the proposed resolution relating to the appointment of Mr. Kendra as the Director of your Company be approved.
The appointment of other 6 (Six) Independent Directors was made at the 24th Annual General Meeting (AGM) held on July 24, 2014 for a period of 5 (Five) consecutive years for a term up to conclusion of the 29th AGM to be held in the calendar year 2019. Pursuant to the provisions of the Companies Act, 2013, they are not liable to retire by rotation.
Pursuant to the recent reorganization in your Company, the designation of Mr. Mritunjay Singh is changed from 'Executive Director and Chief Operating Officer' to 'Executive Director and President – Services'.
In terms of Section 152(6) of the Companies Act, 2013 and Article 137 of the Articles of Association of your Company, Mr. Mritunjay Singh, Executive Director and President – Services is liable to retire by rotation at the Twenty Sixth Annual General Meeting as he is the Executive Director who is holding office for the longest period among both the executive directors liable to retire by rotation.
Mr. Singh has confirmed his eligibility and willingness to accept the office of the Director of your Company, if confirmed by the Members at the ensuing Annual General Meeting. In the opinion of your Directors, Mr. Singh has requisite qualifications and experience and therefore, your Directors recommend that the proposed resolution relating to the re–appointment of Mr. Singh be passed.
At present, your Company has 7 (Seven) Non–Executive Directors who are Independent Directors. Pursuant to the Regulation 17(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the Listing Regulations) every listed company shall have at least half of its total strength of the Board of Directors as Independent Directors. Based on the present composition of the Board of Directors, your Company complies with this requirement.
In terms of the Listing Regulations, your Company conducts the Familiarization Programme for Independent Directors about their roles, rights, responsibilities in your Company, nature of the industry in which your Company operates, business model of your Company, etc., through various initiatives. The details of the same can be found at: <http://investors.persistent.com/familiarisation–programme>
During the year under report, Mr. Rohit Kamat, Chief Financial Officer and one of the Key Managerial Personnel of your Company retired from the services of your Company on November 30, 2015. The Directors wish to place on record their appreciation for the dedicated service and contribution of Mr. Kamat during his tenure with the Company. Mr. Sunil Sapre has been appointed as the Chief Financial Officer effective from December 1, 2015.
Declaration of Independence by Independent Director
The Board confirms that all Independent Directors of your Company have given a declaration to the Board that they meet the criterion of independence as prescribed under Section 149 of the Companies Act, 2013.
Committees of the Board
The Board of Directors at its meeting held in the month of April 2016 considered reconstitution of the Committees of the Board. The revised composition of the committees of the Board is given elsewhere in this Annual Report. The details of the powers, functions, composition and meetings of all the Committees of the Board held during the year under report are given in the Report on Corporate Governance section forming part of this Annual Report.
The details pertaining to the composition, terms of reference, etc. of the Audit Committee of the Board of Directors of your Company and the meetings thereof held during the financial year are given in the Report on Corporate Governance section forming part of this Annual Report. The recommendations of the Audit Committee in terms of its Charter were accepted by the Board of Directors of your Company from time to time during the year under report.
Compensation and Remuneration Committee
The Compensation and Remuneration Committee of the Board was constituted on April 23, 2004. In terms of the erstwhile SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ("SEBI ESOP Guidelines"), your Company re–constituted Compensation and Remuneration Committee for the administration and superintendence of the employee stock options schemes on October 4, 2007. The Committee was last reconstituted by the Board of Directors at its meeting held in April 2016.
The Board of Directors at its meeting held in April 2014 named this Committee as the Nomination and Remuneration Committee for the purpose of provisions under the Companies Act, 2013. As regards the terms of the Compensation and Remuneration Committee of your Company, the same are in line with the statutory terms of the Nomination and Remuneration Committee.
The details including the composition and terms of reference of the Compensation and Remuneration Committee and the meetings thereof held during the financial year are given in the Report on Corporate Governance section forming part of this Annual Report.
The Remuneration Policy of your Company is as follows:
Your Company pays remuneration by way of salary, benefits, perquisites and allowances (fixed component) and performance incentives (variable component) to its Executive Directors. Annual increments are decided by the Compensation and Remuneration Committee as follows:
i. The remuneration of full time directors (Managing Director and Executive Director) is divided in the following proportion:
a. Fixed portion is 50% of the Annual Gross Salary.
b. Variable portion by way of Bonus is 50% of the Annual Gross Salary. The variable portion of the remuneration is payable in terms of the targets set for various parameters including consolidated Company performances and unit performances.
c. Such perquisites and benefits as authorised by the resolution passed by Members of your Company from time to time.
ii. The Independent Directors are entitled to payment of commission of a sum not exceeding 1% per annum of net profits and eligible Independent Directors are entitled for Employee Stock Options under ESOA – X Scheme of your Company which were granted to them before April 1, 2014.
iii. The total managerial remuneration not to exceed 11% of the net profits of your Company and the total remuneration to the managerial persons not to exceed 10% of the net profits of your Company in accordance with section 197 of the Companies Act, 2013.
Nomination and Governance Committee
The Board of Directors at its meeting held in April 2014 named this Committee as the Nomination and Remuneration Committee for the purpose of provisions under the Companies Act, 2013. As regards the terms of the Nomination and Governance Committee of your Company, the same are in line with the statutory terms of the Nomination and Remuneration Committee.
The details including the composition and terms of reference of the Nomination and Governance Committee of the Board of Directors of your Company and the meetings thereof held during the financial year are given in the Report on Corporate Governance section forming part of this Annual Report.
The policy for appointment of a new director on the Board is as follows:
The Board of Directors decides the criterion for the appointment of a new director on the Board from time to time. The criterion may include candidate's expertise area, age, industry experience, professional background, association with other companies and such other things.
Once the criteria are determined, the Board directs the Nomination and Governance Committee to compile profiles of suitable candidates through networking, industry associations and business connects. The Nomination and Governance Committee considers each and every profile on the decided parameters and shortlists the candidates. Shortlisted candidates are then interviewed personally or through tele–conference by the Members of the Committee.
Once the Committee is convinced about a candidate's competency, his/her business acumen, commitment towards his/ her association with your Company and his/her availability for your Company on various matters as and when they arise, it recommends the candidate to the Board of Directors for further consideration for appointment.
In terms of the provisions of Section 197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, 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 provided in the Annexure B of the Directors' Report.
Employee stock option plans
Your Company has various stock option plans for its employees. Details of the stock options granted under various employee stock option schemes are annexed to this Report as Annexure C.
During the year under report, no employee has been granted stock options, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of your Company at the time of grant.
In line with the guidance note on "Accounting for employee share based payments" issued by the Institute of Chartered Accountants of India and the SEBI (Share Based Employee Benefits) Regulations, 2014, your Company has calculated the employee compensation cost using the intrinsic value of stock options. Had the compensation been determined under the fair value method described in the guidance note, your Company's net income and basic and diluted earnings per share would have reduced to the proforma amounts as shown in the table below:
During the financial year 2015–16, pursuant to the resolutions passed by the Compensation and Remuneration Committee of the Board of Directors by way of circulation, Independent Directors, employees including ex–employees exercised their stock options for shares which were already vested in their name. During this exercise, 871,696 (Eight Hundred and Seventy One Thousand Six Hundred and Ninety Six only) i.e. 1.09% Equity shares of the total Paid–up Capital were transferred from PSPL ESOP Management Trust to the eligible employees including ex–employees at an aggregate value of Rs. 107.13 Million under various ESOP Schemes of your Company.
Pursuant to the resolutions passed by the members of your Company by way of Postal Ballot on March 21, 2016, your Company has established a new 'Persistent Systems Limited Employee Stock Option Plan 2016' ('ESOP 2016') to offer, issue and allot from time to time, not exceeding 100,000 (One Hundred Thousand only) options convertible into not more than 100,000 (One Hundred Thousand only) fully paid–up Equity Shares in your Company in aggregate of face value of Rs. 10/– each, at such price or prices, in one or more tranches. The details of the Scheme are included in the Annexure C to this Report.
Your Company has twelve ESOP Schemes as on March 31, 2016 under which options were granted to various permanent Independent Directors, employees and the employees of its subsidiary companies, details of which are given elsewhere in this Annual Report.
Shares Suspense Account
Your Company had opened an 'Unclaimed Securities Suspense Account' on behalf of the allottees who were entitled to the equity shares under the initial public offering. Some of the equity shares could not be transferred to the respective allottees due to technical reasons. Such shares were held in 'Unclaimed Securities Suspense Account', to be transferred to allottees as and when they approach your Company.
Your Company strives to ensure that the Equity Shares are credited to the demat account of the respective Members of your Company. During the year under report, your Company voluntarily approached all the 19 (Nineteen) Members for making the applications to your Company for claiming their securities. In response, your Company received applications from 5 (Five) Members for crediting the shares from the unclaimed securities held in the said Suspense Account to their respective accounts. The Equity Shares along with the Bonus Shares were credited to their respective demat accounts before March 31, 2016. The balance in the above unclaimed demat account as on March 31, 2016 is 560 Equity Shares owned by 14 shareholders. Your Company will continue to try contacting these 14 shareholders and will arrange credit of due shares to them
As on March 31, 2016, the total institutional holding in your Company stood at 34.57% of the total share capital.
Particulars required as per Section 134 of the Companies Act, 2013
As per Section 134 of the Companies Act, 2013, your Company has provided the Consolidated Financial Statements as on March 31, 2016. Your Directors believe that the consolidated financial statements present a more comprehensive picture as compared to standalone financial statements. These documents will also be available for inspection during the business hours at the Registered Office of your Company and the respective subsidiary companies. A statement showing financial highlights of the subsidiary companies is enclosed to the consolidated financial statements.
The Annual Report of your Company, though does not contain full financial statements of the subsidiary companies, your Company will make available the audited annual accounts and related information of the subsidiary companies, upon request by any Member of your Company.
Consolidated financial statements
Consolidated financial statements of your Company and its subsidiaries as at March 31, 2016 are prepared in accordance with the Accounting Standard 21 (AS–21) on 'Consolidated Financial Statements' issued by the Institute of Chartered Accountants of India, and form part of this Annual Report.
The Policy for determining material subsidiaries of your Company is available on your Company's website at <http://investors.persistent.com/policy–on–material–subsidiary>
Particulars of Loans and Guarantees given and Investments made
Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report. (Refer notes 12, 14, 16, 19 and 41 of the standalone financial statements)
Related Party Transactions
The Policy to determine materiality of related party transactions and dealing with related party transactions as approved by the Board of Directors is available on your Company's website at <http://investors.persistent.com/related–party–>transactions–policy.
During the year under report, your Company had not entered into any material transaction with any party who is related to it as per the Companies Act, 2013. There were certain transactions entered into by your Company with its foreign subsidiaries and other parties who are related within the meaning of Accounting Standard (AS – 18). Attention of Members is drawn to the disclosure of transactions with such related parties set out in Note No. 29 of the Standalone Financial Statements, forming part of this Annual Report. The Board of Directors confirms that none of the transactions with any of related parties were in conflict with your Company's interest.
The related party transactions are entered into based on considerations of various business exigencies, such as synergy in operations, sectoral specialisation and your Company's long–term strategy for sectoral investments, optimization of market share, profitability, legal requirements, liquidity and capital resources of subsidiaries.
All related party transactions are entered into on an arm's length basis, are in the ordinary course of business and are intended to further your Company's interests.
A separate section on Corporate Governance with a detailed compliance report as stipulated under the Listing Regulations and any other applicable law for the time being in force forms an integral part of this Report.
Compliance Certificate from the Practicing Company Secretary regarding compliance of conditions of Corporate Governance as stipulated in Listing Regulations forms part of this Annual Report.
Management discussion and analysis
Report on Management Discussion and Analysis as stipulated under the Listing Regulations and any other applicable law for the time being in force based on audited, consolidated financial statements for the financial year 2015–16 forms part of this Annual Report.
Business Responsibility Report
Report on Business Responsibility as stipulated under the Listing Regulations and any other applicable law for the time being in force describing the initiatives taken by the Management from an environmental, social and governance perspective forms part of this Annual Report.
Conservation of energy, technology absorption, research and development, foreign exchange earnings and outgo
Your Company has made the necessary disclosures in this Report in terms of Section 134(3) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014. Your Company strives to conserve energy on a perpetual basis. Your Company has procured various energy saving devices and systems, which help in conserving energy. Bulk of the electric fixtures is equipped with electronic ballast which has resulted into a significant savings in the energy cost.
Carbon management and sustainable development provide business with some of the greatest opportunities towards sustainability. Your Company reduced carbon footprints by taking energy conservation measures. Your Company continues to take various measures on energy saving.
Your Company has reduced excessive illumination levels to standard levels in all common areas by using switching or delamping and aggressively controlled lighting with new sensor technologies. Like in the previous year, your Company has continued to maximise the use of energy efficient flat monitors, VRV air–conditioning systems, solar energy for hot water, LED logo on buildings, LED lighting in common areas, installation of power management software for desktops, WattMiser system in AHUs, En–power Computer Management system and VFD Installation for Fresh Air AHU systems for conservation of energy. Your Company has used all LED light fittings at its Hinjawadi (Yajurveda 2nd floor), Goa (Bhaskar) and Nagpur IT Tower facilities and have proposed to use the same in other facilities. Your Company has regulated working of lifts, vending machines, ventilation systems and water coolers in its premises.
Your Company has made efforts to ensure that there is no cool air leakage from its premises and has adopted measures to ensure optimum usage of air conditioners throughout its premises. A building automation system has been implemented to control working of air conditioners and to make them more power efficient. The power consumption of air conditioning has been reduced by 18% since the cold aisle containment work has been completed in Data center, Hinjawadi. VFD system has been installed for fresh air AHU's in air–conditioning systems. As a part of your Company's Green Movement, two 2.1 MW windmills are operational at Dhule and Sangli Districts of Maharashtra. During the financial year 2015–16, Dhule windmill generated 2,991,449 units and Sangali windmill generated 2,781,840 units.
Your Company has installed Ozone systems with air conditioning systems for balance locations. Modifications have been made in Data Centre arrangement to reduce power consumption. Ground water is used for landscaping to reduce consumption of treated water. A Sewage Treatment Plant was installed at the Gargi–Maitreyi in Nagpur, Aryabhata–Pingala in Pune facilities of your Company and recycled water through these plants is used for gardening.
Your Company celebrated 'No Plastic Days' to promote awareness of using plastic and encourage employees to carry cloth or paper bags whenever possible. 'Zero Plate Wastage Week' was another event celebrated in all Company facilities. All the waste papers are shredded and disposed to scrap at all facilities.
All the facilities of your Company are certified by DNVGL for ISO 14001:2004 and OHSAS 18001:2007 certifications after recertification audit and are now initiated for upgrading Environmental Management System Standard by ISO 14001:20015. Further, your Company has been certified by American Global Standards for ISO 14064–1:2006 (Green House Gases Inventory) for all facilities in India for the financial year 2014–15. Best practices to preserve the environment are undertaken by your Company even during constructing its various premises by using crush sand, fly ash bricks and double glass unit, use of gypsum and recycled wood to protect the environment
Your Company undertakes various initiatives to save energy. A 250 KW rooftop solar power plant was commissioned on the terrace of Aryabhata – Pingala facility on April 30, 2015 and it generated 174,522 units in the financial year 2015–16. Efforts are going on to increase the plant efficiency. The chiller replacement work has been completed at Bhageerath facility in Pune to ensure higher efficiency and it saves around 37% of the air–conditioning consumption. The Old UPS system was replaced by modular higher efficiency UPS system at all the facilities and it resulted in 18% power saving in UPS power. Cold aisle containment work was completed in Hinjawadi Data Centre to reduce the power consumption by 19%. Your Company has used LED lights in new facilities at Hinjawadi (Yajurveda) and Blue Ridge in Pune, Goa and Hyderabad to reduce electricity consumption.
It is your Company's constant endeavor to conserve and save the Environment and hence your Company has launched the Green Persistent Movement to support the same.
As power cost constitutes an insignificant part of the total expenses, the financial impact of these measures is not material.
As your Company has not entered into technical collaboration with any entity, there are no particulars relating to technology absorption.
Adequacy of Internal Financial Controls
The Board is responsible for establishing and maintaining adequate internal financial control as per Section 134 of the Companies Act, 2013.
The Board has laid down policies and processes in respect of internal financial controls and such internal financial controls were adequate and were operating effectively. The internal financial controls covered the policies and procedures adopted by your Company for ensuring orderly and efficient conduct of business including adherence to your Company's policies, safeguarding of the assets of your Company, prevention and detection of fraud and errors, accuracy and completeness of accounting records and the timely preparation of reliable financial information.
Directors' responsibility statement
The Directors state that:
1. In the preparation of the annual accounts, the applicable Accounting Standards have been followed and there is no material departure;
2. Your 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 your Company as at March 31, 2016 and of the profit of your Company for that year;
3. Your Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities, if any;
4. The annual accounts have been prepared on a going concern basis;
5. Your Directors, had laid down internal financial controls to be followed by your Company and that such internal financial controls are adequate and were operating effectively;
6. Your Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
Extract of Annual Return
Pursuant to the provisions of the Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of Annual Return of your Company for the financial year ended on March 31, 2016 is provided in the Annexure D to the Directors' Report.
Vigil Mechanism (Whistle Blower Policy)
The details of the vigil mechanism (whistle blower policy) are given in the Report on Corporate Governance forming part of this Annual Report. Your Company has uploaded the policy on its website at <http://investors.persistent.com/whistle–>blower–policy
Risk Management Policy
Report on Risk Management based on the risk management policy developed and implemented at your Company for the financial year 2015–16 forms part of this Annual Report.
Performance Evaluation of the Board, its Committees and Directors
Your Company conducted the annual performance evaluation of the Board, its various Committees and the Directors individually. This was conducted in March and April 2016 by an External Management Consultant and the findings of the evaluation were presented at the meeting of the Nomination and Governance Committee and the Board of Directors. Recommendations and suggested areas of improvement for the Board, its various committees and the individual Directors were considered by the Board.
Disclosure of Cost Audit
Your Company had filed Form 23C for appointment of Cost Auditor relating to its activities of generation of electricity from windmill turbine under the Companies (Cost Audit Report) Rules, 2011. However, based on another Circular dated November 30, 2011 issued by the Ministry of Corporate Affairs (MCA), your Company claimed exemptions from the requirement of the Cost Auditor for the said purposes and accordingly, had written a letter dated December 19, 2012 to MCA, Cost Audit Branch, for withdrawal of the appointment of the said Cost Auditor as well as cancellation of the Form 23C so filed. Reply to the said letter is still awaited from the concerned office of the MCA.
Listing with the stock exchanges
The Equity Shares of your Company are listed on BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE) since April 6, 2010.
Listing fees for the financial year 2015–16 have been paid to both BSE and NSE. Secretarial Standards
The Ministry of Corporate Affairs notified the Secretarial Standard on Meetings of the Board of Directors (SS – 1) and Secretarial Standard on General Meetings (SS – 2) effective from July 1, 2015. Your Company complies with the same.
Your Company will comply with the other Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) as and when they are made mandatory.
Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
Your Company has in place an Anti–Sexual Harassment Policy in line with requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy. Internal Complaints Committee(s) (ICC) has been set up across all its location in India to redress complaints received regarding sexual harassment. The cases reported to such Committee(s) are investigated by the respective Committee(s) members and the detailed report thereon is presented to the Board of Directors on a regular basis. During the year under report, your Company did not receive any case of sexual harassment and hence as at March 31, 2016, there were no pending cases of anti–harassment in your Company.
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 report:
1. Neither the Managing Director nor the Whole–time Director of your Company receive any remuneration or commission from any of its subsidiaries.
2. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and your Company's operations in future.
Corporate Social Responsibility
Your Company formed a Public Charitable Trust by the name 'Persistent Foundation' in the financial year 2008–09 to institutionalize the CSR initiative of your Company and to develop a systematic approach to administer the process of grant of donations.
During the year under report, Persistent Foundation (the 'Foundation') was able to create excitement among employees to participate in socially relevant causes. With cooperation of the employees of your Company, the Foundation has set up several well–defined programs and activities for the promotion of education, health, community welfare. These activities are carried out through projects undertaken by the Foundation with the support of the employees and through reputed social organizations, institutions and Government authorities.
In addition to contributing Rs. 60.92 Million to the Foundation, your Company made donations of Rs. 1.11 Million to various charitable institutions directly. Thus, during the year under report, your Company donated Rs. 62.03 Million i.e. more than 2% of the Average Net Profits of your Company made during three immediately preceding financial years.
During the financial year 2015–16, Persistent Foundation won 'First prize for the Best CSR Practices' at the HR Summit 2016 organized by 'Datta Meghe Institute of Management Studies, Nagpur'.
Report on CSR activities of your Company under the provisions of the Companies Act, 2013 during the financial year 2015–16 is annexed hereto as Annexure E.
CSR Committee and CSR Policy
The Board of Directors of your Company has constituted the CSR Committee to help your Company to frame, monitor and execute the CSR activities of your Company under its CSR scope. The Committee defines the parameters and observes them for effective discharge of the social responsibility of your Company.
The Board of Directors of your Company has further approved the CSR Policy of your Company to provide a guideline for CSR activities of your Company. The CSR Policy is also uploaded on your Company's website at <http://investors.persist.ent> com/csr–at–persistent
The CSR Policy of your Company highlights that the need for contributing to the society is very large and your Company can make a more significant contribution by staying focused on few areas through its social initiatives. The CSR policy recommends that your Company should consider contributing in the following areas:
3. Community Development
4. Assistance in Natural Calamities
The constitution of the CSR Committee is provided elsewhere in the Annual Report. Acknowledgments and appreciation
Your Board places on record the support and wise counsel received from the Government of India, particularly the Department of Electronics and Information Technology, the Ministry of Corporate Affairs, the Ministry of Finance, the Ministry of Commerce and the Reserve Bank of India throughout the financial year.
Your Board extends its sincere thanks to the officers and staff of the Software Technology Parks of India – Pune, Nagpur, Goa, Hyderabad, Bengaluru, Visakhapatnam Special Economic Zone – Andhra Pradesh, SEEPZ Special Economic Zone –Mumbai, Cochin Special Economic Zone, Central Excise and Customs Department, Department of Revenue, Income Tax Department, Department of Electronics, Director General of Foreign Trade, Director of Industries, Department of Shops and Establishments, Department of Telecommunication, Department of Commerce (SEZ Section), Regional Director of Western Region, Registrar of Companies, Maharashtra, Pune, Sales Tax Department, Securities and Exchange Board of India, High Court of Judicature of Mumbai, ICGL Goa, Goa Industrial Development Corporation, National Stock Exchange of India Limited, BSE Limited, Central Depository Services (India) Limited, National Securities Depository Limited, Pune Municipal Corporation, Maharashtra State Electricity Distribution Company Limited, Telangana (erstwhile Andhra Pradesh) State Electricity Board, Telangana State Industrial Infrastructure Corporation, Maharashtra Industrial Development Corporation, Bengaluru Municipal Corporation, Karnataka Industrial Development Corporation, BSNL, Mobile / Internet Service providers.
Your Board also extends its thanks to Axis Bank, Bank of India, Bank of Tokyo Mitsubishi, BNP Paribas, Citibank NA, HDFC Bank, State Bank of India, Syndicate Bank, HSBC Bank and their officials for extending excellent support in all banking related activities.
Your Board places on record its deep sense of appreciation for the committed services of the associates of your Company at all levels.
Your Board thanks the investors and shareholders for placing immense faith in them.
Your Board takes this opportunity to express its sincere appreciation for the contribution made by the employees at all levels in your Company. The consistent growth was made possible by their hard work, solidarity, cooperation and support.
For and on behalf of the Board of Directors
Dr. Anand Deshpande
Chairman and Managing Director
Place : Pune,
date : une 10, 2016