DIRECTORS’ REPORT Your Directors have pleasure in presenting the Annual Report along with the Audited Financial Statements of Larsen & Toubro Infotech Limited for the year ended March 31, 2016. PERFORMANCE OF THE COMPANY STATE OF COMPANY AFFAIRS On unconsolidated basis, revenue from operations and other income for the financial year under review were Rs. 59,081.26 Million as against Rs. 48,331.83 Million for the previous financial year registering an increase of 22.2%. The profit before tax was Rs. 11,531.74 Million and the profit after tax was Rs. 9,381.31 Million for the financial year under review as against Rs. 9,425.31 Million and Rs. 7,729.62 Million respectively for the previous financial year. There were no material changes and commitments affecting the financial position of the company, between the end of the financial year and the date of the report. On consolidated basis, revenue from operations and other income for the financial year under review were Rs. 61,430.21 Million as against Rs. 50,695.36 Million for the previous financial year registering an increase of 21.2%. The profit before tax was Rs. 11,472.67 Million and the profit after tax was Rs. 9,221.77 Million for the financial year under review as against Rs. 9,369.93 Million and Rs. 7,685.26 Million respectively for the previous financial year. There were no material changes and commitments affecting the financial position of the company, between the end of the financial year and the date of the report. SEGMENTAL PERFORMANCE During the year, the Company had two Business Segments namely, Services Cluster and Industrials Cluster of which contribution to the revenue was 52.4% (previous year 51.6%) from Services Cluster and 47.6% (previous year 48.4%) from Industrials Cluster, on unconsolidated basis. On consolidated basis, the contribution to the revenue was 53.9% (previous year 52.8%) from Services Cluster, 46.1% (previous year 47.0%) from Industrials Cluster and 0.0% (previous year 0.2%) from Telecom (PES Discontinued Business). The detailed segmental performance is referred in Note No. T(9) of the Notes forming part of the unconsolidated financial statements and T(6) of the consolidated financial statements provided in this Annual Report. INITIA PUBLIC OFFERING OF YOUR COMPANY During the year ended March 31, 2016, your Company had filed Draft Red Herring Prospectus (‘DRHP’) with the Securities & Exchange Board of India (‘SEBI’) for the proposed Initial Public Offer (‘IPO’) of your Company through an Offer for Sale (‘the Offer’) by Larsen & Toubro Limited. Due to change in the Offer structure and other considerations, the said DRHP was withdrawn on April 11, 2016 and pursuant to the approval of the IPO Committee, the Company has filed a revised DRHP on April 12, 2016. CAPITAL EXPENDITURE On unconsolidated basis, as at March 31, 2016, the gross fixed and intangible assets stood at Rs. 8,419.33 Million (previous year Rs. 7,910.24 Million) out of which assets amounting to Rs. 1,014.19 Million (previous year Rs. 1,377.63 Million) were added during the year. On consolidated basis, as at March 31, 2016, the gross fixed and intangible assets stood at Rs. 14,209.88 Million (previous year Rs. 13,379.21 Million) out of which assets amounting to Rs. 1,346.97 Million (previous year Rs. 2,243.52 Million) were added during the year. DIVIDEND The Directors recommend payment of final dividend of Rs. 2.60 per equity share of Rs. 1 each on the share capital The total dividend on equity shares including interim dividend and proposed dividend for the year ended March 31, 2016 would aggregate to Rs. 5,908.82 Million (previous year Rs. 4,805.25 Million) and outflow towards dividend distribution tax would aggregate to Rs. 1,106.73 Million (previous year Rs. 906.32 Million). TRANSFER TO RESERVES The Directors do not propose to transfer any amount to reserve. DEPOSITS During the year ended March 31, 2016, the Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the Balance Sheet. PEOPLE We continue on the journey to make the Company the best place to learn and grow. This year we have laid emphasis on personal development and growth of our employees, besides focusing on hiring, engaging and retaining key talent. In order to do so, we have initiated the process of capturing the development needs of employees in our Performance Management System. The Company has put in efforts to continuously simplify all people policies and make them more current and transparent, by seeking inputs from employees, in order to retain our best talent across the globe and build a pipeline of leaders. We continue to recruit top talent and also recruit from top Universities. We also focus to foster gender diversity in our recruitment drive. This year we have launched a program titled - ‘Catalyst’, to hear the voice of the employees and provide them an opportunity to shape their workplace. The Directors express their appreciation to all the employees of the Company for their outstanding contribution to the operations of the Company during the year. INFRASTRUCTURE The Company has been expanding its facilities to keep pace with revenue growth. Emphasis has been on adding capacity in SEZ locations for the new & incremental business. The new units at Mindspace SEZAiroli, Hinjewadi-Pune and DLF SEZ Chennai were made operational during the year ended March 31, 2016. Total capacity at Indian centers stands at 21,585 Seats as on March 31, 2016. BRANDING Brand ‘L&T Infotech’ has grown steadily across the globe, riding strongly on the value added to its Global clients in terms of enabling them build innovative business models, enhance operational efficiencies, and creating captivating experiences for their customers. This has significantly enhanced your Company’s visibility across new industry sectors, new prospects, and also with the Analyst Community. Your Company’s ability to solve complex business challenges at the convergence of digital and physical with real-world expertise, leadership in domain and technology, and building the best organization to learn & grow will help create the Company to be No.1 in Client-centricity. This will further enhance your Company’s brand value as one of the most recognized IT companies in the world. QUALITY INITIATIVES Quality is an all-pervasive commitment of the Company. We translate this commitment into seamless service delivery for our clients. The vision of improvement in Quality and delivery is driven from top to bottom across the organization. We have added new certifications along with sustaining existing ones. The Company was successfully appraised for CMMI SVC Level 5 in September 2015 for Application support and Infrastructure Management services. The focus for the year was to mature the application support and Infrastructure management services. Effective tools, techniques and predictive models are built and deployed for estimation and project management decision making. Statistical techniques are deployed for monitoring the key project processes. The Company continues to maintain and is now ready to be re-appraised for CMMI Dev Level 5 in May 2016. The Company continues to adhere to International quality certifications, namely ISO9001:2008, ISO/IEC27001:2013, ISO14001:2004 & ISO/IEC20000-1:2011 through a combined external audit conducted by Bureau Veritas. As per specific client needs and requirements, your company has sustained the ISAE3402 certification for projects of Insurance domain across Business Units and few specific client engagements. We continue to deliver value to our clients through continuous improvements and value additions. The company has adopted various initiatives such as Lean methodology levers and Extreme Automation to optimize delivery execution and improve productivity. These initiatives are governed and monitored through dashboards and periodic reviews at various levels. On an ongoing basis, we conduct project level and Leadership level client satisfaction surveys to assess the client expectations. Survey results are analyzed to arrive at action plans and initiatives to improve client experience. CORPORATE SOCIAL RESPONSIBILITY (CSR) The Board has constituted CSR Committee in terms of the requirements of the Companies Act, 2013. The details relating to the same are given in Annexure H. The Annual Report on CSR is annexed as Annexure A to this Report. CSR Policy of the Company is available on the Company’s website http://www.lntinfotech.com/aboutus/Corporate_social_ responsibility.html. CORPORATE SUSTAINABILITY Green Initiative During the year, the Company achieved United States Green Building Council’s LEED - Gold Green Building Certification for Powai office in February 2016. This project helped in energy and water savings, waste and e-waste streamlining and management, switching to green certified products and consumables, and aiding employee comfort. Occupational Health Safety Initiative We achieved BS OHSAS 18001:2007 certification for Powai in December 2015. It is aimed at Occupational Health and Safety of all stakeholders working in Powai. DIRECTORS & KEY MANAGERIAL PERSONNEL A. Appointment/ Re-appointment: During the year, following appointments were made on the Board: a. Mr. Sanjay Jalona as the Chief Executive Officer & Managing Director of the Company w.e.f. August 10, 2015 to August 09, 2020. Mr. Jalona, appointed as an Additional Director, will hold office till the ensuing Annual General Meeting (AGM) and is eligible for appointment. b. Mr. Arjun Gupta as an Independent Director of the Company w.e.f. October 28, 2015 to October 27, 2020, subject to the approval of the shareholders. Mr. Gupta, appointed as an Additional Director, will hold office till the ensuing AGM and is eligible for appointment. c. Mr. R. Shankar Raman as a Non-Executive Director of the Company w.e.f. October 28, 2015, subject to the approval of the shareholders. Mr. Shankar Raman, appointed as an Additional Director, will hold office till the ensuing AGM and is eligible for appointment. Mr. A. M. Naik, Director of the Company, retires by rotation and being eligible, offers himself for re-appointment at the ensuing Annual General Meeting of the Company. The notice convening the AGM includes the proposal for appointment/ re-appointment of Directors. B. Cessation: a. Mr. K. R. L. Narasimham ceased to be an Executive Director of the Company w.e.f. April 08, 2015. b. Mr. Sunil Pande ceased to be an Executive Director of the Company w.e.f. August 26, 2015. c. Mr. Chandrashekara Kakal ceased to be an Executive Director of the Company w.e.f. August 27, 2015. d. Mr. V. K. Magapu ceased to be the Managing Director of the Company w.e.f. September 26, 2015. e. Mr. R. Shankar Raman ceased to be a Director of the Company w.e.f. September 26, 2015. The Board places on record valuable contribution made by the Directors during their tenure. C. Key Managerial Personnel: The following were the changes in the Key Managerial Personnel: a. Ms. Angna Arora ceased to be the Company Secretary w.e.f. May 08, 2015. b. Mr. P. S. Kapoor was appointed as Head-Finance & Accounts & Company Secretary w.e.f. May 08, 2015 and was designated as the Chief Financial Officer. He ceased to be Head-Finance & Accounts & Company Secretary and also the Chief Financial Officer w.e.f. August 26, 2015. c. Mr. Ashok Kumar Sonthalia was appointed as Head-Finance & Accounts w.e.f. August 26, 2015 and has been designated as the Chief Financial Officer. d. Mr. Subramanya Bhatt was appointed as the Company Secretary w.e.f. August 26, 2015. DIRECTORS’ RESPONSIBILITY STATEMENT The Board of Directors hereby confirm that: (i) in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure; (ii) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on March 31, 2016 and of the profit of the Company for the year ended March 31, 2016; (iii) the 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 the Company and for preventing and detecting fraud and other irregularities; (iv) the Directors have prepared the annual accounts on a going concern basis; and (v) 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. STATUTORY AUDITORS The Auditors, M/s. Sharp & Tannan, hold office until the conclusion of the ensuing Annual General Meeting. A certificate from them has been received to the effect that their re-appointment, if made, would be in line with the requirement laid under section 139 & 141 of the Companies Act, 2013. The Board, based on the recommendation of the Audit Committee, recommends the appointment of M/s. Sharp & Tannan as Auditors of the Company from the conclusion of the ensuing AGM until the conclusion of the next AGM. The Auditor’s Report to the Shareholders does not contain any qualification and therefore does not call for any comments from Directors. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements pursuant to Section 129(3) of the Companies Act, 2013, prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India, forms part of this Annual Report. The Auditors report to the shareholders does not contain any qualification, observation or adverse comment. SECRETARIAL AUDITOR The Secretarial Audit Report issued by Ms. Naina Desai, Practicing Company Secretary does not contain any qualification and is annexed as Annexure B to this Report. DEPOSITORY SYSTEM As on March 31, 2016, 99.23% of the Company’s total paid-up capital representing 168,511,518 shares are in dematerialized form. In view of the numerous advantages offered by the Depository system, members holding shares in physical mode are advised to avail of the facility of dematerialization from either of the depositories. CHANGES IN SHARE CAPITAL During the year, the following changes have occurred in the authorised and the paid-up equity share capital of the Company: a. The authorised share capital of the Company was sub-divided from 32,750,000 equity shares of Rs. 5 each to 163,750,000 equity shares of Rs. 1 each. Consequently, the paid up share capital was also sub-divided from 32,250,000 equity shares of Rs. 5 each fully paid-up to 161,250,000 equity shares of Rs. 1 each fully paid-up. The sub-division was effected from June 22, 2015. b. The authorised share capital was increased from Rs. 163.75 Million divided into 163,750,000 equity shares of Rs. 1 each to Rs. 200.00 Million divided into 200,000,000 equity shares of Rs. 1 each with effect from June 22, 2015. c. The authorised share capital was further increased to Rs. 240.00 Million divided into 240,000,000 equity shares of Rs. 1 each, pursuant to the Scheme of Amalgamation of Information Systems Resource Centre Private Limited with the Company becoming effective from September 21, 2015. However, there was no change in the paid-up share capital pursuant to the scheme. d. During the year 8,566,188 equity shares were allotted on exercise of the vested options under the employees stock options schemes of the Company. Hence, the paid-up share capital of the Company increased from Rs. 161.25 Million to Rs. 169.82 Million. DISCLOSURES UNDER THE COMPANIES ACT, 2013 1. EXTRACT OF ANNUAL RETURN The details forming part of the extract of annual return is annexed as Annexure C to this Report. 2. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS The Board of Directors met 6 (six) times during the financial year. The details of the Board meetings and the attendance of Directors are provided in Annexure H - Report on Corporate Governance Report forming part of this Annual Report. 3. AUDIT COMMITTEE The Board has constituted the Audit Committee in terms of the requirements of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The details relating to the same are given in Annexure H. In accordance with the requirements of the Companies Act, 2013, the Company has in place a vigil mechanism framework for directors and employees to report genuine concerns. 4. RELATED PARTY TRANSACTIONS The Audit Committee and the Board of Directors have approved the Related Party Transactions Policy and all the related party transactions have been entered in accordance thereof and were in the ordinary course of business and at arm’s length. The details of material contracts or arrangement or transactions at arm’s length basis as per Form AOC-2 as per Companies (Accounts) Rules, 2014 is annexed as Annexure D to this report. 5. SUBSIDIARY/ ASSOCIATE/ JOINT VENTURE COMPANIES As at March 31, 2016, the Company has 9 subsidiaries including a Joint Venture. There has been no material change in the nature of the business of subsidiaries. During the year ended March 31, 2016, the Company subscribed to/acquired equity shares in subsidiary companies as under Performance and Financial Position of each subsidiary/ associate and joint venture companies: A statement containing the salient features of the financial statement of subsidiaries/ associate/ joint venture companies as per form AOC-1 is annexed as Annexure E to this Report. During the year ended March 31, 2016, operations of following subsidiaries were reviewed and a restructuring process was carried out: AMALGAMATION OF ISRC WITH THE COMPANY Pursuant to the Scheme of Amalgamation sanctioned by the Hon’ble High Court of Bombay vide its order dated September 04, 2015, Information Systems Resource Centre Private Limited (ISRC) was amalgamated with the Company with effect from September 21, 2015. The appointed date for the Scheme was October 17, 2014. Consequently, the entire business, assets, liabilities, duties and obligations of ISRC have been transferred to and vested in the Company with effect from October 17, 2014. Ø ISRC was engaged in the business of software services with respect to application development, information technology support and maintenance services to OTIS Elevator Company, USA and other companies of UTC group and was acquired by the Company on October 16, 2014. AMALGAMATION OF GDA TECHNOLOGIES LIMITED WITH THE COMPANY Ø The Board of Larsen & Toubro Infotech Limited and GDA Technologies Limited in their meetings held on October 17, 2014, respectively, approved the Scheme of amalgamation of GDA Technologies Limited with the Company under Section 391 to 394 of the Companies Act, 1956. The Hon’ble High Court of Bombay has sanctioned the Scheme of Amalgamation vide its order dated April 01, 2016. The approval of the Scheme by the Hon’ble High Court of Madras is awaited. The appointed date for the proposed scheme is April 1, 2016 6. PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN OR SECURITY PROVIDED The Company has disclosed the full particulars of the loans given, investments made or guarantees given or security provided in the notes forming part of the financial statements provided in this Annual Report. 7. EMPLOYEE STOCK OPTION SCHEMES The disclosure relating to the Employee Stock Option Schemes of the Company as required under the Companies Act, 2013 and rules made there under is annexed as Annexure F to this Report. Pursuant to the resolution passed by the Board on July 27, 2015 and the shareholders on September 14, 2015, the Company has instituted the Larsen & Toubro Infotech Limited Employee Stock Option Scheme, 2015 (“ESOP Scheme, 2015”) for issue of options to eligible employees which may result in issue of Equity Shares of up to 8,062,500 equity shares of face value of Rs. 1 each. Under the ESOP Scheme 2015, no options have been granted as on the date of this report. 8. COMPANY POLICY ON DIRECTOR APPOINTMENT AND REMUNERATION The Company has constituted the Nomination and Remuneration Committee (NRC) in accordance with the requirements of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The details relating to the same are given in Annexure H. The Committee has formulated a policy on Director’s appointment and remuneration including recommendation of remuneration of key managerial personnel and the criteria for determining qualifications, positive attributes and independence of a Director. 9. DECLARATION BY INDEPENDENT DIRECTORS The Company has received Declaration of Independence from its Independent Directors as stipulated under Section 149(7) of the Companies Act, 2013 confirming that they meet the criteria of Independence. 10. INDEPENDENT DIRECTORS MEETING The meeting of the Independent Directors was held on January 22, 2016, as per schedule IV of the Companies Act, 2013. 11. COMPLIANCE WITH SECRETARIAL STANDARDS The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board Meetings and Annual General Meetings. 12. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO Information as per Section 134 of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 relating to conservation of energy, technology absorption, foreign exchange earnings and outgo is given in Annexure G to this report. 13. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS During the year under review, there were no material and significant orders passed by the regulators or courts or tribunals impacting the going concern status and the Company’s operations in future. CORPORATE GOVERNANCE REPORT A report on Corporate Governance is annexed as Annexure H to this Report. ACKNOWLEDGEMENTS The Directors thank the Company’s customers, vendors and academic institutions for their support to the Company. The Directors also acknowledge the support and co-operation from the Government of India and the Governments of various countries, the concerned State Governments and other Government Departments and Governmental Agencies. The Directors appreciate and value the contributions made by every member of the L&T Infotech family globally. For and on behalf of the Board Sanjay Jalona Chief Executive Officer & Director (DIN: 07256786) R. Shankar Raman Managing Director (DIN: 00019798) Place: Mumbai Date: April 26, 2016 |