DIRECTORS' REPORT Dear Members, Your directors have pleasure in presenting the 24th the financial year ended 31 March 2015. Directors' Report on the business and operations of your company, for financial year ended 31 March 2015. APPROPRIATIONS Dividend Your directors have recommended a final dividend of Rs. 5 per share (100%) on par value of Rs. 5 per share. The total dividend including dividend distribution tax (gross) is Rs. 676.8 million as against Rs. 633.8 million for the previous year. During the year, the board also declared an interim dividend of Rs. 3.00 per share (60%). The total interim dividend paid including the dividend distribution tax (gross) was Rs. 393.6 million. The interim dividend was paid on 29 September 2014. Total dividend (including dividend distribution tax) as a percentage of profit after tax is 39.5% as compared to 24.9% in the previous year. Transfer to Reserves Your directors have voluntarily transferred Rs. 217.1 million to the General Reserve retaining Rs. 5,683.1 million in the Profit and Loss Account. LIQUIDITY Your company maintains sufficient cash reserves to meet its operations and strategic objectives. As at 31 March 2015, your company had liquid assets of Rs. 4,760.6 million as against Rs. 6,208.3 million at the previous year end. These funds have been invested in short term deposits and mutual funds with scheduled banks and debt based mutual funds. FIXED DEPOSITS Your company has not accepted any deposits and as such, no amount of principal or interest was outstanding as on 31 March 2015. SHARE CAPITAL Allotment of Shares Your company has allotted 396,452 equity shares of Rs. 5 each to the associates of the company and its subsidiaries upon exercise of an equal number of stock options vested in them pursuant to the extant Stock Option Schemes of the company. In view of the above allotments, the outstanding shares of the company increased from 111,964,613 equity shares of Rs. 5 each to 112,361,065 equity shares of Rs. 5 each. NAME CHANGE AND RE-BRANDING During the year, the company changed its name from 'Infotech Enterprises Limited' to 'Cyient Limited'. This was done by means of a special resolution passed by postal ballot by the shareholders of the company. The fresh certificate of incorporation evidencing/approving the change of name was issued by the Registrar of Companies, Andhra Pradesh on 5 May 2014. This name change is part of the company's re-branding exercise. STATE OF AFFAIRS/COMPANY'S PERFORMANCE DNO With a goal to provide specialized solutions across our customer's value chain, the Data Transformation, Network and Operations (DNO) group has been engaged in wide-ranging long-term customer engagements, that has enabled the company to emerge as a renowned organization in the industry with marque customers in the sectors addressed. In the Data Transformation, we have over 2 decades of experience in providing varied services in the geospatial technology and mapping industry. Over the years, this Data Transformation group has moved from creating of spatial data to also developing insights from the data, positioning itself as an end to end data transformation business. With some of the world's largest Communication Service Providers and Utilities as our customers, this Network & Operations group provides specialized services spanning across the "Plan - Build - Operate" life cycle of our customers. This operating unit generated revenues of Rs. 5,833.5 million as against previous year's Rs. 5,463.9 million, at a growth rate of 6.8%. As a percentage of operating revenues, this vertical contributed 45.1%. Number of employees - 5,047 Engineering This operating unit provides complete produce life cycle support, from product ideation and design engineering, through product realization to aftermarket services, across Aerospace & Defense, Transportation, Industrial Equipment, Oil & Gas, Energy, Mining, Semiconductors, Consumer, and Medical industries. With deep domain knowledge combined with engineering expertise, application know how and innovative business models, Cyient positioning itself as an ideal partner for clients who want to design innovative products faster, optimize their engineering costs and improve time to market. The operating unit generated revenues of Rs. 7,106.5 million as against last year's revenues of Rs. 6,764.6 million, resulting in an increase of 5.1%. This vertical contributed 54.9% of the total operating revenues. Number of employees - 3,836 Product Realization This operating unit is the latest entry in Cyient offerings and has been incubated to embark on Cyient's S3 journey. This business unit focuses on building capabilities that support conceptualizing, system engineering, prototyping, testing, certification and high-value realization for customers and prospects. Focused on Aerospace & Defense, Medical, Rail and Industrial, this business unit of the company offers Design Led Product Realization for its customers by providing sub systems partnerships, accelerated product development and customizing product for emerging markets. SUBSIDIARIES Cyient Europe Limited (CEL) (formerlylnfotech Enterprises Europe Limited) Incorporated in London as Dataview Solutions in 1992, it became a part of the Infotech Group in1999. Our services are designed to cater to leading tier-1 and tier-2 telcos, large utility companies, public sector agencies, and commercial businesses. We enjoy long-term relationships with several of our partners and customers that have built a strong foundation of trust and reliability. Cyient Benelux BV (formerly Infotech Benelux BV), based in Breda, the Netherlands provides support to our business in the Benelux region, while the Middle East operations are managed at the Dubai Office. We are an ISO 9001 and ISO 27001 certified organization. Leveraging the global execution capability of our parent organization, we maintain client relationships and ensure efficient project management in Europe. Cyient lnc. (Cl) (formerly lnfotech Enterprises America lnc.) Headquartered in East Hartford, Connecticut, CI provides engineering services in North America. We have additional offices across the US and Canada, with over 1,000 associates working in North America alone. We cater to a broad spectrum of clients, from Fortune 500 companies to small organizations and local, state, and federal government agencies, generating annual revenues of over $150M. We leverage the global delivery capability of Cyient Limited while engaging clients and executing projects in the American region. Cyient GmbH (CG) (formerly lnfotech Enterprises GmbH) Cyient GmbH offers world-class engineering services and solutions in Germany. It was established as Advanced Graphics Software (AGS) in Leonberg, Germany, in 1992 - a 3D CAD/CAM, e-solution software and application provider. After becoming a part of Cyient Group in 2000, we extended our foray into other service areas like GIS and IT solutions. Owing to our large pool of engineering, GIS, IT resources, we provide high-quality services and solutions to our clients with offshore cost advantage and onsite project management Cyient KK (CKK) (formerly lnfotech Enterprises Japan KK) Established in 2008 in Central Tokyo, CKK is a leading engineering service provider in Japan. We provide our end-to-end services and solutions across a wide variety of sectors. We leverage the global delivery capability of Cyient KK, while maintaining client relationships and managing projects locally. Cyient Australia Pty Limited (CAPL) Headquartered in Melbourne and incorporated during the year 2014-15, CAPL, seeks to provide engineering, data and network operations services for Asia Pacific region. Commercial operations of the company will commence during the year 2015-16. lnfotech Geospatial (lndia) Private Limited (lGlPL) IGIPL, based in Hyderabad, addresses geospatial business opportunities in India and the Middle East. The Indian government's Open Map Policy and Survey of India's large-scale mapping initiatives are unlocking geospatial opportunities in several areas. These include: land records; urban planning; environment, forestry and natural resources; utility infrastructure planning and management; and defence. Similarly, the rapid pace of infrastructure development in the Middle East has led to a growing demand for geospatial services in that region. lnfotech Enterprises lnformation Technology Services Private Limited (lElTSPL) IEITSPL is based in Hyderabad and offers innovative software solutions and services for the retail and supply chain sector across the globe. We have expertise in a wide of variety of software platforms, including Internet and e-commerce technologies. Leveraging our huge pool of resources and technical acumen, we deliver cutting-edge and cost-effective solutions and services. With global software giants as our partners, we develop end-to-end solutions for the retail sector, including manufacturing, transportation and finance. Cyient lnsights Private Limited (ClPL) (formerly lnvati lnsights Private Limited) Cyient acquired a majority stake in Invati Insights Private Limited, a Hyderabad, India and Troy, Michigan, USA based datasciences company in October 2014. The company was subsequently renamed Cyient Insights Private Limited. CIPL enables customers drive business innovation and deliver quantifiable business results through smart data analytics and actionable intelligence. CIPL prides itself on the unique approach in acquiring, managing and analyzing the vast amount of data generated by sensors embedded in machines and devices, and the unmatched commitment to add value to customers with the proven global delivery model. CIPL leverages Cyient's relationships in different verticals such as Auto and Heavy Engineering, Aerospace, Transportation, and Utilities and its global delivery model in executing projects. Rangsons Electronics Private Limited (REPL) Established in 1993 and headquartered in Mysore, Karnataka, REPL operates world class production facilities to support the requirements for Electronics Manufacturing Services (EMS) and System Integration requirements from customers globally. Cyient acquired a majority stake in REPL in February 2015. REPL is one of the fastest growing companies with customers in India, North America, Europe, Japan and China. Through a dynamic team of professionals with a relentless focus on Quality and delivery, REPL is aiming to be the market leader in High-Mix, High-Tech Electronic Manufacturing Services in Medical, Defense & Aerospace, Telecom, Automotive, Railways and Industrial segments. REPL's strategic positioning in the Railways segment is further boosted with the receipt of IRIS certification, an international railway industry standard. Further, the NADCAP AC7120 accreditation demonstrates the company's commitment towards customer satisfaction and meeting stringent industry specifications on a global scale. JOINT VENTURE/ASSOCIATE lnfotech Aerospace Services lnc (lASl)-Associate Company Established in 2003 in Puerto Rico, Infotech Aerospace Services Inc. (IASI) provides engineering outsourcing and other professional services to Defense, Aerospace, and Power Generation Industries. IASI is a venture between Cyient and Pratt & Whitney, a pioneer in flight technology. We also provide engineering and supply chain services, including aerospace engineering, mechanical design and software development for military, industrial and applications. lnfotech HAL Limited (lHL)-Joint Venture Company IHL aims to provide comprehensive solutions involving conceptual design, re-design and derivates of modules, systems and components, prototyping and supply of these through Manufacturing Programme Management. IHL offers design services in the field of aerospace, viz., aero thermo and mechanical design, structural, stress, thermal and rotor dynamic analysis, aeronautics, computational fluid dynamics, combustion studies, preparation of digital mock up, testing and analysis, control system design, development and software applications. IHL is a joint venture between Cyient and Hindustan Aeronautics Limited. IHL delivers engineering as well as after market engineering and support services, i.e., technical publications, repair design, service bulletins, testing, performance analysis and maintenance monitoring in the aerospace domain. IHL is well positioned to undertake work under offset program from various original equipment manufacturers. Pursuant to Section 129(3) of the Companies Act, 2013, a statement containing salient features of the financial statements of company's subsidiaries in Form AOC-1 is enclosed elsewhere in this report. BUSINESS RESPONSIBILITY REPORT The company has suo moto adopted the 'National Voluntary Guidelines on Social, Environmental and Economical Responsibilities of Business' issued by the Ministry of Corporate Affairs (MCA). The nine areas of business responsibility adopted by the company are briefly described as follows: Principle 1: Businesses should conduct and govern themselves with Ethics, Transparency and Accountability. Principle 2: Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle. Principle 3: Businesses should promote the well being of all employees. Principle 4: Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized. Principle 5: Businesses should respect and promote human rights Principle 6: Business should respect, protect, and make efforts to restore the environment. Principle 7: Business, when engaged in influencing public and regulatory policy, should do so in a responsible manner. Principle 8: Business should support inclusive growth and equitable development. Principle 9: Business should engage with and provide value to their customers and consumers in a responsible manner. The business responsibility report is enclosed as Annexure 'A'. CORPORATE SOCIAL RESPONSIBILITY The company believes in giving back to society in some measure that is proportionate to its success in business. Corporate Social Responsibility (CSR) aims at balancing the needs of all stakeholders. The company's CSR initiative goes beyond charity and believes that as a responsible company it should take into account its impact on society as much as creating business impact.The CSR initiatives are conducted through Cyient Foundation. An elaborate report on CSR is published elsewhere in this annual report. The CSR Annual Report is enclosed as Annexure 'B'. BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNEL None of the directors of the company is disqualified under the provisions of the Act or under the Listing Agreement with the Stock Exchanges. Appointments Mr. B.V.R. Mohan Reddy was appointed as Executive Chairman on 12 April 2014. Mr. Krishna Bodanapu was appointed as Managing Director & CEO by the board on 24 April 2014. Mr. John Paterson and Mrs. Andrea Bierce were appointed as additional directors of the company on 15 October 2014. Mr. John Paterson and Mrs. Andrea Bierce are proposed to be appointed as directors under the provision of section 160 of the Companies Act, 2013 at the ensuing Annual General Meeting (AGM). At the 23rd AGM of the company held on 17 July 2014, Mr. M.M. Murugappan, Mr. K. Ramachandran, Mr. Harsh Manglik and Mr. Som Mittal were appointed as independent directors under the provisions of section 149 of the Companies Act, 2013. Pursuant to Article 56 of the Articles of Association of your company and the provisions of Section 152 of the Companies Act, 2013, Mr. Thomas Prete, Mr. Alain De Taeye and Mr. Shankar Narayanan retire by rotation at the ensuing AGM and offer themselves for re-appointment. Pursuant to the provisions of Clause 49 of the Listing Agreement, brief particulars of the directors who are proposed to be appointed/re-appointed are provided as an annexure to the notice convening the AGM. Cessations Mrs. B. Sucharitha ceased to be Whole Time Director with effect from 12 April 2014. At the 23rd AGM held on 17 July 2014, Mrs. B. Sucharitha, Mr. Vikas Sehgal and Mr. G. V. Prasad retired by rotation. Your directors place on record their appreciation and gratitude to each of them for their valuable contributions during their tenure as directors. Except as stated above, there is no change in the key managerial personnel during the year. Policy on directors' appointment and remuneration and other details The Company's policy on directors' appointment and remuneration and other matters provided in section 178(3) of the Act have been disclosed in the corporate governance report, which forms part of the directors' report. Number of board meetings during the year During the year, 6 meetings of the board were held, the details of which form part of the report on corporate governance. Board evaluation and assessment The company believes that formal evaluation of the board and of the individual directors, on an annual basis, is a potentially effective way to respond to the demand for greater board accountability and effectiveness. For the company, evaluations provide an ongoing means for directors to assess their individual and collective performance and effectiveness. In addition to greater board accountability, evaluation of board members helps in: • More effective board processes • Better collaboration and communication • Greater clarity with regard to members' roles and responsibilities and • Improved Chairman - Managing Director - Board relations By focusing on the board as a team and on its overall performance, the company ensures that communication and overall level of participation and engagement also improves. In this background, the board undertook a formal board assessment and evaluation process during 2014-15. The Leadership, Nomination & Remuneration Committee has overall stewardship for the process. The evaluation process covers the following aspects: Peer and self-evaluation of Directors • Evaluation of the performance and effectiveness of the board • Evaluation of the performance and effectiveness of Board Committees • Feedback from the Non-Executive Directors to the Chairman, and • Feedback on management support to the Board The evaluation process elicits responses from the directors in a judicious manner - ranging from composition and induction of the board to effectiveness and governance. It also seeks feedback on board and committee charters, strategy, risk management and quality of discussion and deliberations at the board. The Lead Independent Director provides feedback to the Executive Chairman. The same is discussed and acted upon accordingly at the board. AUDITORS Pursuant to the provisions of section 139 of the Act and the rules framed thereunder, Deloitte Haskins & Sells, Chartered Accountants, were appointed as statutory auditors of the company from the conclusion of the 23rd AGM of the company held on 17 July 2014 till the conclusion of the 28th AGM to be held in the year 2019, subject to ratification of their appointment at every AGM. AUDITORS' REPORT AND SECRETARIAL AUDITORS' REPORT The auditors' report and secretarial auditors' report do not contain any qualifications, reservations or adverseremarks. Report of the secretarial auditor is given as an annexure which forms part of this report (Annexure 'C'). EMPLOYEE STOCK OPTION PLANS During the year under report, the company had the Infotech Associate Stock Option Plans in operation for granting stock options to the associates of the company and its wholly owned subsidiaries, in accordance with the Securities Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Disclosures pursuant to the above Guidelines and Securities & Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 is enclosed as Annexure 'D'. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO These are enclosed as Annexure 'E'. MANAGEMENT DISCUSSION & ANALYSIS Pursuant to the provisions of Clause 49 of the Listing Agreement, a report on Management Discussion & Analysis is enclosed as Annexure 'F'. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134(5) of the Companies Act, 2013, the board of directors, to the best of their knowledge and ability, confirm that: i. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures; ii. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the company for that period; iii. they have taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; iv. they have prepared the annual accounts on a going concern basis; v. they have laid down internal financial controls to be followed by the company and such internal financial controls are adequate and operating effectively; vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS The particulars of loans, guarantees and investments have been disclosed in the financial statements. RELATED PARTY TRANSACTIONS None of the transactions with related parties falls under the scope of section 188(1) of the Act. Information on transactions with related parties pursuant to section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Form AOC-2 and is enclosed as Annexure 'G'. EXTRACT OF ANNUAL RETURN (MGT 9) The extract of the annual return in Form MGT 9 as required under the provisions of section 92 of the Act is enclosed as Annexure 'H'. PARTICULARS OF EMPLOYEES The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below: c. The percentage increase in the median remuneration of employees in the financial year: 8% d. The number of permanent employees on the rolls of Company: 10,399 e. The explanation on the relationship between average increase in remuneration and Company performance: On an average, employees received an annual increase of 8% in India. The individual increments varied from 4% to 13 %, based on individual performance. Employees outside India received wage increase varying countries. In order to ensure that remuneration reflects company performance, the performance pay is also linked to organization performance, apart from an individual's performance i. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: The average annual increase was around 8%. However, during the course of the year, the total increase is approximately 8%, after accounting for promotions and other event based compensation revisions. k. The key parameters for any variable component of remuneration availed by the directors: The members of the Company vide postal ballot in October 2014 approved payment of commission to the non-executive directors within the ceiling of 1% of the net profits of the Company as computed under the applicable provisions of the Act. The said commission is decided each year by the board of directors and distributed amongst the non-executive directors based on their attendance and contribution at the board and certain committee meetings, as well as the time spent on operational matters other than at meetings. l. The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year: None. m. Affirmation that the remuneration is as per the remuneration policy of the Company: The Company affirms remuneration is as per the remuneration policy of the Company. n. The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary. RISK MANAGEMENT The board of directors has formed a risk management committee to identify, evaluate, mitigate and monitor the risk management in the company. The committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. A comprehensive enterprise risk management mechanism has been put in place and the same is regularly reviewed. A more detailed analysis of the risk management in the company is published in the management discussion and analysis report published elsewhere in the annual report. CORPORATE GOVERNANCE The Company will continue to uphold the true spirit of Corporate Governance and implement the best governance practices. A report on Corporate Governance pursuant to the provisions of Clause 49 of the Listing Agreement forms part of the Annual Report. Full details of the various board committees are also provided therein. As required under Clause 49 of the Listing Agreement, the Auditors' Certificate regarding compliance of conditions of corporate governance is enclosed as Annexure 'I'. DISCLOSURE REQUIREMENTS Details of the familiarization programme of the independent directors are available on the website of theCompany (http:/ /www. cyient.com/investors/corporate-governance). Policy for determining material subsidiaries of the Company is available on the website of the Company (<http://> www.cyient.com/investors/corporate-governance). Policy on dealing with related party transactions is available on the website of the Company(<http://www.cyient.com/> investors/corporate-governance). The Company has formulated and published a Whistle Blower Policy to provide Vigil Mechanism for employees including directors of the Company to report genuine concerns. The provisions of this policy are in line with the provisions of the section 177(9) of the Act and the revised Clause 49 of the Listing Agreements with stock exchanges (<http://www.cyient.com/investors/corporate->governance). The company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All associates of the company are covered under this policy. There were no complaints received under the policy during 2014-15. CEO's DECLARATION Pursuant to the provisions of clause 49 (II)(E) of the Listing Agreement, a declaration by the Managing Director & CEO of the company declaring that all the members of the board and the senior management personnel of the company have affirmed compliance with the Code of Conduct of the company is enclosed as Annexure 'J'. The CEO/CFO certification to the board pursuant to clause 49(V) of the listing agreement is enclosed Annexure 'K'. ACKNOWLEDGMENTS The board of directors expresses its thanks to the company's customers, shareholders, vendors and bankers for their support to the company during the year. Your directors would like to make a special mention of the support extended by the various Departments of the Central and State Governments, particularly the Software Technology Parks of India, Development Commissioners - SEZ, Department of Communication and Information Technology, the Direct and Indirect tax authorities, the Ministry of Commerce, the Reserve Bank of India, Ministry of Corporate Affairs/Registrar of Companies, Securities and Exchange Board of India, the Stock Exchanges and others and look forward to their support in all future endeavours. Your directors wish to place on record their deep sense of appreciation for the committed services of the associates of the company at all levels. For and on behalf of the Board B.V.R. Mohan Reddy Executive Chairman (DIN-00058215) Place : Hyderabad Date : April 23, 2015 |