DIRECTORS’ REPORT Dear Shareholders, Your directors take great pleasure in presenting the Twenty Second Annual Report on the business and operations of R Systems International Limited (“R Systems” or the “Company”) together with the audited statements of accounts for the year ended December 31, 2015 2. Results of Operations Standalone Accounts Total income during the year 2015 decreased to Rs. 2,988.83 mn. as against Rs. 3,045.65 mn. during the year 2014, a decline of 1.87%. Profit after tax including exceptional items was Rs. 906.44 mn. during the year 2015 as compared to Rs. 750.29 mn. during 2014, an increase of 20.81%. Basic earnings per share (of face value of Re. 1/- each) was Rs. 7.14 for the year 2015 as compared to Rs. 5.90 for the year 2014, an increase of 21.02%. Consolidated Accounts Consolidated total income during the year 2015 decreased to Rs. 6,148.45 mn. as against Rs. 6,575.68 mn. during the year 2014, a decline of 6.50%. Profit after tax including exceptional items was Rs. 978.30 mn. during the year 2015 as compared to Rs. 781.34 mn. during 2014, an increase of 25.21%. Basic earnings per share (of face value of Re. 1/- each) were Rs. 7.70 for the year 2015 as compared to Rs. 6.14 for the year 2014, an increase of 25.41%. 3. Appropriations and Reserves Dividend During the year 2015, the Board declared three interim dividends namely, first interim dividend of Re. 0.40 per equity share of Re. 1/- each at its meeting held on April 23, 2015, second interim (special) dividend of Rs. 3.30 per equity share of Re. 1/- each at its meeting held on August 05, 2015 and third interim dividend of Re. 0.25 per equity share of Re. 1/- each at its meeting held on October 29, 2015. Total interim dividends already paid for the year 2015 aggregates to Rs. 3.95 per equity share of Re. 1/- each i.e. 395%, as compared to total dividend including interim dividend paid for the year 2014 at Rs. 5.85 per equity share of Re. 1/- each i.e. 585%. The Board of Directors (the “Board”) has not recommend any final dividend for the financial year ended December 31, 2015. The register of members and share transfer books shall remain closed from June 09, 2016 to June 13, 2016 both days inclusive. Transfer to Reserves It is proposed not to transfer any amount to general reserve in respect to dividend declared during the year ended December 31, 2015 in pursuance of the provisions of Section 123 of the Companies Act, 2013 and Rules made there under. 4. Business R Systems is a leading provider of outsourced product development services, business process outsource services and also offers own product suite in BFSI, Manufacturing & Logistic verticals. R Systems diversified offering includes: Services Group R Systems defines its outsourced product development business as Integrated Product Life Cycle Management (iPLM) services where R Systems helps ISV and other companies to accelerate the speed to market for their products and services with a high degree of time and cost predictability by using our proprietary pSuite framework and global delivery model. Under iPLM Services, R Systems delivers solutions and services in the area of Information Technology and Information Technology enabled services (ITES). The IT services cover application development, systems integration and support and maintenance of applications. Under the ITES, we cover technical support and customer care for IT and Hi-Tech electronic manufacturers, high-end quality process management and revenue and claims management using our global delivery model. R Systems competitive advantage in iPLM Services is further enhanced by its industry specific domain expertise, global delivery capabilities, multi-language support capabilities, industry best quality and security certification and agile development methodologies supported by R Systems’ proprietary pSuite framework. Products Group ECnet Supply Chain products provide solutions for holistic management of the complex interaction between an organisation and its trading partners. The integrated solution aims to reduce all supply chain costs through improved collaboration and optimisation. The solutions are robust and scalable and give measurable ROI to clients that meets the clients’ strategic business goals. Further, ECnet also operates as a Gold Channel Partner for one of the largest business software companies in the world to resell, implement and support enterprise solutions of ERP, WMS, Service Management, BI and Performance Management. It mainly serves small to medium-sized businesses in the manufacturing and distribution industries. These products present an opportunity to cross and up sell these solutions since these are adjunct to ECnet’s own product offerings. R Systems’ recent acquisition, IBIZ, is a Microsoft Gold Channel Partner and is specialized in deploying Microsoft business management solution suites, including enterprise resource planning, customer relationship management, point of sales, mobility, business intelligence and portals. R Systems focused on key verticals i.e. Telecom & Digital Media, Banking and Finance, Health Care, Manufacturing & Logistics and Government Services. Telecom and Digital Media is the largest industry vertical which contributes 30 percent of the total consolidated revenue for the year ended December 31, 2015. Further with the deep expertise in the key vertical like Telecom & Digital Media, BFSI and Healthcare, we have horizontally embraced analytics solutions across these verticals to bring operational efficiency and also create a vital information pool reflecting on the economical, statistical, social media, speech metrics of the customers. R Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organisations across a wide range of industry verticals and has served twenty one million dollor plus customer during the year 2015. Customers and Delivery Centres R Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organizations across a wide range of industry verticals including Banking and Finance, Independent Software Vendors, Telecom and Digital Media, Government, Healthcare, Manufacturing and Logistic Industries. R Systems maintains fourteen development and service centres and using our global delivery model, we serve customers in the USA, Europe and the Far East. There were no changes in the nature of the Company’s business and generally in the classes of business in which the Company has an interest and in the business carried on by the subsidiaries during the year under review. For details of Company’s subsidiaries please refer note number 14 relating to subsidiaries. 5. Quality R Systems has continuously invested in processes, people, training, information systems, quality standards, frameworks, tools and methodologies to mitigate the risks associated with execution of projects. Adoption of quality models and practices such as the Capability Maturity Model Integrated (CMMi) and Six Sigma practices for processes have ensured that risks are identified and mitigated at various levels in the planning and execution process. R Systems journey for various quality certifications / standards for the development and service centres in India is provided below: During the year 2015, all ISMS artifacts of the Company have been migrated from ISO 27001:2005 to new ISO 27001:2013 standard and Noida Unit has been certified for this new Information Security Standard. Further, Noida unit has been reappraised for PCMM Level 5 (Ver.2.0). In the year 2015, Noida BPO Center has been certified as PCI-DSS (ver. 3.1) compliant for the call Analytic Services provided to one of the major client. As of the date of this report, Noida IT centre is CMMi level 5, PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2013 certified; Noida BPO centre is PCI-DSS (ver.3.1), PCMM Level 5, ISO 9001 : 2008, ISO 27001 : 2013 and PCI-DSS (ver.3.1) certified. The continuing compliance with these standards demonstrates the rigor of R Systems processes and differentiates us to keep our competitive edge in service and product offerings To maintain and strengthen competitive strengths, R Systems continues to make investments in its unique and proprietary R with best practices, tools and methodologies for flawless execution and consistent delivery of high quality software. The pSuite framework offers services along the entire software lifecycle that includes technology consulting, architecture, design and development, professional services, testing, maintenance, customer care and technical support. R Systems expects that its technology focus, investment in processes, talent and methodologies will enable it to distinguish itself from competition as it seeks to provide services to technology / product companies. 6. Directors During the year under review, the following changes took place in the office of directors of the Company. Mr. Raj Kumar Gogia, Mr. Gurbax Singh Bhasin, Mr. Suresh Paruthi and Mr. Amardeep Singh Ranghar, Non-Executive Independent Directors of the Company were appointed as Independent Director of the Company, not liable to retire by rotation, as per the provisions of Section 149 of the Companies Act, 2013 at twenty first Annual General Meeting for period commencing from March 29, 2015 till the ensuing Annual General Meeting. Mrs. Ruchica Gupta who was appointed as an additional director at the meeting of the Board of Directors held on July 07, 2014 was regularized at twenty first Annual General Meeting of the Company held on June 09, 2015. Lt. Gen. Baldev Singh (Retd.) was re-appointed as President & Senior Executive Director for a period of three years commencing from April 01, 2015 to April 01, 2018 at twenty first Annual General Meeting held on June 09, 2015. Mr. Raj Swaminathan, Director & Chief Operating Officer of the Company ceased to be director of the Company consequent upon his resignation w.e.f. June 27, 2015. Details of the Director proposed to be appointed and re-appointed at the ensuing Annual General Meeting are as follows: At the ensuing Annual General Meeting Lt. Gen. Baldev Singh (Retd.), President & Senior Executive Director of the Company is liable to retire by rotation in accordance with the provisions of Section 152 of the Companies Act, 2013 read with the Articles of Association of the Company and being eligible, offer himself for reappointment as director of the Company. Further, on the recommendation of the Nomination & Remuneration Committee of the Company, Mr. Raj Kumar Gogia, Mr. Suresh Paruthi, Mr. Gurbax Singh Bhasin and Mr. Amardeep Singh Ranghar, Non- Executive Independent Directors of the Company are proposed to be re-appointed as Independent Director pursuant to the provision of Section 149 of the Companies Act, 2013 and rules made thereunder at the ensuing Annual General Meeting for the second term of five years commencing from the conclusion of twenty second Annual General Meeting. As required under Section 149 of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Hereinafter referred as “Listing Regulations”), all the Independent Directors of the Company have given the declarations that they meet the criteria of independence as laid down therein. The brief profile of the aforesaid Independent Directors forms part of the Corporate Governance Report. None of the directors of the Company is disqualified as per the provisions of Section 164(2) of the Companies Act, 2013. The directors of R Systems have made necessary disclosures, as required under various provisions of the Companies Act, 2013 and Listing Regulations. 7. Employees Stock Option Plans / Schemes The industry in which R Systems operates is people intensive and R Systems believes that human resources play a pivotal role in the sustainability and growth of the Company. R Systems has always believed in rewarding its employees with competitive compensation packages for their dedication, hard work, loyalty and contribution towards better performance of the Company. To enable more and more employees to be a part of the financial success of the Company, retain them for future growth and attract new employees to pursue growth, R Systems has set up employees stock option plans / schemes from time to time for its employees and for the employees of its subsidiaries. As on the date of this report, the stock option plans of R Systems are as follows: (a) R Systems International Ltd. - Year 2004 Employee Stock Option Plan : For the employees of R Systems and its subsidiaries other than ECnet Limited. (b) R Systems International Ltd. - Year 2004 Employee Stock Option Plan – Ecnet : For the employees of ECnet Limited, a subsidiary of R Systems. The term of the said plan has been expired on August 31, 2014. (c) R Systems International Ltd. Employees Stock Option Plan- Year 2001 (Formerly known as Indus Software Employees Stock Option Plan - Year 2001) : Initially formulated for the employees of Indus Software Private Limited which got amalgamated with R Systems and the plan continues as per the scheme of amalgamation approved by the Hon’ble High Courts of Delhi and Mumbai. As on the date of this report, no stock options are in force under this plan EPS is Rupees per equity shares of Re. 1/- each i.e. after giving into effect Sub-division of equity shares of Rs. 10 each into equity shares of Re. 1/- each as per record date of February 28, 2014. **During the year ended December 31, 2015 R Systems International Ltd. Year - 2004 Employee Stock Option Plan has been completely expired on December 27, 2015 due to expiry of the term of the plan. Further, R Systems International Ltd. - Year 2004 Employee Stock Option Plan – ECnet was expired on August 31, 2014 due to expiry of the term of the plan. During the year ended December 31, 2015, R Systems had not granted any options under any of the aforementioned plans. Subsequent to year ended December 31, 2015, on the recommendation of Compensation Committee 150,000 stock options were granted under existing R Systems International Limited Employee Stock Option Scheme 2007 at the price of Rs. 12.07 per option (i.e. the price at which the options were granted earlier on July 11, 2007). All options granted under R Systems International Ltd. Employees Stock Option Plan - Year 2001 has already been vested and exercised or lapsed and no options were in force as on December 31, 2015. For options granted during the earlier years under plan (a), (b) and (c), R Systems used the fair value of the stock options for calculating the employees compensation cost. For the purpose of valuation of the options granted during earlier years, the management obtained fair value of the options at the date of grant under respective schemes from a firm of Chartered Accountants, to determine accounting impact, if any, of options granted over the periods. In the considered opinion of the valuer, the fair value of option determined using ‘Black Scholes Valuation Model’ under each of above schemes is “Nil” and thus no accounting thereof is required. R Systems International Ltd. - Year 2004 Employee Stock Option Plan under which the price was based on Rs. 2 per share. ** R Systems International Ltd. Employees Stock Option Plan - Year 2001 under which originally the price was based on Rs. 10 per share for 21,967 shares. As a result of amalgamation of Indus Software Private Limited into R Systems, R Systems had issued 206,822 equity shares of Rs. 2 each pursuant to the swap ratio approved by Hon’ble High Courts of Delhi and Mumbai. *** R Systems International Ltd. - Year 2004 Employee Stock Option Plan - ECnet under which the price was based on Rs. 2 per share. Please note that the details given above for plan (a), (b) and (c) are after making the required adjustments in relation to consolidation of each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each as approved by the shareholders in the year 2006 and before Sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per record date of February 28, 2014. Further, for the purpose of valuation of the options granted during the year 2005 under R Systems International Ltd. - Year 2004 Employee Stock Option Plan, the management obtained fair value of the options at the date of grant from a firm of Chartered Accountants, to determine accounting impact, if any, of options granted. In the considered opinion of the valuer, the fair value of these options determined using ‘Black Scholes Valuation Model’ is “Nil” and thus no accounting thereof is required. The above information is based on Rs. 2 per share prior to consolidation of 5 equity shares of Rs. 2 each into one equity share of Rs. 10 and subsequent allotment of bonus shares in the ratio of 1 : 1. For the purpose of valuation of the options granted during the year ended December 31, 2007 under R Systems International Limited Employee Stock Option Scheme 2007, the compensation cost relating to Employee Stock Options, calculated as per the intrinsic value method is nil. The management obtained fair value of the options at the date of grant from a firm of Chartered Accountants. In the considered opinion of the valuer, the fair value of these options determined using ‘Black Scholes Valuation Model’ is “Rs. 50.73” per option The stock based compensation cost calculated as per the intrinsic value method for the financial year 2014 and 2015 was nil. If the stock based compensation cost was calculated as per fair value method prescribed by SEBI, the total cost to be recognised in the financial statements for the year 2015 would be nil (Previous year nil). The effect of adopting the fair value method on the net income and earnings per share is presented below: Scheme (a): R Systems International Ltd. - Year 2004 Employee Stock Option Plan. Scheme (b): R Systems International Ltd. Employees Stock Option Plan-Year 2001. Scheme (c): R Systems International Ltd. - Year 2004 Employee Stock Option Plan –ECnet. Scheme (d): R Systems International Limited Employee Stock Option Scheme 2007. As no options are granted during the year under Scheme (a), Scheme (b), Scheme (c) and Scheme (d), hence the required information is not applicable. 8. Liquidity and Borrowings - Consolidated Financial Statement The available Cash and bank balance as at December 31, 2015 was Rs. 921.95 mn. against Rs. 1,098.24 mn. as of December 31, 2014. The decrease was mainly on account of purchase of fixed assets, acquisition of IBIZCS Group Pte Limited (IBIZ) and dividend payouts as offset by cash generation from operations net of taxes and proceeds from the sale of Indus Business Division. The consolidated cash and cash equivalent as at December 31, 2015 were Rs. 786.17 mn. as against Rs. 1,059.10 mn. as on December 31, 2014. Net cash generated from operating activities were Rs. 448.53 mn. for the year ended December 31, 2015 compared to Rs. 724.57 mn. for the year ended December 31, 2014. Cash generated from investing activities were Rs. 397.95 mn. for the year ended December 31, 2015 comprised of proceeds from sale of subsidiaries Rs. 274.01 mn., proceeds from long term fixed deposits with banks Rs. 239.44 mn. (net), proceeds from redemption of mutual funds Rs. 19.77 mn., interest Income Rs. 42.57 mn., rental income from investment property Rs. 3.08 mn., sale of fixed assets Rs. 2.79 mn. as offset by purchase of fixed assets of Rs. 162.58 mn. and initial payout amounting to Rs. 21.13 mn. (net) on acquisition of IBIZ operations. Cash used in financing activities were Rs 1,131.46 mn. for the year ended December 31, 2015 comprised of payment of dividend (including CDT) of Rs. 1,072.22 mn., Rs. 59.57 mn. paid for buy back of Equity shares, Rs. 1.11 mn. paid for interest as offset by cash received from issuance of equity shares of Rs. 1.09 mn. and net increase in long term borrowings by Rs. 0.36 mn. R Systems’ policy is to maintain sufficient liquidity to fund the anticipated capital expenditures, operational expenses and investments for strategic initiatives. R Systems has a credit facility from the Axis Bank Limited amounting to Rs. 200 mn. (including non-fund based credit limit of Rs. 180 mn. for currency derivatives). As at December 31, 2015, the total credit balance was Rs. Nil under fund based line of credit. Loan payable as at December 31, 2015 comprises of loan for motor vehicles purchased amounting to Rs. 11.58 mn. and against general corporate purpose of Rs. 0.99 mn. R Systems primary bankers in India are Axis Bank Limited, ICICI Bank Limited, Kotak Mahindra Bank Limited, State Bank of India, HDFC Bank Limited and Oriental Bank of Commerce. In U.S.A., U.K., Singapore and New Zealand , the primary bankers are California Bank & Trust, Natwest Bank, Citibank N.A. and Bank of Baroda (NZ), respectively. 9. Changes in the Capital Structure During the financial year ended the following changes took place in the capital structure of the Company. At the beginning of the financial year ended December 31, 2015 the issued and paid up capital of the Company was Rupees 127,458,580/- divided into 127,458,580 equity shares of Re. 1/- each. Subsequently, the Company completed the buyback of its 678,155 equity shares of Re. 1/- each on April 23, 2015. Consequent to this buy back the issued and paid up capital of the Company was reduced to Rs. 126,780,425/- divided into 126,780,425 equity shares of Re. 1/- each. Futher, the Company allotted 90,000 equity shares of Re. 1/- each on June 09, 2015 pursuant to exercise of Stock Options under R Systems International Limited Employee Stock Options Scheme 2007, at an exercise price of Rs. 12.07 per share therefore, the issued and paid up share capital reached to Rs. 126,870,425/- divided into 126,870,425 equity shares of Re. 1/- each. During the financial year ended December 31, 2015, the Company has not issued any shares with differential voting rights or any sweat equity shares. Therefore, disclosure pursuantto Section 43(a) (ii) & Section 54(1)(d) of the Companies Act, 2013 are not applicable. Further, no disclosure is required under Section 67 (3) (c) of the Companies Act, 2013, in respect of voting rights not exercised directly by employees of the Company as the provisions of the said section are not applicable. 10. Buy Back The Board of Directors of the Company at its meeting held on December 20, 2014 approved the buy back of the Company’s fully paid-up equity shares of face value of Re. 1/- each from its existing shareholders, other than those who are promoters, members of the promoter group and persons acting in concert, from the open market through stock exchange(s) for a total consideration not exceeding Rs. 60 mn. and at a price not exceeding Rs. 100/- per share, payable in cash. During the year ended December 31, 2015, this offer for buy back remained opened from January 06, 2015 to April 23, 2015. During this period, the Company bought back 678,155 equity shares for Rs. 59.57 mn. All the shares bought back from January 06, 2015 to April 23, 2015 had been extinguished within the statutory time limits and the said buy back was completed on April 23, 2015. 11. Corporate Restructuring During the year ended December 31, 2015, pursuant to shareholder approval accorded by special resolution through postal ballot on September 23, 2014, the Company concluded the divestment of Indus Product Business, in line with its strategy to focus on core services business by executing a ‘Business Transfer Agreement’ (BTA) with R Systems Product & Technologies Private Limited (“RSPTPL”), a wholly owned subsidiary of the Company on June 27, 2015 for the transfer of Indus Business Unit operated out of Pune and Chennai to RSPTPL on a going concern basis by way of slump sale, for consideration of Rs. 783.9 mn. on the terms and conditions agreed in BTA. The Company completed the acquisition of 100% shares of IBIZCS Group Pte Limited (IBIZ), a Singapore based Company engaged in Microsoft Dynamics ERP Practice, w.e.f. April 30, 2015 through its wholly owned subsidiary namely R Systems (Singapore) Pte Limited. IBIZCS Group Pte. Limited is having operations mainly in South East Asia as a reseller of Microsoft Dynamics Navision ERP along with BI and mobility solutions competencies. R Systems Solutions, Inc. (RSSI) has been merged with R Systems, Inc. (RSI), both being wholly owned subsidiaries of the Company based in USA, as per the applicable laws of USA on December 10, 2015. Pursuant to aforesaid merger, the Company has received incremental 150 common stock of RSI against outstanding common and preferred (series A) stocks held in RSSI. 12. Material changes affecting the financial position of the Company There are no significant events, changes occurred between the end of the financial year and till the date of this report which would materially affect the financial position of the Company. 13. Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The particulars as prescribed under Section 134 (1) (m) of the Companies Act, 2013, read with rule 8 of Companies (Accounts) Rules, 2014 for the year ended December 31, 2015 are as follows: A. Conservation of Energy Since the Company does not own any manufacturing facility, the other particulars relating to conservation of energy stipulated in the Companies (Accounts) Rules, 2014 are not applicable. During the year ended December 31, 2015 R Systems continued its’ action plans to curtail the energy bills by adopting various energy conservation options / technologies as identified by Federation of Indian Chambers of Commerce & Industry (“FICCI”) through a detailed Energy Audit carried out by FICCI for R Systems Noida operations in the year 2007. Significant measures were taken to reduce energy consumption by using energy efficient equipment and devices. R Systems constantly evaluates new technologies and makes appropriate investments to be energy efficient. Currently, the Company uses LED/CFL fittings and electronic ballasts to reduce power consumption of fluorescent tubes. The air is conditioned with energy efficient compressors for central air conditioning and with split air conditioning for localized areas. R Systems is always in search of innovative and efficient energy conservation technologies and applies them prudently. However, R Systems being in the software industry, its operations are not energy intensive and energy costs constitute a very small portion of the total cost, therefore, the financial impact of these measures is not material. B. Technology absorption 1. Efforts made towards technology absorption The Company has established practice streams in specific technologies to analyze their implications and the benefits they can provide to the Company’s customers. These steps enable the Company to find and execute the most appropriate solutions for its clients. 2. Benefits derived as a result of the above efforts The benefits derived from the above mentioned efforts are fulfilling customer needs, efficiency in operations, improvement in quality and growth in revenues. 3. Technology imported during the last 3 years Not applicable, as no technology has been imported by the Company. 4. Expenditure incurred on Research and development. Driven by our core value of innovation, we believe that innovation is not just a practice but an essential component embedded within R Systems organizational DNA. Innovation is one of our core areas which keeps us competitive and successful in today’s highly competitive business environment. Over the year ended December 31, 2015, your Company has invested in research and development in the area of Analytics and Mobility solutions in addition to strengthening and up-grading proprietary products and frameworks. The key R&D initiates undertaken by the Company for the year 2015 are as follows: (1) R Systems’s Analytics practice plays a key role in leveraging advanced technologies to develop sophisticated & disruptive analytics solutions that drive the business transformation for the existing and prospective customers. With the deep expertise in the vertical like Telecom & Digital Media, BFSI and Healthcare, we have horizontally embraced Analytics solutions across these verticals to bring operational efficiency and also create a vital information pool reflecting on the economical, statistical, social media, speech metrics of the customers. Our technology innovation agenda focuses on solutions around advanced Analytics themes i.e. Customer Analytics, Speech & Text Analytics and Risk & Financial Portfolio Analytics, Autonomics, Social Media Analytics, Healthcare Analytics and Operational Analytics. We have also initiated our investment in next generation data analytics framework and multiple focused solutions across key verticals. This framework will provide end-to-end functions for conceptualizing and implementing any big data analytics initiative. (2) Your Company has developed a customer interaction analytics platform by leveraging the speech text mining capabilities that empowers organizations to measure and analyse 100% of recorded customer interactions. This platform is built to deliver actionable business insights by analysing unstructured & semi structured data extracted from various data sources such as: CRM, IVR, CDR, ACD and customer interactions etc. with integrated capabilities for speech, text, social media, big data & predictive analytics. (3) The Company has invested in building reusable components library and testing frameworks for mobile platforms (Android and iOS). These reusable components and frameworks provide an edge to your Company in term of cost efficiency and reduced time to market while servicing existing as well as prospective customers. (4) Additionally, your Company has continued its investment building frameworks and proof of concepts in key verticals like Telecom & Digital Media and Healthcare domains. C. Foreign Exchange Earnings and Outgo (Accrual Basis) A significant percentage of R Systems revenues are generated from exports. The development and service centre in Noida is registered with the Software Technology Park of India as 100% Export Oriented Undertaking. All efforts of the Company are geared to increase the business of software exports in different products and markets. We have made investments in sales and marketing activities in various growing markets wholly owned subsidiaries of Computaris International Limited being 100% subsidiary of R Systems. * Wholly owned subsidiary of R Systems (Singapore) Pte Ltd. being 100% subsidiary of R Systems. ^ Wholly owned subsidiaries of IBIZCS Group Pte Ltd. being 100% Subsidiary of R Systems (Singapore) Pte Ltd. being 100% subsidiary of R Systems. $ Subsequent to the year ended December 31, 2015, name of Systemes R. International Ltee, Canada has been changed to RSYS TECHNOLOGIES LTD. During the year ended December 31, 2015, the Company has acquired though R Systems (Singapore) Pte Ltd., wholly owned subsidiary of the Company, 100% share of IBIZCS Group Pte Ltd., Singapore (IBIZ) on April 30, 2015. IBIZ is a Microsoft Gold-certified partner specialized in Microsoft Business Management Solution suites, including Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Point of Sales (POS), Mobility, Business Intelligence (BI) and Portals having subsidiaries in Singapore, Malaysia, Indonesia, India, Hongkong and China. The Company has transferred 93% of its equity share in R Systems Products & Technology Private Limited (“RSPTPL”) on July 07, 2015 by entering into ‘Share Purchase Agreement’ (SPA) with BD Capital Partners Ltd. (“BDC”), a Mauritius based company on June 27, 2015 for a consideration of Rs. 443.17 mn. On December 10, 2015, R Systems Solution Inc. (RSSI), has been merged with R Systems Inc. (RSI), both being wholly owned subsidiaries of the Company, based in U.S.A. As on date of this report, all the aforementioned twenty four subsidiaries except IBIZ Consultancy Services India Private Limited –India were incorporated and based outside India. In addition to providing services to various international clients these subsidiaries also help to generate revenues for R Systems. The Board of Directors of the Company regularly reviews the affairs of these subsidiaries. Policy for determining material subsidiaries of the Company is available on the website of the Company at http://www.rsystems. com/investors/corporategovernance.aspx. Further, the audited annual accounts and related detailed information of our subsidiaries, where applicable, will be made available to shareholders seeking such information at any point of time. The annual accounts of the subsidiary companies will also be available for inspection by any shareholder at Registered Office of R Systems i.e. B-104 A, Greater Kailash-I, New Delhi–10048 and Corporate Office of R Systems i.e. C-40, Sector 59, Noida (U.P.)–01307 and Registered Offices of the subsidiary companies concerned during business hours. The same will also be hosted on R Systems’ website i.e. www.rsystems.com. 15. Particulars of employees The details required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed as Annexure A and forms part of this report. Further, as required under the provisions of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the name and other particulars of employees are set out in Annexure B and forms part of this report. 16. Directors’ responsibility statement Pursuant to the requirement of Section 134 (3) (c) read with Section 134(5) of the Companies Act, 2013 with respect to directors’ responsibility statement, your directors hereby confirm that: i) In the preparation of the annual accounts for the financial year ended December 31, 2015, the applicable accounting standards had been followed along with proper explanation relating to material departures; ii) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the Company for that period; iii) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; iv) the directors had prepared the annual accounts for the financial year ended December 31, 2015 on a going concern basis; v) the directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; vi) 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. 17. Auditors M/s S. R. Batliboi & Associates LLP (Firm Registration No. 101049W/E300004), the statutory auditors of the Company will retire at the ensuing Annual General Meeting and are eligible for reappointment. The Board, based on the recommendation of the audit committee, recommends the re-appointment of M/s S. R. Batliboi & Associates LLP (Firm Registration No. 101049W/E300004) as the statutory auditors of the Company. M/s S. R. Batliboi & Associates LLP have confirmed their eligibility and willingness to act as the statutory auditors of the Company and have further confirmed that their appointment, if made, shall be within the limits prescribed under Section 141 of the Companies Act, 2013 and that they are not disqualified for such appointment within the meaning of the said section Further, the auditors’ report being self - explanatory, does not call for any further comments by the Board of Directors. 18. Audit committee R Systems has a qualified and independent Audit Committee. During the year under review there was no change in composition of the Audit Committee except that Mr. Amardeep Singh Ranghar was appointed as a member of Audit Committee w.e.f. August 04, 2015. The constitution of the Committee is in compliance with the provisions of the Companies Act, 2013, the Listing Regulations and erstwhile Listing Agreement. Detailed description of the Audit Committee has been given in Corporate Governance report. The terms of reference and role of the Committee are as per the guidelines set out in the Listing Regulations and erstwhile Listing Agreement read with Section 177 of the Companies Act, 2013 and rules made there under and includes such other functions as may be assigned to it by the Board from time to time. The Committee has adequate powers to play an effective role as required under the provisions of the statute and Listing Regulations. During the year under review, the Board of Directors of the Company had accepted all the recommendations of the Audit Committee. 19. Prevention and prohibition of sexual harassment of women at work place At R Systems it is our desire to promote a healthy and congenial working environment irrespective of gender, caste, creed or social class of the employees. We value every individual and are committed to protect the dignity and respect of every individual. The Company has always endeavored for providing a better and safe environment free of sexual harassment at all its work places. Consequent to the enactment of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder, the Management of R Systems International Limited has constituted an Internal Complaints Committee (ICC) to deal with any complaints or issues that may arise, in the nature of sexual harassment of women employees. The Company has also prepared and implemented Policy for Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace. During the year ended December 31, 2015, no cases of sexual harassment against women employees at any of its work place were reported to the ICC. 20. Corporate Governance As required under Listing Regulations, the detailed report on corporate governance is given as Annexure C to this report and the certificate obtained from a practicing company secretary regarding compliance of the conditions of corporate governance as stipulated in the said clause is annexed as Annexure D to this report. 21. Deposits The Company has neither invited nor accepted any deposits from the public within the purview of Section 2(31), 71 and 74 of Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014, no amount of principal or interest was outstanding on the date of the balance sheet. 22. Customer relations R Systems recognises that the customers have a choice of service providers and the directors would like to place on record their gratitude on behalf of the Company for the business provided by them. The Company’s quality policy mandates that the voice of the customer is obtained on a regular basis. We constantly review the feedback and incorporate its impact into our delivery systems and communications. 23. Stakeholder’s relations R Systems is inspired by its customers and its employees transform that inspiration and customers’ needs into value for all stakeholders. We thank all R Systems employees worldwide for their hard work, commitment, dedication and discipline that enables the Company to accomplish its customer commitments and commitments to all its stakeholders. R Systems conducts regular employee satisfaction surveys and open house meetings to get employee feedback. R Systems is constantly validating key employee data with industry and peer group business. These practices have helped the Company achieve many of its business goals and have been recognised in many industry surveys over the last few years. The open door policy of our senior management team ensures that the feedback loop is completed promptly. We thank our shareholders for their continuous support and confidence in R Systems. We are aware of our responsibilities to our shareholders to provide full visibility of operations, corporate governance and creating superior shareholder value and we promise to fulfill the same. 24. Management discussion and analysis report In terms of the Listing Regulations management discussion and analysis report is given as Annexure E to this report. 25. Secretarial Report Mr. Jitender Singh, Company Secretary in Whole Time Practice, had been appointed by the Board to carry out the Secretarial Audit under the provision of Section 204 of the Companies Act, 2013 for the financial year ended December 31, 2015. The Secretarial Audit report for financial year ended 2015 is enclosed as Annexure F. The report does not contain any qualification. 26. Vigil Mechanism / Whistle Blower Policy In order to provide a mechanism to employees of the company to disclose any unethical and improper practices or any other alleged wrongful conduct in the company and to prohibit managerial personnel from taking any adverse action against those employees, the company has laid down a Vigil Mechanism also known as Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Vigil Mechanism or Whistle Blower Policy is explained in the Corporate Governance Report and also posted on the website of the Company. 27. Continuance of the Existing Financial Year Pursuant to the provision of Section 2(41) of the Companies Act, 2013, an order from the Company Law Board has been awarded to the Company to continue to follow calendar year (i.e. 1st January to 31st December) as its financial year. 28. Criteria for selection of candidates for Membership on the Board of Directors and the Remuneration Policy As per the provisions of Section 178 of the Companies Act, 2013 and other relevant provisions and on the recommendation of Nomination & Remuneration Committee, the Board has framed a criteria for selection of Directors, a policy for remuneration of directors, key managerial personnel and other employees. The Criteria for selection of candidates for Membership on the Board of Directors and the remuneration policy are stated in the Corporate Governance Report. 29. Meetings of the Board The Board and its Committees of the Company meet at regular intervals to discuss, decide and supervise the various business policies, business strategy, Company’s performance and other statutory matters. During the year under review, the Board has met 09 times. The details of the meeting of the Board and its Committees are given in Corporate Governance Report. The intervening gap between two Board Meetings did not exceed 120 days. 30. Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has carried out an annual performance evaluation of its own performance, its committees and the individual directors . The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. 31. Particulars of Loans, Guarantees or investments under Section 186 of the Companies Act, 2013 During the year ended December 31, 2015, the Company has invested SGD 2,251,000 in R Systems (Singapore) Pte Ltd. by way of acquisition of 1,052,125 shares in R Systems (Singapore) Pte Ltd. Further, the Company has also made investment of Rs. 700,000 in R Systems Products & Technologies Private Limited (“RSPTPL”) by way of acquisition of shares in right issue. Further, the Company also acquired 60,000,003 equity shares at Rs. 6.227333 per equity share and 35,026 Non-Convertible Debentures (“NCD”) at Rs. 10,000/- per NCD as purchase consideration for transfer of its business unit to RSPTPL. The Company has transferred 93% of its equity share in RSPTPL on July 07, 2015 by entering into ‘Share Purchase Agreement’ (SPA) with BD Capital Partners Ltd. (“BDC”), a Mauritius based company on June 27, 2015. 32. Related Party Disclosure All the Related Party Transactions entered during the year were in the ordinary course of business and on arm’s length basis. There are no materially significant related party transactions made by the company with promoters, Directors, Key Managerial personnel or other designated persons which may have a potential conflict of interest with the company at large. All the related party transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on quarterly basis, specifying the terms & conditions of the transactions. The policy on Related Party Transactions as approved by the Board is uploaded on the company’s website at the weblink as mentioned in the Corporate Governance Report. Details of particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 in form AOC-2 has been enclosed herewith as Annexure G. 33. Risk Management The Company is not required to form a Risk Management Committee. The Company has developed and implemented a risk management policy for identifying the risk associated with business of the Company and measures to be taken by including identification of elements of risk and measures to control them. 34. Corporate Social Responsibility In compliance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has constituted a Corporate Social Responsibility Committee (‘CSR Committee’). During the year under review, there is no change in the constitution of the Committee except that Mr. Raj Swaminathan, Director & Chief Operating Officer of the Company ceased to be the member of the Committee consequent to his cessation as Director of the Company w.e.f. June 27, 2015. The detailed terms of reference of the Corporate Social Responsibility Committee has been provided in the Corporate Governance Report. In pursuit of the responsibilities entrusted to the CSR Committee, a policy on Corporate Social Responsibility has been prepared and adopted by the Board which is available at the website of the Company at following link: http://www.rsystems.com/investors/corporategovernance.aspx Annual Report on CSR activities of the Company in format prescribed in Companies (Corporate Social Responsibility Policy) Rules, 2014 in enclosed as Annexure H and forms part of this report. 35. Internal Control System and Internal Financial Controls The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Internal Auditors and the management monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Audit observations of Internal Auditors and corrective actions thereon are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Auditor reports to Audit Committee. The Company has in place adequate internal financial controls commensurate with size, scale and complexity of its operations. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and timely preparation of reliable financial information. 36. Extract of Annual Return The details forming part of the extract of the Annual Return in form MGT - 9 is enclosed as Annexure I to this Report. 37. Significant and Material Orders Passed By The Regulators Or Courts There are no significant or material orders passed by the Regulators / Courts which would impact the going concern status of the Company and it’s operations in future. 38. Acknowledgments Your directors once again take this opportunity to thank the employees, investors, clients, vendors, banks, business associates, regulatory authorities including stock exchanges, Software Technology Park of India, the Central Government, State Government of Delhi, Uttar Pradesh, Maharashtra, Tamil Nadu for the business support, valuable assistance and co-operation continuously extended to R Systems. Your directors gratefully acknowledge the trust and confidence and look forward for their continued support in the future. On behalf of the Board For R Systems International Limited Sd/- Satinder Singh Rekhi (DIN: 00006955) (Managing Director) Place : Singapore Date : April 30, 2016 Sd/- Lt. Gen. Baldev Singh (Retd.) (DIN: 00006966) (President & Senior Executive Director Place : Noida Date : April 30, 2016 |