DIRECTORS REPORT Dear Members, We have pleasure in presenting the report on our business and operations for the year ended 31st March 2015. 1. Extract of Annual Return Form MGT 9 containing details, forming part of the extract of the Annual return is annexed to this report as Annexure "A" [pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and Administration) Rules, 2014] 2. Number of Board meetings conducted during the year under review. The directors of the company have met FIVE (5) times during the financial year under review for the purposes of discussing the affairs of the company and its business, the details of which are listed below: Financial Highlights Revenues-Standalone Revenue for the year ended 31st March, 2015 is Rs 1172.11 lacs as compared to 1004.29 lacs the same period last year. The Company's services improved marginally by 16 % over the previous year. Revenues-Consolidated The subsidiaries of the company both at USA and UAE are dormant hence on account of consolidation there is no addition of revenues Profits- Standalone The Company had earned a net profit of Rs. 13 Lakhs prior to charge off of the following (a) Write off of Investment in US Subsidiary in full as against the amortisation over a period of four years (b) Exceptional Items include Loans, Advances and Book Debts which have been carried forward over the past few years, have turned unrecoverable hence they have been written off. However on account of the write offs, the company had reported a Loss of Rs28.96 Crores as against a Profit of Rs. 2.59 Lakhs in the previous year. Profits-Consolidated There are no additions to the Profits of the company on consolidated results as there were no operations in the Subsidiaries. Capital Expenditure on Tangible Assets-Standalone During the year the company had shifted its registered and corporate office to a new location. Capital Expenditure on Tangible assets amounted to about Rs 10.08 Lakhs as against 154.78 Lakhs in the previous year. The Company has capitalised the Work in Progress amounting to Rs. 26.32 crores which was incurred over the past few years to Software Products as the expenditure pertains to additions in modules and features to the IT Products developed by the company as against Rs.NIL in the previous year. Further the company has transferred an amount of Rs. 35.68 crores treated in holding company's books of account as Capital Work In Progress, to books of Subsidiary in UAE . The amount was incurred towards product/license fee and for ramping up operations of the Subsidiary. Liquidity The Company is dependent on funds from external sources for its working capital. The promoters of the company have funded the working capital from their resources. The company has been looking at raising long term working capital from the markets and had deferred the plan due to unfavourable conditions. Current year due to change in the Political environment and stable capital market conditions the company proposes to raise funds and hence a resolution is being proposed for approval of the shareholders. 4. Directors Responsibility Statement In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submit its responsibility Statement: — a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period; c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; d) the directors had prepared the annual accounts on a going concern basis; and e) 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. (A note on these controls forms a part of Management Discussion and Analysis Report) f) 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. 5. Directors and Key Managerial Personnel Profile of the Directors: (i) Mr. Chenchaiah Pantulu Pattapurathi (DIN 01583136) He is Seventy (70) years old. He is a commerce graduate and a member of Institute of Chartered Accountants of India (qualified in the year 1971). He has forty four (44) years of experience in industries such as Electrical Appliances, Food Processing, Ship Building, Cement, Cement Products, Textiles, Pharmaceuticals etc., to his credit. His experience has been in the area of Financial Management, Management Accounting and Taxation. He promoted CIL in the year 1994 and has led the company since its inception and has been instrumental in shaping and executing strategy and financial structuring. At present he is Managing Director and Chief Executive Officer of CIL and is the chairman of the Nomination and Remuneration Committee. He is a Trustee of Chennarayudu Public Charitable Trust. He is a promoter of the company and holds 93, 15,820 shares of the company in his name as on March 31, 2015. (ii) Mr.Satya Shiva Kumar Kanakadandi (DIN 02103299) He is Forty Nine (49) years old. He is a science graduate. He has more than twenty (25) years of experience in Software Development, Training and Heading MIS Departments. He has been instrumental in launching various corporate training programs for universities, banks and other training establishments. He promoted CIL in the year 1994. He has made significant contribution in setting up of the operations of the company since inception and has also been instrumental in providing a marketing base to the company and for delivering solutions in emerging technologies in yester years. At present he is Director Operations and Chief Operating Officer of CIL and is a member of Stakeholders Relationship Committee. He is a promoter of the company and holds 10, 61, 010 shares of the company in his name as on March 31, 2015. (iii) Mr. Chandra Sekhar Pattapurathi (DIN 01647212) He is Forty (40) years old. He is a commerce graduate and a member of the Institute of Cost and Works Accountants of India (qualified in the year 1998). He began his career with CIL as an Executive in Finance & Account. He has worked with a large retail chain in international markets as a Senior Financial Analyst before joining the Board of CIL He has experience in, Finance, Accounts, Corporate Strategy, Financial Management, Taxation, Secretarial and International Trade Practices. He has been appointed a director of CIL since 30th June 2006 .At present he is Director - Finance and Chief Financial Officer of the Company. He is a promoter of the company and holds 3, 03,100 shares of the company in his name as on March 31, 2015. (iv) Mr. Koteswara Rao Kanamarlapudi (DIN : 06401491) He is sixty nine (69) years old. He is a commerce graduate and a member of the Institute of Chartered Accountants of India (qualified in the year 1972). He has worked with large logistics, Food Processing industries in India before setting up of a Construction and Contracting company in Doha, Qatar He joined the Board of CIL on 30th September 1996 as a non executive director He is a promoter of the company and holds 31,000 shares of the company in his name as on March 31, 2015. (v) Mr. Shankar Madhukar Khasnis (DIN : 02359561) He is Forty Nine (49) years old. He is an Engineering Graduate. He is the Chief Executive Officer of a Feedback Consulting, Mumbai. Shankar has worked across industry sectors and brings a strong strategic perspective to the board.. In his spare time, he teaches in management schools and enjoys mentoring students. He is an independent director on the board of Cybermate Infotek Limited and is not a shareholder of the company. (vi) Mr. Pawan Kumar Kasera (DIN 00125178) He is Sixty One (61) years old. He is a commerce graduate. He has more than 30 years, experience as a business leader with "hands-on" mentality having commercial and technical background. He has extensive background and knowledge of business atmosphere, political and social structure in Asia South Pacific and some parts of South East Asia, Europe, Africa & the Middle-east.He brings his success in management of regional multicultural corporations with emphasis on marketing and corporate investment and also analytical skills and cultural approach. He is an independent director on the board of Cybermate Infotek Limited and is not a shareholder of the company. (vii) Dr. Devarapalli Jayarami Reddy ( DIN 02079731) He is 70 years old. He is a medical practioner by profession. He is well experienced in business of health care and is presently an investor in midsized hospitals. He is an independent director on the board of Cybermate Infotek Limited and is not a shareholder of the company. (viii) Callepalli Kamakshi Bharathi (DIN 07144611) She is 39 years old. She is a post graduate in Electronics. She has rich experience in telecommunications and signalling. She is presently mentoring research trainees on telecom engineering. Independence of directors The Board has received statement of disclosures from all the Independent Directors highlighting the fulfilment of all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules. Every such statement submitted by the independents directors has been taken note of by the board. Re-appointments • Managing Director Mr.P.C.Pantulu, Managing director is being re-appointed for a period of three years. • Directors" Ms.C.Kamakshi Bharathi, was appointed as Additional Director on 28th March 2015 to hold the said office till the date of the Annual General Meeting. Subsequently, a notice has been received from a member proposing her candidature for reappointment. Further, Mr Shankar Khasnis and Dr.D.Jayarami Reddy, retire at this Annual General Meeting and being eligible offer themselves for reappointment. Disclosures about receipt of any commission by MD /WTD from company or any commission/remuneration from the subsidiaries The Managing Director, or Whole time directors are not in receipt of any commission from the company or any remuneration or commission from the subsidiaries. 6. Auditors and Auditors report Statutory Auditors M/s P. Murali & Co , Chartered Accountants, were appointed as Statutory Auditors from the conclusion of previous Annual General meeting until the upcoming annual general meeting. It is now proposed to re-appoint them as Statutory Auditors from the commencement of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting.. The Company has received a certificate from M/s P Murali & Co. to the effect that if reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013. The Notes on financial statements referred to in the Auditor's Report are self explanatory Secretarial Auditor The Board has appointed Mr.Y. Koteswar Rao, Practising Company Secretary, to conduct Secretarial Audit for the financial year 2014-15. The Secretarial Audit report for the financial year ended March 31, 2015 is annexed herewith. Annexure-B The Auditors Report does contain any qualification. The Notes/Remarks on financial statements referred to in the auditors report are self explanatory. The Secretarial Audit Report does contain any qualification, reservation or adverse remark. 7. Particulars of Loans, Guarantees or Investments made under section 186 of the Companies Act, 2013. There were no loans, guarantees or investments made by the Company under Section 186 of the Companies Act, 2013 during the year under review. 8. Particulars of Contracts or Arrangements made with Related Parties. All Contracts/arrangements/transactions entered by the company during the financial year 2014-15 with related parties were in the ordinary course of business and on an arm's length basis. During the year the company has not entered into any contracts/arrangements/transactions with related parties which would be considered material. In this regard, we draw your attention to Note 33 containing a Statement Pursuant to Clause (h) of sub section 134 of the companies Act 2013, and Rule 8(2) of the Companies (Accounts) Rules, 2014, to the financial statements which sets out related party disclosures. 9. Review of Business Operations and Future Prospects. Your Directors wish to present the details of Business operations done during the year under review: a. Services and Profitability The year 2014 can be seen as a year of transformation at Cybermate. The year witnessed some changes in the operations of the company, shifting of the registered office of the company, commencement of BPO operations. Despite negative business sentiments and tough working capital conditions, the company was able to address the challenges on time. During the previous year, the company was able to sustain existing IT operations, Network and Surveillance Services and Staff Augmentation Services to its clients. The Company has also commenced its BPO operations and has two new clients in Telecom Domain. The BPO Operations are now stabilized and are contributing positive margins. The company has also commenced work on platforms for emerging IT opportunities on SMAC Stack with a limited team and is working with one client. The company's profitability for the period before exceptional items improved. However, due to the write off of Loans, Advances and Book debts amounting to Rs. 21.49 Crores, and charge off of investment in US Subsidiary in as against amortisation amounting to Rs. 13.07 Crores the operations resulted in a net loss of Rs. 20.16 Crores b. Sales Revenue for the year ended 31st March, 2015 is Rs 1172.11 lacs as compared to 1004.29 lacs the same period last year. The company's services improved marginally by 16 % over the previous year. c. Marketing and Market environment Our service offerings are primarily custom built application development, system integration , testing , maintenance , network , surveillance , IT support , consulting and BPO. In order to differentiate our service and solution offerings, our strategy will be to bring in concepts of automation , analytics , improving productivity to gain higher accuracy and to reduce the total costs to clients. We continue to leverage the advantage of open source technologies in providing innovative and cost effective performance solutions. Products: The company continues to enhance its products in health care domain and is targeting to get identified as a key player. Heal soft (HMS): A complete Enterprise Hospital Management Software Suite (18 modules) for Clinics, Small, Medium and Large Hospitals at multi locations in multiple technologies which can be integrated to an ERP. EHR: An Electronic Health Record is a digital version of a patient's medical records. Platforms: The company at present is in the process of building mobile applications on multiple technologies to support E commerce and Utilities. We have commenced our efforts in emerging mobile and digital technologies and big data analytics. Services: - The company continues to improve upon its service offerings across domains in the below segments. - IT Support - Consulting - Network and Surveillance Infrastructure: - The company proposes to set up infrastructure such as data center to provide cost effective infrastructure solutions for storage , business continuity, disaster recovery for its own and third party applications and data. Strategic Alliances: We propose to align with startups either as partners or as subsidiaries in creating, deploying, integrating and operating business solutions. We propose to raise additional capital to deploy in making selective business acquisitions that augment our expertise, compliment our presence in certain market segments and accelerate the execution of our strategies. d. Future Prospects including constraints affecting due to Government policies The future of IT Services business is providing a number of open source software components, and or proprietary software products , all of which can be deployed on public or private cloud or at the customer's premise. These platforms are intended to address the key challenges that businesses have n effectively storing , managing and analyzing the increasing amounts of data available to them. CIL's objective is to enable customers find an improved way to package, develop , administer and monitor their enterprise data. 10. Dividend No Dividend is being proposed for the current financial year. 11. Transfer of Unclaimed Dividend to Investor Protection Fund. The provisions of Section 125(2) of the Companies Act, 2013 do not apply as there was no dividend declared and paid last year. 12. Material changes and commitments, if any affecting the financial position of the company occurred between the end of the financial year to which this financial statements relate and the date of the report Considering certain factors, the following are the material changes and commitment that have occurred during the period under review which directly/indirectly had an impact on the financial position of the Company. Company's Property and Litigation The company has its own commercial space which was leased out to another I.T. Services Company for 10 years in 2004. The lease rentals were discounted with a housing finance company to augment working capital for the company. The tenant had terminated the lease and vacated the property of the company in 2009. Owing to the Political Conditions in the state the property could not be leased out and there by the account being irregular. The company approached the lender to restructure the loan but they initiated proceedings under the SARFARESI Act to recover their dues. The company has approached the Debts Recovery Tribunal and appropriate Legal Authorities for relief to protect its property. 13. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo. The detailed information as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished under Annexure "C" as attached to this report. 14. Statement concerning development and implementation of Risk Management Policy of the company. The Company has constituted a Risk Management Committee at a board meeting held on the 28th May 2015 and details pertaining to the role and functions of this committee is mentioned under the Management Discussion and Analysis Report which forms a part of this report. 15. Details of Policy developed and implemented by the company on its Corporate Social Responsibility initiatives. The Companies Act, 2015 lays down a mandatory provision wherein every company having • Net worth of rupees five hundred crore or more, or • Turnover of rupees one thousand crore or more or • Net profit of rupees five crore or more during any financial year, shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director. As the said provisions are not applicable to the company, it has not developed and implemented any Corporate Social Responsibility initiatives. 16. Formal Annual Evaluation of Performance of the Board and its Committees The manner in which the formal evaluation of the members of both the board ad various committees constituted by the company has been covered in the Corporate Governance Report. Annexure-D to this report. The following policies relating to appointment of Directors, payment of Managerial remuneration, Directors' qualifications, positive attributes, independence of Directors and other related matters as provided under Section 178(3) of the Companies Act, 2013 of the company are attached as Annexures E and F (a) Policy relating to selection of directors appointment. (Annexure E) (b) Remuneration Policy for directors, Key Managerial Personnel and other employees.(Annexure F) 17. Subsidiaries, Joint Ventures and Associate Companies. Statement pursuant to Section 129 Subsection (3)(I) of the Companies Act 2013, read with Rule 5 of Companies Accounts Rules, 2014 relating to financial statements of subsidiary companies as formatted in AOC 1 form has been attached as Annexure- E to this report. 18. Deposits The Company has neither accepted nor renewed any deposits during the year under review. 19. Disclosures Board Committees Disclosures pertaining to the mandatory committees constituted by the Board for specific purposes has been included in the Corporate Governance Report which forms a part of the Annual report. Thus the information pertaining to the composition of the and number of meetings held by the committees such as Audit Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee are covered in there. 20 . Management Discussion and Analysis Management Discussion and Analysis Report forms a part of the Annual Report 21. Vigil Mechanism The Company has established a vigil mechanism and oversees through the committee, the genuine concerns expressed by the employees and other Directors. The Company has also provided adequate safeguards against victimization of employees and Directors who express their concerns. The Company has also provided direct access to the chairman of the Audit Committee on reporting issues concerning the interests of co employees and the Company. The company has also set out a whistle blower policy in terms of the listing agreement with the stock exchange, so as to ensure that the business is conducted with integrity and the company's financial information is accurate. The Policy on Vigil Mechanism and whistle blower policy may be accessed on the company's website. 22. Shares Buy back of Securities The Company has not bought back any of its securities during the financial year under review. Sweat Equity The Company has not issued any Sweat Equity Shares during the financial year under review. Bonus Shares No Bonus Shares were issued during the financial year under review. Employees Stock Option Plan The Company has not provided for any Stock Options to its employees during the financial year under review. 23. Disclosures under Sexual Harassment of Women at Workplace In accordance with the provisions of the Sexual Harassment of Women at the workplace (Prevention, Prohibition and Redressal) Act, 2013, the company is required to have an Anti- sexual harassment policy though which an Internal Complaints Committee is constituted. The said committee meets at regular intervals to redress any complaints received by the committee in these lines and after due deliberation aims at disposing off the complaints. However there has been no such complaint filed within the company till date. 24. Acknowledgement Your Directors place on record their sincere thanks to their employees, bankers, business associates, consultants, and various government authorities for their continued support extended to your Company's activities during the financial year under review. Your Directors also acknowledge gratefully for your support and for the confidence reposed on this Company. By Order of the Board P.C. Pantulu Managing Director Place: Hyderabad Date: 30th July 2015 |