Mar 31, 2015
We are pleased to present your Company''s Twenty Sixth Annual Report, together with the Audited Statement of Accounts, for the year ended March 31, 2015.
1. RESULTS OF OPERATIONS - Financial Results
The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Secton 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("2013 Act"), as applicable and guidelines issued by the Securites and Exchange Board of India ("SEBI"). Accounting policies have been consistently applied except where a newly issued Accounting standard, if initally adopted or a revision to an existng Accounting standard requires a change in the Accounting policy hitherto in use. Management evaluates all recently issued or revised Accounting standards on an ongoing basis. The Company has seven subsidiary companies, all of which are wholly-owned subsidiaries. The Company discloses stand-alone audited financial results on a quarterly and annual basis, consolidated un-audited financial results on a quarterly basis and consolidated audited financial results on an annual basis.
a) Consolidated Operations
Revenue from consolidated Operations for the year was Rs. 353.14 crore, 2% higher than Rs. 346.22 crore in the previous year. As the Company continued its focus on strategic initatves for new products, sales and market development and high level people to help drive transformation, the overall operational expense for the year continued to be high at Rs. 287.83 crore, against Rs. 279.64 crore in the previous year. Operatng Profit (EBITDA) was at Rs. 65.31 crore, 18% of revenue, against Rs. 66.58 crore, 19% of revenue, in the previous year.
Profit afer Tax for the year was at Rs. 64.71 crore, 18% of revenue, against Rs. 64.34 crore, 19% of revenue, in the previous year.
The consolidated financial results are as below: (Rs. in crore)
For the Year Ended March 31, 2015 % of Revenue 2014 % of Revenue
Revenue From Operations 353.14 100.00 346.22 100.00 Expenses
a) Changes in inventories of stock-in-trade - - 4.95 1.43
b) Employee benefit expense 201.44 57.04 180.77 52.21
c) Travel expense 20.01 5.67 19.90 5.75
d) Finance costs (Bank charges) 0.54 0.15 0.51 0.15
e) Other expenses 65.84 18.64 73.51 21.23
Total Expenses 287.83 81.51 279.64 80.77
Operatng Profit (EBITDA) 65.31 18.49 66.58 19.23
Depreciaton 11.97 3.39 7.93 2.29
Operatng Profit afer Interest and Depreciaton 53.34 15.10 58.65 16.94
Other Income 31.64 8.96 23.81 6.88
Foreign Exchange Gain/ (Loss) 1.67 0.47 0.74 0.21
Profit Before Tax 86.65 24.54 83.20 24.03 Taxaton
- Withholding Taxes 0.54 0.15 0.65 0.19
- Net current tax 15.97 4.52 18.87 5.45
- Other taxes 5.43 1.54 (0.66) (0.19)
Profit Afer Tax 64.71 18.32 64.34 18.58
b) Standalone Operations
Revenue from the standalone Operations of your Company for the year was Rs. 279.04 crore against Rs. 241.11 crore in the previous year, an increase of 16 %. Total operational expense for the year was at Rs. 218.06 crore against Rs. 196.53 crore in the previous year, an increase of 11%. Operatng Profit (EBITDA) was at Rs. 60.98 crore, 22% of revenue, against Rs. 44.58 crore, 18% of revenue, in the previous year.
Profit afer Tax for the year was at Rs. 60.74 crore, 22% of revenue, against Rs. 55.09 crore, 23% of revenue in the previous year.
Standalone financial results are as below: (Rs. in crore)
For the Year Ended March 31, 2015 % of Revenue 2014 % of Revenue
Revenue from Operations 279.04 100.00 241.11 100.00 Expenses
a) Changes in inventories of stockÂinÂtrade - - 4.95 2.05
b) Employee benefit expense 145.95 52.30 124.80 51.76
c) Travel expense 16.91 6.06 17.38 7.21
d )Finance costs (Bank charges) 0.40 0.14 0.35 0.15
e) Other expenses 54.80 19.64 49.05 20.34
Total Expenses 218.06 78.15 196.53 81.51
Operatng Profit (EBITDA) 60.98 21.85 44.58 18.49
Depreciaton 10.66 3.82 6.76 2.80
Operatng Profit afer Interest and Depreciaton 50.32 18.03 37.82 15.69
Other Income 29.26 10.49 28.77 11.93
Foreign Exchange Gain/ (Loss) 0.12 0.04 1.17 0.49
Profit Before Tax 79.70 28.56 67.76 28.10 Taxaton
Â Net current tax 13.78 4.94 13.38 5.55
Â Other taxes 5.18 1.86 (0.71) (0.29)
Profit Afer Tax 60.74 21.77 55.09 22.85
A detailed analysis on the Company''s performance, both consolidated and standalone, is included in "Management''s Discussion and Analysis" Report, which forms part of this Annual Report.
2. SHARE CAPITAL
Issued and Paid-up Share Capital
The paid-up share capital of the Company, as on March 31, 2015, is 32,383,724 equity shares of Rs. 10 each similar to the paid-up share capital as on March 31, 2014.
Shares under Compulsory Dematerializaton
The shares of the Company are under compulsory dematerializaton ("Demat") category and are available for trading on both the depositories in India viz. Natonal Securites Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Of the entre paid up shares, 32,242,604 shares or 99%, are in dematerialized form as at March 31, 2015. The Internatonal Securites Identfication Number (ISIN) alloted to the Company''s shares is INE096B01018.
Your Company is listed at Natonal Stock Exchange of India Ltd. and BSE Ltd.
Stock Exchange where Nucleus shares Scrip Symbol /Code are listed
Natonal Stock Exchange of India Ltd. NUCLEUS
(NSE) w.e.f. December 19, 2002
BSE Ltd. (BSE) w.e.f. November 6, 1995 531209
4. LIQUIDITY AND CASH EQUIVALENTS
Your Company contnues to retain its debt-free status and maintains sufficient cash and cash equivalents to meet future strategic initatves. The Company has been conservatve in its investment policy over the years, maintaining a reasonably high level of cash and cash equivalents which enable the Company to completely eliminate short and medium term liquidity risks, at the same tme also help scale up Operations at a short notce. The goal of cash management at Nucleus is to:
a. Use cash to provide sufficient working capital to manage business Operations of the Company to be able to add value to all our stakeholders and contnuously enhance the same.
b. Maintain sufficient cash as reserves that will aid the Company in capturing meaningful business opportunites, including acquisitons.
c. Invest surplus funds in low-risk bank deposits, debt schemes of mutual fund and tax free secured bonds of Public Sector Enterprises.
Cash and cash equivalents including current investments at a consolidated level of Rs. 281.25 crore, consttute 64% of the shareholders'' funds at the year end, against Rs. 298.02 crore, 75% of the shareholders'' funds at the close of the previous year. In additon, the Company holds tax free bonds issued by public sector enterprise on a ''hold to maturity'' basis of a face value of Rs. 53.63 crore against Rs. 25 crore in the previous year and long-term fixed maturity plans of mutual funds of Rs. 15 crore against nil last year.
The Dividend Policy of your Company stpulates a dividend payout in the range of 15-30% of the Profits available for distributon, subject to:
a) Provisions of The Companies Act, 2013 and other applicable laws, and
b) Cash flows of the Company
We are pleased to state that for the 15th consecutve year, your Company is recommending a dividend this year also. The proposed dividend is 50% (Rs. 5.00 per equity share of Rs. 10 each). Last year, the dividend was 60% (Rs. 6.00 per equity share of Rs. 10 each) which included a special dividend of 30% (Rs. 3.00 per equity share of Rs. 10 each). Dividend is subject to the approval of the shareholders at the forthcoming Annual General Meetng. If approved, the total dividend payout will be Rs. 16.19 crore, against a payout of Rs. 19.43 crore in the previous year. The total payout will be 27% of standalone Profits for the year. No amount was carried to reserves.
The Register of Members and Share Transfer Register shall remain closed during the period July 02 to July 08, 2015 (both days inclusive) for the purpose of the Annual General Meetng and for payment of dividend. The dividend if approved at the Annual General Meetng, will be payable to Members whose names appear on the Register of Members of the Company on July 02, 2015, being the frst day of Book-Closure and to those whose names appear as benefcial owner in the records of Natonal Securites Depositories Ltd. and Central Depository Services (India) Ltd. on close of business as on July 01, 2015.
6. FIXED DEPOSITS
Your Company has not accepted any fixed deposits covered under Chapter V of the Companies Act, 2013 and, as such, no amount of principal or interest was outstanding on the date of the Balance Sheet.
7. PARTICULARS OF CONTRACTS or ARRANGEMENTS WITH RELATED PARTIES
All contracts / arrangements / transactons entered by the Company during the financial year with related partes were in the ordinary course of business and on an arm''s length basis. The Company policy for determining ''material subsidiaries'' and on ''Related Party Transactons'', as approved by the Board can be accessed on the Company website link: htp://www.nucleussofware.com/investors.
Particulars of contracts or arrangements with related partes in the prescribed Form AOC-2, is provided as Annexure A to this Directors'' Report.
8. PARTICULARS OF LOANS, GUARANTEES or INVESTMENTS
Details of Loans, Guarantees and Investments covered under the provisions of Secton 186 of the Companies Act, 2013 are provided in the notes to the Financial Statements.
9. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THE COMPANY BETWEEN THE END oF FINANCIAL YEAR 2015 AND DATE OF THIS REPORT
No material changes and commitments have occurred afer the close of the year tll the date of this Report, which afect the financial positon of the Company.
10. CHANGE IN THE NATURE OF BUSINESS
There has been no change in the nature of business of the Company.
11. MANAGEMENT DISCUSSION & ANALYSIS
As per requirements of Clause 49 of the Listng agreement, Management''s Discussion and Analysis of the financial conditon and results of both standalone and consolidated Operations have been provided separately in this Annual Report.
12. REVIEW OF BUSINESS & OUTLOOK
Your Company contnues its journey as a preferred partner for banking and financial organizatons worldwide, providing innovatve and pioneering products, services and solutons globally.
Global growth remains moderate, with uneven prospects across the main countries and regions. Relatve to last year, the outlook for advanced economies is improving in comparison to the growth in emerging markets and developing economies. Improvement in the global macroeconomic outlook has led to banks focusing on growth, rather than cost reducton and compliance-centric projects. Innovaton in banking technologies has transformed the entre process of customer interacton with a bank. Technology has not only enhanced customer experience and satsfacton, but has also made banks omnipresent virtually, through mobile banking and other channels. As per Ovum, a global analyst house, IT budgets in the global retail banking industry will reach US $ 131 bn in 2015, an increase of 4.3% over the previous year.
During the year, your Company continued its transformation journey to drive greater innovaton, speed, agility, and efficiency across the business. The year witnessed strategic initatves on new products, sales and market development and investment in high-level people to help drive transformation and contnue the momentum of growth. We believe these initatves will empower the Company for sustainable growth.
13. NEW PRODUCT LAUNCHES
During the year, your Company launched FinnOne NeoTM, a product suite specifically designed to manage end-to-end lending requirements of banking and financial services industry. This comprehensive product suite incorporates the latest in business thinking, compliance, technology, functonality and security aspects. This new ofering has the capability to empower our customers to enhance operational efficiency and drive growth while achieving superior risk management. FinnOne NeoTM enables innovatve banks and finance companies to manage all types of lending from personal and home loans to commercial lending and finance against securites.
Your Company remains commited to providing its existng and potential customers with compettve and cutng-edge products and will contnue to focus on investments in product innovaton and business expansion.
14. NOTABLE ACCOLADES RECEIVED DURING THE YEAR
FinnOneTM has been ranked as the Global No. 1 Best Selling Lending Banking System for the Seventh consecutve year by IBS Publishing, UK in their Annual Sales League Table 2015
Annual Report for the Year Ended March 31, 2014 won the Platnum Award for Excellence within the Technology- Sofware industry category and ranked amongst the World''s Top 50 Annual Reports by the League of American Communicatons Professional (LACP).
9th Social and Corporate Governance Awards in the category "Best Overall Corporate Governance Compliance and Ethics Program organised by World CSR Congress.
Titanium Award at "The Asset Triple A Corporate Awards 2014" for the Third Consecutve Year under the category Financial Performance, Corporate Governance and Investor Relatons.
"Asian CSR Leadership Awards 2014" in the category, "Best Corporate & Financial Reportng".
"The Asian Banker award Â 2014" for "Best Lending Platorm Implementaton Project" for introducing MARC, an innovatve debt servicing soluton that allows customers to make payment anytme, anywhere.
15. SUBSIDIARY COMPANIES
Your Company has seven wholly owned subsidiaries across the globe. During the year a Company was incorporated in Johannesburg, South Africa for tapping business potential in the sub-Saharan Africa region. Capital infusion in this Company is in process.
The following table provides a list of all these subsidiaries as on March 31, 2015:
Name of Subsidiary Locaton Date of incorporaton
Nucleus Sofware Solutons Pte. Ltd. Singapore February 25, 1994
Nucleus Sofware Inc. USA August 5, 1997
Nucleus Sofware Japan Kabushiki Kaisha Japan November 2, 2001
VirStra Technology Services Ltd. India May 6, 2004
Nucleus Sofware Netherlands B.V. Netherlands February 3, 2006
Nucleus Sofware Ltd. India April 21, 2008
Nucleus Sofware Australia Pty. Ltd. Australia February 3, 2014
There has been no material change in the nature of the business of the subsidiaries.
A statement containing the salient features of the financial statement of our subsidiaries in the prescribed form AOC 1 is provided as Annexure B to this Directors'' Report. The statement also provides the details of performance, financial positon of each of the subsidiaries.
a) Nucleus Sofware Solutons Pte. Ltd.
Nucleus Sofware Solutons Pte. Ltd. (NSS) is based in Singapore. It was incorporated in 1994 to expand the Company''s business in South East Asia. Currently, it is the central entty for Asia- Pacifc excluding Japan and Australia with responsibility for business development, sales and delivery for customers in the region.
b) Nucleus Sofware Inc.
Nucleus Sofware Inc. (NSI) is based in New Jersey, USA. It was incorporated in 1997 for providing business presence in the Americas. NSI operates as a business development and sales hub for the region.
c) Nucleus Sofware Japan Kabushiki Kaisha
Nucleus Sofware Japan Kabushiki Kaisha (NSJKK) is based in Tokyo, Japan. It was incorporated in 2001 to expand business in the country. NSJKK operates as a business development and sales hub for Japan.
d) VirStra i- Technology Services Ltd.
VirStra i- Technology Services Ltd. is based in Pune, India. It was incorporated in 2004 to provide sofware development services, targeted at the Japanese market..
e) Nucleus Sofware Netherlands BV
Nucleus Sofware Netherlands BV (NSBV) is based in Amsterdam, The Netherlands. It was incorporated in 2006 for enlarging business presence in the European market. NSBV is a business development and sales hub for Nucleus in Europe.
f) Nucleus Sofware Ltd.
Nucleus Sofware Ltd. (NSL) has Operations in Jaipur with registered ofce in New Delhi. It was incorporated in 2008 for facilitatng delivery to larger clients through Operations in a Special Economic Zone. NSL acquired 17.41 acre of land in the Mahindra World Special Economic Zone, Jaipur and, in the frst phase, has co-developed a 250-seater facility.
g) Nucleus Sofware Australia Pty. Ltd.
Nucleus Sofware Australia Pty. Ltd. (NSA) is based in Sydney, Australia. It was incorporated in 2014 for tapping the growing business opportunites in ANZ region. NSA operates as a business development and sales hub for the region.
Your Company along with its subsidiaries has ofces at several locatons across the globe. The ofce space and seatng capacity of these ofces as on March 31, 2015 is detailed below:
Office Locaton Area in Sq. ft. Seatng Capacity - No. of Persons
Noida 208,122 1,677
Jaipur 22,312 250
Pune 9,573 120
Chennai 4,500 48
New Delhi 4,200 40
Mumbai 3,250 31
Singapore 4,807 61
Dubai, UAE 1,290 17
New Jersey, USA 1,250 15
Tokyo, Japan 735 15
Amsterdam, Netherlands 561 15
London, UK 240 4
Manila, Philippines 194 5
Jakarta, Indonesia 99 3
NOIDA, New Delhi and Jaipur premises are owned by the Company and its subsidiaries.
17. QUALITY PROCESSES
Your Company is commited to ensure the highest level of quality for its products and services. In its journey towards excellence in delivery, "Project Governance" has been selected as its quality theme. Process improvement initatves were centered on ''Process Standardizaton'' and ''Strong Project Governance'' to bring predictability, repeatability and reproducibility. FinnEdge (Standard Implementaton Methodology) has been introduced covering 360 degree of the project governance which included processes, people and product. FinnEdge covers various aspects of the project from ''Value Creation to Value Realizaton'' and from ''Project Discovery'' to ''Project Implementaton'' to ''Project Upgrade''.
A dedicated Quality Assurance team handles the process change management, implementaton and it''s adherence across the organizaton. Quality assurance team monitors quality and productvity improvements through regular metrics analysis and dashboard reportng.
18. BRAND VISIBILITY
In FY 2015, your Company continued to grow its marketng Operations and actvites in support of the strategic aspiratons of the Company.
The year was one of considerable change for the Company as it structured itself for growth into new markets around the world. This brings new challenges and opportunites from a marketng viewpoint, with the need to grow brand awareness and demand generaton on a global scale. Your Company is investng in the marketng Operations in order to achieve both, with focus on growing brand awareness for the longer term as well as building demand and generatng leads for the sales pipeline. The objectves of the Nucleus marketng team are to:
- Ensure that your Company is known to all its target market as a provider of high quality, innovatve lending and transacton banking solutons.
- Establish the Company as a thought leader in the space, whose experts understand the world of banking and finance, the global trends and challenges that are emerging and how technology can be applied to deliver success.
- Equip the sales teams with the materials and tools needed to be successful.
Direct Customer Interactions
Your Company continued to partcipate in key Industry events like SIBOS in Boston, Financial Informaton Technology 2014 in Tokyo and the 4th Annual Middle East Banking Innovaton Summit 2014 in Dubai to help grow awareness of the brand and to meet and interact with executves from the industry and generate opportunites for the Company.
Events involving meetngs of small groups of industry executves were organised to discuss partcular topics or view our solutons and understand how we work with other customers like themselves. These took place in Germany, Indonesia and Philippines.
Digital Presence & Visibility
Your Company continued to build presence on social media channels as well as in more traditonal press, using a mix of in house and external skills. Social channels ofer a powerful way of highlightng our brand and communicatng our successes, so focus contnues to be applied here. In parallel media actvites contnue with increased Interactions with press including television approaching us for interviews around financial results.
A major focus during the year was creatng and launching a new website of the Company, which is now up and running. This features a new, up-to-date look and feel and supports mobile devices, which is increasingly important as more web browsing takes place on mobile phones and tablets. The website is now modern and fresh and works wherever the user wants.
Newsleters, emailers, case studies and various other digital marketng collaterals contnue to be created to ensure the brand image is portrayed consistently and with impact. Digital marketng is an area of increased focus as we go forward.
19. HUMAN RESOURCE MANAGEMENT
Your Company''s focus has been to create a world class experience for associates in a ''high performance culture''. We are determined to accelerate our growth story by corresponding to the changing needs of our diverse workgroup and constant building of unique people capabilites.
The global employee strength of the Company, at the end of FY 2015, was 1512.
While we serve as a steward for excellence and leadership through organizatonal effectiveness & recruitment, retenton, and enrichment, the organizaton witnessed launch of organizaton-wide HR initatves:
- Creation of a diverse & inclusive work environment through functonal leadership and advice, by investments in newer markets to ensure global presence
- 2015 Recruitment drive for Leadership and Talent Pipeline building:
- Talent hiring across all geographies at Leadership, Lateral & Entry levels
- Management Trainee & Sofware Engineer Trainee Programs (from premiere Indian B-schools/Engineering insttutes) for inductng fresh talent from the campuses
- 100 days of Innovaton campaign, doted with events like technology coding contests, webinars, Community Service initatves & events/celebratons which were centered around our ''Core Values''
- Strengthening capability through trainings/workshops/ career dialogues on Project Management, Sales Huntng Orientaton, Technology and Product under Functonal category and YLP (Young Leaders'' Program) and LEAD (Leadership @ Engagement, Acton and Development) under Leadership and Professional areas
- Talent development by expansion of web-based learning (MOOCs) to self-paced learning (E-Learning Cafe) in conjuncton with the Nucleus Career Growth Model (NCGM) to enable people to learn, perform and grow
- Creation of the One HR/Centralized Communicatons unit to refect professionalism & ensure that our programs and services are well communicated.
- Catalyze human assets to deliver efficient results by driving Pay for Performance culture and improving overall operational efciencies Going forward, your Company''s focus lies on creatng an enviable workplace culture, facilitated by revised HR policies/ processes framework, which is responsive to organizaton needs & at the same tme consistent with industry best practces. The integraton of goal-based high-performance culture with a clear career development plan for each employee is targeted to increase the learning curve substantally. Along with our commitment to future leadership development, Succession Planning is also an area of focus to help identfy and develop competencies through interventons to build capability and staying abreast with changing technology.
We plan to align HR operational initatves with Nucleus Sofware''s Strategic Plans to leverage and develop our people and technology through innovaton and collaboratve partnerships to provide unmatched value propositon and exceptonal quality of services to all.
20. CORPORATE GOVERNANCE
We, at Nucleus, believe that good and effective Corporate Governance is critcal to achieve corporate vision and mission of the organizaton; it is more of an organizatonal culture than a mere adherence to rules and regulatons. Law alone cannot bring changes and transformation, and voluntary compliance both in form and in substance plays an important role in developing good Corporate Governance.
Your Company has established and maintained a strong ethical environment, overseen by a fercely independent Board of Directors, where 5 out of 7 Directors are independent. The Company practces and policies refect true spirit of Corporate Governance initatves. Your Company is in compliance of all mandatory requirements of Corporate Governance as stpulated as per the Clause 49 of the Listng Agreement with the stock exchanges. Compliance status is provided in the Corporate Governance secton of the Annual Report. A certfcate issued by the Statutory Auditors of the Company confirming compliance of the conditons of Corporate Governance stpulated in Clause 49 of the Listng Agreement with the stock exchanges, is provided as Annexure C to this Directors'' Report.
A detailed report on Corporate Governance for the year forms part of this Annual Report.
21. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)
In accordance with the provisions of the Companies Act 2013 and the Artcles of Associaton of the Company, Mr. Vishnu R Dusad, Managing Director and CEO of the Company, retres by rotaton at the ensuing Annual General Meetng and being eligible has ofered himself for re-appointment.
Mr. Janki Ballabh, Mr. Prithvi Haldea, Prof. Trilochan Sastry and Mr. N Subramaniam were existng Independent Directors. During the year, in order to comply with provisions of Companies Act 2013, all of them were appointed as Independent Directors by the shareholders as per the Companies Act, 2013, not liable to retre by rotaton, to hold ofce for fve consecutve years.
The Companies Act 2013, Rules made thereunder and Listng Agreement with the Stock Exchanges (including amendments) provide for appointment of Woman Director for prescribed Companies. In compliance with these provisions, the Board of Directors on the recommendaton of Nominaton and Remuneraton Commitee, appointed Mrs. Elaine Mathias as a Woman Director (Additonal Independent Director) of the Company on September 20, 2014. Mrs. Mathias is a highly reputed professional and earlier served as an Executve Director (Finance) in Bharat Electronics Limited, Bangalore. She brings along with her over 34 years of rich experience in finance and corporate management.
During the year, the Board of Directors also appointed Mr. R P Singh as an Additonal Wholetme Director, pursuant to the provisions of Secton 161 of the Companies Act, 2013. Mr. R P Singh has been associated with the Company since incepton and is presently the President and Head Global Product Management. He is a highly respected professional and a part of core management team of the Company.
The shareholders of the Company through postal ballot, approved the appointment of Mrs. Mathias as an Independent Director as per the Companies Act, 2013 for a period of fve years and Mr. Singh as a Whole Time Director liable to retre by rotaton.
Mr. Sanjiv Sarin, Director retred by rotaton at the last Annual General Meetng held on July 8, 2014 under the applicable provisions of the erstwhile Companies Act, 1956 and the Board decided not to fll the vacancy caused due to his retrement.
During the year as per the provisions of Companies Act 2013, Mr. Vishnu R Dusad, CEO and Managing Director, Mr. Pramod K Sanghi, CFO and President Finance and Ms, Poonam Bhasin, AVP (Secretarial) and Company Secretary, were appointed as Key Managerial Persons of the Company. Mr. Sanghi retred from the services of the Company on March 31, 2015.
22. BOARD EVALUATION
The Board, along with the Nominaton and Remuneraton Commitee, developed and adopted the criteria and framework for the evaluaton of each of the Directors and of the Board and its Commitees, as required by the following new laws/ regulatons:
- Clause 49 of the Listng Agreement with the Stock Exchanges requires the Board to monitor and review the Board evaluaton framework.
- The Companies Act 2013 requires a formal annual evaluaton by the Board of its own performance and that of its commitees and individual Directors
- Schedule IV of The Companies Act 2013 requires performance evaluaton of all Independent Directors to be done by the entre Board of Directors, excluding the Director being evaluated.
The evaluaton was then conducted as per the approved process (explained in detail in the Report on Corporate Governance of this Annual report). The Evaluaton Report prepared by the Nominaton and Remuneraton Commitee was then presented and discussed at a Board Meetng and subsequently approved. In additon, the Chairman of the Commitee held one-to-one discussions with the Directors and sought their feed-back on the overall Board effectiveness, Directors, and Commitees of the Board. The Board was satsfed with the performance of each of the Directors and of the Commitees, as was evidenced by high average ratngs, all above 4 on a scale of 5. The Board also recognized that the inducton of 3 new independent Directors and 1 Executve Director on the Board over the last couple of years has indeed brought in qualitatve changes to the Board discussions.
Moreover, pursuant to the provisions of Schedule IV to the Act, the Independent Directors reviewed the performance of the Non- Independent Directors and the Board as a whole, performance of the Chairman of the Board, taking into account the views of all the Directors, quality, quantty and tmeliness of flow of informaton between the Company management and the Board its sufciency for the Board to effectively perform their dutes, and performance of various Commitees of the Board.
The Chairman briefed the Board of Directors on the feedback of the Independent Directors, Non-Executve Directors and Managing Director, on the Board effectiveness, based on the duly flled in Questonnaires and one to one discussions. These were discussed in detail and taken on record. Some of the suggestons emanatng from the discussions included a dedicated Board Meetng for discussion on Strategy and Business Plan, the Company''s Business Plan to be more realistc, along with a sensitvity analysis, improving communicatons with all stakeholders instead of focusing just on shareholders.
23. COMPANY''S POLICY ON DIRECTORS'' APPOTNTMENT AND REMUNERATION
During the year, Charter of the Nominaton and Remuneraton Commitee (NRC), a Commitee of the Board, was further revised in accordance with requirements of newly enacted Companies Act, 2013 and revised Clause 49 of the listng agreement with Stock Exchanges. Primary responsibility of the Commitee is to identfy and nominate suitable candidates for Board membership and as members of senior Management of the Company. The Commitee also formulated policies relatng to the remuneraton of Directors, Key Managerial Personnel and other employees of the Company.
The Commitee, while evaluatng potential candidates for Board membership, considers a variety of personal atributes, including experience, intellect, foresight, judgment and transparency, and match these with the requirements set out by the Board. The basic responsibilites of NRC with regard to Directors'' appointment, are as follows:
- Recommending desirable changes in Board size, compositon, Commitee structure and processes, and other aspects of the Board''s functoning;
- Formulatng criteria for determining qualifcatons, positve atributes and Independence of a Director
- Conductng search and recommending new Board members in light of resignaton of current members or a planned expansion of the Board;
- Identfying persons who are qualifed to become Directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the Board their appointment and removal.
The policy of the Company for selecton of Directors is provided as Annexure D and Remuneraton Policy for Directors, Key Managerial Personnel and other employees is provided as Annexure E to this Directors'' Report.
24. DECLARATION BY INDEPENDENT DIRECTORS
The Company has received declaratons from all the Independent Directors that they meet the criteria of independence as laid down under Secton 149(6) of the Companies Act, 2013 and Clause 49 of the Listng Agreement with the stock exchanges.
25. FAMILIARISATION PROGRAMME For INDEPENDENT DIRECTOR''S
The details of programmes for familiarisaton of Independent Directors with the Company, their roles, rights, responsibilites in the Company, nature of the industry in which the Company operates, business model of the Company and related maters can be accessed on the Company website link : htp://www. nucleussofware.com/investors .
26. MEETINGS OF THE BOARD OF DIRECTORS
The Board met eight tmes during the year and details are providing in the Report on Corporate Governance, a part of this Annual Report.
27. COMMITTEES OF THE BOARD
There are currently six Commitees of the Board, as follows:
- Audit Commitee
- Compensaton Commitee
- Corporate Governance Commitee
- Nominaton and Remuneraton Commitee
- Stakeholder Relatonship Commitee
- Corporate Social Responsibility Commitee
Details of all the Commitees along with their charters, compositon and meetngs held during the year, is provided in the Report on Corporate Governance, a part of this Annual Report.
The Compositon of Board commitees as on March 31, 2015 is as follows:
Memberships across Board Commitees Audit Corporate Nominaton & Commitee Governance Remuneraton Commitee Commitee
Mr. Janki Ballabh - -
Mr. Vishnu R Dusad - -
Mr. Prithvi Haldea - - -
Mrs. Elaine Mathias - - -
Prof. Trilochan Sastry - - -
Mr. R P Singh
Mr. N. Subramaniam - -
Compensaton Stakeholder Corporate Social Commitee Relatonship Responsibility Commitee Commitee
Mr. Janki Ballabh - - -
Mr. Vishnu R Dusad - - -
Mr. Prithvi Haldea - - -
Mrs. Elaine Mathias - - -
Prof. Trilochan Sastry - - -
Mr. R P Singh - - -
Mr. N. Subramaniam - - -
28. VIGIL MECHANISM
The Company has a well established whistle blower policy as part of vigil mechanism for Directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violaton of the Company''s Code of conduct or ethics policy. This mechanism also provides for adequate safeguards against victmizaton of Director(s)/employee(s) who avail of the mechanism and also provides for direct access to the Chairman of the Audit Commitee in exceptonal cases.
29. SIGNIFICANT AND MATERIAL ORDERS
No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s Operations in future.
30. RISK MANAGEMENT POLICY
The Company has developed and implemented a ''Risk Management Policy'' that includes Identfication of elements of risk, which in the opinion of the Board may threaten the existence of the Company. Risk Management Report forms a part of this Annual Report.
31. ADDITIONAL INFORMATION TO SHAREHOLDERS
Detailed informaton to the shareholders is provided in the Shareholders'' Referencer, a part of this Annual Report.
Statutory Auditors of the Company, Deloite Haskins & Sells, Chartered Accountants, retre at the conclusion of the ensuing Annual General Meetng and are eligible for re-appointment. In accordance with the Companies Act 2013 and the Companies (Audit and Auditors) Rules, 2014, the Audit Commitee post considering the qualifcatons and experience of Deloite Haskins & Sell, Chartered Accountants, recommended their reappointment to the Board. The Board further recommends their appointment as Statutory Auditors of the Company to hold ofce from the conclusion of this meetng untl the conclusion of next Annual General Meetng of the Company, to the shareholders'' for approval in the ensuing AGM.
Deloite Haskins & Sells, Chartered Accountants have furnished a certfcate of their eligibility as per Secton 141 of the Companies Act, 2013 and have provided their consent for appointment as Statutory Auditors of the Company for FY 15- 16. As per the relevant provisions of Listng Agreement, your Company has ensured that the Auditors of your Company are subjected to the peer review process of Insttute of Chartered Accountants of India (ICAI) and hold a valid certfcate issued by the Peer Review Board of the ICAI. Deloite Haskins & Sells, Chartered Accountants, have confrmed their compliance with the relevant provision.
The Notes on financial statement referred to in the Auditors'' Report are self-explanatory and do not call for any further comments. The Auditors'' Report does not contain any qualifcaton, reservaton or adverse remark.
As per the Companies Act 2013, Secretarial Audit by a practcing Company Secretary has become mandatory for prescribed companies, and they are required to annex the Secretarial Audit report with their Board Report in the Annual Report. We are pleased to inform that your Company, as a voluntary practce, has been getng Secretarial Audit done for the past several years, and also reportng it in the Annual Report.
Pursuant to the provisions of Secton 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneraton of Managerial Personnel) Rules, 2014, the Board appointed, Sanjay Grover & Associates, Practsing Company Secretaries to undertake the Secretarial Audit of the Company. Secretarial Audit Report in the prescribed Form MR 3, is provided as Annexure F to this Directors'' Report. The Secretarial Auditors'' Report does not contain any qualifcaton, reservaton or adverse remark.
The Company voluntarily adhers to the various Secretarial Standards issue by the Insttute of Companies Secretaries of India.
33. INTERNAL FINANCIAL CONTROLS
Your Company has in place adequate internal financial controls with reference to the financial statements. During the year, in order to further strengthen the internal financial controls, a renowned professional consultant frm was hired to conduct an assessment of the existent internal financial controls and advise on best practces for adopton.
34. CORPORATE SOCIAL RESPONSIBILITY (CSR)
Inclusive growth and sustainable development are strong pillars of your Company''s responsible corporate citzenship and are a part of the core values and driving force for many of its initatves. The Company believes that responsible investments in this regard will generate long term value for all the stakeholders.
In accordance with requirements of The Companies Act 2013, the Company has a Corporate Social Responsibility Commitee comprising of a majority of Independent Directors and chaired by an Independent Director. Prof. Trilochan Sastry is the Chairman of the Commitee and Mr. Vishnu R Dusad and Mr. Prithvi Haldea are the other members. The Commitee framed and recommended a CSR Policy to the Board for adopton and insttuted a transparent monitoring mechanism for ensuring implementaton of the projects / actvites to be undertaken by the Company.
The CSR Policy may be accessed on the Company website link: htp://www.nucleussofware.com/investors. The objectve of CSR Policy of your Company is to support the guiding principle of Together We Grow". Through the CSR initatves, your Company strives to provide equitable opportunites for sustainable growth. Your Company would engage in actvites whereby business further contributes to make a positve and distnguishing impact on the environment, customers, employees and other stakeholders. The objectve of CSR will be achieved through concentrated and dedicated initatves encompassing the identfed core areas of Educaton, Health & Medical Care, Community at large and Environment. Your Company is conscious of its dutes towards the community and our planet and the coming years shall witness your Company in several CSR areas.
Your Company has set up Nucleus Sofware Foundaton, a Trust for the purposes of undertaking CSR actvites of the Company. During the year, the Company spent Rs. 0.71 crore on CSR actvites, out of the total amount mandated as per law. Your Company was in the process of further identfying worthwhile avenues for CSR expenditure during the year and in its absence, there was a shortall of Rs. 0.48 crore in the expenditure done on CSR actvites with regard to the amount mandated as per law. The Annual Report on CSR actvites is provided as Annexure G to this Directors'' Report. The Company is commited to CSR and shall strive to at least spend the amount as provided in law.
35. EMPLOYEE STOCK OPTION PLAN (ESOP)
Your Company launched ESOP 2015 during the year. Currently there are three ESOP schemes prevalent in the Company; ESOP scheme - 2005 (insttuted in 2005), ESOP scheme - 2006 (insttuted in 2006) and ESOP Scheme - 2015 (insttuted in 2015). These schemes were duly approved by the Board of Directors and shareholders. ESOP 2005 scheme provides for 600,000 options, 2006 scheme provides for 1,000,000 options and 2015 scheme provides for 500,000 options to eligible employees. As per ESOP scheme 2015, equity shares would be transferred to eligible employees on exercise of options through Nucleus Sofware Employee Welfare Trust, established during the year, to carry out actvites for the benefit and welfare of its Employees by launching various Schemes in accordance with the Securites and Exchange Board of India (Share Based Employee benefits) Regulatons, 2014.
Details of ESOP as per the provisions of Companies Act, 2013 and Rules made there under are as follows:
Particulars 2005 Plan 2006 Plan 2015 Plan
a) Total number of options under the Plan 600,000 1,000,000 500,000
(b) Pricing formula 100% of the 100% of the 100% of the Fair Market Fair Market Fair Market Price as on Price as on Price as on date of grant date of grant date of grant
(c) options granted during the year - - -
(d) options vested as of March 31, 2015 - - -
(e) (i) options exercised during the year - - -
(ii) Total number of shares arising as a result of exercise of - - - above options during the year
(f) options forfeited during the year - - -
(g) Opton lapsed during the year - - -
(h) Variaton of terms of options during the year - - -
(i) Amount realized by exercise of options during the year - - -
(j) Total number of options in force as on March 31, 2015 - - -
During the year, no stock options were granted to any employee under the above-mentoned ESOP plans and therefore no calculatons are required to be made or reported regarding diference between intrinsic value and fair market value of ESOPs granted.
36. PARTICULARS OF EMPLOYEES
In terms of the provisions of Secton 197 (12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneraton of Managerial Personnel) Rules, 2014, a statement showing the names and other Particulars of the employees drawing remuneraton in excess of the limits set out in the said rules are provided in the Annual Report.
Disclosures pertaining to remuneraton and other details as required under Secton 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneraton of Managerial Personnel ) Rules, 2014 are provided in the Annual Report.
Having regard to the provisions of the frst proviso to Secton 136(1) of the Companies Act, 2013 and as advised, the Annual Report excluding the aforesaid informaton is being sent to the members of the Company. The said informaton is available for inspecton at the registered ofce of the Company during working hours and any member interested in obtaining such informaton may write to the Company Secretary and the same will be furnished on request. The full Annual Report including the aforesaid informaton is available on the Company''s website.
37. DIRECTOR''S RESPONSIBILITY STATEMENT
Pursuant to as per Sec 134 (5) of the Companies Act, 2013, the Directors confrm that:
(a) in the preparaton of the annual accounts for the financial year ended March 31, 2015 , the applicable Accounting standards had been followed along with proper explanaton relatng to material departures;
(b) the Directors had selected such Accounting policies and applied them consistently and made judgments and estmates that are reasonable and prudent so as to give a true and fair view of the state of afairs 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 the Companies Act, 2013, for safeguarding the assets of the Company and for preventng and detectng fraud and other irregularites;
(d) the Directors had prepared the annual accounts on a going concern basis;
(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 operatng effectively; and
(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operatng effectively.
38. EXTRACT OF ANNUAL RETURN
Extract of Annual Return of the Company in the prescribed Form MGT-9, is provided as Annexure H to this Directors'' Report.
Your Directors would like to place on record their grattude for the co-operaton received from the Government of India, State Governments of Delhi, Utar Pradesh and Rajasthan, Customs and Excise Departments, Sofware Technology Park-Noida, Sofware Technology Park-Chennai, Sofware Technology Park- Pune, Special Economic Zone authorites and other government agencies.
Your Directors would also like to thank customers, bankers, vendors, partners and shareholders for their continued support to the Company. In specific, the Board would like to put on record its sincere appreciaton of the commitment and contributon made by all employees of the Company.
For and on behalf of the Board of Directors
Noida Janki Ballabh May 7, 2015 Chairman
Mar 31, 2013
The have pleasure in presenting your Company''s Twenty Fourth Annual Report, together with the Audited Statement of Accounts, for the year ended March 31, 2013.
1. RESULTS OF OPERATIONS - FINANCIAL RESULTS
Financial statements of the Company are prepared in compliance with the Companies Act, 1956 and Generally Accepted Accounting Principles (GAAP) in India and mandatory accounting standards issued by the Institute of Chartered Accountants of India ("ICAI"). The Company has six subsidiary companies, all of which are wholly-owned subsidiaries. The Company discloses stand-alone audited financial results on a quarterly and an annual basis, consolidated un-audited financial results on a quarterly basis and consolidated audited financial results on an annual basis.
a) Consolidated operations
Consolidated financial statements of your Company and its subsidiaries as on March 31, 2013 are prepared in accordance with the Accounting Standard 21 (AS -21) on ''Consolidated Financial Statements'' issued by the Institute of Chartered Accountants of India, and form part of this Annual Report. These Group accounts have been prepared on the basis of audited financial statements of Subsidiaries.
Your Company''s revenue from operations for the year was Rs. 293.76 crore, 4% higher than Rs. 282.25 crore in the previous year. Overall operational expense for the year remained under control at Rs. 247.86 crore, against Rs. 246.70 crore in the previous year. As a result, Operating Profit (EBITDA) at Rs. 45.90 crore, 16% of revenue, was higher by Rs. 10.35 crore over Rs. 35.55 crore, 13% of revenue, in the previous year.
Profit after Tax for the year was at Rs. 45.17 crore, 15% of revenue, higher by 28% over Rs. 35.34 crore, 13% of revenue, in the previous year.
(Rs. in crore)
The consolidated financial results are as below:
For the Year Ended March 31, 2013 % of revenue 2012 % of revenue
income from operations 293.76 100.00 282.25 100.00
a) Employee benefit expense 163.41 55.63 157.08 55.65
b) Travel expenditure 20.20 6.88 19.54 6.92
c) Finance costs (Bank Charges) 0.44 0.15 0.33 0.12
d) Other expenses 63.81 21.72 69.75 24.71
total Expenses 247.86 84.38 246.70 87.40
operating Profit (EBITDA) 45.90 15.63 35.55 12.60
Depreciation 6.09 2.07 7.45 2.64
operating Profit after Interest and Depreciation 39.81 13.55 28.10 9.96
Other Income 17.28 5.88 16.87 5.98
Foreign Exchange Gain/(Loss) 2.97 1.01 3.34 1.18
Profit Before tax 60.06 20.45 48.31 17.12
- Withholding Taxes 0.63 0.21 0.92 0.32
- Current Tax (Net of MAT credit entitlement) 14.66 4.99 11.45 4.06
- Other taxes (0.40) (0.14) 0.59 0.21
Profit After tax 45.17 15.38 35.34 12.52
b) Standalone operations
The total revenue from the standalone operations of your Company for the year was Rs. 202.28 crore against Rs. 204.85 crore in the previous year. Total operational expense for the year was at Rs.171. 62 crore against Rs. 177.89 crore in the previous year, a decrease of 4%. Operating Profit (EBITDA) was at Rs. 30.66 crore, 15% of revenue, against Rs. 26.96 crore, 13% of revenue, in the previous year.
Profit after Tax for the year was at Rs. 37.09 crore, 18% of revenue, against Rs. 32.64 crore, 16% of revenue, after considering dividend receipt of Rs. 3 crore from one of the subsidiaries of the Company (Rs. 3.60 crore in the previous year).
Standalone financial results are as below:
(Rs. in crore)
For the Year Ended March 31, 2013 % of revenue 2012 % of revenue
Revenue from operations 202.28 100.00 204.85 100.00
a) Employee benefit expense 117.58 58.13 115.52 56.39
b) Travel expense 16.08 7.95 16.74 8.17
c) Finance costs (Bank Charges) 0.30 0.15 0.22 0.11
d) Other expenses 37.66 18.16 45.41 22.17
Total Expense 171.62 84.84 177.89 86.84
operating Profit (EBITDA) 30.66 15.16 26.96 13.16
Depreciation 4.97 2.46 6.10 2.98
operating Profit after Interest and Depreciation 25.69 12.70 20.86 10.18
Other Income 19.80 9.79 19.48 9.51
Foreign Exchange Gain/ (Loss) 4.19 2.07 3.52 1.72
Profit Before tax 49.68 24.56 43.86 21.41
- Withholding taxes - - 0.89 0.43
- Current Tax (Net of MAT credit entitlement) 12.79 6.32 9.58 4.68
- Other taxes (0.20) (0.10) 0.75 0.37
Profit After tax 37.09 18.34 32.64 15.93
A detailed analysis on the Company''s performance, both consolidated and standalone, is included in the "Management''s Discussion and Analysis" Report, which forms part of this Annual Report.
The Dividend Policy of your Company mandates a dividend payout in the range of l5%-30% of the profits available for distribution, subject to:
a) Provisions of The Companies Act, 1956 and other applicable laws, and
b) Cash flows of the Company
In accordance with the above Policy, we are pleased to state that for the 13th consecutive year, your Company is recommending a dividend, and this year of 30% (Rs. 3.00 per equity share of Rs.10 each), compared to 25 % (Rs. 2.50 per equity share of Rs. 10 each) in the previous year. It is subject to the approval of the shareholders at the forthcoming Annual General Meeting. If approved, the total dividend payout will be Rs. 9.72 crore, being 26% of standalone profits for the year against a payout of Rs. 8.10 crore, 25% of standalone profits in the previous year.
The Register of Members and Share Transfer Register shall remain closed during the period July 02-10, 2013 (both days inclusive) for the purpose of the Annual General Meeting and for payment of dividend. The dividend, if approved at the Annual General Meeting, will be payable to Members whose names appear on the Register of Members of the Company on July 02, 2013, being the first day of Book-Closure and to those whose names appear as beneficial owner in the records of National Securities Depositories Ltd. and Central Depository Services (India) Ltd. on close of business as on July 01, 2013.
3. TRANSFER TO RESERVES
Ybur Company proposes to transfer Rs. 3.71 crore to the General Reserve out of the amount available for appropriation.
4. TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to the provisions of Section 205 A (5) of the Companies Act, 1956, your Company has transferred the following unpaid / unclaimed dividends relating to the following years to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205 C of the said Act.
Dividend for the Year Unpaid Dividend
2000-2001 - Interim Dividend Rs. 28,762
2000-2001 - Final Dividend Rs. 74,339
2001-2002 - 1st Interim Dividend Rs. 58,921
2001-2002 - 2nd Interim Dividend Rs. 50,979
2002-2003 - Final Dividend Rs. 50,142
2003-2004 - Final Dividend Rs. 131,363
2004-2005 - Final Dividend Rs. 188,007
5. SHARE CAPITAL
- Issue of Shares under Employees Stock option Plans
During the year ended March 31, 2013, the Company allotted 180 equity shares to employees upon exercise of stock options under Employee Stock Option Plan 2005.
- issued and Paid-up Share Capital
The paid-up share capital of the Company, as on March 31, 2013, is 32,383,634 equity shares of Rs.10 each as against 32,383,454 equity shares of Rs.10 each as on March 31, 2012.
- Shares under compulsory dematerialization
Shares ofthe Company are under compulsory dematerialization ("Demat") category and are available for trading on both the depositories in India viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Of the entire paid up shares, 32,008,668 shares, or 98.84% are in dematerialized form as at March 31, 2013.
The International Securities Identification Number (ISIN) allotted to the Company''s shares is INE096B01018.
Your Company is listed at National Stock Exchange of India Ltd. and the BSE Ltd.
Stock Exchange where Scrip Symbol / Nucleus shares are listed Code
National Stock Exchange of India Ltd. (NSE) NUCLEUS w.e.f. December 19, 2002
BSE Ltd. (BSE) w.e.f. November 6, 1995 531209
7. REVIEW OF BUSINESS & OUTLOOK
We take great pride in being one of the few ''Made In India'' Software Product companies. We operate in the Banking and Financial Services domain with banks and non-banking financial institutions as our primary customers. Our products are largely in the area of origination and management of "Retail Loans" and the management of corporate liquidity by banks.
Slow economic growth continued across globe in the FY 13. Fiscal cliff in the US, sovereign debt problems in Europe and slow down in the BRICS economies contributed to slowdown in investments by corporates and banks, leading to an adverse impact on the Information Technology industry.
Your Company has been closely working with its current customers to maintain and improve the functionality of its software products which are working successfully in 50 countries across more than 150 installations. Simultaneously, as technology changes and innovation are required to provide faster access and processing on a scalable basis, your Company, during the year, focused on building teams for the future, setting the base for new product launches and thereby also increasing its market share. Overall, the past year was a year of consolidation as revenue and profitability reflect. We believe that with strong R & D and sales and marketing teams in place, we are now poised to realize the full potential of our products and brand in the global market with addition of several new customers.
A combination of economic growth, new emerging markets, cloud computing, and increasing demand from small and medium enterprises are anticipated to boost growth. We hope that with our customer-centric strategy, we would remain a partner of choice for all our present customers and be able to source many more customers.
8. BIRTH OF ISPIRIT
In the recent years, there has been an upsurge in start-up software product companies in India. This essentially can be termed as beginning of a new era, with enough potential to re-invent the whole Indian software industry, which till now has been dominated by the IT services companies. Emergence of globally recognized Indian product companies will represent the final step in the software value chain. If India can become the hub of the world''s most successful IT services as well as product companies, it can truly lay claim to being a knowledge superpower. To make this possible and transform India into a hub for new generation software products, it is crucial to address government policy, create market catalysts and fuel the maturity of product entrepreneurs. With this context in mind, about 30 software product companies and individuals have come together recently to form iSpirit - the Indian Software Product Industry Roundtable. We are delighted to inform you that Mr. Vishnu R Dusad, MD & CEO of your Company, is a founder member of this revolutionary initiative. Your Company hopes to contribute immensely to this new endeavour and hopes to benefit the country and itself in times to come.
9. LIQUIDITY AND CASH EQUIVALENTS
Your Company continues to retain its status of a debt-free Company and maintains sufficient cash and cash equivalents to meet its futuristic strategic initiatives. The Company has been conservative in its investment policy over the years, maintaining a reasonably high level of cash and cash equivalents which enable the Company to completely eliminate short and medium term liquidity risks. The goal of cash management at Nucleus is to:
a. Use cash to provide sufficient working capital to manage business operations of the Company to be able to add value to all our stakeholders and continuously enhance the same.
b. Maintain sufficient cash as reserves that will aid the Company in capturing meaningful business opportunities.
c. Invest surplus funds in low-risk bank deposits, debt schemes of mutual fund and tax free secured, redeemable, non- convertible Bonds of Public Sector Enterprises.
Cash and cash equivalents at a consolidated level constitute 58% of the total assets at Rs. 266.72 crore, at the year end, against Rs. 196.16 crore, 48% of total assets at the close of the previous year.
As on March 31, 2013 Rs. 92.03 crore was placed in bank fixed deposits (all in India), Rs. 144.74 crore invested in liquid schemes and fixed maturity plans of mutual funds and Rs.10 crore in tax free secured, redeemable, non- convertible Bonds of Public Sector Enterprises. The mix between fixed deposits, liquid schemes, fixed maturity plans and tax free bonds is a function of the desired liquidity and returns.
10. NOTABLE ACCOLADES RECEIVED DURING THE YEAR
- FinnOneÂ has been ranked as the Global No. 1 Lending Software solution for the fifth consecutive year by IBS Publishing, UK in their Sales League Table 2013 for Banking Product Sales.
- Annual Report and Accounts of the Company for the year ended March 31, 2012 was adjudged as the BEsT under the Category X - Service Sector (Other than financial services sector-turnover less than Rs. 500 crore) of the ''ICAI Awards for Excellence in Financial reporting''. A GOLD SHIELD was awarded to the Company for the fifth consecutive year.
- NASSCOM Corporate Award for Excellence in Diversity and Inclusion 2013 for the category Best It services & Product Company - Special recognition (less than 5000 employees)
- ''Best online Annual Report'' globally in the technology sector & the Best in ''Most Improved Financial Disclosure Procedures'' in the regional rankings for India for the year 2012 by IR Global Rankings (IRGR).
- Annual Report for the year ended March 31, 2012 won the Platinum Award for excellence within the Technology- Software industry and ranked 22nd amongst the Top 100 Annual Reports in the Vision Awards by the League of American Communications Professionals (LACP), USA.
- Social and Corporate Governance Award 2013 in the category ''Best overall Corporate Governance''
- Titanium Award for Investor Relations, Corporate Governance and Environment Responsibility in the Asset Triple A Corporate Awards 2012.
11. SUBSIDIARY COMPANIES
Your Company has six wholly owned subsidiaries across the globe. It also has a step-down subsidiary located in Singapore. The following table provides a list of all these subsidiaries as on March 31, 2013 :
Name of Subsidiary Location Date of incorporation
Nucleus Software Solutions Pte. Ltd. Singapore February 25, 1994
Nucleus Software Inc. USA August 5, 1997
Nucleus Software Japan Kabushiki Kaisha Japan November 2, 2001
VirStra i- Technology Services Ltd. India May 6, 2004
Nucleus Software Netherlands B.V Netherlands February 3, 2006
Nucleus Software Ltd. India April 21, 2008
Step Down Subsidiary of Nucleus Software Exports Ltd.
VirStra i- Technology (Singapore) Pte. Ltd. Singapore December 17, 2004
There has been no material change in the nature of the business of the subsidiaries. A statement containing brief financial details of the subsidiaries is included in the Annual Report. As required under the Listing Agreements entered into with the Stock Exchanges, a consolidated financial statement of the Company and all its subsidiaries is attached. The consolidated financial statements have been prepared in accordance with the relevant accounting standards as prescribed under Section 2II(3C) of the Act.
As per General Circular No: 2 /20II issued by the Government of India, Ministry of Corporate Affairs, a general exemption was provided to Companies for attaching the Directors'' Report, Balance Sheet and Profit and Loss Account of all subsidiaries to its balance sheet, subject to fulfilling certain conditions as stipulated in the circular. Your Company complies with those conditions and, therefore, has been generally exempted by the Central Government from attaching detailed accounts of the subsidiaries, and accordingly, the financial statements of the subsidiaries are not attached in the Annual Report. For providing information to Shareholders, the annual accounts of these subsidiary Companies along with related information are available for inspection during business hours at the Company''s registered office and at the concerned subsidiary''s offices.
a) Nucleus Software Solutions Pte. Ltd.
Nucleus Software Solutions Pte. Ltd. (NSS) is based in Singapore. It was incorporated in 1994 to expand the Company''s business in South East Asia. Currently, it is the central entity for Asia- Pacific excluding Japan with full responsibility for business development, sales and delivery for customers in the region.
b) Nucleus Software Inc.
Nucleus Software Inc. (NSI) is based in New Jersey, USA. It was incorporated in 1997 for ensuring business presence in the Americas. NSI operates as a business development and sales hub for the region.
c) Nucleus Software Japan Kabushiki Kaisha
Nucleus Software Japan Kabushiki Kaisha (NSJKK) is based in Tokyo, Japan. It was incorporated in 2001 to expand business in the country. NSJKK operates as a business development and sales hub for Japan, which is the single largest market for the Company.
d) VirStra i- Technology Services Ltd.
VirStra i- Technology Services Ltd. is based in Pune, India. It was incorporated in 2004 as a development centre. This subsidiary set up its own subsidiary VirStra I- Technology (Singapore) Pte. Ltd. in Singapore in 2004 to expand its service operations in Singapore.
e) Nucleus Software Netherlands BV
Nucleus Software Netherlands BV (NSBV) is based in Amsterdam, The Netherlands. It was incorporated in 2006 for ensuring business presence in the European market. NSBV is a business development and sales hub for Nucleus in Europe.
f) Nucleus Software Ltd.
Nucleus Software Ltd. (NSL) is based in Jaipur, India with registered office in New Delhi. It was incorporated in 2008 for facilitating delivery to larger clients through operations in a Special Economic Zone. NSL acquired 17.41 acre of land in the Mahindra World Special Economic Zone, Jaipur and, in the first phase, has co-developed a 250-seater facility.
Your Company has offices at several locations across the globe. The office space and seating capacity of these offices as on March 31, 2013 is detailed below:
Office Location Area in Seating Capacity Sq. ft. - No. of Persons
Unit - I 87,423 705
Unit - II 90,265 778
Multi Facility Block 30,434 194
Total 208,122 1,677
Chennai 3,822 48
Singapore 7,141 95
New Delhi 4,200 40
Pune 9,573 120
Mumbai 3,250 36
Dubai 1,290 17
Jaipur 22,312 250
Tokyo, Japan 430 7
Amsterdam, Netherlands 561 7
New Jersey, USA 1250 15
Total 261,951 2,312
NOIDA, New Delhi and Jaipur premises are owned by the Company and subsidiaries.
13. QUALITY PROCESSES
Nucleus is committed to ensure the highest level of quality for its products and services to achieve higher performance leading to "Customer Delight." This year, we focused on continuous process improvements by incremental advancements in the existing processes and innovations using new tools and methods.
With an objective to increase adherence to secure coding practices, your Company adopted best code review process and automated security code review tools. Review and feedback mechanism was further strengthened by collaborating with customers during project development/reviews which led to faster feedback from customer and improved quality. With prime focus on customer satisfaction, your Company started seeking transactional feedback from customers post key milestones, which led to improved communication with customers. To align with agile methodology and increased visibility of project execution, best project management and defect management tools were adopted.
A dedicated team is also responsible for collecting improvement suggestions from across the organization and incorporating them in the organization standard processes. Existing processes are reviewed for their effectiveness and benchmarked with respect to industry by participating in various reputed industry forums on quality and processes.
14. NUCLEUS BRAND VISIBILITY
Your Company aspires to leverage its domain leadership into a visible, relevant and vibrant brand that connects with key audiences including customers, stakeholders and employees. We believe that it is all about building a history of great experiences and trusted relationships.
We actively represent the brand Nucleus in all 50 countries where we have customers and spend significant time and effort in educating and informing the industry about our products and solutions to help customers make informed choices. Your Company participated in key Industry events (MEFTEC -Dubai, SIBOS -Osaka, IDG Vietnam - Hanoi ) amongst a host of other such events to ensure visibility of your Company''s offerings. In addition, untapped markets in key financial nerve centres like London, Stockholm and Atlanta were also covered with specific events driven through focused branding efforts.
We work to ensure success in individual markets by understanding local requirements and launch programs that cater to these specific markets. Our customers are at the core of all our initiatives and we work closely with various teams to ensure the right impact. During the year, special customer meets were held in markets such as Mumbai, Manila and Dubai to understand how we can help customers deliver increased value to their clients. This was enhanced with targeted media activities in both domestic and overseas regions.
In the coming financial year, a significant boost to leverage the strength of our brands including FinnOneÂ and Cash@WillTM through marketing initiatives is planned. These brand focused visibility programs will be enhanced through diverse channels including print media, online, social media and direct communications. In addition to our marketing programs, we are also planning to host joint outreach programs with our strategic partners in focus geographies such as Africa.
15. HUMAN RESOURCE MANAGEMENT
As we enter a new era of growth and change, there are several areas of product and technology that we are focusing on. Talent is the key to effect this transformation and hence critical focus during the year has been on building capabilities including:
- Continuous workforce enhancement through hiring high quality talent and strengthening our leadership capabilities
- Investing in newer markets
- Investment in developing talent across varied skill sets. Core development quadrants include:
- Leadership and business management capabilities
- Sales force effectiveness
- Banking process and domain expertise
- Delivering process and work level improvements to impact how people learn, perform and engage at the workplace
- Workplace inclusiveness to leverage strengths from diverse backgrounds.
- Nucleus was awarded NASSCOM Corporate Awards for Excellence in Diversity and Inclusion 2013 as a ''Special Recognition'' for the category of Best IT services & product company (less than 5000 employees)
Nucleus has been consistently ranked the global market leader in lending software and we are focused on furthering this unique positioning through our people capabilities.
The global employee strength as at the end of the year stood at 1,503.
16. ADDITIONAL INFORMATION TO SHAREHOLDERS
Detailed information to the shareholders in the form of "Shareholders'' Referencer" is provided later in this report.
17. SECRETARIAL AUDIT
Your Company, as a voluntary practice, has been getting Secretarial audit done for the past several years. This is a process to check compliance with the provisions of various laws and rules/regulations/procedures, maintenance of records etc., by an independent professional firm to ensure that the Company has complied with the statutes and procedural requirements. Ever-increasing complexities of laws and responsibilities of Directors (especially Non-executive Directors) make it even more imperative that an external expert reports on proper compliance mechanism and systems. The audit also points out if there is a need for any corrective measures or improvement.
An assignment for a comprehensive Secretarial Audit for the year 2012 was awarded to a professional Company Secretary firm. It is a matter of pride that the audit confirmed that your Company was generally in compliance with all applicable provisions of the Companies Act, 1956, Depositories Act 1996, Listing Agreements with all the stock exchanges where the Company is listed and all the applicable guidelines, rules and regulations of the Securities & Exchange Board of India (SEBI). The Certificate obtained in this regard is provided as Annexure A to the Report on Corporate Governance. The Secretarial Auditor has made certain recommendations for adopting some more Best Practices, which are now being implemented.
The Institute of Company Secretaries of India (ICSI), one of the premier professional bodies in India, has issued secretarial standards on Board meetings, general meetings, payment of dividend, maintenance of registers and records, minutes of meetings, transmission of shares and debentures, passing of resolution by circulation, affixing of common seal, forfeiture of shares and board''s report. While they are non-mandatory in nature, your Company has complied with all of these.
18. FOREIGN EXCHANGE RISK
Globally, the easy money policies followed consistently by the Federal Reserve and the ECB and the Japanese Central Bank since December 2012, all aimed towards reducing interest rates, have had major consequences on currency exchange rates. The year witnessed extreme volatility with major international currencies at different points of time and required careful monitoring to reduce risk. The Indian Rupee fluctuated from a high of 50.56 to the Dollar in April 2012 to a low of Rs. 57.22 in June 2012 and overall lost 6.68% against the US Dollar on a March-end to March-end comparison. Japanese Yen, in which 11% of your Company''s revenue arises, weakened by over 20% between December 2012 and March 2013 against the US Dollar and as the Indian Rupee traded in a narrow band, the cross was negative for our Yen realisations.
While the weak Rupee has been a national concern, it proved beneficial for export-oriented companies. It is incumbent upon the Management of your Company to follow a prudent policy to hedge the foreign currency risk, without taking speculative positions. Your Company has a conservative approach and does not speculate in foreign currency markets. Forwards are held to maturity and regular reporting and monitoring systems are in place including quarterly updates to the Audit Committee. During the year, the Company followed a well-defined policy of hedging close to receivables through Forward Contracts which are designated as Highly Probable forecast transactions. At the year end, the Company had US$ 10.50 million of hedges compared to US$ 12.00 million at the beginning of the year.
19. FIXED DEPOSITS
Your Company has not accepted any deposits and, as such, no amount of principal or interest was outstanding on the date of the Balance Sheet.
The Statutory Auditors of the Company, Deloitte Haskins & Sells, retire at the conclusion of the ensuing Annual General Meeting, and are eligible for re-appointment. The retiring Auditors have furnished a certificate of their eligibility for re-appointment under section 224 (IB) of the Companies Act, 1956 and have indicated their willingness to continue. The Audit Committee and the Board of Directors recommend the reappointment as Statutory Auditors of Deloitte Haskins & Sells, Chartered Accountants for the financial year 2013-14 for shareholders'' approval. As per the relevant provisions of Listing Agreement, your Company has ensured that the Auditors of your Company are subjected to the peer review process of Institute of Chartered Accountants of India (ICAI) and hold a valid certificate issued by the Peer Review Board of the ICAI. Deloitte Haskins & Sells have confirmed their compliance with the relevant provision.
21. INSIDER TRADING REGULATIONS
Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations, I992, as amended from time to time, the Code of Conduct for the Prevention of Insider Trading and the Code for Corporate Disclosures continue to be in operation at your Company.
Mr. N. Subramaniam and Professor Trilochan Sastry were inducted as Additional Directors on the Board of Directors of the Company with effect from July I I, 2012 and April 27, 2013 respectively. Both Mr. Subramaniam and Professor Sastry are noted experts and bring rich and varied experience to the Board. Their appointment as Non-Executive Independent directors, liable to retire by rotation, will be placed for your approval in the forthcoming Annual General meeting.
In recognition of the proposed policy of Rotation of Directors in the Companies Bill 2012, Mr. Arun Shekhar Aran, an Independent Non-Executive Director of the Company, who served for 18 years on the Board, resigned with effect from April 27, 2013. The Board of Directors considered and accepted his resignation. We place on record our deep sense of appreciation for the immense contribution of Mr. Aran during his tenure as a Board member.
Article 87 of the Articles of Association of the Company provides that at least two-thirds of our Directors shall be subject to retirement by rotation and one third of these retiring Directors must retire from office at each Annual General Meeting of the shareholders. A retiring Director is eligible for re-election. In accordance with the same, Mr. Janki Ballabh and Mr. Prithvi Haldea, Directors of the Company, shall retire at the ensuing Annual General Meeting and both of them being eligible, have offered themselves for re-appointment.
23. COMMITTEES OF THE BOARD
During the year, the Board dissolved its Review Committee, which was constituted for a limited period. There are currently six Committees of the Board, as follows:.
- Audit Committee
- Compensation Committee
- Corporate Governance Committee
- Nomination Committee
- Remuneration Committee
- Share Transfer and Shareholder Grievance Committee
Details of all the Committees along with their charters, composition and meetings held during the year, is provided in the "Report on Corporate Governance", a part of this Annual Report.
24. CORPORATE GOVERNANCE
We, at Nucleus, believe that good and effective Corporate Governance is more of an organizational culture than a mere adherence to rules and regulations. Law alone cannot bring changes and transformation, and voluntary compliance both in form and in substance plays an important role in developing good Corporate Governance.
Your Company is in compliance of all mandatory requirements of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the stock exchanges. For the year ended March 3I, 20I3, the compliance status is provided in the Corporate Governance section of the Annual Report. A certificate issued by the Statutory Auditors of the Company confirming compliance of the conditions of Corporate Governance stipulated in Clause 49 of the Listing Agreement with the stock exchanges forms part of this Directors'' Report as Annexure C.
25. MANAGEMENT DISCUSSION & ANALYSIS
Management Discussion and Analysis of the financial condition and results of both standalone and consolidated operations have been provided separately in this Annual Report.
26. CORPORATE SOCIAL RESPONSIBILITY (CSR)
Inclusive growth and sustainable development are strong pillars of your Company''s responsible corporate citizenship and are a part of the core values and driving force for many of its initiatives. The Company believes that responsible investments in this regard will generate long term value for all the stakeholders.
The proposed Companies Bill, 2012 has certain provisions to encourage corporates to undertake CSR activities. We, at Nucleus, have mapped our status with the requirements of this Bill and have highlighted the areas of improvement. Your Company is conscious of its duties towards our community and our planet and the coming years shall witness your Company in several CSR areas.
27. EMPLOYEE STOCK OPTION PLAN
In accordance with Employee Stock Option scheme and Employee Stock purchase Scheme Guidelines, l999, issued by SEBI, the excess of the market price of the underlying equity shares as of the date of the grant over the exercise price of the option including up-front payments if any, is to be recognized and amortized on a straight-line basis over the vesting period. We have Employee Stock Option Plan 2005 and Employee Stock Option Plan 2006 where the options are granted to the employees at an exercise price equal to fair market price as on date of grant.
Accordingly, we have calculated the compensation cost arising on account of stock option granted using the intrinsic value method. Hence, the disclosure in terms of Clause 12.1 (n) of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guideline, 1999, is not applicable. For fiscal 2013 there was no stock compensation cost, no stock options were granted. Hence, the weighted average fair values of grant during the year is nil.
28. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars as prescribed under subsection (I)(e) of Section 2I7 of the Companies act, I956, read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988, are set out in Annexure A which forms part of this Report.
29. DISCLOSURES UNDER SECTION 217 OF THE COMPANIES ACT, 1956
- The particulars as prescribed under subsection (I)(e) of Section 2I7 of the Companies Act, I956, read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988, are set out in Annexure A which forms part of this Report.
- Except, as disclosed elsewhere in the report, there have been no material changes and commitments, which can affect the financial position of the Company between the end of the financial year and the date of this report.
- The information required under Section 21 7(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, and forming part of the Directors'' Report for the year ended March 31, 2013 is annexed as Annexure B.
30. DIRECTOR''S RESPONSIBILITY
Pursuant to Section 217 (2AA) of the Companies (Amendment) Act, 2000 the Directors confirm that:
(i) in the preparation of the annual accounts for the year 2012-13, the applicable accounting standards have been followed and there is no departure;
(ii) the Directors have selected such accounting policies and applied them consistently, except where otherwise stated in the notes on accounts, 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 or loss of the Company for that year;
(iii) the Directors have 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 have prepared the annual accounts on a going concern basis.
Your Directors would like to place on record their gratitude for the co-operation received from the Government of India, Governments of Delhi, Uttar Pradesh and Rajasthan, Customs and Excise Departments, Software Technology Park-Noida, Software Technology Park-Chennai, Software Technology Park-Pune, Special Economic Zone authorities and several other government agencies.
Your Directors would also like to thank all its bankers, customers, vendors and shareholders for their continued support to the Company. In specific, the Board would also record its sincere appreciation of the commitment and contribution made by all employees of the Company.
For and on behalf of the Board of Directors
Noida Janki Ballabh
April 27, 2013 Chairman