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Directors Report of Oracle Financial Services Software Ltd.

Mar 31, 2015

Dear Members,

The Directors present their report on the business and operations of your Company along with the Annual Report and audited financial statements of the Company for the financial year 2014-15.

Financial highlights

As per Indian GAAP Consolidated financial statements:

(Amounts in Rs. million)

Particulars Year ended Year ended March 31, 2015 March 31, 2014

Revenue from operations 39,049.05 37,413.21

Other income, net 3,481.34 6,736.48

Total income 42,530.39 44,149.69

Depreciation and amortization (680.92) (716.72)

Profit before tax 18,308.37 20,013.61

Tax expenses (6,385.17) (6,420.42)

Profit for the year 11,923.20 13,593.19

As per Indian GAAP Unconsolidated financial statements:

(Amounts in Rs. million)

Particulars Year ended Year ended March 31, 2015 March 31, 2014

Revenue from operations 33,410.95 31,594.68

Other income, net 3,758.99 6,209.16

Total income 37,169.94 37,803.84

Depreciation and amortization (634.37) (643.46)

Profit before tax 16,136.29 17,308.05

Tax expenses (5,556.09) (5,824.43)

Profit for the year 10,580.20 11,483.62

Performance

On consolidated basis, your Company''s revenue stood at Rs. 39,049 million this year, an increase of 4.4% from Rs. 37,413 million of the previous financial year. The net income was Rs. 11,923 million this year, a decrease of 12.3% primarily on account of lower interest income.

On an unconsolidated basis, your Company''s revenue grew to Rs. 33,411 million during the financial year 2014-15 from Rs. 31,595 million last year. This represents a growth of 5.8%. The Company''s net profit for the financial year 2014-15 was Rs. 10,580 million, a decrease of 7.9% over the previous financial year primarily on account of lower interest income.

A detailed analysis of the financials is given in the Management''s discussion and analysis report that forms a part of this Directors'' report.

Dividend

The Company had distributed an interim dividend of Rs. 485 per equity share of Rs. 5 each in September 2014. Further, your Board is pleased to recommend a final dividend of Rs. 180 per equity share of face value of Rs. 5 each for the financial year ended March 31, 2015.

The Register of Members and Share Transfer Books will remain closed from Monday, September 7, 2015 to Friday, September 11, 2015 for the purpose of payment of the final dividend for the financial year ended March 31, 2015, and the Annual General Meeting. The Annual General Meeting is scheduled to be held on Friday, September 11, 2015. The dividend, if approved at the forthcoming Annual General Meeting, will be paid to those shareholders whose names appear on the Register of Members as on Friday, September 4, 2015.

Transfer to reserves

The Company does not propose to transfer any amount to the General Reserve out of the amount available for appropriation.

Particulars of loans, guarantees or investments

Pursuant to Section 186 of the Companies Act, 2013, there are no new loans granted or investments made by the Company during the financial year 2014-15.

Share capital

During the year the Company allotted 470,725 equity shares of face value of Rs. 5 each to its eligible employees who exercised their options under the prevailing Employee Stock Option Schemes of the Company. As a result, as on March 31, 2015, the paid-up equity share capital of the Company was Rs. 423,074,295 divided into 84,614,859 equity shares of face value of Rs. 5 each.

Extract of annual return

Pursuant to Section 92(3) of the Companies Act, 2013 ("the Act") and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of annual return (in form MGT-9) is annexed as Annexure 1.

Directors and key managerial personnel

Mr. Derek H Williams, Mr. Chaitanya Kamat and Ms. Samantha Wellington, Directors of the Company, retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

Pursuant to Section 161 of the Companies Act, 2013, Ms. Maria Smith and Mr. Sridhar Srinivasan were appointed as Additional Directors of the Company on July 23, 2015 and hold office up to the date of ensuing Annual General Meeting. The Company has received Notices in writing from Members, pursuant to Section 160 of the Companies Act, 2013, proposing the candidature of Ms. Maria Smith and Mr. Sridhar Srinivasan for the office of the Director.

In accordance with provisions of Sections 149, 152 read with Schedule IV and any other applicable provisions of the Companies Act, 2013 and the Companies (Appointment and Qualification of Directors) Rules, 2014 and Clause 49 of the Listing Agreement, Mr. Sridhar Srinivasan is recommended to be appointed as an Independent Director of the Company for a term up to March 31, 2020, not liable to retire by rotation.

The Board recommends to the Members the resolutions for re-appointment of Mr. Derek H Williams, Mr. Chaitanya Kamat and Ms. Samantha Wellington as Directors of the Company and appointments of Ms. Maria Smith as a Director and Mr. Sridhar Srinivasan as an Independent Director of the Company.

Mr. Y M Kale, Non-Executive Independent Director, resigned with effect from December 15, 2014. The Board placed on record its appreciation of the valuable contributions rendered by Mr. Kale during his tenure as a Director of the Company.

Mr. William Corey West, Non-Executive Non-Independent Director, resigned with effect from July 22, 2015. The Board placed on record its appreciation of the valuable contributions rendered by Mr. William Corey West during his tenure as a Director of the Company.

Every new independent director of the Board attends a familiarization program. The program provides an insight into the Company''s products, competition, emerging technologies, etc. to gain a better understanding of the business environment as also covers the regulatory landscape. The familiarization program for Independent Directors is available on Company''s website, http://www.oracle.com/us/industries/financial-services/financial- familarization-program-2547373.pdf

A formal letter of appointment outlining his/her role, function, duties and responsibilities is issued to the Independent Director at the time of appointment. The model of the letter of appointment of Independent Director is available on Company''s website, http://www.oracle.com/us/ industries/financial-services/model-letter-appointment-director -2399432.pdf

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

As stipulated under Clause 49 of the Listing Agreement, brief resumes of the Directors proposed to be appointed / re-appointed, the nature of their expertise in specific functional areas and the names of companies in which they hold directorships and membership / chairmanship of Board Committees, etc. are provided in the Notice and / or Report on Corporate Governance forming a part of the Annual Report.

The Board of Directors at its meeting held on May 16, 2014 appointed Mr. Chaitanya Kamat, Managing Director & CEO, Mr. Makarand Padalkar, Chief Financial Officer and Mr. Hoshi D Bhagwagar, Company Secretary and Compliance Officer as the whole-time Key Managerial Personnel (KMP) of the Company effective April 1, 2014. Mr. Hoshi D Bhagwagar resigned as the Company Secretary and Compliance Officer with effect from June 6, 2014. Mr. Jayant Joshi was appointed as the Company Secretary and Compliance Officer of the Company with effect from September 29, 2014. Mr. Jayant Joshi relinquished the position as the Company Secretary and Compliance Officer with effect from May 31, 2015. The Board of Directors at its meeting held on May 15, 2015 has appointed Mr. Onkarnath Banerjee as the Company Secretary and Compliance Officer and a whole-time Key Managerial Personnel (KMP) of the Company effective June 1, 2015.

Board diversity policy

The Board Diversity Policy sets out the guidelines for composition of the Board comprising of members with relevant professional qualifications and wide industry experience. The policy also sets out the gender diversity norms and composition of independent directors in compliance with the Companies Act, 2013 and the Listing Agreement.

Board evaluation policy

In accordance with the requirements of the Companies Act, 2013 and the Clause 49 of the Listing Agreement, the Directors perform annual evaluation of the Board. The evaluation process is led by the Chairman of the Nomination and Remuneration Committee who obtains the feedback of the Board members on contribution of the members, effectiveness of Board processes and areas of improvement. The feedback is used to enhance Board effectiveness and helps in validating that the Board has the right level of expertise.

During the year, the performance of the Board and its Committees was evaluated after seeking inputs from all the directors on the basis of the criteria such as the contribution, participation, effectiveness of Board processes, timeliness and relevance of information to the Board, etc. The evaluation also included evaluation of individual directors. In a separate meeting of Independent Directors, performance of non-independent directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking into account the views of executive directors and non-executive directors. The same was discussed in the board meeting that followed.

Directors'' appointment policy

The Nomination and Remuneration Committee ("NRC") of the Company has formulated the policy on Directors'' Appointment. As per the Policy, NRC frames the criteria in terms of skills and experience based on the feedback from the Board and executive management. NRC may utilize services of a search firm or use other networks to shortlist the candidates. The selection process involves meetings / review of the candidates by at least three other directors.

The tenure of the Independent Directors shall not exceed two consecutive terms of 5 years each.

Remuneration policy

The Nomination and Remuneration Committee determines the quantum of commission payable to the Directors within the limits approved by the shareholders. Periodic review of the commission paid to the Independent Non-Executive Directors is made based on industry benchmarks.

The remuneration to Key Managerial Personnel and Senior Management consists of fixed pay and incentive pay, in compliance with the policies of the Company.

The Committee determines the stock options and other share based awards / payments to be made to Key Managerial Personnel and employees of the Company.

Material subsidiary policy

The Company has framed a Material Subsidiary Policy for identification and governance of the same. The policy is available at Company''s website, http://www.oracle.com/us/industries/financial-services/ policy-determining-material-2615655.pdf

Subsidiaries

Your Company has subsidiaries in Greece, India, Republic of Chile, Republic of China, Republic of Mauritius, Singapore, The Netherlands and United States of America.

The Ministry of Corporate Affairs has issued a General Circular No.: 2/2011 dated February 8, 2011 granting a general exemption to the companies stating that the provisions of Section 129 of the Companies Act, 2013 shall not apply in relation to subsidiaries of companies subject to the company fulfilling certain conditions stated in the said circular.

The Company is in compliance with the conditions stipulated by the Ministry of Corporate Affairs. Therefore, the accounts and related reports of the subsidiary companies are not attached to the Annual Report of the Company for the year ended March 31, 2015. Pursuant to sub-section 3 of Section 129 of the Companies Act, 2013 ("the Act"), the statement containing the salient feature of the financial statement of the subsidiaries is attached to the financial statements in form AOC-1.

The Company will make available the accounts and related information of the subsidiary companies upon request by any member / investor of the Company or its subsidiaries. Further, the accounts and related information of the subsidiary companies will be kept open for inspection by any Member, at the registered office of the Company and at the registered office of the subsidiaries during office hours of the Company / subsidiaries and the same will also be made available on the website of the Company www.oracle.com/financial services

Related party transactions

The Company has framed a related party transactions policy in accordance with the provisions of the Companies Act, 2013 and the Listing Agreement. All related party transactions which were entered into during the financial year 2014-15 were on an arm''s length basis and in the ordinary course of business. Form AOC-2 providing the details of related party transactions of the Company is annexed to this report as Annexure 2.

The policy is available at: http://www.oracle.com/us/industries/ financial-services/ofss-party-transactions-policy-2288144.pdf

Partners and alliances

Your Company continues to focus on building, nurturing and growing a robust partner ecosystem, which helps deliver the solutions that address the nuanced needs of diverse countries, regions and markets of the world efficiently. Your Company conducts periodic knowledge transfer for its products and services offerings empowering the partner, as indeed the user, community. These programs provide users with superior product knowledge and services capabilities, as well as a better understanding of partners'' resources and implementation capabilities.

In August 2014, your Company hosted the third annual Oracle FLEXCUBE Developers Conclave in India. More than 150 customers and partners from 40 countries attended and received training on how to leverage Oracle FLEXCUBE open development tools to meet new business requirements by leveraging Oracle FLEXCUBE web services for integration. Besides, the new Oracle University certifications for Oracle FLEXCUBE have also been made available, allowing partners to train and obtain certification for functional, technical, and advanced levels.

Research and Development

Your Company continuously makes significant investments in research and development to develop solutions that the global banking industry needs today and will need tomorrow. Your Company strives to be at the forefront of innovation, at the same time taking the technology risk away from the banks by future proofing their investments. Your Company''s dedicated in-house research and development (R&D) centres have produced a number of products that are today used by banks in more than 120 countries around the world for running their most critical operations. The investments your Company makes in building applications coupled with access to Oracle''s technology provides a unique competitive edge to its offerings.

Fixed deposits

During the financial year 2014-15, the Company has not accepted any fixed deposits within the meaning of Rule 2(c) of the Companies (Acceptance of Deposits) Rules, 2014, and as such, no amount of principal or interest was outstanding as of the date of the Balance Sheet.

Corporate governance

The Company has taken appropriate steps and measures to comply with all the corporate governance regulations and related requirements as envisaged under Clause 49 of the Listing Agreement entered with the stock exchanges.

Your Company has constituted seven committees consisting of Board Members and other senior officials of the Company, namely, Audit Committee, Nomination and Remuneration Committee, ESOP Allotment Committee, Transfer Committee, Stakeholder''s Relationship Committee, Corporate Social Responsibility Committee and Risk Management Committee. There is a separate report on Corporate Governance which forms a part of this Annual Report alongwith a certificate of Practicing Company Secretary with regard to compliance of conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement.

The Practicing Company Secretary has noted in his certificate on Corporate Governance, and Secretarial Audit Report that the Composition of Board of Directors of the Company was not as per Section 149(4) of the Companies Act, 2013 and Clause 49IIA(2) of the Listing Agreement during the period from 15th December, 2014 to 31st March, 2015. The Directors clarify that the Company had initiated all necessary steps to fill in the position as quickly as possible. After following the appropriate selection process, the Company has appointed Mr. Sridhar Srinivasan, as a Non-Executive, Independent director on July 23, 2015. Accordingly, the composition of the Board of Directors and its Committees is as per aforesaid regulations.

A certificate from the Managing Director & CEO and Chief Financial Officer of the Company confirming internal controls and checks pertaining to financial statements, as also declaring that all Board Members and Senior Managerial Personnel have affirmed compliance with the Code of Ethics and Business Conduct for the financial year ended March 31, 2015, was placed before the Board of Directors and the Board had noted the same. The said certificate is annexed to the Directors'' report.

Secretarial audit

In terms of Section 204 of the Companies Act 2013, and the Rules made thereunder, the Secretarial Audit report issued by Practicing Company Secretary is enclosed as Annexure 3 to this report.

Vigil mechanism / whistle blower policy

The Company has established a Code of Ethics and Business Conduct ("Code") which is applicable to its employees. The Code also extends to the Company''s suppliers and partners. Regular dissemination of the Code and trainings are conducted to reinforce the concepts and ensure that any changes are communicated. The Company''s vigil mechanism deals with reporting and dealing with instances of fraud and mismanagement, and forms part of the Code. The Company has in place a confidential reporting mechanism for any whistle blower to report a matter.

In terms of Companies Act, 2013 and Clause 49 of the Listing Agreement entered with the stock exchanges, the Vigil Mechanism / Whistle Blower Policy forms part of the Company''s Code of Ethics and Business Conduct which is placed on website of the Company at http://www.oracle.com/us/industries/financial-services/046571.html

Business responsibility report

Securities and Exchange Board of India (SEBI) through circular dated August 13, 2012, has mandated the inclusion of Business Responsibility Report ("BR Report") as part of the Annual Report for the top 100 listed entities based on their market capitalization on BSE Limited and National Stock Exchange of India Limited as at March 31, 2012. The SEBI circular is effective from financial year ending on or after December 31, 2012. In line with the press release and FAQ''s dated May 10, 2013 issued by SEBI, the BR Report which forms part of this Annual Report has been hosted on the Company''s website www.oracle.com/financialservices. The members who wish to obtain a printed copy of the report, may write to the Company Secretary at the Registered Office of the Company.

Employee stock option plan ("ESOP")

The Members at their Annual General Meeting held on August 14, 2001 approved grant of ESOPs to the employees / directors of the Company and its subsidiaries up to 7.5% of the issued and paid-up capital of the Company from time to time. This said limit was enhanced and approved up to 12.5% of the issued and paid-up capital of the Company from time to time, by the Members at their Annual General Meeting held on August 18, 2011. This extended limit is an all inclusive limit applicable for stock options granted in the past and in force and those that will be granted by the Company under this authorization.

Pursuant to ESOP scheme approved by the shareholders of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme ("Scheme 2002") for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier). On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme ("Scheme 2010") for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).

Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme ("Scheme 2011"). Accordingly, the Company has granted 1,950,500 options under the Scheme 2011. Nomination and Remuneration Committee in their meeting held on August 7, 2014 approved Oracle Financial Services Software Limited Stock Option Plan 2014 ("OFSS Stock Plan 2014") and during the year 2014-15, the Company granted 58,370 Stock Options and 147,889 Restricted Stock Units (RSUs) under OFSS Stock Plan 2014.

The Stock Options granted under the Scheme 2002, Scheme 2010 and Scheme 2011, each of 20% of the total options granted will vest on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of option.

The Stock Options / RSUs granted in Financial year 2014-15 under OFSS Stock Plan 2014, each of 25% of the total Stock Options / RSUs will vest on completion of 12, 24, 36 and 48 months from the date of grant and is subject to continued employment of the employee of the Company or its subsidiaries. Options have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of option.

The details of the options / RSUs granted under the Scheme 2002, Scheme 2010, Scheme 2011 and OFSS Stock Plan 2014 to eligible employees / directors from time to time are given below:

Particulars Scheme Scheme Scheme OFSS Stock 2002 2010 2011 Plan 2014 (Stock Options)

Pricing Formula At the market price as on the date of grant

Variation of terms of options / RSUs None None None None

Number of options / RSUs granted till 5,167,920 638,000 1,950,500 58,370 March 31, 2015

Number of options / RSUs lapsed* 614,725 267,962 208,250 -

Number of options / RSUs exercised 4,516,795 205,348 327,622 -

Total number of options / RSUs in force as 36,400 164,690 1,414,628 58,370 on March 31, 2015

Particulars OFSS Stock Total Plan 2014 (RSUs)

Pricing Formula Rs. 5

Variation of terms of options/RSUs None

Number of options/RSUs granted till March 31, 2015 147,889 7,962,679

Number of options/RSUs lapsed - 1,090,937

Number of options/RSUs exercised - 5,049,765

Total number of options/RSUs in force as on March 31, 2015 147,889 1,821,977

The details of Options / RSUs granted to Directors and Senior Managerial Personnel under Scheme 2011 and OFSS Stock Plan 2014 during the financial year ended March 31, 2015 are as follows:

Particulars Number Number of of Options RSUs (OFSS (Scheme 2011) Stock Plan 2014)

i. Director:

Mr. Chaitanya Kamat Nil 25,000

Senior Managerial Personnel:

Mr. Arvind Gulhati Nil 5,000

Mr. Avadhut Ketkar Nil 1,687

Mr. Edwin N Moses Nil 3,750

Mr. Jayant Joshi Nil 2,000

Mr. Mahesh Rao Nil 3,750

Mr. Makarand Padalkar Nil 10,000

Mr. Manmath Kulkarni Nil 3,125

Ms. Meenakshy Iyer Nil 375

Mr. Mohamed Yacob Nil 250

Mr. M. Ravikumar Nil 3,125

Mr. Vikram Gupta Nil 5,000

Mr. Vinayak Hampihallikar Nil 1,750

ii. Any other employee, who receives grant in any one year of option amounting to 5% or more of option / RSUs granted during the year Mr. James Finnegan 15,000 Nil

iii. Identified employees who were granted option / RSUs, during any one year, equal Nil Nil to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant

iv. Diluted Earnings Per Share (EPS) pursuant to the issue of shares on exercise of option Rs. 124.86 calculated in accordance with Accounting Standard 20 ''Earnings Per Share'' issued by the Institute of Chartered Accountants of India

Had compensation cost for the Company''s ESOP been determined based on fair value at the grant dates, the Company''s net profit and earnings per share would have been reduced to preformed amounts indicated below:

(Amounts in Rs. million, except per share data)

Particulars Year ended March 31, 2015

Profit as reported 10,580.20

Add: Employee stock compensation under intrinsic value method Nil

Less: Employee stock compensation under fair value method (643.82)

Performa profit 9,936.38

Earnings per share Basic

- As reported 125.38

- Performa 117.75

Diluted

- As reported 124.86

- Performa 117.39

All stock options were granted at market price on the date of grant and RSUs were granted at the face value of the equity shares. The compensation cost arising on account of stock options and RSUs is calculated using the Intrinsic value method. Accordingly the disclosures in terms of Regulation 14 (C) (vii) of the SEBI (Share Based Employee Benefits) Regulations, 2014, are not applicable.

A summary of the activities in the Company''s Scheme 2002, Scheme 2010 and Scheme 2011 for the year ended March 31, 2015 are as follows:

Particulars Scheme 2002 Scheme 2010 Shares Weighted Shares Weighted arising from average exercise arising from average exercise options price (Rs.) options price (Rs.)

Outstanding at beginning of year 91,300 1,976 311,050 2,069

Granted - - - -

Exercised (54,900) 1,975 (141,028) 2,075

Forfeited - - (5,332) 2,050

Outstanding at end of the year 36,400 1,978 164,690 2,064

Vested options 24,400 91,901

Unvested options 12,000 72,789

Options vested during the year 12,000 70,103

Options forfeited / lapsed during Nil 5,332 the year

Particulars Scheme 2011 Shares Weighted arising from average exercise options price (Rs.)

Outstanding at beginning of year 1,703,125 2,783

Granted 15,000 3,076

Exercised (274,797) 2,535

Forfeited (28,700) 2,667

Outstanding at end of the year 1,414,628 2,837

Vested options 347,178

Unvested options 1,067,450

Options vested during the year 344,550

Options forfeited / lapsed during the year 28,700

The weighted average share price for the year over which stock options were exercised was Rs. 3,347. Money realized by exercise of options during the financial year 2014-15 was Rs. 1,097.6 million. The Company has recovered perquisite tax on the options exercised by the employees during the year.

A summary of the activities in the Company''s OFSS Stock Plan 2014 are as follows:

Particulars Year ended March 31, 2015 OFSS Stock Plan 2014

Shares Weighted average Shares Weighted arising from RSUs exercise price (Rs.) arising exercise from price Options (Rs.)

Outstanding at beginning of year - - - -

Granted 147,889 5 58,370 3,241

Exercised - - - -

Forfeited - - - -

Outstanding at end of the year 147,889 5 58,370 3,241

Vested RSUs / Options - -

Unvested RSUs / Option 147,889 58,370

The fair value of stock options / RSUs granted on granted on July 14, 2014 under Scheme 2011 was Rs. 1,542 and Stock Options and RSUs granted on March 30, 2015 under OFSS Stock Plan 2014 was Rs. 2,753, calculated as per the Black Scholes valuation model as stated in 24b in the notes to accounts. There were no Options / RSUs vested during the financial year 2014-15.

The details of options unvested and options vested and exercisable as on March 31, 2015 are as follows:

Particulars Exercise price (Rs.) Number of options Weighted average Weighted average exercise price (Rs.) remaining contrac tual life (Years)

Options unvested 5 147,889 5 10.0

1,930 180,700 1,930 6.7

2,032 16,000 2,032 6.7

2,050 64,789 2,050 5.4

2,333 12,000 2,333 5.6

2,342 8,000 2,342 6.3

3.076 15,000 3,076 9.3

3.077 499,800 3,077 8.5

3,127 355,950 3,127 7.9

3,241 58,370 3,241 10.0

Options vested and exercisable 1,291 12,400 1,291 1.1

1,930 123,428 1,930 6.7

2,050 91,901 2,050 5.4

2,333 12,000 2,333 5.6

3,077 52,700 3,077 8.5

3,127 171,050 3,127 7.9

1,821,977 2,533 7.8

Employee stock purchase scheme ("ESPS")

The Company has adopted the ESPS administered through a Trust with name i-flex Employee Stock Option Trust ("the Trust") to provide equity based incentives to key employees of the Company. i-flex Solution Trustee Company Ltd. is the Trustee of this Trust. As per the scheme, the Trust can purchase shares of the Company from market using the proceeds of loans obtained from the Company. Such shares are allocated by the Trust to nominated employees at an exercise price, which approximates the fair value on the date of the grant. The shares vest in the employees over a period of five years and the employees can purchase the shares from the Trust over a period of ten years based on continued employment, until which, the Trust holds the shares for the benefit of the employees. The employees are entitled to receive dividends, bonus, etc., that may be declared by the Company from time to time for the entire portion of shares held by the Trust on behalf of the employees.

On the acceptance of the offer, the selected employee undertakes to purchase the shares from the Trust within ten years from the date of grant. In case an employee resigns from employment, the rights relating to vested shares, which are eligible for exercise, may be purchased by the employee by payment of the exercise price whereas, the balance shares are forfeited in favour of the Trust. The Trustees have the right of recourse against the employees for any amounts that may remain unpaid on the shares accepted by them. As of the balance sheet date, the Trust has repaid the entire loan obtained from the Company on receipt of payments from employees against shares exercised.

No allocation of shares to the employees have been made through the Trust since 2005 and all selected employees under the Trust have exercised their right of purchase of shares prior to March 31, 2014. In this regard, the Trustee Company has also filed a petition in the Hon''ble Bombay High Court to seek directions for utilization of the remaining unallocated shares along with the other assets held by the Trust for the benefit of the employees of the Company and the matter is presently pending before the Hon''ble Bombay High Court.

A summary of the activities in the Company''s ESPS is as follows:

(Number of shares)

Particulars Year ended

March 31, 2015 March 31, 2014

Opening balance of unallocated shares 166,142 166,142

Shares forfeited during the year - -

Closing balance of unallocated shares 166,142 166,142

Opening balance of allocated shares - 2,750

Shares exercised during the year - (2,750)

Shares forfeited during the year - -

Closing balance of allocated shares - -

Shares eligible for exercise - -

Shares not eligible for exercise - -

Total allocated shares - -

Human resources

Your Company maintains a healthy and productive environment and offers clean and ergonomic workspaces. Human Resources are key assets of the your Company, and your Company invests continuously in imparting latest technology skills together with a range of soft skills to help them excel in their roles. Your Company has a strong performance management system together with a formal talent management processes to nurture employee careers, groom future leaders, and create a high performance workforce. Your Company follows global best HR practices.

Your Company''s total manpower at the end of March 31, 2015 was 8,928 as compared to 9,220 as on March 31, 2014 (including employees of subsidiaries).

During the financial year, one complaint was filed under Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, during the financial year and the same was resolved. There was no complaint outstanding as at the end of financial year.

Corporate social responsibility

The Company has constituted a Corporate Social Responsibility Committee and the Committee has formulated the Company''s Corporate Social Responsibility ("CSR") Policy. The CSR Policy is in line with the provisions listed in Section 135 and Schedule VII of the Companies Act, 2013.

The policy is available at: http://www.oracle.com/us/industries/financial-services/ofss-social -responsibility-2437852.pdf

Pursuant to Rule 8 of Companies (Corporate Social Responsibility) Rules, 2014, a report on the CSR activities for the financial year ended March 31, 2015 is enclosed as Annexure 4.

Risk management policy

The Company has established a Risk Management Policy ("Policy") which sets out the Company''s principles and processes with regard to identification, analysis and management of applicable risks. The policy mandates the ways in which respective risks are expected to be mitigated and monitored.

The Board has constituted a Risk Management Committee to monitor and review the Risk Management Plan for the Company.

Internal financial controls

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Business Assessment & Audit team ("BAA") function is defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee.

The BAA monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, risk management system, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of BAA, the Company undertakes corrective actions in their respective areas thereby strengthening the controls. Significant audit observations and corrective actions thereon are presented by the BAA to the Audit Committee.

Directors'' responsibility statement

As required under clause (c) of sub-section 3 of Section 134 of the Companies Act, 2013, for the financial year ended on March 31, 2015, the Directors hereby confirm that:

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 followed by the Company and that such internal financial controls are adequate and were operating effectively.

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.

Auditors

M/s. S.R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration no. 101049W), were appointed as the Statutory Auditors of the Company by the Members at their Twenty Fifth Annual General Meeting held on September 12, 2014 to hold office till the conclusion of the Annual General Meeting to be held in the year 2017, subject to the ratification of their appointment at every Annual General Meeting. M/s. S.R. Batliboi & Associates LLP have confirmed their eligibility and willingness to accept office as the Statutory Auditors and also confirmed that they have not been disqualified to be appointed as the Statutory Auditors at the ensuing Annual General Meeting.

Auditors'' report

With regard to the Auditors'' comment in the CARO report concerning delays in payment of a few tax payments, e.g., Foreign Income Taxes, Foreign Value Added Tax and Foreign Withholding Tax, the Company would like to state the following:

i. The Company has engaged international tax experts in the interpretation of laws and regulations relating to corporate taxes and VAT in foreign countries. The Company has however, been continuously evaluating and accruing towards any material tax exposures in the books taking a conservative approach and payments are made based on the advice of the tax experts.

ii. The Company continually assesses Payroll Tax implications in various jurisdictions outside India on salaries and travel related reimbursements paid to its employees posted therein and accordingly makes accruals in the books. The Company is in the process of filing the returns for Payroll Tax in such jurisdiction for which the provision is already made in the books. As per the local laws of most host countries, the tax is payable by the employee, however in a few countries tax payment is a responsibility of the employer, which amounts to Rs. 1.88 Crs. The Company and the employees ensure tax compliance in such countries as advised by the tax consultants.

Conservation of energy and technology absorption and foreign exchange earnings and outgo

The particulars as prescribed under sub-section (1)(e) of Section 134 of the Companies Act, 2013 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the relevant data pertaining to conservation of energy, technology absorption and foreign exchange earnings and outgo are furnished hereunder:

i. Conservation of energy and technology absorption

The Company regularly strives to utilize newer technologies with the view to conserve the energy and create an environmentally friendly work environment. The initiatives taken by the Company are summarized below:

Desk-top / workstation refresh: Your Company carried out a major refresh of the laptops and desktops across the Company to deploy modern and energy efficient workstations. This has brought about significant savings in power, strengthened IT Security architecture.

Network Migration: As an organization wide initiative migration of the enterprise networks to MPLS technology has commenced. This migration was strategized and designed during this financial year. The implementation has also commenced and will continue to progress through the next 6 months. The technology reduces latency thereby increasing operational efficiencies. This is possible through a mesh network architecture vis-à-vis point to point architecture. This also improvises on the data and control plane protection aspects of the unified network architecture thereby creating a more secure operating environment.

Online trainings: A new initiative launched during this financial year is the new online internal video platform. From individual contributors to executives, every employee now has access to securely find, share, record and store high-quality video content internally. This platform empowers individual to create and edit video messages, slides accompanied by audio, web camera recordings. This enhances communication across the globe, minimizing travel, increasing efficiencies from a support perspective as well by making self service operations easier and effective.

Mobile Device Management: Management of external devices to an organization is constant challenge and this year, your Company introduced the Mobile Device Management platform which tracks, monitors and has the capability to delete company information from mobile devices in the event that it device is lost / stolen. This has led to better control over corporate data and thereby minimized the possibility of data loss or compromise.

Availability Management: As a part of improvising on the availability requirements across the organization, there has been a dual initiative of management and back up of product source codes, as well as provisioning of infrastructure to manage any business disruption based on the criticality of business requirements. This has lead to a more robust operating environment, creating increased operating efficiencies.

VOIP: During the year, your Company further expanded the communication infrastructure with the objective to provide a seamless multi-channel communication to all the employees by significantly enhancing the video calling options. Apart from improving productivity, this helps in reducing carbon footprint by reducing the travel.

Virtualization: Virtualization has been further ingrained into the OFSS IT architecture, wherein the OFSS computing environment is almost completely virtualized. This has lead to better performance, better utilization of resources (i.e., space and power), increased operating efficiencies and leads to a greener work environment.

All these initiatives planned lead to a more secure and efficient operating environment.

Activities relating to exports; initiatives taken to increase exports; development of new export markets for products and services; and export plans

Your Company has established an extensive global presence across leading markets through its sales and marketing network. The Company will continue to focus on tapping various potential markets available globally. Experienced sales and marketing specialists focus on building strong international business presence to develop new export markets for your Company.

Prospects

A variety of changes are shaping the complexion and direction of the Banking and Financial Services (BFSI) industry, these challenges also raise several new opportunities. World-over, the banks are in a hurry to become relevant and competitive in the changing business landscape, and they aspire to adopt the same tools and technologies that have run one of the finest global banks.

The compelling drive for banks to final a response to the digital opportunities, adopting globally proven product that enable them to take a several notches up in their capability, the need to leverage the power of technology such as big data, cloud and analytics to deliver superior customer experience.

Digitization is sweeping the banking world. Digitization means utilizing the right technology to deliver memorable customer experiences well into the future. Facing severe disruptive threats from young and nimble players that promise a unique financial convenience through the use of technology, financial institutions are urgently called upon to deliver superior customer experiences at the time and place determined by customers. The young generation with their here and now demand creates an opportunity for the banks to use their wealth of experience and strength of reliability to create a delightful customer experience. Banks are now strategically investing in platforms that are highly flexible, process-centric, scalable and sustainable well into the future.

With a portfolio of offerings that addresses this very need, your Company sees this as a significant opportunity, and is maintaining an unremitting focus on it. Your Company''s wins in the last year have demonstrated that its products are relevant not just large banks in developed markets, but also small and specialized institutions in emerging and frontier markets. Through these and other similar successes, your Company has helped banks achieve their business vision by providing technology which preserves their investments for the long-term. Your Company will continue to pursue such opportunities vigorously.

Employee particulars

The information required under Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given below:

Following guidelines have been used when preparing this statement. For statistically relevant computation of median value of employee remuneration, employees who have served the entire 12 months in the corresponding fiscal year were used. Further, the expression "median" means the numerical value separating the higher half of a population from the lower half and the median of a finite list of numbers may be found by arranging all the observations from lowest value to highest value and picking the middle one; and if there is an even number of observations, the median is the average of the two middle values. The remuneration used for the analysis in this section excludes the (perquisite) value of the difference between the fair market value and the exercise price on the date of exercise of options, to make the comparisons relevant.

(i) The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year:

Name of the Director Ratio to median remuneration

Non Executive Directors

Mr. S Venkatachalam1 3

Mr. Derek H Williams -

Mr. Harinderjit Singh -

Mr. Richard Jackson 2

Mr. Robert K Weiler -

Ms. Samantha Wellington -

Mr. William Corey West -

Mr. Y M Kale2 2

Executive Directors

Mr. Chaitanya Kamat1 43

1 Excludes the value towards difference between the fair market value and the exercise price on the date of exercise of options.

2 For the period April 1, 2014 to December 15, 2014.

(ii) The percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer and Company Secretary in the financial year:

Name and Title Percentage increase of remuneration in FY 2015 as compared to FY 2014

Mr. S Venkatachalam1 9%

Mr. Derek H Williams -

Mr. Harinderjit Singh -

Mr. Richard Jackson2 32%

Mr. Robert K Weiler -

Ms. Samantha Wellington -

Mr. William Corey West -

Mr. Y M Kale3 -

Mr. Chaitanya Kamat1 (18%)

Mr. Makarand Padalkar1, Chief Financial Officer (5%)

Mr. Hoshi Bhagwagar4, Company Secretary NA

Mr. Jayant Joshi5, Company Secretary NA

1 Excludes the (perquisite) value towards difference between the fair market value and the exercise price on the date of exercise of options.

2 Increase on account of additional committee memberships in line with compensation policy of the Company.

3 For the period April 1, 2014 to December 15, 2014 and being for part of the year, comparison with the previous year is not relevant.

4 For the period April 1, 2014 to June 6, 2014 and being for part of the year, comparison with the previous year is not relevant.

5 For the period September 29, 2014 to March 31, 2015 and being for part of the year, comparison with the previous year is not relevant.

(iii) The percentage increase in the Median Remuneration of Employees in fiscal 2015, as compared to fiscal 2014: 17%.

(iv) The number of permanent employees on the rolls of the Company: 7,151

(v) The explanation on the relationship between average increase in remuneration and Company performance:

The increase in the remuneration is based on individual performance of each employee within overall budget reflecting the overall performance of the Company, strategic priorities, and talent market dynamics. On a consolidated basis, Company''s operating income in the fiscal 2015 increased by 12% as compared to fiscal 2014. During the year the employees received average increase in the compensation of 13%.

(vi) Comparison of the remuneration of the Key Managerial Personnel against the performance of the Company:

The remuneration of key managerial personnel is compared with the consolidated revenue (Rs. 39,049 million) and net profits (Rs. 11,923 million) of the Company for the fiscal 2015.

(Amounts in Rs. thousand)

Name of the key managerial personnel (KMP) Remuneration in As % of As % of Net fiscal 2015 Revenues profit

Aggregate remuneration of KMP1 53,030 0.14% 0.44%

1 Excludes an amount of Rs. 126,040 towards perquisite on ESOPs exercised in financial year 2014-15. Including this, the percentages above would have been 0.46% and 1.5% respectively.

(vii) Variations in the market capitalization of the Company, price earnings ratio as at the closing date of the current financial year:

Particulars March 31, 2015 March 31, 2014 % Change

Market Capitalization as per NSE Price (Rs. Crs.) 27,585 25,979 6.2%

Price Earnings Ratio 26 23 15.0%

Percentage increase over decrease in the market quotations of the shares of the Company in comparison to the rate at which the Company came out with the last public offer on June 28, 2002:

Particulars March 31, 2015 June 28, 2002* Change

Market Price (NSE) Rs. 3,260.05 Rs. 250.53 1,201%

Market Price (BSE) Rs. 3,257.60 Rs. 249.73 1,204%

*Adjusted for any corporate actions.

(viii) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

During the financial year 2014-15, the average increments given to the employee other than the managerial personnel was around 13%. The Average percentile change in the compensation of KMP shows decrease of 17% as compared to previous financial year excluding the perquisite value of the options exercised.

(ix) Comparison of the each remuneration of the Key Managerial Personnel against the performance of the Company;

The comparison of the remuneration of key managerial personnel is done with the consolidated revenue (Rs. 39,049 million) and net profits (Rs. 11,923 million) of the Company for the fiscal 2015.

(Amounts in Rs. thousand)

Name of the key managerial personnel (KMP) Remuneration in As % of As % of Net fiscal 2015 Revenues profit

Mr. Chaitanya Kamat1, Managing Director and CEO 41,542 0.11% 0.35%

Mr. Makarand Padalkar2, Chief Financial Officer 9,047 0.02% 0.08%

Mr. Hoshi Bhagwagar3, Company Secretary 1,522 NA NA

Mr. Jayant Joshi4, Company Secretary 919 NA NA

1 Excludes an amount of Rs. 92,894 towards perquisite on ESOPs exercised in FY 2014-15. Including this, the percentages above would have been 0.34% and 1.13% respectively.

2 Excludes an amount of Rs. 32,717 towards perquisite on ESOPs exercised in FY 2014-15. Including this, the percentages above would have been 0.11% and 0.35% respectively.

3 For the period April 1, 2014 to June 6, 2014; Excludes an amount of Rs. 429 towards perquisite on ESOPs exercised in FY 2014-15 and being for part of the year, the percentages to revenue and net profit are not relevant.

4 For the period September 29, 2014 to March 31, 2015 and being for part of the year, the percentages to revenue and net profit are not relevant.

(x) The key parameters for any variable component of remuneration availed by the directors:

The Independent directors are entitled for such fees and remuneration including commission as the Board or the Nomination and Remuneration Committee may approve from time to time within the limits as approved by the Members in the past and subject to such limits, prescribed under the Companies Act, 2013.

Managing Director and CEO is entitled for Performance linked Bonus which is Payable annually or at other intervals, as may be decided by the Board of Directors of the Company ("the Board") or the Nomination and Remuneration Committee of the Board as approved by the Members in the past and subject to such limits, prescribed under the Companies Act, 2013.

(xi) The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year:

During the Financial year 2014-15, no employee received remuneration in excess of the highest-paid director.

(xii) Affirmation that the remuneration is as per the remuneration policy of the Company:

The Company affirms remuneration is as per the remuneration policy of the Company.

The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.

Acknowledgements

Your Directors take this opportunity to thank the Company''s customers, members, vendors and bankers for their continued support during the year. Your Directors also wish to thank the Government of India and its various agencies, Department of Electronics, the Software Technology Parks - Bangalore, Chennai, Mumbai, and Pune, Special Economic Zone authorities at SEEPZ and Cochin, the Customs and Excise Department, Ministry of Commerce, Ministry of Finance, Ministry of External Affairs, Ministry of Corporate Affairs, Department of Telecommunication, the Reserve Bank of India, the State Governments of Maharashtra, Karnataka, Haryana and Tamil Nadu and other local Government Bodies, for their support and look forward to their continued support in the future.

Your Directors also place on record their appreciation for the excellent contribution made by employees of the Company through their commitment, competence, co-operation and diligence with a view to achieving consistent growth for the Company.

For and on behalf of the Board

S Venkatachalam

Chairman

DIN: 00257819

July 23, 2015


Mar 31, 2014

Dear Members,

The Directors present their report on the business and operations of your Company along with the Annual Report and audited financial statements for the financial year 2013-2014.

Financial highlights

As per Indian GAAP Consolidated financial statements:

(Amounts in Rs. million)

Particulars Year ended Year ended March 31, 2014 March 31, 2013

Revenue from operations 37,413.21 34,739.99

Other income, net 6,736.48 4,595.44

Total income 44,149.69 39,335.43

Depreciation and amortization (716.72) (655.02)

Profit before tax 20,013.61 16,132.01

Tax expenses (6,420.42) (5,380.58)

Profit for the year 13,593.19 10,751.43

As per Indian GAAP Unconsolidated financial statements:

(Amounts in Rs. million)

Particulars Year ended Year ended March 31, 2014 March 31, 2013

Revenue from operations 31,594.68 29,377.01

Other income, net 6,209.16 4,403.20

Total income 37,803.84 33,780.21

Depreciation and amortization (643.46) (586.08)

Profit before tax 17,308.05 15,047.60

Tax expenses (5,824.43) (4,755.00)

Profit for the year 11,483.62 10,292.60

Performance

On consolidated basis, your Company''s revenue stood at Rs. 37,413.21 million this year, an increase of 8% from Rs. 34,739.99 million as compared to the previous financial year. The net income increased to Rs. 13,593.19 million this year, an increase of 26%.

On an unconsolidated basis, your Company''s revenue grew to Rs. 31,594.68 million during the financial year 2013-2014 from Rs. 29,377.01 million last year. This represents a growth of 8%. The Company''s profit for the financial year 2013-2014 has increased to Rs. 11,483.62 million, an increase of 12% over the previous financial year.

A detailed analysis of the financials is given in the Management''s discussion and analysis report that forms a part of this Directors'' report.

Dividend

The Board has decided to conserve the funds of the Company for organic and inorganic growth opportunities. Accordingly, the Board has decided not to declare a dividend for the financial year 2013-2014.

Transfer to reserves

The Company does not propose to transfer any amount to the General Reserve out of the amount available for appropriation. An amount of Rs. 64,032.26 million is proposed to be retained in the Profit & Loss Account.

Share capital

During the year, the Company allotted 78,656 equity shares of face value of Rs. 5 each to its eligible employees, who exercised their options under the prevailing Employee Stock Option Schemes of the Company. As a result, as on March 31, 2014, the paid-up equity share capital of the Company was Rs. 420,720,670 divided into 84,144,134 equity shares of face value of Rs. 5 each.

Oracle''s holding in the Company

As on March 31, 2014, Oracle Global (Mauritius) Limited, the Promoter held 63,051,197 equity shares constituting 74.93% of the equity capital of the Company.

Directors

Mr. Robert K Weiler and Mr. William Corey West, Directors of the Company, retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

In accordance with the provisions of Sections 149, 152 read with Schedule IV and any other applicable provisions of the Companies Act, 2013 and the Companies (Appointment and Qualification of Directors) Rules, 2014 and Clause 49 of the Listing Agreement, Mr. Y M Kale, Mr. S Venkatachalam and Mr. Richard Jackson, who were appointed as Directors liable to retire by rotation are being appointed as Independent Directors of the Company for a term of five consecutive years up to March 31, 2019, not liable to retire by rotation.

As stipulated under Clause 49 of the Listing Agreement entered into with the stock exchanges, brief resumes of the Directors proposed to be appointed / re-appointed, the nature of their expertise in specific functional areas and the names of companies in which they hold directorships and membership / chairmanship of Board Committees, etc. are provided in the Notice and / or Report on Corporate Governance forming a part of the Annual Report.

The Board recommends to the Members the resolutions for re-appointment of Mr. Robert K Weiler and Mr. William Corey West as Directors of the Company and appointment of Mr. Y M Kale, Mr. S Venkatachalam and Mr. Richard Jackson, as Independent Directors of the Company.

Infrastructure

The Company maintains optimal infrastructure for its operations. The Company continues to upgrade its infrastructure to provide a productive work environment to its staff.

Global alliances

Your Company pursued the previous years'' initiative to strengthen the partner ecosystem as a way of enlarging the Company''s outreach to customers across geographies and market segments. The programs launched to enhance the product knowledge of partners'' resources and implementation capabilities, resulted in the expansion of the partner base capable of providing high quality services.

In addition to the programs, partner certifications launched on Oracle FLEXCUBE Universal Banking and Oracle FLEXCUBE direct banking versions 12, further enhanced the demonstrability of partners'' FLEXCUBE knowledge in the market. This has resulted in a vibrant partner ecosystem that is well appreciated by customers.

Subsidiaries

Your Company has subsidiaries in Greece, India, Republic of Chile, Republic of China, Republic of Mauritius, Singapore, The Netherlands and USA for sales and marketing and customer support in these regions.

The Ministry of Corporate Affairs has issued a General Circular No.: 2/2011 dated February 8, 2011 granting a general exemption to the companies stating that the provisions of Section 212 of the Companies Act, 1956 ("Act") shall not apply in relation to subsidiaries of companies subject to the company fulfilling certain conditions stated in the said circular. The Company is in compliance with the conditions stipulated by the Ministry of Corporate Affairs. Therefore, the accounts and related reports of the subsidiary companies are not attached to the Annual Report of the Company for the year ended March 31, 2014. The Company will make available the accounts and related information of the subsidiary companies upon request by any member / investor of the Company or its subsidiaries. Further, the accounts and related information of the subsidiary companies will be kept open for inspection by any Member, at the registered office of the Company and at the registered office of the subsidiaries during office hours of the Company / subsidiaries and the same will also be made available on the website of the Company www.oracle.com/financialservices

Fixed deposits

During the financial year 2013-2014, the Company has not accepted any fixed deposits within the meaning of Section 58A of the Companies Act, 1956, and as such, no amount of principal or interest was outstanding as of the date of the Balance Sheet.

Corporate governance

The Company has taken appropriate steps and measures to comply with all the corporate governance and related requirements as envisaged under Clause 49 of the Listing Agreement entered with stock exchanges and Section 292A of the Companies Act, 1956.

Your Company has constituted six committees consisting of Board Members and other senior officials of the Company, namely, Audit Committee, Compensation Committee, ESOP Allotment Committee, Transfer Committee, Shareholders'' Grievances Committee and Business Responsibility Committee. There is a separate report on Corporate Governance which forms a part of this Annual Report. A certificate of Statutory Auditors, M/s. S. R. Batliboi & Associates LLP, Chartered Accountants, with regard to compliance of conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement is annexed herewith. The Company is also supporting the Go Green initiative announced by the Ministry of Corporate Affairs allowing paperless compliance.

A certificate from the Managing Director & CEO and Chief Financial Officer of the Company confirming internal controls and checks pertaining to financial statements, as also declaring that all Board Members and senior managerial personnel have affirmed compliance with the Code of Ethics and Business Conduct for the financial year ended March 31, 2014, was placed before the Board of Directors and the Board has noted the same. The said certificate is annexed to the Directors'' report.

A list of the committees of the Board, names of their Members, scope and other related information are detailed in the Corporate Governance Report.

Business Responsibility Report

Securities and Exchange Board of India (SEBI) through circular dated August 13, 2012, has mandated the inclusion of Business Responsibility Report ("BR Report") as part of the Annual Report for the top 100 listed entities based on their market capitalization on BSE Limited and National Stock Exchange of India Limited as at March 31, 2012. The SEBI circular is effective from financial year ending on or after December 31, 2012. In line with the press release and FAQ''s dated May 10, 2013 issued by SEBI, the BR Report which forms part of this Annual Report has been hosted on the Company''s website www.oracle.com/financialservices. Members who wish to obtain a printed copy of the report, may write to the Company Secretary at the Registered Office of the Company.

Employee Stock Option Plan ("ESOP")

The Members at their Annual General Meeting held on August 14, 2001 approved grant of ESOPs to the employees / directors of the Company and its subsidiaries up to 7.5% of the issued and paid-up capital of the Company from time to time. This said limit was enhanced and approved up to 12.5% of the issued and paid-up capital of the Company from time to time, by the Members at their Annual General Meeting held on August 18, 2011. This extended limit is an all inclusive limit applicable for stock options granted in the past and in force and those that will be granted by the Company under this authorization.

Pursuant to ESOP scheme approved by the Members of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme ("Scheme 2002") for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier).

On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme ("Scheme 2010") for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).

Pursuant to ESOP scheme approved by the Members of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme ("Scheme 2011") for issue of 5,100,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2011, the Company has granted 1,935,500 options till March 31, 2014.

As per the above schemes, each of 20% of the total options granted will vest to the eligible employees and directors on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have exercise period of 10 years from the date of grant. The employee / directors pays the exercise price upon exercise of option.

All stock options under the Employee Stock Option Plans were granted at market price on the date of grant. Accordingly, we have calculated the compensation cost arising on account of stock options granted using the intrinsic value method. Hence, the disclosure in terms of Clause 12.1(n) of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, is not applicable.

The fair value of stock options granted during the financial year 2013-2014 under ESOP 2011 Scheme was Rs. 1,712 (granted on September 13, 2013), calculated as per the Black Scholes valuation model as stated in 23b in the notes to accounts.

The Company has recovered Perquisite Tax on the options exercised by the employees during the year.

Employee Stock Purchase Scheme ("ESPS")

The Company has the ESPS administered through a Trust ("the Trust") to provide equity based incentives to key employees of the Company. As per the scheme, the Trust can purchase shares of the Company from market using the proceeds of loans obtained from the Company. Such shares are allocated by the Trust to nominated employees at an exercise price, which approximates the fair value on the date of the grant. The shares vest in the employees over a period of five years and the employees can purchase the shares from the Trust over a period of ten years based on continued employment, until which, the Trust holds the shares for the benefit of the employees. The employees are entitled to receive dividends, bonus, etc., that may be declared by the Company from time to time for the entire portion of shares held by the Trust on behalf of the employees.

On the acceptance of the offer, the selected employee undertakes to purchase the shares from the Trust within ten years from the date of acceptance of the offer. In case an employee resigns from employment, the rights relating to vested shares, which are eligible for exercise, may be purchased by the employee by payment of the exercise price whereas, the balance shares are forfeited in favor of the Trust. The Trustees have the right of recourse against the employees for any amounts that may remain unpaid on the shares accepted by them. As of the balance sheet date, the Trust has repaid the entire loan obtained from the Company on receipt of payments from employees against shares exercised.

The Securities and Exchange Board of India (''''SEBI'''') has issued the Employee Stock Option Scheme and Stock Purchase Guidelines, 1999 (''''SEBI guidelines''''), which are applicable to stock purchase schemes for employees of all Indian listed companies. In accordance with these guidelines, the excess of market price of the underlying equity shares on the date of grant of the stock options over the exercise price of the options is to be recognized in the books of account and amortized over the vesting period. However, no compensation cost has been recorded as the scheme terms are fixed and the exercise price equals the market price of the underlying stock on the grant date.

A summary of the activities in the Company''s ESPS is as follows:

Human resources

Employees are our key assets and we continuously invest in them to retain our competitive edge. We have created a healthy and productive environment, together with a strong performance management system to encourage excellence. Our HR practices are among the best in the industry. Our people development initiative offers the best and latest in technology, finance domain and develops contemporary leadership attitude and practices in our employees.

Our total manpower at the end of March 2014 was 9,220 as compared to 9,969 as on March 2013 (including employees of the subsidiaries).

Corporate social responsibility

In May 2014, the Board has constituted the Corporate Social Responsibility Committee (''''CSR Committee'''') comprising Directors Mr. Chaitanya Kamat (Chairman of the Committee), Mr. S Venkatachalam and Ms. Samantha Wellington, as its members.

The CSR Committee shall prepare and recommend to the Board the Corporate Social Responsibility Policy ("CSR Policy"), recommend CSR activities and the amount the Company should spend on CSR activities, monitor the implementation of CSR Policy and activities from time to time, ensure compliance with all matters relating to CSR and provide regular updates to the Board.

Directors'' responsibility statement

As required under Section 217(2AA) of the Companies Act, 1956, for the financial year ended on March 31, 2014, the Directors hereby confirm that:

i. In preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

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; and

iv. The Directors have prepared the annual accounts on a ''going concern'' basis.

Auditors

The Members may note that, M/s. S. R. Batliboi & Associates LLP, Chartered Accountants (ICAI Firm Registration no. 101049W), were appointed as the Statutory Auditors of the Company by the Members at their Twenty Fourth Annual General Meeting held on August 14, 2013 to hold office till the conclusion of the ensuing Annual General Meeting. They have confirmed their eligibility and willingness to accept office as the Statutory Auditors and also confirmed that they have not been disqualified to be appointed as the Statutory Auditors at the ensuing Annual General Meeting.

Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the Rules framed thereunder, it is proposed to appoint M/s. S. R. Batliboi & Associates LLP, Chartered Accountants (ICAI Firm Registration no. 101049W), as the Statutory Auditors of the Company from the conclusion of ensuing Annual General Meeting till the conclusion of the Annual General Meeting to be held in the year 2017, subject to ratification of the appointment by the Members at every Annual General Meeting held after this Annual General Meeting.

Auditors'' Report

With regard to the Auditors'' comment in the CARO report concerning delays in payment of a few tax payments, e.g., Foreign Income Taxes, Foreign Value Added Tax and Foreign Withholding Tax, the Company would like to state the following:

i. The Company has engaged international tax experts in the interpretation of laws and regulations relating to corporate taxes and VAT in foreign countries. The Company has however, been continuously evaluating and accruing towards any material tax exposures in the books taking a conservative approach and payments are made based on the advice of the tax experts.

ii. The Company continually assesses Payroll Tax implications in various jurisdictions outside India on salaries and travel related reimbursements paid to its employees posted therein and accordingly makes accruals in the books. The Company is in the process of filing the returns for Payroll Tax in such jurisdiction for which the provision is already made in the books. As per the local laws of most host countries, the tax is payable by the employee, however in a few countries tax payment is a responsibility of the employer, which amounts to Rs. 23.57 million. The Company and the employees ensure tax compliance in such countries as advised by the tax consultants.

Conservation of energy, technology absorption and foreign exchange earnings and outgo

The particulars as prescribed under sub-section (1)(e) of Section 217 of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the relevant data pertaining to conservation of energy, technology absorption and foreign exchange earnings and outgo are furnished hereunder:

i. Conservation of energy and technology absorption:

The Company regularly strives to utilize newer technologies with the view to conserve the energy and create an environmentally friendly work environment. The initiatives taken by the Company are summarized below:

Desk-top / workstation refresh: During the year, we carried out a major refresh of the laptops and desktops across the Company to deploy modern and energy efficient workstations. This has brought about significant savings in power, strengthened IT Security architecture.

Communication Infrastructure: During the year, we further expanded the communication infrastructure with the objective to provide a seamless multi-channel communication to all our employees by significantly enhancing the video calling options. Apart from improving productivity, this helps in reducing carbon footprint by reducing the travel.

Virtualization: Virtualization has been further ingrained into the OFSS IT architecture, wherein the OFSS computing environment is almost completely virtualized. This has lead to better performance, better utilization of resources (i.e., space and power), increased operating efficiencies and leads to a greener work environment.

Energy Conservation: The Company has always been promoting usage of energy efficient devices. During the year, we significantly upgraded the lighting in the office areas with highly energy efficient devices leading to energy saving.

Green Initiatives: In line with our corporate philosophy, we have a special focus on green development of open areas around our offices. During the year, we significantly developed the open areas around our Pune offices by natural landscaping with water aeration using recycled water.

ii. Foreign exchange earnings and outgo:

(Amounts in Rs. million)

Foreign Exchange Earnings 30,232.59 (excluding reimbursement of travelling expenses)

Foreign Exchange Outgo 8,541.54 (including capital goods & other expenditure)

Activities relating to exports; initiatives taken to increase exports; development of new export markets for products and services; and export plans

Your Company has established an extensive global presence across leading markets through its sales and marketing network. We will continue to focus on tapping various potential markets available globally. Experienced sales and marketing specialists focus on building strong international business presence to develop new export markets for your Company.

Prospects

Banks around the world are witnessing new competition emerge as regulators in many countries, for example in India, China, UK, have started issuing new banking licenses to create or expand services of existing non-banking financial services companies. Non-traditional players with large consumer franchise such as retail and telco companies are launching new products and services in financial services business.

Financial institutions since the market events of 2008 face significant challenges on the regulatory front. In 2013, 30 directives were published and these impact - capital, liquidity, systemic risk, supervision, governance, remuneration, customer treatments, traded markets, accounting, crime and taxation at a financial institution.

Financial institutions now prepare to serve customers new and existing that have a very different expectation of "service" in the digitized world. The technology landscape for a financial institution is undergoing a sea change with increasing adoption of Social, Mobile, Big Data and the Cloud in the both segments i.e. consumer and enterprise.

Your Company has focused on delivering solutions to financial institutions that face unprecedented challenges, as well as opportunities. We enable financial institutions deliver a differentiated customer experience driven by deep customer insight, that is seamlessly available at any time and any place and on any channel. We provide the ability to evolve a sustainable framework for securely and efficiently keeping up with ever increasing regulations, and offering a resilient, scalable and cost effective business capability for servicing the customer needs.

The continuous planned investment in the applications and your Company''s access to Oracle''s technology provides a competitive edge in the address the opportunities in the market. Your Company''s applications are tested for performance on Oracle platforms to ensure best-in-class results to the banks when deployed together. Your Company is uniquely positioned to address the emerging requirements at Financial Institutions with the changes in the technology landscape and consumer expectations.

Employee particulars

Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 for the financial year ended on March 31, 2014 forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Act, the Directors'' Report and the Accounts are being sent to the Members excluding the statement giving particulars of employees under Section 217(2A) of the Act.

Members who wish to obtain a copy of the statement, may write to the Company Secretary at the Registered Office of the Company.

Acknowledgements

Your Directors take this opportunity to thank the Company''s customers, members, vendors and bankers for their continued support during the year. Your Directors also wish to thank the Government of India and its various agencies, Department of Electronics, the Software Technology Parks - Bangalore, Chennai, Mumbai, NOIDA and Pune, Special Economic Zone authorities at SEEPZ and Cochin, the Customs and Excise Department, Ministry of Commerce, Ministry of Finance, Ministry of External Affairs, Ministry of Corporate Affairs, Department of Telecommunication, the Reserve Bank of India, the State Governments of Maharashtra, Karnataka, Haryana and Tamil Nadu and other local Government Bodies, for their support and look forward to their continued support in the future.

Your Directors also place on record their appreciation for the excellent contribution made by employees of the Company through their commitment, competence, co-operation and diligence with a view to achieving consistent growth for the Company.

For and on behalf of the Board

S Venkatachalam

Chairman

July 24, 2014


Mar 31, 2013

Dear Members,

The Directors present their report on the business and operations of your Company along with the Annual Report and audited financial statements for the financial year 2012-2013.

Financial highlights

As per Indian GAAP Consolidated financial statements:

(Amounts in Rs. million)

Particulars Year ended Year ended March 31, 2013 March 31, 2012

Revenue from operations 34,739.99 31,466.76

Other income, net 4,595.44 4,217.49

Total income 39,335.43 35,684.25

Depreciation and amortization (655.02) (466.17)

Profit before exceptional item and tax 16,132.01 14,862.34

Exceptional item - (693.32)

Profit before tax 16,132.01 14,169.02

Tax expenses (5,380.58) (5,076.29)

Profit for the year 10,751.43 9,092.73

As per Indian GAAP Unconsolidated financial statements:

(Amounts in Rs. million)

Particulars Year ended Year ended March 31, 2013 March 31, 2012

Revenue from operations 29,377.01 26,058.54

Other income, net 4,403.20 3,750.34

Total income 33,780.21 29,808.88

Depreciation and amortization (586.08) (401.19)

Profit before exceptional items and tax 15,047.60 13,243.95

Exceptional items, net - 2,414.98

Profit before tax 15,047.60 15,658.93

Tax expenses (4,755.00) (4,766.60)

Profit for the year 10,292.60 10,892.33

Performance

On consolidated basis, your Company''s revenue, stood at Rs. 34,740 million this year, an increase of 10% from Rs. 31,467 million as compared to the previous financial year. The net income increased to Rs. 10,751 million this year, an increase of 18%.

On an unconsolidated basis, your Company''s revenue grew to Rs. 29,377 million during the financial year 2012-2013 from Rs. 26,058 million last year. This represents a growth of 13%. The Company''s profit for the financial year 2012-2013 has decreased to Rs. 10,293 million, a decrease of 5.5% over the previous financial year.

A detailed analysis of the financials is given in the Management''s discussion and analysis report that forms a part of this Directors'' report.

Dividend

The Board has decided to conserve the funds of the Company for organic and inorganic growth opportunities. Accordingly, the Board has decided not to declare a dividend for the financial year 2012-2013.

Transfer to reserves

The Company does not propose to transfer any amount to the General Reserve out of the amount available for appropriation. An amount of Rs. 52,548.64 million is proposed to be retained in the Profit & Loss Account.

Share capital

During the year, the Company allotted 91,721 equity shares of face value of Rs. 5/- each to its eligible employees, who exercised their options under the prevailing Employee Stock Option Schemes of the Company. As a result, as on March 31, 2013, the paid-up equity share capital of the Company was Rs. 420,327,390/- divided into 84,065,478 equity shares of face value of Rs. 5/- each.

Oracle''s holding in the Company

As on March 31, 2013, Oracle Global (Mauritius) Limited, the Promoter held 67,481,698 equity shares constituting 80.27% of the equity capital of the Company.

With reference to SEBI Guidelines including Clause 40A of the Listing Agreement on Minimum Public Shareholding of 25%, Oracle Global (Mauritius) Ltd. ("OGML"), the Promoter of the Company, had come out with an "Offer for Sale through the Stock Exchange Mechanism" on May 22, 2013 for reducing its holding from 80.27% to 75% as required. Pursuant to the said offer for sale, the shareholding of OGML as on May 24, 2013 was reduced to 75%. The current shareholding of OGML is 74.99% and the Company is in compliance with the SEBI Guidelines including Clause 40A of the Listing Agreement which requires a Minimum Public Shareholding of 25% of the paid-up capital.

Directors

Mr. Derek H Williams and Mr. Chaitanya Kamat, Directors of the Company, retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

The Board appointed Mr. Richard Jackson, Ms. Samantha Wellington and Mr. Harinderjit Singh as Additional Directors with effect from December 12, 2012, April 10, 2013 and July 10, 2013 respectively. They hold office up to the date of the ensuing Annual General Meeting. The Company has received Notices in writing from Members, pursuant to Section 257 of the Companies Act, 1956, proposing the candidature of Mr. Richard Jackson, Ms. Samantha Wellington and Mr. Harinderjit Singh for the office of a Director.

As stipulated under Clause 49 of the Listing Agreement entered into with the stock exchanges, brief resumes of the Directors proposed to be appointed/re-appointed, the nature of their expertise in specific functional areas and the names of companies in which they hold directorships and membership/chairmanship of Board Committees, etc. are provided in the Notice and/or Report on Corporate Governance forming a part of the Annual Report.

The Board recommends to the Members the resolutions for re-appointment of Mr. Derek H Williams and Mr. Chaitanya Kamat as Directors of the Company. The Board also recommends the appointment of Mr. Richard Jackson, Ms. Samantha Wellington and Mr. Harinderjit Singh as Directors.

Mr. William T Comfort, Jr., resigned as a Director and Chairman of the Company with effect from May 11, 2012. The Board appointed Mr. S Venkatachalam as the Chairman of the Board with effect from May 12, 2012. Mr. Frank Brienzi resigned as a Director of the Company with effect from July 2, 2013. The Board placed on record its appreciation of the services rendered by Mr. William T Comfort, Jr., and Mr. Frank Brienzi during their tenure as Directors of the Company.

Infrastructure

The Company maintains optimal infrastructure for its operations. The Company made significant addition to the communication infrastructure in the year to facilitate remote working and team collaboration.

Global alliances

Your Company furthered its commitment to expand its footprint through partners. In order to provide a specific focus, a dedicated group for consulting partners was established. This group nurtures a robust partner ecosystem and develops strategic partners with sound delivery capabilities in the consulting services around the products.

Specific programs have been designed to build the capability of the partners to deliver high quality implementation services. The programs support partners and end-customers through all stages; from identifying the right solution for the customers'' needs, progressing through the various stages of implementation cycle, and even after go-live.

Subsidiaries

Your Company has subsidiaries in Greece, India, Republic of Chile, Republic of China, Republic of Mauritius, Singapore, The Netherlands and USA for sales and marketing and customer support in these regions.

The Ministry of Corporate Affairs has issued a General Circular No.: 2/2011 dated February 8, 2011 granting a general exemption to the companies stating that the provisions of Section 212 of the Companies Act, 1956 ("Act") shall not apply in relation to subsidiaries of companies subject to the company fulfilling certain conditions stated in the said circular. The Company is in compliance with the conditions stipulated by the Ministry of Corporate Affairs. Therefore, the accounts and related reports of the subsidiary companies are not attached to the Annual Report of the Company for the year ended March 31, 2013. The Company will make available the accounts and related information of the subsidiary companies upon request by any member/investor of the Company or its subsidiaries. Further, the accounts and related information of the subsidiary companies will be kept open for inspection by any Member, at the registered office of the Company and at the registered office of the subsidiaries during office hours of the Company/subsidiaries and the same will also be made available on the website of the Company www.oracle.com/financialservices.

Fixed deposits

During the financial year 2012-2013, the Company has not accepted any fixed deposits within the meaning of Section 58A of the Companies Act, 1956, and as such, no amount of principal or interest was outstanding as of the date of the Balance Sheet.

Corporate governance

The Company has taken appropriate steps and measures to comply with all the corporate governance and related requirements as envisaged under Clause 49 of the Listing Agreement entered with stock exchanges and Section 292A of the Companies Act, 1956, except that there was a delay of 34 days beyond the specified time limit provided under clause 49{T)(C)(iy) in appointing a new Independent Director on the Board, after the resignation of an existing Independent Director.

Your Company has constituted five committees consisting of Board Members and other senior officials of the Company, namely, Audit Committee, Compensation Committee, ESOP Allotment Committee, Transfer Committee and Shareholders'' Grievances Committee. There is a separate report on Corporate Governance which forms a part of this Annual Report. A certificate of Statutory Auditors, M/s. S. R. Batliboi & Associates LLP, Chartered Accountants, with regard to compliance of conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement is annexed herewith. The Company is also supporting the Go Green initiative announced by the Ministry of Corporate Affairs allowing paperless compliance.

A certificate from the Managing Director & CEO and Chief Financial Officer of the Company confirming internal controls and checks pertaining to financial statements, as also declaring that all Board Members and senior managerial personnel have affirmed compliance with the Code of Ethics and Business Conduct for the financial year ended March 31, 2013, was placed before the Board of Directors and the Board has noted the same. The said certificate is annexed to the Directors'' report.

A list of the committees of the Board, names of their Members, scope and other related information are detailed in the Corporate Governance Report.

Business Responsibility Report

Securities and Exchange Board of India (SEBI) through circular dated August 13, 2012, has mandated the inclusion of Business Responsibility Report ("BR Report") as part of the Annual Report for the top 100 listed entities based on their market capitalization on BSE Limited and National Stock Exchange of India Limited as at March 31, 2012. The SEBI circular is effective from financial year ending on or after December 31, 2012. In line with the press release and FAQ''s dated May 10, 2013 issued by SEBI, the BR Report which forms part of this Annual Report has been hosted on the Company''s website www.oracle.com/financialservices. Members who wish to obtain a printed copy of the report, may write to the Company Secretary at the Registered Office of the Company.

Employee Stock Option Plan (''ESOP'')

The Members at their Annual General Meeting held on August 14, 2001 approved grant of ESOPs to the employees/directors of the Company and its subsidiaries up to 7.5% of the issued and paid-up capital of the Company from time to time. This said limit was enhanced and approved up to 12.5% of the issued and paid-up capital of the Company from time to time, by the Members at their Annual General Meeting held on August 18, 2011. This extended limit is an all inclusive limit applicable for stock options granted in the past and in force and those that will be granted by the Company under this authorization.

Pursuant to ESOP scheme approved by the Members of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme ("Scheme 2002") for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier).

On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme ("Scheme 2010") for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).

Pursuant to ESOP scheme approved by the Members of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme ("Scheme 2011") for issue of 5,100,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2011, the Company has granted 1,285,500 options till March 31, 2013.

As per the above schemes, each of 20% of the total options granted will vest to the eligible employees and directors on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have exercise period of 10 years from the date of grant. The employee/director pays the exercise price upon exercise of option.

The details of the options granted under the ESOP 2002, ESOP 2010 and ESOP 2011 Schemes to eligible employees/directors from time to time are given below:

Particulars Scheme Total

ESOP 2002 ESOP 2010 ESOP 2011

Number of options granted till March 31, 2013 5,167,920 638,000 1,285,500 7,091,420

Number of options lapsed* 614,725 245,883 89,950 950,558

Number of options exercised 4,439,915 36,254 24,215 4,500,384

Total number of options in force as on March 31, 2013 113,280 355,863 1,171,335 1,640,478

Pricing Formula At the market price as on the date of grant

Variation of terms of options None None None

* includes number of options forfeited.

The details of options granted to Directors and Senior Managerial Personnel under ESOP 2011 Scheme during the financial year ended March 31, 2013 are as follows:

Particulars Number of Options

i. Directors:

Mr. Chaitanya Kamat 100,000

Senior Managerial Personnel:

Mr. Atul Kumar Gupta 7,500

Mr. Avadhut Ketkar 3,000

Mr. Edwin N Moses 15,000

Mr. Hoshi D Bhagwagar 1,000

Mr. Kishore Kapoor 12,500

Mr. Makarand Padalkar 40,000

Mr. Manmath Kulkarni 17,250

Mr. Vikram Gupta 20,000

ii. Any other employee, who receives grant in any one year of option amounting to 5% or more of option granted during the year

Mr. Chaitanya Kamat 100,000

Mr. Makarand Padalkar 40,000

iii. Identified employees who were granted option, during any one year, equal to or exceeding 1% of the Nil issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant

iv. Diluted Earnings Per Share (EPS) pursuant to the issue of shares on exercise of option calculated in Rs. 121.96 accordance with Accounting Standard 20 ''Earnings Per Share'' issued by the Institute of Chartered Accountants of India

Had compensation cost for the Company''s ESOP been determined based on fair value at the grant dates, Company''s net profit and earnings per share would have been reduced to proforma amounts indicated below:

(Amounts in Rs. million, except per share data)

Particulars Year ended March 31, 2013

Profit as reported 10,292.60

Add: Employee stock compensation under intrinsic value method Nil

Less: Employee stock compensation under fair value method (385.97)

Proforma profit 9,906.63

Earnings Per Share Basic

As reported 122.52

Proforma 117.93

Diluted

As reported 121.96

Proforma 117.59

All stock options under the Employee Stock Option Plans were granted at market price on the date of grant. Accordingly, we have calculated the compensation cost arising on account of stock options granted using the intrinsic value method. Hence, the disclosure in terms of Clause 12.1(n) of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, is not applicable.

A summary of the activities in the Company''s ESOP 2002, ESOP 2010 and ESOP 2011 Schemes are as follows:

Particulars ESOP 2002 ESOP 2010 Shares arising Weighted Shares arising Weighted from options average from options average exercise price exercise price

(Rs.) (Rs.)

Outstanding at beginning of year 145,212 1,721 428,344 2,064

Granted - - - -

Exercised (31,932) 1,290 (35,574) 2,050

Forfeited - - (36,907) 2,050

Outstanding at end of the year 113,280 1,843 355,863 2,066

Vested options 77,280 121,853

Unvested options 36,000 234,010

Particulars Year ended March 31, 2013 ESOP 2011 Shares arising Weighted from options average exercise price (Rs.)

Outstanding at beginning of year 617,500 1,937

Granted 645,000 3,131

Exercised (24,215) 1,964

Forfeited (66,950) 1,984

Outstanding at end of the year 1,171,335 2,591

Vested options 88,935

Unvested Options 1,082,400

The weighted average share price for the year over which stock options were exercised was Rs. 2,859. Money realized by exercise of options during the financial year 2012-2013 was Rs. 161,669,419.

The details of options unvested and options vested and exercisable as on March 31, 2013 are as follows: Exercise price Number of options Weighted average Weighted average (Rs.) exercise price remaining contractual (Rs.) life (Years)

Options unvested 1,930 408,400 1,930 8.7

2,032 32,000 2,032 8.7

2.050 218,010 2,050 7.4

2.333 36,000 2,333 7.6

2.342 16,000 2,342 8.3

3,127 627,000 3,127 9.9

3,320 15,000 3,320 9.8

Options vested and exercisable 1,291 53,280 1,291 3.1

1,930 88,935 1,930 8.7

2.050 117,853 2,050 7.4

2.333 24,000 2,333 7.6

2.342 4,000 2,342 8.3

1,640,478 2,426 8.7

The fair value of stock options granted during the financial year 2012-2013 under ESOP 2011 Scheme was Rs. 1,912 (granted on January 14, 2013) and Rs. 1,762 (granted on February 5, 2013), calculated as per the Black Scholes valuation model as stated in 24b in the notes to accounts.

The Company has recovered Perquisite Tax on the options exercised by the employees during the year.

Employee Stock Purchase Scheme (''ESPS'')

The Company has the ESPS administered through a Trust ("the Trust") to provide equity based incentives to key employees of the Company. As per the scheme, the Trust can purchase shares of the Company from market using the proceeds of loans obtained from the Company. Such shares are allocated by the Trust to nominated employees at an exercise price, which approximates the fair value on the date of the grant. The shares vest in the employees over a period of five years and the employees can purchase the shares from the Trust over a period of ten years based on continued employment, until which, the Trust holds the shares for the benefit of the employees. The employees are entitled to receive dividends, bonus, etc., that may be declared by the Company from time to time for the entire portion of shares held by the Trust on behalf of the employees.

On the acceptance of the offer, the selected employee undertakes to purchase the shares from the Trust within ten years from the date of acceptance of the offer. In case an employee resigns from employment, the rights relating to vested shares, which are eligible for exercise, may be purchased by the employee by payment of the exercise price whereas, the balance shares are forfeited in favor of the Trust. The Trustees have the right of recourse against the employees for any amounts that may remain unpaid on the shares accepted by them. As of the balance sheet date, the Trust has repaid the entire loan obtained from the Company on receipt of payments from employees against shares exercised.

A summary of the activities in the Company''s ESPS is as follows:

(Number of shares)

Particulars Year ended Year ended March 31, 2013 March 31, 2012

Opening balance of unallocated shares 166,142 166,142

Shares forfeited during the year - -

Closing balance of unallocated shares 166,142 166,142

Opening balance of allocated shares 18,817 29,081

Shares exercised during the year (16,067) (10,264)

Shares forfeited during the year - -

Closing balance of allocated shares 2,750 18,817

Shares eligible for exercise 2,750 18,817

Shares not eligible for exercise - -

Total allocated shares 2,750 18,817

Human resources

Employees are our key assets and we continuously invest in them to retain our competitive edge. We have created a healthy and productive environment, together with a strong performance management system to encourage excellence. Our HR practices are among the best in the industry. Our people development initiative offers the best and latest in technology, finance domain and develops contemporary leadership attitude and practices in our employees.

Our total manpower at the end of March 2013 was 9,969 as compared to 9,682 as on March 2012 (including employees of subsidiaries).

Directors'' responsibility statement

As required under Section 217(2AA) of the Companies Act, 1956, for the financial year ended on March 31, 2013, the Directors hereby confirm that:

i. In preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

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; and

iv. The Directors have prepared the annual accounts on a ''going concern'' basis.

Auditors

The Members may note that, S.R. Batliboi & Associates, Chartered Accountants (Registration no. 101049W), were appointed as the Statutory Auditors of the Company by the Members at their Twenty Third Annual General Meeting held on August 17, 2012 to hold office till the conclusion of the ensuing Annual General Meeting. They have vide letter dated April 1, 2013 intimated the Company about the change in their name pursuant to their conversion as a Limited Liability Partnership. Consequently, their name is changed from "S.R. Batliboi & Associates" to "S.R. Batliboi & Associates LLP" with effect from April 1, 2013. This change of name does not affect their rights and obligations as the Statutory Auditors of the Company. Further, they have confirmed their eligibility and willingness to accept office, if appointed as the Statutory Auditors at the ensuing Annual General Meeting.

Auditors'' Report

With regard to the Auditors'' comment in the CARO report concerning delays in payment of a few tax payments, e.g., Foreign Income Taxes, Foreign Value Added Tax and Foreign Withholding Tax, the Company would like to state the following:

i. The Company has engaged international tax experts in the interpretation of laws and regulations relating to corporate taxes and VAT in foreign countries. The Company has however, been continuously evaluating and accruing towards any material tax exposures in the books taking a conservative approach and payments are made based on the advice of the tax experts.

ii. The Company continually assesses Payroll Tax implications in various jurisdictions outside India on salaries and travel related reimbursements paid to its employees posted therein and accordingly makes accruals in the books. The Company is in the process of filing the returns for Payroll Tax in such jurisdiction for which the provision is already made in the books. As per the local laws of most host countries, the tax is payable by the employee, however in a few countries tax payment is a responsibility of the employer, which amounts to Rs. 3.94 crore. The Company and the employees ensure tax compliance in such countries as advised by the tax consultants.

Conservation of energy, technology absorption and foreign exchange earnings and outgo

The particulars as prescribed under sub-section (1)(e) of Section 217 of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the relevant data pertaining to conservation of energy, technology absorption and foreign exchange earnings and outgo are furnished hereunder:

i. Conservation of energy and technology absorption:

The Company regularly strives to utilize newer technologies with the view to conserve the energy and create an environmentally friendly work environment. The initiatives taken by the Company are summarized below:

Data Center Consolidation: During the year, we consolidated and modernized our data centers. This has brought about significant business benefits such as space and power conservation, strengthened IT Security architecture and a reduced network complexity.

Disaster recovery: A significant technology overhaul for the backup and restoration technology was undertaken during the year. This has significantly reduced the backup media requirement for a greener work environment. This eventually leads to cost benefits due to decrease in efforts, lesser number of tapes required for the same back up, longer tape life, as well as lower probability of human error.

VOIP: During the year, we carried out a complete upgrade of the communication infrastructure with the objective to provide a seamless multi-channel communication to all our employees. The new infrastructure supports a mobile office that enables employees to work flexibly out of any location. This initiate has resulted in significant direct as well as indirect cost benefits to the business. This has also been beneficial in reducing carbon footprint by reducing the travel cost.

Virtualization: Virtualization has been further ingrained into the OFSS IT architecture, wherein the OFSS computing environment is almost completely virtualized. This has lead to better performance, better utilization of resources (i.e., space and power), increased operating efficiencies and leads to a greener work environment.

Asset disposal: Disposal of End of Life equipment has been centralized and standardized uniformly across the Company and follows the best global practices. Secure means of disposal have been adopted which helps secure e-waste as per the government guidelines as well as ensures complete cleansing of any kind of confidential information.

Technology advancements supplemented by enhanced operating efficiencies result in synchronized benefits to the organization, blending in cost efficiency along with environment sustenance.

ii. Foreign exchange earnings and outgo:

(Amounts in Rs. million)

Foreign Exchange Earnings 28,094.87

(excluding reimbursement of travelling expenses)

Foreign Exchange Outgo 8,533.71

(including capital goods & other expenditure)

Activities relating to exports; initiatives taken to increase exports; development of new export markets for products and services; and export plans:

Your Company has established an extensive global presence across leading markets through its sales and marketing network. We will continue to focus on tapping various potential markets available globally. Experienced sales and marketing specialists focus on building strong international business presence to develop new export markets for your Company.

Prospects

The prolonged period of slower growth in the global economy has impacted banking operations. Banks are coping and realigning to earn, sustain and grow their businesses. The increasing influence of new consumer and banking regulations in the past 24 months across countries continues to add to the existing challenges banks face.

Oracle is simplifying IT by engineering hardware and software to work together-from servers and storage to the database and middleware to applications. The idea behind Oracle''s integrated technology stack is that the whole is greater than the sum of the parts. There are best-of-breed products throughout the stack, and every product and every layer of the technology stack are designed and engineered to work together. That''s not all. Integrated solutions engineered for specific industries make delivering IT simpler. In the past years, your Company invested to build the Oracle Banking Platform to leverage this vision. The general availability of Oracle Banking Platform for banks to deploy was announced in September 2012. The new offering already has gained the first two deployments in Asia. Oracle Banking Platform strengthens the portfolio and capability of your Company to address replacements at Tier 1 Retail Banking Institutions in Europe, North America and Asia.

Your Company in the last fiscal year stayed focused to deliver solutions to banks in countries that faced significant challenges. The Oracle Financial Analytical Applications Suite has helped your Company deliver and engage in multi-year transformation projects at Tier 1 banks. The application suite now supports new regulations for FATCA, Capital Adequacy and Stress Testing. Your Company along with Oracle is well placed to address the opportunity at banks by providing the application that is complete and optimized on Oracle Hardware along with the necessary services.

Your Company announced the availability of Oracle FLEXCUBE 12.0 during the year. This release enables more personalized and convenient service to customers across all channels. It also offers a harmonized infrastructure and open development environment that allows more flexible deployment options and upgrade paths. With this release, your Company made a strategic shift including new versions Oracle FLEXCUBE Private Banking and Oracle FLEXCUBE Direct Banking along with Oracle FLEXCUBE 12.0. The past year we did see an increasing number of partners who have invested to train, certify and provide services around Oracle FLEXCUBE 12.0 to banks that deploy. Oracle FLEXCUBE customers have leveraged the extreme performance on Oracle Exadata and Oracle Exalogic for their operations.

Your Company''s products continue to win accolades from the international analyst community for its leadership and execution capability. Banking Technology named Oracle FLEXCUBE the Best Core Banking Product for 2012. Banks who have deployed your Company''s products have won the recognition too. EcoBank won the Euromoney Award for the Best Bank in Africa. Mashreq Bank''s FLEXCUBE deployment won the Asian Banker Technology Award for the Best Core Banking Implementation in the Middle East.

Consulting Services provided by your Company are very valued by the banks. This continues to play a key and vital role in your Company''s annual revenue and profitability each year. Support services for our applications continue to grow and banks see this service as vital for operations at their banks.

Employee particulars

Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 for the financial year ended on March 31, 2013 forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Act, the Directors'' Report and the Accounts are being sent to the Members excluding the statement giving particulars of employees under Section 217(2A) of the Act.

Members who wish to obtain a copy of the statement, may write to the Company Secretary at the Registered Office of the Company.

Acknowledgements

Your Directors take this opportunity to thank the Company''s customers, members, vendors and bankers for their continued support during the year. Your Directors also wish to thank the Government of India and its various agencies, Department of Electronics, the Software Technology Parks - Bangalore, Chennai, Mumbai, NOIDA and Pune, Special Economic Zone authorities at SEEPZ and Cochin, the Customs and Excise Department, Ministry of Commerce, Ministry of Finance, Ministry of External Affairs, Ministry of Corporate Affairs, Department of Telecommunication, the Reserve Bank of India, the State Governments of Maharashtra, Karnataka, Haryana and Tamil Nadu and other local Government Bodies, for their support and look forward to their continued support in the future.

Your Directors also place on record their appreciation for the excellent contribution made by employees of the Company through their commitment, competence, co-operation and diligence with a view to achieving consistent growth for the Company.

For and on behalf of the Board

S Venkatachalam

Chairman

July 11, 2013

 
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