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Directors Report of Nucleus Software Exports Ltd.

Mar 31, 2017

Dear Members,

The are pleased to present your Company’s Twenty Eighth Annual Report, together with the Audited Statement of Accounts, for the year ended March 31, 2017.

1. RESULTS OF OPERATIONS - Financial Results

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 (“2013 Act”), as applicable and guidelines issued by the Securities and Exchange Board of India (“SEBI”). Accounting policies have been consistently applied except where a newly issued accounting standard, if initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an ongoing basis. The Company has nine subsidiary companies across the globe. The Company discloses stand-alone audited financial results on a quarterly and annual basis, consolidated un-audited financial results on a quarterly basis and consolidated audited financial results on an annual basis.

a) Consolidated Operations

Revenue from consolidated operations for the year was Rs.372.39 crore, as compared to Rs.348.70 crore in the previous year. As the Company continued its focus on strategic initiatives for new products, focused sales and market development and hiring of senior experienced personnel to help drive transformation, the overall operational expense for the year continued to be high at Rs.320.64 crore, against Rs.318.51 crore in the previous year. The Operating Profit (EBITDA) was at Rs.51.75 crore, 14% of revenue, against Rs.30.19 crore, 9% of revenue, in the previous year. Profit after Tax for the year was higher at Rs.62.69 crore, 17% of revenue, against Rs.32.47 crore, 9% of revenue, in the previous year.

The consolidated financial results are as below: (Rs. in crore)

For the Year Ended March 31,

2017

% of Revenue

2016

% of Revenue

Income from Operations

372.39

100.00

348.70

100.00

Expenses

a) Employee benefit expense

245.26

65.86

226.84

65.05

b) Travel expense

13.18

3.54

20.99

6.02

c) Finance costs (Bank charges)

0.54

0.15

0.62

0.18

d) Other expenses

61.66

16.56

70.06

20.09

Total Expense

320.64

86.10

318.51

91.34

Operating Profit (EBITDA)

51.75

13.90

30.19

8.66

Depreciation

11.21

3.01

12.22

3.50

Operating Profit after Interest and Depreciation

40.54

10.89

17.97

5.15

Other Income

30.33

8.14

25.08

7.19

Foreign Exchange Gain/ (Loss)

(0.48)

(0.13)

0.83

0.24

Profit Before Tax

70.39

18.90

43.88

12.58

Taxation

7.70

2.07

11.41

3.27

Profit After Tax

62.69

16.83

32.47

9.31

b) Standalone Operations

Revenue from the standalone operations for the year was Rs.299.35 crore against Rs.278.17 crore in the previous year. Total operational expense for the year was Rs.266.38 crore against Rs.265.24 crore in the previous year, an increase of 0.4%.

Operating Profit (EBITDA) for the year was at Rs.32.97 crore, 11% of revenue, against Rs.12.93 crore, 5% of revenue, in the previous year. Profit after Tax for the year was at Rs.47.82 crore, 16% of revenue, against Rs.44.66 crore, 16% of revenue in the previous year.

Standalone financial results are as below: (Rs. in crore)

For the Year Ended March 31,

2017

% of Revenue

2016

% of Revenue

Income from Operations

299.35

100.00

278.17

100.00

Expenses

a) Employee benefit expense

176.57

58.98

166.02

59.68

b) Travel expense

11.01

3.68

17.04

6.13

c) Finance costs (Bank charges)

0.35

0.12

0.43

0.15

d) Other expenses

78.45

26.21

81.75

29.39

Total Expense

266.38

88.99

265.24

95.35

Operating Profit (EBITDA)

32.97

11.01

12.93

4.65

Depreciation

10.27

3.43

10.91

3.92

Operating Profit after Interest and Depreciation

22.70

7.58

2.02

0.73

Other Income

29.41

9.82

50.40

18.12

Foreign Exchange Gain/ (Loss)

(0.17)

(0.06)

0.33

0.12

Profit Before Tax

51.94

17.35

52.75

18.96

Taxation

4.12

1.38

8.09

2.91

Profit After Tax

47.82

15.97

44.66

16.05

A detailed analysis on the Company’s performance, both consolidated and standalone, is included in “Management’s Discussion and Analysis” Report, which forms part of this Annual Report.

2. SHARE CAPITAL

Issued and Paid-up Share Capital

The paid-up share capital of the Company, as on March 31, 2017, is 32,383,724 equity shares of Rs.10 each, similar to the paid-up share capital as on March 31, 2016.

Shares under Compulsory Dematerialization

The shares of the Company are under compulsory dematerialization (“Demat”) category and are available for trading on both the depositories in India viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Out of the entire paid up shares, i.e. 32,383,724 shares, 99.59% are in dematerialized form as at March 31, 2017. The International Securities Identification Number (ISIN) allotted to the Company’s shares is INE096B01018.

3. LISTING

Your Company is listed at National Stock Exchange of India Ltd. and BSE Ltd.

Stock Exchange where Company shares are listed

Scrip Symbol / Code

National Stock Exchange of India Ltd. (NSE) w.e.f. December 19, 2002

NUCLEUS

BSE Ltd. (BSE) w.e.f. November 6, 1995

531209

4. LIQUIDITY AND CASH EQUIVALENTS

Your Company continues to retain its debt-free status and maintains sufficient cash and cash equivalents to meet future strategic initiatives. The Company has been conservative in its investment policy over the years, maintaining a reasonably high level of cash and cash equivalents which enable the Company to completely eliminate short and medium term liquidity risks, and at the same time also help scale up operations at a short notice. The goal of cash management at Nucleus is to:

a. Use cash to provide sufficient working capital to manage business operations of the Company to be able to add value to all our stakeholders and continuously enhance the same.

b. Maintain sufficient cash as reserves that will aid the Company in capturing meaningful business opportunities, including acquisitions.

c. Invest surplus funds in low-risk bank deposits, debt schemes of mutual funds, preference shares and tax free secured bonds of Public Sector Enterprises.

Cash and cash equivalents including current investments at a consolidated level of Rs.293.40 crore, constitute 69% of the shareholders’ funds at the year end, against Rs.237.48 crore, 49% of the shareholders’ funds at the close of the previous year. In addition, the Company holds tax-free bonds issued by public sector enterprises on a ‘hold to maturity’ basis of a face value of Rs.77.74 crore against Rs.77.74 crore in the previous year, long-term fixed maturity plans of mutual funds of Rs.52.51 crore against Rs.27.00 crore last year, preference shares of Rs.51.06 crore against Rs.14.91 crore last year and debentures of Rs.5.00 crore against Rs.NIL in the previous year.

5. DIVIDEND

The Dividend Policy of your Company stipulates a dividend payout in the range of 15-30% of the profits available for distribution, subject to:

a) Provisions of The Companies Act, 2013 and other applicable laws, and

b) Cash flows of the Company

We are pleased to state that for the 17th consecutive year, your Company has recommended a dividend. The proposed dividend for the year is 50% (Rs.5.00 per equity share of Rs.10 each). Last year, the dividend paid was also 50% (Rs.5.00 per equity share of Rs.10 each). Dividend is subject to the approval of shareholders at the forthcoming Annual General Meeting. If approved, the total dividend payout will be Rs.16.19 crore, against payout of Rs.32.38 crore in the previous year (Rs.16.19 crore was paid as final dividend for FY 14-15 in July 2015 and Rs.16.19 crore was paid as interim dividend for FY 15-16 in March 2016) .

The Register of Members and Share Transfer Register shall remain closed during the period July 3 - July 8, 2017 (both days inclusive) for the purpose of Annual General Meeting and payment of dividend. The dividend, if approved at the Annual General Meeting , will be payable to such members whose names appear on the Register of Members of the Company and as beneficial owners in the records of National Securities Depositories Ltd. and Central Depository Services ( India) Ltd., at close of business hours as on July 1, 2017.

6. BUY BACK OF EQUITY SHARES

The Board of Directors at their meeting held on April 25, 2017, approved, subject to the approval of regulatory authorities, shareholders, Companies Act 2013, the Securities and Exchange Board Of India (Buyback of Securities) Regulations, 1998, as amended (the “Buyback Regulations”) and such applicable acts or rules including amendments if any, a Buyback of up to an aggregate amount not exceeding Rs.117.79 crore (representing 25% of the paid up share capital and free reserves as on March 31, 2017) (“Maximum Offer Size”) at a price not exceeding Rs.350 per equity share (“Maximum Buyback Price”), from the existing equity shareholders of the Company on the Record Date to be determined on a proportionate basis through the “Tender Offer” route as prescribed under the SEBI Buyback Regulations. The Promoters have undertaken not to tender any shares in the offer.

At the maximum offer price of Rs.350 per equity share and for the maximum offer size of Rs.117.79 crore, the indicative maximum number of equity shares that can be bought back would be fully paid up 3,365,523 equity shares representing 10.39% of the total paid up equity share capital of the Company. In case the final Buyback price is lower than the maximum Buyback price, the indicative maximum number of shares will also go up accordingly.

The current Buyback is a capital allocation decision taken with the objective of using some of the cash reserves, seeking a fairer valuation of the Company’s stock, improving the Company’s Return on Equity and increasing shareholder value in the longer term.

7. INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to applicable provisions of the Companies Act 2013, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules 2016 (‘the Rules’) all unpaid or unclaimed dividends are required to be transferred by the Company to the IEPF Account established by the Central Government, after completion of seven years. Further, according to the Rules, the shares in respect of which dividend has not been paid or claimed by the members for seven consecutive years or more shall also be transferred to the Demat account created by IEPF Authority. Accordingly, the Company has transferred all unclaimed and unpaid dividends. Further, the details of the shares that will be transferred as per the requirement of the IEPF Rules, is provided on Company’s website http://www.nucleussoftware.com/investors.

8. DEPOSITS FROM PUBLIC

Your Company has not accepted any deposits from public covered under Chapter V of the Companies Act, 2013 and, as such, no amount of principal or interest was outstanding on the date of the Balance Sheet.

9. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, is provided as Annexure I to this Directors’ Report.

10. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

Particulars of contracts or arrangements with related parties in the prescribed Form AOC-2, are provided as Annexure A to this Directors’ Report.

The Company policy for determining ‘Material Subsidiaries’ and on ‘Related Party Transactions’, as approved by the Board can be accessed on the Company website link: http://www.nucleussoftware.com/investors.

11. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are provided in the notes to the Financial Statements.

12. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THE COMPANY BETWEEN THE END OF FINANCIAL YEAR 2017 AND DATE OF THIS REPORT

No material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company.

13. CHANGE IN THE NATURE OF BUSINESS

There has been no change in the nature of business of the Company.

14. MANAGEMENT DISCUSSION & ANALYSIS

As per requirements of Regulation 34 of Securities and Exchange Board of India (Listing Obligations and Disclosures) Regulations 2015, the Management’s Discussion and Analysis of the financial condition and results of both standalone and consolidated operations have been provided separately in this Annual Report.

15. REVIEW OF BUSINESS & OUTLOOK

Your Company continues its journey as a preferred partner for banking and financial organizations worldwide, providing innovative and pioneering products, services and solutions. Continuing the relentless focus on customer success, your Company launched a range of innovative solutions during the year.

As technology continues to evolve rapidly and permeate more layers of business operations, digital solutions have become an integral component of the growth roadmaps for most enterprises. Packaged software was the fastest growth segment (6.2%) in 2016. Investments are being done on applications that facilitate enterprise and IT operations, such as enterprise resource management and operations & manufacturing applications, collaborative applications, SaaS, etc.

The Indian IT sector is expected to grow at a rate of 12-14 per cent for FY 2017-18 in constant currency terms. The sector is also expected triple its current annual revenue to reach US$ 350 billion by FY 2025 (source: Nasscom). On the other hand, the public cloud services market in India is slated to grow 35.9 per cent to reach US$ 1.3 billion according to IT consultancy, Gartner.

The most successful banks in the future will be those that understand the tremendous power of technology and use it to transform their lending businesses. Delivering great customer experiences and living up to the needs of digital banking are some of the business challenges that banks face today. The pace of technological change will not slow down and the tech sector as a whole must continue to seek the answer to achieve seamless integration and communication between products and platforms.

16. NEW PRODUCT LAUNCHES

Your Company’s flagship product FinnOne Neo™ was launched on cloud and is already a success in the domestic market. By providing FinnOne Neo™ on cloud, we are making one of the best lending software more affordable, quickly deployable and scalable as per our customer’s business requirements.

Your Company has also launched Collections module as part of FinnOne Neo™ Lending Suite. Collections module is aimed at automating the collection operation in a financial institution, increase collection efficiency and thereby also reduce delinquency.

As a part of ongoing development program, your Company also launched FinnAxia™ 4.0, the latest version of its next-generation integrated transaction banking product suite. This new product suite includes extended compliance to global and regional regulations; increased flexibility for corporate treasurer for greater control, visibility, management of liquidity and enhanced capabilities to digitize the financial value chain of supplier’s-buyer’s-dealer’s thereby creating a business network for collaborative commerce leading to working capital optimization.

During the year, PaySe™, the world’s first offline digital cash solution innovated by your Company in the previous year, was made available in 3 new form factors: smart watch, band and micro SD. With this, we can now cater to consumers more effectively. During the year, we also launched an innovative project with an esteemed education institution in India.

Your Company remains committed to providing its existing and potential customers with competitive and cuffing-edge products and will continue to focus on investments in product innovation and business expansion.

17. NOTABLE ACCOLADES RECEIVED DURING THE YEAR

- bob Finance and FinnOne™ win The Banking Technology Award 2016, bob Finance AG, a financial service company in Switzerland deployed Nucleus Software’s FinnOne™ for offering an innovative and completely digitized loan service. This implementation won The Banking Technology Award 2016 - Highly Commended for Best Use of IT in Lending.

18. SUBSIDIARY COMPANIES

Your Company has nine subsidiaries across the globe. There are no associate companies or joint venture companies within the meaning of Section 2(6) of the Companies Act, 2013 (“Act”).

The following table provides a list of all these subsidiaries as on March 31, 2017:

Name of Subsidiary

Location

Date of Incorporation/ Acquisition

Percentage of Shareholding

Nucleus Software Solutions Pte. Ltd.

Singapore

February 25, 1994

100%

Nucleus Software Inc.

USA

August 5, 1997

100%

Nucleus Software Japan Kabushiki Kaisha

Japan

November 2, 2001

100%

VirStra i- Technology Services Ltd.

India

May 6, 2004

100%

Nucleus Software Netherlands B.V.

Netherlands

February 3, 2006

100%

Nucleus Software Ltd.

India

April 21, 2008

100%

Nucleus Software Australia Pty. Ltd.

Australia

February 3, 2014

100%

Nucleus Software South Africa Pty. Ltd.

South Africa

February 10, 2015

100%

Avon Mobility Solutions Pvt. Ltd.

India

March 17, 2016 (Date of Acquisition)

96%

There has been no material change in the nature of the business of the subsidiaries.

A statement containing the salient features of the financial statement of our subsidiaries in the prescribed form AOC 1 is provided as Annexure B to this Directors’ Report. The statement also provides the details of performance, financial position of each of the subsidiaries.

Further, pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company.

a) Nucleus Software Solutions Pte. Ltd.

Nucleus Software Solutions Pte. Ltd. (NSS) is based in Singapore. It was incorporated in 1994 to expand the Company’s business in South East Asia. Currently, it is the central entity for Asia-Pacific excluding Japan and Australia with responsibility for business development, sales and software development services for customers in the region.

b) Nucleus Software Inc.

Nucleus Software Inc. (NSI) is based in New Jersey, USA. It was incorporated in 1997 for providing business presence in the Americas. NSI operates as a business development and sales hub for the region.

c) Nucleus Software Japan Kabushiki Kaisha

Nucleus Software Japan Kabushiki Kaisha (NSJKK) is based in Tokyo, Japan. It was incorporated in 2001 to expand business in the country. NSJKK operates as a business development and sales hub for Japan. Additionally the subsidiary provides software development services, to the local customers in Japan.

d) VirStra i- Technology Services Ltd.

VirStra i- Technology Services Ltd. is based in Pune, India. It was incorporated in 2004 to provide software development services, targeted at the Japanese market.

e) Nucleus Software Netherlands B.V.

Nucleus Software Netherlands B.V. (NSBV) is based in Amsterdam, The Netherlands. It was incorporated in 2006 for enlarging business presence in the European market. NSBV is a business development and sales hub for Nucleus in Europe.

f) Nucleus Software Ltd.

Nucleus Software Ltd. (NSL) has operations in Jaipur with registered office in New Delhi. It was incorporated in 2008 for facilitating delivery to larger clients through operations in a Special Economic Zone. NSL acquired 17.41 acre of land in the Mahindra World Special Economic Zone, Jaipur and has co-developed a 250-seater facility.

g) Nucleus Software Australia Pty. Ltd.

Nucleus Software Australia Pty. Ltd. (NSA) is based in Sydney, Australia. It was incorporated in 2014 for tapping the growing business opportunities in ANZ region. NSA operates as a business development and sales hub for the region. Additionally the subsidiary provides software development services, to the local customers in Australia.

h) Nucleus Software South Africa Pty. Ltd.

Nucleus Software South Africa Pty. Ltd. (NSSA) is based in Johannesburg, South Africa. It was incorporated in 2015 for tapping the growing business opportunities in South African region. NSSA operates as a business development and sales hub for the region.

i) Avon Mobility Solutions Pvt. Ltd.

Avon Mobility Solutions Pvt. Ltd, is based in Chennai and has very good experience in logistics domain and expertise in developing mobile applications.

Avon Mobility Solutions Pvt. Ltd. became subsidiary of your Company on March 17, 2016.

19. INFRASTRUCTURE

Your Company, along with its subsidiaries, has offices at several locations across the globe. The office space and seating capacity of these offices as on March 31, 2017 is detailed below:

Office Location

Area in Sq. ft.

Seating Capacity - No. of Persons

India

NOIDA

2,08,122

1,677

Jaipur

22,312

250

Pune

9,573

114

Chennai

8,100

67

New Delhi

4,200

40

Mumbai

3,250

31

Overseas

Singapore

4,807

61

Dubai, UAE

1,290

17

Tokyo, Japan

735

15

Johannesburg, South Africa

1,605

8

Manila, Philippines

151

2

Jakarta, Indonesia

97

3

London, UK

226

2

Sydney, Australia

130

2

California, USA

100

2

2,64,698

2,291

NOIDA, New Delhi and Jaipur premises are owned by the Company and its subsidiaries. In Chennai we have two offices, out of which one office is for Avon Mobility Solutions Pvt. Ltd, subsidiary of the Company.

20. QUALITY PROCESSES

Your Company is committed to ensure the highest level of quality for its products and services. The key focus for this year was to synchronize the quality processes with the transformational journey of the organisation and optimize the cost of quality. Process improvement initiatives were centred on ‘Process Optimization’. The FinnEdge implementation methodology has been successfully implemented in multiple projects and has started to pay dividends. FinnEdge covers various aspects of the project from ‘Value Creation to Value Realization’ and from ‘Project Discovery’ to ‘Project Implementation’ to ‘Project Upgrade’. Additional focus is on increasing product quality by early detection of Risks and Defects.

A dedicated Quality Assurance team handles the process change management, implementation and it’s adherence across the organization. The Quality Assurance team monitors quality and productivity improvements through audits and dashboard reporting.

21. BRAND VISIBILITY

In FY 2017, your Company continued to grow its marketing operations and activities in support of its strategic aspirations.

During the year, the Company moved forward on its agenda of growth into new markets around the world by establishing brand awareness and generating demand from focused target segments. Your Company is continually investing in marketing, with the below objectives:

- Ensure that your Company is known to provide high quality, innovative lending and transaction banking solutions to the target markets.

- Establish your Company as an Industry Thought Leader.

- Equip the sales team fully with the material and tools required to sell the product or service they represent.

Industry Interactions

To showcase our expertise and product offerings, your Company continued to participate in the leading industry events and business forums worldwide.

In Europe, we exhibited at ‘Sibos 2016’, the world’s premier financial services event in Geneva and engaged in insightful discussions with leading bankers on the key trends that are shaping the transaction banking Industry. In Africa, we sponsored the ‘3rd Annual West Africa International Retail Banking Dialogue 2016’ in Nigeria, organized by The Asian Banker in Nigeria. PaySe, our offline digital cash solution, showcased its offering at the ‘Cards & Payments 2016’ in Kenya. We also hosted leading bank executives for an exclusive round table on ‘Adapting to the Pace of Change’ in Australia. We participated in the ‘Australian Retail Banking Summit 2016’, organized by the RFi Group in partnership with Asia-Pacific Banking & Finance (AB F). In Las Vegas, USA, we presented our views on ‘Unleashing the High-Tech Power of the Underbanked’ at Digital Money Forum at CES (Consumer Electronics Show). In the Middle East, we participated in the ‘Islamic Banking Forum’ organized by the RFi Group at Dubai. In South East Asia, we participated in the ‘Asian Banking and Finance Retail Banking & Wholesale Banking Awards 2016’ in Singapore. In India, we organized a focused roundtable discussion around ‘Shaping the future of lending for NBFCs’ in association with Dun & Bradstreet and Amazon Web Services.

Digital Presence & Visibility

Your Company continued to build its presence in traditional media as well as on social media channels. Media activities continued with interactions with worldwide media including television, print, wires and online portals and source exclusive media opportunities in various geographies such as Australia, Africa, Middle East and India. Social media has been a focus area, covering a wide range of brand activities and our successes. The Company used social media primarily for activities involving thought leadership blogs, articles, press releases, customer video testimonials and other business content marketing purposes.

22. HUMAN RESOURCE MANAGEMENT

Your Company is determined to accelerate its growth story by corresponding to the changing needs of diverse workgroup by fostering an engaging work environment, to constantly build the unique capabilities and skills of the people.

The global employee strength of the Company, at the end of FY 2017, was 1,665.

During the year, there were launches of various organization-wide HR initiatives to ensure high-performing and engaged workforce, like:

1. Delivering Business Excellence - Frequent connect sessions with associates largely targeting the high potentials

a. Gathering insights about the workplace, culture & opportunities offered & sharing them with the business for preventive action

b. Acting as strategic business partner by regularly sharing HR metrics in the form of dashboard

2. Employee Assist - Conceptualize & execute suitable interventions to keep associates motivated

a. Revamping referral program to attract talent from the industry

b. Aligning the annual performance management process (NucEDGE17) to the industry standards by moving away from forced distribution

c. Working with legal team to protect IP of the organization through proactive intervention & case management

d. Launch of day care in Nucleus Software premises

Going forward, your Company’s focus lies in creating a performance-based culture, driven by clear career development plan for each employee. Going forward, the HR roadmap will also focus on ‘Collaboration & Acceleration’ to stimulate our strategic growth through employee empowerment to make it a great place to work for.

23. CORPORATE GOVERNANCE

We, at Nucleus, believe that good and effective Corporate Governance is critical to achieve corporate vision and mission of the organization; it is more of an organizational culture than a mere adherence to rules and regulations. Law alone cannot bring changes and transformation, and voluntary compliance both in form and in substance plays an important role in developing good Corporate Governance.

Your Company has established and maintained a strong ethical environment, overseen by Board of Directors, where 6 out of 9 Directors are Independent. The Company practices and policies reflect true spirit of Corporate Governance initiatives.

Your Company is in compliance of all mandatory requirements of Corporate Governance as stipulated as per Securities and Exchange Board of India (Listing Obligations and Disclosure) Regulations 2015. Compliance status is provided in the Corporate Governance section of the Annual Report. A certificate issued by the Statutory Auditors of the Company under Regulation 34 of Securities and Exchange Board of India (Listing Obligations and Disclosure) Regulations 2015, confirming compliance of the conditions of Corporate Governance, is provided as Annexure C to this Directors’ Report. The auditors’ certificate for fiscal 2017 does not contain any qualifications, reservations or adverse remark.

A detailed report on Corporate Governance for the year forms part of this Annual Report.

24. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)

In accordance with the provisions of the Companies Act 2013 and the Articles of Association of the Company, Mr. Vishnu R Dusad, Managing Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible has offered himself for re-appointment.

Mr. Janki Ballabh, Mr. Prithvi Haldea, Prof. Trilochan Sastry, Mr. N. Subramaniam, Mr. S. M. Acharya and Mrs. Elaine Mathias are Independent Directors as per the Companies Act, 2013, not liable to retire by rotation, to hold office for five consecutive years. They have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as Independent Director during the year.

During the year, the Board of Directors on the recommendation of Nomination and Remuneration/Compensation Committee, appointed Ms. Ritika Dusad as a Non-Executive Director (Additional Director) of the Company on July 20, 2016.

The resolution seeking approval of the members for the appointment of Ms. Ritika Dusad as a Non-Executive Director, liable to retire by rotation was incorporated in the Postal Ballot Notice dated April 25, 2017. The Company has received a notice under Section 160 of the Companies Act, 2013 along with the requisite deposit proposing the appointment of Ms. Ritika Dusad.

Mr. Vishnu R Dusad. CEO and Managing Director, had been reappointed as Managing Director w.e.f January 1, 2017 for a period of 5 years. His present term expires on December 31, 2021.

During the year, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with the Company, other than siffing fees, commission, and reimbursement of expenses incurred by them for the purpose of attending meetings of the Company.

Pursuant to provisions of Section 203 of the Companies Act, 2013, Mr. Vishnu R Dusad, Managing Director & CEO, Mr. Ashish Nanda, Chief Financial Officer and Ms. Poonam Bhasin, Company Secretary are the Key Managerial Personnel of the Company as on March 31, 2017.

25. BOARD EVALUATION

The Board of Directors carried out an annual evaluation of its own performance and performance of the Chairman, Board committees and individual Directors pursuant to the provisions of the Companies Act 2013 and the Corporate Governance requirements under Regulation 25 (4) of Securities and Exchange Board of India (Listing Obligations and Disclosure) Regulations 2015.

The Board, along with the Nomination and Remuneration/ Compensation Committee, developed and adopted the criteria and framework for the evaluation of each of the Directors and of the Board and its Committees.

The evaluation was then conducted as per the approved process (explained in detail in the Report on Corporate Governance of this Annual report). The Chairman of the Committee also had interactions with each of the Directors and sought their feedback and suggestions on the overall Board Effectiveness and Directors performance.

In addition, pursuant to the provisions of Schedule IV to the Companies Act, 2013 the Independent Directors reviewed the performance of the Non-Independent Directors and of the Board as a whole, performance of the Chairman of the Board taking into account the views of all the Directors, and the quality, quantity and timeliness of flow of information between the Company management and the Board and its sufficiency for the Board to effectively perform its duties.

The Chairman placed the Evaluation Summary before the committee members. The same was discussed in detail, and the members recorded their satisfaction.

26. COMPANY’S POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION

The primary responsibility of the Nomination and Remuneration/ Compensation Committee (NRC) is to identify and nominate suitable candidates for Board membership. The Committee also formulate policies relating to the remuneration of Directors, Key Managerial Personnel and other senior employees of the Company.

The Committee, while evaluating potential candidates for Board membership, considers a variety of personal attributes, including experience, intellect, foresight, judgment and transparency, and match these with the requirements set out by the Board. The basic responsibilities of NRC with regard to Directors’ appointment are as follows:

- Recommending desirable changes in Board size, composition, Committee structure and processes, and other aspects of the Board’s functioning;

- Formulating criteria for determining qualifications, positive attributes and Independence of a Director;

- Conducting search and recommending new Board members in light of resignation of current members or a planned expansion of the Board;

- Identifying persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the Board their appointment and removal.

The policy of the Company for selection of Directors is provided as Annexure D and Remuneration Policy for Directors, Key Managerial Personnel and other employees is provided as Annexure E to this Directors’ Report.

27. DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declarations from all the Independent Directors that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 25 of Securities and Exchange Board of India (Listing Obligations and Disclosure) Regulations 2015.

28. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTOR’S

The details of programmes for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters can be accessed on the Company website link : http://www. nucleussoftware.com/investors .

29. MEETINGS OF THE BOARD OF DIRECTORS

The Board met 9 times during the year. The details are provided in the Report on Corporate Governance, a part of this Annual Report.

30. COMMITTEES OF THE BOARD

There are four Committees of the Board as on March 31, 2017, as follows:

- Audit Committee

- Nomination and Remuneration/Compensation Committee

- Stakeholder Relationship Committee

- Corporate Social Responsibility Committee

Details of all the Committees along with their charters, composition and meetings held during the year, are provided in the Report on Corporate Governance, a part of this Annual Report.

The Composition of Board Committees as on March 31, 2017 is as follows:

Memberships across Board Committees

Audit Committee

Nomination & Remuneration / Compensation Committee

Stakeholder Relationship Corporate Social

Committee Responsibility Committee

Mr. Janki Ballabh

_/

Mr. Vishnu R Dusad

_/_/

Mr. S. M. Acharya

_/

_/

Mr. Prithvi Haldea

_/

_/

_/_/

Mrs. Elaine Mathias

_/

_/

Prof. Trilochan Sastry

_/

_/

_/_/

Mr. N. Subramaniam

_/

31. VIGIL MECHANISM

The Company has a well established whistle blower policy as part of vigil mechanism for Directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violation of the Company’s Code of conduct or ethics policy. This mechanism also provides for adequate safeguards against victimization of Director(s)/employee(s) who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee in exceptional cases.

32. SIGNIFICANT AND MATERIAL ORDERS

No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company’s operations in future.

33. RISK MANAGEMENT POLICY

The Company has developed and implemented a ‘Risk Management Policy’ that includes identification of elements of risk, which in the opinion of the Board may threaten the existence of the Company. Risk Management Report forms a part of this Annual Report.

34. ADDITIONAL INFORMATION TO SHAREHOLDERS

Detailed information to the shareholders is provided in the Shareholders’ Referencer, a part of this Annual Report.

35. AUDITORS Statutory Auditors

Pursuant to the provisions of Section 139 of the Companies Act 2013 and the rules framed thereafter, M/s BSR and Co., LLP, Chartered Accountants, were appointed as statutory auditors of the Company from the conclusion of the Annual General Meeting (AGM) of the Company held on July 8, 2016 until the conclusion of Annual General Meeting of the Company to be held in Calendar year 2021, subject to ratification of their appointment at every AGM.

M/s BSR and Co, LLP, Chartered Accountants have furnished a certificate of their eligibility as per Section 141 of the Companies Act, 2013

The Statutory Auditors have submitted the Auditors’ Report for the year ended March 31, 2017 which is self explanatory and does not call for any further comments from the Board of Directors.

Secretarial Auditor

As per the Companies Act 2013, Secretarial Audit by a practicing Company Secretary has become mandatory for prescribed companies, and they are required to annex the Secretarial Audit report with their Board Report in the Annual Report. We are pleased to inform that your Company, as a voluntary practice, has been getting Secretarial Audit done for the past several years and also reporting it in the Annual Report.

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board appointed, Sanjay Grover & Associates, Practising Company Secretaries to undertake the Secretarial Audit of the Company. Secretarial Audit Report in the prescribed Form MR 3, is provided as Annexure F to this Directors’ Report. The Secretarial Auditors’ Report does not contain any qualification, reservation or adverse remark.

The Company also adheres to the various Secretarial Standards issued by the Institute of Companies Secretaries of India.

36. INTERNAL FINANCIAL CONTROLS

Your Company has in place adequate internal financial controls with reference to the financial statements.

M/s BSR and Co, LLP, the statutory auditors of the Company, has audited the financial statements included in this annual report and has issued an attestation report on our internal control over financial reporting (as defined in Section 143 of Companies Act 2013).

37. CORPORATE SOCIAL RESPONSIBILITY (CSR)

Inclusive growth and sustainable development are strong pillars of your Company’s responsible corporate citizenship and are a part of the core values and driving force for many of its initiatives. The Company believes that responsible investments in this regard will generate long term value for all the stakeholders.

In accordance with requirements of The Companies Act 2013, the Company has a Corporate Social Responsibility Committee comprising of a majority of Independent Directors and chaired by an Independent Director. Prof. Trilochan Sastry is the Chairman of the Committee and Mr. Vishnu R Dusad, Mr. Prithvi Haldea and Mr. S. M. Acharya are the other members. The Committee framed and recommended a CSR Policy to the Board for adoption and instituted a transparent monitoring mechanism for ensuring implementation of the projects / activities to be undertaken by the Company.

The CSR Policy may be accessed on the Company website link: http://www.nucleussoftware.com/investors.

Your Company has set up Nucleus Software Foundation, a Trust for the purposes of undertaking CSR activities of the Company. This Foundation, established in 2014 as a Section 25 Company, works towards its stated mission: “Empowering underprivileged with essence of education and thereby better livelihood and better life”.

During the year under review, the Foundation continued working towards its aim to take technology aid for enabling Quality Education at the bottom of pyramid. It has continued its efforts on the projects, to support the education for the underprivileged children by use of digital games in app format for better engagement and assessments.

The schools which were selected for the pilot run were for the underprivileged children, managed by NGOs and located in the NCR area. During the year , the schools outside NCR area were also selected for the project.

The other CSR initiatives undertaken by the Foundation during the year are:

- Sponsor of college and hostel fees of two students of IIT Roorkee.

- Funding for health assistance facilities

- Funding for skill development

During the year, the Company contributed Rs.1.10 crore, as a mandatory requirement, towards CSR activities to the Foundation. Out of this, the Foundation expended Rs.0.93 crore. The Foundation is still in the process of stabilizing the initiative of digital education for making it a long-term project and as such there is a shortfall of Rs.0.17 crore in the expenditure. The Annual Report on CSR activities is provided as Annexure G to this Directors’ Report.

38. EMPLOYEE STOCK OPTION PLAN (ESOP)

Currently, there is only one ESOP scheme prevalent in the Company; ESOP scheme - 2015 (instituted in 2015). As per ESOP scheme 2015, equity shares would be transferred to eligible employees on exercise of options through Nucleus Software Employee Welfare Trust, which is established to carry out activities for the benefit and welfare of its Employees by launching various Schemes in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.

Details of ESOP as per the provisions of Companies Act, 2013 and Rules made there under are as follows:

Particulars

2015 Plan

(a)

Total number of options under the Plan

500,000

(b)

Pricing formula

100% of the Fair Market Price as on date of grant

(c)

Options granted during the year

-

(d)

Options vested as of March 31, 2017

-

(i) Options exercised during the year

-

(ii) Total number of shares arising as a result of exercise of above options during the year

(e)

Options forfeited during the year

-

(f)

Option lapsed during the year

-

(g)

Variation of terms of options during the year

-

(h)

Amount realized by exercise of options during the year

-

(i)

Total number of options in force as on March 31, 2017

-

During the year, no stock options were granted to any employee under the above-mentioned ESOP plan and therefore no calculations are required to be made or reported regarding difference between intrinsic value and fair market value of ESOPs granted.

39. PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the prescribed format and annexed herewith as Annexure J to this Report.

40. DIRECTOR’S RESPONSIBILITY STATEMENT

Pursuant to as per Section 134 (5) of the Companies Act, 2013, the Directors confirm that:

(a) in the preparation of the annual accounts for the financial year ended March 31, 2017, 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 the Companies Act, 2013, 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;

(e) the Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors, including audit of internal financial controls over financial reporting by the statutory auditors, and the reviews performed by the management, the Board is of the opinion that the Company’s internal financial controls were adequate and effective during FY 2016-17.

41. EXTRACT OF ANNUAL RETURN

Extract of Annual Return of the Company in the prescribed Form MGT-9, is provided as Annexure H to this Directors’ Report.

42. ACKNOWLEDGEMENTS

Your Directors would like to place on record their gratitude for the co-operation received from the Government of India, State Governments of Delhi, Uttar Pradesh and Rajasthan, Customs and Excise Departments, Department of Scientific and Industrial Research (Ministry of Science and Technology), Software Technology Park-Noida, Software Technology Park-Pune, Special Economic Zone authorities and other government agencies.

Your Directors would also like to thank the Company’s customers, bankers, vendors, partners and shareholders for their continued support to the Company. In specific, the Board would like to put on record its sincere appreciation of the commitment and contribution made by all employees of the Company.

For and on behalf of the Board of Directors

New Delhi Janki Ballabh

April 25, 2017 Chairman


Mar 31, 2016

Dear Members,

We are pleased to present your Company''s Twenty Seventh Annual Report, together with the Audited Statement of Accounts, for the year ended March 31, 2016.

1. RESULTS OF OPERATIONS - Financial Results

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("2013 Act"), as applicable and guidelines issued by the Securities and Exchange Board of India ("SEBI"). Accounting policies have been consistently applied except where a newly issued accounting standard, if initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an ongoing basis. The Company has nine subsidiary companies across the globe. The Company discloses stand-alone audited financial results on a quarterly and annual basis, consolidated un-audited financial results on a quarterly basis and consolidated audited financial results on an annual basis.

a) Consolidated Operations

Revenue from consolidated operations for the year was Rs. 348.70 crore, as compared to Rs. 353.14 crore in the previous year. As the Company continued its focus on strategic initiatives for new products, sales and market development and high level people to help drive transformation, the overall operational expense for the year continued to be high at Rs. 318.51 crore, against Rs. 287.83 crore in the previous year. This impacted the Operating Profit (EBITDA) which was at Rs. 30.19 crore, 9% of revenue, against Rs. 65.31 crore, 18% of revenue, in the previous year.

Profit after Tax for the year was at Rs. 32.47 crore, 9% of revenue, against Rs. 64.71 crore, 18% of revenue, in the previous year.

The consolidated financial results are as below: (Rs. in crore)

For the Year Ended March 31,

2016

% of Revenue

2015

% of Revenue

Revenue From Operations

348.70

100.00

353.14

100.00

Expenses

a) Employee benefit expense

226.84

65.05

201.44

57.04

b) Travel expense

20.99

6.02

20.01

5.67

c) Finance costs (Bank charges)

0.62

0.18

0.54

0.15

d) Other expenses

70.06

20.09

65.84

18.64

Total Expenses

318.51

91.34

287.83

81.51

Operating Profit (EBITDA)

30.19

8.66

65.31

18.49

Depreciation

12.22

3.50

11.97

3.39

Operating Profit after Interest and Depreciation

17.97

5.15

53.34

15.10

Other Income

25.08

7.19

31.64

8.96

Foreign Exchange Gain/ (Loss)

0.83

0.24

1.67

0.47

Profit Before Tax

43.88

12.58

86.65

24.54

Taxation

11.41

3.27

21.94

6.21

Profit After Tax

32.47

9.31

64.71

18.32

b) Standalone Operations

Revenue from the standalone operations of your Company for the year was Rs. 278.17 crore against Rs. 279.04 crore in the previous year. Total operational expense for the year was Rs. 265.24 crore against Rs. 218.06 crore in the previous year, an increase of 22%. Our planned expenditure on strategic initiatives in product, marketing and sales and people resulted in a lower Operating Profit (EBITDA) of Rs. 12.93 crore, 5% of revenue, against Rs. 60.98 crore, 22% of revenue, in the previous year.

Profit after Tax for the year was at Rs. 44.66 crore, 16% of revenue, against Rs. 60.74 crore, 22% of revenue in the previous year.

Standalone financial results are as below: ( Rs.in crore)

For the Year Ended March 31,

2016

% of Revenue

2015

% of Revenue

Revenue from Operations

278.17

100.00

279.04

100.00

Expenses

a) Employee benefit expense

166.02

59.68

145.95

52.30

b) Travel expense

17.04

6.13

16.91

6.06

c) Finance costs (Bank charges)

0.43

0.15

0.40

0.14

d) Other expenses

81.75

29.39

54.80

19.64

Total Expenses

265.24

95.35

218.06

78.15

Operating Profit (EBITDA)

12.93

4.65

60.98

21.85

Depreciation

10.91

3.92

10.66

3.82

Operating Profit after Interest and Depreciation

2.02

0.73

50.32

18.03

Other Income

50.40

18.12

29.26

10.49

Foreign Exchange Gain/ (Loss)

0.33

0.12

0.12

0.04

Profit Before Tax

52.75

18.96

79.70

28.56

Taxation

8.09

2.91

18.96

6.79

Profit After Tax

44.66

16.05

60.74

21.77

A detailed analysis on the Company''s performance, both consolidated and standalone, is included in "Management''s Discussion and Analysis" Report, which forms part of this Annual Report.

2. SHARE CAPITAL

Issued and Paid-up Share Capital

The paid-up share capital of the Company, as on March 31, 2016, is 32,383,724 equity shares of '' 10 each similar to the paid-up share capital as on March 31, 2015.

Shares under Compulsory Dematerialization

The shares of the Company are under compulsory dematerialization ("Demat") category and are available for trading on both the depositories in India viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Of the entire paid up shares, 32,246,178 shares or 99%, are in dematerialized form as at March 31, 2016. The International Securities Identification Number (ISIN) allotted to the Company''s shares is INE096B01018.

3. LISTING

Your Company is listed at National Stock Exchange of India Ltd. and BSE Ltd.

Stock Exchange where Nucleus shares are listed

Scrip Symbol / Code

National Stock Exchange of India Ltd. (NSE) w.e.f. December 19, 2002

NUCLEUS

BSE Ltd. (BSE) w.e.f. November 6, 1995

531209

4. LIQUIDITY AND CASH EQUIVALENTS

Your Company continues to retain its debt-free status and maintains sufficient cash and cash equivalents to meet future strategic initiatives. The Company has been conservative in its investment policy over the years, maintaining a reasonably high level of cash and cash equivalents which enable the Company to completely eliminate short and medium term liquidity risks, at the same time also help scale up operations at a short notice. The goal of cash management at Nucleus is to:

a. Use cash to provide sufficient working capital to manage business operations of the Company to be able to add value to all our stakeholders and continuously enhance the same.

b. Maintain sufficient cash as reserves that will aid the Company in capturing meaningful business opportunities, including acquisitions.

c. Invest surplus funds in low-risk bank deposits, debt schemes of mutual fund and tax free secured bonds of Public Sector Enterprises.

Cash and cash equivalents including current investments at a consolidated level of Rs. 249.00 crore, constitute 54% of the shareholders'' funds at the year end, against Rs. 281.25 crore, 64% of the shareholders'' funds at the close of the previous year. In addition, the Company holds tax free bonds issued by public sector enterprise on a ''hold to maturity'' basis of a face value of Rs.77.74 crore against Rs. 53.63 crore in the previous year, long-term fixed maturity plans of mutual funds of Rs. 27 crore against Rs. 15 crore last year and preference shares of Rs. 14.91 crore against Rs. Nil last year.

5. DIVIDEND

The Dividend Policy of your Company stipulates a dividend payout in the range of 15-30% of the profits available for distribution, subject to:

a) Provisions of The Companies Act, 2013 and other applicable laws, and

b) Cash flows of the Company

We are pleased to state that for the 16th consecutive year, your Company has paid dividend. During the year, the Board of Directors had declared an interim dividend of 50% (Rs. 5.00 per equity share of Rs. 10 each). Last year, the dividend declared (final) and approved by shareholders was also 50% (Rs. 5.00 per equity share of Rs. 10 each). During the year, the Company paid a total dividend of Rs. 32.38 crore, of which Rs. 16.19 crore was paid as final dividend for FY14-15 in July 2015 and Rs. 16.19 crore was paid as interim dividend for the FY15-16 in March 2016. The total payout of Dividend for FY 2015-16 is 36% of standalone profits for the year. No amount was carried to reserves.

6. FIXED DEPOSITS

Your Company has not accepted any fixed deposits covered under Chapter V of the Companies Act, 2013 and, as such, no amount of principal or interest was outstanding on the date of the Balance Sheet.

7. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The Company policy for determining ''Material Subsidiaries'' and on ''Related Party Transactions'', as approved by the Board can be accessed on the Company website link: http://www.nucleussoftware.com/investors.

Particulars of contracts or arrangements with related parties in the prescribed Form AOC-2, is provided as Annexure A to this Directors'' Report.

8. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are provided in the notes to the Financial Statements.

9. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THE COMPANY BETWEEN THE END OF FINANCIAL YEAR 2016 AND DATE OF THIS REPORT

No material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company.

10. CHANGE IN THE NATURE OF BUSINESS

There has been no change in the nature of business of the Company.

11. MANAGEMENT DISCUSSION & ANALYSIS

As per requirements of Regulation 34 of Securities and Exchange Board of India ( Listing Obligations and Disclosure) Regulations 2015, Management''s Discussion and Analysis of the financial condition and results of both standalone and consolidated operations have been provided separately in this Annual Report.

12. REVIEW OF BUSINESS & OUTLOOK

Your Company continues its journey as a preferred partner for banking and financial organizations worldwide, providing innovative and pioneering products, services and solutions. Continuing the relentless focus on customer success, your Company launched a range of innovative solutions during the year.

Due to the increasing demand for real-time solutions among customers, many retail banks are focusing on moving to agile technology architectures. Mobile technology and analytical inputs based on social media are providing an increasing number of sources for real-time data that can be leveraged to gain a competitive advantage. Delivering great customer experiences and living up to the needs of digital banking are some of the business challenges that banks face today. The pace of technological change will not slow down and the tech sector as a whole must continue to seek the answer to achieving seamless integration and communication between products and platforms. According to the research consultancy IDC, the global information technology (IT) market surpassed $3.7 trillion in 2015 and is on track to reach $3.8 trillion in 2016 (constant currency).

The software industry body-National Association of Software and Services Companies (Nasscom) expects the country''s information technology (IT) industry to grow at 12-14% during 2016-17.

13. NEW PRODUCT LAUNCHES

Your Company soft launched during the year, the world''s first offline digital cash solution, PaySe™, designed and created with an aim to democratize money. Along with PaySe™, we have introduced PURSE™, a mobile to carry money, and PalmATM™ a bank teller application to democratize money.

PaySe™ utilizes the latest advances in mobility, big data, open source and crypto currency (primarily tokenization) to deliver the world''s first secure offline peer to peer payment solution. PaySe™ helps to reduce and offset the costs associated with cash by replacing physical cash notes with digital currency. With fewer notes in circulation, the cost of storing, transporting and processing cash will reduce dramatically. This will also increase the velocity of money.

PaySe™ helps address the access challenges faced by banks, micro finance institutions (MFIs) and non banking finance companies (NBFCs) by making basic banking services accessible to the unbanked such as direct benefit transfers (DBT), micro pension, saving deposits, loans, recurring deposits etc. while delivering financial services.

Your Company''s flagship product FinnOne NeoTM was launched on cloud and is already a success in the domestic market. By providing FinnOne NeoTM on cloud, we are making one of the best lending software more affordable, quickly deployable and scalable as per our customer''s business requirements.

Your Company also launched a Lending Analytics product during the year. With cutting edge statistical and data analysis capabilities, Nucleus''s Lending Analytics is a powerful and user-friendly solution enabling informed decision making through data visualization and business insight generation. The solution uses sophisticated predictive scoring models to allow various financial institution stakeholders to create scorecards that span the entire loan management life cycle.

Your Company also unveiled a new mobility product module, mApply, as part of the FinnOne NeoTM mobility suite. This mobility app is meant for end customers / prospects who can apply for a loan, track the status, check offers from the comfort of their home or office, or even when they are on the move. The product is a key offering helping banks to digitize their loan sourcing business process.

As a part of ongoing development program, your Company also launched FinnAxia™ 3.0, the latest version of its next-generation integrated transaction banking product suite. The new product suite includes extended compliance with global and regional regulations and payment standards, increased capabilities for ''payments on behalf of'' and additional features to support bank customers running corporate shared service centres and outsourced receivables management.

Your Company remains committed to providing its existing and potential customers with competitive and cutting-edge products and will continue to focus on investments in product innovation and business expansion.

14. NOTABLE ACCOLADES RECEIVED DURING THE YEAR

- Named as a ''Model Bank Vendor 2016'' Award by Celent for helping multiple clients achieve technology or implementation excellence.

- Recognized amongst the ''World''s top 5 Mobile Banking Solution Providers'' by Forrester Research, Inc. in The

Forrester Wave™: Mobile Banking Solutions, Q4 2015.

- Corporate LiveWire - FinTech Excellence Awards 2015 in the category "Excellence in Providing Banking Products"

15. SUBSIDIARY COMPANIES

Your Company has nine subsidiaries across the globe. There are no associate companies or joint venture companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act").

During the year your Company made a beginning in the direction of acquiring new technologies through acquisitions. The Company acquired 96% stake in Avon Mobility Solutions Pvt. Ltd., a Company based in Chennai, with very good experience in logistics domain and expertise in developing mobile applications. Avon Mobility Solutions Pvt. Ltd. is now a Subsidiary of Nucleus.

The following table provides a list of all these subsidiaries as on March 31, 2016:

Name of Subsidiary

Location

Date of Incorporation/ Acquisition

Percentage of Shareholding

Nucleus Software Solutions Pte. Ltd.

Singapore

February 25, 1994

100%

Nucleus Software Inc.

USA

August 5, 1997

100%

Nucleus Software Japan Kabushiki Kaisha

Japan

November 2, 2001

100%

VirStra i- Technology Services Ltd.

India

May 6, 2004

100%

Nucleus Software Netherlands B.V.

Netherlands

February 3, 2006

100%

Nucleus Software Ltd.

India

April 21, 2008

100%

Nucleus Software Australia Pty. Ltd.

Australia

February 3, 2014

100%

Nucleus Software South Africa Pty. Ltd.

South Africa

February 10, 2015

100%

Avon Mobility Solutions Pvt. Ltd.

India

March 17, 2016 (Date of Acquisition)

96%

There has been no material change in the nature of the business of the subsidiaries.

A statement containing the salient features of the financial statement of our subsidiaries in the prescribed Form AOC-1 is attached at the end of consolidated financial statements of the Company. The statement also provides the details of performance, financial position of each of the subsidiaries.

Further, pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company.

a) Nucleus Software Solutions Pte. Ltd.

Nucleus Software Solutions Pte. Ltd. (NSS) is based in Singapore. It was incorporated in 1994 to expand the Company''s business in South East Asia. Currently, it is the central entity for Asia-Pacific excluding Japan and Australia with responsibility for business development, sales and software development services for customers in the region.

b) Nucleus Software Inc.

Nucleus Software Inc. (NSI) is based in New Jersey, USA. It was incorporated in 1997 for providing business presence in the Americas. NSI operates as a business development and sales hub for the region.

c) Nucleus Software Japan Kabushiki Kaisha

Nucleus Software Japan Kabushiki Kaisha (NSJKK) is based in Tokyo, Japan. It was incorporated in 2001 to expand business in the country. NSJKK operates as a business development and sales hub for Japan. Additionally the subsidiary provides software development services, to the local customers in Japan.

d) VirStra i- Technology Services Ltd.

VirStra i- Technology Services Ltd. is based in Pune, India. It was incorporated in 2004 to provide software development services, targeted at the Japanese market.

e) Nucleus Software Netherlands B.V.

Nucleus Software Netherlands B.V. (NSBV) is based in Amsterdam, The Netherlands. It was incorporated in 2006 for enlarging business presence in the European market. NSBV is a business development and sales hub for Nucleus in Europe.

f) Nucleus Software Ltd.

Nucleus Software Ltd. (NSL) has operations in Jaipur with registered office in New Delhi. It was incorporated in 2008 for facilitating delivery to larger clients through operations in a Special Economic Zone. NSL acquired 17.41 acre of land in the Mahindra World Special Economic Zone, Jaipur and, in the first phase, has co-developed a 250-seater facility.

g) Nucleus Software Australia Pty. Ltd.

Nucleus Software Australia Pty. Ltd. (NSA) is based in Sydney, Australia. It was incorporated in 2014 for tapping the growing business opportunities in ANZ region. NSA operates as a business development and sales hub for the region. Additionally the subsidiary provides software development services, to the local customers in Australia.

h) Nucleus Software South Africa Pty. Ltd.

Nucleus Software South Africa Pty. Ltd. (NSSA) is based in Johannesburg , South Africa. It was incorporated in 2015 for tapping the growing business opportunities in South African region. NSSA operates as a business development and sales hub for the region.

i) Avon Mobility Solutions Pvt. Ltd.

Avon Mobility Solutions Pvt. Ltd, is based in Chennai and has very good experience in logistics domain and expertise in developing mobile applications.

Avon Mobility Solutions Pvt. Ltd. became subsidiary of your Company on March 17, 2016.

16. INFRASTRUCTURE

Your Company along with its subsidiaries has offices at several locations across the globe. The office space and seating capacity of these offices as on March 31, 2016 is detailed below:

Office Location

Area in Sq. ft.

Seating Capacity - No. of Persons

India

Noida

208,122

1,677

Jaipur

22,312

250

Pune

9,573

114

Chennai

4,500

48

New Delhi

4,200

40

Mumbai

3,250

31

Overseas

Singapore

4,807

61

Dubai, UAE

1,290

17

Tokyo, Japan

735

15

Amsterdam, Netherlands

561

15

Johannesburg, South Africa

1,609

8

Manila, Philippines

194

5

Office Location

Area in Sq. ft.

Seating Capacity - No. of Persons

London, UK

100

2

Sydney, Australia

140

2

California, USA

100

1

Total

261,493

2,286

NOIDA, New Delhi and Jaipur premises are owned by the Company and its subsidiaries.

17. QUALITY PROCESSES

Your Company is committed to ensure the highest level of quality for its products and services. The key focus for this year was to synchronize the quality processes with the transformational journey of the organization and optimize the cost of quality. Process improvement initiatives were centered on ''Process Optimization''. The Finn Edge implementation methodology has been successfully implemented in multiple projects and has started to pay dividends. Finn Edge covers various aspects of the project from ''Value Creation to Value Realization'' and from ''Project Discovery'' to ''Project Implementation'' to ''Project Upgrade''.

A dedicated Quality Assurance team handles the process change management, implementation and it''s adherence across the organization. Quality assurance team monitors quality and productivity improvements through audits and dashboard reporting.

18. BRAND VISIBILITY

In FY 2016, your Company continued to grow its marketing operations and activities in support of the strategic aspirations of the Company.

During the year, the Company moved forward on its agenda of growth into new markets around the world by establishing brand awareness and generating demand from focused target segments. Your Company is continually investing in marketing mandated with the below objectives:

- Ensure that your Company is known to provide high quality, innovative lending and transaction banking solutions to the target markets.

- Establish your Company as the Industry Thought Leader.

- Equip the sales team fully with the material and tools required to sell the product or service they represent.

Industry interactions

Your Company continued to participate in the leading industry events and business forums. The Company demonstrated how it can help customers achieve their business goals while sharing thoughts on industry best practices in 30 industry forums across 5 continents. These include 11th Annual Loan Origination Excellence Summit 2016 in Australia, ENG''s Automotive Finance Summit in Europe, Sibos 2015 in Singapore, 7th Annual Retail Banking Africa 2015 in Africa, ABTEC 2015 in the Middle East and FIBAC 2015 in India. The Company also showcased its expertise in an exclusive webinar on Loan Collections Technology: Accelerating Digital Transformation and Minimizing Loan Delinquencies, organized in association with CEB Tower Group. Road shows and meetings with Industry leaders were organized to discuss the business opportunities for the Company.

Digital Presence & Visibility

Your Company continued to also build its presence in traditional media as well as on social media channels. Media activities continued with interactions with worldwide media including television, print, wires and online portals and source excellent media opportunities in various geographies such as Australia, Africa, Middle East and India. Social media has been a focus area, covering a wide range of brand activities and our successes. The Company used social media primarily for activities involving thought leadership blogs, articles, customer video testimonials and other business content marketing purposes.

19. HUMAN RESOURCE MANAGEMENT

Your Company is determined to accelerate its growth story by corresponding to the changing needs of diverse workgroup by fostering an engaging work environment, to constantly build the unique capabilities and skills of the people.

The global employee strength of the Company, at the end of FY 2016, was 1,565.

During the year, there were launches of various organization-wide HR initiatives to ensure high-performing and engaged workforce like:

- Creation of a diverse and inclusive work environment through functional leadership and investments in newer markets to ensure global presence.

- 2016 Recruitment drive for Talent Pipeline and Leadership Building:

- Campus to Corporate - Software Engineer Trainee & Graduate Internship Programs (from premier Indian Engineering institutes) for inducting fresh talent from the campuses

- Talent hiring across all geographies at Leadership level

- Nucleus Global Internship Program (NGIP) - Phase 2 of JAPTEL (Japanese Trainees Engagement & Learning) was launched which was a 3-week program dotted with project internship, various industrial & cultural visits - to foster a multicultural work environment and build sustainable partnership with Nucleus and Top Educational Campuses around the world.

- Week of Innovative Ideation - Innofest - was launched for participants to come up with innovative ideas on how to ''Uberize Lending'' i.e. creating the lending experience of tomorrow.

- Strengthening capability through trainings/workshops on Project Management & Technology through Functional/ Behavioral & Technical trainings, YLP (Young Leaders'' Program) and LEAD (Leadership @ Engagement, Action and Development) programs

Going forward, your Company''s focus lies in creating an enviable workplace, driven by high performance culture and a clear career development plan for each employee. The HR roadmap will also focus on ''Collaboration & Acceleration'' to stimulate our strategic growth through employee empowerment via employee councils.

20. CORPORATE GOVERNANCE

We, at Nucleus, believe that good and effective Corporate Governance is critical to achieve corporate vision and mission of the organization; it is more of an organizational culture than a mere adherence to rules and regulations. Law alone cannot bring changes and transformation, and voluntary compliance both in form and in substance plays an important role in developing good Corporate Governance.

Your Company has established and maintained a strong ethical environment, overseen by a fiercely independent Board of Directors, where 6 out of 8 Directors are independent. The Company practices and policies reflect true spirit of Corporate Governance initiatives.

Your Company is in compliance of all mandatory requirements of Corporate Governance as stipulated as per Securities and Exchange Board of India ( Listing Obligations and Disclosure) Regulations 2015. Compliance status is provided in the Corporate Governance section of the Annual Report. A certificate issued by the Statutory Auditors of the Company under Regulation 34 of Securities and Exchange Board of India ( Listing Obligations and Disclosure) Regulations 2015 , confirming compliance of the conditions of Corporate Governance, is provided as Annexure C to this Directors'' Report. The auditors'' certificate for fiscal 2016 does not contain any qualifications, reservations or adverse remark.

21. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)

In accordance with the provisions of the Companies Act 2013("Act") and the Articles of Association of the Company, Mr. R P Singh, Executive Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible has offered himself for re-appointment.

Mr. Janki Ballabh, Mr. Prithvi Haldea, Prof. Trilochan Sastry, Mr. N. Subramaniam and Mrs. Elaine Mathias are Independent Directors as per the Companies Act, 2013, not liable to retire by rotation, to hold office for five consecutive years. They have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as Independent Director during the year.

During the year, the Board of Directors on the recommendation of Nomination and Remuneration Committee, appointed Mr. S.M. Acharya as a Non-Executive Director (Additional Independent Director) of the Company on March 19, 2016. Mr. S. M. Acharya is a retired IAS officer of the Karnataka cadre. He has held various senior positions in both State and Central Governments in his long and distinguished career and retired as Secretary to the Government of India in the Ministry of Defense in 2009.

The resolution seeking approval of the Members for the appointment of Mr. S. M. Acharya as an Independent Director has been incorporated in the notice of the forthcoming Annual General Meeting of the Company along with brief details about him. The Company has received a notice under Section 160 of the Act along with the requisite deposit proposing the appointment of Mr. S. M. Acharya.

Mr. Vishnu R. Dusad. CEO and Managing Director had been reappointed as Managing Director w.e.f January 1, 2012 for a period of 5 years. His present term expires on December 31, 2016. The resolution seeking approval of the Members for the reappointment of Mr. Vishnu R. Dusad as CEO and Managing Director has been incorporated in the notice of the forthcoming Annual General Meeting of the Company along with brief details about him. The Company has received a notice under Section 160 of the Act along with the requisite deposit proposing the appointment of Mr. Vishnu R. Dusad.

During the year, as per the provisions of Companies Act 2013, Mr.Ashish Nanda was appointed as the Chief Financial Officer and a Key Managerial Person of the Company.

Pursuant to provisions of Section 203 of the Companies Act, 2013, Mr. Vishnu R. Dusad, CEO and Managing Director, Mr. Ashish Nanda, Chief Financial Officer and Ms. Poonam Bhasin, Company Secretary are the Key Managerial Personnel of the Company as on March 31, 2016.

22. BOARD EVALUATION

The Board of Directors has carried out an annual evaluation of its own performance and performance of the Chairman, Board committees and individual Directors pursuant to the provisions of the Companies Act 2013 and the Corporate Governance requirements under Regulation 25 (4) of Securities and Exchange Board of India (Listing Obligations and Disclosure) Regulations 2015.

The Board, along with the Nomination and Remuneration Committee, developed and adopted the criteria and framework for the evaluation of each of the Directors and of the Board and its Committees.

The evaluation was then conducted as per the approved process (explained in detail in the Report on Corporate Governance of this Annual report). The Chairman of the Committee also had interactions with each of the Directors and sought their feedback and suggestions on the overall Board Effectiveness and Directors performance.

In addition, pursuant to the provisions of Schedule IV to the Companies Act, 2013 the Independent Directors reviewed the performance of the Non-Independent Directors and of the Board as a whole, performance of the Chairman of the Board taking into account the views of all the Directors, and the quality, quantity and timeliness of flow of information between the Company management and the Board and its sufficiency for the Board to effectively perform its duties.

The Chairman placed the Evaluation Summary before the committee members. The same was discussed in detail, and the Members recorded their overall satisfaction

23. COMPANY''S POLICY ON DIRECTORS'' APPOINTMENT AND REMUNERATION

The primary responsibility of the Nomination and Remuneration Committee (NRC) is to identify and nominate suitable candidates for Board membership. The Committee also formulate policies relating to the remuneration of Directors, Key Managerial

Personnel and other senior employees of the Company.

The Committee, while evaluating potential candidates for Board membership, considers a variety of personal attributes, including experience, intellect, foresight, judgment and transparency, and match these with the requirements set out by the Board. The basic responsibilities of NRC with regard to Directors'' appointment, are as follows:

- Recommending desirable changes in Board size, composition, Committee structure and processes, and other aspects of the Board''s functioning.

- Formulating criteria for determining qualifications, positive attributes and Independence of a Director.

- Conducting search and recommending new Board members in light of resignation of current members or a planned expansion of the Board.

- Identifying persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the Board their appointment and removal.

The policy of the Company for selection of Directors is provided as Annexure D and Remuneration Policy for Directors, Key Managerial Personnel and other employees is provided as Annexure E to this Directors'' Report.

24. DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declarations from all the Independent Directors that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 25 of Securities and Exchange Board of India ( Listing Obligations and Disclosure) Regulations 2015 .

25. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTOR''S

The details of programmes for familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters can be accessed on the Company website link : http://www. nucleussoftware.com/investors .

26. MEETINGS OF THE BOARD OF DIRECTORS

The Board met 9 times during the year. The details are provided in the Report on Corporate Governance, a part of this Annual Report.

27. COMMITTEES OF THE BOARD

There are currently six Committees of the Board, as follows:

- Audit Committee

- Compensation Committee

- Corporate Governance Committee

- Nomination and Remuneration Committee

- Stakeholder Relationship Committee

- Corporate Social Responsibility Committee

Details of all the Committees along with their charters, composition and meetings held during the year, are provided in the Report on Corporate Governance, a part of this Annual Report.

The Composition of Board Committees as on March 31, 2016 is as follows:

Memberships across Board Committees

Audit Committee

Corporate

Governance

Committee

Nomination & Remuneration Committee

Compensation

Committee

Stakeholder

Relationship

Committee

Corporate Social Responsibility Committee

Mr. Janki Ballabh

V

V

Mr. Vishnu R Dusad

V

V

V

V

Mr. S. M. Acharya

V

V

V

Mr. Prithvi Haldea

V

V

V

V

V

V

Mrs. Elaine Mathias

V

V

V

Prof. Trilochan Sastry

V

V

V

V

V

V

Mr. R P Singh

Mr. N. Subramaniam

V

V


28. VIGIL MECHANISM

The Company has a well established whistle blower policy as part of vigil mechanism for Directors and employees to report concerns about unethical behavior, actual or suspected fraud or violation of the Company''s Code of conduct or ethics policy. This mechanism also provides for adequate safeguards against victimization of Director(s)/employee(s) who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee in exceptional cases.

29. SIGNIFICANT AND MATERIAL ORDERS

No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s operations in future.

30. RISK MANAGEMENT POLICY

The Company has developed and implemented a ''Risk Management Policy'' that includes identification of elements of risk, which in the opinion of the Board may threaten the existence of the Company. Risk Management Report forms a part of this Annual Report.

31. ADDITIONAL INFORMATION TO SHAREHOLDERS

Detailed information to the shareholders is provided in the Shareholders'' Reference, a part of this Annual Report.

32. AUDITORS

Statutory Auditors

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, the Statutory Auditors of your Company, hold office upto the conclusion of the forthcoming Annual General Meeting of the Company.

In line with the requirement of Sec 139 (1) of the Companies Act, 2013 and Company''s Policy for Rotation of Auditors, the Audit Committee considering the qualifications and experience of M/s BSR and Associates, LLP, Chartered Accountants, recommended their appointment as Statutory Auditors of the Company, to the Board. The Board further recommends their appointment as Statutory Auditors to hold office from the conclusion of this Annual General Meeting (AGM) until the conclusion of Annual General Meeting of the Company to be held in Calendar year 2021, to the shareholders'' for approval in this AGM. In terms of proviso one of Section 139 of the Companies Act 2013, the appointment of Auditors shall be placed for ratification at every general meeting.

M/s BSR and Associates, LLP, Chartered Accountants have furnished a certificate of their eligibility as per Section 141 of the Companies Act, 2013 and have provided their consent for appointment as Statutory Auditors of the Company.

Secretarial Auditor

As per the Companies Act 2013, Secretarial Audit by a practicing Company Secretary has become mandatory for prescribed companies, and they are required to annex the Secretarial Audit report with their Board Report in the Annual Report. We are pleased to inform that your Company, as a voluntary practice, has been getting Secretarial Audit done for the past several years and also reporting it in the Annual Report.

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board appointed, Sanjay Grover & Associates, Practising Company Secretaries to undertake the Secretarial Audit of the Company. Secretarial Audit Report in the prescribed Form MR 3, is provided as Annexure F to this Directors'' Report. The Secretarial Auditors'' Report does not contain any qualification, reservation or adverse remark.

The Company also adheres to the various Secretarial Standards issued by the Institute of Companies Secretaries of India.

33. INTERNAL FINANCIAL CONTROLS

Your Company has in place adequate internal financial controls with reference to the financial statements. During the year, in order to further strengthen the internal financial controls, a renowned professional consultant firm was hired to conduct an assessment of the existent internal financial controls and advise on best practices for adoption.

Deloitte Haskins & Sells, the statutory auditors of the Company, have audited the financial statements included in this annual report and have issued unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting.

34. CORPORATE SOCIAL RESPONSIBILITY (CSR)

Inclusive growth and sustainable development are strong pillars of your Company''s responsible corporate citizenship and are a part of the core values and driving force for many of its initiatives. The Company believes that responsible investments in this regard will generate long term value for all the stakeholders.

In accordance with requirements of the Companies Act 2013, the Company has a Corporate Social Responsibility Committee comprising of a majority of Independent Directors and chaired by an Independent Director. Prof. Trilochan Sastry is the Chairman of the Committee and Mr. Vishnu R Dusad, Mr. Prithvi Haldea and Mr. S. M. Acharya are the other members. The Committee framed and recommended a CSR Policy to the Board for adoption and instituted a transparent monitoring mechanism for ensuring implementation of the projects / activities to be undertaken by the Company.

The CSR Policy may be accessed on the Company website link: http://www.nucleussoftware.com/investors.

Your Company has set up Nucleus Software Foundation, a Trust for the purposes of undertaking CSR activities of the Company.

Nucleus Software Foundation, the CSR arm of the Company, established in 2014, works towards a stated mission: "Empowering underprivileged with essence of education and thereby better livelihood and better life".

During the year under review, the Foundation worked towards its aim to take technology aid for enabling Quality Education at the bottom of pyramid. It undertook a project to support the education for the underprivileged children by use of digital games in app format for better engagement and assessments.

The schools which were selected for the pilot run were for underprivileged children, managed by NGO''s and located in NCR area.

The other CSR initiatives undertaken by the Foundation during the year are:

- Sponsor of college and hostel fees of two students of IIT Roorkee.

- Funding for watershed projects

- Donation for flood relief in Chennai

During the year, the Company contributed Rs. 1.20 crore towards CSR activities to the Foundation. Out of the total funds received, the Foundation expended Rs. 1.12 crore towards CSR activities. The Foundation is in the process of stabilizing the initiative of digital education for making it a long-term project and thus there is a shortfall in the expenditure done on CSR activities by the Foundation, with regard to the amount mandated as per law. The Annual Report on CSR activities is provided as Annexure G to this Directors'' Report.

35. EMPLOYEE STOCK OPTION PLAN (ESOP)

Currently, there is only one ESOP scheme prevalent in the Company; ESOP scheme - 2015 (instituted in 2015). As per ESOP scheme 2015, equity shares would be transferred to eligible employees on exercise of options through Nucleus Software Employee Welfare Trust, which is established to carry out activities for the benefit and welfare of its Employees by launching various Schemes in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.

During the year, the Board of Directors at the recommendation of Compensation Committee terminated the ESOP scheme 1999, ESOP scheme 2002, ESOP scheme 2005 and ESOP scheme 2006.

Details of ESOP as per the provisions of Companies Act, 2013 and Rules made there under are as follows:

Particulars

2015 Plan

(a) Total number of options under the Plan

500,000

(b) Pricing formula

100% of the Fair Market Price as on date of grant

(c) Options granted during the year

-

(d) Options vested as of March 31, 2016

-

(e) (i) Options exercised during the year

(ii) Total number of shares arising as a result of exercise of above options during the year

-

(f) Options forfeited during the year

-

(g) Option lapsed during the year

-

(h) Variation of terms of options during the year

-

(i) Amount realized by exercise of options during the year

-

(j) Total number of options in force as on March 31, 2016

-

During the year, no stock options were granted to any employee under the above-mentioned ESOP plan and therefore no calculations are required to be made or reported regarding difference between intrinsic value and fair market value of ESOPs granted.

36. PARTICULARS OF EMPLOYEES

In terms of the provisions of Section 197 (12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annual Report.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel ) Rules, 2014 are provided in the Annual Report.

Having regard to the provisions of the first proviso to Section 136(1) of the Companies Act, 2013 and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request. The full Annual Report including the aforesaid information is available on the Company''s website.

37. DIRECTOR''S RESPONSIBILITY STATEMENT

Pursuant to Sec 134 (5) of the Companies Act, 2013, the Directors confirm that:

(a) in the preparation of the annual accounts for the financial year ended March 31, 2016, 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 the Companies Act, 2013, 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;

(e) the Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors, including audit of internal financial controls over financial reporting by the statutory auditors, and the reviews performed by management, the Board is of the opinion that the Company''s internal financial controls were adequate and effective during FY 2015-16.

38. EXTRACT OF ANNUAL RETURN

Extract of Annual Return of the Company in the prescribed Form MGT-9, is provided as Annexure H to this Directors'' Report.

39. ACKNOWLEDGEMENTS

Your Directors would like to place on record their gratitude for the co-operation received from the Government of India, State Governments of Delhi, Uttar Pradesh and Rajasthan, Customs and Excise Departments, Department of Scientific and Industrial Research (Ministry of Science and Technology), Software Technology Park-Noida, Software Technology Park-Pune, Special Economic Zone authorities and other government agencies.

Your Directors would also like to thank the Company''s customers, bankers, vendors, partners and shareholders for their continued support to the Company. In specific, the Board would like to put on record its sincere appreciation of the commitment and contribution made by all employees of the Company.

For and on behalf of the Board of Directors

New Delhi Janki Ballabh

June 2, 2016 Chairman


Mar 31, 2015

Dear Members,

We are pleased to present your Company''s Twenty Sixth Annual Report, together with the Audited Statement of Accounts, for the year ended March 31, 2015.

1. RESULTS OF OPERATIONS - Financial Results

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Secton 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("2013 Act"), as applicable and guidelines issued by the Securites and Exchange Board of India ("SEBI"). Accounting policies have been consistently applied except where a newly issued Accounting standard, if initally adopted or a revision to an existng Accounting standard requires a change in the Accounting policy hitherto in use. Management evaluates all recently issued or revised Accounting standards on an ongoing basis. The Company has seven subsidiary companies, all of which are wholly-owned subsidiaries. The Company discloses stand-alone audited financial results on a quarterly and annual basis, consolidated un-audited financial results on a quarterly basis and consolidated audited financial results on an annual basis.

a) Consolidated Operations

Revenue from consolidated Operations for the year was Rs. 353.14 crore, 2% higher than Rs. 346.22 crore in the previous year. As the Company continued its focus on strategic initatves for new products, sales and market development and high level people to help drive transformation, the overall operational expense for the year continued to be high at Rs. 287.83 crore, against Rs. 279.64 crore in the previous year. Operatng Profit (EBITDA) was at Rs. 65.31 crore, 18% of revenue, against Rs. 66.58 crore, 19% of revenue, in the previous year.

Profit afer Tax for the year was at Rs. 64.71 crore, 18% of revenue, against Rs. 64.34 crore, 19% of revenue, in the previous year.

The consolidated financial results are as below: (Rs. in crore)

For the Year Ended March 31, 2015 % of Revenue 2014 % of Revenue

Revenue From Operations 353.14 100.00 346.22 100.00 Expenses

a) Changes in inventories of stock-in-trade - - 4.95 1.43

b) Employee benefit expense 201.44 57.04 180.77 52.21

c) Travel expense 20.01 5.67 19.90 5.75

d) Finance costs (Bank charges) 0.54 0.15 0.51 0.15

e) Other expenses 65.84 18.64 73.51 21.23

Total Expenses 287.83 81.51 279.64 80.77

Operatng Profit (EBITDA) 65.31 18.49 66.58 19.23

Depreciaton 11.97 3.39 7.93 2.29

Operatng Profit afer Interest and Depreciaton 53.34 15.10 58.65 16.94

Other Income 31.64 8.96 23.81 6.88

Foreign Exchange Gain/ (Loss) 1.67 0.47 0.74 0.21

Profit Before Tax 86.65 24.54 83.20 24.03 Taxaton

- Withholding Taxes 0.54 0.15 0.65 0.19

- Net current tax 15.97 4.52 18.87 5.45

- Other taxes 5.43 1.54 (0.66) (0.19)

Profit Afer Tax 64.71 18.32 64.34 18.58

b) Standalone Operations

Revenue from the standalone Operations of your Company for the year was Rs. 279.04 crore against Rs. 241.11 crore in the previous year, an increase of 16 %. Total operational expense for the year was at Rs. 218.06 crore against Rs. 196.53 crore in the previous year, an increase of 11%. Operatng Profit (EBITDA) was at Rs. 60.98 crore, 22% of revenue, against Rs. 44.58 crore, 18% of revenue, in the previous year.

Profit afer Tax for the year was at Rs. 60.74 crore, 22% of revenue, against Rs. 55.09 crore, 23% of revenue in the previous year.

Standalone financial results are as below: (Rs. in crore)

For the Year Ended March 31, 2015 % of Revenue 2014 % of Revenue

Revenue from Operations 279.04 100.00 241.11 100.00 Expenses

a) Changes in inventories of stock–in–trade - - 4.95 2.05

b) Employee benefit expense 145.95 52.30 124.80 51.76

c) Travel expense 16.91 6.06 17.38 7.21

d )Finance costs (Bank charges) 0.40 0.14 0.35 0.15

e) Other expenses 54.80 19.64 49.05 20.34

Total Expenses 218.06 78.15 196.53 81.51

Operatng Profit (EBITDA) 60.98 21.85 44.58 18.49

Depreciaton 10.66 3.82 6.76 2.80

Operatng Profit afer Interest and Depreciaton 50.32 18.03 37.82 15.69

Other Income 29.26 10.49 28.77 11.93

Foreign Exchange Gain/ (Loss) 0.12 0.04 1.17 0.49

Profit Before Tax 79.70 28.56 67.76 28.10 Taxaton

– Net current tax 13.78 4.94 13.38 5.55

– Other taxes 5.18 1.86 (0.71) (0.29)

Profit Afer Tax 60.74 21.77 55.09 22.85

A detailed analysis on the Company''s performance, both consolidated and standalone, is included in "Management''s Discussion and Analysis" Report, which forms part of this Annual Report.

2. SHARE CAPITAL

Issued and Paid-up Share Capital

The paid-up share capital of the Company, as on March 31, 2015, is 32,383,724 equity shares of Rs. 10 each similar to the paid-up share capital as on March 31, 2014.

Shares under Compulsory Dematerializaton

The shares of the Company are under compulsory dematerializaton ("Demat") category and are available for trading on both the depositories in India viz. Natonal Securites Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Of the entre paid up shares, 32,242,604 shares or 99%, are in dematerialized form as at March 31, 2015. The Internatonal Securites Identfication Number (ISIN) alloted to the Company''s shares is INE096B01018.

3. LISTING

Your Company is listed at Natonal Stock Exchange of India Ltd. and BSE Ltd.

Stock Exchange where Nucleus shares Scrip Symbol /Code are listed

Natonal Stock Exchange of India Ltd. NUCLEUS

(NSE) w.e.f. December 19, 2002

BSE Ltd. (BSE) w.e.f. November 6, 1995 531209

4. LIQUIDITY AND CASH EQUIVALENTS

Your Company contnues to retain its debt-free status and maintains sufficient cash and cash equivalents to meet future strategic initatves. The Company has been conservatve in its investment policy over the years, maintaining a reasonably high level of cash and cash equivalents which enable the Company to completely eliminate short and medium term liquidity risks, at the same tme also help scale up Operations at a short notce. The goal of cash management at Nucleus is to:

a. Use cash to provide sufficient working capital to manage business Operations of the Company to be able to add value to all our stakeholders and contnuously enhance the same.

b. Maintain sufficient cash as reserves that will aid the Company in capturing meaningful business opportunites, including acquisitons.

c. Invest surplus funds in low-risk bank deposits, debt schemes of mutual fund and tax free secured bonds of Public Sector Enterprises.

Cash and cash equivalents including current investments at a consolidated level of Rs. 281.25 crore, consttute 64% of the shareholders'' funds at the year end, against Rs. 298.02 crore, 75% of the shareholders'' funds at the close of the previous year. In additon, the Company holds tax free bonds issued by public sector enterprise on a ''hold to maturity'' basis of a face value of Rs. 53.63 crore against Rs. 25 crore in the previous year and long-term fixed maturity plans of mutual funds of Rs. 15 crore against nil last year.

5. DIVIDEND

The Dividend Policy of your Company stpulates a dividend payout in the range of 15-30% of the Profits available for distributon, subject to:

a) Provisions of The Companies Act, 2013 and other applicable laws, and

b) Cash flows of the Company

We are pleased to state that for the 15th consecutve year, your Company is recommending a dividend this year also. The proposed dividend is 50% (Rs. 5.00 per equity share of Rs. 10 each). Last year, the dividend was 60% (Rs. 6.00 per equity share of Rs. 10 each) which included a special dividend of 30% (Rs. 3.00 per equity share of Rs. 10 each). Dividend is subject to the approval of the shareholders at the forthcoming Annual General Meetng. If approved, the total dividend payout will be Rs. 16.19 crore, against a payout of Rs. 19.43 crore in the previous year. The total payout will be 27% of standalone Profits for the year. No amount was carried to reserves.

The Register of Members and Share Transfer Register shall remain closed during the period July 02 to July 08, 2015 (both days inclusive) for the purpose of the Annual General Meetng and for payment of dividend. The dividend if approved at the Annual General Meetng, will be payable to Members whose names appear on the Register of Members of the Company on July 02, 2015, being the frst day of Book-Closure and to those whose names appear as benefcial owner in the records of Natonal Securites Depositories Ltd. and Central Depository Services (India) Ltd. on close of business as on July 01, 2015.

6. FIXED DEPOSITS

Your Company has not accepted any fixed deposits covered under Chapter V of the Companies Act, 2013 and, as such, no amount of principal or interest was outstanding on the date of the Balance Sheet.

7. PARTICULARS OF CONTRACTS or ARRANGEMENTS WITH RELATED PARTIES

All contracts / arrangements / transactons entered by the Company during the financial year with related partes were in the ordinary course of business and on an arm''s length basis. The Company policy for determining ''material subsidiaries'' and on ''Related Party Transactons'', as approved by the Board can be accessed on the Company website link: htp://www.nucleussofware.com/investors.

Particulars of contracts or arrangements with related partes in the prescribed Form AOC-2, is provided as Annexure A to this Directors'' Report.

8. PARTICULARS OF LOANS, GUARANTEES or INVESTMENTS

Details of Loans, Guarantees and Investments covered under the provisions of Secton 186 of the Companies Act, 2013 are provided in the notes to the Financial Statements.

9. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THE COMPANY BETWEEN THE END oF FINANCIAL YEAR 2015 AND DATE OF THIS REPORT

No material changes and commitments have occurred afer the close of the year tll the date of this Report, which afect the financial positon of the Company.

10. CHANGE IN THE NATURE OF BUSINESS

There has been no change in the nature of business of the Company.

11. MANAGEMENT DISCUSSION & ANALYSIS

As per requirements of Clause 49 of the Listng agreement, Management''s Discussion and Analysis of the financial conditon and results of both standalone and consolidated Operations have been provided separately in this Annual Report.

12. REVIEW OF BUSINESS & OUTLOOK

Your Company contnues its journey as a preferred partner for banking and financial organizatons worldwide, providing innovatve and pioneering products, services and solutons globally.

Global growth remains moderate, with uneven prospects across the main countries and regions. Relatve to last year, the outlook for advanced economies is improving in comparison to the growth in emerging markets and developing economies. Improvement in the global macroeconomic outlook has led to banks focusing on growth, rather than cost reducton and compliance-centric projects. Innovaton in banking technologies has transformed the entre process of customer interacton with a bank. Technology has not only enhanced customer experience and satsfacton, but has also made banks omnipresent virtually, through mobile banking and other channels. As per Ovum, a global analyst house, IT budgets in the global retail banking industry will reach US $ 131 bn in 2015, an increase of 4.3% over the previous year.

During the year, your Company continued its transformation journey to drive greater innovaton, speed, agility, and efficiency across the business. The year witnessed strategic initatves on new products, sales and market development and investment in high-level people to help drive transformation and contnue the momentum of growth. We believe these initatves will empower the Company for sustainable growth.

13. NEW PRODUCT LAUNCHES

During the year, your Company launched FinnOne NeoTM, a product suite specifically designed to manage end-to-end lending requirements of banking and financial services industry. This comprehensive product suite incorporates the latest in business thinking, compliance, technology, functonality and security aspects. This new ofering has the capability to empower our customers to enhance operational efficiency and drive growth while achieving superior risk management. FinnOne NeoTM enables innovatve banks and finance companies to manage all types of lending from personal and home loans to commercial lending and finance against securites.

Your Company remains commited to providing its existng and potential customers with compettve and cutng-edge products and will contnue to focus on investments in product innovaton and business expansion.

14. NOTABLE ACCOLADES RECEIVED DURING THE YEAR

FinnOneTM has been ranked as the Global No. 1 Best Selling Lending Banking System for the Seventh consecutve year by IBS Publishing, UK in their Annual Sales League Table 2015

Annual Report for the Year Ended March 31, 2014 won the Platnum Award for Excellence within the Technology- Sofware industry category and ranked amongst the World''s Top 50 Annual Reports by the League of American Communicatons Professional (LACP).

9th Social and Corporate Governance Awards in the category "Best Overall Corporate Governance Compliance and Ethics Program organised by World CSR Congress.

Titanium Award at "The Asset Triple A Corporate Awards 2014" for the Third Consecutve Year under the category Financial Performance, Corporate Governance and Investor Relatons.

"Asian CSR Leadership Awards 2014" in the category, "Best Corporate & Financial Reportng".

"The Asian Banker award – 2014" for "Best Lending Platorm Implementaton Project" for introducing MARC, an innovatve debt servicing soluton that allows customers to make payment anytme, anywhere.

15. SUBSIDIARY COMPANIES

Your Company has seven wholly owned subsidiaries across the globe. During the year a Company was incorporated in Johannesburg, South Africa for tapping business potential in the sub-Saharan Africa region. Capital infusion in this Company is in process.

The following table provides a list of all these subsidiaries as on March 31, 2015:

Name of Subsidiary Locaton Date of incorporaton

Nucleus Sofware Solutons Pte. Ltd. Singapore February 25, 1994

Nucleus Sofware Inc. USA August 5, 1997

Nucleus Sofware Japan Kabushiki Kaisha Japan November 2, 2001

VirStra Technology Services Ltd. India May 6, 2004

Nucleus Sofware Netherlands B.V. Netherlands February 3, 2006

Nucleus Sofware Ltd. India April 21, 2008

Nucleus Sofware Australia Pty. Ltd. Australia February 3, 2014

There has been no material change in the nature of the business of the subsidiaries.

A statement containing the salient features of the financial statement of our subsidiaries in the prescribed form AOC 1 is provided as Annexure B to this Directors'' Report. The statement also provides the details of performance, financial positon of each of the subsidiaries.

a) Nucleus Sofware Solutons Pte. Ltd.

Nucleus Sofware Solutons Pte. Ltd. (NSS) is based in Singapore. It was incorporated in 1994 to expand the Company''s business in South East Asia. Currently, it is the central entty for Asia- Pacifc excluding Japan and Australia with responsibility for business development, sales and delivery for customers in the region.

b) Nucleus Sofware Inc.

Nucleus Sofware Inc. (NSI) is based in New Jersey, USA. It was incorporated in 1997 for providing business presence in the Americas. NSI operates as a business development and sales hub for the region.

c) Nucleus Sofware Japan Kabushiki Kaisha

Nucleus Sofware Japan Kabushiki Kaisha (NSJKK) is based in Tokyo, Japan. It was incorporated in 2001 to expand business in the country. NSJKK operates as a business development and sales hub for Japan.

d) VirStra i- Technology Services Ltd.

VirStra i- Technology Services Ltd. is based in Pune, India. It was incorporated in 2004 to provide sofware development services, targeted at the Japanese market..

e) Nucleus Sofware Netherlands BV

Nucleus Sofware Netherlands BV (NSBV) is based in Amsterdam, The Netherlands. It was incorporated in 2006 for enlarging business presence in the European market. NSBV is a business development and sales hub for Nucleus in Europe.

f) Nucleus Sofware Ltd.

Nucleus Sofware Ltd. (NSL) has Operations in Jaipur with registered ofce in New Delhi. It was incorporated in 2008 for facilitatng delivery to larger clients through Operations in a Special Economic Zone. NSL acquired 17.41 acre of land in the Mahindra World Special Economic Zone, Jaipur and, in the frst phase, has co-developed a 250-seater facility.

g) Nucleus Sofware Australia Pty. Ltd.

Nucleus Sofware Australia Pty. Ltd. (NSA) is based in Sydney, Australia. It was incorporated in 2014 for tapping the growing business opportunites in ANZ region. NSA operates as a business development and sales hub for the region.

16. INFRASTRUCTURE

Your Company along with its subsidiaries has ofces at several locatons across the globe. The ofce space and seatng capacity of these ofces as on March 31, 2015 is detailed below:

Office Locaton Area in Sq. ft. Seatng Capacity - No. of Persons

iNDiA

Noida 208,122 1,677

Jaipur 22,312 250

Pune 9,573 120

Chennai 4,500 48

New Delhi 4,200 40

Mumbai 3,250 31

Singapore 4,807 61

Dubai, UAE 1,290 17

New Jersey, USA 1,250 15

Tokyo, Japan 735 15

Amsterdam, Netherlands 561 15

London, UK 240 4

Manila, Philippines 194 5

Jakarta, Indonesia 99 3

261,133 2,301

NOIDA, New Delhi and Jaipur premises are owned by the Company and its subsidiaries.

17. QUALITY PROCESSES

Your Company is commited to ensure the highest level of quality for its products and services. In its journey towards excellence in delivery, "Project Governance" has been selected as its quality theme. Process improvement initatves were centered on ''Process Standardizaton'' and ''Strong Project Governance'' to bring predictability, repeatability and reproducibility. FinnEdge (Standard Implementaton Methodology) has been introduced covering 360 degree of the project governance which included processes, people and product. FinnEdge covers various aspects of the project from ''Value Creation to Value Realizaton'' and from ''Project Discovery'' to ''Project Implementaton'' to ''Project Upgrade''.

A dedicated Quality Assurance team handles the process change management, implementaton and it''s adherence across the organizaton. Quality assurance team monitors quality and productvity improvements through regular metrics analysis and dashboard reportng.

18. BRAND VISIBILITY

In FY 2015, your Company continued to grow its marketng Operations and actvites in support of the strategic aspiratons of the Company.

The year was one of considerable change for the Company as it structured itself for growth into new markets around the world. This brings new challenges and opportunites from a marketng viewpoint, with the need to grow brand awareness and demand generaton on a global scale. Your Company is investng in the marketng Operations in order to achieve both, with focus on growing brand awareness for the longer term as well as building demand and generatng leads for the sales pipeline. The objectves of the Nucleus marketng team are to:

- Ensure that your Company is known to all its target market as a provider of high quality, innovatve lending and transacton banking solutons.

- Establish the Company as a thought leader in the space, whose experts understand the world of banking and finance, the global trends and challenges that are emerging and how technology can be applied to deliver success.

- Equip the sales teams with the materials and tools needed to be successful.

Direct Customer Interactions

Your Company continued to partcipate in key Industry events like SIBOS in Boston, Financial Informaton Technology 2014 in Tokyo and the 4th Annual Middle East Banking Innovaton Summit 2014 in Dubai to help grow awareness of the brand and to meet and interact with executves from the industry and generate opportunites for the Company.

Events involving meetngs of small groups of industry executves were organised to discuss partcular topics or view our solutons and understand how we work with other customers like themselves. These took place in Germany, Indonesia and Philippines.

Digital Presence & Visibility

Your Company continued to build presence on social media channels as well as in more traditonal press, using a mix of in house and external skills. Social channels ofer a powerful way of highlightng our brand and communicatng our successes, so focus contnues to be applied here. In parallel media actvites contnue with increased Interactions with press including television approaching us for interviews around financial results.

A major focus during the year was creatng and launching a new website of the Company, which is now up and running. This features a new, up-to-date look and feel and supports mobile devices, which is increasingly important as more web browsing takes place on mobile phones and tablets. The website is now modern and fresh and works wherever the user wants.

Newsleters, emailers, case studies and various other digital marketng collaterals contnue to be created to ensure the brand image is portrayed consistently and with impact. Digital marketng is an area of increased focus as we go forward.

19. HUMAN RESOURCE MANAGEMENT

Your Company''s focus has been to create a world class experience for associates in a ''high performance culture''. We are determined to accelerate our growth story by corresponding to the changing needs of our diverse workgroup and constant building of unique people capabilites.

The global employee strength of the Company, at the end of FY 2015, was 1512.

While we serve as a steward for excellence and leadership through organizatonal effectiveness & recruitment, retenton, and enrichment, the organizaton witnessed launch of organizaton-wide HR initatves:

- Creation of a diverse & inclusive work environment through functonal leadership and advice, by investments in newer markets to ensure global presence

- 2015 Recruitment drive for Leadership and Talent Pipeline building:

- Talent hiring across all geographies at Leadership, Lateral & Entry levels

- Management Trainee & Sofware Engineer Trainee Programs (from premiere Indian B-schools/Engineering insttutes) for inductng fresh talent from the campuses

- 100 days of Innovaton campaign, doted with events like technology coding contests, webinars, Community Service initatves & events/celebratons which were centered around our ''Core Values''

- Strengthening capability through trainings/workshops/ career dialogues on Project Management, Sales Huntng Orientaton, Technology and Product under Functonal category and YLP (Young Leaders'' Program) and LEAD (Leadership @ Engagement, Acton and Development) under Leadership and Professional areas

- Talent development by expansion of web-based learning (MOOCs) to self-paced learning (E-Learning Cafe) in conjuncton with the Nucleus Career Growth Model (NCGM) to enable people to learn, perform and grow

- Creation of the One HR/Centralized Communicatons unit to refect professionalism & ensure that our programs and services are well communicated.

- Catalyze human assets to deliver efficient results by driving Pay for Performance culture and improving overall operational efciencies Going forward, your Company''s focus lies on creatng an enviable workplace culture, facilitated by revised HR policies/ processes framework, which is responsive to organizaton needs & at the same tme consistent with industry best practces. The integraton of goal-based high-performance culture with a clear career development plan for each employee is targeted to increase the learning curve substantally. Along with our commitment to future leadership development, Succession Planning is also an area of focus to help identfy and develop competencies through interventons to build capability and staying abreast with changing technology.

We plan to align HR operational initatves with Nucleus Sofware''s Strategic Plans to leverage and develop our people and technology through innovaton and collaboratve partnerships to provide unmatched value propositon and exceptonal quality of services to all.

20. CORPORATE GOVERNANCE

We, at Nucleus, believe that good and effective Corporate Governance is critcal to achieve corporate vision and mission of the organizaton; it is more of an organizatonal culture than a mere adherence to rules and regulatons. Law alone cannot bring changes and transformation, and voluntary compliance both in form and in substance plays an important role in developing good Corporate Governance.

Your Company has established and maintained a strong ethical environment, overseen by a fercely independent Board of Directors, where 5 out of 7 Directors are independent. The Company practces and policies refect true spirit of Corporate Governance initatves. Your Company is in compliance of all mandatory requirements of Corporate Governance as stpulated as per the Clause 49 of the Listng Agreement with the stock exchanges. Compliance status is provided in the Corporate Governance secton of the Annual Report. A certfcate issued by the Statutory Auditors of the Company confirming compliance of the conditons of Corporate Governance stpulated in Clause 49 of the Listng Agreement with the stock exchanges, is provided as Annexure C to this Directors'' Report.

A detailed report on Corporate Governance for the year forms part of this Annual Report.

21. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)

In accordance with the provisions of the Companies Act 2013 and the Artcles of Associaton of the Company, Mr. Vishnu R Dusad, Managing Director and CEO of the Company, retres by rotaton at the ensuing Annual General Meetng and being eligible has ofered himself for re-appointment.

Mr. Janki Ballabh, Mr. Prithvi Haldea, Prof. Trilochan Sastry and Mr. N Subramaniam were existng Independent Directors. During the year, in order to comply with provisions of Companies Act 2013, all of them were appointed as Independent Directors by the shareholders as per the Companies Act, 2013, not liable to retre by rotaton, to hold ofce for fve consecutve years.

The Companies Act 2013, Rules made thereunder and Listng Agreement with the Stock Exchanges (including amendments) provide for appointment of Woman Director for prescribed Companies. In compliance with these provisions, the Board of Directors on the recommendaton of Nominaton and Remuneraton Commitee, appointed Mrs. Elaine Mathias as a Woman Director (Additonal Independent Director) of the Company on September 20, 2014. Mrs. Mathias is a highly reputed professional and earlier served as an Executve Director (Finance) in Bharat Electronics Limited, Bangalore. She brings along with her over 34 years of rich experience in finance and corporate management.

During the year, the Board of Directors also appointed Mr. R P Singh as an Additonal Wholetme Director, pursuant to the provisions of Secton 161 of the Companies Act, 2013. Mr. R P Singh has been associated with the Company since incepton and is presently the President and Head Global Product Management. He is a highly respected professional and a part of core management team of the Company.

The shareholders of the Company through postal ballot, approved the appointment of Mrs. Mathias as an Independent Director as per the Companies Act, 2013 for a period of fve years and Mr. Singh as a Whole Time Director liable to retre by rotaton.

Mr. Sanjiv Sarin, Director retred by rotaton at the last Annual General Meetng held on July 8, 2014 under the applicable provisions of the erstwhile Companies Act, 1956 and the Board decided not to fll the vacancy caused due to his retrement.

During the year as per the provisions of Companies Act 2013, Mr. Vishnu R Dusad, CEO and Managing Director, Mr. Pramod K Sanghi, CFO and President Finance and Ms, Poonam Bhasin, AVP (Secretarial) and Company Secretary, were appointed as Key Managerial Persons of the Company. Mr. Sanghi retred from the services of the Company on March 31, 2015.

22. BOARD EVALUATION

The Board, along with the Nominaton and Remuneraton Commitee, developed and adopted the criteria and framework for the evaluaton of each of the Directors and of the Board and its Commitees, as required by the following new laws/ regulatons:

- Clause 49 of the Listng Agreement with the Stock Exchanges requires the Board to monitor and review the Board evaluaton framework.

- The Companies Act 2013 requires a formal annual evaluaton by the Board of its own performance and that of its commitees and individual Directors

- Schedule IV of The Companies Act 2013 requires performance evaluaton of all Independent Directors to be done by the entre Board of Directors, excluding the Director being evaluated.

The evaluaton was then conducted as per the approved process (explained in detail in the Report on Corporate Governance of this Annual report). The Evaluaton Report prepared by the Nominaton and Remuneraton Commitee was then presented and discussed at a Board Meetng and subsequently approved. In additon, the Chairman of the Commitee held one-to-one discussions with the Directors and sought their feed-back on the overall Board effectiveness, Directors, and Commitees of the Board. The Board was satsfed with the performance of each of the Directors and of the Commitees, as was evidenced by high average ratngs, all above 4 on a scale of 5. The Board also recognized that the inducton of 3 new independent Directors and 1 Executve Director on the Board over the last couple of years has indeed brought in qualitatve changes to the Board discussions.

Moreover, pursuant to the provisions of Schedule IV to the Act, the Independent Directors reviewed the performance of the Non- Independent Directors and the Board as a whole, performance of the Chairman of the Board, taking into account the views of all the Directors, quality, quantty and tmeliness of flow of informaton between the Company management and the Board its sufciency for the Board to effectively perform their dutes, and performance of various Commitees of the Board.

The Chairman briefed the Board of Directors on the feedback of the Independent Directors, Non-Executve Directors and Managing Director, on the Board effectiveness, based on the duly flled in Questonnaires and one to one discussions. These were discussed in detail and taken on record. Some of the suggestons emanatng from the discussions included a dedicated Board Meetng for discussion on Strategy and Business Plan, the Company''s Business Plan to be more realistc, along with a sensitvity analysis, improving communicatons with all stakeholders instead of focusing just on shareholders.

23. COMPANY''S POLICY ON DIRECTORS'' APPOTNTMENT AND REMUNERATION

During the year, Charter of the Nominaton and Remuneraton Commitee (NRC), a Commitee of the Board, was further revised in accordance with requirements of newly enacted Companies Act, 2013 and revised Clause 49 of the listng agreement with Stock Exchanges. Primary responsibility of the Commitee is to identfy and nominate suitable candidates for Board membership and as members of senior Management of the Company. The Commitee also formulated policies relatng to the remuneraton of Directors, Key Managerial Personnel and other employees of the Company.

The Commitee, while evaluatng potential candidates for Board membership, considers a variety of personal atributes, including experience, intellect, foresight, judgment and transparency, and match these with the requirements set out by the Board. The basic responsibilites of NRC with regard to Directors'' appointment, are as follows:

- Recommending desirable changes in Board size, compositon, Commitee structure and processes, and other aspects of the Board''s functoning;

- Formulatng criteria for determining qualifcatons, positve atributes and Independence of a Director

- Conductng search and recommending new Board members in light of resignaton of current members or a planned expansion of the Board;

- Identfying persons who are qualifed to become Directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the Board their appointment and removal.

The policy of the Company for selecton of Directors is provided as Annexure D and Remuneraton Policy for Directors, Key Managerial Personnel and other employees is provided as Annexure E to this Directors'' Report.

24. DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declaratons from all the Independent Directors that they meet the criteria of independence as laid down under Secton 149(6) of the Companies Act, 2013 and Clause 49 of the Listng Agreement with the stock exchanges.

25. FAMILIARISATION PROGRAMME For INDEPENDENT DIRECTOR''S

The details of programmes for familiarisaton of Independent Directors with the Company, their roles, rights, responsibilites in the Company, nature of the industry in which the Company operates, business model of the Company and related maters can be accessed on the Company website link : htp://www. nucleussofware.com/investors .

26. MEETINGS OF THE BOARD OF DIRECTORS

The Board met eight tmes during the year and details are providing in the Report on Corporate Governance, a part of this Annual Report.

27. COMMITTEES OF THE BOARD

There are currently six Commitees of the Board, as follows:

- Audit Commitee

- Compensaton Commitee

- Corporate Governance Commitee

- Nominaton and Remuneraton Commitee

- Stakeholder Relatonship Commitee

- Corporate Social Responsibility Commitee

Details of all the Commitees along with their charters, compositon and meetngs held during the year, is provided in the Report on Corporate Governance, a part of this Annual Report.

The Compositon of Board commitees as on March 31, 2015 is as follows:

Memberships across Board Commitees Audit Corporate Nominaton & Commitee Governance Remuneraton Commitee Commitee

Mr. Janki Ballabh - -

Mr. Vishnu R Dusad - -

Mr. Prithvi Haldea - - -

Mrs. Elaine Mathias - - -

Prof. Trilochan Sastry - - -

Mr. R P Singh

Mr. N. Subramaniam - -

Compensaton Stakeholder Corporate Social Commitee Relatonship Responsibility Commitee Commitee

Mr. Janki Ballabh - - -

Mr. Vishnu R Dusad - - -

Mr. Prithvi Haldea - - -

Mrs. Elaine Mathias - - -

Prof. Trilochan Sastry - - -

Mr. R P Singh - - -

Mr. N. Subramaniam - - -

28. VIGIL MECHANISM

The Company has a well established whistle blower policy as part of vigil mechanism for Directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violaton of the Company''s Code of conduct or ethics policy. This mechanism also provides for adequate safeguards against victmizaton of Director(s)/employee(s) who avail of the mechanism and also provides for direct access to the Chairman of the Audit Commitee in exceptonal cases.

29. SIGNIFICANT AND MATERIAL ORDERS

No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s Operations in future.

30. RISK MANAGEMENT POLICY

The Company has developed and implemented a ''Risk Management Policy'' that includes Identfication of elements of risk, which in the opinion of the Board may threaten the existence of the Company. Risk Management Report forms a part of this Annual Report.

31. ADDITIONAL INFORMATION TO SHAREHOLDERS

Detailed informaton to the shareholders is provided in the Shareholders'' Referencer, a part of this Annual Report.

32. AUDITORS

Statutory Auditors

Statutory Auditors of the Company, Deloite Haskins & Sells, Chartered Accountants, retre at the conclusion of the ensuing Annual General Meetng and are eligible for re-appointment. In accordance with the Companies Act 2013 and the Companies (Audit and Auditors) Rules, 2014, the Audit Commitee post considering the qualifcatons and experience of Deloite Haskins & Sell, Chartered Accountants, recommended their reappointment to the Board. The Board further recommends their appointment as Statutory Auditors of the Company to hold ofce from the conclusion of this meetng untl the conclusion of next Annual General Meetng of the Company, to the shareholders'' for approval in the ensuing AGM.

Deloite Haskins & Sells, Chartered Accountants have furnished a certfcate of their eligibility as per Secton 141 of the Companies Act, 2013 and have provided their consent for appointment as Statutory Auditors of the Company for FY 15- 16. As per the relevant provisions of Listng Agreement, your Company has ensured that the Auditors of your Company are subjected to the peer review process of Insttute of Chartered Accountants of India (ICAI) and hold a valid certfcate issued by the Peer Review Board of the ICAI. Deloite Haskins & Sells, Chartered Accountants, have confrmed their compliance with the relevant provision.

The Notes on financial statement referred to in the Auditors'' Report are self-explanatory and do not call for any further comments. The Auditors'' Report does not contain any qualifcaton, reservaton or adverse remark.

Secretarial Auditor

As per the Companies Act 2013, Secretarial Audit by a practcing Company Secretary has become mandatory for prescribed companies, and they are required to annex the Secretarial Audit report with their Board Report in the Annual Report. We are pleased to inform that your Company, as a voluntary practce, has been getng Secretarial Audit done for the past several years, and also reportng it in the Annual Report.

Pursuant to the provisions of Secton 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneraton of Managerial Personnel) Rules, 2014, the Board appointed, Sanjay Grover & Associates, Practsing Company Secretaries to undertake the Secretarial Audit of the Company. Secretarial Audit Report in the prescribed Form MR 3, is provided as Annexure F to this Directors'' Report. The Secretarial Auditors'' Report does not contain any qualifcaton, reservaton or adverse remark.

The Company voluntarily adhers to the various Secretarial Standards issue by the Insttute of Companies Secretaries of India.

33. INTERNAL FINANCIAL CONTROLS

Your Company has in place adequate internal financial controls with reference to the financial statements. During the year, in order to further strengthen the internal financial controls, a renowned professional consultant frm was hired to conduct an assessment of the existent internal financial controls and advise on best practces for adopton.

34. CORPORATE SOCIAL RESPONSIBILITY (CSR)

Inclusive growth and sustainable development are strong pillars of your Company''s responsible corporate citzenship and are a part of the core values and driving force for many of its initatves. The Company believes that responsible investments in this regard will generate long term value for all the stakeholders.

In accordance with requirements of The Companies Act 2013, the Company has a Corporate Social Responsibility Commitee comprising of a majority of Independent Directors and chaired by an Independent Director. Prof. Trilochan Sastry is the Chairman of the Commitee and Mr. Vishnu R Dusad and Mr. Prithvi Haldea are the other members. The Commitee framed and recommended a CSR Policy to the Board for adopton and insttuted a transparent monitoring mechanism for ensuring implementaton of the projects / actvites to be undertaken by the Company.

The CSR Policy may be accessed on the Company website link: htp://www.nucleussofware.com/investors. The objectve of CSR Policy of your Company is to support the guiding principle of Together We Grow". Through the CSR initatves, your Company strives to provide equitable opportunites for sustainable growth. Your Company would engage in actvites whereby business further contributes to make a positve and distnguishing impact on the environment, customers, employees and other stakeholders. The objectve of CSR will be achieved through concentrated and dedicated initatves encompassing the identfed core areas of Educaton, Health & Medical Care, Community at large and Environment. Your Company is conscious of its dutes towards the community and our planet and the coming years shall witness your Company in several CSR areas.

Your Company has set up Nucleus Sofware Foundaton, a Trust for the purposes of undertaking CSR actvites of the Company. During the year, the Company spent Rs. 0.71 crore on CSR actvites, out of the total amount mandated as per law. Your Company was in the process of further identfying worthwhile avenues for CSR expenditure during the year and in its absence, there was a shortall of Rs. 0.48 crore in the expenditure done on CSR actvites with regard to the amount mandated as per law. The Annual Report on CSR actvites is provided as Annexure G to this Directors'' Report. The Company is commited to CSR and shall strive to at least spend the amount as provided in law.

35. EMPLOYEE STOCK OPTION PLAN (ESOP)

Your Company launched ESOP 2015 during the year. Currently there are three ESOP schemes prevalent in the Company; ESOP scheme - 2005 (insttuted in 2005), ESOP scheme - 2006 (insttuted in 2006) and ESOP Scheme - 2015 (insttuted in 2015). These schemes were duly approved by the Board of Directors and shareholders. ESOP 2005 scheme provides for 600,000 options, 2006 scheme provides for 1,000,000 options and 2015 scheme provides for 500,000 options to eligible employees. As per ESOP scheme 2015, equity shares would be transferred to eligible employees on exercise of options through Nucleus Sofware Employee Welfare Trust, established during the year, to carry out actvites for the benefit and welfare of its Employees by launching various Schemes in accordance with the Securites and Exchange Board of India (Share Based Employee benefits) Regulatons, 2014.

Details of ESOP as per the provisions of Companies Act, 2013 and Rules made there under are as follows:

Particulars 2005 Plan 2006 Plan 2015 Plan

a) Total number of options under the Plan 600,000 1,000,000 500,000

(b) Pricing formula 100% of the 100% of the 100% of the Fair Market Fair Market Fair Market Price as on Price as on Price as on date of grant date of grant date of grant

(c) options granted during the year - - -

(d) options vested as of March 31, 2015 - - -

(e) (i) options exercised during the year - - -

(ii) Total number of shares arising as a result of exercise of - - - above options during the year

(f) options forfeited during the year - - -

(g) Opton lapsed during the year - - -

(h) Variaton of terms of options during the year - - -

(i) Amount realized by exercise of options during the year - - -

(j) Total number of options in force as on March 31, 2015 - - -

During the year, no stock options were granted to any employee under the above-mentoned ESOP plans and therefore no calculatons are required to be made or reported regarding diference between intrinsic value and fair market value of ESOPs granted.

36. PARTICULARS OF EMPLOYEES

In terms of the provisions of Secton 197 (12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneraton of Managerial Personnel) Rules, 2014, a statement showing the names and other Particulars of the employees drawing remuneraton in excess of the limits set out in the said rules are provided in the Annual Report.

Disclosures pertaining to remuneraton and other details as required under Secton 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneraton of Managerial Personnel ) Rules, 2014 are provided in the Annual Report.

Having regard to the provisions of the frst proviso to Secton 136(1) of the Companies Act, 2013 and as advised, the Annual Report excluding the aforesaid informaton is being sent to the members of the Company. The said informaton is available for inspecton at the registered ofce of the Company during working hours and any member interested in obtaining such informaton may write to the Company Secretary and the same will be furnished on request. The full Annual Report including the aforesaid informaton is available on the Company''s website.

37. DIRECTOR''S RESPONSIBILITY STATEMENT

Pursuant to as per Sec 134 (5) of the Companies Act, 2013, the Directors confrm that:

(a) in the preparaton of the annual accounts for the financial year ended March 31, 2015 , the applicable Accounting standards had been followed along with proper explanaton relatng to material departures;

(b) the Directors had selected such Accounting policies and applied them consistently and made judgments and estmates that are reasonable and prudent so as to give a true and fair view of the state of afairs of the Company at the end of the financial year and of the Profit and loss of the Company for that period;

(c) the Directors had taken proper and sufficient care for the maintenance of adequate Accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventng and detectng fraud and other irregularites;

(d) the Directors had prepared the annual accounts on a going concern basis;

(e) the Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operatng effectively; and

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operatng effectively.

38. EXTRACT OF ANNUAL RETURN

Extract of Annual Return of the Company in the prescribed Form MGT-9, is provided as Annexure H to this Directors'' Report.

39. ACKNOWLEDGEMENTS

Your Directors would like to place on record their grattude for the co-operaton received from the Government of India, State Governments of Delhi, Utar Pradesh and Rajasthan, Customs and Excise Departments, Sofware Technology Park-Noida, Sofware Technology Park-Chennai, Sofware Technology Park- Pune, Special Economic Zone authorites and other government agencies.

Your Directors would also like to thank customers, bankers, vendors, partners and shareholders for their continued support to the Company. In specific, the Board would like to put on record its sincere appreciaton of the commitment and contributon made by all employees of the Company.

For and on behalf of the Board of Directors

Noida Janki Ballabh May 7, 2015 Chairman


Mar 31, 2013

Dear Members,

The have pleasure in presenting your Company''s Twenty Fourth Annual Report, together with the Audited Statement of Accounts, for the year ended March 31, 2013.

1. RESULTS OF OPERATIONS - FINANCIAL RESULTS

Financial statements of the Company are prepared in compliance with the Companies Act, 1956 and Generally Accepted Accounting Principles (GAAP) in India and mandatory accounting standards issued by the Institute of Chartered Accountants of India ("ICAI"). The Company has six subsidiary companies, all of which are wholly-owned subsidiaries. The Company discloses stand-alone audited financial results on a quarterly and an annual basis, consolidated un-audited financial results on a quarterly basis and consolidated audited financial results on an annual basis.

a) Consolidated operations

Consolidated financial statements of your Company and its subsidiaries as on March 31, 2013 are prepared in accordance with the Accounting Standard 21 (AS -21) on ''Consolidated Financial Statements'' issued by the Institute of Chartered Accountants of India, and form part of this Annual Report. These Group accounts have been prepared on the basis of audited financial statements of Subsidiaries.

Your Company''s revenue from operations for the year was Rs. 293.76 crore, 4% higher than Rs. 282.25 crore in the previous year. Overall operational expense for the year remained under control at Rs. 247.86 crore, against Rs. 246.70 crore in the previous year. As a result, Operating Profit (EBITDA) at Rs. 45.90 crore, 16% of revenue, was higher by Rs. 10.35 crore over Rs. 35.55 crore, 13% of revenue, in the previous year.

Profit after Tax for the year was at Rs. 45.17 crore, 15% of revenue, higher by 28% over Rs. 35.34 crore, 13% of revenue, in the previous year.

(Rs. in crore)

The consolidated financial results are as below:

For the Year Ended March 31, 2013 % of revenue 2012 % of revenue

income from operations 293.76 100.00 282.25 100.00

Expenses

a) Employee benefit expense 163.41 55.63 157.08 55.65

b) Travel expenditure 20.20 6.88 19.54 6.92

c) Finance costs (Bank Charges) 0.44 0.15 0.33 0.12

d) Other expenses 63.81 21.72 69.75 24.71

total Expenses 247.86 84.38 246.70 87.40

operating Profit (EBITDA) 45.90 15.63 35.55 12.60

Depreciation 6.09 2.07 7.45 2.64

operating Profit after Interest and Depreciation 39.81 13.55 28.10 9.96

Other Income 17.28 5.88 16.87 5.98

Foreign Exchange Gain/(Loss) 2.97 1.01 3.34 1.18

Profit Before tax 60.06 20.45 48.31 17.12

Taxation

- Withholding Taxes 0.63 0.21 0.92 0.32

- Current Tax (Net of MAT credit entitlement) 14.66 4.99 11.45 4.06

- Other taxes (0.40) (0.14) 0.59 0.21

Profit After tax 45.17 15.38 35.34 12.52

b) Standalone operations

The total revenue from the standalone operations of your Company for the year was Rs. 202.28 crore against Rs. 204.85 crore in the previous year. Total operational expense for the year was at Rs.171. 62 crore against Rs. 177.89 crore in the previous year, a decrease of 4%. Operating Profit (EBITDA) was at Rs. 30.66 crore, 15% of revenue, against Rs. 26.96 crore, 13% of revenue, in the previous year.

Profit after Tax for the year was at Rs. 37.09 crore, 18% of revenue, against Rs. 32.64 crore, 16% of revenue, after considering dividend receipt of Rs. 3 crore from one of the subsidiaries of the Company (Rs. 3.60 crore in the previous year).

Standalone financial results are as below:

(Rs. in crore)

For the Year Ended March 31, 2013 % of revenue 2012 % of revenue

Revenue from operations 202.28 100.00 204.85 100.00

Expenses

a) Employee benefit expense 117.58 58.13 115.52 56.39

b) Travel expense 16.08 7.95 16.74 8.17

c) Finance costs (Bank Charges) 0.30 0.15 0.22 0.11

d) Other expenses 37.66 18.16 45.41 22.17

Total Expense 171.62 84.84 177.89 86.84

operating Profit (EBITDA) 30.66 15.16 26.96 13.16

Depreciation 4.97 2.46 6.10 2.98

operating Profit after Interest and Depreciation 25.69 12.70 20.86 10.18

Other Income 19.80 9.79 19.48 9.51

Foreign Exchange Gain/ (Loss) 4.19 2.07 3.52 1.72

Profit Before tax 49.68 24.56 43.86 21.41

Taxation

- Withholding taxes - - 0.89 0.43

- Current Tax (Net of MAT credit entitlement) 12.79 6.32 9.58 4.68

- Other taxes (0.20) (0.10) 0.75 0.37

Profit After tax 37.09 18.34 32.64 15.93

A detailed analysis on the Company''s performance, both consolidated and standalone, is included in the "Management''s Discussion and Analysis" Report, which forms part of this Annual Report.

2. DIVIDEND

The Dividend Policy of your Company mandates a dividend payout in the range of l5%-30% of the profits available for distribution, subject to:

a) Provisions of The Companies Act, 1956 and other applicable laws, and

b) Cash flows of the Company

In accordance with the above Policy, we are pleased to state that for the 13th consecutive year, your Company is recommending a dividend, and this year of 30% (Rs. 3.00 per equity share of Rs.10 each), compared to 25 % (Rs. 2.50 per equity share of Rs. 10 each) in the previous year. It is subject to the approval of the shareholders at the forthcoming Annual General Meeting. If approved, the total dividend payout will be Rs. 9.72 crore, being 26% of standalone profits for the year against a payout of Rs. 8.10 crore, 25% of standalone profits in the previous year.

The Register of Members and Share Transfer Register shall remain closed during the period July 02-10, 2013 (both days inclusive) for the purpose of the Annual General Meeting and for payment of dividend. The dividend, if approved at the Annual General Meeting, will be payable to Members whose names appear on the Register of Members of the Company on July 02, 2013, being the first day of Book-Closure and to those whose names appear as beneficial owner in the records of National Securities Depositories Ltd. and Central Depository Services (India) Ltd. on close of business as on July 01, 2013.

3. TRANSFER TO RESERVES

Ybur Company proposes to transfer Rs. 3.71 crore to the General Reserve out of the amount available for appropriation.

4. TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the provisions of Section 205 A (5) of the Companies Act, 1956, your Company has transferred the following unpaid / unclaimed dividends relating to the following years to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205 C of the said Act.

Dividend for the Year Unpaid Dividend

2000-2001 - Interim Dividend Rs. 28,762

2000-2001 - Final Dividend Rs. 74,339

2001-2002 - 1st Interim Dividend Rs. 58,921

2001-2002 - 2nd Interim Dividend Rs. 50,979

2002-2003 - Final Dividend Rs. 50,142

2003-2004 - Final Dividend Rs. 131,363

2004-2005 - Final Dividend Rs. 188,007

5. SHARE CAPITAL

- Issue of Shares under Employees Stock option Plans

During the year ended March 31, 2013, the Company allotted 180 equity shares to employees upon exercise of stock options under Employee Stock Option Plan 2005.

- issued and Paid-up Share Capital

The paid-up share capital of the Company, as on March 31, 2013, is 32,383,634 equity shares of Rs.10 each as against 32,383,454 equity shares of Rs.10 each as on March 31, 2012.

- Shares under compulsory dematerialization

Shares ofthe Company are under compulsory dematerialization ("Demat") category and are available for trading on both the depositories in India viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Of the entire paid up shares, 32,008,668 shares, or 98.84% are in dematerialized form as at March 31, 2013.

The International Securities Identification Number (ISIN) allotted to the Company''s shares is INE096B01018.

6. LISTING

Your Company is listed at National Stock Exchange of India Ltd. and the BSE Ltd.

Stock Exchange where Scrip Symbol / Nucleus shares are listed Code

National Stock Exchange of India Ltd. (NSE) NUCLEUS w.e.f. December 19, 2002

BSE Ltd. (BSE) w.e.f. November 6, 1995 531209

7. REVIEW OF BUSINESS & OUTLOOK

We take great pride in being one of the few ''Made In India'' Software Product companies. We operate in the Banking and Financial Services domain with banks and non-banking financial institutions as our primary customers. Our products are largely in the area of origination and management of "Retail Loans" and the management of corporate liquidity by banks.

Slow economic growth continued across globe in the FY 13. Fiscal cliff in the US, sovereign debt problems in Europe and slow down in the BRICS economies contributed to slowdown in investments by corporates and banks, leading to an adverse impact on the Information Technology industry.

Your Company has been closely working with its current customers to maintain and improve the functionality of its software products which are working successfully in 50 countries across more than 150 installations. Simultaneously, as technology changes and innovation are required to provide faster access and processing on a scalable basis, your Company, during the year, focused on building teams for the future, setting the base for new product launches and thereby also increasing its market share. Overall, the past year was a year of consolidation as revenue and profitability reflect. We believe that with strong R & D and sales and marketing teams in place, we are now poised to realize the full potential of our products and brand in the global market with addition of several new customers.

A combination of economic growth, new emerging markets, cloud computing, and increasing demand from small and medium enterprises are anticipated to boost growth. We hope that with our customer-centric strategy, we would remain a partner of choice for all our present customers and be able to source many more customers.

8. BIRTH OF ISPIRIT

In the recent years, there has been an upsurge in start-up software product companies in India. This essentially can be termed as beginning of a new era, with enough potential to re-invent the whole Indian software industry, which till now has been dominated by the IT services companies. Emergence of globally recognized Indian product companies will represent the final step in the software value chain. If India can become the hub of the world''s most successful IT services as well as product companies, it can truly lay claim to being a knowledge superpower. To make this possible and transform India into a hub for new generation software products, it is crucial to address government policy, create market catalysts and fuel the maturity of product entrepreneurs. With this context in mind, about 30 software product companies and individuals have come together recently to form iSpirit - the Indian Software Product Industry Roundtable. We are delighted to inform you that Mr. Vishnu R Dusad, MD & CEO of your Company, is a founder member of this revolutionary initiative. Your Company hopes to contribute immensely to this new endeavour and hopes to benefit the country and itself in times to come.

9. LIQUIDITY AND CASH EQUIVALENTS

Your Company continues to retain its status of a debt-free Company and maintains sufficient cash and cash equivalents to meet its futuristic strategic initiatives. The Company has been conservative in its investment policy over the years, maintaining a reasonably high level of cash and cash equivalents which enable the Company to completely eliminate short and medium term liquidity risks. The goal of cash management at Nucleus is to:

a. Use cash to provide sufficient working capital to manage business operations of the Company to be able to add value to all our stakeholders and continuously enhance the same.

b. Maintain sufficient cash as reserves that will aid the Company in capturing meaningful business opportunities.

c. Invest surplus funds in low-risk bank deposits, debt schemes of mutual fund and tax free secured, redeemable, non- convertible Bonds of Public Sector Enterprises.

Cash and cash equivalents at a consolidated level constitute 58% of the total assets at Rs. 266.72 crore, at the year end, against Rs. 196.16 crore, 48% of total assets at the close of the previous year.

As on March 31, 2013 Rs. 92.03 crore was placed in bank fixed deposits (all in India), Rs. 144.74 crore invested in liquid schemes and fixed maturity plans of mutual funds and Rs.10 crore in tax free secured, redeemable, non- convertible Bonds of Public Sector Enterprises. The mix between fixed deposits, liquid schemes, fixed maturity plans and tax free bonds is a function of the desired liquidity and returns.

10. NOTABLE ACCOLADES RECEIVED DURING THE YEAR

- FinnOne™ has been ranked as the Global No. 1 Lending Software solution for the fifth consecutive year by IBS Publishing, UK in their Sales League Table 2013 for Banking Product Sales.

- Annual Report and Accounts of the Company for the year ended March 31, 2012 was adjudged as the BEsT under the Category X - Service Sector (Other than financial services sector-turnover less than Rs. 500 crore) of the ''ICAI Awards for Excellence in Financial reporting''. A GOLD SHIELD was awarded to the Company for the fifth consecutive year.

- NASSCOM Corporate Award for Excellence in Diversity and Inclusion 2013 for the category Best It services & Product Company - Special recognition (less than 5000 employees)

- ''Best online Annual Report'' globally in the technology sector & the Best in ''Most Improved Financial Disclosure Procedures'' in the regional rankings for India for the year 2012 by IR Global Rankings (IRGR).

- Annual Report for the year ended March 31, 2012 won the Platinum Award for excellence within the Technology- Software industry and ranked 22nd amongst the Top 100 Annual Reports in the Vision Awards by the League of American Communications Professionals (LACP), USA.

- Social and Corporate Governance Award 2013 in the category ''Best overall Corporate Governance''

- Titanium Award for Investor Relations, Corporate Governance and Environment Responsibility in the Asset Triple A Corporate Awards 2012.

11. SUBSIDIARY COMPANIES

Your Company has six wholly owned subsidiaries across the globe. It also has a step-down subsidiary located in Singapore. The following table provides a list of all these subsidiaries as on March 31, 2013 :

Name of Subsidiary Location Date of incorporation

Nucleus Software Solutions Pte. Ltd. Singapore February 25, 1994

Nucleus Software Inc. USA August 5, 1997

Nucleus Software Japan Kabushiki Kaisha Japan November 2, 2001

VirStra i- Technology Services Ltd. India May 6, 2004

Nucleus Software Netherlands B.V Netherlands February 3, 2006

Nucleus Software Ltd. India April 21, 2008

Step Down Subsidiary of Nucleus Software Exports Ltd.

VirStra i- Technology (Singapore) Pte. Ltd. Singapore December 17, 2004

There has been no material change in the nature of the business of the subsidiaries. A statement containing brief financial details of the subsidiaries is included in the Annual Report. As required under the Listing Agreements entered into with the Stock Exchanges, a consolidated financial statement of the Company and all its subsidiaries is attached. The consolidated financial statements have been prepared in accordance with the relevant accounting standards as prescribed under Section 2II(3C) of the Act.

As per General Circular No: 2 /20II issued by the Government of India, Ministry of Corporate Affairs, a general exemption was provided to Companies for attaching the Directors'' Report, Balance Sheet and Profit and Loss Account of all subsidiaries to its balance sheet, subject to fulfilling certain conditions as stipulated in the circular. Your Company complies with those conditions and, therefore, has been generally exempted by the Central Government from attaching detailed accounts of the subsidiaries, and accordingly, the financial statements of the subsidiaries are not attached in the Annual Report. For providing information to Shareholders, the annual accounts of these subsidiary Companies along with related information are available for inspection during business hours at the Company''s registered office and at the concerned subsidiary''s offices.

a) Nucleus Software Solutions Pte. Ltd.

Nucleus Software Solutions Pte. Ltd. (NSS) is based in Singapore. It was incorporated in 1994 to expand the Company''s business in South East Asia. Currently, it is the central entity for Asia- Pacific excluding Japan with full responsibility for business development, sales and delivery for customers in the region.

b) Nucleus Software Inc.

Nucleus Software Inc. (NSI) is based in New Jersey, USA. It was incorporated in 1997 for ensuring business presence in the Americas. NSI operates as a business development and sales hub for the region.

c) Nucleus Software Japan Kabushiki Kaisha

Nucleus Software Japan Kabushiki Kaisha (NSJKK) is based in Tokyo, Japan. It was incorporated in 2001 to expand business in the country. NSJKK operates as a business development and sales hub for Japan, which is the single largest market for the Company.

d) VirStra i- Technology Services Ltd.

VirStra i- Technology Services Ltd. is based in Pune, India. It was incorporated in 2004 as a development centre. This subsidiary set up its own subsidiary VirStra I- Technology (Singapore) Pte. Ltd. in Singapore in 2004 to expand its service operations in Singapore.

e) Nucleus Software Netherlands BV

Nucleus Software Netherlands BV (NSBV) is based in Amsterdam, The Netherlands. It was incorporated in 2006 for ensuring business presence in the European market. NSBV is a business development and sales hub for Nucleus in Europe.

f) Nucleus Software Ltd.

Nucleus Software Ltd. (NSL) is based in Jaipur, India with registered office in New Delhi. It was incorporated in 2008 for facilitating delivery to larger clients through operations in a Special Economic Zone. NSL acquired 17.41 acre of land in the Mahindra World Special Economic Zone, Jaipur and, in the first phase, has co-developed a 250-seater facility.

12. INFRASTRUCTURE

Your Company has offices at several locations across the globe. The office space and seating capacity of these offices as on March 31, 2013 is detailed below:

Office Location Area in Seating Capacity Sq. ft. - No. of Persons

NOIDA

Unit - I 87,423 705

Unit - II 90,265 778

Multi Facility Block 30,434 194

Total 208,122 1,677

Chennai 3,822 48

Singapore 7,141 95

New Delhi 4,200 40

Pune 9,573 120

Mumbai 3,250 36

Dubai 1,290 17

Jaipur 22,312 250

Tokyo, Japan 430 7

Amsterdam, Netherlands 561 7

New Jersey, USA 1250 15

Total 261,951 2,312

NOIDA, New Delhi and Jaipur premises are owned by the Company and subsidiaries.

13. QUALITY PROCESSES

Nucleus is committed to ensure the highest level of quality for its products and services to achieve higher performance leading to "Customer Delight." This year, we focused on continuous process improvements by incremental advancements in the existing processes and innovations using new tools and methods.

With an objective to increase adherence to secure coding practices, your Company adopted best code review process and automated security code review tools. Review and feedback mechanism was further strengthened by collaborating with customers during project development/reviews which led to faster feedback from customer and improved quality. With prime focus on customer satisfaction, your Company started seeking transactional feedback from customers post key milestones, which led to improved communication with customers. To align with agile methodology and increased visibility of project execution, best project management and defect management tools were adopted.

A dedicated team is also responsible for collecting improvement suggestions from across the organization and incorporating them in the organization standard processes. Existing processes are reviewed for their effectiveness and benchmarked with respect to industry by participating in various reputed industry forums on quality and processes.

14. NUCLEUS BRAND VISIBILITY

Your Company aspires to leverage its domain leadership into a visible, relevant and vibrant brand that connects with key audiences including customers, stakeholders and employees. We believe that it is all about building a history of great experiences and trusted relationships.

We actively represent the brand Nucleus in all 50 countries where we have customers and spend significant time and effort in educating and informing the industry about our products and solutions to help customers make informed choices. Your Company participated in key Industry events (MEFTEC -Dubai, SIBOS -Osaka, IDG Vietnam - Hanoi ) amongst a host of other such events to ensure visibility of your Company''s offerings. In addition, untapped markets in key financial nerve centres like London, Stockholm and Atlanta were also covered with specific events driven through focused branding efforts.

We work to ensure success in individual markets by understanding local requirements and launch programs that cater to these specific markets. Our customers are at the core of all our initiatives and we work closely with various teams to ensure the right impact. During the year, special customer meets were held in markets such as Mumbai, Manila and Dubai to understand how we can help customers deliver increased value to their clients. This was enhanced with targeted media activities in both domestic and overseas regions.

In the coming financial year, a significant boost to leverage the strength of our brands including FinnOne™ and Cash@WillTM through marketing initiatives is planned. These brand focused visibility programs will be enhanced through diverse channels including print media, online, social media and direct communications. In addition to our marketing programs, we are also planning to host joint outreach programs with our strategic partners in focus geographies such as Africa.

15. HUMAN RESOURCE MANAGEMENT

As we enter a new era of growth and change, there are several areas of product and technology that we are focusing on. Talent is the key to effect this transformation and hence critical focus during the year has been on building capabilities including:

- Continuous workforce enhancement through hiring high quality talent and strengthening our leadership capabilities

- Investing in newer markets

- Investment in developing talent across varied skill sets. Core development quadrants include:

- Leadership and business management capabilities

- Sales force effectiveness

- Banking process and domain expertise

- Delivering process and work level improvements to impact how people learn, perform and engage at the workplace

- Workplace inclusiveness to leverage strengths from diverse backgrounds.

- Nucleus was awarded NASSCOM Corporate Awards for Excellence in Diversity and Inclusion 2013 as a ''Special Recognition'' for the category of Best IT services & product company (less than 5000 employees)

Nucleus has been consistently ranked the global market leader in lending software and we are focused on furthering this unique positioning through our people capabilities.

The global employee strength as at the end of the year stood at 1,503.

16. ADDITIONAL INFORMATION TO SHAREHOLDERS

Detailed information to the shareholders in the form of "Shareholders'' Referencer" is provided later in this report.

17. SECRETARIAL AUDIT

Your Company, as a voluntary practice, has been getting Secretarial audit done for the past several years. This is a process to check compliance with the provisions of various laws and rules/regulations/procedures, maintenance of records etc., by an independent professional firm to ensure that the Company has complied with the statutes and procedural requirements. Ever-increasing complexities of laws and responsibilities of Directors (especially Non-executive Directors) make it even more imperative that an external expert reports on proper compliance mechanism and systems. The audit also points out if there is a need for any corrective measures or improvement.

An assignment for a comprehensive Secretarial Audit for the year 2012 was awarded to a professional Company Secretary firm. It is a matter of pride that the audit confirmed that your Company was generally in compliance with all applicable provisions of the Companies Act, 1956, Depositories Act 1996, Listing Agreements with all the stock exchanges where the Company is listed and all the applicable guidelines, rules and regulations of the Securities & Exchange Board of India (SEBI). The Certificate obtained in this regard is provided as Annexure A to the Report on Corporate Governance. The Secretarial Auditor has made certain recommendations for adopting some more Best Practices, which are now being implemented.

The Institute of Company Secretaries of India (ICSI), one of the premier professional bodies in India, has issued secretarial standards on Board meetings, general meetings, payment of dividend, maintenance of registers and records, minutes of meetings, transmission of shares and debentures, passing of resolution by circulation, affixing of common seal, forfeiture of shares and board''s report. While they are non-mandatory in nature, your Company has complied with all of these.

18. FOREIGN EXCHANGE RISK

Globally, the easy money policies followed consistently by the Federal Reserve and the ECB and the Japanese Central Bank since December 2012, all aimed towards reducing interest rates, have had major consequences on currency exchange rates. The year witnessed extreme volatility with major international currencies at different points of time and required careful monitoring to reduce risk. The Indian Rupee fluctuated from a high of 50.56 to the Dollar in April 2012 to a low of Rs. 57.22 in June 2012 and overall lost 6.68% against the US Dollar on a March-end to March-end comparison. Japanese Yen, in which 11% of your Company''s revenue arises, weakened by over 20% between December 2012 and March 2013 against the US Dollar and as the Indian Rupee traded in a narrow band, the cross was negative for our Yen realisations.

While the weak Rupee has been a national concern, it proved beneficial for export-oriented companies. It is incumbent upon the Management of your Company to follow a prudent policy to hedge the foreign currency risk, without taking speculative positions. Your Company has a conservative approach and does not speculate in foreign currency markets. Forwards are held to maturity and regular reporting and monitoring systems are in place including quarterly updates to the Audit Committee. During the year, the Company followed a well-defined policy of hedging close to receivables through Forward Contracts which are designated as Highly Probable forecast transactions. At the year end, the Company had US$ 10.50 million of hedges compared to US$ 12.00 million at the beginning of the year.

19. FIXED DEPOSITS

Your Company has not accepted any deposits and, as such, no amount of principal or interest was outstanding on the date of the Balance Sheet.

20. AUDITORS

The Statutory Auditors of the Company, Deloitte Haskins & Sells, retire at the conclusion of the ensuing Annual General Meeting, and are eligible for re-appointment. The retiring Auditors have furnished a certificate of their eligibility for re-appointment under section 224 (IB) of the Companies Act, 1956 and have indicated their willingness to continue. The Audit Committee and the Board of Directors recommend the reappointment as Statutory Auditors of Deloitte Haskins & Sells, Chartered Accountants for the financial year 2013-14 for shareholders'' approval. As per the relevant provisions of Listing Agreement, your Company has ensured that the Auditors of your Company are subjected to the peer review process of Institute of Chartered Accountants of India (ICAI) and hold a valid certificate issued by the Peer Review Board of the ICAI. Deloitte Haskins & Sells have confirmed their compliance with the relevant provision.

21. INSIDER TRADING REGULATIONS

Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations, I992, as amended from time to time, the Code of Conduct for the Prevention of Insider Trading and the Code for Corporate Disclosures continue to be in operation at your Company.

22. DIRECTORS

Mr. N. Subramaniam and Professor Trilochan Sastry were inducted as Additional Directors on the Board of Directors of the Company with effect from July I I, 2012 and April 27, 2013 respectively. Both Mr. Subramaniam and Professor Sastry are noted experts and bring rich and varied experience to the Board. Their appointment as Non-Executive Independent directors, liable to retire by rotation, will be placed for your approval in the forthcoming Annual General meeting.

In recognition of the proposed policy of Rotation of Directors in the Companies Bill 2012, Mr. Arun Shekhar Aran, an Independent Non-Executive Director of the Company, who served for 18 years on the Board, resigned with effect from April 27, 2013. The Board of Directors considered and accepted his resignation. We place on record our deep sense of appreciation for the immense contribution of Mr. Aran during his tenure as a Board member.

Article 87 of the Articles of Association of the Company provides that at least two-thirds of our Directors shall be subject to retirement by rotation and one third of these retiring Directors must retire from office at each Annual General Meeting of the shareholders. A retiring Director is eligible for re-election. In accordance with the same, Mr. Janki Ballabh and Mr. Prithvi Haldea, Directors of the Company, shall retire at the ensuing Annual General Meeting and both of them being eligible, have offered themselves for re-appointment.

23. COMMITTEES OF THE BOARD

During the year, the Board dissolved its Review Committee, which was constituted for a limited period. There are currently six Committees of the Board, as follows:.

- Audit Committee

- Compensation Committee

- Corporate Governance Committee

- Nomination Committee

- Remuneration Committee

- Share Transfer and Shareholder Grievance Committee

Details of all the Committees along with their charters, composition and meetings held during the year, is provided in the "Report on Corporate Governance", a part of this Annual Report.

24. CORPORATE GOVERNANCE

We, at Nucleus, believe that good and effective Corporate Governance is more of an organizational culture than a mere adherence to rules and regulations. Law alone cannot bring changes and transformation, and voluntary compliance both in form and in substance plays an important role in developing good Corporate Governance.

Your Company is in compliance of all mandatory requirements of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the stock exchanges. For the year ended March 3I, 20I3, the compliance status is provided in the Corporate Governance section of the Annual Report. A certificate issued by the Statutory Auditors of the Company confirming compliance of the conditions of Corporate Governance stipulated in Clause 49 of the Listing Agreement with the stock exchanges forms part of this Directors'' Report as Annexure C.

25. MANAGEMENT DISCUSSION & ANALYSIS

Management Discussion and Analysis of the financial condition and results of both standalone and consolidated operations have been provided separately in this Annual Report.

26. CORPORATE SOCIAL RESPONSIBILITY (CSR)

Inclusive growth and sustainable development are strong pillars of your Company''s responsible corporate citizenship and are a part of the core values and driving force for many of its initiatives. The Company believes that responsible investments in this regard will generate long term value for all the stakeholders.

The proposed Companies Bill, 2012 has certain provisions to encourage corporates to undertake CSR activities. We, at Nucleus, have mapped our status with the requirements of this Bill and have highlighted the areas of improvement. Your Company is conscious of its duties towards our community and our planet and the coming years shall witness your Company in several CSR areas.

27. EMPLOYEE STOCK OPTION PLAN

In accordance with Employee Stock Option scheme and Employee Stock purchase Scheme Guidelines, l999, issued by SEBI, the excess of the market price of the underlying equity shares as of the date of the grant over the exercise price of the option including up-front payments if any, is to be recognized and amortized on a straight-line basis over the vesting period. We have Employee Stock Option Plan 2005 and Employee Stock Option Plan 2006 where the options are granted to the employees at an exercise price equal to fair market price as on date of grant.

Accordingly, we have calculated the compensation cost arising on account of stock option granted using the intrinsic value method. Hence, the disclosure in terms of Clause 12.1 (n) of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guideline, 1999, is not applicable. For fiscal 2013 there was no stock compensation cost, no stock options were granted. Hence, the weighted average fair values of grant during the year is nil.

28. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under subsection (I)(e) of Section 2I7 of the Companies act, I956, read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988, are set out in Annexure A which forms part of this Report.

29. DISCLOSURES UNDER SECTION 217 OF THE COMPANIES ACT, 1956

- The particulars as prescribed under subsection (I)(e) of Section 2I7 of the Companies Act, I956, read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988, are set out in Annexure A which forms part of this Report.

- Except, as disclosed elsewhere in the report, there have been no material changes and commitments, which can affect the financial position of the Company between the end of the financial year and the date of this report.

- The information required under Section 21 7(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, and forming part of the Directors'' Report for the year ended March 31, 2013 is annexed as Annexure B.

30. DIRECTOR''S RESPONSIBILITY

Pursuant to Section 217 (2AA) of the Companies (Amendment) Act, 2000 the Directors confirm that:

(i) in the preparation of the annual accounts for the year 2012-13, the applicable accounting standards have been followed and there is no departure;

(ii) the Directors have selected such accounting policies and applied them consistently, except where otherwise stated in the notes on accounts, and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that year;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the Directors have prepared the annual accounts on a going concern basis.

31. ACKNOWLEDGEMENTS

Your Directors would like to place on record their gratitude for the co-operation received from the Government of India, Governments of Delhi, Uttar Pradesh and Rajasthan, Customs and Excise Departments, Software Technology Park-Noida, Software Technology Park-Chennai, Software Technology Park-Pune, Special Economic Zone authorities and several other government agencies.

Your Directors would also like to thank all its bankers, customers, vendors and shareholders for their continued support to the Company. In specific, the Board would also record its sincere appreciation of the commitment and contribution made by all employees of the Company.

For and on behalf of the Board of Directors

Noida Janki Ballabh

April 27, 2013 Chairman


Mar 31, 2011

We have pleasure in presenting your Companys Twenty Second Annual Report, together with the Audited Statement of Accounts, for the year ended March 31, 2011.

1. FINANCIAL RESULTS – Consolidated

(Rs. in crore)

For the Year Ended March 31, 2011 % of revenue 2010 % of revenue

revenue from operations 270.48 100.00 291.78 100.00

Software Development Expenses 183.40 67.81 196.17 67.23

Gross Profit 87.08 32.19 95.61 32.77

Selling and Marketing Expenses 30.21 11.17 22.66 7.77

General and Administration Expenses 26.39 9.76 18.87 6.47

operating Profit (EBitDA) 30.48 11.27 54.08 18.53

Depreciation 9.28 3.43 11.33 3.88

Operating Profit After Interest and Depreciation 21.20 7.84 42.75 14.65

Other Income 9.40 3.48 9.62 3.30

Foreign Exchange Gain/ (Loss) (0.74) (0.27) (8.03) (2.75)

Profit Before tax 29.86 11.04 44.34 15.20

Withholding Taxes 2.69 0.99 0.43 0.15

Provision for Taxation

- Current (Net of MAT credit entitlement) 2.96 1.09 6.84 2.34

- Other taxes (2.13) (0.79) (1.33) (0.46)

Profit After tax 26.34 9.74 38.40 13.16

Earning Per share (in rs. per Equity share of face value rs.10 each)

- Basic 8.13 11.86

- Diluted 8.13 11.86

FiNANCiAL rEsULts – Nucleus software Exports Limited (Rs. in crore)

For the Year Ended March 31, 2011 % of revenue 2010 % of revenue

revenue from operations 199.55 100.00 194.15 100.00

Software Development Expenses 133.16 66.73 125.48 64.63

Gross Profit 66.39 33.27 68.67 35.37

Selling and Marketing Expenses 18.60 9.32 14.12 7.27

General and Administration Expenses 22.10 11.07 14.95 7.70

operating Profit (EBitDA) 25.69 12.87 39.60 20.40

Depreciation 8.10 4.06 9.80 5.05

Operating Profit After Interest and Depreciation 17.59 8.81 29.80 15.35

Other Income 29.61 14.84 15.63 8.05

Foreign Exchange Gain/ (Loss) 0.99 0.50 (5.71) (2.94)

Profit Before tax 48.19 24.15 39.72 20.46

Withholding Taxes 1.33 0.67 0.43 0.22

Provision for Taxation

- Current (Net of MAT credit entitlement) 3.10 1.55 6.83 3.52

- Other taxes (2.00) (1.00) (1.28) (0.66)

Profit After tax 45.76 22.93 33.74 17.38

Dividend 8.10 8.09

Tax on Dividend (0.01) 0.15

Transferred to General Reserve 4.58 3.37

Profit Retained in Profit & Loss Account 33.09 22.13

Earning Per share (in rs. per Equity share of face value rs.10 each)

- Basic 14.13 10.42

- Diluted 14.12 10.42

2. RESULTS OF OPERATIONs

The financial statements of the Company are prepared in compliance with the Companies Act, 1956 and Generally Accepted Accounting Principles in India (Indian GAAP). The Company has six subsidiary companies, all of which are wholly- owned. The Company discloses stand-alone audited financial results on a quarterly and annual basis, consolidated un-audited financial results on a quarterly basis and consolidated audited financial results on an annual basis.

(a) Consolidated operations

Your Companys revenue from operations for the year is Rs.270.48 crore against Rs.291.78 crore in the previous year, a fall of 7%. Overall operational expenses at Rs.240.00 crore for the year remained under control, with only a marginal increase of 1% over Rs.237.70 crore in the previous year. Lower revenue coupled with significant investments in people, products and sales & marketing and under-utilization of infrastructure resulted in a decline in the operating margins. The Operating Profit (EBITDA) achieved is Rs.30.48 crore, 11% of revenue, against Rs.54.08 crore, 19% of revenue in the previous year.

Profit After Tax for the year at Rs.26.34 crore, 10% of revenue, lower by 31% over Rs.38.40 crore, 13% of revenue in the previous year.

(b) standalone operations

The total revenue from operations of your Company for the year is Rs.199.55 crore against Rs.194.15 crore in the previous year, an increase of 3%. Total operational expenses for the year are at Rs.173.86 crore against Rs.154.55 crore in the previous year, an increase of 12%. Operating Profit (EBITDA) is at Rs.25.69 crore, 13% of revenue, against Rs.39.60 crore, 20% of revenue in the previous year.

Profit After Tax for the year at Rs.45.76 crore, 23% of revenue, higher by 36% over Rs.33.74 crore, 17% of revenue, for the previous year. This is after considering dividend receipt of Rs.21.00 crore from a Companys subsidiary (Rs.7.00 crore in the previous year).

3. DiViDEND

Your Directors are pleased to recommend a dividend of 25% (Rs.2.50 per equity share of Rs.10 each), subject to the approval by the Shareholders at the forthcoming Annual General Meeting. The total dividend payout will be Rs.8.10 crore, being 31% of consolidated profits for the year against a payout of Rs.8.09 crore, 21% of consolidated profits in the previous year.

The Register of Members and Share Transfer Register shall remain closed during the period 1st July to 8th July, 2011 (both days inclusive) for the purpose of the Annual General Meeting and for payment of dividend. The dividend, if approved at the Annual General Meeting, will be payable to Members whose names appear on the Register of Members of the Company on July 1, 2011, being the first day of Book-Closure and to those whose names appear as beneficial owner in the records of National Securities Depositories Ltd. and Central Depository Services (India) Ltd. on close of business as on June 30, 2011.

Pursuant to the provisions of Section 205A (5) of the Companies Act, 1956, the Company transferred the following unpaid / unclaimed dividends relating to the following three years to the

Investor Education and Protection Fund (IEPF) established by the Central Government.

Dividend for the Year Amount of Unpaid Dividend

2000-2001 – Interim Dividend Rs.28,762

2000-2001 – Final Dividend Rs.74,339

2001-2002 – 1st Interim Dividend Rs.58,921

2001-2002 – 2nd Interim Dividend Rs.50,979

2002-2003 – Final Dividend Rs.50,142

4. sHARE CAPITAL

The paid-up share capital as on March 31, 2011 is 32,382,524 equity shares of Rs.10 each against 32,370,024 equity shares of Rs.10 each as on March 31, 2010. The increase in the paid-up share capital of the Company during the year has been due to allotment of 12,500 shares on exercise of Employee Stock Options as per ESOP 2002.

5. REVIEW OF BUsINESS & OUTLOOK

We are a Software Product Company operating in the Banking and Financial Services domain. Our primary customers are banks and non-banking financial institutions and our products are largely in the origination and management of "Retail Loans" and the management of corporate liquidity by banks.

Putting behind fiscal 2009-10 as a year of downturn, when the annual growth plunged to 6 percent after cumulative growth of 25-30 per cent during the previous four years, the Information Technology industry returned to a double-digit growth in the fiscal 2010-11, thanks to renewed investments by global firms across verticals in IT infrastructure, software and back office services. Growth returned to the Industry because of transformational needs of global customers and changing business models favoring cost effective solutions. Our customers, banks and non-banking financial institutions, also were in the recovery mode after the economic depression, and wanted to increase efficiency by using technologically superior products to reduce cost, earn better margins and in turn offer their customers value services at lower costs. The Company received orders from all over the world, including North Africa, Mediterranean region, America, Europe, Australia and the Middle East. With these orders, your Company also added 32 new customers during the year.

However, while the Product Business of the Company reflected this change in global economic conditions with growth in revenue of 11%, the "Projects and Services "business of the Company declined over the previous year due to consolidation activity by some major customers, leading to an overall decline of 7% in the revenue of the Company. This reduction, in turn, led to lower margins and reduced profits on a consolidated basis.

The impact of the global meltdown in 2008 was felt severely by your company, resulting in lower revenues and profits on a consolidated basis in 2009-10 after a peak previous year. Significant challenges on account of vendor consolidation and budgetary constraints of major services customers have since continued resulting in further lower revenues in the past year. During the current year, your Company is confident of at least reversing the downward trend, and is gearing towards a higher revenue and profits in the ensuing years.

The future growth of your Company will lie on how well the Company addresses the challenges such as attracting skilled manpower, controlling high attrition and provide for increased compensation on one hand and meeting the changing needs of its clients on the other. With growth strategies led by innovation and intellectual property becoming more mainstream, we believe that the Company is well placed for growth. Greater focus in the coming years will be on processes to improve productivity.

As per the Information Technology Annual Report 2010-1 1, Banking, Financial Services & Insurance (BFSI) remains the largest vertical market accounting for over 40 per cent of the Indian IT- ITeS exports in year 2010-11. With market posing no significant constraints, we believe that your Company is now poised to move into the next orbit , with its focus on delivering value to all its stakeholders.

6. NOTABLE ACCOLADEs RECEIVED DURING THE YEAR

- Forrester recognized Nucleus as a "Global Pursuer" and stated it "regained traction in 2010". Based on the number of deals and regions covered, Nucleus was ranked among top Banking Platform providers. Source: Global Banking Platform Deals 2010, Forrester Research, Inc., 31 March 2011.

- FinnOneTM ranked for the third consecutive year as the Worlds No 1 Selling Lending Software Product (for year 2010) by IBS Publishing, UK | 2011 & ranked third in global sales across all banking products.

- Annual Report and Accounts of the Company for the year ended March 31, 2010 adjudged as the BEST under the Category VIII - Service Sector (Other Than Banking & Insurance) (Turnover Less Than Rs.500 Crore) of the ICAI Awards for Excellence in Financial Reporting. A GOLD SHIELD awarded to the Company, for the third consecutive year.

- South Asian Federation of Accountants (SAFA) adjudged Annual Report of the Company as the recipient of the joint first runners up position for the Best Presented Accounts Award for the year 2009 under the Communication and Information Technology Sector Category.

- HDFC Bank, a Nucleus Software customer, won the prestigious Celent 2010 Model Bank Award for its loan origination system, FinnOneTM.

7. SUBSIDIARIES

The following table lists the subsidiaries of your Company as on March 3 1, 201 1 . All these are wholly owned subsidiaries including one step-down subsidiary in Singapore.

Name of subsidiary Location

- Nucleus Software Solutions Pte. Ltd. Singapore

- Nucleus Software Inc. USA

- Nucleus Software Japan Kabushiki Kaisha Japan

- VirStra/-Technology Services Ltd. India

- Nucleus Software Netherlands B.V Netherlands

- Nucleus Software Ltd. India

step Down subsidiary of Nucleus software Exports Ltd.

- VirStra /-Technology (Singapore) Pte. Ltd. Singapore

a) Nucleus software solutions Pte. Ltd.

Nucleus Software Solutions Pte. Ltd. (NSS) is based in Singapore. It was incorporated in the year 1994, to expand business in South East Asia. Currently, it is the central entity for Asia- Pacific excluding Japan with full responsibility for business development, sale and delivery to customers in the region.

b) Nucleus software inc.

Nucleus Software Inc. (NSI) is based in New Jersey, USA. It was incorporated in the year 1997 for ensuring a business presence and further growth in the Americas. NSI operates as a business development and sales hub for the region.

c) Nucleus software Japan Kabushiki Kaisha

Nucleus Software Japan Kabushiki Kaisha (NSJKK) is based in Tokyo, Japan. It was incorporated in the year 2001 to expand business in the country. NSJKK operates as a business development and sales hub for Japan, which is the single largest market for the Company.

d) Virstra i-technology services Ltd.

VirStra i-Technology Services Ltd. is based in Pune, India. It was incorporated in the year 2004 as a development centre. This subsidiary set up its own subsidiary VirStra i-Technology (Singapore) Pte. Ltd. in Singapore in the year 2004 to expand its service operations in Singapore.

e) Nucleus software Netherlands B.V.

Nucleus Software Netherlands B.V. (NSBV) is based in Amsterdam, The Netherlands. It was incorporated in the year 2006 for a business presence and growth of the European market. NSBV is a business development and sales hub for Nucleus in Europe. During the year, your Company made an additional investment of €100,000 in this subsidiary by subscribing to its equity share capital.

f) Nucleus software Ltd.

Nucleus Software Ltd. (NSL) is based in New Delhi, India. It was incorporated in the year 2008 for facilitating business through operations in a Special Economic Zone. NSL acquired 17.41 acres of land in Mahindra World Special Economic Zone, Jaipur and, in the first phase, is co-developing a 250- seater facility, which will be ready by June 2011, for software exports.

As per General Circular No: 2 /2011 issued by the Ministry of Corporate Affairs, Government of India, a general exemption has been provided to Companies for attaching the Directors Report, Balance Sheet and Profit and Loss Account of all subsidiaries to its balance sheet, subject to fulfilling certain conditions as stipulated in the circular. Your Company complies with those conditions and, therefore, has been generally exempted by the Central Government from attaching detailed accounts of the subsidiaries, and accordingly, the financial statements of the subsidiaries are not attached in the Annual Report. For providing information to Shareholders, the annual accounts of these subsidiary Companies along with related information are available for inspection during business hours at the Companys registered office and at the concerned subsidiarys offices.

8. Infrastructure

Your Company has offices at several locations across the globe. The office space and seating capacity of these offices as on March 31, 2011 is detailed below:

office Location Area in seating sq. ft. Capacity - No. of Persons

NOIDA

Unit - I 87,423 705

Unit - II 90,265 778

Multi Facility Block 30,434 194

total 208,122 1,677

Chennai 13,524 209

Singapore 6,101 95

New Delhi 10,000 140

Pune 9,573 120

Mumbai 3,250 31

Dubai 1,290 17

Tokyo, Japan 728 10

Amsterdam, Netherlands 561 7

New Jersey, USA 410 4

total 253,559 2,310

NOIDA and Delhi premises are owned by the Company. All other office premises are under lease.

9. SPECIAL ECONOMIC ZONE (SEZ) PROJECT

Nucleus Software Ltd. (NSL), a wholly-owned subsidiary of the Company, had acquired 17.41 acres of land in a SEZ in Jaipur at a private sector multi-product Special Economic Zone, "Mahindra World City" in the year 2008-09. SEZs are eligible for a host of fiscal benefits, incentives and concessions both from the State and Union Government.

During the year, NSL acquired the status of Co-Developer for the above land along with Mahindra World City, Jaipur Ltd. (MWCJL). This was pursuant to approval granted by Board of Approvals (BOA) of the Ministry of Commerce and Industries, Government of India, in their meeting held on June 8, 2010, for developing, operating and marinating the area of 17.41 acres in the SEZ. Your Company i.e. Nucleus Software Exports Ltd., has received the approval from Ministry of Commerce and Industries, Government of India, to set up a unit with a covered area of 2,063 sq meters for a 250-person facility, which will be ready by June 2011.

Your Company had two units registered under "Software Technology Parks" in India during the year which were entitled to income tax exemption as per applicable laws. Despite numerous industry representations, there has been no extension of tax holiday enjoyed by units in STP/ FTZ under Section 10A of the IT Act beyond 31 March 2011 and there is additionally increase in the rate of Minimum Alternate Tax (MAT) from existing 15% to 18% (plus applicable surcharge and education cess) for future years.

The tax implication for all the units in India will be higher w.e.f the financial year 2011-12.

10. QUALITY PROCESSES

This year, your Company further strengthened its focus on quality. Many new initiatives were launched during the year.

The year started with a renewed focus on closer interaction between delivery and quality, which contributed to an increase of process awareness for adoption of better practices resulting in better productivity, reduced defect density and shorter development cycle.

Key focus of the new initiatives was automation of project health dashboards and reports generation. A Project Management Tool- PMP which was launched last year, was enhanced with new features, enabling the project teams to have a better and more comprehensive perspective on the project progress. Parameters for monitoring of project health were revised to reflect project health from multiple view points, which provides a closer to accurate status of the projects health to the project team and the senior management.

Your Company understands the importance of having good processes, and is continuously working on improving its processes by ensuring that they meet the business objectives. There is a clear focus on implementation of Industry Best Practices. A dedicated team is responsible for collecting improvement suggestions from across the organization and incorporating them in the organization standard processes.

Defect prevention has become the prime focus and in this regard, new trainings have been launched and project teams are being trained. This is expected to result in further reduction of rework effort and defect density, which are benchmarks for measuring product quality.

11. HUMAN RESOURCE MANAGEMENT

Your Company operates in a knowledge-based industry where high intellectual human capital leads to a significant competitive advantage. With a global explosion in market opportunities in the IT sector, the shortage of manpower both in numbers and skills is becoming a prime challenge. The related issues are varied indeed:

- Recruitment of world-class workforce and their retention,

- Compensation and career planning,

- Technological obsolescence and employee turnover.

In todays world, the HR function assumes a bigger role of an HR facilitator, one that facilitates the change processes. The HR facilitator needs to involve the entire organisation in this process and act as a guide, coach and counselor.

The year gone by witnessed business growth challenges and consolidation. The Companys HR function continued its focus on managing most of the requirements with internal resource movements and improving productivity of the existing teams. Post-recession, the attrition rate in the IT industry has risen again and has become one of the major challenges faced by the industry. As the industry recovers fully from the economic downturn, lateral hiring has reached its peak which in turn has resulted in widespread attrition. The Company has reworked on its freshers hiring programme. Besides depending upon campus recruitments, it has established Nucleus School of Banking and Technology (NSBT), as a division of your Company to provide focussed role-based training programs specializing in the Banking & Financial Service Industry Technology segment. In the past one

year, over two hundred NSBT trained freshers were inducted in your Company. In future too, more trained freshers would be hired from NSBT.

During the year, new Development and Training programs were designed to enhance skills related to Project Management, Business Analysis, Product Knowledge and Role Realignment. Mid-term salary revision was done during the year to rationalize compensation of the deserving employees.

Various measures were initiated in the Company to improve employee productivity. Project Incentive policy was rolled out during the year to motivate employees to achieve project completions on time and achieve higher customer satisfaction ratings. Communication with employees was regularized through monthly open houses where open discussions were held between the Management and the Nucleites. The new concept of Business HR Representatives in respective IBUs was very well received and has proved helpful in ensuring effective and positive employee engagement.

On a consolidated basis, the employee strength as at the end of the year stood at 1,720.

12. ADDITIONAL INFORMATION TO sHAREHOLDERS

Detailed information to the shareholders in the form of "Shareholders Referencer" is provided later in this report.

13. SECRETARIAL AUDIT

In order to strengthen the internal processes of the secretarial department of your Company, an assignment was given for a comprehensive Secretarial Audit for the calendar year 2010, to a professional Company Secretary firm. While the audit revealed that the Company was in compliance of all laws/regulations, some recommendations made by the Secretarial Auditor for adopting Best Practices are now being implemented. This is a voluntary initiative undertaken by the Company to adopt the best practices and procedures. Certificate obtained in this regard is provided as Annexure A to the Report on Corporate Governance.

The Company endeavors to comply to the extent possible and relevant with the non mandatory Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).

14. LIQUIDITY AND CAsH EQUIVALENTS

Your Company continues to retain its status of a debt-free Company. The Company has been conservative in its investment policy over the years, maintaining a reasonably high level of cash and cash equivalents which enables the Company to completely eliminate short and medium term liquidity risks.

Cash and cash equivalents constitute 65% of the total assets at Rs.187.51 crore, at the year end, against Rs.162.41 crore, 60% of total assets at the close of the previous year.

An amount of Rs.40.37 crore, as on March 31, 2011 was in bank fixed deposits at an average interest rate of 9.05% per annum and Rs.125.76 crore in liquid schemes and fixed maturity plans of various mutual funds. The mix between fixed deposits, liquid schemes and fixed maturity plans is a function of the prevailing interest rates.

15. FOREIGN EXCHANGE RISK

The Indian Rupee continued to remain volatile in FY 2010-11. After closing at 45.09 per US Dollar end of March 2010, it touched 47.70 on the lower side in May 2010 and 44.10 on the higher

side in October 2010. It closed the financial year at 44.68 per US Dollar, strengthened by 0.91 per cent against the US dollar during the year ended March, 2011. Overall, there was no significant year- end change compared to a year ago, but volatility during the year was a major challenge.

While exchange rates are determined by macro level parameters in India, especially inward fund flows in a limited capital account. Convertibility scenario is incumbent upon the management to follow a prudent policy to hedge the foreign currency risk, without taking speculative positions. The Company has a conservative approach and does not speculate in foreign currency markets. Forwards are held to maturity and regular reporting and monitoring systems are in place including quarterly updates to the Audit Committee.

During the year, the Company followed a well-defined policy of hedging close to receivables through Forward Contracts which are designated as Highly Probable forecast transactions. We had hedged our receivables at higher spot rates and with Rupee appreciation in past year, this has resulted in favourable contribution to the revenue. There have, however, been losses below the EBITDA line due to translation of receivables and other foreign currency current assets held in India.

At the year end, the Company had US$ 13.75 million of hedges compared to US$ 10.40 million at the beginning of the year.

16. FiXED DEPosits

Your Company has not accepted any deposits and, as such, no amount of principal or interest was outstanding on the date of the Balance Sheet.

17. AUDitors

The present Statutory Auditors of the Company, Deloitte Haskins & Sells, retire at the forthcoming Annual General Meeting, and are eligible for re-appointment. The retiring Auditors have furnished a certificate of their eligibility for re-appointment under section 224 (1B) of the Companies Act, 1956 and have indicated their willingness to continue.

18. Directors

The Articles of Association of the Company provide that at least two-thirds of our Directors shall be subject to retirement by rotation. One third of these retiring Directors must retire from office at each Annual General Meeting of the shareholders. A retiring Director is eligible for re-election.

Mr. Janki Ballabh, Chairman and Mr. Prithvi Haldea, Director of the Company, shall retire at the ensuing Annual General Meeting, and have offered themselves for re-appointment.

19. CORPORATE GoVERNANCE

We, at Nucleus believe that good and effective Corporate Governance is more of an organization culture than mere adherence to the applicable rules. Laws alone cannot bring changes and transformation and voluntary compliance both in form and in substance plays an important role in developing a system of good Corporate Governance.

Good Corporate Governance and Risk Management frameworks at Nucleus put in place over the years ensure a values-driven approach, sound business practices, fundamentally strong control environment, strong information systems, effective early warning mechanisms and real-time response system.

The Company is in compliance of all mandatory requirements regarding Corporate Governance as stipulated under Clause 49 of the listing agreement with the stock exchange(s). For the fiscal year ending 2011, the compliance report is provided in the Corporate Governance section of this Annual Report. A certificate issued by the statutory auditors of the Company on confirming compliance of the conditions of Corporate Governance stipulated in Clause 49 of the listing agreement with the stock exchange(s) is provided as Annexure B to the Report on Corporate Governance.

20. POSTAL BALLOT

During the year, one special resolution was passed by the Shareholders of the Company through Postal Ballot for alteration of main objects of the Company and alteration of the objects incidental or ancillary to the attainment of main objects of the Company under Section 17 of the Companies Act, 1956. The details of the postal ballot are mentioned in the report on Corporate Governance.

21. CORPORATE SOCIAL RESPONSIBILITY

Corporate Social responsibility (CSR) as an initiative was further strengthened during the year. A quarterly update on the CSR activities is placed before the Board every quarter for review. Employee participation in such CSR initiatives is actively encouraged and supported by the Company. A separate chapter detailing CSR activities of the Company is provided later in this report.

22. EMPLOYEE STOCK OPTION PLAN

Particulars 2002 Plan 2005 Plan 2006 Plan

(a) Total number of options under the Plan 225,000 6,00,000 1,000,000

(b) Pricing formula 75% of the 100% of the 100% of the Fair Market Fair Market Fair Market Price as on Price as on Price as on date of grant date of grant date of grant

(c) Options granted during the year – 3,560 –

(d) Options vested as of March 31, 2011 49,550 43,920 48,002

(e) (i) Options exercised during the year 6,250 – –

(ii) Total number of shares arising as a result of exercise of above 12,500 – – options during the year*

(f) Options forfeited during the year – 8,440 3,500

(g) Option lapsed during the year 17,500 13,572 36,600

(h) Variation of terms of options during the year – – –

(i) Amount realized by exercise of options during the year – – –

(j) Total number of options in force as on March 31,2011 49,550 43,900 84,002

(k) Details of options granted during the year ended March 31, 2011 to:

(i) Senior managerial personnel of the Company** – 10 –

(ii) any other employee who receives a grant in any one year of – – – option amounting to 5% or more of option granted during that year.

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

(l) Weighted average exercise price of options – 144.00 268.64

(m) Weighted average fair value of the options – 33.13 209.49

Your Company has used intrinsic value of stock options to determine compensation cost. If the compensation cost for the ESOPs had been determined in a manner with the fair value approach, the Companys net income and EPS would have been impacted as below:

Net income

As reported rs.45.76 crore

Less: Adjusted Amount Rs.0.37 crore

Adjusted Net income rs.45.39 crore

Basic and Diluted EPs As reported

Basic Rs.14.13

Diluted Rs.14.12

After Adjustment

Basic Rs.14.02

Diluted Rs.14.01

Your Company has adopted Black Scholes option pricing model to determine the fair value of stock options.

the significant assumptions are:

1. Risk free interest rate 7.64%

2. Expected life 1-4 years

3. Expected volatility 51.34% to

149.75%

4. Expected dividend yield 1.66%

5. Market price grant wise,

Plan wise on date of grant: (In Rs.)

ESOP (2005) 144.00

ESOP (2006) 117.00 to 568.00

23. CONSERVATION OF ENERGY, TECHNOLOGY ABSRPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under subsection (1)(e) of Section 217 of the Companies act, 1956, read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988, are set out in Annexure-A which forms part of this Report.

24. PARTICULARS OF EMPLOYEES

The information required under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, and forming part of the Directors Report for the year ended March 31, 2011 is annexed as Annexure B.

25. DIRECTORS RESPONSIBILITY

Pursuant to Section 217 (2AA) of the Companies (Amendment) Act, 2000 the Directors confirm that:

(i) in the 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, except where otherwise stated in the notes on accounts, and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that 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;

(iv) the Directors have prepared the annual accounts on a going concern basis.

26. ACKNOWLEDGMENTS

Your Directors would like to place on record their gratitude for the co-operation received from the Government of India, the Customs and Excise Departments, Software Technology Park- Noida, Software Technology Park-Chennai, Software Technology Park-Pune and all other government agencies.

Your Directors also thank all the customers, vendors, shareholders and bankers of the Company for their support to the Company, and wish to place on record its sincere appreciation of the contribution made by all the employees.

For and on behalf of the Board of Directors

NOIDA (U.P.) Janki Ballabh

May 1, 2011 Chairman


Mar 31, 2010

We have pleasure in presenting your Companys Twenty First Annual Report, together with the Audited Statement of Accounts, for the year ended March 31, 2010.

1. FINANCIAL RESULTS - Consolidated

(Rs. in crore)

For the Year Ended March 31, 2010 % of 2009 % of Revenue Revenue

Revenue from Operations 291.78 100.00 328.40 100.00

Software Development Expenses 196.17 67.23 222.55 67.77

Gross Profit 95.61 32.77 105.85 32.23

Selling and Marketing Expenses 22.66 7.77 27.80 8.47

General and Administration Expenses 18.87 6.47 28.45 8.66

Operating Profit (EBITDA) 54.08 18.53 49.60 15.10

Depreciation 11.33 3.88 13.28 4.04

Withholding Taxes Charged off 0.43 0.15 7.26 2.21

Operating Profit After Interest,

Depreciation and Withholding Taxes 42.32 14.50 29.06 8.85

Foreign Exchange Gain / (Loss) (8.03) (2.75) (7.92) (2.41)

Other Income 9.62 3.30 13.71 4.17

Profit Before Tax 43.91 15.05 34.85 10.61

Provision for Taxation

– Current 8.99 3.08 5.38 1.64

– MAT Credit Entitlement (2.15) (0.74) (2.02) (0.62)

– Fringe Benefit 0.03 0.01 0.70 0.21

– Deferred (1.36) (0.47) (1.49) (0.45)

– Earlier Year Tax -- -- 0.02 0.01

Profit After Tax 38.40 13.16 32.26 9.82

Earning Per Share (in Rs. per Equity Share of face value Rs. 10 each)

– Basic 11.86 9.97

– Diluted 11.86 9.96

FINANCIAL RESULTS - Nucleus Software Exports Limited

(Rs. in crore)

For the Year Ended March 31, 2010 % of 2009 % of Revenue Revenue

Revenue from Operations 194.15 100.00 209.43 100.00

Software Development Expenses 125.48 64.63 130.73 62.42

Gross Profit 68.67 35.37 78.70 37.58

Selling and Marketing Expenses 14.12 7.27 18.73 8.94

General and Administration Expenses 14.95 7.70 21.77 10.39

Operating Profit (EBITDA) 39.60 20.40 38.20 18.24

Depreciation 9.80 5.05 10.12 4.83

Withholding Taxes Charged off 0.43 0.22 7.26 3.47

Operating Profit after Interest,

Depreciation and Withholding Taxes 29.37 15.13 20.82 9.94

Foreign Exchange Gain / (Loss) (5.71) (2.94) (8.81) (4.21)

Other Income 15.63 8.05 16.56 7.91

Profit Before Tax 39.29 20.24 28.57 13.64

Provision for Taxation

– Current 6.83 3.52 3.36 1.60

– MAT Credit Entitlement -- -- (0.52) (0.25)

– Fringe Benefit 0.03 0.02 0.70 0.33

– Deferred (1.31) (0.67) (1.31) (0.63)

– Earlier Year Tax -- -- 0.19 0.09

Profit After Tax 33.74 17.38 26.15 12.49

Dividend 8.09 8.09

Ta x on Dividend 0.15 0.65

Transferred to General Reserve 3.37 2.61

Profit Retained in Profit & Loss Account 22.13 14.80

Earning Per Share (in Rs. per Equity Share of face value Rs. 10 each)

– Basic 10.42 8.08

– Diluted 10.42 8.08

2. RESULTS OF OPERATIONS

(a) Consolidated Operations

Your Companys revenue from operations for the year is Rs.291.78 crore against Rs.328.40 crore in the previous year, a fall of 11%. Total operational expenses for the year are at Rs.237.70 crore against Rs.278.80 crore in the previous year, a reduction of 15%. Despite a fall in revenue precipitated by global meltdown and slow recovery, the Company was able to achieve an increase in the operating margins by 343 basis points, as it was able to put in place well in time several cost control measures. As a result, the Operating Profit (EBITDA) achieved was Rs.54.08 crore, 19% of revenue, against Rs.49.60 crore, 15% of revenue in the previous year.

Profit after Ta x for the year at Rs.38.40 crore, 13% of revenue, is higher by 19% over Rs.32.26 crore, 10% of revenue, for the previous year.

(b) Standalone Operations

The total revenue from operations for the year is Rs.194.15 crore against Rs.209.43 crore in the previous year, a fall of 7%. Total operational expenses for the year are at Rs.154.55 crore against Rs.171.23 crore in the previous year, a reduction of 10%. Operating Profit (EBITDA) is at Rs. 39.60 crore, 20% of revenue, against Rs.38.20 crore, 18% of revenue in the previous year.

Profit after Ta x for the year at Rs.33.74 crore, 17% of revenue, is higher by 29% over Rs.26.15 crore, 12% of revenue, in the previous year.

3. DIVIDEND

Your Directors are pleased to recommend a dividend of 25% (Rs.2.50 per equity share of Rs.10 each), subject to the approval by the Shareholders at the forthcoming Annual General Meeting.

The total amount of dividend payout will be Rs.8.09 crore, 21% of consolidated profits for the year, against a payout of Rs.8.09 crore, 25% of consolidated profits in the previous year.

The Register of Members and Share Transfer Register shall remain closed during the period starting 17th June to 24th June 2010 (both days inclusive) for the purpose of Annual General Meeting and for payment of dividend. The dividend, if approved at the Annual General Meeting, will be payable to members whose names appear on the Register of Members of the Company on June 17, 2010, being the first day of Book-Closure and to those whose names appear as beneficial owner in the records of National Securities Depositories Ltd. and Central Depository Services (India) Ltd. on close of business as on June 16, 2010.

Pursuant to the provisions of Section 205A (5) of the Companies Act, 1956, the Company transferred the following unpaid /unclaimed dividends relating to the following two years to the Investor Education and Protection Fund (IEPF) established by the Central Government.

Dividend for the Year Amount of Unpaid Dividend

2000-2001 - Interim Dividend Rs.28,762

2000-2001 - Final Dividend Rs.74,339

2001-2002 - 1st Interim Dividend Rs.58,921

2001-2002 - 2nd Interim Dividend Rs.50,979

4. SHARE CAPITAL

The paid-up share capital as on March 31, 2010 was 32,370,024 equity shares of Rs.10 each. There has been no increase in the paid-up share capital of the Company during the year.

5. REVIEW OF BUSINESS & OUTLOOK

We are a Software Product Company operating in the Banking and Financial Services Domain. Our customers are banks and non-banking financial institutions and our products are largely in the origination and management of "Retail Loans", and the management of corporate liquidity by banks .The Global Financial Crisis was characterized by near universal uncertainty about bank solvency , the collapse /rescue of large financial institutions , severe credit squeeze, lack of liquidity for industry and the consequent negative effect on the Real economy. There were Government bailouts and global co-operation across the so called developed and emerging markets. Though the 2010 global GDP forecast is 2.7%, the recent events in the Euro zone and the need to finance huge fiscal deficits, do underline the fragility of the Global recovery.

The fiscal year ended March 2010 had challenges with slow decision making by the customers and, increasing price competition. In addition, there was a partial cancellation of a major customer order of our subsidiary in Japan. While there is no current or future liability arising from this partial cancellation, the learnings have been imbibed which will make us focus on skill development and training, appropriate to the business and cultural nuances specific to each country that we deal with.

While the initial response by our customers, existing and prospective, was to postpone their spending decisions, including on IT products, there are now signs of increased interest, especially in end-to- end solutions and for innovative product-based solutions and pricing models to improve the offerings. Several banks and financial institutions are now willing to commit to product orders. This trend is being witnessed in almost all markets, including Latin America.

There are clear signs that the developing countries are now excelling at business innovation and technology and will lead the way in the future. This is already visible in the Mobile banking and money exchange segments with Inclusive banking being the dominant trend to take banking to the masses. Your Company is investing in new technology to upgrade its existing product portfolio and at the same time looking at new products and applications, both from an organic and an inorganic growth perspective. Of course, the focus of your Company would continue to be on development of software products for the Banking and Financial Institutions.

6. NOTABLE ACCOLADES RECEIVED DURING THE YEAR

• Nucleus Softwares FinnOneTM has been ranked Worlds No 1 Selling Lending Software product by IBS Publishing for the second consecutive year in 2009.

• The Annual Report of Nucleus Software for year ended March 31, 2009 has been adjudged as the BEST under the category Information Technology, Communication and Entertainment enterprises of the ICAI Awards for Excellence in Financial Reporting by the Institute of Chartered Accountants of India (ICAI). A GOLD SHIELD was awarded to the Company, for the second consecutive year.

• Nucleus Software has been ranked among the Top 25 companies adopting "Good Corporate Governance Practices" by ICSI for fourth consecutive year in 2009.

• South Asian Federation of Accountants (SAFA) has adjudged Nucleus Annual Report as the recipient of the Merit Position for the Best Presented Accounts and Corporate Governance Disclosures Award 2008 under the category of Corporate Governance Disclosure.

• Forrester Research, a leading independent analyst firm, has recognized Nucleus Software as an industry vertical specialist in their recent report "Working with Tier Tw o Offshore Providers".

7. SUBSIDIARIES

The Company has following wholly owned subsidiaries:

Name of Subsidiary Location

• Nucleus Software Solutions Pte. Ltd. Singapore

• Nucleus Software Inc. USA

• Nucleus Software Japan Kabushiki Kaiga Japan

• VirStra I- Technology Services Ltd. India

• Nucleus Software Netherlands B.V. Netherlands

• Nucleus Software Ltd. India

Step Down Subsidiary of Nucleus Software Exports Ltd.

• VirStra I- Technology (Singapore) Pte. Ltd. Singapore

During the year, your Company made an additional investment of C 100,000 in Nucleus Software Netherlands B.V., by subscribing to its equity share capital. The Company also received an interim dividend of Rs. 7 crore from VirStra i-Technology Services Ltd., a wholly owned subsidiary.

In order to rationalize operations, the Board of Directors of your Company, in the previous financial year, decided closure of two wholly owned subsidiaries viz. Nucleus Software (Australia) Pty Ltd., Australia, and Nucleus Software (HK) Ltd., Hong Kong, subject to necessary regulatory approvals. During the year, Nucleus Software (HK) Ltd., Hongkong, was de-registered as per the applicable laws of Hong Kong and Nucleus Software (Australia) Pty Ltd., Australia was de-registered on April 5, 2010 as per the applicable laws of Australia.

As per Section 212 of the Companies Act, 1956, a Company is required to attach the Directors Report, Balance Sheet and Profit and Loss Account of all subsidiaries to its balance sheet. Your Company has been presenting the audited consolidated accounts in the Annual Report in the past in accordance with Indian GAAP, which give a full and fair presentation of the Companys financials in keeping with global best practices. Accordingly, your Company applied to the Central Government for an exemption from attaching detailed accounts of the subsidiaries. The Government has granted exemption to the Company from Section 212 of the Companies Act, 1956 and accordingly, the financial statements of the subsidiaries are not attached in the Annual Report.

For providing information to Shareholders, the annual accounts of these subsidiary Companies along with related information are available for inspection during business hours at the Companys registered office and at the concerned subsidiarys offices.

8. INFRASTRUCTURE

Your Company has offices in several locations across the globe. The office space and seating capacity of these offices is detailed below:

Office Location Area in Sq. ft. Seating Capacity

- No. of Persons

Noida

Unit - I 87,423 705

Unit - II 90,265 778

Multi Facility Block 30,433 194

Total 208,122 1,677

Chennai 13,524 209

Singapore 12,379 201

New Delhi 10,000 140

Pune 9,573 120

Mumbai 3,250 31

Dubai 1,290 17

Japan 431 5

Amsterdam 561 7

USA 410 4 Total 259,540 2,411

Noida and New Delhi premises are owned by the Company and the other office premises are under lease.

9. SPECIAL ECONOMIC ZONE (SEZ) PROJECT

Nucleus Software Ltd., a wholly-owned subsidiary of the Company, had acquired 17.41 acres of land in a SEZ in Jaipur at a private sector multi-product Special Economic Zone, "Mahindra World City" in the year 2008-09. SEZs are eligible for a host of fiscal benefits, incentives and concessions both from the State and Union Government.

On account of the economic downturn, the Company decided to defer the plans for commencing operations at the SEZ. The basic infrastructural work has now commenced and we expect to commission a 250-person facility before March, 2011.

10. QUALITY PROCESSES

Your Company continues its focus on Quality. To further augment this, during the year, your Company engaged external consultants to familiarize Project Managers with Best Practices of the industry. On-job handholding sessions were organized to enhance key process/metrics concepts of the practitioners. The Capability Maturity Model Integration (CMMI) initiative progressed as per schedule with the appraisal of implementation status of various process areas required for Maturity Level 3. This helped in further institutionalization of processes across the organization in a sustained manner.

A Project Management tool- PMP, which was developed in-house, was launched during the year for better planning and management of product development, implementation of projects. Extensive training on PMP and related tools was conducted to make users come up the curve within a short period. New and enhanced process steps were formulated to eliminate waste and improve efficiencies. These were included in the in-house software process standards and have been made applicable to all the employees.

Your Company is also focusing on a high-quality "Voice of Customer" (Customer Satisfaction Rating) system. A centralized business analyst pool has been created to interact with customers to ensure that their requirements are clearly documented and understood, and are communicated to the Delivery Team. During the year, your Company also created a Delivery Assurance Group to facilitate development and implementation of standard processes.

11. HUMAN RESOURCE MANAGEMENT

Your Company strongly believes that it is only investing in people that will make your Company scale new heights,

which in turn would ensure better performance and sustainability of the Company, the society, the economy and the environment. Being a knowledge-based industry, a high intellectual capital lends competitive advantage to a firm; intellectual capital that comprise of human capital and intellectual assets.

The year witnessed new challenges as the IT sector in India started recovering from a severe recession and IT companies started recruiting once again. During the year, your Companys HR team focused on providing cost-efficient solutions and leveraging economies of scale through manpower planning (ramp up and ramp down), compensation and benefits, to align with the business in hand and the future pipeline. Employee retention strategies were worked out for key resources. Regular communication with Nucleites, open houses and understanding and resolving their concerns was a major activity during the year. A special interim appraisal for employees was also carried out during the year.

Focus was imparted on managing manpower requirements with the internal movement of resources, at the same time maintaining and improving productivity of the existing teams. Selective hiring was done for skills not available internally and temporary and contract staff were hired for short-term requirements of the projects.

Project Management and Business Analysis competencies were further strengthened through new hiring and series of training sessions which culminate in internal competency assessments (ICA) and certifications. Extensive skill enhancement programs were conducted for technology and framework knowledge of products, and product knowledge was captured and translated into Computer-Based Trainings (CBTs).This ensured the building of knowledge repository at the organization level.

12. ADDITIONAL INFORMATION TO SHAREHOLDERS

Detailed information to the shareholders in the form of "Shareholders Referencer" is provided later in this report.

13. SECRETARIAL AUDIT

In order to strengthen the internal processes of the secretarial department of your Company, an assignment was given for a comprehensive Secretarial Audit to a professional Company Secretary firm. While the audit revealed that the Company was in compliance of all laws/regulations, some recommendations made by the Secretarial Auditor for adopting Best Practices are now being implemented.

14. LIQUIDITY AND CASH EQUIVALENTS

Your Company continues to retain its status of a debt-free Company. It has been consistently following a conservative investment policy over the years, maintaining a reasonably high level of cash and cash equivalents, which enable the Company to completely eliminate short and medium term liquidity risks.

Our liquidity position continue to be strong with cash and cash equivalents reaching 60% of our total assets at Rs.162.40 crore at the year end, against Rs.122.18 crore, 51% of total assets at the close of the previous year.

During the year, working capital requirements, capital expenditure and dividend payments were more than adequately covered by the internal cash accruals. An amount of Rs.38.68 crore, as on March 31, 2010 was in bank fixed deposits at an average interest rate of 4.69% per annum net of tax, and Rs.95.66 crore was in Liquid and Liquid Plus schemes of various mutual funds, in dally dividend schemes with full liquidity. The mix between deposits and liquid mutual funds is a function of the prevailing interest rates.

15. FOREIGN EXCHANGE RISK

The Indian Rupee strengthened by 11 per cent against the US dollar during the year ended March, 2010, from Rs.50.74 per Dollar end-March 2009 to Rs.45.09 per Dollar end-March 2010.

With continued foreign capital inflows, largely portfolio investments, seeking participation in the country, with the second highest GDP growth rate in the world, the Rupee also appreciated by 5.5 per cent against the Pound Sterling, 9.44 per cent against the Euro and 7.35 per cent against the Japanese Yen.

However, this firming Rupee on the back of rising foreign investments in Indias fast growing economy, poses a challenge to the industry, which is substantially export- oriented. At a macro level, high inflation, continuing current account deficit and the fiscal deficit do indicate a weakening of Rupee. However, the exchange rate continues to be influenced by short term flows and there is a loss in competitiveness especially with China, which has held the exchange rate steady for almost 18 months.

While the Company cannot directly influence the exchange rates, it is incumbent upon the management to follow a prudent policy to hedge the foreign currency risk, but without taking speculative positions. The Company has a conservative approach and does not speculate in foreign currency markets. Forwards are held to maturity and regular reporting and monitoring systems are in place including quarterly updates to the Audit Committee.

During the year, the Company followed a well-defined hedging policy of hedging close to receivables through Forward Contracts which are designated Highly Probable Forecast Transactions. With Rupee appreciation, this has resulted in favorable contribution to the revenue. There have, however , been losses below the EBITDA line due to translation of receivables and other foreign currency current assets held in India.

At the year end, the Company had US$ 10.40 million of hedges compared to US$ 9.15 million at the beginning of the year.

16. FIXED DEPOSITS

Your Company has not accepted any deposits and, as such, no amount of principal or interest was outstanding on the date of the Balance Sheet.

17. AUDITORS

The present Statutory Auditors of the Company, B S R & Co, retire at the forthcoming Annual General Meeting, and are eligible for re-appointment.

The Board of Directors have formally approved a Policy for Rotation of Statutory Auditors of the Company in their meeting held on January 17, 2010. According to the Policy, the Statutory Auditors of the Company will have a maximum tenure of 6 years. The first proposal for rotation of Statutory Auditors for the year 2010-11 has been recommended by the Board to the Shareholders in the forthcoming Annual General Meeting of the Company, for their approval, pursuant to the receipt of Special Notice from a member of the Company in terms of Section 190 to be read with Section 225(1) of the Companies Act, 1956, proposing the appointment of Deloitte Haskins & Sells, Chartered Accoutants, New Delhi as Statutory Auditors of the Company from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting. Deloitte Haskins & Sells have expressed their willingness to act as Statutory Auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of Section 224(1B) of the Companies Act, 1956.

Ensuring quality and independent audit has been a long- standing objective of good Corporate Governance at Nucleus. Adoption of the Rotation Policy will be a significant move in that direction. It is also expected to improve Auditors independence and enhance audit quality.

18. DIRECTORS

The Articles of Association of the Company provide that at least two-thirds of our Directors shall be subject to retirement by rotation. One third of these retiring directors must retire from office at each Annual General Meeting of the shareholders. A retiring Director is eligible for re-election.

Mr. Arun Shekhar Aran and Mr. Sanjiv Sarin, Directors of the Company, shall retire at the ensuing Annual General Meeting, and have offered themselves for re-appointment.

Mr. Janki Ballabh was appointed as an Additional Director and Chairman of the Board on November 15, 2008. The shareholders at the Annual General Meeting held on July 8, 2009, approved his appointment as a Director liable to retire by rotation. At the same time, Mr. Ballabh was re- elected as the Chairman of the Board by the Board of Directors.

Mr. Suresh Joshi, a Non-Executive Director liable to retire by rotation at the Annual General Meeting held on July 8, 2009, vacated his office as he did not offer himself for re- appointment due to his advancing age.

19. CORPORATE GOVERNANCE

Good Corporate Governance and Risk Management frameworks at Nucleus put in place over the years ensure a value-driven approach, sound business practices, fundamentally strong control environment, strong information systems, effective early warning mechanisms and real-time response system.

We, at Nucleus, believe that good and effective Corporate Governance is more of values and culture and not just compliance of laws and regulations in general, and Corporate Governance guidelines in particular. It is true that the law alone cannot bring changes and transformation. Voluntary compliance both in form and in substance, and going beyond that, plays an important role in developing a system of good Corporate Governance.

The Ministry of Corporate Affairs (MCA), released in December 2009, the voluntary guidelines on Corporate Governance, drawn from best practices. Although voluntary in nature, listed companies are expected to be proactive in compliance and provide reasons of non-compliance of any section, if any. Although your Company is already compliant with most of the sections, the Corporate Governance Committee of your Company has charted the plan for implementation of some of the new suggestions. The section-wise response to these Guidelines is provided later in this report.

In recognition of the Corporate Governance policies and practices implemented both in form and substance, your Company was short listed as one of the Top 25 Companies adopting "Good Corporate Governance Practices" by the Institute of Company Secretaries of India for the fourth consecutive year in 2009.

20. CORPORATE SOCIAL RESPONSIBILITY (CSR)

A new renewed area of focus for your Company during the year was Corporate Social responsibility (CSR). On the basis of directions provided by the Board of Directors, many programmes have been initiated to promote CSR activities. A separate chapter detailing CSR activities of the Company is provided later in this report.

Your Company has used intrinsic value of stock options to determine compensation cost. If the compensation cost for the ESOPs had been determined in a manner with the fair value approach, the Companys net income and EPS would have been impacted as below:

Net Income

As Reported Rs. 33.74 crore

Less: Adjusted

Amount Rs. 0.82 crore

Adjusted Net Income Rs. 32.92 crore

Basic and Diluted EPS

As Reported

Basic Rs.10.42

Diluted Rs.10.42

After Adjustment

Basic Rs.10.17

Diluted Rs.10.17

Your Company has adopted Black Scholes option pricing model to determine the fair value of stock options.

The significant assumptions are:

1. Risk free interest rate 8.00%

2. Expected life 1-4 years

3. Expected volatility 42.06% to 149.75%

4. Expected dividend yield 0.84%

5. Market price grant wise,

Plan wise on date of grant: (In Rs.)

ESOP (2002) 193.95 to 505.00

ESOP (2005) 357.00 and 320.00

ESOP (2006) 117.00 to 568.00

22. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under subsection (1)(e) of Section 217 of the Companies act, 1956, read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988, are set out in Annexure-A which forms part of this Report.

23. PARTICULARS OF EMPLOYEES

The information required under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, and forming part of the Directors Report for the year ended March 31, 2010 is annexed as Annexure-B.

24. DIRECTORS RESPONSIBILITY

Pursuant to Section 217 (2AA) of the Companies (Amendment) Act, 2000 the Directors confirm that:

(i) in the 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, except where otherwise stated in the notes on accounts, and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that 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;

(iv) the Directors have prepared the annual accounts on a going concern basis.

25. ACKNOWLEDGMENTS

Your Directors would like to place on record their gratitude for the co-operation received from the Government of India, the Customs and Excise Departments, Software Technology Park-Noida, Software Technology Park-Chennai, Software Technology Park-Pune and all other government agencies.

Your Directors also thank all the customers, vendors, shareholders and bankers for their support to the Company. The Board, in specific, wishes to place on record its sincere appreciation of the contribution made by all the employees towards the continued growth of the Company.

For and on behalf of the Board of Directors

Noida (U.P.) Janki Ballabh

April 25, 2010 Chairman

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