DIRECTORS' REPORT To, The Members, STARCOM INFORMATION TECHNOLOGY LIMITED The Directors have pleasure in presenting the Twentieth Annual Report of the Company and the Audited Financial Statement for the financial year ended 31st March 2015. 2. Brief description of the Company's working during the year/ State of Company's affair: During the year, the Company's performance has been rated at average through regular business operations. The total turnover during the year has seen a decrease due to decrease in the government grants to educational segments despite which the sales and services made to educational segments have remained at 40% of the turnover. The significant change can be noticed in the growth of revenue contribution from Data Analytics segments which is the core objective of the Company. The level of contribution of revenue from Data Analytics Services was at 30% during the previous year. The management of the Company is optimistic about this growth during the forthcoming years which would also contribute significantly towards growth of consolidated revenues and the profitability. Your Directors assure to keep the growth momentum in coming years and strive for bright future for your Company. 3. Dividend: In view of losses, your Board expresses its inability to recommend any dividend for the financial year 2014-15. 4. Reserves: The Board does not propose to carry any amounts to reserves. 5. Change in the nature of business, if any: There was no change in nature of business. 6. Material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report: No material changes have occurred subsequent to the close of the financial year of the Company to which the balance sheet relates and the date of the report. 7. Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future: During the year under review, no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future. 8. Details of Subsidiary/Joint Ventures/Associate Companies: The Company does not have any Subsidiary Company/Joint Venture/Associate Company during the year under review. 9. Details in respect of adequacy of internal financial controls with reference to the Financial Statements: The Company has devised appropriate systems and framework for adequate internal financial controls with reference to financial statements commensurate with the size, scale and complexity of its operations including proper delegation of authority, policies and procedures, effective IT systems aligned to business requirements, risk based internal audit framework, risk management framework and whistle blower mechanism. The Audit Committee regularly reviews the internal control system to ensure that it remains effective and aligned with the business requirements. In case weaknesses are identified as a result of the reviews, new procedures are put in place to strengthen controls. The Company has implemented various policies such as code of conduct, whistle-blower policy, insider trading policy, Risk Management Policy, etc. During the year, controls were tested and no reportable material weakness in design and operation were observed. 10. Deposits: During the year, the Company has not accepted any Deposits falling within the preview of Chapter V of the Companies Act, 2013 and Rules made there under. Therefore, the Company is not required to furnish information in respect of outstanding deposits under the Companies Act, 2013. 11. Directors and Key Managerial Personnel: A. Changes in Directors and Key Managerial Personnel: In accordance with the requirements of the Companies Act, 2013 and Articles of Association of the Company, Mr. Laxminarayan Purohit (DIN: 03599758), Non- Executive Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself, for re-appointment pursuant to provision of Section 152 of the Act. The Board recommends the re-appointment to the Members. During the year, the members in the 19th Annual General Meeting held on 23rd December 2014 had approved the appointment of Ms. Sayeeda Hina Ahmed (DIN: 03642269), as a Non-executive Director and Mr. Maddur Gundurao Mohankumar (DIN: 00020029), as an Independent Non-Executive Director in the Company, not liable to retire by rotation, for the term of 5 years. The Board of Directors in their meeting held on 1st September 2015, have appointed Ms. Preeti Verma (Membership number-A39128) as the Whole-time Company Secretary designated as Key Managerial Personnel and Compliance officer of the Company w.e.f. 1st September 2015. B. Board Evaluation: Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, of individual Directors as well as the evaluation of the working of its Audit, Nomination & Remuneration and Compliance Committees. The performance of each director was evaluated by the entire Board of Directors (in the absence of the Director getting evaluated) on various parameters like engagement, leadership, analysis, decision making, communication, governance, interest of stakeholders decision making, functional knowledge, etc. The Board was of the unanimous view that all the Directors were providing good business and people leadership. The Company believes that the Board be continuously empowered with the knowledge of the latest developments in the Company's business and the external forces affecting the industry in which Company operates. The details of the programs for familarisation 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 are put up on the website of the Company at the link : <http://www.starcominfotech.com/policies.html> The following policies of the Company are attached herewith marked as Annexure 1: 1. Policy for selection of Directors and senior management and determining Directors independence and 2. Remuneration policy for Directors, Key Managerial Personnel and other employees. Further brief resume of the Director proposed to be re-appointed as stipulated under clause 49 of the Listing Agreement has been furnished separately in the Notice convening the 20th Annual General Meeting read with the Annexure thereto forming part of this Report. Details of the number of meetings of the Board of Directors have been furnished in the Report of Corporate Governance. C. Declaration by an Independent Director(s) and re-appointment, if any: The Company has received declaration u/s 149(7) of the Act from Mr. Maddur Gundurao Mohankumar (DIN: 00020029), Independent Director of the Company confirming that he meets the criteria of independence as prescribed both under the Act and Clause 49 of Listing Agreement with Stock Exchanges. The Company has also received disclosure of interest by all the Directors as per the provisions of Section 184 of Companies Act, 2013. 12. Number of meetings of the Board of Directors: The Board of Directors met Six (6) times during the Financial Year on 29th May 2014, 13th August 2014, 23rd September 2014, 8th November 2014, 26th December 2014 and 14th February 2015. The intervening gap between any two meetings was not more than 120 days as prescribed by the Companies Act, 2013. 13. Details of Committees of the Board: Currently the Board has 3 Committees; the Audit Committee, Stakeholders' Relationship Committee and Nomination and Remuneration Committee. The composition of various committees and compliances, as per the applicable provisions of the Companies Act, 2013 along with the Rules and Listing agreement, brief details of various Committees is also provided separately in the Corporate Governance Report: i) Audit Committee: The Board has an Audit Committee comprising three Directors. The composition of the Audit Committee is as follows: All the members of the Audit committee are financially literate and have accounting or related financial management expertise as required under the Companies Act, 2013 and Clause 49 of the Listing Agreement. During the year under review, Mr. Ziaulla Sheriff acted as the Secretary to the Committee. The Company currently has only one Independent Director. The management is in the process of inducting the Independent Directors on the Board. On their appointment, the Company shall reconstitute the Committee. The scope and terms of reference of the Audit Committee have been amended in accordance with the Act and the Listing Agreement entered into with the Stock Exchanges. All the major steps impacting the financials of the Company are undertaken only after the consultation of the Audit Committee. During the year under review, the Board of Directors of the Company had accepted all the recommendations of the Committee iii) Nomination and Remuneration Committee: As per Section 178 of the Companies Act, 2013, Nomination and Remuneration Committee shall consist of 3 or more NonExecutive Directors out of which not less than one half shall be independent directors. The Company currently has only one Independent Director. The management is in the process of inducting the Independent Directors on the Board. On their appointment, the Company shall reconstitute the Committee. The Committee has framed a policy to determine the qualification and attributes for appointment and basis of determination of remuneration of all the Directors, Key Managerial Personnel and other employees. A copy of the policy is appended as Annexure 1 to the Board's Report. iv) Corporate Social Responsibility Committee: During the year under review, the Company did not fall within the purview of the Section 135 of the Companies Act, 2013 and it was not mandatory for the Company to constitute committee on Corporate Social Responsibility or expend on such activity. 14. Corporate Governance: The Company constantly strives to implement and comply with the requirements and disclosures of the Code of Corporate Governance as required under clause 49 of the Listing Agreement (as amended), even though Clause 49 is not mandatory to the Company w.e.f 1st October 2014, as per the revised Listing Agreement. A report on Corporate Governance as stated above, forms part of this Report as Annexure 7. 15. Auditors: At the Annual General Meeting held on 23rd December 2014, M/s. S G C O & Co., Chartered Accountants (Firm Registration No. 112081W), were appointed as Statutory Auditors of the Company for 3 consecutive financial years i.e. till the financial year 2016-17. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. S G C O & Co., Chartered Accountants, as the Statutory Auditors of the Company for the financial year 2015-16, is to be placed for ratification by the shareholders. In this regard, the Company has received a certificate from the Auditors to the effect that if their appointment is ratified at the ensuing Annual General Meeting, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013. The Members are requested to ratify the appointment of the Statutory Auditors as aforesaid and fix their remuneration. 17. Secretarial Audit 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 had appointed M/s. Hemanshu Kapadia & Associates, Practicing Company Secretary, to undertake the Secretarial Audit of the Company for the financial year 2014-15 and issue Secretarial Audit Report. The Secretarial Audit Report issued by M/s. Hemanshu Kapadia & Associates for the financial year 2014-15 in Form MR-3 forms part of this report and marked as Annexure 3. The reply from the Board on the remarks/ qualifications of the Secretarial Auditors are as under: 18. Extract of the Annual Return: In accordance with Section 134(3)(a) of the Companies Act, 2013, read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of the Annual Return in Form MGT - 9 is annexed to the Directors' Report as Annexure 4. 19. Details of establishment of vigil mechanism for Directors and employees: The Vigil Mechanism of the Company, which also incorporates a whistle blower policy in terms of the Listing Agreement, provides Directors and Employees to report their concerns and has also taken steps to safeguard any person using this mechanism from victimization and in appropriate and exceptional cases, there is direct access to approach Mr. Maddur Gundurao Mohankumar (DIN: 00020029), Chairman of the Audit Committee. Protected disclosures can be made by a whistle blower through an e-mail, or dedicated telephone line or a letter to the Chairman of the Audit Committee. The policy on vigil mechanism/ whistle blower policy may be accessed on the Company's website at the link: <http://www.starcominfotech.com/policies.html> 20. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013: The Company has in place an Anti-sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been setup to redress the complaints received regarding sexual harassment. All employees are covered under this Policy. The policy is gender neutral. During the year under review there were no cases filed/pending. 21. Conservation of energy, technology absorption and foreign exchange earnings and outgo: The particulars as prescribed under Sub-Section (3)(m) of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 are as follows: A) Conservation of energy: i) the steps taken or impact on conservation of energy; The Company is not covered under the list of specified industries. However the Company on continuous basis takes measures for conservation of power. 22. Particulars of loans, guarantees or investments under Section 186: During the year under review, the Company has not provided any loans, made investments, given guarantees or subscribed/ purchased securities under Section 186 of the Companies Act, 2013. 23. Particulars of contracts or arrangements with related parties: The particulars of every contract or arrangements entered into by the Company with related parties referred to in sub-Section (1) of Section 188 of the Companies Act, 2013 including transactions entered at arm's length under third proviso, in prescribed Form No. AOC -2, is appended as Annexure 2 to the Board's Report. The policy can be accessed at the web link: <http://www>. starcominfotech.com/policies.html 24. Directors' Responsibility Statement: As stipulated under clause (c) of sub-Section (3) of Section 134 of the Companies Act, 2013, your Directors subscribe to the Directors' Responsibility Statement and state that: In preparation of the annual accounts, the applicable accounting standards had been followed and there are no material departures from them; 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; 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 proper internal financial controls are in place and that the financial controls are adequate and are 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. 25. Managerial Remuneration: A) The information required to be disclosed with respect to the remuneration of Directors and KMPs in the Directors' Report pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 pertaining to the ratio of the remuneration of each Director to the median employee's remuneration is attached as Annexure 5. B) Details of every employee of the Company as required pursuant to Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 - The Company has one employee drawing remuneration more than the limit mentioned under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The details are attached as Annexure 6. C) The Company does not have any Holding Company or Fellow Subsidiary Company and thus, provision w.r.t. receipt of commission from them is not applicable. 26. Risk management policy: During the year, your Directors had discussed the various risks for Company and framed the Risk Management Policy containing Company's enterprise wide risk management framework and covering all the risks identified which the organization faces such as strategic, financial, credit, market, liquidity, Management Personnel related risk and other risks. There is an adequate risk management infrastructure in place capable of addressing those risks. Further, the Risk Management Policy was reviewed and approved by the Committee. The Management manages, monitors and reports on the principal risks and uncertainties that can impact its ability to achieve its strategic objectives. The Company's management systems, organizational structures, processes, standards, code of conduct and behaviors together form the Risk Management System (RMS) that governs how the Management conducts the business of the Company and manages associated risks. The Board periodically discussed and reviewed the Risk Management Policy to strengthen the optimal risk mitigation responses, reporting of risk and efficient management of internal control. 27. Management Discussion and Analysis: The Management Discussion and Analysis Report for the financial year under review as stipulated under the Listing Agreement entered with the Stock Exchange forms part of this Annual Report as Annexure 8. 28. General: Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: a) Issue of equity shares with differential rights as to dividend, voting or otherwise. b) Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOS referred to in this Report. c) Voting rights which are not directly exercised by the employees in respect of shares for the subscription/ purchase of which loan was given by the Company (as there is no scheme pursuant to which such persons can beneficially hold shares as envisaged under Section 67(3)(c ) of the Companies Act, 2013). 29. Acknowledgements: The Directors express their deep gratitude for the co-operation and support extended to your Company by its customers, suppliers, bankers and various government agencies. Your Directors also place on record the commitment and involvement of the employees at all levels and looks forward to their continued co-operation. The Directors are also thankful to the Shareholders for their continued support to the Company. For and on behalf of the Board of Directors Sd/- Ziaulla Sheriff Chairman and Managing Director DIN: 00002098 Address: Al-Barka Golden Enclave, Airport Road, Bangalore-560017 Place: Bangalore Date: 1st September 2015 |