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DIRECTOR'S REPORT

Mastek Ltd.

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Market Cap. (₹) 857.52 Cr. P/BV 1.22 Book Value (₹) 291.92
52 Week High/Low (₹) 578/302 FV/ML 5/1 P/E(X) 8.45
Bookclosure 16/07/2019 EPS (₹) 42.26 Div Yield (%) 2.38
Year End :2019-03 

Dear Members,

The Directors have great pleasure in presenting the 37th Annual Report on the business and operations of the Company together with the Audited Financial Statements for the financial year ended 31 March, 2019. The Consolidated Performance of the Company and its Subsidiaries has been referred to wherever required.

1. Highlights of Consolidated and Standalone Financial Results

(Rs. in lakhs)

Consolidated

Standalone

2018-19

2017-18

2018-19

2017-18

Revenue from operations

1,03,321

81,721

18,944

16,232

Other Income

2,478

2,099

3,459

2,323

Total Income

1,05,799

83,820

22,403

18,555

Expenses

90,167

71,755

17,252

14,683

Depreciation and amortization expenses

1,735

1,876

1,208

1,119

Finance costs

613

586

27

19

Exceptional items

55

-

-

-

Profit before tax

13,339

9,603

3,916

2,734

Tax expense

3,192

2,607

865

1,160

Profit after tax

10,147

6,996

3,051

1,574

Other comprehensive income

8,755

(248)

872

(1,315)

Total Comprehensive income

18,902

6,748

3,923

259

Equity Holders

18,902

6,748

3,923

259

Dividend

(1,788)

(1,056)

(1,788)

(1,056)

Dividend Distribution Tax

-

(12)

-

(12)

EPS

- Basic

42.61

29.74

12.81

6.69

- Diluted

40.32

28.14

12.12

6.33

2. Overview of Company’s Financial

Performance

a. Mastek Operations

On a Consolidated basis, the Group registered revenue from operations of Rs. 1,03,321 lakhs for the year ended 31 March, 2019 as compared to Rs. 81,721 lakhs in the previous year ended 31 March, 2018, which is an increase of 26.4%. The Group registered a Net Profit of ^ 10,147 lakhs for the year ended 31 March, 2019 as compared to Rs. 6,996 lakhs in the previous year ended 31 March, 2018, thereby registering an increase of 45%.

On a Standalone basis, Mastek registered revenue from operations of Rs. 18,944 lakhs for the year ended 31 March, 2019, as compared to Rs. 16,232 lakhs in the previous year ended 31 March, 2018. The Company made a Net prof it of Rs. 3,051 lakhs for the year ended 31 March, 2019 as compared to Net Profit ofRs. 1,574 lakhs in the previous year ended 31 March, 2018. Further details are included in notes to the Accounts of Standalone Financial Statement.

The Consolidated and Standalone Financial Statements of the Company for the year ended 31 March, 2019 have been prepared in accordance with applicable Accounting Standards and the relevant provisions of the Companies Act, 2013. The said Financial Statements have been prepared based on the Audited Financial Statements of the Company and Audited / Un-audited Financial Statements of its Subsidiaries, which have been reviewed by the Statutory Auditors. The Company discloses Consolidated and Standalone financial results on a quarterly basis, which are subjected to limited review, and publishes Consolidated and Standalone audited financial results on an annual basis.

No material changes or commitments have occurred between the end of the financial year and the date of this Report, which affect the Financial Statements of the Company in respect of the financial year under review.

In accordance with the provisions contained in Section 136 of the Companies Act, 2013, the Annual Report of the Company, containing therein its Consolidated and Standalone Financial Statements are available on the website of the Company at web link http://www.mastek.com/financial-information. Further, the Financial Statements of each of the subsidiary companies are uploaded on the Company’s website and shall be available for inspection during business hours at the Registered Office of the Company. Any member who is interested in obtaining a copy of the Subsidiaries Financial Statements may write to the Company Secretary at the Registered Office of the Company.

Further, a detailed analysis of Company’s performance is included in the Management Discussion and Analysis, which forms part of this Annual report.

b. Break-Up of the Operating Revenue by Regions

Region

Year ended 31 March, 2019

Year ended 31 March, 2018

Rs. in lakhs % of Revenue

Rs. in lakhs % of Revenue

UK

76,361

73.9%

56,315

68.9%

North America

25,275

24.5%

23,715

29.0%

Others

1,685

1.6%

1,691

2.1%

Total

1,03,321

100.0%

81,721

100.0%

The U.K. operations contributed Rs. 76,361 lakhs in total operating revenue for the financial year ended 2018-19 as compared to Rs. 56,315 lakhs for the financial year ended 2017-18, resulting in a growth of 35.6%. This growth was driven by increased business in the Government vertical followed by Retail and Finance vertical. UK business grew by 29.3% on constant currency basis.

The North America operations contributed Rs. 25,275 lakhs in revenue for the financial year ended 2018-19 as compared to Rs. 23,715 lakhs for the financial year ended 2017 - 18 witnessing a growth of 6.6%.

Indian operations contributed Rs. 1,685 lakhs for the financial year ended 2018-19 as compared to Rs. 1,691 lakhs for the financial year ended 2017-18, resulting in a marginal decrease of (0.4%).

c. Break-Up of Revenue by Service Lines

Year ended

Year ended

Service Line

31 March, 2019

31 March, 2018

Rs. in lakhs % of Revenue

Rs. in lakhs % of Revenue

Application Development

48,917

47.3%

38,891

47.6%

Digital Commerce

23,914

23.1%

21,211

26.0%

Application Support & Maintenance

14,394

13.9%

8,008

9.8%

Bl & Analytics

8,899

8.6%

6,484

7.9%

Agile Consulting

3,109

3.0%

4,771

5.8%

Assurance & Testing

4,088

4.0%

2,356

2.9%

Total

1,03,321

100.0%

81,721

100.0%

Profitability

During the Year ended 31 March, 2019, the Group earned a profit of Rs. 10,147 lakhs as compared to Rs. 6,996 lakhs for the year ended 31 March, 2018. The profits for the financial year 2018 - 19 achieved growth of 45%, driven by focused profitable growth in revenue, operational improvement and better utilization of existing investment in Sales, General & Administrative expenses (SG&A) and capacity to service growth.

3. Dividend

The Company has a robust track record of rewarding its members with a generous dividend payout (both Interim and Final). Based on Company’s Financial performance, the Board of Directors, at its meeting held on 16 April, 2019 has recommended payment of a Final Dividend @ of Rs. 5/- per Equity Share (face value of Rs. 5/- each) i.e. @100%, subject to approval of the members at the ensuing 37th Annual General Meeting to be held on 23 July, 2019.

Further, the Board of Directors at its meeting held on 25 October, 2018 had also approved the payment of Interim Dividend of Rs. 3.50/- per share i.e. @ 70%, which was paid on 15 November, 2018.

Therefore, the total dividend for the financial year ended 31 March, 2019 stands at Rs. 8.50/- per share, (Previous Year Rs. 6/- per share) involving a total outflow approximately of Rs. 2,035 lakhs (Previous YearRs. 1,422 lakhs).

The Final Dividend, if approved, at the ensuing 37th Annual General Meeting, will be paid to those members whose names appears on the Register of Members of the Company as of the end of the day on Saturday, 13 July, 2019.

4. Transfer of Unclaimed Dividend Amounts and Concerned Shares to Investor Education and Protection Fund (IEPF) Authority

There were neither Unclaimed Dividend Amount nor Concerned Shares which were due and required to be transferred to IEPF Authority during the year under review.

5. Transfer to Reserves

There was no amount from profit, which was transferred to General Reserves during the year under review.

6. Management Discussion and Analysis

Management Discussion and Analysis as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the SEBI Listing Regulations) is presented in a separate section forming part of this Annual Report. It provides details about the overall industry structure, global and domestic economic scenarios, developments in business operations/ performance of the Company’s various businesses, internal controls and their adequacy, risk management systems, human resources and other material developments during the financial year 2018-19.

7. Credit Rating

The Company enjoys a good reputation for its sound financial management and the ability to meet its financial obligations. During the year under review, ICRA Limited, a reputed Credit Rating Agency, had reaffirmed the ratings assigned for the Bank facilities as [ICRA] A (Positive) rating for fund-based limits and [ICRA] A1 for non-fund based limits for the Working Capital Facilities granted to the Company by its Bankers.

8. Subsidiary Companies

Your Company continues to be the Holding Company of Trans American Information Systems Private Limited and Mastek (UK) Limited (MUK). MUK in turn has IndigoBlue Consulting Limited and Mastek Inc. (formerly known as Digility Inc.) as its wholly owned subsidiaries.

IndigoBlue Consulting Limited, the step down subsidiary of the Company has entered into Business Transfer Agreement w.e.f. 30 June, 2018 with its parent Company to merge itself (transfer of its business, assets and liabilities). This will enable greater synergies between them and will also achieve higher operational efficiencies.

Mastek Inc., the step down subsidiary of your Company has TAISTech LLC (100% membership interest) and Trans American Information Systems Inc. as its wholly owned subsidiaries and consequently, they are step down wholly owned overseas subsidiaries of the Company.

Your Company has 2 direct wholly owned subsidiaries and 4 step down subsidiaries as at 31 March, 2019 and pursuant to the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement containing salient features of the Financial Statements of all the subsidiaries and their contribution to overall performance of the Company are provided in Form AOC-1 which is annexed as Annexure 1 to the report.

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

The Company does not have any Joint Venture or Associate Company or any joint operations during the year under review.

9. Material Subsidiary

Mastek (UK) Limited, a UK based entity is the only material subsidiary of the Company.

The Board of Directors of the Company has revised the Policy for determining material subsidiaries in accordance with the amendments to the SEBI Listing Regulations with effect from 1 April, 2019. The policy can be accessed on the website of the Company at web link https://www.mastek.com/ corporate-governance.

10. Update on Board of Directors / Key Managerial Personnel

a. Directorship Changes:

There has been no change in the Board of Directors of the Company during the year under review.

All the directors of the Company have confirmed that they are not disqualified from being appointed as Directors in terms of Section 164 of the Companies Act, 2013.

b. Independent Directors Re-appointment:

Mr. S. Sandilya (DIN 00037542), Ms. Priti Rao (DIN 03352049) and Mr. Atul Kanagat (DIN 06452489), were appointed as Independent Directors of the Company pursuant to Section 149 of the Com pan ies Act, 2013 for the first term of 4 years i.e. from 1 April, 2015 to 31 March, 2019. Considering their knowledge, expertise and experience in their respective fields and the substantial contribution made by these Directors during their tenure as Independent Directors since their appointment, the Nomination and Remuneration Committee and the Board recommends the re-appointment of all the 3 Directors as Independent Directors on the Board of the Company, to hold office for the second term of 5 consecutive years i.e. from 1 April, 2019 to 31 March, 2024 and not liable to retire by rotation, subject to approval by the members at the ensuing 37th Annual General Meeting. The proposal for their re-appointment is based on individual performance evaluation by the Board.

Pursuant to the provision of Regulation 17(1 A) of the SEBI Listing (Amendment) Regulations, 2018 notified by the SEBI on 7 June, 2018, and which is effective from 1 April, 2019, which prescribes that no listed entity shall appoint a person or continue the directorship of any person as the Non-Executive Director who has attained the age of 75 years unless a special resolution is passed to that effect in which case the Explanatory Statement annexed to the Notice for such motion shall indicate the justification for appointing such person. In view of the amendment, the Board of Directors is of the opinion that considering Mr. Sandilya’s integrity, relevant expertise, vast experience, in depth industry knowledge, continuous valuable guidance to the management and his strong Board performance, his continuous association as Non-Executive Independent Director will be beneficial and to the best interest of the Company. Accordingly, the Board recommends his re-appointment for the approval of the members even after him attaining the age of 75 years on 11 April, 2023 during his on-going second term till the expiry of his term i.e. on 31, March, 2024.

Further, the Company after due assessment took on record the necessary declarations received from each of the Independent Directors under Section 149(7) of the Companies Act, 2013, that they meet the criteria of Independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 16(1 )(b) of the SEBI Listing Regulations, and also in the opinion of the Board and as confirmed by these Directors, they fulfil the conditions specified in Section 149 of the Companies Act, 2013 and the Rules made thereunder about their status as Independent Directors of the Company.

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

Accordingly, approval of the members by special resolutions for re-appointing the aforesaid directors as Independent Directors for a further term of 5 consecutive years i.e. from 1 April, 2019 to 31 March, 2024 has been sought in the enclosed Notice convening the Annual General Meeting of the Company. (Please refer to Item Nos. 4, 5 and 6 of the Notice). The Board recommends all the three re-appointments of Individual Directors to the members.

c. Director liable to retire by rotation:

In accordance with the provisions of Section 152 and other applicable provisions, if any of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Sudhakar Ram (DIN: 00101473) is liable to retire by rotation at the forthcoming Annual General Meeting and being eligible has offered himself for re-appointment. The Board recommends his re-appointment to the members at the ensuing 37th Annual General Meeting.

d. Board Effectiveness:

1. Manner of Evaluation of the Board’s Performance

In compliance with the provisions of the Companies Act, 2013 and the SEBI Listing Regulations, the Board of Directors has carried out an Annual Evaluation of its own performance. Board Committees, Individual Directors, Chairpersons and the Managing Director for the year under review.

The Board and the Nomination and Remuneration Committee reviewed the performance of individual Directors including the Non-Executive Chairman and the Managing Director, their personal performance carried out using a peer review process, facilitated by an outside subject matter expert with confidential processing of inputs, interpretation of findings followed by one-on-one meeting with the individual Directors, and concluding with an aggregate presentation to the entire Board.

Board and Committees functioning was reviewed and evaluated on the basis of responses received from Directors. Committee Members and the Managing Director to structured questionnaires, covering various aspects of the composition and functioning of the Board and its Committees.

In a separate meeting of the Independent Directors, performance of Non-Independent Directors, performance of the Board as a whole and performance of the Chairman were also evaluated, taking into account the views of Executive Director and Non- Executive Directors. The Directors were asked to provide their valuable feedback and suggestions about the overall functioning of the Board and its Committees and its areas of improvement for a higher degree of engagement with the Management.

The Board expressed its satisfaction with the evaluation results, which reflects the high degree of engagement of the Board and its Committees with the Company and its Management. Based on the outcome of the evaluation and assessment cum feedback of the Directors, the Board and the Management have also agreed on some action points, which will be implemented over an agreed period.

2. Induction and Familiarisation Programme for Directors

The Familiarisation Programme for Independent Directors, which also extends to other Non-Executive Directors aims to familiarise them with the Company, nature of the IT industry, business model, processes & policies, compliances etc., and seeks to update them on the roles, responsibilities, rights and duties under the Companies Act, 2013 and the SEBI Listing Regulations and other applicable statutes. The details of the induction and familiarisation programme for the Directors are given in the Corporate Governance Report, which forms part of the Annual Report.

3. Code of Conduct

The Company has formulated a “Code of Business Conduct and Ethics” for the Board of Directors and Senior Managerial Personnel. The confirmation of compliance of the same is obtained from all concerned on an annual basis. All Board Members and Senior Managerial Personnel have given their confirmation of compliance for the year under review. A declaration duly signed by Vice Chairman & Managing Director is given under Corporate Governance Report appearing elsewhere as a separate section in this Annual Report. The Code of Business Conduct and Ethics for Board of Directors and Senior Managerial Personnel is also posted on the website of the Company at web link https://www.mastek.com/corporate-qovernance

e. Board Independence:

The definition of ‘Independence’ of Directors is derived from Regulation 16(1 )(b) of the SEBI Listing Regulations and Section 149(6) of the Companies Act, 2013. Based on the confirmation /disclosures received from the Directors and on evaluation of the relationships disclosed by the Directors during the Board evaluation process, the following Non-Executive Directors are Independent of the Management:

1) Mr. S. Sandilya

2) Ms. Priti Rao

3) Mr. Atul Kanagat, and

4) Mr. Keith Bogg

There has been no change in the circumstances affecting their status as Independent Directors of the Company.

f. Key Managerial Personnel:

Pursuant to the provisions of Sections 2(51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (as amended from time to time), the following are the Key Managerial Personnel of the Company:

1) Mr. Sudhakar Ram - Vice Chairman & Managing Director;

2) Mr. Abhishek Singh - Group Chief Financial Officer; and

3) Mr. Dinesh Kalani - Company Secretary

There is no change in the composition of Key Managerial Personnel during the year under review.

g. Committees of the Board:

The Board has 5 Committees:

1) Audit Committee

2) Nomination and Remuneration Committee

3) Stakeholders’ Relationship Committee

4) Corporate Social Responsibility Committee, and

5) Governance Committee

Details of all the Committees along with their amended charters, composition and meetings held during the year are given under Corporate Governance Report appearing elsewhere as a separate section in this Annual Report.

11. Nomination and Remuneration Policy

The Company has a policy on Nomination and Remuneration of Directors and Senior Managerial Personnel approved by the Nomination and Remuneration Committee and the Board. The policy is available at the website of the Company at web link https://www.mastek.com/corporate-qovernance.

The policy inter-alia covers:

1. Directors’ appointment and remuneration; and

2. Key Managerial Personnel and other senior employees appointment and remuneration.

Please refer the Notes to Accounts and Corporate Governance Section for the details on Remuneration of Directors and Key Managerial Personnel.

12. Employee Stock Option Plans

The Company has 3 ongoing Employee Stock Option Plans (ESOPs) at present. During the year under review, the Company had granted 386,000 Employee Stock options to its selected employees. The Board of Directors confirms that there is neither any new plan introduced nor there were any material changes made in the existing ESOP Plans and all the existing ESOP Plans comply with the SEBI Guidelines. Details of shares issued under ESOPs, as also the disclosure in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014, read with SEBI circular dated 16 June, 2015 are uploaded on the website of the Company at web link https://www.mastek.com/ corporate-governance.

The Annual Certificate from M/s. Walker Chandiok & Co. LLP, Chartered Accountants, Statutory Auditors stating that the ESOP Plans have been implemented in accordance with the SEBI Regulations and the resolutions have been passed by the members in their general meeting, will be obtained and placed at the ensuing 37th Annual General Meeting for inspection of members.

13. Audit Committee

The Company has an Audit Committee that currently comprises of 4 Independent Directors and 1 Non-Executive Director. The Chairman of the Audit Committee is Independent Director. The Independent Directors are accomplished professionals from the Corporate fields. The Managing Director and Group Chief Financial Officer attend the meetings as permanent invitees. The Company Secretary acts as the Secretary to the Committee.

During the financial year 2018-19 the Committee met 5 times. The details of the Audit Committee meetings and the attendance of the members there at, are provided in the Corporate Governance Report, appearing elsewhere as a separate section in this Annual Report.

During the year under review, the Board accepted all the recommendations of the Audit Committee.

14. Related Party Transactions

The Company revised its Policies on determining materiality of related party transactions and also on dealing with Related Party Transactions in accordance with the amendments to the applicable provisions of the SEBI Listing Regulations. The same has been posted on the website of the Company at web link https://www.mastek.com/corporate-aovernance

During the year under review, the Company has not entered into transactions with related parties (except with its wholly owned subsidiaries which are exempt for the purpose of Section 188(1) of the Companies Act, 2013). As defined under Section 2(76) of the Companies Act, 2013 read with Companies (Specification and Definitions Details) Rules, 2014, all of the Related Party Transactions entered into were at an arm’s length basis and in compliance with the applicable provisions of the Companies Act, 2013 and the SEBI Listing Regulations. There are no materially significant Related Party Transactions made by the Company with Promoters, Directors or Key Managerial Personnel, etc., which may have potential conflict with the interest of the Company at large.

Omnibus approvals are given by the Audit Committee for the transactions, which are foreseen and are repetitive in nature on yearly basis. A statement of all Related Party Transactions is presented before the Audit Committee and the Board on a quarterly basis, specifying the nature, value and terms & conditions of the transactions. The said transactions were unanimously approved by the Audit Committee as well as by the Board.

During the year under review, the Company had not entered into any contract / arrangement / transaction with any related parties, which could be considered material in accordance with the policy of the Company on determining materiality of related party transactions. Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013 along with the justification for entering into such contract or arrangement in Form AOC-2 is not required to be given. However, the Directors draw attention of the members to the Note no. 24 of the Standalone Financial Statement, which sets out, related party transaction disclosures.

15. Human Resource and Relations

Human Resources are vital and most valuableassets for the Company. Mastek Group deploys its intellectual capability to create and deliver Intellectual Property (IP)-led solutions that make a business impact for its global clients. For this, the key success enabler and most vital resource is excellent talent.

As on 31 March, 2019, Mastek Group had a total head count of 2069. The Directors wish to place on record their appreciation and acknowledgment of the efforts and dedication and contributions made by employees at all levels during the year under review. Mastek Group continues to focus on attracting new talent & help them to acquire new skills, explore new roles and realise their potential byway of providing training Programmes and retain such high quality talent.

The detailed information pertaining to Human Resources initiatives taken by the Company is given under the Management Discussion and Analysis, which forms Part of this Annual Report.

16. Particular of Employees

The disclosure 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 is annexed as Annexure 2 to the report.

Further, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits as set out in the Rules 5(2) and 5(3) of the aforesaid Rules forms part of this report. However, in terms of first provision of Section 136(1) of the Companies Act, 2013, the Annual Report and Accounts are being sent to the members and others entitled thereto, excluding the aforesaid information. The said information is available for inspection to the members at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent.

17. Equal Opportunity Employer

The Company has always provided a congenial atmosphere for work that is free from discrimination and harassment, including sexual harassment but not limited to. It has provided equal opportunities of employment to all irrespective of their caste, religion, colour, marital status and gender.

18. Management of Risks of Fraud, Corruption and Unethical Business Practices

a. Whistle Blower Policy / Vigil Mechanism

In compliance with the requirements of the Companies Act, 2013 and the SEBI Listing Regulations, the Company has established a Whistle Blower Policy/Vigil Mechanism Policy and the same is placed on the web site of the Company at web link https://www.mastek.com/ corporate-qovernance

The Company has a Vigil Mechanism for Directors and Employees to report their concerns about unethical behavior, leakage of unpublished price sensitive information, actual or suspected fraud or violation of the Company’s Code of Conduct. The mechanism provides for adequate safeguards against victimisation of Director(s) and / or Employee(s) who avail the mechanism.

b. Anti - Corruption and Bribery Policy

In furtherance of the Company’s Philosophy of conducting business in an honest, transparent and ethical manner, the Board has laid down ‘Anti-Corruption and Bribery Policy’ as part of the Company’s Code of Business Conduct and Ethics. As a Company, Mastek has zero-tolerance to bribery and corruption and is committed to act professionally and fairly in all its business dealings. To spread awareness about the Company’s commitment to conduct business professionally, fairly and free from bribery and corruption and as part of continuous education to the employees an ‘Anti- Bribery’, mandatory online training & testing through a web-based application tool was conducted for relevant employees. The above policy and its implementation are closely monitored.

The concerned employees of the Company are made aware of the said policy at the time of joining the Company and are also provided online training, wherever necessary.

19. Policy on Prevention of Sexual Harassment of Women at Workplace

The Company has zero tolerance towards any action on the part of any employee which may fall under the ambit of ‘Sexual Harassment’ at workplace, and is fully committed to provide a safe and conducive work environment to all its employees and associates to uphold and maintain the dignity of every women employee working in the Company. The Company’s Policy provides for protection against sexual harassment of women employees at workplace and for prevention and redressal of such complaints.

The Company has a qualified Internal Complaints Committee, who along with the external member reviews the policy and framework on a regular basis. Additionally, the Company ensures that every new employee undergoes an awareness programme which will sensitise them to uphold the dignity of their colleagues at workplace, particularly with respect to prevention of sexual harassment.

During the year under review, the Company has not received any complaint.

No cases of child labour, forced labour and involuntary labour were reported during the year.

20. Corporate Social Responsibility

Mastek Foundation is the CSR wing of the Company. Founded in 2002, the mission of Mastek Foundation evolves as Informed Giving, Responsible Receiving. The institution seeks to inspire Company employees by creating awareness among them to give back to the community in ways which would meet the needs and challenges faced by the community members. One such medium could be through volunteering and giving opportunities. The Foundation also supports Non - Governmental Organisation (NGOs) to scale and build their capabilities through our core skill of IT. Hence, the Foundation has 3 clearly defined pillars:

ENGAGE, GIVE AND BUILD.

In compliance with the provisions of Section 135 of the Companies Act, 2013 the Board of the Company has formed a Corporate Social Responsibility (CSR) Committee. The Committee met once during the year under review and a detailed report about CSR activities undertaken during the year is annexed as Annexure 3 to the report. The CSR Policy has been uploaded on the website of the Company at web link www.mastek.com/corporate-aovernance. The CSR projects or programmes undertaken are within the broad framework of Schedule VII of Companies Act, 2013. The highlights of the policy are asfollows:-

Mastek CSR programmes falls under the following categories:

a. Promoting education, enhancing skills of children, and development of children and women working in red- light areas. We are also involved in special education and employment - enhancing vocational skills especially among women, elderly and the differently abled and livelihood enhancement projects.

b. Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making safe drinking water available.

c. Promoting gender equality and empowering women: Activities include setting up homes / hostels for women and orphans, old age homes and other such facilities for senior citizens, day care centres, and measures to reduce inequalities faced by socially and economically backward groups.

d. Protection and up gradation of environmental conditions: These include ensuring environ mental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining the quality of soil, air and water.

e. Any other projects with the approval of the Board.

Corpus:

The corpus for the CSR consists of:

- 2% of the Average Net Profit of the preceding 3 years

- Any income / surplus arising out of the above activities

- Payroll contribution from the employees

- Proceeds from Fund-raising events

Mastek may pool its resources and CSR spending with other Groups or Associate Companies on collaborative efforts that qualify as CSR spending.

Roles and Responsibilities:

- Decide CSR projects, programmes, or activities to be taken up by the Company

- The CSR activities proposed to be taken up by the Company each year are placed before the Board for approval

- Oversee the progress of the initiatives rolled out under this policy

- Define and monitor the budgets for carrying out the initiatives

- Submit a report to the Board of Directors on all CSR activities / projects spent during the financial year

- Monitor and review the implementation of the CSR policy

CSR Committee Composition:

The Chairperson of the Committee is Ms. Priti Rao, Non - Executive Independent director. The other members are Mr. Ashank Desai, Non - Executive Director and Mr. Sudhakar Ram, Vice - Chairman & Managing Director. The Company Secretary acts as the Secretary to the Committee.

Based on the Average Net Profits of the Company for 3 immediately preceding financial years, the amount to be spent on CSR activities during the financial year 2018-19 was budgeted at Rs. 54 lakhs. However, a total sum of Rs. 100.05 lakhs was spent on projects approved under Section 135 of the Companies Act, 2013 on CSR activities during the year, which is almost 85% higher than the budgeted amount.

21. Auditors

a. Statutory Auditors

As per the requirements of the Companies Act, 2013, the Audit Committee and the Board of Directors at their meeting held on 20 April, 2017 and the members of the Company at the 35th Annual General Meeting (AGM) appointed M/s. Walker Chandiok & Co. LLP, Chartered Accountants (Firm Registration No. 001076N / N500013), as the Statutory Auditors of the Company for a period of 5 Consecutive years, commencing from the conclusion of 35th AGM untill the conclusion of the 40th AGM, subject to ratification by members every year.

Pursuant to the provisions of Section 139 and the Companies (Amendment) Act, 2018 effective from 7 May, 2018, the requirement of seeking ratification from the members for the continuation of re-appointment of the Statutory Auditors has been withdrawn from the Statute, hence re-appointment of M/s. Walker Chandiok & Co. LLP, Statutory Auditors of the Company does not require ratification and will continue to be Statutory Auditors of the Company. Hence, the resolution seeking ratification of the members for their appointment is not being placed at the ensuing AGM.

M/s. Walker Chandiok & Co. LLP has confirmed their eligibility and consent under Sections 139 and 141 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014 for their continuance as the Auditors of the Company for the financial year 2019-2020. In terms of the SEBI Listing Regulations, the Auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the ICAI.

Further, the report of the Statutory Auditors along with the notes is enclosed with the Financial Statements. The Auditors have issued an unmodified opinion on the Financial Statements for the financial year ended 31 March, 2019.

The Auditors of the Company have not reported any fraud as specified under Section 143(12) of the Companies Act, 2013.

b. Secretarial Auditors

In terms of Section 204 of the Companies Act, 2013 and Rules made thereunder, the Board has appointed Mr. Prashant S. Mehta, Proprietor of P. Mehta & Associates, Practicing Company Secretaries, as Secretarial Auditorof the Company for the financial year 2018-19 to conduct the Secretarial Audit and issue the Secretarial Audit Report in Form MR-3 pursuant to the provisions of Section 204 of the Companies Act, 2013 and read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The report of the Secretarial Auditors for the financial year 2018-19 is annexed as Annexure4 to this report. The report is self-explanatory and does not contain any qualification, reservation and adverse remarks.

Pursuant to the circular issued by the SEBI dated 8 February, 2019, Secretarial Auditor will issue the “Annual Secretarial Compliance Report” and the same will be submitted to the stock exchanges in time.

22. Enterprise Risk Management (ERM)

In terms of the requirements of the Companies Act, 2013, the Company has developed and implemented the Risk Management Framework which captures and classifies the risks faced by the Company. This is periodically reviewed by the Governance Committee of the Board as well as by the Board of Directors of the Company.

The objectives of ERM includes:

- Identifying and assessing a broad array of risks that could negatively impact the achievement of Organizational goals and objectives

- Ensuring appropriate ownership and accountability of risks

- Developing and implementing appropriate risk mitigation and monitoring plans by risk owners

Risk identified are defined in the “Risk Register” and categorized as High, Medium or Low risks. The risk owners quantify the impact of identified risks and outline the steps taken to mitigate it. The risks identified are reviewed periodically to assess its impact on the business. As a result, a risk can go up or down in its impact. Once mitigated, it can go out of the Risk Register as well. This is a robust process governed by the Board in conjunction with the risk owners. Based on the probability & impact of the risk, the requisite controls and mitigation action plans have been designed and implemented.

Risk of non-compliance can result in reputational damage, penalty and business risk. To ensure optimal compliances, periodic checks and tests of compliance and controls are performed by the Company. The report of such checks are presented to the Board periodically. This spreads awareness about various risk management activities / achievement, new topics / practices / updates on ERM and to create enthusiasm in them to proactively control risks in their work processes & areas. Mastek is committed to further strengthen its risk management capabilities in order to protect interests of stakeholders and enhance shareholder value.

The detailed information pertaining to ERM is given under the management Discussion and Analysis which forms part of this Annual Report.

23. Internal Control Systems

- Internal Audit and its Adequacy

The scope and authority of the Internal Audit function is defined by the Audit Committee. With a view to maintain independence and objectivity in its working, the Internal Audit function reports directly to the Audit Committee. At the beginning of each financial year, a risk based Annual Audit Plan is rolled out after the same is approved by the Audit Committee. The Audit Plan is aimed at evaluation of the efficacy and adequacy of internal control system and compliance thereof, robustness of internal processes, policies and accounting procedures, compliance with laws and regulations. Based on the reports of internal audit function, process owners undertake corrective action in their respective areas. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

- Internal Financial Controls over Financial Reporting (IFCoFR)

The internal financial controls within the Company are commensurate with the size, scale and complexity of its operations. The controls were tested during the year and no reportable material weaknesses either in their design or operations were observed. The Company has robust policies and procedures which, inter alia, ensures integrity in conducting its business, safeguarding of its assets, timely preparation of reliable financial information, accuracy and completeness in maintaining accounting records and prevention and detection of frauds and errors.

24. Directors’ Responsibility Statement

Based on the framework of Internal Financial Controls and compliance systems established and maintained by the Company, audit and reviews performed by the Internal, Statutory and Secretarial Auditors and the reviews undertaken by the Management and the Audit Committee, the Board is of the opinion that the Company’s Internal Financial Controls have been adequate and effective during the year under review.

Pursuant to Section 134 of the Companies Act, 2013, and to the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors confirm the following statements:

(a) that in the preparation of the Annual Financial Statements for the year ended 31 March, 2019, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(b) that such accounting policies as mentioned in Note. 1 of the Notes to the financial statements have been selected and applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 March, 2019 and of the profits of the Company for the year ended on that date;

(c) that proper and sufficient care has been taken 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) that the Annual Financial Statements have been prepared on a going concern basis;

(e) that proper internal financial controls to be followed by the Company have been laid down and that such internal financial controls are adequate and were operating effectively; and

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

25. Details of Conservation of Energy and Technology Absorption & Foreign Exchange Earnings and Outgo

a. Conservation of Energy and Technology Absorption

The Company is entirely a Services Company and thus essentially, a non-energy intensive organisation. Additionally, the Company’s facilities are set up at locations chosen for adequate availability and supply of energy. The Company has optimisation of IT power usage as well as higher operational efficiency.

Further, the Company was able to reduce the power consumption over the previous year, through monitoring energy use and installing LED lights. To further save energy and improve efficiency, the Company implemented smarter solutions with automated controls to maintain optimal temperature at optimal power consumption. LED lights fitment in our offices as well as replacement of old power guzzler with new smarter solutions have helped to reduce energy costs as well.

The Company continues to adopt and use the latest technologies to improve the productivity and quality of its services. The Company’s operations do not require significant import of technology.

b. Foreign Exchange Earnings and Outgo

Total Foreign Exchange used and earned by the Company is as follows:

(Rs. lakhs)

Particulars

Year Ended 31 March, 2019

Year Ended 31 March, 2018

Foreign Exchange

413

490

Used

Foreign Exchange

19,526

16,026

Earned

26. Corporate Governance

The Company is committed to maintaining the highest standards of Corporate Governance and adhering to the Corporate Governance requirements as set out by the SEBI Listing Regulations.

The Company has complied fully with Corporate Governance requirements under the SEBI Listing Regulations. A separate section on Corporate Governance practices followed by the Company together with a Certificate appearing elsewhere in this report and forms an integral part of this report.

27. Code of Conduct for Prevention of Insider Trading

The Board of Directors has revised the Code of Internal Procedures and Conduct for regulating, monitoring and reporting of trading by Insiders in accordance with SEBI (Prohibition of Insider Trading) Regulations, (Amendment) 2018. The code is available on website of the Company at web link https://www.mastek.com/corporate-governance

28. Disclosures under the Companies Act, 2013 and the SEBI Listing Regulations

a. Extract of Annual Return:

As required under the provisions of Sections 134(3)(a) and 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, (including any statutory modification(s) or re-enactment thereof, for the time being in force), the extract of Annual Return in Form No. MGT-9 is annexed herewith as Annexure 5 to this report.

b. Number of Board Meetings:

The Board of Directors met 5 times during the financial year 2018-19. The details of the Board Meetings and the attendance of the Directors there at, are provided in the Corporate Governance Report, appearing elsewhere as a separate section in this Annual Report.

c. Increase in Issued, Subscribed and Paid-up Equity Share Capital:

During the year, the Company has issued and allotted 2,80,747 number of Equity Shares of face value of Rs. 5/- each for a total nominal value of Rs. 14,03,735 under various ESOP Plans to the selected employees of the Company, who exercised their vested Employee Stock Options. These Equity Shares rank pari passu in all respects with the existing Equity Shares of the Company.

The movement of share capital during the year was as under:

Particulars

No. of shares allotted

Cumulative outstanding No. of shares

Cumulative outstanding capital (Rs.)

Capital at the beginning of the year, i.e. as on 1 April, 2018

-

2,36,92,056

11,84,60,280

Allotment of shares to employees pursuant to exercise of options granted under ESOP Plans on -

1. 17 April, 2018

2. 04 July, 2018

3. 24 October, 2018

4. 16 January, 2019

5. 27 March, 2019

35,894

57,863

97,250

59,498

30,242

2,37,27,950

2,37,85,813

2,38,83,063

2,39,42,561

2,39,72,803

11,86,39,750

11,89,29,065

11,94,15,315

11,97,12,805

11,98,64,015

Capital at the end of the Year, i.e. as on 31 March, 2019

-

2,39,72,803

11,98,64,015


d. Changes in the Nature of Business:

There has been no change in the nature of business of the Company during the financial year ended 31 March, 2019.

e. Listing with Stock Exchanges:

Your Company is listed with the BSE Limited and the National Stock Exchange of India Limited.

f. Compliance with Secretarial Standards on Board and General Meetings:

During the year under review, the Company has complied with Secretarial Standards on meetings of the Board of Directors and on General Meetings issued by the Institute of Company Secretaries of India in terms of Section 118(10) of the Companies Act, 2013.

g. Insurance:

The Company has sufficiently insured itself under various Insurance policies to mitigate risks arising from third party or customer claims, property, casualty, etc.

h. Equity Shares with Differential Rights:

Your Company has not issued any Equity Shares with differential rights as to dividend, voting or otherwise.

i. Particulars of Loans, Guarantees or Investment:

In compliance with the provisions of the Companies Act, 2013, there were no loans given or investments made by the Company during the year.

Further, the Company had provided a Corporate Guarantee for an amount of GBP 17 million and also security / charge / mortgage over one of its Property as a Security for a term loan facility availed by one of its wholly owned subsidiary for an aggregate principal amount not exceeding GBP 15 million from the Bank. The Company had released its earlier Corporate Guarantee of US$ 12 million during the year based on prepayment of the loan by the Subsidiary.

j. Other Disclosures:

No disclosure or reporting is made with respect to the following items, as there were no transactions during the year under review:

- There were no revision in the Financial Statements.

- No material fraud has been reported by the Auditors to the Audit Committee or the Board.

- The Managing Director of the Company has not received any remuneration or commission from any of its subsidiaries.

- The Company does not have any scheme or provision of money for the purchase of its own shares by trustees for employees benefit.

- The Company is not required to maintain cost records as per Section 148 of the Companies Act, 2013.

- There were no buy back of shares during the year under review

- Your Company has not accepted any deposits from public in terms of Section 73 and / or 74 of the Companies Act, 2013.

- During the year under review, no significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and the Company’s operations and legal compliances.

29. Industry Recognition

During the year under review, your Company, its Subsidiaries and Executives received many awards and felicitations conferred by reputable organisations. Some of them are:

a. Gartner listed your Company in its prestigious “Leading IT Service Provider Offering RPA Services” section

b. Mastek Learning & Development team won the award for “Best Learning Strategy of the Year” this award was presented at the 3rd Edition of the “Future of L&D Summit & Awards 2019”

c. Outstanding Contribution - IT at CNBC-AWAAZ CEO Awards

d. Your Company was shortlisted in not 1 but 3 categories of the UK IT Industry Awards including:

1. Vendor of the Year

2. Digital Project of the Year and

3. IT Service and Support Professional of the Year

e. Your Company was selected as a finalist in 2 categories of this year’s European Software Testing Awards. The categories were:

1. Best Agile Project: Student Loans Company (SLC) in partnership with Mastek

2. Best Test Automation Project - Functional: Specsavers in partnership with Mastek

f. Insights Success magazine which has overn 70,000 qualified subscribers across the globe ran a cover story recognising Mr. John Owen’s exemplary leadership skills, his work as the Group CEO - leading by example and effectively driving transformation to deliver outstanding results and bringing about positive change and awarded him ‘The 10 Best Performing IT Leaders to Watch in 2019’.

g. Mr. John Owen, Group Chief Executive Officer won the Finance Monthly CEO Award 2018 for his outstanding contribution in driving Mastek’s growth agenda over the past 12 months.

h. The CF0100 2019 Roll of Honor was presented to Mr. Abhishek Singh, Group Chief Financial Officer, in recognition of his contributions to Financial Planning & Cost Management. He is Recipient of this honor for 3rd year in a row.

30. Enhancing Shareholders Value

The Company accords top priority for creating and enhancing shareholders value. All the Company’s operations are guided and aligned towards maximising shareholders value.

31. Appreciation and Acknowledgement

Your Directors are grateful to the Investors for their continued patronage and confidence in the Company over the past several years. Your Directors also thank the Central and State Governments, other Statutory and Regulatory Authorities for their continued guidance, assistance, co-operation and support received.

Your Directors thank all our esteemed clients, associates, vendors and contractors within the country and overseas for their continued support, faith and trust reposed in the professional integrity of Mastek. With continuous learning, skill up-gradation and technology development Company will continue to provide world class professionalism and services to its clients, associates, vendors and contractors.

Your Directors also wish to convey their sincere appreciation to all employees at all levels for their dedicated efforts and consistent contributions and co-operation extended and is confident that they will continue to contribute their best towards achieving still better performance in future to become a significant leading player under Information Technology Industry.

For and on behalf of the Board of Directors

Sudhakar Ram S. Sandilya

Vice Chairman and Non- Executive Chairman and

Managing Director Independent Director

(DIN: 00101473) (DIN: 00037542)

Date: 16 April, 2019

Place: Mumbai

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