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Allsec Technologies Ltd.

BSE: 532633 Sector: IT
NSE: ALLSEC ISIN Code: INE835G01018
BSE 00:00 | 24 Apr 2020 Allsec Technologies Ltd
NSE 05:30 | 01 Jan 1970 Allsec Technologies Ltd

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OPEN 139.40
PREVIOUS CLOSE 132.80
VOLUME 2
52-Week high 340.00
52-Week low 109.15
P/E 11.68
Mkt Cap.(Rs cr) 212
Buy Price 139.40
Buy Qty 750.00
Sell Price 125.95
Sell Qty 20.00
OPEN 139.40
CLOSE 132.80
VOLUME 2
52-Week high 340.00
52-Week low 109.15
P/E 11.68
Mkt Cap.(Rs cr) 212
Buy Price 139.40
Buy Qty 750.00
Sell Price 125.95
Sell Qty 20.00

Allsec Technologies Ltd. (ALLSEC) - Director Report


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Company director report

The Directors take pleasure in presenting to you the 20th Annual Report ofthe Company covering the financial year ended 31st March 2019.

FINANCIAL HIGHLIGHTS

Pursuant to the notification dated 16th February 2015 issued by the Ministryof Corporate Affairs the Company has adopted the Indian Accounting Standards (Ind AS)notified under the Companies (Indian Accounting Standards) Rules 2015 with effect from 1stApril 2017. The performance of the Company for the financial year 2018-19 is summarizedbelow:

(IN R In Lakhs)

STANDALONE

CONSOLIDATED

YEAR ENDED

YEAR ENDED

31-Mar-19 31-Mar-18 F/(A) 31-Mar-19 31-Mar-18 F/(A)
INCOME FROM SERVICES 15317 12878 19% 26116 32496 (20%)
TOTAL COSTS 12310 10568 (17%) 22153 26392 16%
OPERATING MARGIN 3007 2310 30% 3963 6104 (35%)
OTHER INCOME 680 518 31% 675 727 (7%)
EBIDTA 3687 2828 30% 4638 6831 (32%)
EBIDTA (%) 24% 22% 18% 21%
DEPRECIATION 408 328 (24%) 526 450 (17%)
INTEREST EXP /(INCOME) (43) 22 295% (18) 22 182%
PROFIT/(LOSS) BEFORE TAX & EXCEPTIONAL ITEM 3322 2478 34% 4130 6359 (35%)
EXCEPTIONAL ITEM 1307 - 1247
PROFIT/(LOSS) BEFORE TAX 2015 2478 (19%) 2883 6359 (55%)
PROFIT/(LOSS) AFTER TAX 951 2899 (67%) 1567 5953 (74%)

* F/(A) means Favorable / (Adverse)

Business Outlook

The Company in India primarily operates two business segments namely the HumanResources Operations (HRO) business that caters to the payroll and other HR service weprovide to our clients and the Customer Lifecycle Management (CLM) business which providesthe voice and non-voice services to domestic and international clients. Globally theCompany has a CLM and HRO business in Manila and Anti Money Laundering (AML) business inthe US.

Our HRO division continued its growth momentum and in line with the focus on expandingits footprint globally. The division now services more than 30 countries in AsiaMiddle-East and Africa. Your Company has been chosen as the preferred vendor in MiddleEast and India by a global leader in Beverages and Foods business. Allsec bouquet ofservices includes Outsourced payroll services Expense Claims management HRO servicesincluding (Onboarding Info Store Employee movements Rewards Letter generationAttendance and Leave and Exit) Statutory compliance services (payroll complianceincluding PF ESI PT and LWF Labour law compliance Contract labour compliance andFactory compliance). The Company is currently focussing on setting up sales teams in theMiddle East and South East Asia to leverage sales operations in these areas. The Statutoryservices has huge potential for significant growth in the coming years. Allsec's digitaltechnology delivery platform using RPA digitization of Registers and Returns will enablethe Company to increase the statutory services business vertical in India.

The CLM - Domestic business continued with improved volumes and margins as compared toprevious year. Our strategy of identifying processes that have better margins and alsostrengthening relationships with existing clients by way of client farming andrelationship nurturing has helped us in growing this business. We witnessed growth in BFS(Banking & Financial Services) and E-commerce space while also adding businesses fromInsurance industry and emerging industries like Early Education Products for Children. OurNoida centre has further increased its existing share of business by ramping up in otherNorth Indian languages.

The CLM - International business in India has remained stable over the last year. TheCompany continues to pursue opportunities to increase volumes in this business especiallyin the non-voice segment and has maintained a sharp focus on expanding its Finance andAccounts Outsourcing offering especially in the Accounts Receivable space.

The Operational financial performance of your Company continued to improve during thisyear. Profit before Tax and Exceptional Item (PBTE) stood at INR 3322 Lakhs as comparedto INR 2478 Lakhs in the previous year. During the year the Company had a one timeimpairment charge of INR 1307 Lakhs which resulted in lower Profit before tax of INR2015 Lakhs as against INR 2478 Lakhs in previous year. Your Company has reported Netprofit after tax for the current year at INR 951 Lakhs as compared to Net profit after taxof INR 2899 lakhs for the previous year. Detailed analysis of the Standalone resultsforms part of the Management Discussion and Analysis (MD&A) report provided separatelyas part of the Annual Report.

Consolidated Revenues for the year stands at INR 26116 lakhs as compared to INR 32496in the previous year. Consolidated Profit before Tax and Exceptional Item decreased to INR4130 lakhs from INR 6359 INR in the previous year. The reduction is attributableprimarily to the US business with reduction in volumes in the AML business. Net profitafter tax stood at INR 1567 lakhs down from INR 5953 lakhs in previous year.

The Company has delivery centers in India at Chennai Bengaluru & NCR locations. Inthe international front Allsec has centers in Manila (Philippines) and Dallas (UnitedStates of America).

Dividend

The Board of Directors of your Company does not recommend any dividend for the year.

Deposits

Your Company has not accepted any deposit from the public during the period underreview and did not have any outstanding deposits.

Directors

Pursuant to the Public Announcement dated 17th April 2019 made by Conneqt BusinessSolutions Limited (“Acquirer”) along with Quess Corp Limited (“PersonActing in Concert”/PAC”) the Detailed Public Statement (“DPS” ) inleading News papers dated 25th April 2019 and the Acquisition process as per the SEBI(SAST) Regulations 2011 the Board of Directors has constituted a “Committee ofIndependent Directors for Open Offer” to provide written recommendations to the OpenOffer. A note on the material developments and changes due to the Acquisition process isdetailed as in this report.

Key Managerial personnel

The Key Managerial Personnel of Allsec Technologies Limited upto the report date arementioned below:

1. Mr. R. Jagadish - Chief Executive Officer

2. Mr. P. Raghunath - Chief Financial Officer

3. Mr. Gagan Preet Singh - Company Secretary Employees

The information relating to Employees to be given under Section 197(12) of theCompanies Act 2013 is given in Annexure G.

Corporate Governance

Your Company is fully compliant with the requirements under SEBI (LODR) Regulations2015. The report on Corporate Governance as per Regulation 34(3) read with Schedule V ofthe listing Regulations is given in Annexure A.

Certificate from Auditors confirming the compliance of conditions of CorporateGovernance is included in Annexure B. CEO / CFO certification is attached in Annexure I.

In terms of Regulation 34 of SEBI (LODR) Regulations 2015 the Management Discussionand Analysis report is given in Annexure - C.

Subsidiary Companies

The Company has three subsidiaries as at year end namely Allsec Tech Inc. USAAllsectech Manila Inc. Philippines and Retreat Capital Management Inc. USA.

The Consolidated Financial Statements of the Company and its subsidiaries are preparedin accordance with Indian Accounting Standards and forms an integral part of this AnnualReport.

The Annual Accounts of the said subsidiaries and the related detailed information willbe made available to the investors of the Company seeking such information at any point oftime. Performance and financial position of subsidiaries included in consolidatedfinancial statements of the Company in format AOC-1 is provided in Annexure E.

The Company monitors performance of subsidiary companies (list of subsidiary companieshas been provided in the financial statements) inter-alia by the following means:

a) The Company does not have any material unlisted Indian subsidiary and hence is notrequired to nominate an Independent Director of the Company on the Board of anysubsidiary.

b) The Audit Committee reviews the financial statements in particular the investmentsmade by the subsidiary companies on a quarterly basis.

c) Your Company has formulated a Policy on Material Subsidiary as required under SEBI(LODR) Regulations 2015 and the policy is hosted on the website of the Company under theweb link https:// www.allsectech.com/investor-information.

Compliance under Companies Act 2013

Pursuant to Section 134 of the Companies Act 2013 read with the Companies (Accounts)Rules 2014 your Company complied with the compliance requirements and the detail ofcompliances under Companies Act 2013 are enumerated in this report.

Extract of Annual Return

An Extract of the Annual Return in form MGT-9 as of 31st March 2019 pursuant to thesub section (3) of Section 92 of the Companies Act 2013 and forming part of the report isplaced in the Company's website under the web linkhttps://www.allsectech.com/investor-information.

Board Meetings held during the year

During the year 4 meetings of the Board of Directors were held. The details of themeetings are furnished in the Corporate Governance Report which is attached as Annexure-Ato this Report.

Committees of the Board

The Board of Directors have 4 committees 1. Audit Committee 2. Nomination andRemuneration Committee 3. Corporate Social Responsibility & 4. StakeholderRelationship Committee. The Details of the composition and meetings are furnished in theCorporate Governance Report which is attached as Annexure -A to this report.

Directors' Responsibility Statement

The Board of Directors acknowledges the responsibility of ensuring compliance with theprovisions of Section 134(3)(c) of the 2013 Act. To the best of their knowledge and beliefand according to the information and explanations obtained by them your Directors makethe following statements:

Your Directors confirm the following that:

a. In preparation of the annual accounts the applicable accounting standards had beenfollowed along with proper explanation relating to material departures.

b. The Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit or loss of the Company for that period.

c. The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.

d. The Directors had prepared the annual accounts on a going concern basis.

e. Proper internal financial controls were in place and that the financial controlswere adequate and were operating effectively.

f. Proper systems were in place so as to ensure compliance with the provisions of allapplicable laws and were adequate and operating effectively.

Independent Directors and Board Evaluation

The Independent Directors of the Company have declared that they meet the criteria ofIndependence in terms of Section 149(6) of the Companies Act 2013 Regulation 25 of theSEBI (LODR) Regulations 2015.

Pursuant to Section 134(3) of the Companies Act 2013 & Rule (8) of the Companies(Accounts) Rules 2014 and the listing Regulations a structured Questionnaire wasprepared considering the various aspects of Board Committees functioning and compositionof Board Committees and used to evaluate the performance of the Board. The IndependentDirectors considered / evaluated the performance of the Non-independent Directors at ameeting without the Non-independent Directors.

The Board members subsequently evaluated performance of the Board the Committees andIndependent Directors as per the criteria and questionnaire developed for the purpose andthe Board of Directors expressed their satisfaction with the evaluation process.

Familiarisation Programme

Your Company follows an orientation and familiarization program through various reports/ codes / internal policies for all the Directors with a view to update them on theCompany's policies and procedures on a regular basis. Periodic presentations are made atthe Board Meetings on business and performance long term strategy initiatives and risksinvolved. The details about the familiarization program have been posted in the website ofthe Company under the web link https://www . allsectech.com/investor-information.

Remuneration Policy

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The Company's policy on appointment and remuneration including criteria fordetermining qualifications positive attributes and independence are provided in theCorporate Governance Report forming part as an Annexure-A to this Report.

Related Party Transactions

The Company has formulated a policy on Related Party Transactions as approved by theBoard and the same is uploaded on the Company's website https://www.allsectech.com/investor-information.

All the Related Party Transactions that were entered into by the Company during thefinancial year 2018-19 were on an arm's length basis and were in the ordinary course ofbusiness. All repetitive Related Party Transactions are placed before the Audit Committeeand are within the Omnibus Approval limits obtained in accordance with the requirements ofthe SEBI (LODR) Regulation 2015. The transactions entered into pursuant to such approvalare placed periodically before the Audit Committee.

There are no materially significant related party transactions made by the Company withPromoters Directors Key Managerial Personnel which may have a potential conflict withthe interest of the Company at large. None of the Directors has any pecuniaryrelationships or transactions vis-a-vis the Company otherwise than disclosed in theCorporate Governance Report forming part of this report.

Details of the transaction are provided in Form AOC-2 which is attached as Annexure - Fto this Report.

Vigil Mechanism / Whistle Blower Policy

In accordance with the requirements of the Companies Act 2013 your Company hasestablished a Vigil Mechanism / Whistle Blower Policy for Directors and Employees toreport genuine concerns. The said Policy meets the requirement of the Vigil Mechanismframework under the 2013 Act and the members can view the details of the policy onhttps://www.allsectech. com/investor-information. No member has been denied access toVigil Mechanism and no complaints have been received during the year.

Corporate Social Responsibility

The Board of Directors of your Company has constituted the CSR Committee to help theCompany to frame monitor and execute the CSR activities.

As per Section 135 of the Companies Act 2013 the Board of every Company referred to insub-section (1) shall ensure that the Company spends in every financial year at least2% of the average net profits of the Company made during the three immediately precedingfinancial years.

As per Computations made under Section 198 of the Companies Act 2013 the Company mustcontribute approximately INR 37 lakhs as CSR Contribution. During the financial year2018-19 the Company has formulated a CSR policy and the CSR committee had a meeting on26th March 2019 which approved the contributions made and proposed to the tune of INR 38Lakhs to promote various educational institutions identified and which falls under thecategories prescribed in Schedule VII of the Companies Act 2013 under (ii) promotingeducation including special education and employment enhancing vocational skillsspecially among children women elderly and the differently abled and livelihoodenhancement project.

The report on CSR activities as required under the Companies (Corporate SocialResponsibility Policy) Rules 2014 is annexed in Annexure - H and forms an integral part ofthe this Report. The policy has been uploaded on the Company's website at the Linkhttps:// www.allsectech.com/investor-information.

Particulars of loans guarantees or investments under Section 186 of the Companies Act2013

Details of loans guarantees and investments covered under the provisions of Section186 of the Companies Act 2013 are given in the Notes to the financial statements formingan integral Part of the Annual Report.

Internal Financial Control and Adequacy

The Board has adopted policies and procedures for ensuring the orderly and efficientconduct of its business including adherence to Company's policies safeguarding of itsassets prevention and detection of frauds and errors the accuracy and completeness ofthe accounting records and the timely preparation of reliable financial disclosures. TheInternal Audit is entrusted to M/s. Srinivasan & Shankar Chartered Accountants and themain scope of the Audit is to test and review controls appraisal of risks and businessprocesses besides benchmarking controls with best practices in the Industry.

Auditors

As required under SEBI (LODR) Regulations 2015 the Statutory Auditors have alsoconfirmed that they hold a valid certificate issued by the Peer Review Board of theInstitute of Chartered Accountants of India.

Comments on Auditors' report

There are no qualifications reservations or adverse remarks or disclaimers made by theStatutory Auditors and Company Secretary in Practice in their reports respectively. TheStatutory Auditors have not reported any incident of fraud to the Audit Committee of theCompany in the year under review.

Material changes and commitments affecting the financial position of the Company whichhave occurred between March 31 2019 and May 17 2019 (date of the Report)

Pursuant to a Public Announcement dated April 17 2019 Conneqt Business SolutionsLimited (“Acquirer”) along with Quess Corp Limited (“Person Acting inConcert” / “PAC”) informed of their proposal to purchase 3961940 numberof shares from First Carlyle Ventures Mauritius Carlyle and 5387155 number of sharesfrom the Promoters of the Company.

Subsequent to above the Acquirer and the PAC also proposed an Open Offer(“Offer”) for acquisition of upto 3961965 fully paid equity shares of facevalue of Rs. 10/- each representing 26% of the Voting Share Capital of the Company fromthe Public Shareholders of the Company in accordance with SEBI (SAST) Regulations 2011.

The Acquirer published a Detailed Public Statement (“DPS”) in leadingnewspapers to draw the attention of the public shareholders of the Company detailing theprocess involved in the Open Offer and a synopsis of the Share Purchase agreements enteredinto with First Carlyle Ventures Mauritius and the Promoters of the Company.

Subsequently the Acquirer has submitted a Draft Letter of Offer with SEBI for itsreview and Approval as per the requirements of SEBI (SAST) Regulations 2011 as amendedfrom time to time.

The Board of Directors of the Company has also constituted a ‘Committee ofIndependent Directors for Open Offer' to give its written reasoned recommendations on theopen offer to the shareholders of the Company. The members of the Committee are as statedbelow.

S.No Directors Name Designation
1 Mr. T. Anantha Narayanan Chairman
2 Mr. C. Jayaram Member
3 Mr. D. Padmanabhan Member

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 Act and theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed Mr. P. Sriram (CP No. 3310) a Company Secretary in Practice to undertakethe Secretarial Audit of the Company. The Report of the Secretarial Audit Report is givenas an Annexure - D and forms part of this Report.

Names of Companies which have ceased / become Subsidiaries / Joint Ventures /Associates

During the year there is no change in the status of any subsidiary.

Quality & Information Security

The Company has a robust Quality Management and Information Security Management systemin place to identify potential risks areas for improvement and further to have smoothbusiness operations. Periodic Management Review meetings are conducted to review these.

ISO 9001 certification at Chennai that was upgraded to latest version i.e. ISO9001:2015 from ISO 9001:2008 last year which enhanced the strength of our QMS to a newlevel continues to be in practice and is renewed this year. ISO 27001:2013 certificationhas been renewed at Chennai Manila and Bengaluru facilities. Our facility in Noida isincluded in Scope of ISO 27001:2013 certification this year and this center is alsocertified now. Every Allsec service delivery location across globe is ISO 27001:2013certified.

Existing PCI DSS compliance certifications at Chennai Manila and Irving facilities arerenewed this year. Further existing SSAE 18 / ISAE 3402 which is a graduated version ofSAS 70 Type II certification for the HRO business has been renewed. Frequency of SSAE 18 /ISAE 3402 audits is now 2 annually instead of 1 to fulfill the requirements of variousclients.

General Data Protection Regulation (GDPR) is a regulation in EU law on data protection& privacy for EU / UK citizens or those residing in EU / UK region. It also addressesthe requirements to be fulfilled for export of personal data from EU to outside the EU.This act is applicable to the entities which can be located anywhere in the world whocollect or process personally identifiable information (PII) of EU citizens or thoseresiding in EU. We deployed this framework and accomplished GDPR compliance (adequacy) ina comprehensive validation audit conducted by an external agency. This has not onlyfulfilled few clients' and legal requirements but is also a value addition toOrganization's information security frameworks.

Disclosure as per Securities and Exchange Board of India (Employees Stock option Schemeand Employee Stock Purchase Scheme) Guidelines 2011

The options granted under the scheme have lapsed.

Conservation of energy technology absorption foreign exchange earnings and outgo

Since your Company is in the Information Technology Enabled Services (ITES) businessthe provisions relating to conservation of energy and technology absorptions are notapplicable.

The details of the earnings and expenditure in foreign currency are given below:

Particulars INR in Lakhs
Earnings in Foreign Currency 4560
Expenditure in Foreign Currency 169

Environment Health & Safety

The Company is conscious of the importance of environmentally clean and safeoperations. The Company's policy requires conduct of operations in such a manner so as toensure safety of all concerned compliances of environmental regulations and preservationof natural resources.

In order to comply with provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and Rules framed thereunder the Companyhas formulated and implemented a policy on prevention prohibition and redressal ofcomplaints related to sexual harassment of women at the workplace. All women employeeseither permanent temporary or contractual are covered under the above policy. The saidpolicy has been uploaded on the internal portal of the Company for information of allemployees. An Internal Complaint Committee (ICC) has been set up in compliance with thesaid Act. During the year the committee has not received any complaints.

Investor Services

Your Company will constantly endeavor to give the best possible services to theinvestors. Towards this end the following are some of the initiatives taken by theCompany:

The investor Information section of the Website of the Company (www.allsectech.com)furnishes important financial details and other data of frequent reference by theinvestors as per the Regulation 46 of SEBI (LODR) Regulations 2015. The Company also hasa Stakeholders' Relationship Committee to address shareholders grievances if any andresolve them as & when they are reported. The Company has provided an exclusive emailid: investorcontact@allsectech.com for the investors to facilitate the redressal of thequeries and complaints of the investors.

The Company has appointed M/s. Karvy Fintech Private limtied as Registrars & ShareTransfer Agents for attending to issues relating to Physical shares and routine servicesrequests.

Shareholders can also address any unresolved issues or information requests by postalmail to - Company Secretary Allsec Technologies Ltd 46B Velachery Main Road VelacheryChennai 600042.

Shareholders are requested to update their email addresses with their respectivedepository participants so that the Company can provide better services at all times.

Acknowledgement

Your Directors wish to place on record their appreciation for the excellent support andco-operation given by customers shareholders service providers and Government Agencies.

Your Directors also record their appreciation and gratitude to Financial Institutionand Bankers for their continued support and timely assistance in meeting the Company'sresource requirements. Your Directors acknowledge the dedicated services rendered by allthe employees of the Company.

For and on behalf of the Board of Directors

Chennai A. Saravanan R. Jagadish
May 17 2019 Director Director
DIN : 00033683 DIN : 00033589


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