Your Directors have great pleasure in presenting the report on the Business andOperations of your Company (the Company or Zen) along with theaudited financial statements for the financial year ended 31 March 2019. Theconsolidated performance of your Company and its Subsidiaries has been referred towherever required.
The financial highlights of the Company are as follows:
(Rs. in lakhs)
| ||Consolidated ||Standalone |
|Particulars ||2018-19 ||2017-18 ||2018-19 ||2017-18 |
|Total Income ||9532.84 ||-- ||9532.84 ||4336.43 |
|Total Operating Expenditure ||7554.79 ||-- ||6967.54 ||4082.07 |
|Operating Profi t (PBIDT) ||1978.05 ||-- ||2565.30 ||254.36 |
|Less: Interest ||481.12 ||-- ||478.88 ||240.76 |
|Less: Depreciation & Amortization ||379.69 ||-- ||376.81 ||282.39 |
|Profit/(Loss) before tax ||1117.24 ||-- ||1709.61 ||(268.80) |
|Current Tax ||368.40 ||-- ||368.40 ||-- |
|Deferred Tax ||(582.50) ||-- ||(582.50) ||(229.89) |
|Share of Profit / (Loss) from Associates ||0.35 ||-- ||-- ||-- |
|Add: Other Comprehensive Income / (Expense) ||(16.35) ||-- ||(18.13) ||59.71 |
|Profit after Tax ||1315.34 ||-- ||1905.58 ||20.80 |
|Earnings per Share (Rs.) (face value Rs. 1/- per share) ||1.73 ||-- ||2.49 ||0.03 |
The Board of Directors of your Company in its meeting held on 18 May 2019 recommended afinal dividend @ 30% on the paid-up equity share capital i.e. Rs. 0.30 per equity shareof Rs. 1/- each for the year 2018-19 which will be paid upon the approval of shareholdersat the ensuing Annual General Meeting. Accordingly the total dividend amount comes to Rs.23148018/- excluding the dividend distribution tax.
PREFERENTIAL ISSUE OF CONVERTIBLE WARRANTS
The Board of Directors allotted 2349940 Convertible Warrants at an issue price of Rs.76/- per warrant aggregating to an amount of Rs. 178595440/- on a preferential basisin accordance with the applicable provisions of the Companies Act 2013 and SEBI (Issue ofCapital and Disclosure Requirements) Regulations 2018.
STATE OF THE COMPANYS AFFAIRS
During the year under review your Company achieved total income of Rs. 9532.84 lakhsas against Rs. 4336.43 lakhs during the previous year. The Net profit after tax stood atRs. 1905.58 lakhs as against Rs. 20.80 lakhs for the previous year.
The order book size as on 31 March 2019 is around Rs. 282.20 Crores including AMCs ofworth Rs. 111.17 Crores as against Rs. 348.78 Crores including AMCs of worth Rs. 125.13Crores for the previous year.
During the year the R&D expenditure (capital and revenue) is Rs. 12.33 Crores(previous year Rs. 16.10 Crores). The R&D products developed during the year havesubstantial scope for revenue generation and are expected to become commercially viable inthe next few years.
SUBSIDIARIES ASSOCIATES AND JOINT VENTURE COMPANIES
The Company has one subsidiary and one associate company as on 31 March 2019. There areno joint ventures within the meaning of Section 2(6)(b) of the Companies Act 2013("Act"). There has been no material change in the nature of the business of thesubsidiaries.
Pursuant to the provisions of Section 129(3) of the Act a statement containing thesalient features of the financial statements of the Companys subsidiary andassociate company in Form AOC-1 is attached as Annexure I to this report.
Further pursuant to the provisions of Section 136 of the Act the financial statementsof the Company including the consolidated financial statements along with the relevantdocuments and the separate audited financial statements in respect of subsidiaries areavailable on the website of the Company https://www. zentechnologies.com/investors.
ZEN TECHNOLOGIES USA INC.
During the year the Company formed ZEN TECHNOLOGIES USA INC. a wholly ownedsubsidiary for exploring opportunities in the USA to enter into joint ventures and toforay into the American and South American markets.
UNISTRING TECH SOLUTIONS PRIVATE LIMITED
The Company invested in Unistring Tech Solutions Private Limited (UTS) a companyengaged in the business of development of electronic warfare (EW) solutions advancedcommunication systems for defence telemetry systems and Simulators for radar and EWsystem evaluation.
The Company completed acquiring 288794 (no. of equity shares) aggregating to 51% ofshareholding of UTS on 08 May 2019 and accordingly UTS became a subsidiary of the Companyw.e.f. 08 May 2019.
CONSOLIDATED FINANCIAL STATEMENTS (CFS)
During the year the Board of Directors reviewed the a3 airs of its subsidiaries. YourCompany has prepared its consolidated financial statements in accordance with therequirements of IND AS-27 issued by the Institute of Chartered Accountants of India (ICAI)and as per the provisions of Section 129(3) of the Companies Act 2013. The ConsolidatedFinancial Statements together with the Auditors Report form part of this AnnualReport. Further this year being the first year of consolidation comparative figures forthe corresponding previous year where not available.
In accordance with Section 136 of the Companies Act 2013 the financial statements ofthe Company including the consolidated financial statements and all other documentsrequired to be attached to this report are available for inspection by the members at theregistered o3 ce of the Company during the business hours on all days except SaturdaysSundays and public holidays up to the date of the Annual General Meeting(AGM). Any member desirous of obtaining a copy of the said financialstatements may write to the Company Secretary of the Company. The above-mentioneddocuments have also been uploaded on the website of the Company (www.zentechnologies.com).
EXTRACT OF ANNUAL RETURN
In accordance with Section 92(3) of the Companies Act 2013 read with Companies(Management and Administration) Rules 2014 an extract of the Annual Return in Form MGT-9is annexed as
NUMBER OF MEETINGS OF THE BOARD
The Board met six times during the year 2018-19 viz on 26 May 2018 06 June 2018 14August 2018 10 November 2018 27 December 2018 and 28 January 2019.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement under Section 134 of the Companies Act 2013 the Directorsconfirm that:
i. In the preparation of Annual Accounts the applicable Accounting Standards had beenfollowed along with proper explanation relating to material departures.
ii. they had selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of a3 airs of the Company at the end of the financial year and of the profitand loss of the Company for that period.
iii. they had taken proper and su3 cient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.
iv. they had prepared the annual accounts on a going concern basis.
v. they had laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and are operating e3 ectively; and
vi. they had devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating e3 ectively.
STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS UNDER SUB-SECTION (6) OFSECTION 149
As required under Section 149(7) of the Companies Act 2013 the Independent Directorshave submitted the declaration a3 rming that they meet the criteria of independence asprovided in Section 149(6) of the Act and Regulation 25 of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.
POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION AND OTHER DETAILS
The Companys policy on directors appointment and remuneration and othermatters provided in Section 178(3) of the Act has been disclosed in the CorporateGovernance Report forming part of this Report and is also available onhttps://www.zentechnologies.com/ investors.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Particulars of loans given guarantees provided and investments made by the Companyduring the year 2018-19 as required under the provisions of Section 186 of the CompaniesAct 2013 read with Companies (Meetings of Board and its Powers) Rules 2014 aredisclosed in the notes to Financial Statements which may be read as a part of this Report.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
Particulars of contracts or arrangements with related parties referred to in Section188(1) of the Companies Act 2013 in the prescribed Form AOC-2 is appended as AnnexureIII to this Report.
All Related Party Transactions were placed before the Audit Committee and the Board forapproval. The Board of Directors has framed a policy on Related Party Transactions toensure a process for approval and reporting of transactions between the Company and itsrelated parties. The policy is posted under the Investors section of the Companyswebsite at: http://www.zentechnologies.com/investor_relations/Related-Party-Transaction-Policy.pdf.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars as prescribed under Section 134(3)(m) of the Companies Act 2013 readwith the Companies (Accounts) Rules 2014 with respect to Conservation of EnergyTechnology Absorption and Foreign Exchange Earnings and Outgo are provided in Annexure IVto this Report.
DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY
The Board has formulated a Risk Management Policy which includes identification thereinof various elements of risk including those that may threaten the existence of theCompany and the measures adopted to contain and mitigate such risks.
A Risk management process has been established across the organization and is designedto identify assess and frame a response to threats that a3 ect the achievement of itsobjectives.
The Board has constituted a Risk Management Committee which meets regularly to monitorand review the Risk Management Policy.
The Audit Committee and Board reviews and evaluates the internal financial controls andrisk management systems of the Company.
Mitigation plans are finalized owners are identified and the progress of mitigationactions are monitored and reviewed.
The Risk Management Policy is also posted under the Investors section of theCompanys website at: http://www.zentechnologies.com/investor_relations/Zen-Risk-Management-Policy.pdf.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Corporate Social Responsibility Committee (CSR Committee) constituted by the Boardhas formulated a Corporate Social Responsibility Policy (CSR Policy) indicating theactivities to be undertaken by the Company.
The Corporate Social Responsibility Policy is posted under the Investors section of theCompanys website at: http://www.zentechnologies.com/investor_relations/CSR-Policy.pdf.
However your Company was not required to expend any amount towards CSR during the yearunder review as it did not fall under the purview of the provisions of Section 135(1) ofthe Act during the said year.
ANNUAL EVALUATION OF PERFOMANCE OF BOARD COMMITTEES AND INDIVIDUAL DIRECTORS
The Board of Directors evaluated the annual performance of the Board as a whole itsCommittees and the directors individually in accordance with the provisions of theCompanies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 with specific focus on the performance and e3 ective functioning of theBoard and individual directors.
A separate meeting of Independent Directors was held on 28 January 2019 to review theperformance of the Non-Independent Directors and the Board as a whole review theperformance of Chairperson of the Company and assess the quality quantity and timelinessof flow of information between the management and the Board that is necessary for theBoard to e3 ectively and reasonably perform its duties.
CRITERIA FOR PERFORMANCE EVALUATION
a. Ability of the candidate to devote su3 cient time and attention to his professionalobligations as Independent Director for informed and balanced decision making.
b. Adherence to the Code of Conduct in letter and in spirit by the IndependentDirectors.
c. Bringing objectivity and independence of view to the Boards discussions inrelation to the Companys strategy performance and risk management.
d. Statutory compliance and ensuring high standards of financial probity and CorporateGovernance.
e. Responsibility towards requirements under the Companies Act 2013 responsibilitiesof the Board and accountability under the Directors Responsibility Statement.
FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS
All Independent Directors inducted into the Board attended an orientation programme.The details of training and familiarizationprogramareavailableonthewebsiteathttps://www.zentechnologies. com/investors.
The Board of Directors consists of six directors four of whom are independentdirectors and the remaining two executive directors. In accordance with the provisions ofCompanies Act 2013 and the Articles of Association of the Company Mr. Ashok Atluri whois the Chairman and Managing Director retires by rotation at the ensuing Annual GeneralMeeting and being eligible o3 ers himself for reappointment. The aforesaidappointment/reappointment as Chairman and Managing Director is subject to theshareholders approval. Dr Ravindra Kumar Tyagi has been co-opted as an AdditionalDirector w.e.f. 01 April 2019 to act as an Independent Director subject to the approvalof shareholders by way of a resolution at the ensuing Annual General Meeting.
As the tenure of Mr. M Ravi Kumar as the Whole-time Director ended on 28 June 2019 theBoard reappointed him w.e.f. 29 June 2019 which is subject to the approval of theshareholders at the ensuing Annual General Meeting.
DIRECTORS OR KEY MANAGERIAL PERSONNEL (KMP) WHO WERE APPOINTED OR HAVE RESIGNED ORCEASED DURING THE YEAR
Mr. Venkata Samir Kumar Oruganti Independent Director was reappointed for a secondterm of 3 years w.e.f. 14 August 2018. Mr. N. Ramesh Kumar ceased and Mr M. Ravi Kiranwas appointed as Chief Financial O3 cer of the Company w.e.f. 01 February 2019. Dr.Ravindra Kimar Tyagi was co-opted as an Additional Director to act as Independent Directorw.e.f. 01 April 2019.
Mr. M. Ravi Kumar was re-appointed as the Whole-time Director w.e.f. 29 June 2019 for aperiod of 3 years which is subject to approval of the shareholders in the ensuing AnnualGeneral Meeting.
In accordance with the provisions of Section 152 of the Companies Act 2013 Mr. AshokAtluri Managing Director retires by rotation and being eligible o3 ers himself forre-appointment.
Mr. M. Satish Choudhury resigned as Company Secretary w.e.f. 09 July 2019.
Mr. Hansraj Singh Rajput was appointed as Company Secretary w.e.f. 03 August 2019.
In compliance with Regulation 36(3) of the Listing Regulations brief resume of all thedirectors proposed to be appointed / re-appointed are attached along with the Notice ofthe ensuing Annual General Meeting.
Apart from the above there have been no changes in Directors and KMP.
NAMES OF COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES JOINT VENTURESOR ASSOCIATE COMPANIES DURING THE YEAR:
Zen Technologies USA INC became a subsidiary of the Company during the year.
DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THEFINANCIAL STATEMENTS
Your Company has established and maintained a framework of internal financial controlsand compliance systems. Based on the framework of internal financial controls andcompliance systems established and maintained by the Company the work performed by theinternal statutory and secretarial auditors and external consultants including the auditof internal financial controls over financial reporting by the statutory auditors and thereviews performed by management and the relevant board committees including the auditcommittee the Board is of the opinion that the Companys internal financial controlswere adequate and your Company is constantly endeavoring to improve the standards ofinternal control in various areas and taking steps to strengthen the internal controlsystem to make it commensurate and e3 ective with the nature of its business.
Further the statutory auditors of your Company have also issued an attestation reporton internal control over financial reporting (as defined in section 143 of Companies Act2013) for the financial year ended 31 March 2019 which forms part to the StatutoryAuditors Report.
The Board of Directors on the recommendation of the Audit Committee established avigil mechanism for directors and employees called "Whistle Blower Policy"pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirement) Regulations 2015 to report genuine concerns or grievances aboutunethical behavior actual or suspected fraud or violation of the Companys Code ofConduct or Ethics Policy and to provide adequate safeguards against victimization ofpersons who use such mechanism and to provide direct access to the Chairperson of theAudit Committee in appropriate or exceptional cases.
The Whistle Blower Policy is posted under the Investors section of the Companyswebsite at: http://www.zentechnologies.com/investor_relations/Whistle-Blower-Policy-2014.pdf.
SEXUAL HARASSMENT POLICY
The Company has adopted a policy on Prevention of Sexual Harassment of Women atWorkplace in accordance with The Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.
The Company has taken several initiatives across the organization to build awarenessamongst employees about the Policy and the provisions of the Prevention of SexualHarassment of Women at Workplace Act.
During the financial year ended 31 March 2019 the Company has not received anycomplaints pertaining to Sexual Harassment. The Company has complied with provisionsrelating to the constitution of Internal Complaints Committee under the Sexual Harassmentof Women at Workplace (Prevention Prohibition and Redressal) Act 2013.
ZEN TECHNOLOGIES LIMITEDS CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING
The Board of Directors has adopted the Insider Trading Policy in accordance with therequirements of the SEBI (Prohibition of Insider Trading) Regulations 2015. The InsiderTrading Policy of the Company lays down guidelines and procedures to be followed anddisclosures to be made while in possession of Unpublished Price Sensitive Information andwhile dealing in the shares of the Company as well as the consequences of violations. ThePolicy has been formulated to regulate monitor and ensure reporting of trading byinsiders by employees and to maintain the highest ethical standards while dealing in thecompanys securities.
The Insider Trading Policy of the Company covering the Code of Practices andProcedures for Fair Disclosure of Unpublished Price Sensitive Information and Code ofConduct for prevention of insider trading is available on our website(htttp://www.zentechnologies. com).
MANAGEMENT DISCUSSION & ANALYSIS REPORT
A Report on Management Discussion & Analysis forms part of the Annual Report as perthe requirements of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirement)Regulations 2015.
INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the applicable provisions of the Companies Act 2013 read with InvestorEducation and Protection Fund Authority (Accounting Audit Transfer and Refund) Rules2016 (the Rules) all unpaid or unclaimed dividend are required to betransferred by the Company to the IEPF established by the Central Government after thecompletion of seven years. Further according to the Rules the shares in respect of whichdividend has not been paid or claimed by the shareholders for seven consecutive years ormore shall also be transferred to the demat account created by the IEPF Authority.Accordingly the Company has transferred the unclaimed and unpaid dividend of Rs. 99090/-pertaining to the FY 2010-11. Further 11360 corresponding shares were also transferredas per the requirement of IEPF Rules. The details are also available on the Companyswebsite i.e. www. zentechnologies.com.
a) STATUTORY AUDITORS:
M/s Sekhar & Co Chartered Accountants (Registration number 003695S)Secunderabad were appointed as Statutory Auditors to hold o3 ce from the conclusion ofthe 24thAnnual General Meeting and till the conclusion of 29th Annual General Meeting.However M/s Sekhar & Co resigned as Statutory Auditors of the Company w.e.f. 28 June2019 owning to their internal reasons which includes one of their partners dissociatingand other partners being busy with income tax assignments and their inability to devolvetime for the quarterly audits of the Company.
The Board of Directors noted the resignation of M/s Sekhar & Co. as the StatutoryAuditors in the Board meeting held on 28 June 2019 and upon recommendation of the AuditCommittee recommended the appointment of M/s. Ramasamy Koteswara Rao and Co LLP.Chartered Accountants as the Statutory Auditors of the Company to fill the casual vacancyand for a period of 5 years. The said recommendation is forming part of the Notice to the26th Annual General Meeting for approval of members of the Company.
Ramasamy Koteswara Rao and Co LLP is a Chartered Accountants firm established in 2003with Registration No. 010396S/S200084. Ramasamy Koteswara Rao and Co LLP was co-founded byMr. Ramasamy Radhakrishnan and Mr. C.V. Koteswara Rao. The founders have been associatedin the field for Chartered Accountancy for over 30 years. Besides Taxation and StatutoryAudit the firms practice has grown steadily in the areas of Internal AuditConcurrent Audit/ Stock Audit Management Audit FEMA and Taxation of Non-residents. Thefirm has a strong team of 10 partners and 40+ professional sta3 (qualified andsemi-qualified Chartered Accountants).
The Audit Committee considered various parameters like capability to serve the businesslandscape of the Company audit experience in the Companys operating segmentsmarket standing of the firm clientele served technical knowledge etc. and foundRamasamy Koteswara Rao and Co LLP to be best suited to handle the scale diversity andcomplexity associated with the audit of the financial statements of the Company.
The financial statements of the year ended 31 March 2019 were audited by M/s Sekhar& Co Chartered Accountants. The standalone and consolidated financial statements ofthe Company have been prepared in accordance with the Indian Accounting Standardsprescribed under Section 133 of the Act read with the relevant rules issued thereunder(Ind AS) and other accounting principles generally accepted in India.
The Auditors Report on the financial statements of the Company does not containany reservation qualification or adverse remark and the Notes on the financial statementsreferred to therein are self-explanatory thereby not requiring any further comments onthe same.
M/s. P S Rao & Associates Practicing Company Secretaries were appointed to conductthe secretarial audit for the financial year 2018-19. Pursuant to Section 204 of theCompanies Act 2013 and Rules made thereunder the Secretarial Audit Report for thefinancial year ended 31 March 2019 in Form MR-3 is annexed to this Annual Report asAnnexure V. The Board has appointed M/s P S Rao & Associates Practicing CompanySecretaries as the Secretarial Auditors of the Company for the financial year 2019-20.
Audit Committee has been reconstituted w.e.f. 18 May 2019 pursuant to inducting Dr. RKTyagi as a member of the Committee. The details of the composition of the Audit Committeeas required under the provisions of Section 177(8) of the Companies Act 2013 is given inthe Corporate Governance Report furnished as part of the Annual Report. During the yearunder review the Board has accepted all the recommendations of the Audit Committee.
NOMINATION AND REMUNERATION COMMITTEE
The details of the composition of the Committee are given in the Corporate GovernanceReport furnished as a part of the Annual Report.
STAKEHOLDERS RELATIONSHIP COMMITTEE
The detail of the composition of the Committee is given in the Corporate GovernanceReport furnished as part of the Annual Report.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
The remuneration paid to your directors is in accordance with the Nomination andRemuneration Policy formulated in accordance with Section 178 of the Companies Act 2013and Regulation 19 of the Listing Regulations.
The information required under Section 197 of the Companies Act 2013 read withCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 (includingany statutory modification(s) or re-enactment(s) thereof for the time being in force) inrespect of directors/employees of the Company is appended as Annexure VI to this Report.
Your Company is committed to maintain high standards of corporate governance and adhereto the corporate governance requirements set out by Securities and Exchange Board ofIndia. The Report on Corporate Governance as stipulated under the Listing Regulationsforms part of the Annual Report. The requisite certificate from the Practicing CompanySecretary confirming compliance with the conditions of corporate governance as stipulatedunder the aforesaid Regulations forms part of this Report.
Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the financial yearunder review:
1. Issue of equity shares with di3 erential rights as to dividend voting or otherwise.
2. Issue of shares (including sweat equity shares) to employees of your Company underany scheme.
3. The company did not transfer any amount to the reserves.
4. Your Company has not accepted any fixed deposits and as such no amount ofprincipal or interest was outstanding on the date of the Balance Sheet.
5. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Companys operations in future.
6. The maintenance of cost records is not applicable to the Company.
7. There is no change in the nature of the business of the Company.
8. During the period under review none of the Auditors of the Company have reportedany fraud as specified under the second proviso of Section 143 (12) of the Companies Act2013 (including any statutory modification(s) or re-enactment(s) thereof for the timebeing in force).
9. The Company has complied with Secretarial Standards i.e. SS-1 SS-2 and SS-3relating to Meetings of the Board of Directors General Meetings and Dividendrespectively issued by the Institute of Company Secretaries of India.
10. There were no material changes/commitments a3 ecting the financial position of yourCompany between the end of the financial year (31 March 2019) and the date of this Report(August 03 2019).
Your directors thank various departments of Central and State Government Organizationsand Agencies for the continued help and co-operation extended by them to your Company.Your directors also gratefully acknowledge all stakeholders of the Company viz. memberscustomers dealers vendors financial institutions banks and other business partners forthe excellent support received from them during the year. Your directors place on recordtheir sincere appreciation to all employees of the Company for their unstinted commitmentand continued contribution to the Company.
| ||For and on behalf of the Board |
| ||Ashok Atluri |
|Place: Hyderabad ||Chairman and Managing Director |
|Date: 03 August 2019 ||DIN: 00056050 |