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R Systems International
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Download Annual Report PDF Format 2011 | 2010
Directors Report Year End : Dec '12    Dec 11
Dear Shareholders,
 
 The directors take great pleasure in presenting the Nineteenth Annual
 Report on the business and operations of R Systems International
 Limited (R Systems or the Company) together with the audited
 statements of accounts for the year ended December 31, 2012.
 
 1.  FINANCIAL RESULTS
 
 a.  Standalone fnancial results of R Systems
  
                                                      (Rs. in lakhs)
 
 Particulars                                    Financial Year ended
                                               31.12.2012    31.12.2011
 
 Total income                                   23,314.88     19,768.03
 
 Proft before depreciation,                      3,696.62      1,671.59
 exceptional items and tax
 
 Less : Depreciation and                           624.01        881.24
 amortisation
 
 Proft before tax                                3,072.61        790.35
 
 Less : Current tax (net of MAT                    954.02        477.24
 credit)
 
 Less : Deferred tax                                65.82       (333.40)
 
 Proft after tax                                 2,052.77        646.51
 
 Surplus in the statement of proft and loss
 Balance as per last fnancial                    8,050.09      7,982.43
 statements
 
 Add: Proft for the current                      2,052.77        646.51
 year
 
 Less: Appropriations
 
 Proposed dividend                                 939.05        443.41
 
 Tax on proposed dividend                          152.34         70.79
 
 Final dividend*                                     3.50             -
 
 Tax on fnal dividend*                               0.57             -
 
 Interim dividend                                1,991.95             -
 
 Tax on interim dividend                           323.14             - 
 
 Transfer to general reserve                       595.29         64.65
 
 Total appropriations                            4,005.84        578.85
 
 Net surplus in the                              6,097.02      8,050.09
 statement of proft and loss
 
 *It relates to fnal dividend paid for the year 2011, on account of
 97,220 additional equity shares issued under ESOP after the approval of
 previous year accounts but before the book closure dates.
 
 b.  Consolidated fnancial results of R Systems and its subsidiaries
 
                                                        (Rs. in lakhs)
 
 Particulars                                    Financial Year ended
                                               31.12.2012    31.12.2011
 
 Total income                                   47,001.32     41,505.98
 
 Proft before depreciation,                      3,894.30      3,403.76
 exceptional items and tax
 
 Less : Depreciation and                         1,008.94      1,311.85
 amortisation
 
 Proft before tax                                2,885.36      2,091.91
 
 Less : Current tax (net of MAT                    949.86        857.44
 credit)
 
 Less : Deferred tax                                99.30       (416.78)
 
 Proft after tax                                 1,836.20      1,651.25
 
 Surplus in the statement of proft and loss
 Balance as per last fnancial                    7,991.05      6,918.65
 statements
 
 Add: Proft for the current                      1,836.20      1,651.25
 year
 
 Less: Appropriations
 
 Proposed dividend                                 939.05        443.41
 
 Tax on proposed dividend                          152.34         70.79
 
 Final dividend*                                     3.50             -
 
 Tax on fnal dividend*                               0.57             - 
 
 Interim dividend                                1,991.95             -
 
 Tax on interim dividend                           323.14             -
 
 Transfer to general reserve                       595.29         64.65
 
 Total appropriations                            4,005.84        578.85
 
 Net surplus in the                              5,821.41      7,991.05
 statement of proft and loss
 
 Previous Year fgures have been regrouped / recasted, wherever
 necessary.
 
 2.  RESULTS OF OPERATIONS Standalone Accounts
 
 - Total income during the year 2012 increased to Rs. 23,314.88 lakhs as
 against Rs. 19,768.03 lakhs during the year 2011, a growth of 17.94%.
 
 - Proft after tax was Rs. 2,052.77 lakhs during the year 2012 as
 compared to Rs. 646.51 lakhs during 2011, a growth of 217.51%.
 
 - Basic earnings per share was Rs. 16.50 for the year 2012 as compared
 to Rs. 5.25 for the year 2011, a growth of 214.35%.
 
 Consolidated Accounts
 
 - Consolidated total income during the year 2012 increased to Rs.
 47,001.32 lakhs as against Rs. 41,505.98 lakhs during the year 2011, a
 growth of 13.24%.
 
 - Proft after taxes was Rs. 1,836.20 lakhs during the year 2012 as
 compared to Rs. 1,651.25 lakhs during 2011, a growth of 11.20%.
 
 - Basic earnings per share were Rs. 14.76 for the year 2012 as compared
 to Rs. 13.41 for the year 2011, a growth of 10.12%.
 
 3.  APPROPRIATIONS AND RESERVES
 
 Dividend
 
 The Board of Directors on the occasion of Company having entered into
 20th year of its business since incorporation, at its meeting held on
 May 18, 2012 declared the special dividend in the form of interim
 dividend at the rate of Rs. 16/- (Rupees Sixteen only) per equity share
 of Rs. 10/- each.
 
 Taking into consideration the operating profts for the year 2012 and a
 positive outlook for the future, the Board of Directors (the Board)
 is pleased to recommend a fnal dividend of Rs. 7.50 per equity share,
 being 75% on the par value of Rs. 10 per share (previous year Rs. 3.60
 per share, being 36% on the par value of Rs. 10 per share), to be
 appropriated from the profts of the Company for the fnancial year 2012
 subject to the approval of the shareholders at the ensuing Annual
 General Meeting. The dividend, if approved, will be paid to all the
 equity shareholders whose names appear in the Register of Members of
 the Company as of the opening business hours on May 03, 2013 after
 giving efect to all valid share transfers in physical form which would
 be received by the Company''s registrar and share transfer agent M/s
 Link Intime India Private Limited up to the end of business hours on,
 May 02, 2013 and to those whose names appear as benefcial owners in the
 records of National Securities Depository Limited (NSDL) and Central
 Depository Services (India) Limited (CDSL) as of the said date.
 
 The register of members and share transfer books shall remain closed
 from May 03, 2013 to May 11, 2013, both days inclusive.
 
 Transfer to Reserves
 
 It is proposed to transfer a sum of Rs. 20,527,701/- (Rupees Two Crore
 Five Lakhs Twenty Seven Thousand Seven Hundred and One only) from the
 current year proft and Rs. 39,001,591/- (Rupees Three Crore Ninety Lakh
 One Thousand Five Hundred and Ninety One only) from the carried forward
 surplus in Statement of Proft and Loss to the General Reserve in
 compliance with the Companies (Transfer of Profts to Reserves) Rules,
 1975.
 
 4.  BUSINESS
 
 R Systems is a leading provider of outsourced product development
 services, business process outsource services and also ofers own
 product suite in BFSI, Manufacturing & Logistic verticals. R Systems
 diversifed ofering includes:
 
 IPLM Services Group
 
 Under IPLM Services, R Systems delivers solutions and services in the
 area of Information Technology and Information Technology enabled
 services. The IT services cover application development, systems
 integration and support and maintenance of applications. Under the ITES
 we cover managed services, BPO services covering both technical support
 for IT and Hi-Tech electronic gadgets, high-end Quality Process
 Management and Revenue and Claims Management using our global delivery
 model in 18 languages.
 
 Products Group
 
 R Systems products group consists of Indus solutions and ECnet Supply
 Chain products.
 
 Indus solutions oferings include an integrated enterprise
 multi-portfolio lending suite for banking and fnancial services, credit
 management and revenue collection for telecom companies, iPerSyst for
 insurance companies which helps in timely policy renewal and customer
 retention along with other IT services to banking and fnancial service
 clients.
 
 ECnet Supply Chain products provide solutions for holistic management
 of the complex interaction between an organisation and its trading
 partners. The integrated solution aims to reduce all supply chain costs
 through improved collaboration and optimisation.
 
 R Systems is focused on key business verticals - Telecommunication and
 Digital Media, BFSI, Hi-Tech Manufacturing and Logistics, Government
 and Health Care and invested in building capabilities and domain
 knowledge around these focused verticals. This has helped in providing
 innovative and cost efcient solutions or services under chosen
 verticals.
 
 Customers and Delivery Centres
 
 R Systems rapidly growing customer list includes a variety of Fortune
 1000, government and mid-sized organizations across a wide range of
 industry verticals including Banking and Finance, High Technology,
 Independent Software Vendors, Telecom and Digital Media, Government,
 HealthCare, Manufacturing and Logistic Industries. R Systems maintains
 thirteen development and service centres and using our global delivery
 model, we serve customers in the US, Europe, South America, the Far
 East, the Middle East and Africa.
 
 There were no changes in the nature of the Company''s business and
 generally in the classes of business in which the Company has an
 interest and in the business carried on by the subsidiaries during the
 year under review. For details of Company''s subsidiaries please refer
 note number 14 relating to subsidiaries.
 
 5.  QUALITY
 
 R Systems has continuously invested in processes, people, training,
 information systems, quality standards, frameworks, tools and
 methodologies to mitigate the risks associated with execution of
 projects. Adoption of quality models and practices such as the Software
 Engineering Institute''s - Capability Maturity Model Integrated
 (SEI-CMMi) and Six Sigma practices for processes have ensured that
 risks are identifed and mitigated at various levels in the planning and
 execution process. R Systems journey for various quality certifcations
 / standards for the development and service centres in India is
 provided below:
 
 In the year 2012, Noida centre of the Company is appraised at PCMM
 Level 5 (Ver 2.0).
 
 As of the date of this report, Noida IT centre is SEI-CMMi level 5,
 PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certifed; Noida BPO
 centre is PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certifed.
 Pune and Chennai development centres are SEI-CMM Level 5, ISO 9001 :
 2008 and ISO 27001 : 2005 certifed. The continuing compliance with
 these standards demonstrates the rigor of R Systems processes and
 diferentiates us to keep our competitive edge in service and product
 oferings.
 
 To maintain and strengthen competitive strengths, R Systems continues
 to make investments in its unique and proprietary with best practices,
 tools and methodologies for fawless execution and consistent delivery
 of high quality software. The pSuite framework ofers services along the
 entire software lifecycle that includes technology consulting,
 architecture, design and development, professional services, testing,
 maintenance, customer care and technical support.  R Systems expects
 that its technology focus, investment in processes, talent and
 methodologies will enable it to distinguish itself from competition as
 it seeks to provide services to technology / product companies.
 
 6.  ACQUISITION
 
 During the year under review, ECnet Limited, Singapore, a 99.56%
 subsidiary of the Company has entered into defnitive agreement with
 Nikko Computer Systems (s) Pte Ltd. (NCS) for acquisition of its ERP
 business. This acquisition has been completed by ECnet Limited,
 Singapore on March 13, 2013.
 
 NCS provides ERP implementation and support services primarily to
 Japanese companies located in Singapore and Malaysia. This business
 acquisition will strengthen our ERP business and customer base in South
 East Asia under our subsidiary ECnet Limited, Singapore. The
 acquisition will provide a good Japanese client base and help to grow
 our business in the South East Asia region.
 
 7.  DIRECTORS
 
 During the year under review, the following changes took place in the
 ofce of directors of the Company.
 
 Lt. Gen. Baldev Singh (Retd.) and Mr. Raj Swaminathan were reappointed
 as directors liable to retire by rotation and Lt. Gen. Baldev Singh
 (Retd.) was further re-appointed as President & Senior Executive
 Director of the Company for a period of three years w.e.f. April 01,
 2012 at the previous Annual General Meeting held on May 04, 2012.
 
 The Board of Directors at its meeting held on July 28, 2012 has
 appointed Mr. Anuj Kanish as an alternate Director to Mr. Gurbax Singh
 Bhasin. Further, at the meeting of Board of Directors held on September
 16, 2012 Mr. Raj Swaminathan has been re-appointed as Director & Chief
 Operating Ofcer of the Company for a period of three years i.e. w.e.f.
 September 29, 2012 to September 29, 2015 subject to the approval of the
 Central Government, if applicable and the shareholders at the ensuing
 Annual General Meeting of the Company.
 
 At the ensuing Annual General Meeting, Mr. Raj Kumar Gogia and Mr.
 Gurbax Singh Bhasin directors of the Company are liable to retire by
 rotation in accordance with the provisions of Section 255 and 256 of
 the Companies Act, 1956 read with the Articles of Association of the
 Company and being eligible, ofer themselves for reappointment as
 directors of the Company.
 
 None of the directors of the Company are disqualifed as per the
 provisions of Section 274(1)(g) of the Companies Act, 1956. The
 directors of R Systems have made necessary disclosures, as required
 under various provisions of the Act and Clause 49 of the Listing
 Agreement.
 
 8.  EMPLOYEES STOCK OPTION PLANS / SCHEMES
 
 The industry in which R Systems operates is people intensive and R
 Systems believes that human resources play a pivotal role in the
 sustainability and growth of the Company.  R Systems has always
 believed in rewarding its employees with competitive compensation
 packages for their dedication, hard work, loyalty and contribution
 towards better performance of the Company. To enable more and more
 employees to be a part of the fnancial success of the Company, retain
 them for future growth and attract new employees to pursue growth, R
 Systems has set up employees stock option plans / schemes from time to
 time for its employees and for the employees of its subsidiaries. As on
 the date of this report, the prevailing stock option plans of R Systems
 are as follows:
 
 (a) R Systems International Ltd. - Year 2004 Employee Stock Option Plan
 : For the employees of R Systems and its subsidiaries other than ECnet
 Limited.
 
 (b) R Systems International Ltd. - Year 2004 Employee Stock Option Plan
  Ecnet : For the employees of ECnet Limited, a subsidiary of R
 Systems.
 
 (c) Indus Software Employees Stock Option Plan - Year 2001 : Initially
 formulated for the employees of Indus Software Private Limited which
 got amalgamated with R Systems and the plan continues as per the scheme
 of amalgamation approved by the Hon''ble High Courts of Delhi and
 Mumbai. As on the date of this report, no stock options are in force
 under this plan.
 
 (d) R Systems International Limited Employee Stock Option Scheme 2007 :
 For the employees of R Systems and its subsidiaries.
 
 As required under the Securities and Exchange Board of India (Employee
 Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines,
 1999 as amended, details relating to options approved, granted, vested,
 exercised, lapsed, in force etc. under the prevailing employees stock
 option plans / schemes during the year ended December 31, 2012 are as
 follows:
 
 S.   Particulars                  R Systems         R Systems
 No.                               International     International Ltd.-
                                   Ltd. Year - 2004  Year 2004 Employee
                                   Employee Stock    Stock Option Plan -
                                   Option Plan       ECnet
                                         (a)                 (b)
 
 a.   Total number of                       199,500          200,000 
      shares covered under 
      the plan
 
 b.   Pricing Formula              Prevailing Price  Prevailing Price
                                                     once
                                   once the
                                   Company''s         the Company''s shares
                                   shares are 
                                   listed and        are listed and at 
                                                     the 
                                   at the Fair 
                                   Market            Fair Market Value 
                                   Value as per the  as per the terms of
                                   terms of R 
                                   Systems           R Systems 
                                                     International
                                   International 
                                   Ltd. -            Ltd. - Year 2004
                                   Year 2004 
                                   Employees         Employees Stock
                                   Stock Option 
                                   Plan on           Option Plan - 
                                                     ECnet on 
                                   the date such
                                   option            the date such 
                                                     option 
                                   is granted 
                                   when the          is granted when the
                                   Company''s 
                                   shares are        Company''s shares 
                                                     are 
                                   not listed.       not listed.
 
 c.   Options granted              Nil               Nil 
      during the year
 
 d.   Options vested               Nil               Nil
      during the year
 
 S.No Indus Software                    R Systems International Limited
      Employees Stock                   Employee Stock Option Scheme 
      Option Plan Year                  2007
      2001
           (c)                                     (d)
 
 a.            73,898                                     650,000
 
 b.   As approved under                Exercise Price means the market
      the Scheme of                    price which is payable for 
                                        exercising
      Amalgamation                     the options and Market Price 
                                        means
      of Indus Software                 the latest available closing 
                                        price,
      Private Limited with              prior to the date of the meeting
                                        of the
      the Company by                    Board of Directors / Compensation
      the Hon''ble High                  Committee, in which options are
      Courts of Delhi and               granted, on the stock exchange on
      Mumbai.                           which the shares of the Company
                                        are listed. If the shares are
                                        listed on more than one stock 
                                        exchange, then the stock
                                        exchange where there is highest 
                                        trading volume on the said
                                        date shall be considered.
 
 c.   Nil                               Nil
 
 b.   Nil                               Nil
 
 S.   Particulars                  R Systems         R Systems
 No.                               International     International Ltd.-
                                   Ltd. Year - 2004  Year 2004 Employee
                                   Employee Stock    Stock Option Plan -
                                   Option Plan       ECnet
                                         (a)                 (b)
 
 
 e.   Options exercised            Nil               Nil 
      during the year
 
 f.   The total number of          Nil               Nil 
      shares arising as a
      result of exercise of
      options during the year
 
 g.   Options lapsed               5,890             600
      during the year
 
 h.   Variation of terms of        Nil               Nil
      options during the year
 
 i.   Money realised by            Nil               Nil
      exercise of options
      during the year (Rs.)
 
 j.   Total number of              56,035            6,200
      options in force at the
      end of the year
 
 k.   Employee wise details of options granted to (during the year)
 
 (i)  Senior managerial            Nil               Nil
      personnel
 
 (ii) Any other employee           Nil               Nil
      who receives a grant in 
      any one year of options 
      amounting to 5% or more
      of options granted during
      that year
 
 (iii)Identifed employees          Nil               Nil
      who were granted options, 
      during any one year, 
      equal to or exceeding 1% 
      of the issued capital
     (excluding outstanding 
      warrants and conversions)
      of the Company at the
      time of grant
 
 l.   Diluted Earnings Per         N.A.              N.A.  
      Share (EPS) pursuant to
      issue of shares on 
      exercise of options
 
 S.No Indus Software                    R Systems International Limited
      Employees Stock                   Employee Stock Option Scheme 
      Option Plan Year                  2007
      2001
           (c)                                     (d)
 
 
 
 e.   Nil                               203,822
 
 f.   Nil                               203,822
 
 g.   Nil                                15,500
 
 h.   Nil                                   Nil
 
 i.   Nil                         24,601,315.40
 
 j.   Nil                               255,678
 
 k.  
 
 (i)  Nil                                   Nil
 
 (ii) Nil                                   Nil
 
 (iii)Nil                                   Nil
 
 l.   N.A.                                16.50
 
 Please note that the details given above for plan (a), (b) and (c) are
 after making the required adjustments in relation to consolidation of
 each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10
 each as approved by the shareholders in the year 2006.
 
 During the year ended December 31, 2012, R Systems had not granted any
 options under any of the aforementioned plans.
 
 All options granted under Indus Software Employees Stock Option Plan -
 Year 2001 have already been vested and exercised or lapsed and no
 options were in force as on December 31, 2012.
 
 For options granted during the earlier years under plan (a), (b) and
 (c), R Systems used the fair value of the stock options for calculating
 the employees compensation cost.
 
 For the purpose of valuation of the options granted during earlier
 years, the management obtained fair value of the options at the date of
 grant under respective schemes from a frm of Chartered Accountants, to
 determine accounting impact, if any, of options granted over the
 periods. In the considered opinion of the valuer, the fair value of
 option determined using ''Black Scholes Valuation Model'' under each of
 above schemes is Nil and thus no accounting thereof is required.
 
 The assumptions used for the purpose of determination of fair value are
 stated below:
 
 Assumptions   Unit        Scheme   Scheme   Scheme   Comments by the 
                           (a) *    (b) **  (c)***    valuer
 
 Strike price  Rs.           42        154      26
 
 Current share Rs.           16        140      16    Taken on the basis
                                                      of
 price                                                NAV and PECV method 
                                                      of valuation.
 
 Expected      No. of         5        2.5       5    Being half of the
 option life   Years                                  maximum option life.
 
 Volatility    %              1        0.5       1    In case of unlisted
                                                      shares, the
                                                      volatility may be 
                                                      taken as zero. 
                                                      Verma committee
                                                      also recommends 
                                                      this.
 
 Risk free     %              7       11.3       7    Zero coupon rate
 return                                               estimated from 
                                                      trading government
                                                      securities for a 
                                                      maturity 
                                                      corresponding to 
                                                      expected life of
                                                      option - taken
                                                      from sites of NSE
                                                      and / or BSE.
 
 Expected      %              -         15       -    Company has no set
 dividend                                             policy so dividend
                                                      taken
 Yield                                                as zero.
 
                                                      In case of Indus
                                                      plan, as the
                                                      dividend had been
                                                      paid by the
                                                      erstwhile company,
                                                      it has been
                                                      assumed at 15%.
 
 * R Systems International Ltd. - Year 2004 Employee Stock Option Plan
 under which the price was based on Rs. 2 per share.
 
 ** Indus Software Employees Stock Option Plan - Year 2001 under which
 originally the price was based on Rs. 10 per share for 21,967 shares.
 As a result of amalgamation of Indus Software Private Limited into R
 Systems, R Systems had issued 206,822 equity shares of Rs. 2 each
 pursuant to the swap ratio approved by Hon''ble High Courts of Delhi and
 Mumbai.
 
 *** R Systems International Ltd. - Year 2004 Employee Stock Option Plan
 - ECnet under which the price was based on Rs. 2 per share.
 
 The above information is based on Rs. 2 per share prior to
 consolidation of 5 equity shares of Rs. 2 each into one equity share of
 Rs. 10 and subsequent allotment of bonus shares in the ratio of 1 : 1.
 
 Further, for the purpose of valuation of the options granted during the
 year 2005 under R Systems International Ltd. - Year 2004 Employee Stock
 Option Plan, the management obtained fair value of the options at the
 date of grant from a frm of Chartered Accountants, to determine
 accounting impact, if any, of options granted. In the considered
 opinion of the valuer, the fair value of these options determined using
 ''Black Scholes Valuation Model'' is Nil and thus no accounting thereof
 is required.
 
 The assumptions used by the valuer for the purpose of determination of
 fair value are stated below:
 
 Assumptions     Unit       Scheme       Comments by the valuer
 
 Stfrike price   Rs.           42
 
 Current share   Rs.        13.58        Taken on the basis of NAV and
 price                                   PECV method of valuation.
 
 Expected option No. of         5        Being half of the maximum
 life            Years                   option life.
 
 Volatility      %              1        In case of unlisted shares, the
                                         volatility may be taken as zero.
                                         Verma committee also recommends
                                         this.
 
 Risk free 
 return          %           7.42        Zero coupon rate estimated
                                         from trading government 
                                         securities for a maturity 
                                         corresponding to expected life
                                         of option - taken from sites of
                                         NSE.
 
 Expected        %              -        Company has no set policy so
 dividend Yield                          dividend taken as zero.
 
 The above information is based on Rs. 2 per share prior to
 consolidation of 5 equity shares of Rs. 2 each into one equity share of
 Rs. 10 and subsequent allotment of bonus shares in the ratio of 1 : 1.
 
 For the purpose of valuation of the options granted during the year
 ended December 31, 2007 under R Systems International Limited Employee
 Stock Option Scheme 2007, the compensation cost relating to Employee
 Stock Options, calculated as per the intrinsic value method is nil.
 
 The management obtained fair value of the options at the date of grant
 from a frm of Chartered Accountants. In the considered opinion of the
 valuer, the fair value of these options determined using ''Black Scholes
 Valuation Model'' is Rs. 50.73 per option.
 
 The assumptions used by the valuer for the purpose of determination of
 fair value are stated below:
 
 Assumptions     Unit       Scheme       Comments by the valuer
 
 
 Strike price    Rs.        120.701
 
 Current share   Rs.         118.50      Price on the date of grant by
 price                                   Board of Directors i.e. closing
                                         price on July 11, 2007.
 
 Expected        No. of           4      Being the vesting period.
 option life     Years
 
 Volatility      %               44      On the basis of industry 
                                         average.
 
 Risk free       %                7      Zero coupon rate estimated from
 return                                  trading government securities
                                         for a maturity corresponding to
                                         expected life of option - taken
                                         from site of NSE.
 
 Expected        %             0.86      Company has declared Dividends
 dividend Yield                          of 12% in the past. Assuming 
                                         that it will continue declaring
                                         similar dividends in future.
 
 The stock based compensation cost calculated as per the intrinsic value
 method for the fnancial year 2011 and 2012 was nil. If the stock based
 compensation cost was calculated as per fair value method prescribed by
 SEBI, the total cost to be recognised in the fnancial statements for
 the year 2012 would be Rs. (-)786,296/- (Previous year Rs.
 (-)585,874/-). The efect of adopting the fair value method on the net
 income and earnings per share is presented below:
 
 Pro Forma adjusted Net Income and Earnings Per Share
 
                                                         (Amont in Rs.)
 
 Particulars                                 Year ended     Year ended
                                             December 31,   December 31,
                                             2012           2011
 
 Net Income as reported                      205,277,009     64,651,348
 
 Add : Intrinsic Value Compensation Cost               -              -
 
 Less : Fair Value                              (786,296)      (585,874)
 Compensation Cost*
 
 Adjusted Pro-forma Net                      206,063,305     65,237,222
 Income
 
 Earnings Per Share Basic
 
 - As reported                                     16.50           5.25
 
 - Proforma                                        16.57           5.30 
 
 Diluted
 
 - As reported                                     16.50           5.19
 
 - Proforma                                        16.57           5.24
 
 *Figures in brackets represent income due to options lapsed during the
 year.
 
 Weighted average exercise price of options granted during the year
 
 S.  Particulars                    Scheme    Scheme    Scheme   Scheme
 No.                                 (a)       (b)       (c)       (d)
 
 1.  Exercise price equals           N.A.      N.A.      N.A.      N.A. 
     market price
 
 2.  Exercise price is               N.A.      N.A.      N.A.      N.A. 
     greater than market price
 
 3.  Exercise price is less          N.A.      N.A.      N.A.      N.A.
     than market price
 
 Weighted average fair value of the options granted during the year
 
 S.  Particulars                    Scheme    Scheme    Scheme   Scheme
 No.                                 (a)       (b)       (c)       (d)
 
 
 1.  Exercise price equals           N.A.       N.A.      N.A.     N.A. 
     market price
 
 2.  Exercise price is               N.A.       N.A.      N.A.     N.A.
     greater than market price
 
 3.  Exercise price is less          N.A.       N.A.      N.A.     N.A. 
     than market price
 
 Scheme (a): R Systems International Ltd. - Year 2004 Employee Stock
 Option Plan.
 
 Scheme (b): Indus Software Employees Stock Option Plan -Year 2001.
 
 Scheme (c): R Systems International Ltd. - Year 2004 Employee Stock
 Option Plan -ECnet.
 
 Scheme (d): R Systems International Limited Employee Stock Option
 Scheme 2007.
 
 As no options are granted during the year under Scheme (a), Scheme (b),
 Scheme (c) and Scheme (d), hence the required information is not
 applicable.
 
 9.  LIQUIDITY AND BORROWINGS - CONSOLIDATED FINANCIAL STATEMENT
 
 Cash and bank balance, including bank deposits as of December 31, 2012
 was Rs. 8,893.91 lakhs against Rs.  9,495.54 lakhs as of December 31,
 2011. Decrease was mainly on account of payment of special dividend in
 the form of interim dividend along with the frst earn out payment to
 the ex-shareholder of subsidiary as ofset by cash generated from
 operations during the year. The cash and bank balance per share as of
 December 31, 2012 was Rs. 71.46 against Rs. 77.56 as of December 31,
 2011.
 
 The consolidated cash and cash equivalent as at December 31, 2012 were
 Rs. 5,241.42 lakhs as against Rs. 5,719.82 lakhs as on December 31,
 2011. Net cash generated from operating activities was Rs. 3,451.84
 lakhs for the year ended December 31, 2012 compared to Rs. 3,391.84
 lakhs for the year ended December 31, 2011.
 
 Cash fow generated from operating activities is the signifcant source
 of funding for investing and fnancing activities.
 
 During the year, R Systems paid Rs. 1,121.47 lakhs deferred
 compensation to the ex-shareholder of a subsidiary, Rs. 858.73 lakhs
 for the purchase of fxed assets. The interest received during the year
 2012 was Rs. 445.91 lakhs against Rs. 552.05 lakhs during the year
 2011.
 
 Cash used in fnancing activities during the year 2012 was Rs. 2,603.18
 lakhs mainly due to payment of dividend of Rs. 2,432.90 lakhs
 (including special dividend in the form of interim dividend) and Rs.
 395.64 lakhs for dividend distribution tax as ofset by proceeds from
 issuance of share capital pursuant to exercise of employee stock
 options amounting to Rs. 246.01 lakhs.
 
 R Systems'' policy is to maintain sufcient liquidity to fund the
 anticipated capital expenditures, operational expenses and investments
 for strategic initiatives.
 
 R Systems has a credit facility from the Axis Bank amounting to Rs.
 1,850 lakhs (including non-fund based credit limit of Rs. 1,050 lakhs).
 As at December 31, 2012, the total credit balance was nil under the
 said line of credit. The total liability of R Systems for motor
 vehicles purchased against the loan was Rs. 56.32 lakhs as at December
 31, 2012. R Systems primary bankers in India are Axis Bank, State Bank
 of India, ICICI Bank Limited and HDFC Bank Limited. In U.S.A., U.K.,
 Singapore, Netherland and Japan, the primary bankers are California
 Bank & Trust, Natwest Bank, Citibank N.A., ABN Amro Bank N.V. and
 Sumitomo Mitsui Banking Corporation respectively.
 
 10.  CHANGES IN THE CAPITAL STRUCTURE
 
 As of December 31, 2012, the authorised share capital of the Company
 was Rs. 200,000,000 divided into 20,000,000 equity shares of Rs. 10
 each and the issued, subscribed and paid up share capital was Rs.
 125,207,080/- divided into 12,520,708 equity shares of Rs. 10 each.
 During the year under review, the Company has allotted 203,822 equity
 shares of Rs. 10/- each pursuant to exercise of Stock Options under R
 Systems International Limited Employee Stock Options Scheme 2007, at an
 exercise price of Rs. 120.70 per share.
 
 Further subsequent to the year end, the Company has allotted 50,100
 equity shares of Rs. 10/- each on February 22, 2013 at a price of Rs.
 120.70 per equity share pursuant to exercise of options by employees of
 the Company in terms of R Systems
 
 International Limited Employee Stock Option Scheme 2007.  With the said
 allotment, the paid-up capital of the Company stands increased to Rs.
 125,708,080/- divided into 12,570,808 fully paid up equity shares of
 Rs. 10/- each.
 
 11.  CORPORATE RESTRUCTURING
 
 Pursuant to the scheme of corporate restructuring of its two
 subsidiaries based in Singapore for their revival and growth namely,
 ECnet Limited and R Systems (Singapore) Pte Limited as was approved by
 the Board of your company, loan given by the Company to ECnet Limited
 has been converted into equity investment during the previous year i.e.
 2011. Further implementation of the said corporate restructuring is
 under process.
 
 Following the corporate restructuring strategy for growth, earlier the
 Board has also approved liquidation of R Systems NV, Belgium (wholly
 owned subsidiary) and closure of Branch Ofce of the Company in London,
 United Kingdom, subject to required statutory and corporate approvals
 in India and the respective countries and the same is under process.
 
 12.  MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY
 
 Further to the year-end 2012, the Company has allotted 50,100 equity
 shares of Rs. 10/- each at a price of Rs. 120.70 per share pursuant to
 the exercise of stock option by employees under R Systems
 International Limited Employee Stock option Scheme 2007. With this
 allotment, the paid-up equity capital of the Company has increased to
 Rs. 125,708,080/- divided into 12,570,808 fully paid up equity shares
 of Rs. 10/- each.
 
 Except as detailed above, there were no other signifcant events
 subsequent to the balance sheet date till the date of this report which
 would materially afect the fnancial position of the Company.
 
 13.  PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND
 FOREIGN EXCHANGE EARNINGS AND OUTGO
 
 The particulars as prescribed under Section 217 (1) (e) of the
 Companies Act, 1956, read with the Companies (Disclosure of Particulars
 in the Report of Board of Directors) Rules, 1988 for the year ended
 December 31, 2012 are as follows:
 
 A.  Conservation of Energy
 
 During the year ended December 31, 2012 R Systems continued its'' action
 plans to curtail the energy bills by adopting various energy
 conservation options / technologies as identifed by Federation of
 Indian Chambers of Commerce & Industry (FICCI) through a detailed
 Energy Audit carried out by FICCI for R Systems Noida operations in the
 year 2007. Signifcant measures were taken to reduce energy consumption
 by using energy efcient equipment and devices. R Systems constantly
 evaluates new technologies and makes appropriate investments to be
 energy efcient.  Currently, the Company uses CFL fttings and electronic
 ballasts to reduce power consumption of fuorescent tubes.  The air is
 conditioned with energy efcient compressors for central air
 conditioning and with split air conditioning for localized areas. R
 Systems is always in search of innovative and efcient energy
 conservation technologies and applies them prudently. However, R
 Systems being in the software industry, its operations are not energy
 intensive and energy costs constitute a very small portion of the total
 cost, therefore, the fnancial impact of these measures is not material.
 
 Form A of the said Rules is not applicable to the software industry.
 
 B.  Technology Absorption
 
 The particulars with respect to technology absorption are given below:
 
 (a) Research and Development (R & D)
 
 1.  Specifc areas in which R & D carried out by the Company
 
 R Systems continues to invest in developing new versions of its
 proprietary products to operate in diferent environments and in
 developing new tools in CRM, RMA and other processes to serve the
 customers. In addition, R Systems carries out research, makes
 investment in developing new prototypes in varied areas like digital
 media, mobility, WiMax etc. to demonstrate to its clients.
 
 2.  Benefts derived as a result of the above R & D
 
 Research and development has helped R Systems in fulflling clients''
 needs, winning new engagements from existing clients, winning new
 customers, growing revenues and enhancing the quality of services. We
 have been beneftted in product improvement, cost reduction, better
 product development, import substitution etc.  which has resulted in
 high product quality and increased business potential.
 
 3.  Future plan of action
 
 The Company continues to focus its eforts on innovations in software
 development processes, methodologies and tools.
 
 4.  Expenditure on R & D
 
 The Company''s R & D activities are part of its normal software
 development process. There is no separate R & D department and hence
 there is no specifc capital or recurring R & D expenditure. It is not
 practical to identify R & D expenditure out of the total expenditure
 incurred by the Company.
 
 (b) Technology absorption, adaptation and innovation
 
 1.  Eforts made towards technology absorption, adaptation and
 innovation
 
 The Company has established practice streams in specifc technologies to
 analyze their implications and the benefts they can provide to the
 Company''s customers. These steps enable the Company to fnd and execute
 the most appropriate solutions for its clients.
 
 2.  Benefts derived as a result of the above eforts
 
 The benefts derived from the above mentioned eforts are fulflling
 customer needs, efciency in operations, improvement in quality and
 growth in revenues.
 
 3.  Technology imported during the last 5 years
 
 Not applicable, as no technology has been imported by the Company.
 
 C.  Foreign Exchange Earnings and Outgo (Accrual Basis)
 
 A signifcant percentage of R Systems revenues are generated from
 exports. The development and service centres in Noida, Pune and Chennai
 are registered with the Software Technology Park of India in their
 respective areas as 100% Export Oriented Undertakings. All eforts of
 the Company are geared to increase the business of software exports in
 diferent products and markets. We have made investments in sales and
 marketing activities in various growing markets.
 
 The total foreign exchange used and earned by R Systems during the year
 as compared with the previous year is as follows:
 
                                                     (Rs. in lakhs)
 
 Particulars                                 Financial Year ended
 
                                          31.12.2012    31.12.2011
 
 (a) Earnings (Accrual                     20,822.06     17,626.93
 Basis)
 
 (b) Expenditure (Accrual                   3,776.85      3,637.97
 Basis)
 
 (c) CIF value of imports                      91.16        158.19
 
 14.  SUBSIDIARIES
 
 During the year under review, the Company has set up a wholly owned
 subsidiary in Canada i.e. Systmes R. International Lte, Canada.
 
 As on December 31, 2012, R Systems has twenty two subsidiaries. The
 names and country of incorporation of those subsidiaries are as
 follows:
 
 S.   Name of the Subsidiaries                        Country of
 No.                                                  Incorporation
 
 1.   R Systems (Singapore) Pte Limited               Singapore
 
 2.   R Systems, Inc.                                 U.S.A.
 
 3.   Indus Software, Inc.                            U.S.A.
 
 4.   ECnet Limited                                   Singapore
 
 5.   R Systems Solutions, Inc.                       U.S.A.
 
 6.   R Systems NV                                    Belgium
 
 7.   R Systems Europe B.V.                           The Netherlands
 
 8.   R Systems S.A.S.                                France
 
 9.   Computaris International Limited                U.K.
 
 10.  Systmes R. International Ltee                  Canada
 
 11.  ECnet (M) Sdn. Bhd. #                           Malaysia
 
 12.  ECnet, Inc. #                                   U.S.A.
 
 13.  ECnet (Hong Kong) Limited #                     Hong Kong
 
 14.  ECnet Systems (Thailand) Company Limited#       Thailand
 
 15.  ECnet Kabushiki Kaisha #                        Japan
 
 16.  ECnet (Shanghai) Co. Ltd. #                     People''s Republic
                                                      of China
 
 17.  ICS Computaris International Srl @              Moldova
 
 18.  Computaris Malaysia Sdn.Bhd. @                  Malaysia
 
 19.  Computaris Polska sp z o.o. @                   Poland
 
 20.  Computaris Romania SRL @                        Romania
 
 21.  Computaris USA, Inc. (formerly known as         U.S.A.
      Computaris USA, LLC) @
 
 22.  Computaris Limited @                            U.K.
 
 # wholly owned subsidiaries of ECnet Limited, Singapore being 99.56%
 (previous year 99.55%) subsidiary of R Systems.
 
 @ wholly owned subsidiaries of Computaris International Limited being
 100% subsidiary of R Systems.
 
 All the aforementioned twenty two subsidiaries are incorporated and
 based outside India. In addition to providing services to various
 international clients these subsidiaries also help to generate revenues
 for R Systems.  The Board of Directors of the Company regularly reviews
 the afairs of these subsidiaries.
 
 As per Section 212 of the Companies Act, 1956, we are required to
 attach the Directors'' Report, Balance Sheet and Proft and Loss Account
 (referred to as Financial Statements) of our subsidiaries. The Ministry
 of Corporate Afairs, Government of India vide its General Circular No.
 2/2011 dated 8th February, 2011 has provided an exemption to companies
 from complying with Section 212, provided such companies publish the
 audited consolidated fnancial statement in the Annual Report.
 Accordingly, the Annual Report 2012 does not contain the Financial
 Statements of our twenty two subsidiaries. As directed under the said
 Circular, information in aggregate in respect of each subsidiaries
 including subsidiaries of subsidiaries i.e. (a) capital (b) reserves
 (c) total assets (d) total liabilities (e) details of investments
 (except in case of investment in subsidiaries) (f) turnover (g) proft
 before taxation (h) provisions for taxation (i) proft after taxation
 and (j) proposed dividend for each subsidiary has been disclosed in
 brief abstract forming part of the consolidated balance sheet.
 
 Further, the audited annual accounts and related detailed information
 of our subsidiaries, where applicable, will be made available to
 shareholders seeking such information at any point of time. The annual
 accounts of the subsidiary companies will also be available for
 inspection by any shareholder at Registered Ofce of R Systems i.e.
 B-104 A, Greater Kailash-I, New Delhi  110 048 and Corporate Ofce of R
 Systems i.e. C-40, Sector 59, Noida  201 307 and Registered Ofces of
 the subsidiary companies concerned during business hours. The same will
 also be hosted on R Systems'' website, www.rsystems.com.
 
 15.  PARTICULARS OF EMPLOYEES
 
 As required under the provisions of Section 217 (2A) of the Companies
 Act, 1956, read with the Companies (Particulars of Employees) Rules,
 1975, as amended by notifcation dated March 31, 2011, the names and
 other particulars of employees are set out in Annexure A to this
 report.
 
 16.  DIRECTORS'' RESPONSIBILITY STATEMENT
 
 Pursuant to the requirement under Section 217(2AA) of the Companies
 Act, 1956 with respect to directors'' responsibility statement, your
 directors hereby confrm that:
 
 (i) In the preparation of the annual accounts for the fnancial year
 ended December 31, 2012, the applicable accounting standards had been
 followed along with proper explanation relating to material departures,
 wherever applicable;
 
 (ii) The directors had selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of afairs
 of the Company at the end of the fnancial year and of the proft or loss
 of the Company for the year under review;
 
 (iii) The directors had taken proper and sufcient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 1956 for safeguarding the assets of
 the Company and for preventing and detecting fraud and other
 irregularities;
 
 (iv) The directors had prepared the annual accounts for the fnancial
 year ended December 31, 2012 on a going concern basis.
 
 17.  AUDITORS
 
 M/s S. R. Batliboi & Co. LLP (formerly M/s S. R. Batliboi & Co.),
 Chartered Accountants, the statutory auditors of the Company will
 retire at the ensuing Annual General Meeting and are eligible for
 reappointment. The Company has received letter from Auditors to the
 efect that their appointment, if made, shall be in accordance with
 Section 224(1B) of the Companies Act, 1956 and that they are not
 dis-qualifed for such re-appointment within the meaning of Section 226
 of the said Act.
 
 Further, the auditors'' report being self-explanatory, does not call for
 any further comments by the Board of Directors.
 
 18.  AUDIT COMMITTEE
 
 R Systems has a qualifed and independent Audit Committee.  During the
 year under review there was no change in composition of the Audit
 Committee except that Mr. Anuj Kanish was appointed as a member of the
 Audit Committee as an Alternate Director to Mr. Gurbax Singh Bhasin on
 August 05, 2012.
 
 The constitution of the Committee is in compliance with the provisions
 of the Companies Act, 1956 and the Listing Agreement entered into with
 the stock exchanges.
 
 The terms of reference and role of the Committee are as per the
 guidelines set out in the Listing Agreement with the stock exchanges
 read with Section 292A of the Companies Act, 1956 and includes such
 other functions as may be assigned to it by the Board from time to
 time. The Committee has adequate powers to play an efective role as
 required under the provisions of the statute and Listing Agreement.
 
 19.  DETAILS OF UTILISATION OF IPO PROCEEDS
 
 Pursuant to the Initial Public Ofer, the Company collected Rs. 7,062.50
 lakhs (net of selling shareholders'' proceeds). For details of
 utilisation of IPO proceeds, please refer note no. 35 under Notes to
 the standalone fnancial statements and note no. 34 under Notes to the
 consolidated fnancial statements for the year ended December 31, 2012.
 
 Please note that entire proceeds of the IPO has already been fully
 utilized by the Company before the year under review and as on December
 31, 2012 the Company has no balance of unutilized IPO proceeds.
 
 20.  CORPORATE GOVERNANCE
 
 As required under Clause 49 of the Listing Agreement entered into with
 the stock exchanges, the detailed report on corporate governance is
 given as Annexure B to this report and the certifcate obtained from a
 practicing company secretary regarding compliance of the conditions of
 corporate governance as stipulated in the said clause is annexed as
 Annexure C to this report.
 
 Further, the disclosure as required pursuant to Section II Clause C of
 Part II of Schedule XIII to the Companies Act, 1956 and in terms of
 Clause 49 of the Listing Agreement entered into with the stock
 exchanges for all the directors is given in the detailed report on
 corporate governance which forms part of this report and annexed as
 Annexure B to this report.
 
 21.  DEPOSITS
 
 The Company has neither invited nor accepted any deposits from the
 public within the meaning of Section 58A of the Companies Act, 1956 and
 as such, no amount of principal or interest was outstanding on the date
 of the balance sheet.
 
 22.  CUSTOMER RELATIONS
 
 R Systems recognises that the customers have a choice of service
 providers and the directors would like to place on record their
 gratitude on behalf of the Company for the business provided by them.
 The Company''s quality policy mandates that the Voice of the Customer is
 obtained on a regular basis. We constantly review the feedback and
 incorporate its impact into our delivery systems and communications.
 
 23.  EMPLOYEE RELATIONS
 
 R Systems is inspired by its customers and its employees transform that
 inspiration and customers'' needs into value for all stakeholders. We
 thank all R Systems employees worldwide for their hard work,
 commitment, dedication and discipline that enables the Company to
 accomplish its customer commitments and commitments to all its
 stakeholders.  R Systems conducts regular employee satisfaction
 surveys, and open house meetings to get employee feedback.  R Systems
 is constantly validating key employee data with industry and peer group
 business. These practices have helped the Company achieve many of its
 business goals and have been recognised in many industry surveys over
 the last few years. The open door policy of our senior management team
 ensures that the feedback loop is completed promptly.
 
 We thank our shareholders for their continuous support and confdence in
 R Systems. We are aware of our responsibilities to our shareholders to
 provide full visibility of operations, corporate governance and
 creating superior shareholder value and we promise to fulfll the same.
 
 24.  MANAGEMENT DISCUSSION AND ANALYSIS REPORT
 
 In terms of Clause 49 of the Listing Agreement entered into with the
 stock exchanges, management discussion and analysis report is given as
 Annexure D to this report.
 
 25.  ACKNOWLEDGMENTS
 
 Your directors once again take this opportunity to thank the employees,
 investors, clients, vendors, banks, business associates, regulatory
 authorities including stock exchanges, Software Technology Park of
 India, the Central Government, State Government of Delhi, Uttar
 Pradesh, Maharashtra, Tamil Nadu for the business support, valuable
 assistance and co-operation continuously extended to R Systems. Your
 directors gratefully acknowledge the trust and confdence and look
 forward for their continued support in the future.
 
                                                 On behalf of the Board
 
                                    For R Systems International Limited
 
                                                                   Sd/-
 
 Place : CA, U.S.A.                                Satinder Singh Rekhi
 
 Date : April 15, 2013                  (Chairman and Managing Director)
Source : Dion Global Solutions Limited
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