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R Systems International

BSE: 532735|NSE: RSYSTEMS|ISIN: INE411H01032|SECTOR: Computers - Software Medium & Small
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Directors Report Year End : Dec '16    Dec 15

Dear Shareholders,

Your directors take great pleasure in presenting the Twenty Third 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, 2016.

1. Financial Results

a. Standalone financial results of R Systems

(Rs. in Million)

Particulars

Financial Year ended

31.12.2016

31.12.2015

Total income

2,755.44

2,988.83

Profit before depreciation, exceptional items and tax

636.70

625.69

Less : Depreciation and amortisation expense

69.30

95.80

Add : Exceptional items1

46.35

648.07

Profit before tax

613.75

1,177.96

Less : Current tax

224.94

262.82

Less: MAT credit entitlement

(15.13)

-

Less : Deferred tax charge / (credit)

(8.20)

8.70

Profit after tax

412.14

906.44

Surplus in the statement of profit and loss

Balance as per last financial statements

785.80

494.41

Add: Profit for the current year

412.14

906.44

Less: Appropriations

Interim dividend5

-

501.10

Tax on interim dividend5

-

102.27

Adjustment on account of aligning the useful life of fixed asset in accordance with Schedule II of the Companies Act, 20132

18.87

Tax impact of above adjustment**

-

(6.41)

Proposed dividend written back on buyback$

-

(0.65)

Tax on proposed dividend written back on buyback$

-

(0.13)

Total Appropriation

-

615.05

Net surplus in statement of profit and loss

1,197.94

785.80

b. consolidated financial results of R Systems and its Subsidiaries

(Rs. in Million)

Particulars

Financial Year ended

31.12.2016

31.12.2015

Total income

6,009.44

6,148.45

Profit before depreciation, exceptional items and tax

825.64

812.06

Less : Depreciation and amortisation expense

115.12

140.23

Add : Exceptional items*

46.35

603.10

Profit before tax

756.87

1,274.93

Less : Current tax

244.03

290.08

Less: MAT credit entitlement

(15.13)

-

Less : Deferred tax charge / (credit)

(8.91)

6.55

Profit after tax

536.88

978.30

Surplus in the statement of profit and loss

Balance as per last financial statements

1,022.61

659.36

Add: Profit for the current year

536.88

978.30

Less: Appropriations

Interim dividend5

-

501.10

Tax on interim dividend5

-

102.27

Adjustment on account of aligning the useful life of fixed asset in accordance with Schedule II of the Companies Act, 2013**

18.87

Tax impact of above adjustment**

-

(6.41)

Proposed dividend written back on buyback5

-

(0.65)

Tax on proposed dividend written back on buyback5

-

(0.13)

Total Appropriation

-

615.05

Net surplus in statement of profit and loss

1,559.49

1,022.61

• refer Note No. 23 of consolidated financial statements.

$ refer Note No. 4 of consolidated financial statements.

** refer Note No. 33 of consolidated financial statements.

2. Results of operations Standalone Accounts

• Total income during the year 2016 was Rs. 2,755.44 mn. as compared to Rs. 2,988.83 mn. during the year 2015.

• Profit after tax including exceptional items was Rs. 412.14 mn. during the year 2016 as compared to Rs. 906.44 mn. during

2015.

• Basic earnings per share (of face value of Re. 1/- each) was Rs. 3.26 for the year 2016 as compared to Rs. 7.14 for the year 2015.

consolidated Accounts

• Consolidated total income during the year 2016 was Rs. 6,009.44 mn. as compared to Rs. 6,148.45 mn. during the year 2015.

• Profit after tax including exceptional items was Rs. 536.88 mn. during the year 2016 as compared to Rs. 978.30 mn. during

2015.

• Basic earnings per share (of face value of Re. 1/- each) was Rs. 4.24 for the year 2016 as compared to Rs. 7.70 for the year 2015.

The state of affairs of the Company is presented as part of Management Discussion and Analysis Report forming part of this report.

3. Appropriations and Reserves Dividend

The Board of Directors (the Board) has not recommended any dividend for the financial year ended December 31, 2016.

Transfer to Reserves

In order to augment resources your directors do not propose to transfer any amount to reserves.

4. Business

R Systems is a leading provider of product engineering services, business process outsource services and also offers own product suite in Manufacturing & Logistic vertical. R Systems diversified offering includes:

I Services Group

R Systems defines its product engineering business as Integrated Product Life Cycle Management (iPLM) services where R Systems helps ISVs and other companies to accelerate the speed to market for their products and services with a high degree of time and cost predictability by using our proprietary pSuite framework and global delivery model.

Under iPLM Services, R Systems delivers solutions and services in the area of Information Technology and Information Technology enabled services (ITES). The IT services cover application development, systems integration and support & maintenance of applications. Under the ITES, we cover technical support and customer care for IT and Hi-Tech electronic manufacturers, high-end quality process management and revenue and claims management using our global delivery model.

R Systems competitive advantage in iPLM Services is further enhanced by its industry specific domain expertise, global delivery capabilities, multi-language support capabilities, industry best quality and security certification and agile development methodologies supported by R Systems'' proprietary pSuite framework.

Solution offerings

ECnet Supply Chain 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. The solutions are robust and scalable and give measurable ROI to clients that meets the clients'' strategic business goals.

Further, ECnet also operates as a Gold Channel Partner for one of the largest business software companies in the world to resell, implement and support enterprise solutions of ERP, WMS, Service Management, BI and Performance Management. It mainly serves small to medium-sized businesses in the manufacturing and distribution industries. These products present an opportunity to cross and up sell these solutions since these are adjunct to ECnet''s own product offerings.

I BIZ, is a Microsoft Gold Channel Partner and is specialized in deploying Microsoft business management solution suites, including enterprise resource planning, customer relationship management, point of sales, mobility, business intelligence and portals. IBIZ operates across Singapore, Malaysia, China, Indonesia, Hong Kong and India.

R Systems is focused on key verticals i.e. Telecom & Digital Media, Banking & Finance, Health Care, Manufacturing & Logistics and Retail & E-Commerce. Telecom and Digital Media is the largest industry vertical which contributes 29 percent of the total consolidated revenue for the year ended December 31, 2016. Further, with the deep expertise in the key vertical like Telecom & Digital Media, Banking & Finance, Healthcare and Retail & E-Commerce, we have horizontally embraced analytics solutions, Mobility, IoT and Cloud across these verticals to bring operational efficiency and also create a vital information pool reflecting on the economical, statistical, social media, speech metrics of the customers. R Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organisations across a wide range of industry verticals and has served twenty one million dollor plus customer during the year 2016.

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, Independent Software Vendors, Telecom and Digital Media, Retail & E-Commerce, Healthcare, Manufacturing and Logistic Industries. R Systems maintains fifteen development and service centres and using our global delivery model, we serve customers in the USA, Europe and the Far East. 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 13 relating to subsidiaries.

The Company has set up its new SEZ unit vide ''Letter of Approval'' (LOA) received from Department of Commerce, Ministry of Commerce & Industry, Government of India on October 19, 2016 measuring approx. 15,000 sq. ft. located at Greater Noida West (NCR). Subsequent to the year end, the Company has commenced its operation in SEZ premises on January 25, 2017.

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 Capability Maturity Model Integration (CMMI) and Six Sigma practices for processes have ensured that risks are identified and mitigated at various levels in the planning and execution process. R Systems journey on various quality standards/models is as follows:

During the year 2016, all QMS artifacts of the Company have been migrated from ISO 9001:2008 to new ISO 9001:2015 standard and process wise risk assessment as per the new standard has been carried out, the formal certificate is yet to be received. Noida BPO Center has been certified as PCI-DSS (ver. 3.1) compliant for the call Analytic Services provided to one of the major client.

As of the date of this report, Noida IT centre is CMMI level 5, PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2013 certified; Noida BPO centre is PCMM Level 5, ISO 9001 : 2008, ISO 27001 : 2013 certified and PCI-DSS (ver.3.1) certified for call analytics services.

To maintain and strengthen competitive strengths, R Systems continues to make investments in its unique and proprietary jsjite ® with best practices, tools and methodologies for flawless execution and consistent delivery of high quality software.

The pSuite framework offers 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. Directors

During the year under review, the following changes took place in the office of directors of the Company.

Mr. Raj Kumar Gogia, Mr. Gurbax Singh Bhasin, Mr. Suresh Paruthi and Mr. Amardeep Singh Ranghar, Non-Executive Independent Directors of the Company could not be re-appointed as Independent Director of the Company at twenty second Annual General Meeting held on June 13, 2016.

On June 29, 2016, Mr. Aditya Wadhwa and Mr. Kapil Dhameja were appointed as Additional Directors in the capacity of Independent director.

As per approval of shareholders through Postal Ballot on September 09, 2016, Mrs. Ruchica Gupta (erstwhile NonExecutive Director of the Company) was appointed as an Independent Director of the Company w.e.f. June 29, 2016.

Details of the Directors proposed to be appointed and re-appointed at the ensuing Annual General Meeting are as follows:

At the ensuing Annual General Meeting Lt. Gen. Baldev Singh (Retd.), President & Senior Executive Director of the Company is liable to retire by rotation in accordance with the provisions of Section 152 of the Companies Act, 2013 read with the Articles of Association of the Company and being eligible, offers himself for re-appointment as director of the Company.

Further, on the recommendation of the Nomination & Remuneration Committee of the Company, Mr. Aditya Wadhwa and Mr. Kapil Dhameja, Non- Executive Independent Directors of the Company are proposed to be appointed as Independent Director pursuant to the provision of Section 149 of the Companies Act, 2013 and rules made thereunder at the ensuing Annual General Meeting for the first term of five years commencing from June 29, 2016.

As required under Section 149 of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Hereinafter referred as Listing Regulations), Mr. Aditya Wadhwa and Mr. Kapil Dhameja have submitted the declaration that they meet the criteria of independence as laid down therein.

The brief profile of the aforesaid directors proposed to be appointed/re-appointed forms part of the Corporate Governance Report.

None of the directors of the Company is disqualified as per the provisions of Section 164(2) of the Companies Act, 2013. The directors of R Systems have made necessary disclosures, as required under various provisions of the Companies Act, 2013 and Listing Regulations.

7. 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 financial 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 stock option plans of R Systems are as follows:

• R Systems International Ltd. Employees Stock Option Plan Year 2001 (Formerly known as 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 continued 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.

• R Systems International Limited Employee Stock Option Scheme 2007: For the employees of R Systems and its subsidiaries.

• R Systems International Ltd. - Year 2004 Employee Stock Option Plan: For the employees of R Systems and its subsidiaries other than ECnet Limited. The term of the said plan has been expired on December 27, 2015.

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, 2016 are as follows:

S.

No.

Particulars

R Systems international Ltd.

Year - 2004 employee Stock option Plan**

R Systems international Ltd. employees Stock option Plan -Year 2001

R Systems international Limited employee Stock option Scheme 2007

(a) #

(b)#

(c)“

a.

Total number of shares covered under the plan/scheme

1,995,000

738,980

6,500,000

b.

Pricing Formula

Prevailing Price once the Company''s shares are listed and at the Fair Market Value as per the terms of R Systems International Ltd. -Year 2004 Employees Stock Option Plan on the date such option is granted when the Company''s shares are not listed.

As approved under the Scheme of Amalgamation of Indus Software Private Limited with the Company by the Hon''ble High Courts of Delhi and Mumbai.

Rs. 12.07 per option for 6,350,000 options i.e. latest available closing price, prior to the date of the meeting of the Board of Directors / Compensation Committee, in which options are granted, on the stock exchange. Rs. 12.07 per option for 150,000 options as approved by the Compensation Committee.

c.

Options granted during the year

Nil

Nil

150,000

d.

Options vested during the year

Nil

Nil

Nil

e.

Options exercised during the year

Nil

Nil

Nil

f.

The total number of shares arising as a result of exercise of options during the year

Nil

Nil

Nil

g.

Options lapsed during the year

Nil

Nil

35,000

h.

Variation of terms of options during the year

Nil

Nil

Nil

i.

Money realised by exercise of options during the year (Rs.)

Nil

Nil

Nil

j.

k.

Total number of options in force at the end of the year Employee wise details of options granted to (during the year)

Nil

Nil

195,280

(i)

Senior managerial personnel5

Nil

Nil

150,000

(ii)

Any other employee who receives a grant in any one year of options amounting to 5% or more of options granted during that year

Nil

Nil

Nil

(iii)

Identified employees 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

Nil

Nil

Nil

l.

Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of options

N.A.

N.A.

3.25*

# Please note that the details given above for plan (a) and (b) 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 and after Sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per record date of February 28, 2014.

The details given above for plan (c) are after making the required adjustment in relation to sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per the record date of February, 28 2014.

* EPS is Rupees per equity shares of Re. 1/- each i.e. after giving into effect Sub-division of equity shares of Rs. 10 each into equity shares of Re. 1/- each as per record date of February 28, 2014.

** R Systems International Ltd. - Year 2004 Employee Stock Option Plan has been completely expired on December 27, 2015 due to expiry of the term of the plan.

5 During the year ended December 31, 2016, on the recommendation of Compensation Committee and Nomination and Remuneration Committee, the Board of Directors at its meeting held on April 30, 2016, had further granted 150,000 options to Mr. Nand Sardana, Chief Financial Officer (Senior Management Personnel), at an exercise price of Rs. 12.07/- per option under R Systems International Limited Employee Stock Option Scheme 2007.

Disclosures as required under SEBI Employee Benefits Regulations read with Securities and Exchange Board of India circular no. CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015 are available on the Company''s website at http://www.rsystems.com/investors/Annual reports.aspx.

All options granted under R Systems Employees Stock Option Plan - Year 2001 have already been vested and exercised or lapsed and no options were in force as on December 31, 2016.

For options granted during the earlier years under plan (a) 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 firm 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 (a)*

Scheme (b)**

comments by the valuer

Strike price

Rs.

42

154

Current share price

Rs.

16

140

Taken on the basis of NAV and PECV method of valuation.

Expected option life

No. of Years

5

2.5

Being half of the maximum option life.

Volatility

%

1

0.5

In case of unlisted shares, the volatility may be taken as zero. Verma committee also recommends this.

Risk free return

%

7

11.3

Zero coupon rate estimated from trading government securities for a maturity corresponding to expected life of option - taken from sites of NSE and / or BSE.

Expected dividend Yield

%

15

Company has no set policy so dividend taken as zero.

In case of R Systems Employee Stock Option Plan - Year 2001, 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.

** R Systems 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.

Please note that the details given above for plan (a), and (b) are before 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 and before Sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per record date of February 28, 2014.

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 firm 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

Strike price

Rs.

42

Current share price

Rs.

13.58

Taken on the basis of NAV and PECV method of valuation.

Expected option life

No. of Years

5

Being half of the maximum 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 dividend Yield

%

-

Company has no set policy so 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, subsequent allotment of bonus shares in the ratio of 1 : 1 and sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per record date of February 28, 2014.

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 firm 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.

120.70

Current share price

Rs.

118.50

Price on the date of grant by Board of Directors i.e. closing price on July 11, 2007.

Expected option life

No. of Years

4

Being the vesting period.

Volatility

%

44

On the basis of industry average.

Risk free return

%

7

Zero coupon rate estimated from trading government securities for a maturity corresponding to expected life of option -taken from sites of NSE.

Expected dividend Yield

%

0.86

Company has declared Dividends of 12% in the past. Assuming that it will continue declaring similar dividends in future.

The above information is based on Rs. 10 per share before sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per the record date of February 28, 2014.

For the purpose of valuation of the options granted during the year ended December 31, 2016 under R Systems International Limited Employee Stock Option Scheme 2007, the year to date compensation cost relating to Employee Stock Options, calculated as per the intrinsic value method is Rs 2,589,490.

The management obtained fair value of the options at the date of grant i.e. April 30, 2016 from a firm of Chartered Accountants. In the considered opinion of the valuer, the weighted average fair value of these options determined using ''Black Scholes Valuation Model'' is Rs. 49.89 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.

12.07

Current share price

Rs.

61.45

Price on the date of grant by Board of Directors i.e. closing price on April 30, 2016.

Expected option life

No. of Years

4

Being the vesting period.

Volatility

%

55.32-55.83

On the basis of industry average.

Risk free return

%

7.84

The yield on a Treasury bond by Government of India (Source: RBI) on the valuation date with the tenor matching the remaining term of the stock options.

Expected dividend Yield

%

1.32

Assuming that the Company will continue declaring at similar rate, consistent with past years.

The above information is based on per equity share having face value of Re. 1/- each.

The stock based compensation cost calculated as per the intrinsic value method for the financial year 2016 was Rs. 2,589,490 (Previous year 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 financial statements for the year 2016 would be Rs. 2,617,180 (Previous year nil). The effect 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

(Amount in Rs.)

Particulars

Year ended December 31, 2016

Year ended December 31, 2015

Net Income as reported

412,138,007

906,439,976

Add : Intrinsic Value Compensation Cost

2,589,490

-

Less : Fair Value Compensation Cost

2,617,180

-

Adjusted Pro-forma Net Income

412,110,317

906,439,976

Weighted average number of equity shares for calculating Basic EPS

126,616,327

126,983,064

Weighted average number of equity shares for calculating Diluted EPS

126,653,124

126,983,064

Earnings''Per Share (Face Value of Re. 1/-)

Basic (Face Value of Re. 1/-)

- As reported

3.26

7.14

- Pro-forma

3.25

7.14

Diluted (Face Value of Re. 1/-)

- As reported

3.25

7.14

- Pro-forma

3.25

7.14

Weighted average exercise price of options granted during the year

S. No.

Particulars

Scheme

(a)

Scheme

(b)

Scheme

(c)

1.

Exercise price equals market price

N.A.

N.A.

N.A.

2.

Exercise price is greater than market price

N.A.

N.A.

N.A.

3.

Exercise price is less than market price

N.A.

N.A.

Rs.12.07

Weighted average fair value of the options granted during the year

S. No.

Particulars

Scheme

(a)

Scheme

(b)

Scheme

(c)

1.

Exercise price equals market price

N.A.

N.A.

N.A.

2.

Exercise price is greater than market price

N.A.

N.A.

N.A.

3.

Exercise price is less than market price

N.A.

N.A.

Rs. 49.89

Scheme (a): R Systems International Ltd. - Year 2004 Employee Stock Option Plan.

Scheme (b): R Systems Employees Stock Option Plan -Year 2001.

Scheme (c): R Systems International Limited Employee Stock Option Scheme 2007.

As no options are granted during the year under Scheme (a), Scheme (b), hence the required information is not applicable.

8. Liquidity and Borrowings - consolidated Financial Statement

The available Cash and bank balance as at December 31, 2016 was Rs. 1,199.70 mn. against Rs. 921.95 mn. as of December 31, 2015. The increase was mainly on account cash generated from operations, proceeds from redemption of debenture and sale of balance share in Indus Software Technologies Private Limited as offset by cash used for buyback of share capital, purchase of fixed assets mainly on set of new SEZ unit and earnout payment for IBIZ acquisition. The consolidated cash and cash equivalent as at December 31, 2016 were Rs. 1,136.05 mn. as against Rs. 786.17 mn. as on December 31, 2015.

Net cash generated from operating activities were Rs. 436.24 mn. for the year ended December 31, 2016 compared to Rs. 448.53 mn. for the year ended December 31, 2015.

Cash generated from investing activities were Rs. 101.49 mn. for the year ended December 31, 2016 comprised of proceeds from redemption of debenture Rs. 87.57 mn., proceeds from sale of balance 7% share in Indus Software Technologies Private Limited Rs. 67.61 mn., proceeds from long term fixed deposits with banks Rs. 58.10 mn. (net), interest income Rs. 56.45 mn., rental income from investment property Rs. 6.40 mn., sale of fixed assets Rs. 2.53 mn. as offset by purchase of fixed assets of Rs. 140.07 mn. and earn out payment for IBIZ Rs. 37.10 mn. (net).

Cash used in financing activities were Rs. 194.57 mn. for the year ended December 31, 2016 mainly consist of Rs. 195.00 mn. for buyback of equity shares.

R Systems'' policy is to maintain sufficient liquidity to fund the anticipated capital expenditures, operational expenses and investments for strategic initiatives. R Systems has a credit facility from the Axis Bank Limited amounting to Rs. 380 mn. (including non-fund based credit limit of Rs. 180 mn. for currency derivatives). As at December 31, 2016, the total credit balance was nil under fund based line of credit. Loan payable as at December 31, 2016 comprises of loan for motor vehicles purchased amounting to Rs. 13.44 mn. and finance lease obligation of Rs. 10.88 mn newly SEZ premises. R Systems'' primary bankers in India are Axis Bank Limited, ICICI Bank Limited, Kotak Mahindra Bank Limited, State Bank of India, HDFC Bank Limited and Oriental Bank of Commerce. In U.S.A., U.K., Singapore and New Zealand, the primary bankers are California Bank & Trust, Natwest Bank, Citibank N.A. and Bank of Baroda (NZ), respectively.

9. changes in the capital Structure

During the year under review, the following changes took place in the capital structure of the Company.

At the beginning of the financial year ended December 31, 2016 the issued and paid up capital of the Company was Rs. 126,870,425/- divided into 126,870,425 equity shares of face value of Re. 1/- each. Further, the Company has completed the buyback of its 3,000,000 equity shares of Re. 1/- each on November 29, 2016. Consequent to this buyback the issued and paid up capital of the Company was reduced to Rs. 123,870,425/divided into 123,870,425 equity shares of face value of Re. 1/- each.

During the financial year ended December 31, 2016, the Company has not issued any shares with differential voting rights or any sweat equity shares. Therefore, disclosure pursuant to Section 43(a) (ii) & Section 54(1 )(d) of the Companies Act, 2013 are not applicable. Further, no disclosure is required under Section 67 (3) (c) of the Companies Act, 2013, in respect of voting rights not exercised directly by employees of the Company as the provisions of the said section are not applicable.

10. BuyBack

On September 14, 2016, the Board approved a proposal to buyback up to 3,000,000 equity shares of the Company for an aggregate amount not exceeding Rs. 195,000,000 being 2.36% of the total paid up equity share capital, at Rs. 65 per equity share. The buyback was to be made from all existing shareholders of the Company on September 30, 2016, being the record date for the buyback, on a proportionate basis under the tender offer route in accordance with the provisions contained in the Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998 and the Companies Act, 2013 and rules made thereunder. All the shares bought back pursuant the above buyback had been extinguished within the statutory time limits and the said buyback was completed on November 29, 2016.

11. Material changes affecting the financial position of the company

There are no significant events, changes occurred between the end of the financial year and till the date of this report which would materially affect the financial position of the Company.

12. Particulars of conservation of energy, Technology Absorption and Foreign exchange earnings and outgo

The particulars as prescribed under Section 134 (1) (m) of the Companies Act, 2013, read with rule 8 of Companies (Accounts) Rules, 2014 for the year ended December 31, 2016 are as follows:

A. conservation of energy

Though your Company does not have energy intensive operations, every endeavor has been made to ensure the optimal usage of energy, avoid wastage and conserve energy.

During the year ended December 31, 2016 R Systems continued its action plans to curtail the energy bills by adopting various energy conservation options / technologies as identified 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.

Significant measures were taken to reduce energy consumption by using energy efficient equipment and devices. R Systems constantly evaluates new technologies and makes appropriate investments to be energy efficient. Currently, the Company uses LED/CFL fittings and electronic ballasts to reduce power consumption of fluorescent tubes. The air is conditioned with energy efficient compressors for central air conditioning and with split air conditioning for localized areas.

R Systems is always in search of innovative and efficient 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 financial impact of these measures is not material.

B. Technology absorption

1. Efforts made towards technology absorption

The Company has established practice streams in specific technologies to analyze their implications and the benefits they can provide to the Company''s customers. These steps enable the Company to find and execute the most appropriate solutions for its clients.

2. Benefits derived as a result of the above efforts

The benefits derived from the above mentioned efforts are fulfilling customer needs, efficiency in operations, improvement in quality and growth in revenues.

3. Technology imported during the last 3 years

Not applicable, as no technology has been imported by the Company.

4. Expenditure incurred on Research and development

Driven by our core value of innovation, we believe that innovation is not just a practice but an essential component embedded within R Systems organizational DNA. We are now operating in a digital world. Digital transformation is one of our core areas where we partner with businesses to make them competitive and successful in today''s hyper-changing environment. Over the year ended December 31, 2016, your Company has invested in research and development in the area of digital technologies like Analytics, Cloud Computation, Mobility and IoT in addition to strengthening and up-grading proprietary solutions and frameworks. The key R&D initiates undertaken by the Company for the year 2016 are as follows:

(1) Grasping the inevitability of big data analytics for businesses in today''s cognitive world, R Systems has invested in building robust analytics solutions, accelerators and framework that address the key challenges around data analytics. Medley, our unified data framework enables rapid deployment of custom advance analytics solutions. Medley simplifies data acquisition, transformation & visualization for virtually any data source. Analytics Gym, our consulting framework helps organizations to discover & evaluate relevant data, technology and right approach for their analytics roadmap.

(2) Anagram, our proprietary customer interaction analytics platform uses speech analytics technology combined with predictive analytics to help businesses glean important business insights and tap into new business opportunities using the big data generated from the entire population of all customer interactions across multiple channels. It helps augment business efficiency by proffering real-time data insights.

(3) Your Company has continued to invest in building reusable components library and testing frameworks for mobile platforms (Android and iOS). These reusable components and frameworks provide an edge to your Company in term of cost efficiency and reduced time to market while servicing existing as well as prospective customers.

(4) Our new initiatives for IoT covers bringing intelligence to the new edge and futuristic sensor devices which use machine learning and artificial intelligence.

(5) Additionally, your Company has continued its investment building frameworks and proof of concepts in key verticals like Telecom & Digital Media, Banking and Finance, Retail & E-commerce and Healthcare, Manufacturing and Logistic domains.

c. Foreign exchange earnings and outgo (Accrual Basis)

A significant percentage of R Systems revenues are generated from exports. The development and service centre in Noida is registered with the Software Technology Park of India as 100% Export Oriented Undertaking. All efforts of the Company are geared to increase the business of software exports in different 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 Million)

S.

Particulars

Financial Year ended

No.

31.12.2016

31.12.2015

(a)

Earnings (Accrual Basis)

2,594.89

2,638.34

(b)

Expenditure (Accrual Basis)

356.32

423.67

(c)

CIF value of imports

66.53

39.73

13. Subsidiaries & other corporate Restructuring

As on December 31, 2016, R Systems has twenty five subsidiaries. The name and country of incorporation of those subsidiaries are as follows:

S.

No.

Name of the company

country of incorporation

1.

R Systems (Singapore) Pte Limited

Singapore

2.

R Systems, Inc.

U.S.A.

3.

R Systems Technologies Limited (Formerly known as Indus Software, Inc.)

U.S.A.

4.

RSYS Technologies Ltd. (Formerly known as Systemes R. International Ltee)

Canada

5.

ECnet Limited

Singapore

6.

ECnet (M) Sdn. Bhd*

Malaysia

7.

ECnet, Inc.*

U.S.A.

8.

ECnet (Hong Kong) Ltd.*

Hong Kong

9.

ECnet Systems (Thailand) Co. Ltd.*

Thailand

10.

ECnet Kabushiki Kaisha*

Japan

11.

ECnet (Shanghai) Co. Ltd.*

People''s Republic of China

12.

Computaris International Limited

U.K.

13.

ICS Computaris International Srl@

Moldova

14.

Computaris Malaysia Sdn. Bhd.@

Malaysia

15.

Computaris Polska sp z o.o.@

Poland

S.

No.

Name of the company

country of incorporation

16.

Computaris Romania SRL@

Romania

17.

Computaris USA, Inc.®

U.S.A.

18.

Computaris Philippines Pte Ltd. Inc.®

Philippines

19.

IBIZ Consulting Pte. Ltd.* (Formerly known as IBIZCS Group Pte. Ltd.)

Singapore

20.

IBIZ Consulting Services Pte Ltd.

Singapore

21.

IBIZ Consulting Services Sdn. Bhd.

Malaysia

22.

PT. IBIZCS Indonesia''

Indonesia

23.

IBIZ Consultancy Services India Private Limited

India

24.

IBIZ Consulting Services Limited

Hong Kong

25.

IBIZ Consulting Services (Shanghai) Co., Ltd%

People''s Republic of China

* wholly owned subsidiaries of ECnet Limited, Singapore being 99.75% subsidiary of R Systems (The shareholding held by the Company and R Systems (Singapore) Pte Limited is 69.37% and 30.38% respectively).

@ wholly owned subsidiaries of Computaris International Limited being 100% subsidiary of R Systems.

* Wholly owned subsidiary of R Systems (Singapore) Pte Limited being 100% subsidiary of R Systems.

Wholly owned subsidiaries of IBIZ Consulting Pte. Ltd. (Formerly known as IBIZCS Group Pte. Ltd.) being 100% Subsidiary of R Systems (Singapore) Pte Limited being 100% subsidiary of R Systems.

% Wholly owned subsidiary of IBIZ Consulting Services Limited -Hong Kong being 100% Subsidiary of IBIZ Consulting Pte. Ltd.

During the year ended December 31, 2016, the Company has invested SGD 960,000 (Singapore Dollar Nine Lakhs Sixty Thousand only) in R Systems (Singapore) Pte Limited and also made an investment of CAD 99,800 (Canadian Dollar Ninty Nine Thousand Eight Hundred only) in RSYS Technologies Ltd., Canada (Formerly known as Systemes R. International Ltee).

Computaris International Limited, U.K., wholly owned subsidiary of the Company, has incorporated a subsidiary namely Computaris Philippines Pte. Ltd. Inc. in Philippines on May 23, 2016.

As on date of this report, all the aforementioned twenty five subsidiaries except IBIZ Consultancy Services India Private Limited - were incorporated and based outside India. In addition to providing services to various international clients these subsidiaries also help to generate revenues for R Systems.

Further, subsequent to the year ended on December 31, 2016 IBIZ Consulting Pte. Ltd., Singapore has completed the purchase of business of IBIZ Consulting Services Pte. Ltd. on going concern basis at book value pursuant to business purchase agreement dated March 31, 2017.

During the year, no other corporate restructuring activity was done by the company.

The Board of Directors of the Company regularly reviews the affairs of these subsidiaries. Policy for determining material subsidiaries of the Company is available on the website of the Company at http://www.rsystems.com/investors/corporategovernance.aspx.

A statement containing the salient features of the financial statement of our subsidiaries in the prescribed Form AOC-1 is attached at the end of consolidated financial statements of the Company. The statement also provides the details of performance, financial position of each of the subsidiaries.

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 Office of R Systems i.e. B-104 A, Greater Kailash-I, New Delhi-110048 and Corporate Office of R Systems i.e. C-40, Sector 59, Noida (U.P.)-201307 and Registered Offices of the subsidiary companies concerned during business hours. The same will also be hosted on R Systems'' website i.e. www.rsystems.com.

14. Particulars of employees

The details required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed as Annexure A and forms part of this report. Further, as required under the provisions of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the name and other particulars of employees are set out in Annexure B and forms part of this report.

15 Directors'' responsibility statement

Pursuant to the requirement of Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013 with respect to directors'' responsibility statement, your directors hereby confirm that:

1. In the preparation of the annual accounts for the financial year ended December 31, 2016, the applicable accounting standards had been followed along with proper explanation relating to material departures;

2. t he directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the Company for that period;

3. the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

4. t he directors had prepared the annual accounts for the financial year ended December 31, 2016 on a going concern basis;

5. the directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

6. the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

16. Auditors

The exiting Statutory Auditors of the Company M/s. S. R. Batliboi & Associates LLP (Firm Registration No. 101049W/E300004), Chartered Accountants who are the Statutory Auditors of the Company hold office as statutory auditors until the conclusion of the 23rd Annual General Meeting of the Company scheduled to be held on May 15, 2017.

I n view of the mandatory requirement for rotation of auditors upon completion of 10 years of association with the Company and in terms of Section 139 of the Companies Act, 2013, M/s. S. R. Batliboi & Associates LLP, Chartered Accountants will retire as Company''s Auditors at the conclusion of 23rd Annual General Meeting.

It is proposed to appoint M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, [Firm''s Registration No. 117366W/ W-100018] as the Statutory Auditors for a period of five (5) continuous years i.e. from the conclusion of 23rd Annual General Meeting till the conclusion of 28th Annual General Meeting of the Company.

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, have confirmed their eligibility and willingness to act as the statutory auditors of the Company and that their appointment, if made, shall be in accordance with the conditions as may be prescribed under the provisions of the Companies Act, 2013 and rules made thereunder.

The Board of Directors, based on the recommendation of the audit committee, recommends the appointment of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, as the statutory auditors from the conclusion of the ensuing Annual General Meeting till the conclusion of the 28th Annual General Meeting of the Company, subject to ratification at every Annual General Meeting.

Further, the auditors'' report being self - explanatory, does not call for any further comments by the Board of Directors as there are no qualifications, reservation or adverse remark or disclaimer made in the audit report for the Financial Year ended December 31, 2016.

17. Audit committee

R Systems has a qualified and independent Audit Committee. During the year under review, Mr. Raj Kumar Gogia, Mr. Gurbax Singh Bhasin, Mr. Suresh Paruthi and Mr. Amardeep Singh

Ranghar, Non-Executive Independent Directors could not be re-appointed as Independent Directors, therefore, they ceased to be members of the Audit Committee w.e.f. June 13, 2016.

Mrs. Ruchica Gupta was re-designated as Non-Executive Independent Director w.e.f. June 29, 2016 and was appointed as chairperson of the Audit Committee w.e.f. June 30, 2016.

Mr. Kapil Dhameja and Mr. Aditya Wadhwa were appointed as Additional Directors in the capacity of Independent Director w.e.f. June 29, 2016. Mr. Kapil Dhameja, Non-Executive Independent Director and Lt. Gen. Baldev Singh (Retd.), President & Senior Executive Director were appointed as a member of the Audit Committee w.e.f. June 30, 2016.

Mr. Aditya Wadhwa, Non-Executive Independent Director was appointed as a member of the Audit Committee w.e.f. July 29, 2016.

The constitution of the Committee is in compliance with the provisions of the Companies Act, 2013 and the Listing Regulations.

Detailed description of the Audit Committee has been given in Corporate Governance Report. The terms of reference and role of the Committee are as per the guidelines set out in the Listing Regulations and Section 177 of the Companies Act, 2013 and rules made thereunder 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 effective role as required under the provisions of the Act and Listing Regulations. During the year under review, the Board of Directors of the Company had accepted all the recommendations of the Audit Committee.

18. Prevention and prohibition of sexual harassment of women at work place

At R Systems, it is our desire to promote a healthy and congenial working environment irrespective of gender, caste, creed or social class of the employees. We value every individual and are committed to protect the dignity and respect of every individual. The Company has always endeavored for providing a better and safe environment free of sexual harassment at all its work places. Consequent to the enactment of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder, the Management of R Systems International Limited has constituted an Internal Complaints Committee (ICC) to deal with any complaints or issues that may arise, in the nature of sexual harassment of women employees. The Company has also prepared and implemented Policy for Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace. During the year ended December 31,

2016, no cases of sexual harassment against women employees at any of its work place were reported to the ICC.

19. corporate Governance

As required under Listing Regulations, the detailed report on corporate governance is given as Annexure c to this report and the certificate obtained from a practicing company secretary regarding compliance of the conditions of corporate governance as stipulated in the said clause is annexed as Annexure D to this report.

20. Deposits

The Company has neither invited nor accepted any deposits from the public within the purview of the Companies Act, 2013 and the Rules made thereunder, no amount of principal or interest was outstanding as on the date of the balance sheet.

21. 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.

22. Stakeholder''s 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 to 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 confidence 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 fulfill the same.

23. Management discussion and analysis report

In terms of the Listing Regulations management discussion and analysis report is given as Annexure E to this report.

24. Secretarial Audit Report

Mr. Jitender Singh, Company Secretary in Whole Time Practice, had been appointed by the Board to carry out the Secretarial Audit under the provision of Section 204 of the Companies Act, 2013 for the financial year ended December 31, 2016. The Secretarial Audit report for financial year ended on December 31, 2016 is enclosed as Annexure F. The report does not contain any qualification.

25. Vigil Mechanism / Whistle Blower Policy

In order to provide a mechanism to employees of the Company to disclose any unethical and improper practices or any other alleged wrongful conduct in the Company and to prohibit managerial personnel from taking any adverse action against those employees, the company has laid down a Vigil Mechanism also known as Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Vigil Mechanism or Whistle Blower Policy is explained in the Corporate Governance Report and also posted on the website of the Company.

26. criteria for selection of candidates for Membership on the Board of Directors and the Remuneration Policy

As per the provisions of Section 178 of the Companies Act, 2013 and other relevant provisions and on the recommendation of Nomination & Remuneration Committee, the Board has framed a criteria for selection of Directors, a policy for remuneration of directors, key managerial personnel and other employees. The Criteria for selection of candidates for Membership on the Board of Directors and the remuneration policy are stated in the Corporate Governance Report.

27. Meetings of the Board

The Board of the Company and its Committees meet at regular intervals to discuss, decide and supervise the various business policies, business strategy, Company''s performance and other statutory matters. During the year under review, the Board has met six times. The details of the meeting of the Board and its Committees are given in Corporate Governance Report. The intervening gap between two Board Meetings did not exceed 120 days.

28. Board evaluation

Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has carried out an annual performance evaluation of its own performance, its committees and the individual directors. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

29. Particulars of Loans, Guarantees or investments under Section 186 of the companies Act, 2013

During the year ended December 31, 2016, the Company has invested SGD 960,000 (Singapore Dollar Nine Lakhs Sixty Thousand only) in R Systems (Singapore) Pte Limited by way of acquisition of additional shares. Further, the Company has also made an investment of CAD 99,800 (Canadian Dollar Ninty Nine Thousand Eight Hundred only) for acqisition of shares of RSYS Technologies Ltd., Canada (Formerly known as Systemes R. International Ltee).

30. Related Party Disclosure

All the Related Party Transactions entered during the year were in the ordinary course of business and on arm''s length basis. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict of interest with the company at large. All the related party transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on quarterly basis, specifying the terms & conditions of the transactions. The policy on Related Party Transactions as approved by the Board is uploaded on the company''s website at the weblink as mentioned in the Corporate Governance Report. Details of particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 in form AOC-2 has been enclosed herewith as Annexure G.

31. Risk Management

The Company is not required to form a Risk Management Committee. The Company has developed and implemented a risk management policy for identifying the risk associated with business of the Company and measures to be taken by including identification of elements of risk and measures to control them.

32. corporate Social Responsibility

In compliance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has constituted a Corporate Social Responsibility Committee (''CSR Committee'').

During the year under review, Mr. Raj Kumar Gogia and Mr. Suresh Paruthi, Non-Executive Independent Directors could not be re-appointed as Independent Director, therefore, they ceased to be members of the CSR Committee w.e.f. June 13, 2016.

Mr. Kapil Dhameja and Mr. Aditya Wadhwa were appointed as Additional Directors in the capacity of Independent Director w.e.f. June 29, 2016.

Mr. Kapil Dhameja Non-Executive Independent Director was appointed as member & chairman of the CSR Committee w.e.f. June 30, 2016. Mr. Aditya Wadhwa, Non-Executive Independent Director was appointed as member of the CSR Committee w.e.f. June 30, 2016.

The detailed terms of reference of the CSR Committee has been provided in the Corporate Governance Report. In pursuit of the responsibilities entrusted to the CSR Committee, a policy on Corporate Social Responsibility has been prepared and adopted by the Board which is available at the website of the Company at following link: http://www.rsystems.com/ investors/corporategovernance.aspx Annual Report on CSR activities of the Company in format prescribed in Companies (Corporate Social Responsibility Policy) Rules, 2014 is enclosed as Annexure H and forms part of this report.

33. internal control System and internal Financial controls

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Internal Auditors and the management monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Audit observations of Internal Auditors and corrective actions thereon are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Auditor reports to the Audit Committee.

The Board of your Company has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively.

During the year, in order to further strengthen the internal financial controls, a renowned professional consultant firm was hired to conduct an assessment of the existent internal financial controls and advise on best practices for adoption.

S.R. Batliboi & Associates LLP, Chartered Accountants the statutory auditors of the Company, has audited the financial statements included in this annual report and have issued unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting.

34. extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT - 9 is enclosed as Annexure i to this Report.

35. Significant and Material orders Passed by the Regulators or courts

There are no significant or material orders passed by the Regulators / Courts which would impact the going concern status of the Company and it''s operations in future.

36. 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, Tamil Nadu for the business support, valuable assistance and co-operation continuously extended to R Systems. Your directors gratefully acknowledge the trust and confidence and look forward for their continued support in the future.

On behalf of the Board

For R Systems International Limited

Sd/- Sd/-

Satinder Singh Rekhi Lt. Gen. Baldev Singh (Retd.)

(DIN: 00006955) (DIN: 00006966)

(Managing Director) (President & Senior Executive Director)

Place: Singapore Place: Noida, U.P.

Date: April 06, 2017 Date: April 06, 2017

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