The Board of Directors of 8K Miles Software Services Limited have pleasure in presenting the Thirty First Report on the business & operations for the year ended March 31, 2016 along with the Audited Financial Statements for the year.
The comparative figures of the financial performance of the Company for the last two years are presented in the table below.
(Rs. in Lakhs)
Earnings Before Interest & Depreciation
Depreciation and Amortization
Profit Before Tax (PBT)
Profit After Tax (PAT) before Minority Interest
Profit After Tax (PAT) after Minority Interest
Revenue for the year is INR 2,719.3 million signifying a growth of 117.8 % in Rupee terms. EBITDA margin for the current year is 30.9% as compared to 31.5% in previous year. Our effective tax rate is about 22.04 % as compared to about 20.35 % in the previous year. PAT after Minority Interest has increased by 108.6 % to 395.8 million as compared to 189.7 million in the previous year.
Your Company has not declared any dividend for the year.
Your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014.
TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND The provisions of Section 125(2) of the Companies Act, 2013 do not apply, as there was no dividend declared and paid during the year.
MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There have not been any material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the Financial Year of the Company to which the financial statements relate and the date of the Report & change in nature of business, if any.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
The Company has not given any loans or guarantees covered under the provisions of section 186 of the Companies Act, 2013. The detail of the investments made by Company is given in the notes to the financial statements.
BOARD AND COMMITTEE MEETINGS
The Board met 7 times during the year. The details regarding the board meetings and committee meetings are given separately in the Corporate Governance Report.
1) 8K Miles Software Services Inc. USA
2) 8K Miles Software Services FZE - UAE
3) 8K Miles Health Cloud Inc. USA
4) Mentor Minds Solutions and Services Inc. USA
5) Mentor Minds Solutions and Services Private Ltd. India
The accounts of the subsidiary companies are consolidated with the accounts of the Company in accordance with the provisions of section 129 of the Companies Act, 2013 and Regulation 33 of SEBI (LODR) Regulations, 2015. The consolidated financial information forms part of the Annual Report.
A statement under Section 129 (3) of the Companies Act, 2013 in Form AOC-1 is annexed to the Directors Report.
CONSERVATION OF ENERGY
a) Company ensures that the operations are conducted in the manner whereby optimum utilisation and maximum possible savings of energy is achieved.
b) No specific investment has been made in reduction in energy consumption.
c) As the impact of measures taken for conservation and optimum utilization of energy are not quantitative, its impact on cost cannot be stated accurately.
d) Since the Company does not fall under the list of industries, which should furnish this information in Form A annexed to the aforesaid Rules, the question of furnishing the same does not arise.
MANAGEMENT DISCUSSION AND ANALYSIS
As required under Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation 2015, a detailed Report on Management Discussions and Analysis is given below:
"We continue to see significant growth in our Cloud Security Solutions and Cloud Managed Services. Our recent launch of cloudezrx™, a cloud-platform designed to answer the compliance and regulatory needs of Pharmaceutical/Life Sciences industry is gaining market awareness while adding more key-functionalities to meet uprising demand by Healthcare providers,".
We have accomplished integration of businesses acquired - SERJ, Mindprint, Cintel and Nexage. We are leaders in the Life Sciences and Healthcare space where the Cloud is helping companies change the way drugs are developed and brought to market. We are also prepared for changes in our client''''s industry like consumerisation of healthcare. Our CloudEzRxTM gives Pharmaceutical companies the ability to quickly bring new drugs to market by offering on-demand scalable Compute resources quickly & efficiently, reducing cost and decreasing the time to market, irrespective of the composition of their teams and resources.
Your Company has been working on strategy to monitor and grow annuity business and has succeeded to increase the proportion to over 37% in March 2016. In last 18 months, we have delivered IP led cloud solutions to the clients and have migrated multiple clients to category of over $ millions TCV. Our clients are amongst top 5 companies in both healthcare and life sciences sector; Your Company has become one of the leading providers of public cloud services and solutions to highly regulated customers.
As a geography, North America contributes 80% of our revenue. About 40% of our revenue is from fixed price contracts.
INDUSTRY STRUCTURE AND OPPORTUNITIES
NASSCOM data states that IT-BPM industry (global) grew by 0.4% in CY 2015 to US$ 1.2 trillion. Of that US$ 1.2 trillion, IT services is at US$ 650 billion. India''''s share in global sourcing market (IT services) of US$ 97 - 99 billion stands at 67%. NASSCOM projects revenue of US$ 175 to 190 billion for India from IT services market. It emphasis focus on going bimodal IT, gaining share in both traditional and digital markets, increased emphasis on value addition and innovation, gaining customer experience, building digital talent pool. The future of the industry is in Managed Services and for that to become reality, collapsible infrastructures such as Cloud Computing and low-cost affordable technologies will make it a key priority on enterprise customer''''s mind.
Gartner Says Worldwide Public Cloud Services Market Is Forecast to Reach $204 Billion in 2016. The worldwide public cloud services market is projected to grow to total $204 billion at 16.5 percent in 2016, up from $175 billion in 2015, according to Gartner, Inc. The highest growth will come from cloud system infrastructure services (infrastructure as a service [IaaS]), which is projected to grow 38.4 percent in 2016. It is estimated that by 2018, more than 60% of all enterprises will have at least half of their infrastructure on Cloud based platform.
8K MILES IP DRIVEN CLOUDEZ SOLUTIONS AND AS-A-SERVICE OFFERINGS:
Life sciences solutions built on Cloud
8K Miles is partnering with major cloud providers such as AWS, and Microsoft Azure and IBM in building Life Sciences solutions on a sustainable cloud environment that solves the challenge of digital transformation facing regulatory affairs and security concerns.
8K Miles is helping highly regulated large enterprise companies to build a secure and standardized enterprise wide self-service platform using 8K Miles CloudEz solutions and Cloud security and compliance control framework that address the pharma qualification & validation compliance requirements.
Deep domain expertise particularly in pharma/Healthcare
Recent acquisition of NexAge Technologies, one of the principal regulatory compliance and technology solutions firms in the U.S. with more than 15 years of experience in computer systems validation, quality review, vendor audits, data analysis and migration, as well as process governance for the life science and pharmaceutical industry has brought significant experience in system validation mandated for regulated systems and working with GxP guidelines. This helps to provide services that help Pharma companies achieve gold standard in compliance, improve quality and bring in operations efficiencies across the entire product development lifecycle.
8K Miles provides Cloudier, a highly regulated vertical focused framework composed of inter-dependent infrastructure, security, automation, compliance, governance and service management functionality (ITSM) to deploy a fully qualified and validated infrastructure platform design and implementation service. The validated framework defines a Company-wide solution to provide cloud services for users via a self-service dashboard.
Thus, Cloudier enables life sciences companies creating a cloud environment meeting stringent security, privacy and regulatory challenges and strategies including GxP, HIPAA etc. Integrated advanced DevOps automation ensures that continuous compliance is met at every step of cloud adoption, implementation and managed services. An all-in-one integrated dashboard provides a powerful interface to manage, control and audit the entire IT portfolio.
While investments are being made towards digital healthcare world we target to achieve by 2020, there is significant resistance in healthcare and life sciences ecosystem to adapt public cloud and digital technology. 8k Miles has been at the forefront to work with the leading providers, payors and life sciences companies to prepare them for digital revolution. We engage with our clients at consulting stage where we formulate their data/ workload migration strategy and then we migrate and maintain the workloads using our in-house build IP/ tools. Our process is fully automated, agile and scalable to take care workload requirements of any size in a secure environment. Our focus is to provide more solutions and analytics to our clients once they have migrated to cloud.
FINANCIAL SERVICES - THE NEXT FOCUS SEGMENT
By 2018, more than 60% of all enterprises will have at least half of their infrastructure on cloud based platforms. Financial service providers are starting to move legacy systems to the cloud which can accommodate its fast online growth. Functionalities including data warehousing and electronic business processing systems are to replace paper-based application systems. Some of the customers are even moving their entire retail banking platforms to the cloud to reduce complexity and costs while improving agility making the banks much more responsive to changing customer demands.
Another area is moving storage to the cloud which cuts costs in half. Similar savings can be achieved by moving application testing and development to cloud. Major cloud providers such as Amazon Web Services (AWS) has scooped up significant business from financial services firms which have been early adopters of cloud. Amazon cloud is able to run credit risk simulations for its customers in 20 minutes, down from 23 hours before.
Adopting a cloud model will provide the banks, mortgage and insurance agencies with a platform that is secure, scalable and can handle mission-critical workloads while offering greater flexibility and performance. Following are the top established and emerging financial services related opportunities for cloud providers:
1. Card and mobile payment processing -- Visa, MasterCard, and trusted 3rd parties
2. Marketing and customer relationship management
3. Core banking
4. Human Resources and talent management
5. Infrastructure as a Service
6. Wealth management
7. Mortgage and Insurance applications
8K Miles can take a leadership role in these areas and be part of the cloud journey for financial service providers by providing the digital transformation services and cloud solutions in banking, insurance and mortgage industries.
IT is undergoing significant change. Agility, security, speed, connectivity and storage are at the forefront of this change. Your Company is blessed to be born in this age. We have grown our top line at over 100% last 2 years. Infrastructure as a service is expected to grow at 38.4% in 2016 (Gartner).
RISK AND RISK MITIGATION
1. Execution risk: While fixed price contracts offer an opportunity to add better margins in IP/ non-linear execution model, they also expose us to execution risk in remote scenarios of any inability to adhere to delivery or quality SLA. Your Company has made significant investments in it''''s platform (IP).
2. Employee related risk: Employee attrition and/ or constraints in the availability of skilled human resources could pose a challenge for any services Company. Your Company has kept its human capital at the centre and has initiated multiple steps for overall development of its employees. We encourage entrepreneurship culture within organization and offer new challenges and opportunities for our employees. We have made significant investments in our recruitment and training procedures.
3. M&A execution risk: Your Company has been acquisitive in past when comes to acquisition of capabilities at right price. We believe in reducing our time to tap opportunity offered in this age of IT transformation but at the same time, we have put in place stringent evaluation criteria, diligence parameters and high standard of corporate governance practices for any target opportunity to cross the line. We have senior management team and independent board of advisors to monitor the progress of each opportunity pre- and post-closure.
4. Exchange rate risk: Given that the Company''''s revenues are largely denominated in US dollars and fluctuations in foreign currency exchange rates could have an impact on Company''''s earnings.
5. Investment risk: The strength of your Company is IP developed over years of research and development. We expense the costs that is unlikely to yield significant results in future, in the year of accrual. We conduct regular impairment test of all intangible assets created either by way of internal Research and Development (R&D) and/ or assets acquired through acquisitions.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company ensures that all transactions are authorized, recorded and reported. Also the Company has adequate internal control systems to ensure that the assets are safeguarded and protected against any loss. The scope and authority of internal auditors are clearly defined. The audit committee on periodical basis reviews the findings and recommendation of the internal auditors and the board takes necessary corrective actions.
It was a year where we grew by 40% in our human capital. Your Company has taken initiatives to see that Employees are encouraged to complete the professional certification in the area they specialize, be it AWS, Azure, IAM, Big-Data, Analytics etc. About 20% of our cloud Engineers are “AWS Certified Associates or Professionals". Other key steps to ensure overall development of our human capital:
Technopreneur @ 8K Miles - At 8K Miles we believe, Independent thinkers need to be given the space, time to brood, ideate and create. That is why at 8K Miles ideas are seen as a true potential.
Compass - All employees are assigned to the leaders of the organization who act as Mentors. This enables in building up future leaders of the organization.
Smile - As responsible corporate citizens the employees of 8K Miles under the social group SMile undertake projects that bring smiles in people.
Fun @ Work - At 8K Miles we take the quote "All work and no play makes Jack a dull boy" little seriously. We have fun filled evenings organized to lighten up the mood of the employees.
CHANGE IN SHARE CAPITAL
During the year the Authorized share capital of the Company was increased from Rs. 15 crores to Rs. 20 crores with the shareholders'''' approval at the Annual General Meeting held on 18.09.2015. The paid up share capital of the Company was increased from Rs. 103441020 consisting of 10344102 equity shares to Rs. 108941020 consisting of 10894102 equity shares of Rs. 10 each. During the year the Company allotted 5,50,000 shares to promoter and Non-promoter strategic investor pursuant to exercise of conversion of warrants.
APPOINTMENT OF DIRECTORS
Mr. Lakshmanan Kannappan, Who retires by rotation, being eligible, offers himself re-appointment.
Mr. R.S. Ramani, whose appointment as whole-time Director ended on 13th August, 2016 and being eligible for re-appointment. The board recommends his re-appointment for a period of five years effective August 13, 2016.
Mr. Dinesh Raja Punniamurthy was appointed as an Additional Director under Independent and Non-Executive Category at the meeting of board of directors held on March 31, 2016 pursuant to Section 152 & 161 of the Companies Act, 2013, who holds office up to the date of ensuing AGM and is proposed to be appointed as an Independent Director for five years effective 30th September, 2016.
Ms. Babita Singaram was appointed as an Additional Director under Independent and Non-Executive Category at the meeting of board of directors held on March 31, 2016 pursuant to Section 152 & 161 of the Companies Act, 2013, who holds office up to the date of ensuing AGM and is proposed to be appointed as an Independent Director for a period of five years with effect from 30th September, 2016.
At the Annual General Meeting held on September 18, 2015 M/s GHG Associates, Chartered Accountants, were appointed as statutory auditors of the Company to hold office till the conclusion of Annual General Meeting to be held in the calendar year 2021. In terms of first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every AGM. Accordingly the appointment of M/s GHG Associates, statutory auditors of the Company, is placed for ratification by the shareholders. In this regard the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013.
PARTICULARS OF EMPLOYEES
Statement of personnel particulars of employee''''s pursuant to Section 197(12) of the Companies Act, 2013 are not applicable since none of the employees are in receipt of remuneration in excess of the limits specified herein (Rs.5,00,000 per month or Rs.60,00,000 per annum) during the period under review
RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the financial year were on arm''''s length basis and were in the ordinary course of the business and are in compliance of the provisions of the Companies Act, 2013 and the Listing Regulations. There are no material related party transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the Company at large.
The Audit Committee on a quarterly basis approves all related party transactions. The details of the transactions with related parties are provided in the financial statements. Policy on Related Party transactions are available in the website.
The Company had the following Committees of the Board during the year 2015-16:
1. Audit Committee;
2. Nomination and Remuneration Committee;
3. Stakeholders'''' Relationship Committee;
CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
The provisions of Section 135 of the Companies Act, 2013 are not applicable to the Company. However CSR activities have already embodied in the value system of the Company.
CODE OF BUSINESS CONDUCT AND ETHICS
The Board of Directors has approved a Code of Conduct and Ethics in terms of Schedule IV of Companies Act, 2013 and Listing Agreement. All the Board Members and the Senior Management personnel have confirmed compliance with the Code for the year ended 31st March 2016. The annual report contains a declaration to this effect signed by the Managing Director.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
In accordance with Section 177(9) and (10) of the Companies Act, 2013 and Regulation 22 of SEBI (LODR) Regulations, 2015 the Company has established a Vigil Mechanism and has a Whistle Blower Policy. The policy provides a mechanism for all employees to report to the management, grievances about the unethical behavior or any suspected fraud. The policy is available at the website of the Company.
PREVENTION OF INSIDER TRADING
The Company has complied with the provisions of SEBI (Prevention of Insider Trading) Regulations. The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre-clearance for dealing in the Company''''s shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed. The Board is responsible for implementation of the Code. The code of conduct for prevention of insider trading is available in the website of the Company.
EVALUATION OF BOARD’S PERFORMANCE
The board has carried out an evaluation of its own performance, and that of its directors individually. The manner in which the evaluation has been carried out is explained in the Corporate Governance Report.
Pursuant to provisions of section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the Company has appointed Mr. Gouri Shanker Mishra, Company Secretary in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit report forms part of the Annual Report.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is appended to this report.
CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION & ANALYSIS REPORTS
The Corporate Governance and Management Discussion & Analysis Report, which form an integral part of this Report, are set out as separate Annexure, together with the Certificate from the auditors of the Company regarding compliance with the requirements of Corporate Governance as stipulated in Regulation 27 (2) of SEBI (LODR) Regulations, 2015.
DIRECTORS’ RESPONSIBILITY STATEMENT
In terms of Section 134 (5) of the Companies Act, 2013, the directors would like to state that:
i) I n the preparation of the annual accounts, the applicable accounting standards have been followed.
ii) The directors have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 or loss of the Company for the year under review.
iii) The directors have 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.
iv) The directors have prepared the annual accounts on a going concern basis.
v) 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.
vi) The directors had devised proper system to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively.
ACKNOWLEDGMENT AND APPRECIATION
The Directors take this opportunity to thank the Shareholders, Financial Institutions, Banks, Customers, Suppliers and Regulatory & Governmental Authorities for their continued support to the Company. Further, the Directors appreciate and value the contributions made by Employees at all levels.
For and on behalf of the Board, 8K Miles Software Services Limited
Venkatachari Suresh Managing Director
Place: Chennai Date: August 24, 2016