HEXAWARE Directors Report

TO


THE MEMBERS,


The Directors are pleased to present their Twenty fourth Annual Report, on the business and operations of Hexaware Technologies Limited (hereafter referred to as ''''The Company’) together with audited financial statements for the financial year ended December 31, 2016.


Financial Performance:


Global Operations:


(USD million)









































FY 2016



FY 2015



Income from Operations



525.55



485.47



EBITDA before Employees Stock Option Compensations Cost



89.20



86.59



EBITDA after Employees Stock Option Compensations Cost



85.53



83.32



Profit from Operations *



77.23



75.82



Profit before Tax



83.04



77.96



Profit after Tax



62.06



60.65



(INR million)





























































FY 2016



FY 2015



Income from Operations



35,348.99



31,235.23



EBITDA before Employees Stock Option Compensations Cost



5,994.01



5,569.31



EBITDA after Employees Stock Option Compensations Cost



5,747.27



5,358.21



Profit from Operations *



5,188.84



4,875.74



Add: Exchange Rate Gain/ (Loss) (net)



355.93



81.40



Less: Interest



1.41



1.19



Add: Other Income



38.41



90.17



Profit before Tax



5,581.77



5,046.12



Less: Provision for Taxation



1,410.68



1,114.02



Profit after Tax



4,171.09



3,932.10



* excludes Exceptional items, Exchange Rate Difference, Interest, Other Income and Provision for Taxation India Operations:


(INR million)
































































































FY 2016



FY 2015



Income from Operations



13,930.41



12,935.97



EBITDA



4,552.05



4,312.32



Profit from Operations *



4,126.18



3,903.96



Less: Exchange Rate (Gain) / Loss (net)



(284.64)



(73.53)



Less: Interest



1.01



0.29



Add: Other Income



94.36



103.36



Profit before Tax



4,504.17



4,080.56



Less: Provision for Taxation



943.44



750.85



Profit after Tax



3,560.73



3,329.71



Add : Balance brought forward from previous year



3,007.25



2,862.59



Add: Transfer from Special Economic Zone Reinvestment Reserve



174.30



124.62



Balance available for appropriation



6,742.28



6,316.92



Appropriation



Interim Dividend



1,660.60



2,608.16



Tax on Dividends



338.04



528.76



Transfer to Special Economic Zone Reinvestment Reserve



177.73



172.75



Balance carried to Balance Sheet



4,565.91



3,007.25



Results of Operations


a) Global operations:


Income from operations increased to INR 35,348.99 million in 2016 from INR 31,235.23 million in 2015, growth of 13.2%. The growth in Dollar terms was 8.3%, reaching USD 525.55 million. Revenue in constant currency was USD 529.6 million, growth of 9.0%. Growth was driven largely by volume increase, aided by increased realized bill rates and higher onsite mix, however there was an adverse impact of cross currency. Profit from Operations (profit before Exchange rate difference, Interest, Other income and Provision for taxation) was at INR 5,188.84 million in 2016 as against INR 4,875.74 million in 2015, growth of 6.4%. The growth in profit from operations without considering RSU cost under long term incentive plan was 6.9%. During the year, the Profit after tax stood at INR 4,171.09 million in 2016 as compared to a profit of INR 3932.10 million in 2015, growth of 6.1%. PAT margins in Rupee terms were at 11.8% in 2016 compared to 12.6% in 2015.


Material changes from end of financial year till date of report


There are no material changes and commitments, 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 other than:


Buy back of 56,94,835 equity shares aggregating to Rs. 1,366,760,400 @ Rs. 240/- per equity shares.


On October 25, 2016, the Board gave in-principle approval for the merger of M/s. Risk Technology International Limited, Wholly Owned Subsidiary with the Company. The scheme of Merger was approved by the Board at its meeting held on March 8, 2017.


Company''''s major achievements in 2016


Over the last two years the primary objective was to establish momentum in growth. The growth in revenue was 13.2% in Rupee terms and 8.3% in USD terms as compared to 2015.


We have also established good momentum for next year with new booking from new clients at $ 153 million TCV for the year and that would give us confidence about growth for 2017 and beyond.


In USD terms, EBITDA before ESOP cost grew by 3.0%, after ESOP by 2.7% and PAT grew by 2.3%.


EPS after the ESOP dilution grew at 5.9%.


During the year 2016, 30 new clients were added. We continued to improve on depth of customer relationships. On a year Q4-2016 last year to Q4-2015, the top of the pyramid has bulked up. The number of clients in $50Mn has increased from 1 to 3. Bottom of the pyramid, we have solid growth which forms the basis for a strong account base for us to grow in the future, both greater than one million and more importantly the one to five million category.


b) India operations:


In the year 2016, the revenue of the standalone legal entity increased by 7.7% to Rs. 13930.41 million in comparison with revenue of Rs. 12,935.97 million in the previous year. The net profit after tax was Rs. 3,560.73 million as compared to Rs. 3,329.71 million in 2015 showing growth of 6.9%.


Share capital


The paid-up Share Capital of the Company as on December 31 2016 was Rs. 604.06 million comprising of 302,028,195 Equity Shares of Rs. 2/- each. During the year 4,65,298 shares were exercised under different ESOP schemes. The market capitalization of the Company as on December, 31, 2016 was at INR 62,550 million (USD 921 million). The market capitalization is calculated on the basis of closing prices of INR 207.10 on The National Stock Exchange and the closing exchange rate of 1 USD = INR 67.92 as of December 31, 2016.


Reserve


The balance in the Statement of Profit and Loss after adjusting the appropriations for the year is Rs. 4,565.91 million.


Forex Mark-To-Market: The year-end Hedging Reserve stood at gain of Rs. 322.77 million, as compared Rs. 15.96 million in the previous year. This is in accordance with the recognition and measurement principles for accounting of forward exchange contracts and derivative contracts of Accounting Standard (AS)-30.


The Company recorded Rs. 455.17 million in Employee stock options outstanding a reserve being amortization of compensation cost of RSU’s granted.


There was no transfer to General reserve during the year.


In summary, total reserves stood at Rs. 12,624.16 million, including Rs. 4,808.73 million of Securities Premium account.


Dividend


During the year 2016, the Company paid four interim dividends on equity shares, Q1 - Rs. 2.50 (125%), Q2 -Rs. 1.00 (50%), Q3 - Rs. 1.00 (50%) and Q4 - Rs. 1.00 (50%). This brings the interim dividends for the four quarters of 2016 to Rs. 5.50 per share (275%).


The Board of Directors have not recommended payment of any final dividend and interim dividends as aforesaid be considered as final. The total dividend declared for 2016 on account of interim dividend & tax thereon amounts to Rs. 1,998.64 million.


The break-up of dividend is as under: (Rs. million)






































Q1



Q2



Q3



Q4



Total



Dividend



754.63



301.88



301.94



302.15



1,660.60



Tax



153.62



61.45



61.47



61.50



338.04



Total



908.25



363.33



363.41



363.65



1,998.64



Particulars of loan, guarantee or investments


Loan, guarantees and investments covered under section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report. Please refer note no. 9 to 12 and note no. 15 of Standalone Financial Statements.


Subsidiaries and Associates


During the year 2016, Company has formed one step down subsidiary Company in Romania. The Company also formed one wholly owned subsidiary in Saudi (final registration is under process). The Company through its wholly owned subsidiary in Singapore also invested in one associate Company in Singapore. The total amount of initial investment in these three companies are given below:


























Sr. No.



Name of Company



Rs. Million



1



Hexaware Technologies Romania SRL



1.87



2



Hexaware Technologies Saudi LLC



8.03



3



Experis Technology Solutions PTE Ltd



16.95



During the year 2016, Company has also invested further funds in the following wholly owned subsidiaries. The total further investments in these subsidiaries are given below:





















Sr. No.



Name of Company



Rs. Million



1



Guangzhou Hexaware Information Technologies Company Limited



5.06



2



Hexaware Technologies LLC - Russia



68.59



Further, during the year, the Company has also granted additional loan aggregating Rs. 774.05 million to wholly owned subsidiary Risk Technology International Limited for the development of SEZ at Hinjewadi, Pune.


In accordance with Section 129(3) of the Companies Act, 2013, consolidated financial statements of the Company and all its subsidiaries, forms part of the Annual Report. Further, a statement containing the salient features of the financial statement of our subsidiaries in the prescribed format AOC - 1 is appended as Annexure 1 to the Board’s report. The statement also provides the details of performance, financial positions of each of the subsidiaries.


In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited financial statements of each of its subsidiaries, are available on our website www. hexaware.com. These documents will also be available for inspection during business hours at the registered office of the Company.


Business Strategy


Company’s strategic objective is to build a sustainable organization which is important and relevant for our customers and also generates profitable growth for investors.


No matter the size, Hexaware is committed in providing Personal Attention to every relationship. For the company, it’s just about more than performance. It’s more about being Transparent, Co-Innovating, predictability through Extreme Automation and striving to Shrink your IT. The company has infused fresh thinking into future technologies like Artificial Intelligence, Virtual Reality, and Digitization and provide solutions with the millennial mindset. Read about the distinctive traits that have helped Hexaware transform enterprises, through a newer, exciting human centered process based on Design Thinking in tandem with Intelligent Process Automation.


It has following strategy focus areas:


1. Delighting customers, in a different way, Co-Innovate & Make things Better: The Company challenges its team deployed in projects to think deeply about each customer problem and ReArchitect for Innovation and Smart Digitalization, to make its customers stand out. Hexaware strongly encourages Crowd sourcing (bottom-up Innovation) for each customer from 12,100 Hexawarians, as they believe the best of ideas actually come from people actually working on ground. Hexaware’s Innovation lab has built over 160 Proprietary tools & Accelerators on advanced technologies.


2. Exclusively focused on each relationship: Hexaware is focused on acquiring only a handful of new customers every quarter and building an organization with empowered Account Managers, increased accountability and improved decision making thus ensuring every client ''''Executive Attention’. This has resulted in the Customers staying for Life. The average tenure of top 10 of our customers has been 11 years.


3. Our Aspiration makes us indispensable-Shrink IT Grow Digital: Shrink IT concept is based on Hexaware’s decades of IT experience, Industry predictions and firm belief that the customers IT budget could be shrunk upto 30% in the coming years. The company has championed this approach by considering factors like- Proactive Problem Management, embracing Robotic Process Automation Solution and only using Hyperconverged Technology in the infrastructure space.


4. Willingness to cannibalize our revenue for automation: Traditional service providers actually find it hard to take up automation, as they would lose out in profit on T&M of resources. While automation would be catastrophic for them, the Company is willing to cannibalize its own revenue for mutual success and a lasting relationship.


5. Pursue strategic alliances: We are developing alliances that complement our core competencies. We are planning with niche and state of art technology software service providers in creating, deploying, integrating and operating business solution for our clients.


6. Exceeded delivery promises, anti-pyramid engagement approach: The typical difference that is experienced when working with Traditional IT players is that they extensively use fresh recruits for low-level manual tasks and too much rotation. But with Hexaware, its assigned Consultants stay with the same client account for generally four/five years, which strengthens and retains customer institutional knowledge.


7. Design is the Way of Life


- Build & Manage Hybrid environments: Hexaware powers its digital transformation further by blending traditional and cloud infrastructures. Leveraging Hybrid Cloud has helped in enabling next-generation technologies like IOT, Virtual Reality for customers.


- Digital DNA for Business Intelligence: With its roots deep enriched in Enterprise data management, Hexaware is committed in modernizing and transforming application environment and undertaking end-to-end digitalization journey for its customers. The strong background in rich data sets has resulted in a robust foundation for Business Intelligence.


- Design Thinking: Hexaware uses design thinking for creative problem-solving, rapid prototyping and solution development. For all its customer engagements, Hexaware follows this human centered process that helps in identifying unique challenges and goes about delivering the best possible experience.


There is ever increasing relevance of disruptive competitiveness of service providers like Hexaware today unlike traditional players as they can scale up and down aggressively based on client needs.


Infrastructure:


A tangible signature of the Company’s growth aspirations is its investment in infrastructure. The Company invested (in terms of outflow) Rs. 2,222.67 million in 2016 mainly in expanding its physical and technical (IT) infrastructure globally. Primarily the investment is in SEZ development i.e. Phase 2 of facility in Siruseri, Chennai and phase 1 of facility in Hinjewadi, Pune. The investments are made with an intent to serve the long term need and to provide quality support for its global delivery operations.


Delivery Centers


India based Global Delivery Centers Mumbai:


The Company has three Offshore Development Centers (ODCs) at Millennium Business Park in Mahape, Navi Mumbai. One of these is the registered office of the Company. There are around 1,500 employees working from these centers.


The Company’s BPS arm operates out of another building in the same complex, with 1300 employees - providing BPS services to its global clients in shift mode.


The Company has also taken premises on long-term lease for its IT and BPS operation in the SEZ facility named Loma IT Park, Ghansoli, Navi Mumbai with seating capacity of 1200 employees. This will be fully operational in 2017.


Chennai:


There are around 3,736 IT employees working from the Company’s 27 acre campus in Chennai. This campus houses all employee-friendly amenities like recreation center, library and gymnasium facilities offering plenty of avenues for relaxation and rejuvenation as well as knowledge enhancement through Hexavarsity -the Company’s in house Learning and Development University.


The Company’s Chennai "green campus" conforms to eco-friendly norms and regulations, like optimal use of solar energy, use of eco- friendly building materials and a judicious spread of landscaped spaces around seating facilities across various levels.


Currently seating capacity is expanded to 5,500 seats in Phase 1. The Company has also constructed Phase 2 with approximately 3300 seats.


The BPS arm also operates out of another two facilities in Chennai of which one is in SEZ. The combined strength of around 940 employees operates from these facilities.


Pune:


In Pune, the Company had 2 ODCs on lease in Hinjewadi Rajiv Gandhi InfoTech Park SEZ. The Company surrendered aforesaid leased premises and moved to its own SEZ campus at Hinjewadi from January, 2017. The first phase of this campus has capacity of 1900 seats with 968 seats ready to be occupied. Around 440 employees are currently operating from this campus.


Nagpur:


The Company owns 20 acres of land in MIHAN SEZ, Nagpur, a tier II city. This facility is currently operational with around 680 professionals and has seating capacity to accommodate 904 professionals in different shifts.


Bangalore:


This facility in the India’s IT capital of Bengaluru has capacity of 400 seats & the number of employees seated at office is around 240. This facility mainly houses the delivery operations for a major global client and is now being staffed with senior managerial roles in line with our increasing focus in solving their business-critical challenges.


Coimbatore:


Hexaware BPS arm has a facility in Coimbatore with 284 employees working from the facility.


Overseas Global Delivery Centers


New Jersey (USA):


The Company has an established Global Delivery Centre (GDC) at Secaucus, New Jersey (USA) for a few years now to cater specifically to its American clients. While this proximity centre offers benefits such as the same time zone, direct communication and enables convenient management oversight, it also further enables the clients to outsource mission-critical tasks and share secure information that would have otherwise not been shipped beyond the shores.


Alpharetta, GA (USA)


The Company has Global Delivery Centre (GDC) at Alpharetta and Sandy Springs in the state of Georgia, USA with employees strength of around 260.


Dunwoody, GA


The Company has Global Delivery Centre (GDC) at Dunwoody in the state of Georgia, USA with employees strength of around 180.


Herndon, VA (USA)


The Company has Global Delivery Centre (GDC) at Herndon in the state of Virginia, USA with employees strength of around 39.


Saltillo (Mexico):


The Company has a strong presence in Mexico with a nearshore Delivery Centre at Saltillo with employee''''s strength of around 290. While Mexico offers cost competitiveness compared to the United States of America, the country also provides immense benefits in the form of same time zone, enables immediate response and access to a vast talent pool and an untapped emerging market. The Company intends to leverage its near shore Delivery Centre to cater to several global clients as an addition to the other existing options of continuing operations in the USA or in the Company''''s locations in India.


Tver (Russia):


The Company has center in Russia for its BPS operation which has 110 employees.


Bucharest (Romania):


The Centre will be made operational from 2017.


Cash Flow


The cash generated from operations in 2016 was Rs. 4,803.07 million. The Company has redeemed money from Mutual Fund amounting to Rs. 220.83 million (net). The Company has invested Rs. 2,222.67 million in fixed assets mainly for new development centre in Chennai and Pune. During the year, the Company paid dividend including dividend tax of Rs. 2,505.86 million.


The Company has received Rs. 13.06 million from issue of shares. As of December 31, the cash position of the Company was Rs. 4,293.98 million excluding the restricted bank balance, equivalent in USD 63.22 million. Including the Mutual Fund investments (cash equivalent), the total cash & bank balance was at Rs. 4,482.48 million equivalent USD 65.99 million.


Human Resource Capital


As every industry globally is being re-shaped by digital technologies, individuals are transforming themselves to stay relevant and succeed in a digital world. The focus of the Company has been to leverage digital re-imagination to drive growth and efficiency of business models, products and services, business processes as well as the workplace. This helps the Company to deliver a superior experience to every key stakeholder, viz. customers, employees, investors and the community.


The Company has proper recruitment and human resources management process. Over the last year, the Company has added 740 employees this year, taking the total strength to 12,115 from 11,375 at the end of the previous year as of December 31, 2015. The Company is focused towards attracting and retaining high caliber employees through sound and resilient human resource management process. The Company consciously enhanced gender diversity with 30% of the employees being women.


The Company continues its focus on employee retention. The Company''''s efforts to make Hexaware as Great Place to work with a strong focus on employees'''' career aspirations, rewards & recognition helped maintain attrition rate at 16.1% in FY 2016.


Recognizing the fact that the workforce lives your brand, the HR team has embarked on a major branding exercise to build an engaging organization. For Making Hexaware a Great Place to Work, Company has launched Employee Assistance Program for employees, Company has tied up with counseling service provider to provide professional counseling services to the employees.


Talent Management - Asset Development


The Company believes that its employees are the heart of the organization; hence a large part of the management focus is to care and support its employees. The Company is future focused and is fully aware about what it needs from its talent. A significant portion of senior management focus is invested in engaging with the employees.


The Company strengthens its talent pool by providing employees with growth and talent enhancement opportunities. The Company is aware about the current market trends and is at the fore front of "Shrink IT, Grow Digital" mantra. The Company not only encourages its consultants but also provides them the right platform wherein they can innovate and provide value to customers. Brainbox is one such platform where consultants can post the ideas/innovation which can help the customers in saving the time & money. The platform has full support from the senior management. Appreciation and motivation goes a long way in encouraging consultants to give their best to the organization. The new Rewards & Recognition portal is the one stop solution for the same wherein managers can nominate the consultants for the rewards anytime of the year.


Feedback and appraisal is another very powerful tool to manage the talent in the Company. The new version of the Performance Management System is the right step in that direction. It provides the opportunity to the consultants to get the feedback from each of the projects they have worked and also an overall view about their performance and improvement areas. The system also assesses the consultants about their readiness for the next role/ position. The development plan provided by the managers serves as the building blocks of the training programs designed by Hexavarsity. Due to the ever changing & evolving nature of the industry, training & reskilling is not a luxury but the norm for the consultants. The up to date training modules coupled with external trainers and various hackathons organized by the service partners help in making our consultants among the best in the industry. Also, the Technical Competency Development Program (TCDP) helps to sharpen the technical skills of the consultants according to the role that they are playing.


The Company is future focused and is fully aware about what it needs from its talent. It has a systematic structured approach of attracting, identifying, developing, engaging/ retaining and deploying of those individuals with high potential who are of particular value to an organization, either in view of their high potential for the future or because they are fulfilling business/ operation critical roles. The Company also understands the need to connect with the Hexaware world on a global platform and therefore has launched Facebook@Work for consultants through which they can connect, communicate & collaborate. This also helps them in connecting with various stakeholders and gives them the chance to provide their suggestions, concerns and feedback for the improvement to make Hexaware a great place to work.


The Company has a pipelined approach of identifying future talent needed by the organization, also with the Planned Development Programs nurturing them for future top positions. The HR/Learning and Development team provides clarity about expectations and the differentiated capabilities required at different levels also helping them to work on the identified skill gap with some prominent development programs at each level.


The Company focuses on talent management through interventions like smooth process (from Hiring to retention), managing the programs as per diversity of the work force, and supporting high performers with an effective talent management system.


Last but not the least, All work & No Play, makes Jack a dull boy. The Company incorporated enough Fun@Work activities for consultants to rewind, relax & rejuvenate themselves. Funsters group, project outings and project lunch helps the team to bond together and work towards a common goal thereby taking Hexaware to its goal.


Information Security


Today’s digital enterprises face an increased exposure of cyber security threats from phishing attacks, Advanced Persistent Threat (APT) and hyper-connected universe. The Company has taken proactive steps to combat these threats and provide uninterrupted service delivery to customers.


The Company has established a comprehensive system to preserve the confidentiality, integrity and availability of information and also provides global analysis, assessment, policy, and governance for risks related to information security, privacy, business continuity, third party engagements and operational activities.


Stringent information security measures are in place in the Company to ensure business continuity and to reduce business damage by preventing and minimizing the impact of security incidents. Security controls are regularly monitored and improved up on, thereby giving confidence to our customers to do business with us.


Quality Assurance


The Company has sustained its commitment to the highest levels of quality, best-in-class service management, robust information security practices and mature business continuity processes that have collectively helped achieve significant milestones during the year. While sustaining existing external benchmarks and certifications, we have added new certifications and further enhanced our programs and initiatives.


We continue to adhere to international quality standard certifications such as ISO 9001-2008 & Tick ITplus, ISO 27001:2013, ISO 20000-1:2011, CMMI - DEV & SVC Version 1.3 - Level 5, ISAE3402 and SSAE16 SOC-1 Type II


The Company commissioned a study on client satisfaction for 2016 by Feedback Consulting, an independent market research firm. On a scale of -100 to 100, Company scored 66.2 in fiscal 2016, as against an industry score in the range of 40.1 to 68.4.


Benefits:


The customers / clients have benefited as a result of higher quality of delivery and support , reduction in cycle time and improved productivity . Hexaware’s understanding of customer’s business and technology landscape enables client value additions for efficiency improvement and cost reduction for the customer. This has resulted in high levels of customer satisfaction and repeat business. Implementing the best in class processes has trained the organization and people to be methodical and process-driven. The Company has introduced and improved upon best-of-breed industry practices and standards and thereby improved our delivery capability. Focus on quality has led to lower costs and improved efficiency within the organization.


Company focused on Corporate Governance


The Corporate governance is about maximizing shareholder value legally, ethically and sustainably. At Hexaware, the goal of corporate governance is to ensure fairness for every stakeholder. We believe sound corporate governance is critical to enhance and retain investor trust. The Company always seeks to ensure that performance is driven by integrity. The Board exercises its fiduciary responsibilities in the widest sense of the term. The disclosures seek to attain the best practices in international corporate governance. The Company also endeavors to enhance long-term shareholder value and respect minority rights in all its business decisions.


The Company believes that Good corporate governance underpins the success and integrity of the organizations, institutions and markets. It is one of the essential pillars for building an efficient and sustainable environment.


The Company has two "Big 4" firms as auditors - Deloitte Haskins & Sells LLP as its Statutory Auditors till the date of the Annual General Meeting and KPMG as its Internal Auditors. Ernst & Young are the tax advisors of the Company. The Company’s Board of Directors comprises eminent professionals in their respective fields with rich experience in policy-making and strategy formulation. All the major committees of the Board are headed by Independent Directors and the Company has followed Cadbury Committee’s recommendation of having two different individuals as Chairman & CEO for several years. The Company was the winner of the prestigious Golden Peacock Award for excellence in Corporate Governance for the year 2011 and 2015 and won the Special Commendation in the year 2009 and 2013.


In compliance with Regulation 34 of the Listing Regulations, a separate report on Corporate Governance along with certificate from the Auditors on its compliance, is attached and forms part of this Report.


Awards & Recognition:


The Company won the following awards / recognition in 2016:


Hexaware has won 5 awards in "Asia Outsourcing Congress & Awards 2015-16"


- Fastest Growing Outsourcing Company of the year 2015


- Best Customer Experienced Delivered by a Contact Center


- Excellence in Customer Services in the Outsourcing Industry


- Health Insurance BPO Provider


- Non - Voice Excellence Company of the year


Hexaware has won an Award for Excellence in Customer Service and a Certification of Recognition for Outsourcing Organization of the year at the Golden Globe Tiger Awards (For Outsourcing Excellence) in Malaysia.


Hexaware has been recognized and honoured for its unmatched capabilities in providing Business Process Outsourcing services to global Telecom clients at the recently concluded ''''National Awards for Excellence in Outsourcing 2016’ in the following categories-


- Best Outsourcing Service Providers- Telecom Industry


- Telecom Outsourcing Project of the Year


Hexaware has been awarded the prestigious CIO100 Award for Year 2016 from IDG India. The award was given in two categories for the Transformative & Collaboration initiatives done by the Company.


Hexaware has won the Brand Revitalization and Brand Excellence in IT/ITeS sector awards at the 7th CMO Asia Awards for Branding & Marketing.


Hexaware won the prestigious ''''Best Process Improvement Project Award’ at Golden Star Six Sigma Awards 2016.


Hexaware received Infonavit’s Excellence Award for being an Employer of Merit, 2016.


Hexaware has been identified the "Best IT Service Provider" in Europe and UK, as rated by a survey of 600 end customers by whitelane Research


Hexaware ranks top among 27 different vendors in IT outsourcing client satisfaction study in Europe conducted by WhiteLane Research Dated 14th July 2016 by analyst John Leigh.


Hexaware has been mentioned as one of the major IT services providers to North American insurers in the Novarica report titled, "IT SERVICES PROVIDERS FOR INSURERS", dated February 2016, by analysts Rob McIsaac and Alex Effgen.


Hexaware has been mentioned in the Forrester report titled "The Future of Consulting Through 2020", dated 11 February 2016, by analyst Marc Cecere.


Hexaware’s revenue has been mentioned to have recorded a 15% jump in the Ovum report titled "India IT Services Vendor Quarterly, 4Q15", dated 23 February 2016, by analyst Hansa Iyengar.


Hexaware has been mentioned in High potential quadrant in HfS Bluprint Grid for Successfactors services, dated March 2016, by analysts Khada De Souza and Charles Sutherland.


Hexaware has been mentioned as one of the vendors in the Gartner report titled "Market Share: IT Services, 2015" dated 06 April 2016, by analysts Kathryn Hale, Dean Blackmore, Jacqueline Heng, Twiggy Lo and a few others.


Hexaware has been mentioned as one of the mid-tier player with geographic/sector specialization in API Strategy And Delivery Service Providers space in the Forrester report titled, "Vendor Landscape: API Strategy And Delivery Service Providers", dated 19 April 2016 by analyst Randy Heffner.


Hexaware has been mentioned as one of the 25 fastest-growing BPO providers in 2015 by AGR in the Gartner report titled "Market Share Analysis: Business Process Outsourcing, Worldwide, 2015" dated 10 May 2016 by analysts Cathy Tornbohm and Dean Blackmore.


Hexaware has been mentioned as one of the Midsize Players With Geographic Or Sector Specializations in the Forrester report titled, "Vendor Landscape: Integration Strategy And Delivery Service Providers", dated 23 June 2016, by analyst Randy Heffner.


Hexaware has mentioned as a Global Systems Integrator, who deployed a smartwatch application for a large retailer in the Forrester report Titled "Enterprise Business Intelligence: Now Always At Hand On Your Smartwatch-Smart watches Are No Longer Just For Collecting Data: Use Them For Instant Glanceable Insights" , by analysts Boris Evelson and Michael Facemire dated 30th June 2016.


IDC Insight provides review of the recent Hexaware''''s Hexarising Event in the Report Titled "Hexaware: Transforming the Customer Experience to a Digital World" Dated 19th July by Analyst David Tapper and Peter Martson.


Hexaware has been stated as an IT Service Provider providing Targeted Analytics and Building Models for specific industry verticals in the Ovum Report titled "Market Landscape: Self-Service Visual Business Intelligence/ Analytics, 2016" dated 7th July 2016 by analyst Surya Mukherjee.


Hexaware identified as High Achiever in Nelson Hall’s NEAT Vendor Evaluation for Software Testing under Overall, Digital Focus, Efficiency Focus and Transformation Focus Market Segments Dated 26th July by Analyst Dominique Raviart.


Hexaware has been mentioned in "Aspirants" category in the Everest Report titled "Capital Markets BPO- Service


Provider Landscape with PEAK Matrix Assessment- 2016" Dated 9th August 2016 by Analyst Anupam Jain, Manu Aggarwal.


Hexaware has been mentioned in "Major Contenders" category and adjudged as "Star Performer" in the Everest Report titled "Multi Processing Human Resource Outsourcing Service Providers Assessment 2016" Dated 16th August by Analyst Anil Vijayan and Rajesh Ranjan.


Hexaware has been mentioned in "Major Contenders" category and adjudged as "Star Performer" in the Everest Report titled IT Outsourcing in Global Capital Markets Service Providers Assessment 2016 Dated 16th September by Analyst Ankur Seth and Aadithya Jain.


Hexaware has been mentioned in "Major Contenders" category and in the Everest Report titled Life Sciences Digital IT Services PEAK Matrix Assessment 2016 dated 22nd September bY Analyst Jimit Arora.


Hexaware''''s Raise IT Platform has been mentioned among the vendors offering cognitive Automation platforms in the IDC Report titled "Automatic Decisions: Rise of the Service Provider Cognitive Platforms " dated 11th October 2016 by Analyst David Tapper.


Hexaware has been mentioned among the Consulting, BPO and IT Outsourcing Providers Deploying RPA solution in the Market in the Gartner Report Titled "Robotic Process Automation: Eight Guidelines for Effective Results" dated 12 October 2016 by analyst Cathy Tornbohm.


Hexaware has been mentioned as one of the established providers have pivoted to SaaS in the Forrester Report titled "Vendor Landscape: Oracle Services Providers Aggressively Pivot To Cloud Solutions" dated 19th October 2016, by analyst Liz Herbert.


Hexaware has been positioned in "Star Performer and Major Contender" category in the Everest Report Titled Health Care Payer IT AO PEAK Matrix dated 31st October 2016 by analyst Jimit Arora.


Hexaware has been positioned in "Star Performer and Major Contender" category in the Everest Report Titled ITO In Insurance PEAK Matrix dated 30th November 2016 by analyst Jimit Arora.


Hexaware has been positioned in "Major Contender" category in the Everest Report Titled Healthcare Service Providers PEAK Matrix dated 30th November 2016 by analyst Jimit Arora.


Forrester mentions Hexaware as STAR PERFORMERS in their Wave Report Titled" Application Outsourcing for MidSize Providers, Q4 2016", dated 14th December by Analyst Somak Roy.


Risk Management


The Company has well defined Enterprise Risk Management (ERM) framework in place. The primary objective of ERM function is to implement a framework that augments risk response decisions and reduce surprises. ERM programme involves risk identification, assessment and risk mitigation planning for strategic, operational & financial and compliance related risks across various levels of the organization.


The Board of Directors and senior management team recurrently assess the operations and operating environment to identify potential risks and take necessary mitigation actions.


The Board has formed Strategy and Risk Committee to oversee activities related to risk minimization.


The details of risk faced by the Company is discussed in detail in the Management Discussion and Analysis section of this Annual Report.


Insurance


The Company has sufficiently insured itself under various insurance policies to mitigate risks arising from third party or customer claims, property/casualty, etc.


Errors & Omissions/ Cyber Liability/General Liability:


In a global services business, customers insist on taking suitable Insurance covers including Errors & Omission (Professional Indemnity), Cyber Liability and Commercial General Liability. The Company has taken appropriate insurance covers with reputed insurers & re- insurers to protect the Company from any third party liability claims that may arise at any point of time.


Directors’ & Officer’s Liabilities (D&O) /Employment Practices Liability Insurance (EPLI) / Crime:


D&O policy covers the Directors & Officers of the Company against the risk of third party claims arising out of their actions / decisions, which may have resulted in financial loss to any third party. The Company has appropriately insured itself to mitigate such risks emanating from any third party. EPLI Insurance protects the Company from claims from employees or third parties on account of any actual or alleged Employment Practice Violation. Crime insurance protects the Company from loss of money, securities or other financial loss arising from any fraudulent or criminal activity of employees or third parties.


Property / Employee Benefits:


The Company has insured its various properties & facilities against the risk of fire, theft etc. so that financials are not impacted by such unfortunate events. The employees of the Company are covered under various employee benefit insurance that provide cover for Hospitalization, Accidental Disability and Death.


Internal Financial Control Systems


The Company has a proper and adequate system of internal controls. This ensures that all transactions are authorized, recorded and reported correctly and assets are safeguarded and protected against loss from unauthorized use or disposition. In addition there are operational controls.


The Company has adopted accounting policies which are in line with the Accounting Standards prescribed in the Companies (Accounting Standards) Rules, 2006 that continue to apply under Section 133 and other applicable provisions, if any, of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions of the Companies Act, to the extent applicable. These are in accordance with generally accepted accounting principles in India. Changes in policies, if any, are approved by the Audit Committee in consultation with the Statutory Auditors.


The policies to ensure uniform accounting treatment are prescribed to the subsidiaries of your Company. The accounts of the subsidiary companies are audited and certified by their respective Auditors for consolidation.


The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timey preparation of reliable financial disclosures.


The Company has audit committee comprising of 5 (Five) professionally qualified and well experienced Directors, who review the operational efficiency, adequacy and effectiveness of systems, processes, and Internal finance control of the Company.


In addition to this, the Company continues to engage KPMG as its Internal Auditor. The Internal Auditors findings are discussed with the process owners and suitable corrective actions taken as per the directions of Audit Committee on an ongoing basis to improve efficiency in operations. During the year, the Company continued to implement suggestions and recommendations by the Internal auditor and audit committee to improve the control environment.


The further details regarding internal financial control are included in the Management Discussion and Analysis, which form part of this report. Report of statutory auditor on the internal financial control is also included in this Annual report on page 112 and 136.


HexaVarsity


HexaVarsity - Organizational Development (OD) Initiative


The Company launched the Organizational Development (OD) initiative, Ignite, in 2015. The purpose of the OD initiative was to equip the leaders to succeed in their roles and develop the potential of the employees in the context of the organizational growth and realignment of the organization structure and process.


The philosophy of the initiative is to ''''Ignite the Genius Within!’


The objective of Ignite was to design and deliver a leadership development program that:


- re-energizes and re-boots for action polishes and sharpens competencies to boost performance in leadership roles acts as a catalyst to ignite creativity


Ignite programs for key leadership roles:


- Mindset Analysis Workshops


- Bootstraps (Hard skills)


- LEAP - Leadership Excellence Achievement Program (Behavioral competencies)


Ignite programs for Managers & Leads:


- Creative Management Workshop mLEAP -Leadership Excellence Achievement Program for Managers (Behavioral competencies)


Special Programs:


- BA2BC - Business Analyst to Business Consultant


- Design Thinking Workshop


Ignite programs are built around the key competencies of Accountability and Ownership, Strategic Thinking, Planning, Collaboration and Customer Focus.


In 2015, the Company’s focus was to ensure that the initiative was perceived as truly developmental, with special focus on knowledge acquisition and retention.


The company covered 68% of its target audience by the end of 2015 and 79.6% of by mid-2016.


The programs were delivered across locations using a blend of methodologies such as Instructor-Led Training (ILT), virtual and e-learning.


The key leadership roles covered under Ignite in 2015 were ASDMs, Account Managers, Hunters, Overlay Sales, Competency Heads, and Practice and Solution Heads


In 2016 the company also extended the Ignite programs to cover the managers and leads reporting in to the leaders who had completed the Ignite program. A new set of programs were created and are being delivered across locations.


English Language Development


A key OD initiative for 2016 was to identify and use a tool for English Language Development. The company uses the Burlington English Tool for this purpose. Development on this tool is used to up-scale the English language skill and abilities of employees at various levels. The tool measures and rates the English language ability and skill of the employee before and after development on the CEFR rating scale.


The Common European Framework of Reference for Languages (CEFR) is an international standard for describing language ability. It is used around the world to describe learners’ language skills.


The company had 80 employees complete development programs on the tool in 2016 and over 25% of them have moved up to the highest CEFR level possible (C1) on the tool. Over 140 employees are undergoing development on the tool currently.


CTaDel - Customer Centric Talent Development Program


HexaVarsity has launched the CTaDel initiative in January 2015 to address the account specific learning and development needs. Dedicated team members are assigned from both HexaVarsity and the accounts to work together on this initiative.


In 2016, the Company chose the overall Category "A" accounts (including Top 20) of Hexaware to cater to their account specific learning and development needs.


The company has covered 63% of the targeted Category "A" accounts.


The following are offerings provided through the CTaDel initiative,


1. Account specific training and certifications


2. Account specific knowledge management


3. Account specific content creation


4. Account specific custom learning plan


Link-N-Learn: This is a weekly connect program to share and learn with peer group placed across locations.


The objective of this initiative is to share and learn from best practices, experiences, solutions, challenges, and successes.


This initiative was kick started in 2015 and completed around 30 sessions across various verticals and horizontals.


Fresher Training Program (FTP)


The Fresher Training Program (FTP) is a Hexavarsity initiated program designed and delivered exclusively for fresh graduate recruits, management trainees (MT) and senior management trainees (SMT). The program includes a series of technical and behavioural trainings and assessments for Engineering, Management and B.Sc. / B.Com / B.A. graduates to enable them to be work ready and deployable.


FTP courseware restructuring was completed with introduction of Gamification in courses and real-time/ practical question banks in assessments.


Technical Competency Development Program (TCDP)


The Technical Competency Development Program (TCDP) is a HexaVarsity initiative aimed at developing the technical competencies of the Hexaware workforce. The competencies mapped to each role are documented in the Technical Quotient (TQ) frameworks and are uniquely defined for each unit. Horizontals and Verticals participated in the courseware revamp to keep the courses and assessments are up to date. Role based Learning plans were enhanced with assessment tracking features.


Professional Certification and Incentives


- Currently 2,099 employees have been certified in the system.


- 1027 overall certifications in 2016 by 810 unique employees


- 8 in-house certification drives were organized in 2016 and 142 employees participated from across locations.


- 975 hours have been spent on developing internal e-contents and hosting on the knowledge management portal.


Related party transactions


During the financial year 2016, the Company has entered into transactions with related parties as defined under Section 2(76) of the Companies Act, 2013 all of which were in the ordinary course of business and on arm''''s length basis and in accordance with the provisions of the Companies Act, 2013, read with the Rules issued there under and the Listing Regulations.


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 with the interest of the Company at large.


All Related Party Transactions are placed before the Audit Committee and also the Board for approval. The policy on Related Party Transactions is uploaded on the Company''''s website.


The details as required to be provided under Section 134(3) (h) of Companies Act, 2013 are disclosed in form AOC-2 as Annexure 2 and form part of this Annual Report.


Policy on dealing with related party transaction is available on the website of the Company. http://hexaware.com/ investors/ Policy on determining material subsidiaries of the Company is available on the website of the Company. http://hexaware.com/investors/


Employee Stock Option Plans (ESOP)


Pursuant to the approval of the shareholders, the Company has instituted various Employee Stock Option Schemes for all eligible employees, directors (excluding promoter directors) of the Company and employees of its subsidiaries. All the plans are administered by the Nomination & Remuneration Committee of the Board.


During the year 2016, 4,65,298 options were exercised and the Company allotted 4,65,298 equity shares of INR 2/- each to the employees on such exercise. These shares have been listed on the Bombay Stock Exchange Limited and National Stock Exchange of India Limited. 1,048,312 Restricted Stock Units (RSUs) were granted under 2015 schemes during the year 2015, as explained below:


On February 03, 2016, 295120 RSUs were granted exercisable at a price of Rs. 2/- under the Employee Stock Option Scheme 2015 convertible into equal number of equity shares of the company.


On July 28, 2016, 238,592 RSU''''s were granted with exercise price of Rs. 2/- to Mr. R Srikrishna, CEO & Executive Director under the Employee Stock Option Scheme 2015 convertible into equal number of equity shares of the company.


On October 24, 2016, 514,600 Restricted Stock Units (RSUs) were granted at a price of Rs. 2/- under the Employee Stock Option Scheme 2015 convertible into equal number of equity shares of the company.


Details of the shares issued under Employee Stock Option Plan (ESOP), and also the disclosures in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 are available on the website of the company at the following link : http://hexaware.com/investors/ No employee was issued Stock Option, during the year equal to or exceeding 1% of the issued capital of the Company at the time of grant.


Fixed deposits


During the year under review, the Company did not accept or invite any deposits from the public.


Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo


The information relating to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo required under Section 134(3) (m) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 is annexed and forms part of the report.


Directors'''' Responsibility Statement


Pursuant to Section 134 (3) (c) and (5) of the Companies Act, 2013, the Directors confirm the following:


(a) in the preparation of the annual accounts, the applicable accounting standards have been followed and there were no material departures;


(b) the directors have 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;


(c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;


(d) the directors have prepared the annual accounts on a going concern basis; and


(e) the directors, have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.


(f) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.


Directors and Key Managerial Personnel


Mr. P R Chandrasekar having DIN 02251080 was re-appointed as Non Executive Director of the Company for one year w.e.f January 1, 2017 on the existing terms and conditions including remuneration.


Mr. Bharat Shah (DIN number 00136969) and Mr. Dileep Choksi (DIN 00016322) were re-appointed as Independent Directors for a period of three years w.e.f October 17, 2016.


Re-appointments/ Retirement by rotation


In accordance with the provisions of Companies Act, 2013, Mr. P R Chandrasekar and Mr. Atul Nishar, Directors of the Company, retire by rotation at this Annual General Meeting and, being eligible; offers themselves for reappointment at the Annual General Meeting.


The information of Directors seeking appointment / re- appointment/ retirement by rotation at the Annual General Meeting to be given to the shareholders as per regulation 36 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is being provided separately in the on Page No. 95 & 96 of this Annual Report. Members are requested to refer the said section of the Corporate Governance Report.


Number of Meetings of the Board


Six Meetings of the Board were held during the year. For details of the meetings of the Board, you may refer to the corporate governance report, which forms part of this Annual report.


Declaration by Independent directors


The Independent Directors have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and there has been no change in the circumstances which may affect their status as Independent Director during the year.


Board Evaluation


The Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandates evaluation of performance of Independent Directors, non Independent Directors and Chairperson. The Companies Act, 2013 states that a format annual evaluation needs to be made by the Board of its own performance and that of its committees and individual Directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of Independent Directors shall be done by the entire board of Directors, excluding the director being evaluated.


The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as the Board composition and structure, effectiveness of board processes, information and functioning, etc.


The performance of the committees was evaluated by the board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc.


The Board and the Nomination and Remuneration Committee ("NRC") reviewed the performance of the individual directors on the basis of the criteria approved by the Board.


In a separate meeting of Independent Directors held on 22nd December, 2016, performance of Non-Independent directors, performance of the board as a whole and performance of the Chairman was evaluated.


Further SEBI vide its guidance note dated January 5, 2017 has suggested process / practice that may be adopted by the Companies for performance evaluation. The Company is in process of evaluating the required changes, if any, in performance evaluation process as per the SEBI guidance note.


Training of Independent Directors


To familiarize the Independent Directors with the strategy, operations and functions of the Company, the Executive Director and Senior Managerial personnel make presentations at the Board Meeting about Company’s operations, markets, financial results, human resources and on other important aspects.


The terms and conditions of the appointment of every Independent Director is available on the website of the Company at: http://hexaware.com/investors/


Details of the familiarization programme of the independent Directors are available on website of the Company at http://hexaware.com/investors/


Committees of the Board


The following Committees of the Board existed till 25th October, 2016:


1. Audit, Governance & Compliance Committee


2. Nomination & Remuneration Committee


3. Stakeholders Relationship Committee


4. Capital Issue Committee


5. Banking, Investments, Operations & Forex Committee


6. Corporate Social Responsibility Committee


7. Infrastructure Committee


8. Special Committee for Internal Automation


The Board of Directors have re-constituted all the committees in the Board meeting held on 25th October, 2016. Currently the following committees exist:


1. Audit, Governance & Compliance Committee


2. Nomination & Remuneration Committee


3. Stakeholders Relationship Committee


4. Corporate Social Responsibility Committee


5. Strategy and Risk Committee


The details of the composition of the committee and attendance of the Directors at the meetings of Committees of the Board are provided in the Corporate Governance report.


Policy on directors and Key Managerial Personnel appointment and remuneration and other details


The Company’s policy on directors and Key Managerial

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