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    Oracle Financial Services Software Limited Annual Report 2012-2013


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    From the Chairman’s desk It is my pleasure to report the results for the financial year ended March 31, 2013. In the year under review, on a consolidated basis, our net profit increased by 18 percent to ` 10,751 million. Our focus on innovation and operational excellence has reinforced our leadership in the marketplace, and a growing number of financial services organizations, worldwide, are selecting our products to achieve competitive differentiation, ensure regulatory compliance and deliver personalized service to their customers. In addition, these institutions value the consulting services provided by your Company. Our strategy has been centered around consolidation of our position in markets where we are already present, and expansion of our addressable market by launching relevant offerings to segments hereto not addressed and opening major markets. We maintain our focus on key areas of opportunity, including mobile banking, direct banking and Shariah-compliant banking. Your Company intends to stay ahead of competition by making substantial investments to our product suites that address these opportunities. We launched Oracle FLEXCUBE 12.0 earlier this year. The suite now includes in its ken Oracle FLEXCUBE Direct Banking and Private Banking functionality. This synthesized version also enables enhanced mobile banking with iPhone, iPad and Java ME devices. During the financial year, we reported several marquee deals with Tier One banks, especially in North America, Europe, Middle East and Africa (EMEA) regions, relating to our risk management solutions stack. These are a direct result of the investments we have continued to make in our risk solutions portfolio to keep it at the leading edge. This year, we announced the availability of Oracle Financial Services Analytical Applications for Customer Insight, a comprehensive solution that enables institutions to gain a 360-degree view of customer relationships across finance, risk management and marketing for extended and actionable insight into customer behavior. To address the specific requirements of complex regulations such as Basel III, Dodd Frank, and Foreign Account Tax Compliance Act (FATCA), we expanded our Enterprise Risk Management suite and the Enterprise Stress Testing & Capital Planning Analytics suite. We also launched the Oracle Financial Services Loan Loss Forecasting & Provisioning System, a new analytical application that helps organizations accurately forecast credit losses and compute loan loss provisions. Your Company announced general availability of Oracle Banking Platform for banks in September 2012. The new offering already has gained the first two deployments in Asia. Oracle Banking Platform strengthens the portfolio and capability of your Company to address replacements at Tier 1 Retail Banking Institutions in Europe, North America and Asia. Our track-record, technology assets and investments place us, along with Oracle, in an excellent position to leverage the opportunities that we see ahead of us, providing an application set that is complete and optimized on Oracle Hardware, along with the necessary services. On behalf of the Board of Directors and the Management of Oracle Financial Services Software, I would like to thank you for your support over the financial year. I look forward to your continued patronage to help us achieve our mission of being the most preferred technology partner of banks across the world. Regards, S Venkatachalam Chairman Oracle Financial Services Software Limited


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    This page has been intentionally left blank. Oracle Financial Services Software – Annual Report 2012-2013


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    Contents Financials at a Glance 4 Corporate Information 6 Directors’ Report 9 Corporate Governance Report 17 Management’s Discussion and Analysis 33 Consolidated Financials 47 Unconsolidated Financials 79 Notice of Annual General Meeting 117 Attendance Slip & Proxy Form 127 Annual General Meeting Day and Date : Wednesday, August 14, 2013 Time : 3.00 p.m. Venue : The Leela Kempinski Sahar, Andheri (East) Mumbai 400059 3


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    Financials at a glance Key performance indicators 2012-2013 As per Indian GAAP Consolidated results Fiscal year 2012-2013 break up in terms of operating revenue by region, operating revenue by portfolio and expense by category BPO Services 3% Services Asia Pacific North America 22% 35% 33% Products 75% Europe, Middle East, Africa 32% Operating revenue by region Operating revenue by portfolio Depreciation and amortization Other expenses 3% 6% Facility costs 2% Professional fees 8% Travel cost 7% Staff cost 74% Expense by category (All figures in ` million except EPS & Book Value) Our 10 years in the industry 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Operating Revenue 7,881.29 11,385.93 14,823.00 20,609.38 23,802.36 29,276.20 28,739.74 29,969.32 31,466.76 34,739.99 Interest and Other Income (expense) 136.58 259.28 290.54 367.28 631.16 1,763.89 (858.03) 1,668.26 4,217.49 4,595.44 Total Revenue 8,017.87 11,645.21 15,113.54 20,976.66 24,433.52 31,040.09 27,881.71 31,637.58 35,684.25 39,335.43 Total Expenses 5,703.26 8,693.82 12,176.60 16,837.91 19,835.95 22,839.30 18,947.38 19,157.57 21,515.23 23,203.42 EBT 2,314.61 2,951.39 2,936.94 4,138.75 4,597.57 8,200.79 8,934.33 12,480.01 14,169.02 16,132.01 Tax 526.75 627.06 560.41 415.95 441.68 835.36 1,197.69 1,370.12 5,076.29 5,380.58 EAT 1,787.86 2,324.33 2,376.53 3,722.80 4,155.89 7,365.43 7,736.64 11,109.89 9,092.73 10,751.43 EPS 21.27 27.65 28.27 44.28 49.44 87.62 92.03 132.16 108.16 127.89 Book Value 110.97 136.24 164.12 280.95 330.34 416.92 510.27 643.03 751.48 881.03 Note: All EPS and Book Values are computed based on the current equity capital base of 84,065,478 shares as on March 31, 2013. Oracle Financial Services Software – Annual Report 2012-2013


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    Key metrics 2003-2013 Operating revenue Operating income 40,000.00 14,000.00 34,739.99 35,000.00 11,536.57 31,466.76 12,000.00 10,811.75 10,644.85 30,000.00 29,276.20 28,739.74 29,969.32 9,792.36 10,000.00 25,000.00 23,802.36 in ` million in ` million 20,609.38 8,000.00 7,196.85 20,000.00 14,823.00 6,000.00 15,000.00 11,385.93 3,771.47 3,966.41 4,000.00 10,000.00 7,881.29 2,692.11 2,744.00 2,176.00 5,000.00 2,000.00 0.00 0.00 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 Net income Earnings per share 12,000.00 140.00 132.16 11,109.89 127.89 10,751.43 10,000.00 120.00 9,092.73 108.16 7,736.64 100.00 8,000.00 92.03 7,365.43 87.62 in ` million 80.00 6,000.00 in ` 60.00 3,722.80 4,155.89 49.44 4,000.00 44.28 40.00 2,324.33 2,376.53 27.65 28.27 1,787.86 21.27 2,000.00 20.00 0.00 0.00 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 Earnings per share is computed on the equity capital base of 84,065,478 shares as on March 31, 2013. Book value Number of employees including subsidiaries 1,000.00 12,000 11,386 11,006 881.03 10,451 900.00 9,969 10,000 9,652 9,682 800.00 751.48 9,068 Number of employees 700.00 643.03 8,000 600.00 6,858 510.27 500.00 6,000 in ` 416.92 4,747 400.00 330.34 280.95 4,000 300.00 2,974 164.12 200.00 136.24 110.97 2,000 100.00 0.00 0 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 Book Value is computed on the equity capital base of 84,065,478 shares as on March 31, 2013. Customers serviced ... in countries 1,200 160 1,084 141 141 1,028 137 137 139 971 140 133 1,000 922 128 123 882 Number of customers 120 112 814 108 800 753 Country base 100 642 600 544 80 480 60 400 40 200 20 0 0 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 5


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    Corporate information Oracle Financial Services Software Limited Board of Directors Manmath Kulkarni Chief Financial Officer S Venkatachalam, Chairman Manoj Narayan Kulkarni Makarand Padalkar Chaitanya Kamat, Managing Director & CEO Meenakshy Iyer Derek H Williams Mini Muralidhar Chief Accounting Officer Harinderjit Singh Nikos Goutsoulas Avadhut (Vinay) Ketkar Richard Jackson Parmeet Soin Robert K Weiler Rajaram N Vadapandeshwara Samantha Wellington Auditors Rajendra Potdar William Corey West S. R. Batliboi & Associates LLP Rajesh Makhija Y M Kale Ravikumar M Management Team Ravikumar V Bankers Abhik Ray S Bhargava Bank of India Arvind Gulhati Sanjay Bajaj Canara Bank Atul Kumar Gupta Sanjay V Deshpande Central Bank of Libya Bhaskar Jayaraman Sanjeet Prakash Rao Citibank, N.A. Dinesh V Shetty Surendra Shukla HDFC Bank Ltd. Don Ganguly Suresh Kumar Pinglay Kotak Mahindra Bank Ltd. Edwin Niranjan Moses Sivaramakrishnan G J P Morgan Chase George Thomas Syndicate Bank Venkata Subramanian Girish Chhatpar Yes Bank Ltd. Venkatesh Srinivasan H S Teji Vijay Alexander Jambu Natarajan P V Vikram Gupta Registrars & Transfer Agents K K Davis Vinayak L Hampihallikar Link Intime India Private Limited Kishore Kapoor C-13 Pannalal Silk Mills Compound Laura Balachandran L.B.S. Marg, Bhandup (West) Company Secretary Mahesh Kandavar Rao Mumbai 400078 Hoshi D Bhagwagar Oracle Financial Services Software – Annual Report 2012-2013


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    Registered Office SDF-1, Unit 12 Oracle Financial Services Software Limited SEEPZ - SEZ Oracle Park Andheri (East) Off Western Express Highway Mumbai 400096 Maharashtra, India Goregaon (East) Mumbai 400063 Maharashtra, India Block A, NR Enclave, 4th Floor Plot No. 1, EPIP Industrial Area Offices Village limits of Hoodi Nirlon Compound Krishnarajapuram Hobli Off Western Express Highway Whitefield Goregaon (East) Bangalore 560066 Karnataka, India Mumbai 400063 Maharashtra, India Subsidiary Offices – Asia Pacific Oracle Park Oracle Financial Services Software (Shanghai) Limited Ambrosia Unit 806 in Henderson Metropolitan Pune 411021 Maharashtra, India 155 Tianjin Road Shanghai, PRC, China 200001 Embassy Business Park C.V. Raman Nagar Oracle Financial Services Software Pte. Ltd. Bangalore 560093 Karnataka, India 27, International Business Park #02-01 iQUEST@IBP Building Singapore 609924 Gopalan Enterprises (I) Pvt. Ltd., (SEZ) Global Axis, Unit 1 & 2 Plot # 152, EPIP Zone Offices Whitefield Akasaka Center Building 13F, Bangalore 560066 Karnataka, India 1-3-13 Motoakasaka, Minato-ku, Tokyo 107-0051 Green I-Tech, # 5 16F ASEM Tower Muthiah Mudali Street 159-1 Samsung-dong, Kangnam-gu, Off Cathedral Road Seoul, South Korea Chennai 600086 Tamil Nadu, India 18 Krasnopresnenskaya nab. Level 4, 4 Julius Avenue Block C, 9th floor North Ryde Moscow 123317, Russia Sydney, NSW 2113, Australia 3rd Floor-Right Wing, Oracle Financial Services Consulting Pte. Ltd. Building # 6, Dubai Internet City (subsidiary of Oracle Financial Services Software Pte. Ltd.) P O Box 500053, Dubai, UAE 27, International Business Park #04-05 iQUEST@IBP Building Singapore 609924 Subsidiary Offices – India Oracle (OFSS) ASP Private Limited Oracle Park Subsidiary Office – Europe Off Western Express Highway Oracle Financial Services Software B.V. Goregaon (East) Claude Debussylaan 32 Mumbai 400063 Maharashtra, India 14th floor, Vinoly Building 1082 MD Amsterdam, The Netherlands Oracle (OFSS) Processing Services Limited Oracle Park Off Western Express Highway Offices Goregaon (East) Mainzer Landstrasse 49a Mumbai 400063 Maharashtra, India 60329 Frankfurt am Main, Germany 7


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    Level 29, 40 Bank Street Subsidiary Offices – South America Canary Wharf Oracle Financial Services Software Chile Limitada London E14 5NR, UK Edificio 12, Avenida del Valle 537 - 3rd Floor Ciudad Empresarial Huechuraba Suite 22 Santiago, Chile, CP 8580678 Portes de la Defense 15, boulevard Charles de Gaulle 92700 Colombes, France Subsidiary Office – Mauritius ISP Internet (Mauritius) Company C/o Cim Global Business Molyneux House Rogers House Bride Street, Dublin 8 5 President John Kennedy Street Ireland Port Louis, Mauritius Oracle Financial Services Software SA Offices 14nr Paradeisou Str. & 1nr Patroklou Str. 151 25 Oracle (OFSS) BPO Services Inc. Marousi, Athens, Greece 17901 Von Karman Ave. Suite # 800 Irvine, CA 92614 USA Subsidiary Offices – North America Oracle Financial Services Software America, Inc. Oracle (OFSS) BPO Services Limited Oracle Financial Services Software, Inc. & Mantas Inc. DLF Infinity Tower A, 3rd Floor 399 Thornall Street, 6th Floor DLF Cyber City, Phase II Edison, NJ 08837 USA Gurgaon 122002 Haryana, India Oracle Financial Services Software – Annual Report 2012-2013


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    Directors’ report Financial year 2012-2013 Dear Members, The Directors present their report on the business and operations of your Company along with the Annual Report and audited financial statements for the financial year 2012-2013. Financial highlights As per Indian GAAP Consolidated financial statements: (Amounts in ` million) Particulars Year ended Year ended March 31, 2013 March 31, 2012 Revenue from operations 34,739.99 31,466.76 Other income, net 4,595.44 4,217.49 Total income 39,335.43 35,684.25 Depreciation and amortization (655.02) (466.17) Profit before exceptional item and tax 16,132.01 14,862.34 Exceptional item – (693.32) Profit before tax 16,132.01 14,169.02 Tax expenses (5,380.58) (5,076.29) Profit for the year 10,751.43 9,092.73 As per Indian GAAP Unconsolidated financial statements: (Amounts in ` million) Particulars Year ended Year ended March 31, 2013 March 31, 2012 Revenue from operations 29,377.01 26,058.54 Other income, net 4,403.20 3,750.34 Total income 33,780.21 29,808.88 Depreciation and amortization (586.08) (401.19) Profit before exceptional items and tax 15,047.60 13,243.95 Exceptional items, net – 2,414.98 Profit before tax 15,047.60 15,658.93 Tax expenses (4,755.00) (4,766.60) Profit for the year 10,292.60 10,892.33 Performance On consolidated basis, your Company’s revenue, stood at ` 34,740 million this year, an increase of 10% from ` 31,467 million as compared to the previous financial year. The net income increased to ` 10,751 million this year, an increase of 18%. On an unconsolidated basis, your Company’s revenue grew to ` 29,377 million during the financial year 2012-2013 from ` 26,058 million last year. This represents a growth of 13%. The Company’s profit for the financial year 2012-2013 has decreased to ` 10,293 million, a decrease of 5.5% over the previous financial year. A detailed analysis of the financials is given in the Management’s discussion and analysis report that forms a part of this Directors’ report. Dividend The Board has decided to conserve the funds of the Company for organic and inorganic growth opportunities. Accordingly, the Board has decided not to declare a dividend for the financial year 2012-2013. Transfer to reserves The Company does not propose to transfer any amount to the General Reserve out of the amount available for appropriation. An amount of ` 52,548.64 million is proposed to be retained in the Profit & Loss Account. Share capital During the year, the Company allotted 91,721 equity shares of face value of ` 5/- each to its eligible employees, who exercised their options under the prevailing Employee Stock Option Schemes of the Company. As a result, as on March 31, 2013, the paid-up equity share capital of the Company was ` 420,327,390/- divided into 84,065,478 equity shares of face value of ` 5/- each. 9


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    Oracle’s holding in the Company As on March 31, 2013, Oracle Global (Mauritius) Limited, the Promoter held 67,481,698 equity shares constituting 80.27% of the equity capital of the Company. With reference to SEBI Guidelines including Clause 40A of the Listing Agreement on Minimum Public Shareholding of 25%, Oracle Global (Mauritius) Ltd. (“OGML”), the Promoter of the Company, had come out with an “Offer for Sale through the Stock Exchange Mechanism” on May 22, 2013 for reducing its holding from 80.27% to 75% as required. Pursuant to the said offer for sale, the shareholding of OGML as on May 24, 2013 was reduced to 75%. The current shareholding of OGML is 74.99% and the Company is in compliance with the SEBI Guidelines including Clause 40A of the Listing Agreement which requires a Minimum Public Shareholding of 25% of the paid-up capital. Directors Mr. Derek H Williams and Mr. Chaitanya Kamat, Directors of the Company, retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. The Board appointed Mr. Richard Jackson, Ms. Samantha Wellington and Mr. Harinderjit Singh as Additional Directors with effect from December 12, 2012, April 10, 2013 and July 10, 2013 respectively. They hold office up to the date of the ensuing Annual General Meeting. The Company has received Notices in writing from Members, pursuant to Section 257 of the Companies Act, 1956, proposing the candidature of Mr. Richard Jackson, Ms. Samantha Wellington and Mr. Harinderjit Singh for the office of a Director. As stipulated under Clause 49 of the Listing Agreement entered into with the stock exchanges, brief resumes of the Directors proposed to be appointed/re-appointed, the nature of their expertise in specific functional areas and the names of companies in which they hold directorships and membership/chairmanship of Board Committees, etc. are provided in the Notice and/or Report on Corporate Governance forming a part of the Annual Report. The Board recommends to the Members the resolutions for re-appointment of Mr. Derek H Williams and Mr. Chaitanya Kamat as Directors of the Company. The Board also recommends the appointment of Mr. Richard Jackson, Ms. Samantha Wellington and Mr. Harinderjit Singh as Directors. Mr. William T Comfort, Jr., resigned as a Director and Chairman of the Company with effect from May 11, 2012. The Board appointed Mr. S Venkatachalam as the Chairman of the Board with effect from May 12, 2012. Mr. Frank Brienzi resigned as a Director of the Company with effect from July 2, 2013. The Board placed on record its appreciation of the services rendered by Mr. William T Comfort, Jr., and Mr. Frank Brienzi during their tenure as Directors of the Company. Infrastructure The Company maintains optimal infrastructure for its operations. The Company made significant addition to the communication infrastructure in the year to facilitate remote working and team collaboration. Global alliances Your Company furthered its commitment to expand its footprint through partners. In order to provide a specific focus, a dedicated group for consulting partners was established. This group nurtures a robust partner ecosystem and develops strategic partners with sound delivery capabilities in the consulting services around the products. Specific programs have been designed to build the capability of the partners to deliver high quality implementation services. The programs support partners and end-customers through all stages; from identifying the right solution for the customers’ needs, progressing through the various stages of implementation cycle, and even after go-live. Subsidiaries Your Company has subsidiaries in Greece, India, Republic of Chile, Republic of China, Republic of Mauritius, Singapore, The Netherlands and USA for sales and marketing and customer support in these regions. The Ministry of Corporate Affairs has issued a General Circular No.: 2/2011 dated February 8, 2011 granting a general exemption to the companies stating that the provisions of Section 212 of the Companies Act, 1956 (“Act”) shall not apply in relation to subsidiaries of companies subject to the company fulfilling certain conditions stated in the said circular. The Company is in compliance with the conditions stipulated by the Ministry of Corporate Affairs. Therefore, the accounts and related reports of the subsidiary companies are not attached to the Annual Report of the Company for the year ended March 31, 2013. The Company will make available the accounts and related information of the subsidiary companies upon request by any member/investor of the Company or its subsidiaries. Further, the accounts and related information of the subsidiary companies will be kept open for inspection by any Member, at the registered office of the Company and at the registered office of the subsidiaries during office hours of the Company/subsidiaries and the same will also be made available on the website of the Company www.oracle.com/financialservices. Oracle Financial Services Software – Annual Report 2012-2013


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    Fixed deposits During the financial year 2012-2013, the Company has not accepted any fixed deposits within the meaning of Section 58A of the Companies Act, 1956, and as such, no amount of principal or interest was outstanding as of the date of the Balance Sheet. Corporate governance The Company has taken appropriate steps and measures to comply with all the corporate governance and related requirements as envisaged under Clause 49 of the Listing Agreement entered with stock exchanges and Section 292A of the Companies Act, 1956, except that there was a delay of 34 days beyond the specified time limit provided under clause 49(I)(C)(iv) in appointing a new Independent Director on the Board, after the resignation of an existing Independent Director. Your Company has constituted five committees consisting of Board Members and other senior officials of the Company, namely, Audit Committee, Compensation Committee, ESOP Allotment Committee, Transfer Committee and Shareholders’ Grievances Committee. There is a separate report on Corporate Governance which forms a part of this Annual Report. A certificate of Statutory Auditors, M/s. S. R. Batliboi & Associates LLP, Chartered Accountants, with regard to compliance of conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement is annexed herewith. The Company is also supporting the Go Green initiative announced by the Ministry of Corporate Affairs allowing paperless compliance. A certificate from the Managing Director & CEO and Chief Financial Officer of the Company confirming internal controls and checks pertaining to financial statements, as also declaring that all Board Members and senior managerial personnel have affirmed compliance with the Code of Ethics and Business Conduct for the financial year ended March 31, 2013, was placed before the Board of Directors and the Board has noted the same. The said certificate is annexed to the Directors’ report. A list of the committees of the Board, names of their Members, scope and other related information are detailed in the Corporate Governance Report. Business Responsibility Report Securities and Exchange Board of India (SEBI) through circular dated August 13, 2012, has mandated the inclusion of Business Responsibility Report (“BR Report”) as part of the Annual Report for the top 100 listed entities based on their market capitalization on BSE Limited and National Stock Exchange of India Limited as at March 31, 2012. The SEBI circular is effective from financial year ending on or after December 31, 2012. In line with the press release and FAQ’s dated May 10, 2013 issued by SEBI, the BR Report which forms part of this Annual Report has been hosted on the Company’s website www.oracle.com/financialservices. Members who wish to obtain a printed copy of the report, may write to the Company Secretary at the Registered Office of the Company. Employee Stock Option Plan (‘ESOP’) The Members at their Annual General Meeting held on August 14, 2001 approved grant of ESOPs to the employees/directors of the Company and its subsidiaries up to 7.5% of the issued and paid-up capital of the Company from time to time. This said limit was enhanced and approved up to 12.5% of the issued and paid-up capital of the Company from time to time, by the Members at their Annual General Meeting held on August 18, 2011. This extended limit is an all inclusive limit applicable for stock options granted in the past and in force and those that will be granted by the Company under this authorization. Pursuant to ESOP scheme approved by the Members of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme (“Scheme 2002”) for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier). On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme (“Scheme 2010”) for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier). Pursuant to ESOP scheme approved by the Members of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme (“Scheme 2011”) for issue of 5,100,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2011, the Company has granted 1,285,500 options till March 31, 2013. As per the above schemes, each of 20% of the total options granted will vest to the eligible employees and directors on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have exercise period of 10 years from the date of grant. The employee/director pays the exercise price upon exercise of option. 11


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    The details of the options granted under the ESOP 2002, ESOP 2010 and ESOP 2011 Schemes to eligible employees/directors from time to time are given below: Particulars Scheme Total ESOP 2002 ESOP 2010 ESOP 2011 Number of options granted till March 31, 2013 5,167,920 638,000 1,285,500 7,091,420 Number of options lapsed* 614,725 245,883 89,950 950,558 Number of options exercised 4,439,915 36,254 24,215 4,500,384 Total number of options in force as on March 31, 2013 113,280 355,863 1,171,335 1,640,478 Pricing Formula At the market price as on the date of grant Variation of terms of options None None None * includes number of options forfeited. The details of options granted to Directors and Senior Managerial Personnel under ESOP 2011 Scheme during the financial year ended March 31, 2013 are as follows: Particulars Number of Options i. Directors: Mr. Chaitanya Kamat 100,000 Senior Managerial Personnel: Mr. Atul Kumar Gupta 7,500 Mr. Avadhut Ketkar 3,000 Mr. Edwin N Moses 15,000 Mr. Hoshi D Bhagwagar 1,000 Mr. Kishore Kapoor 12,500 Mr. Makarand Padalkar 40,000 Mr. Manmath Kulkarni 17,250 Mr. Vikram Gupta 20,000 ii. Any other employee, who receives grant in any one year of option amounting to 5% or more of option granted during the year Mr. Chaitanya Kamat 100,000 Mr. Makarand Padalkar 40,000 iii. Identified employees who were granted option, during any one year, equal to or exceeding 1% of the Nil issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant iv. Diluted Earnings Per Share (EPS) pursuant to the issue of shares on exercise of option calculated in ` 121.96 accordance with Accounting Standard 20 ‘Earnings Per Share’ issued by the Institute of Chartered Accountants of India Had compensation cost for the Company’s ESOP been determined based on fair value at the grant dates, Company’s net profit and earnings per share would have been reduced to proforma amounts indicated below: (Amounts in ` million, except per share data) Particulars Year ended March 31, 2013 Profit as reported 10,292.60 Add: Employee stock compensation under intrinsic value method Nil Less: Employee stock compensation under fair value method (385.97) Proforma profit 9,906.63 Earnings Per Share Basic As reported 122.52 Proforma 117.93 Diluted As reported 121.96 Proforma 117.59 All stock options under the Employee Stock Option Plans were granted at market price on the date of grant. Accordingly, we have calculated the compensation cost arising on account of stock options granted using the intrinsic value method. Hence, the disclosure in terms of Clause 12.1(n) of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, is not applicable. Oracle Financial Services Software – Annual Report 2012-2013


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    A summary of the activities in the Company’s ESOP 2002, ESOP 2010 and ESOP 2011 Schemes are as follows: Particulars Year ended March 31, 2013 ESOP 2002 ESOP 2010 ESOP 2011 Shares arising Weighted Shares arising Weighted Shares arising Weighted from options average from options average from options average exercise price exercise price exercise price (`) (`) (`) Outstanding at beginning of year 145,212 1,721 428,344 2,064 617,500 1,937 Granted – – – – 645,000 3,131 Exercised (31,932) 1,290 (35,574) 2,050 (24,215) 1,964 Forfeited – – (36,907) 2,050 (66,950) 1,984 Outstanding at end of the year 113,280 1,843 355,863 2,066 1,171,335 2,591 Vested options 77,280 121,853 88,935 Unvested options 36,000 234,010 1,082,400 The weighted average share price for the year over which stock options were exercised was ` 2,859. Money realized by exercise of options during the financial year 2012-2013 was ` 161,669,419. The details of options unvested and options vested and exercisable as on March 31, 2013 are as follows: Exercise price Number of options Weighted average Weighted average (`) exercise price remaining contractual (`) life (Years) Options unvested 1,930 408,400 1,930 8.7 2,032 32,000 2,032 8.7 2,050 218,010 2,050 7.4 2,333 36,000 2,333 7.6 2,342 16,000 2,342 8.3 3,127 627,000 3,127 9.9 3,320 15,000 3,320 9.8 Options vested and exercisable 1,291 53,280 1,291 3.1 1,930 88,935 1,930 8.7 2,050 117,853 2,050 7.4 2,333 24,000 2,333 7.6 2,342 4,000 2,342 8.3 1,640,478 2,426 8.7 The fair value of stock options granted during the financial year 2012-2013 under ESOP 2011 Scheme was ` 1,912 (granted on January 14, 2013) and ` 1,762 (granted on February 5, 2013), calculated as per the Black Scholes valuation model as stated in 24b in the notes to accounts. The Company has recovered Perquisite Tax on the options exercised by the employees during the year. Employee Stock Purchase Scheme (‘ESPS’) The Company has the ESPS administered through a Trust (“the Trust”) to provide equity based incentives to key employees of the Company. As per the scheme, the Trust can purchase shares of the Company from market using the proceeds of loans obtained from the Company. Such shares are allocated by the Trust to nominated employees at an exercise price, which approximates the fair value on the date of the grant. The shares vest in the employees over a period of five years and the employees can purchase the shares from the Trust over a period of ten years based on continued employment, until which, the Trust holds the shares for the benefit of the employees. The employees are entitled to receive dividends, bonus, etc., that may be declared by the Company from time to time for the entire portion of shares held by the Trust on behalf of the employees. On the acceptance of the offer, the selected employee undertakes to purchase the shares from the Trust within ten years from the date of acceptance of the offer. In case an employee resigns from employment, the rights relating to vested shares, which are eligible for exercise, may be purchased by the employee by payment of the exercise price whereas, the balance shares are forfeited in favor of the Trust. The Trustees have the right of recourse against the employees for any amounts that may remain unpaid on the shares accepted by them. As of the balance sheet date, the Trust has repaid the entire loan obtained from the Company on receipt of payments from employees against shares exercised. 13


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    A summary of the activities in the Company’s ESPS is as follows: (Number of shares) Particulars Year ended Year ended March 31, 2013 March 31, 2012 Opening balance of unallocated shares 166,142 166,142 Shares forfeited during the year – – Closing balance of unallocated shares 166,142 166,142 Opening balance of allocated shares 18,817 29,081 Shares exercised during the year (16,067) (10,264) Shares forfeited during the year – – Closing balance of allocated shares 2,750 18,817 Shares eligible for exercise 2,750 18,817 Shares not eligible for exercise – – Total allocated shares 2,750 18,817 Human resources Employees are our key assets and we continuously invest in them to retain our competitive edge. We have created a healthy and productive environment, together with a strong performance management system to encourage excellence. Our HR practices are among the best in the industry. Our people development initiative offers the best and latest in technology, finance domain and develops contemporary leadership attitude and practices in our employees. Our total manpower at the end of March 2013 was 9,969 as compared to 9,682 as on March 2012 (including employees of subsidiaries). Directors’ responsibility statement As required under Section 217(2AA) of the Companies Act, 1956, for the financial year ended on March 31, 2013, the Directors hereby confirm that: i. In preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; ii. 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 of the Company for that period; 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; and iv. The Directors have prepared the annual accounts on a ‘going concern’ basis. Auditors The Members may note that, S.R. Batliboi & Associates, Chartered Accountants (Registration no. 101049W), were appointed as the Statutory Auditors of the Company by the Members at their Twenty Third Annual General Meeting held on August 17, 2012 to hold office till the conclusion of the ensuing Annual General Meeting. They have vide letter dated April 1, 2013 intimated the Company about the change in their name pursuant to their conversion as a Limited Liability Partnership. Consequently, their name is changed from “S.R. Batliboi & Associates” to “S.R. Batliboi & Associates LLP” with effect from April 1, 2013. This change of name does not affect their rights and obligations as the Statutory Auditors of the Company. Further, they have confirmed their eligibility and willingness to accept office, if appointed as the Statutory Auditors at the ensuing Annual General Meeting. Auditors’ Report With regard to the Auditors’ comment in the CARO report concerning delays in payment of a few tax payments, e.g., Foreign Income Taxes, Foreign Value Added Tax and Foreign Withholding Tax, the Company would like to state the following: i. The Company has engaged international tax experts in the interpretation of laws and regulations relating to corporate taxes and VAT in foreign countries. The Company has however, been continuously evaluating and accruing towards any material tax exposures in the books taking a conservative approach and payments are made based on the advice of the tax experts. ii. The Company continually assesses Payroll Tax implications in various jurisdictions outside India on salaries and travel related reimbursements paid to its employees posted therein and accordingly makes accruals in the books. The Company is in the process of filing the returns for Payroll Tax in such jurisdiction for which the provision is already made in the books. As per the local laws of most host countries, the tax is payable by the employee, however in a few countries tax payment is a responsibility of the employer, which amounts to ` 3.94 crore. The Company and the employees ensure tax compliance in such countries as advised by the tax consultants. Oracle Financial Services Software – Annual Report 2012-2013


  • Page 17

    Conservation of energy, technology absorption and foreign exchange earnings and outgo The particulars as prescribed under sub-section (1)(e) of Section 217 of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the relevant data pertaining to conservation of energy, technology absorption and foreign exchange earnings and outgo are furnished hereunder: i. Conservation of energy and technology absorption: The Company regularly strives to utilize newer technologies with the view to conserve the energy and create an environmentally friendly work environment. The initiatives taken by the Company are summarized below: Data Center Consolidation: During the year, we consolidated and modernized our data centers. This has brought about significant business benefits such as space and power conservation, strengthened IT Security architecture and a reduced network complexity. Disaster recovery: A significant technology overhaul for the backup and restoration technology was undertaken during the year. This has significantly reduced the backup media requirement for a greener work environment. This eventually leads to cost benefits due to decrease in efforts, lesser number of tapes required for the same back up, longer tape life, as well as lower probability of human error. VOIP: During the year, we carried out a complete upgrade of the communication infrastructure with the objective to provide a seamless multi-channel communication to all our employees. The new infrastructure supports a mobile office that enables employees to work flexibly out of any location. This initiate has resulted in significant direct as well as indirect cost benefits to the business. This has also been beneficial in reducing carbon footprint by reducing the travel cost. Virtualization: Virtualization has been further ingrained into the OFSS IT architecture, wherein the OFSS computing environment is almost completely virtualized. This has lead to better performance, better utilization of resources (i.e., space and power), increased operating efficiencies and leads to a greener work environment. Asset disposal: Disposal of End of Life equipment has been centralized and standardized uniformly across the Company and follows the best global practices. Secure means of disposal have been adopted which helps secure e-waste as per the government guidelines as well as ensures complete cleansing of any kind of confidential information. Technology advancements supplemented by enhanced operating efficiencies result in synchronized benefits to the organization, blending in cost efficiency along with environment sustenance. ii. Foreign exchange earnings and outgo: (Amounts in ` million) Foreign Exchange Earnings 28,094.87 (excluding reimbursement of travelling expenses) Foreign Exchange Outgo 8,533.71 (including capital goods & other expenditure) Activities relating to exports; initiatives taken to increase exports; development of new export markets for products and services; and export plans: Your Company has established an extensive global presence across leading markets through its sales and marketing network. We will continue to focus on tapping various potential markets available globally. Experienced sales and marketing specialists focus on building strong international business presence to develop new export markets for your Company. Prospects The prolonged period of slower growth in the global economy has impacted banking operations. Banks are coping and realigning to earn, sustain and grow their businesses. The increasing influence of new consumer and banking regulations in the past 24 months across countries continues to add to the existing challenges banks face. Oracle is simplifying IT by engineering hardware and software to work together-from servers and storage to the database and middleware to applications. The idea behind Oracle’s integrated technology stack is that the whole is greater than the sum of the parts. There are best-of-breed products throughout the stack, and every product and every layer of the technology stack are designed and engineered to work together. That’s not all. Integrated solutions engineered for specific industries make delivering IT simpler. In the past years, your Company invested to build the Oracle Banking Platform to leverage this vision. The general availability of Oracle Banking Platform for banks to deploy was announced in September 2012. The new offering already has gained the first two deployments in Asia. Oracle Banking Platform strengthens the portfolio and capability of your Company to address replacements at Tier 1 Retail Banking Institutions in Europe, North America and Asia. Your Company in the last fiscal year stayed focused to deliver solutions to banks in countries that faced significant challenges. The Oracle Financial Analytical Applications Suite has helped your Company deliver and engage in multi-year transformation projects at Tier 1 banks. The application suite now supports new regulations for FATCA, Capital Adequacy and Stress Testing. Your Company along with Oracle is well placed to address the opportunity at banks by providing the application that is complete and optimized on Oracle Hardware along with the necessary services. 15


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    Your Company announced the availability of Oracle FLEXCUBE 12.0 during the year. This release enables more personalized and convenient service to customers across all channels. It also offers a harmonized infrastructure and open development environment that allows more flexible deployment options and upgrade paths. With this release, your Company made a strategic shift including new versions Oracle FLEXCUBE Private Banking and Oracle FLEXCUBE Direct Banking along with Oracle FLEXCUBE 12.0. The past year we did see an increasing number of partners who have invested to train, certify and provide services around Oracle FLEXCUBE 12.0 to banks that deploy. Oracle FLEXCUBE customers have leveraged the extreme performance on Oracle Exadata and Oracle Exalogic for their operations. Your Company’s products continue to win accolades from the international analyst community for its leadership and execution capability. Banking Technology named Oracle FLEXCUBE the Best Core Banking Product for 2012. Banks who have deployed your Company’s products have won the recognition too. EcoBank won the Euromoney Award for the Best Bank in Africa. Mashreq Bank’s FLEXCUBE deployment won the Asian Banker Technology Award for the Best Core Banking Implementation in the Middle East. Consulting Services provided by your Company are very valued by the banks. This continues to play a key and vital role in your Company’s annual revenue and profitability each year. Support services for our applications continue to grow and banks see this service as vital for operations at their banks. Employee particulars Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 for the financial year ended on March 31, 2013 forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Act, the Directors’ Report and the Accounts are being sent to the Members excluding the statement giving particulars of employees under Section 217(2A) of the Act. Members who wish to obtain a copy of the statement, may write to the Company Secretary at the Registered Office of the Company. Acknowledgements Your Directors take this opportunity to thank the Company’s customers, members, vendors and bankers for their continued support during the year. Your Directors also wish to thank the Government of India and its various agencies, Department of Electronics, the Software Technology Parks - Bangalore, Chennai, Mumbai, NOIDA and Pune, Special Economic Zone authorities at SEEPZ and Cochin, the Customs and Excise Department, Ministry of Commerce, Ministry of Finance, Ministry of External Affairs, Ministry of Corporate Affairs, Department of Telecommunication, the Reserve Bank of India, the State Governments of Maharashtra, Karnataka, Haryana and Tamil Nadu and other local Government Bodies, for their support and look forward to their continued support in the future. Your Directors also place on record their appreciation for the excellent contribution made by employees of the Company through their commitment, competence, co-operation and diligence with a view to achieving consistent growth for the Company. For and on behalf of the Board S Venkatachalam Chairman July 11, 2013 Oracle Financial Services Software – Annual Report 2012-2013


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    Corporate governance report The detailed report on Corporate Governance of Oracle Financial Services Software Limited (“the Company”) for the financial year 2012-2013 as per Clause 49 of the Listing Agreement entered with Stock Exchanges is set out below. 1. Company’s philosophy on code of governance The Company believes in adopting and adhering to globally recognized corporate governance practices and continuously benchmarking itself against such practices. The Company understands and respects its fiduciary role and responsibility to its Members and strives to meet their expectations. 2. Board of Directors 2.1 Composition and category The composition of the Board of Directors of the Company (“the Board”) as on March 31, 2013, was as under: Name of the Director Designation Category Directorships Chairmanship Membership of in other of Committees Committees of Companies of Boards Boards of other of other Companies Companies Mr. S Venkatachalam Chairman Non-Executive, 3 2 Nil Independent Director Mr. Chaitanya Kamat Managing Director Executive, Nil Nil Nil & CEO Non-Independent Director Mr. Derek H Williams Director Non-Executive, 1 1 Nil Non-Independent Director Mr. Frank Brienzi Director Non-Executive, 2 Nil Nil Non-Independent Director Mr. Richard Jackson Director Non-Executive, Nil Nil Nil Independent Director Mr. Robert K Weiler Director Non-Executive, Nil Nil Nil Non-Independent Director Mr. William Corey West Director Non-Executive, 18 Nil Nil Non-Independent Director Mr. Y M Kale Director Non-Executive, 5 Nil 1 Independent Director Notes: 1. Mr. William T Comfort, Jr., resigned as a Director and the Chairman of the Board with effect from May 11, 2012. 2. Mr. S Venkatachalam was appointed as the Chairman of the Board with effect from May 12, 2012. 3. Mr. Richard Jackson was appointed as an Additional Director with effect from December 12, 2012. 4. Directorships of Mr. Y M Kale include being an Alternate Director in three companies. 5. Only the Audit Committee and the Shareholders’ Grievances Committee are considered. 6. All Directorships of Mr. Frank Brienzi, Mr. William Corey West and Mr. Derek H Williams are in foreign companies. 7. None of the Directors are related inter se. 8. Changes in the Board after March 31, 2013: • Ms. Samantha Wellington was appointed as an Additional Director with effect from April 10, 2013. • Mr. Frank Brienzi resigned as a Director with effect from July 2, 2013. • Mr. Harinderjit Singh was appointed as an Additional Director with effect from July 10, 2013. 2.2 Attendance of each Director at the Board Meetings and the last Annual General Meeting The Company holds Board Meetings at regular intervals. The detailed agenda along with the explanatory notes is circulated in advance. The Directors can suggest inclusion of any item to the agenda at the Board Meeting. The Independent Directors actively participate in the Board Meetings and contribute to the decision making process by expressing their opinions, views and suggestions. During the Financial Year 2012-2013, six Board Meetings were held on the following dates: May 11, 2012, July 10, 2012, August 2, 2012, August 17, 2012, October 31, 2012 and January 29, 2013. 17


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    The attendance of the Directors at the Board Meetings and the Annual General Meeting held during the financial year 2012-2013 was as under: Name of the Director Number of Board Number of Board Meetings attended Last AGM Meetings attended attended In person On phone Mr. William T Comfort, Jr.* 1 – 1 NA Mr. Chaitanya Kamat 6 6 – Yes Mr. Derek H Williams 5 2 3 Yes Mr. Frank Brienzi 3 – 3 No Mr. Richard Jackson 1 – 1 NA Mr. Robert K Weiler 5 – 5 No Mr. S Venkatachalam 6 6 – Yes Mr. William Corey West 4 – 4 No Mr. Y M Kale 6 6 – Yes * resigned with effect from May 11, 2012. 2.3 Details of other directorships Details of the directorships of the Company’s Directors in other companies as on March 31, 2013 were as under: Name of the Director Other directorships Mr. S Venkatachalam State Bank of India Equifax Credit Information Services Private Limited Canara Robecco Asset Management Company Limited Mr. Chaitanya Kamat – Mr. Derek H Williams Nihon Oracle Kabushiki Kaisha Mr. Frank Brienzi NPower, Texas Aidmatrix Mr. Richard Jackson – Mr. Robert K Weiler – Mr. William Corey West BEA Crossgain International Eontec Limited J.D. Edwards Europe Limited Netsure Telecom Limited OCAPAC Distributor Partner OCAPAC Hardware Partner OCAPAC Holding Company OCAPAC Research Company OCAPAC Research Partner Oracle Australia Holdings Pty. Ltd. Oracle Consolidation Australia Pty. Ltd. Oracle Global (Mauritius) Ltd. Oracle Hong Kong Holdings Limited Oracle Singapore Holdings Pte Ltd. Oracle Technology Company Pillar Data Systems NRI Ltd. Siebel Systems Ireland Holding Ltd. Sun Microsystems Technology Limited Mr. Y M Kale Ashok Leyland Limited (Alternate Director) Gulf Oil Marine Limited Hinduja Foundries Limited (Alternate Director) IndusInd Bank Limited (Alternate Director) Hinduja Leyland Finance Limited Oracle Financial Services Software – Annual Report 2012-2013


  • Page 21

    2.4 Details of Memberships of Board Committees None of the Directors of the Company hold Memberships in more than ten Committees, nor is any Director a Chairman in more than five Committees of the Boards of the companies where he holds directorships. For this purpose, “Committees” include Audit Committee and Shareholders’ Grievances Committee of a company. The details of the Memberships of the Company’s Directors in the above mentioned committees of all the Indian Public Limited Companies (including the Company) of which they are Members as on March 31, 2013 were as under: Name of the Director Audit Committee Shareholders’ Grievances Committee Chairman Member Chairman Member Mr. S Venkatachalam 1 1 2 – Mr. Chaitanya Kamat – – – – Mr. Derek H Williams – – – – Mr. Frank Brienzi – – – – Mr. Richard Jackson – – – – Mr. Robert K Weiler – – – – Mr. William Corey West – 1 – – Mr. Y M Kale 1 1 – – 3. Audit committee 3.1 Primary objectives and powers of the Audit Committee The primary objective of Audit Committee is to monitor and provide effective supervision of the management’s financial reporting process and to ensure accurate, timely and proper disclosures and transparency, integrity and quality of financial reporting. The powers of the Audit Committee include the following: 1. To investigate any activity within its terms of reference. 2. To seek information from any employee. 3. To obtain external legal or other professional advice. 4. To secure attendance of outsiders with relevant expertise, if considered necessary. 3.2 Broad terms of reference The terms of reference of the Audit Committee are as follows: 1. Oversight of the Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible. 2. Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the statutory auditor and their audit fees. 3. Approval of fees for any other services rendered by the statutory auditors. 4. Reviewing, with the management, the annual financial statements before submission to the Board for approval, with particular reference to: a. Matters required to be included in the Director’s Responsibility Statement to be included in the Directors’ Report in terms of Section 217(2AA) of the Companies Act, 1956 b. Changes, if any, in accounting policies and practices and reasons for the same c. Major accounting entries involving estimates based on the exercise of judgment by management d. Significant adjustments made in the financial statements arising out of audit findings e. Compliance with listing and other legal requirements relating to financial statements f. Disclosure of any related party transactions g. Qualifications in the draft audit report 5. Reviewing, with management, the quarterly financial statements before submission to the Board for approval. 6. Reviewing, with management, the performance of statutory and internal auditors and the adequacy of the internal control systems. 7. Reviewing the adequacy of the internal audit function including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit. 19


  • Page 22

    8. Discussion with internal auditors regarding any significant findings and any follow-up required. 9. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. 10. Discussion with statutory auditors before the audit commences about the nature and scope of the audit as well as post-audit discussion to determine any areas of concern. 11. To determine the reasons for any substantial defaults in the payment to depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors. 12. To review the functioning of the Whistle Blower mechanism. 13. Carrying out any other function as is mentioned in the terms of reference of the Audit Committee. 3.3 Composition of the committee The Composition of Audit Committee as on March 31, 2013 was as under: Name of the Member Mr. Y M Kale Chairman, Non-Executive, Independent Director Mr. S Venkatachalam Member, Non-Executive, Independent Director Mr. William Corey West Member, Non-Executive, Non - Independent Director 3.4 Meetings and attendance During the financial year 2012-2013, four meetings of the Committee were held on May 11, 2012, August 2, 2012, October 31, 2012 and January 29, 2013. The Member’s attendance at the Committee Meetings is as under: Name of the Member Number of meetings attended In person On phone Mr. Y M Kale 4 – Mr. S Venkatachalam 4 – Mr. William Corey West – 4 The auditors of the Company were invited for the above meetings. 3.5 Audit committee’s recommendations The Committee reviewed the financial results of the Company prepared in accordance with the Indian GAAP (including consolidated results) as at and for the quarters ended June 30, 2012, September 30, 2012 and December 31, 2012 as also for the year ended March 31, 2013 and recommended the same to the Board for adoption. The Committee recommended to the Board the re-appointment of M/s. S. R. Batliboi & Associates LLP, Chartered Accountants (Registration no. 101049W), as Statutory Auditors of the Company for the financial year 2013-2014. The Internal Audit Group of the Company headed by Mr. Atul Kumar Gupta, Business Planning Vice President - Operations, is the Internal Auditor of the Company. The Committee also reviewed Internal Auditors’ reports and related reports on actions taken, risk management policies, compliance report on corporate governance, litigation and compliance ethics report, etc. from time to time. 4. Compensation committee 4.1 Brief description of terms of reference The scope of Compensation Committee is to determine the compensation policy as well as profit linked bonus policies for the Directors and key managerial personnel of the Company. The Compensation Committee also approves, allocates and administers the Employee Stock Option Plans - ESOP 2002 Scheme, ESOP 2010 Scheme and ESOP 2011 Scheme, reviews performance appraisal criteria and sets norms for ESOP allocations. Oracle Financial Services Software – Annual Report 2012-2013


  • Page 23

    4.2 The Composition of the Committee The Composition of Compensation Committee as on March 31, 2013 was as under: Name of the Member Mr. William T Comfort, Jr.* Chairman, Non-Executive, Independent Director Mr. Frank Brienzi** Member, Non-Executive, Non-Independent Director Mr. Y M Kale Member, Non-Executive, Independent Director * Mr. William T Comfort, Jr. resigned with effect from May 11, 2012. ** Mr. Frank Brienzi resigned with effect from July 2, 2013. Mr. Richard Jackson was appointed as the Chairman of the Compensation Committee on April 10, 2013. Mr. Harinderjit Singh was appointed as a member of the Compensation Committee on July 11, 2013. 4.3 Meeting and attendance During the year no meeting of the Committee was held and the business was dealt with by passing circular resolutions. 4.4 Compensation policy The Compensation Committee determines and recommends to the Board the compensation payable to the Directors and key managerial personnel of the Company. The limit for the commission to be paid to the Board Members and the remuneration payable to the Managing Director & CEO of the Company are approved by the Members of the Company. The annual compensation of the Non-Executive Directors is approved by the Compensation Committee, within the parameters set by the Members of the Company. The criteria for payment of commission to the non-executive directors include a base commission plus incremental commission depending on the number and type of committees where they are members or chairpersons. The Committee also has the mandate to review and recommend norms for ESOP allocation. 4.5 Details of remuneration paid to the Directors during the financial year 2012-2013 were as under: (Amounts in ` thousands, except number of ESOPs) Name of the Director Options granted Commission Salary Contribution to Total Amount under ESOPs paid Provident Fund paid during the year and other funds Mr. William T Comfort, Jr. – – – – – Mr. S Venkatachalam – 2,350 – – 2,350 Mr. Chaitanya Kamat 100,000 – 26,256 1,681 27,937 Mr. Derek H Williams – – – – – Mr. Frank Brienzi – – – – – Mr. Richard Jackson – 365 – – 365 Mr. Robert K Weiler – – – – – Mr. William Corey West – – – – – Mr. Y M Kale – 1,950 – – 1,950 TOTAL 100,000 4,665 26,256 1,681 32,602 The Company accrues for gratuity benefit, compensated absences and bonus for all employees as a whole. It is not possible to ascertain the provision for individual director and hence the same has not been disclosed above. The Company discloses such benefits on cash basis. During the year, the Compensation Committee granted 100,000 options to Mr. Chaitanya Kamat, Managing Director & CEO under the ESOP 2011 Scheme at an exercise price of ` 3,126.85. The managerial remuneration paid to Mr. Chaitanya Kamat was within the limits envisaged in the Companies Act, 1956. The remuneration paid to Mr. Y M Kale and Mr. S Venkatachalam and payable to Mr. Richard Jackson, the Non-Executive, Independent Directors of the Company by way of commission, as approved by the Members of the Company, does not exceed 1% of the net profits of the Company in any one financial year. There was no other remuneration paid to the Directors during the financial year 2012-2013 except as stated above. During the financial year ended March 31, 2013, the Compensation Committee granted 645,000 options to the eligible employees including Directors of the Company and its Subsidiaries as under: Date of Grant No. of Options granted Exercise price (`) January 14, 2013 15,000 3,320.10 February 5, 2013 630,000 3,126.85 21


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    The terms of Employee Stock Options granted to the Directors was as under: Name of the Director Scheme Options Options Options Exercise Expiry Date outstanding exercised outstanding price (`) as at during the as at April 1, 2012 year March 31, 2013 Mr. William T Comfort, Jr. – – – – – – Mr. S Venkatachalam ESOP 2011 10,000 Nil 10,000 1,929.95 December 19, 2021 Mr. Chaitanya Kamat ESOP 2002 60,000 Nil 60,000 2,333.45 October 24, 2020 ESOP 2011 30,000 Nil 30,000 1,929.95 December 19, 2021 ESOP 2011 – Nil 100,000 3,126.85 February 4, 2023 Mr. Derek H Williams – – – – – – Mr. Frank Brienzi – – – – – – Mr. Richard Jackson – – – – – – Mr. Robert K Weiler – – – – – – Mr. William Corey West – – – – – – Mr. Y M Kale* – – – – – – * all the options granted under the ESOP 2002 Scheme at an exercise price of ` 418.92 have already been exercised. The above options were issued at prevailing market price of shares on the respective dates of grant. The options vest over a period of 5 years from the date of grant and are subject to continued employment/directorship with the Company. As on March 31, 2013, none of the Directors of the Company held any equity shares of the Company, except Mr. S Venkatachalam, who held 1,000 equity shares of the Company. 5. Shareholders’ Grievances Committee 5.1 Composition of the Committee The composition of Shareholders’ Grievances Committee as on March 31, 2013 was as under: Name of the Member Mr. S Venkatachalam Chairman, Non-Executive, Independent Director Mr. Makarand Padalkar Member, Chief Financial Officer 5.2 Scope of Shareholders’ Grievances Committee’s activities The scope of the Shareholders’ Grievances Committee is to review and address the grievances of the Members in respect of share transfers, transmission, dematerialization and rematerialization of shares and other share related activities. During the year, three meetings of the Committee were held on May 11, 2012, August 2, 2012 and January 15, 2013. The Member’s attendance at the Committee Meetings was as under: Name of the Member Number of meetings attended In person Mr. S Venkatachalam 3 Mr. Makarand Padalkar 3 6. Transfer Committee 6.1 Composition of the Committee The composition of Transfer Committee as on March 31, 2013 was as under: Name of the Member Mr. S Venkatachalam Chairman, Non-Executive, Independent Director Mr. Makarand Padalkar Member, Chief Financial Officer 6.2 Scope of Transfer Committee The scope of Transfer Committee is to consider and approve requests for transfer, transmission, rematerialization of shares and other investor related matters. During the year, five meetings of the Committee were held on May 25, 2012, July 4, 2012, August 2, 2012, September 27, 2012 and January 15, 2013. Oracle Financial Services Software – Annual Report 2012-2013


  • Page 25

    The Member’s attendance at the Committee Meetings was as under: Name of the Member Number of meetings attended In person Mr. S Venkatachalam 5 Mr. Makarand Padalkar 5 7. ESOP Allotment Committee 7.1 Composition of the Committee The composition of ESOP Allotment Committee as on March 31, 2013 was as under: Name of the Member Mr. Y M Kale Chairman, Non-Executive, Independent Director Mr. Chaitanya Kamat Member, Managing Director & Chief Executive Officer Mr. S Venkatachalam Member, Non-Executive, Independent Director Mr. Makarand Padalkar Member, Chief Financial Officer 7.2 Scope of ESOP Allotment Committee The scope of ESOP Allotment Committee is to consider and approve requests for allotment of shares on exercise of stock options by eligible employees. During the year, eight meetings of the Committee were held on May 23, 2012, July 4, 2012, August 29, 2012, October 10, 2012, December 5, 2012, January 31, 2013, February 26, 2013 and March 20, 2013. The Member’s attendance at the Committee Meetings was as under: Name of the Member Number of meetings attended In person On Phone Mr. Y M Kale 8 – Mr. Chaitanya Kamat – 5 Mr. S Venkatachalam 6 – Mr. Makarand Padalkar 8 – 8. Company Secretary and Compliance Officer Company Secretary and Compliance Officer Mr. Hoshi D Bhagwagar Address Oracle Financial Services Software Limited Oracle Park Off Western Express Highway Goregaon (East), Mumbai 400 063 Maharashtra, India Tel. + 91-22-6718 4493 Fax + 91-22-6718 4604 e-mail hoshi.bhagwagar@oracle.com 9. Details of shareholders’ complaints received, resolved and outstanding during the financial year 2012-2013 Particulars No. of Complaints Complaints outstanding on April 1, 2012 1 Complaints received during the financial year ended March 31, 2013 7 Complaints resolved during the financial year ended March 31, 2013 7 Complaints outstanding on March 31, 2013 1 Number of pending share transfers as on March 31, 2013 – Nil 23


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    10. General body meetings 10.1 Location, date and time where last three Annual General Meetings were held: Financial Year Venue Day Date Time 2011-2012 The Leela Kempinski, Friday August 17, 2012 3.00 p.m. Sahar, Andheri (East), Mumbai 400 059 2010-2011 The Leela Kempinski, Thursday August 18, 2011 3.00 p.m. Sahar, Andheri (East), Mumbai 400 059 2009-2010 The Leela Kempinski, Wednesday August 25, 2010 3.00 p.m. Sahar, Andheri (East), Mumbai 400 059 10.2 The details of Special Resolutions passed in AGMs during the last three years are as under: Financial Year Day, Date & Time Venue Gist of Special Resolution passed 2011-2012 Friday, The Leela Kempinski, No special resolution was passed. August 17, 2012 Sahar, Andheri (East), at 3.00 p.m. Mumbai 400 059 2010-2011 Thursday, The Leela Kempinski, Payment of Commission to Directors of the Company August 18, 2011 Sahar, Andheri (East), (excluding the Managing Director and Whole-time at 3.00 p.m. Mumbai 400 059 Directors), not exceeding in the aggregate one per cent per annum of the net profits of the Company, which shall be calculated in accordance with the provisions of Sections 198, 349 and 350 of the Companies Act, 1956; for a further period of five years from April 1, 2012 to March 31, 2017. Authority to grant stock option to the present and future employees and Directors (whole-time or otherwise) of the Company, such number of options as the Board may decide which could give rise to equity shares of face value of ` 5/- each of the Company, not exceeding 12.5% of the issued and paid-up share capital of the Company at any given time. Authority to grant stock option to the present and future employees and Directors (whole-time or otherwise) of the Company's present and future subsidiaries, such number of options as the Board may decide which could give rise to equity shares of face value of ` 5/- each of the Company, not exceeding the aforesaid limit of 12.5% of the issued and paid-up share capital of the Company at any given time. 2009-2010 Wednesday, The Leela Kempinski, No special resolution was passed. August 25, 2010 Sahar, Andheri (East), at 3.00 p.m. Mumbai 400 059 10.3 There was no Extra-Ordinary General Meeting held during the Financial Years 2009-2010, 2010-2011 and 2011-2012. 10.4 There were no matter requiring approval of the Members through Postal Ballot during the financial year ended March 31, 2013. 10.5 No special resolution is currently proposed to be conducted through postal ballot. Oracle Financial Services Software – Annual Report 2012-2013


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    10.6 Procedure for the Postal Ballot process: After receiving the approval of the Board of Directors for matters requiring Members approval by postal ballot, notice of the Postal Ballot, text of the Resolution along with Explanatory Statement, Postal Ballot Form and self-addressed postage pre-paid envelopes are required to be sent to the Members to enable them to consider and vote for or against the proposal within a period of 30 days from the date of dispatch. The calendar of events containing the activity chart is to be filed with the Registrar of Companies within 7 days of the passing of the Resolution by the Board of Directors of the Company. After the last date for receipt of the ballots, the Scrutinizer after due verification, is required to submit the results to the Chairman of the Board of Directors of the Company. Thereafter, the Chairman declares the result of the Postal ballot. The same is required to be published in the Newspapers and displayed on the website and the Notice Board at the registered office of the Company. In addition to the above, Clause 35B of the listing agreement requires the Company to offer electronic voting facility to Members for matters requiring approval by postal ballot. The Company has entered into agreement with the National Securities Depository Ltd. (“NSDL”) and Central Depository Services (India) Limited (“CDSL”) for offering e-Voting platform in respect of those businesses, which are required to be transacted through postal ballot. 11. Disclosures a. All the relevant information in respect of materially significant related party transactions, i.e., transactions of the Company of material nature with its promoters, directors or management or their relatives, subsidiaries of the Company, etc. has been disclosed in the respective financial statements presented in the Annual Report. The Company did not undertake any transaction with any related party having potential conflict with the interest of the Company at large. b. The Company has complied with statutory compliances and no penalty or stricture is imposed on the Company by the Stock Exchanges or Securities and Exchange Board of India (SEBI) or any other statutory authority on any matter related to the capital markets during the last three years. c. The Company has a Whistle Blower mechanism which provides adequate safeguards to employees who wish to raise concerns about violations of the Code of Ethics and Business Conduct, incorrect or misrepresentation of any financial statements and reports, unethical behavior, etc. No employee has been denied access to the Audit Committee. The Whistle Blower mechanism forms part of the Code of Ethics and Business Conduct. d. The Company is compliant with the applicable mandatory requirements of Clause 49 of the listing agreement entered with the Stock Exchanges, except that there was a delay of 34 days beyond the specified time limit provided under Clause 49(I)(C)(iv) in appointing a new Independent Director on the Board, after the resignation of an existing Independent Director. This was due to the fact that the Company did not get suitable candidate for the appointment within the stipulated timeline. Of the non-mandatory requirements, the Company has a Compensation Committee and also has a Whistle Blower mechanism in place through its Code of Ethics and Business Conduct. e. The Ministry of Corporate Affairs, Government of India had issued the Corporate Governance Voluntary Guidelines, 2009 (“the Guidelines”). The objective of these Guidelines is to encourage companies to voluntarily adopt best practices in corporate governance. The Guidelines focuses on matters relating to functions of the Board, Audit Committee, Auditors role and Secretarial Compliance. The corporate governance framework of the Company already encompasses a significant portion of the recommendations contained in the Guidelines. f. Unclaimed Shares In terms of clause 5A of the listing agreement entered with stock exchanges, the information with regard to unclaimed/undelivered shares relating to the initial public offering was as under: Particulars No. of Shareholders No. of Shares of ` 5/- each Aggregate number of Shareholders and outstanding shares in the suspense 2 40 account as on April 1, 2012 Number of shareholders who approached the Company for transfer of shares – – from the suspense account during the year Number of shareholders and shares transferred from suspense account during – – the year Aggregate number of Shareholders and shares held in suspense account as on 2 40 March 31, 2013 The shares are in the Unclaimed Shares Demat Suspense Account and the Voting rights of these unclaimed/undelivered shares remain frozen until the same are claimed by the shareholders. g. In terms of Clause 55 of the Listing Agreement, a Business Responsibility Report forms part of this Annual Report. 25


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    12. Means of communication During the Financial Year 2012-2013: • The quarterly and annual financial results of the Company were published in widely circulated English and Marathi newspapers, namely, The Business Standard and Sakal. Notices with regard to issue of duplicate share certificates of the Company were also published in widely circulated English and Marathi newspapers, namely, The Free Press Journal and Navshakti. • The Company’s quarterly financial results, press releases, Annual Reports and other relevant corporate documents are posted on the Company’s website www.oracle.com/financialservices • Detailed Management’s discussion and analysis Report covering Indian GAAP consolidated and unconsolidated financials has been included in this Annual Report. • The Company has uploaded the information relating to its financial results, shareholding pattern and report on corporate governance on website – www.corpfiling.co.in • As per National Stock Exchange’s letter dated September 29, 2011, introducing Electronic filing of Corporate Governance and Shareholding Pattern, through NSE Electronic Application Processing System (NEAPS), the Company has been uploading the information relating to its Shareholding Pattern, Report on corporate governance, listing & trading applications and financial results on website – http://www.connect2nse.com/LISTING • Securities and Exchange Board of India (SEBI) introduced a centralized web based SEBI Complaints Redress System (SCORES) vide Circular no. CIR/OIAE/2/2011 dated June 3, 2011 for all Listed Companies. The Company has been online viewing the complaints, uploading Action Taken Reports (ATRs) and monitoring its current status on website – http://scores.gov.in/Admin • As per the Circular issued by Ministry of Corporate Affairs, the Company has filed its Balance Sheet and Profit and Loss Account in extensible Business Reporting Language (XBRL), for the financial year ended March 31, 2012. • As a part of Green Initiative in Corporate Governance, the Ministry of Corporate Affairs vide its Circular No. 17/2011 dated April 21, 2011 and Circular No. 18/2011 dated April 29, 2011 has clarified that a company would have complied with Section 53 of the Companies Act, 1956, if the service of a document has been made through electronic mode, provided the company has obtained e-mail address for sending the notice/documents through e-mail by giving an advance opportunity to the Members to register their e-mail address and changes therein from time to time with the Company. The Company has since been annually sending communications to the incremental Members of the Company seeking their preference for receiving corporate documents and has issued/dispatched Annual Reports accordingly. 13. General shareholder information Annual General Meeting Day and Date Wednesday, August 14, 2013 Time 3.00 p.m. Venue The Leela Kempinski, Sahar, Andheri (East), Mumbai 400 059 Financial Year April 1, 2012 to March 31, 2013 Dividend Payment Date Not Applicable Date of Book Closure Thursday, August 8, 2013 to Wednesday, August 14, 2013 (both days inclusive) for Annual General Meeting Listing on Stock Exchanges at BSE Ltd. (BSE); and National Stock Exchange of India Limited (NSE) Stock Code BSE Ltd. (BSE) 532466 National Stock Exchange of India Limited (NSE) OFSS Oracle Financial Services Software – Annual Report 2012-2013


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    Listing The annual listing fees for the financial year 2013-2014 have been paid to BSE and NSE. The Company has also paid Annual Custodial fees for the financial year 2013-2014 to National Securities Depository Limited and Central Depository Services (India) Limited on the basis of average number of beneficial accounts maintained by them during the previous financial year ended March 31, 2013. Unclaimed Dividend Pursuant to Sections 205A, 205C and other applicable provisions, if any, of the Companies Act, 1956, any money transferred to the unpaid dividend account which remains unpaid or unclaimed for a period of 7 years from the date they become due for payment, is required to be transferred to the ‘Investor Education and Protection Fund’ set up by the Central Government. Accordingly, the amount of unclaimed dividend for the financial year ended March 31, 2006 will be transferred to the ‘Investor Education and Protection Fund’ in due course. Once the amount is so transferred, no claims shall lie against the aforesaid fund or the Company in respect of such dividend amount thereafter. The Members are requested to send to the Company their claims, if any, for the dividend for financial year ended March 31, 2006 immediately. 14. Market price data Monthly high, low and volume of the shares of the Company traded on the stock exchanges from April 1, 2012 to March 31, 2013 are given below: Month and Year BSE NSE High (`) Low (`) Volume of shares High (`) Low (`) Volume of shares April 2012 2,765.90 2,510.00 249,859 2,762.80 2,505.00 1,268,763 May 2012 2,642.60 2,360.00 80,149 2,648.90 2,353.00 762,805 June 2012 2,600.00 2,386.00 78,019 2,649.00 2,380.00 591,736 July 2012 2,600.00 2,450.00 96,386 2,620.00 2,426.00 958,926 August 2012 3,009.65 2,535.00 494,432 3,020.50 2,534.00 2,889,270 September 2012 3,066.00 2,880.00 773,773 3,067.00 2,816.00 1,443,232 October 2012 3,125.00 2,894.00 75,474 3,126.00 2,884.05 747,879 November 2012 2,990.05 2,797.00 111,150 2,990.00 2,792.05 705,253 December 2012 3,340.00 2,848.05 186,822 3,339.80 2,846.10 1,450,991 January 2013 3,414.00 3,150.15 232,827 3,415.00 3,161.15 964,674 February 2013 3,205.00 2,700.00 87,578 3,210.00 2,664.30 720,426 March 2013 2,970.35 2,520.00 139,466 2,975.00 2,513.20 989,489 27


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    Relative movement chart The chart below gives the comparison of your Company’s share price movement on NSE vis-a-vis the movement of S&P CNX NIFTY for the financial year 2012-2013. 7,000 3,500 6,000 3,000 S&P CNX NIFTY OFSSL Price (`) 5,000 2,500 4,000 2,000 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 OFSSL Price S&P CNX NIFTY The chart below gives the comparison of your Company’s share price movement on NSE vis-a-vis the movement of S&P CNX NIFTY since the listing of the share on NSE. 1,400 1,300 1,200 1,100 1,000 900 800 Relative movement 700 600 500 400 300 200 100 0 Jul 2002 Jul 2003 Jul 2004 Jul 2005 Jul 2006 Jul 2007 Jul 2008 Jul 2009 Jul 2010 Jul 2011 Jul 2012 Jul 2013 OFSSL Price S&P CNX NIFTY Oracle Financial Services Software – Annual Report 2012-2013


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    15. Registrars and Transfer Agents Link Intime India Private Limited (formerly Intime Spectrum Registry Limited) are the Registrars and Transfer Agents of the Company (“the RTA”) and their contact details are: Name Link Intime India Private Limited Address C-13, Pannalal Silk Mills Compound, L.B.S. Marg, Bhandup (West), Mumbai 400078 Tel. +91-22-2594 6970 Fax +91-22-2594 6969 Contact person Mr. Dnyanesh Gharote, Asst. Vice President - Corporate Registry E-mail rnt.helpdesk@linkintime.co.in 16. Physical share certificate transfer system The RTA, on receipt of transfer deed along with share certificate(s) scrutinizes the same and verifies signature(s) of transferor(s) on the transfer deed with specimen signature(s) registered with the Company. A list of such transfers is prepared and checked thoroughly and a transfer register is prepared accordingly. The transfer register is placed before the Transfer Committee for approval, which meets as and when required. During the last financial year, there was 1 request received for transfer of 1,600 shares in physical mode. Reconciliation of share capital audit A qualified Practicing Chartered Accountant has carried out reconciliation of Share Capital Audit for every quarter of financial year 2012-2013 to reconcile the share capital held with depositories and in physical form with the issued/listed capital. The audit confirms that the total issued/paid-up/listed share capital is in agreement with the aggregate total number of shares in physical form and the total number of dematerialized shares held with NSDL and CDSL. 17. Distribution of shareholding as on March 31, 2013 Paid-up share capital Number of % to total No. of shares Paid-up value (Face % to Total no. of (in `) shareholders shareholders value ` 5/- each) shares Up to 2,500 17,972 92.55 665,076 3,325,380 0.79 2,501 – 5,000 374 1.92 287,082 1,435,410 0.34 5,001 – 10,000 324 1.67 489,703 2,448,515 0.58 10,001 – 20,000 283 1.46 846,284 4,231,420 1.01 20,001 – 30,000 100 0.51 498,439 2,492,195 0.59 30,001 – 40,000 87 0.45 612,723 3,063,615 0.73 40,001 – 50,000 45 0.23 413,579 2,067,895 0.49 50,001 – 100,000 116 0.60 1,595,876 7,979,380 1.90 100,001 & Above 118 0.61 78,656,716 393,283,580 93.57 Total 19,419 100.00 84,065,478 420,327,390 100.00 18. Shareholding pattern as on March 31, 2013 Category of shareholders Number of shares % Promoters: Oracle Global (Mauritius) Limited 67,481,698 80.27 Mutual Funds/UTI 1,719,789 2.05 Financial Institutions/Banks 16,293 0.02 Central Government 4,000 0.00 Insurance Companies – – Foreign Institutional Investors 4,082,272 4.86 Bodies Corporate 982,690 1.17 Individuals– i. Holding nominal share capital up to ` 1 lakh 3,829,100 4.56 ii. Holding nominal share capital in excess of ` 1 lakh 1,660,967 1.98 NRI (Repatriate) 474,931 0.56 NRI (Non-Repatriate) 791,161 0.94 Foreign Mutual Fund 2,784,414 3.31 Clearing Member 32,721 0.04 29


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    Category of shareholders Number of shares % Directors/Relatives 2,000 0.00 HUF 14,678 0.02 Market Maker 2,336 0.00 Overseas Corporate Bodies 800 0.00 Trust 185,628 0.22 Foreign Nationals – – Total 84,065,478 100.00 During the financial year 2012-2013: 1. The Company issued and allotted 91,721 equity shares to eligible employees who exercised their ESOPs during the year. 2. The Company has not issued any ADR/GDR/Warrants/other convertible instruments except ESOPs. 3. The promoters have not pledged any of the shares held in the Company. 19. Dematerialization of shares and liquidity The shares of the Company are tradable under compulsory demat mode. Under the Depository System, the International Securities Identification Number (ISIN) allotted to the Company’s shares is INE881D01027. In order to avoid the possibility of dealing in shares of a company before the receipt of final listing/trading approval from the stock exchanges, the Securities and Exchange Board of India vide circular no. CIR/MRD/DP/21/2012 and CIR/MRD/DP/24/2012 dated August 2, 2012 and September 11, 2012 respectively, directed that any additional issue of shares shall be first credited to a new temporary ISIN which shall be kept frozen and only upon receipt of final listing/trading permission from the stock exchanges, the no. of shares shall be moved out of the temporary ISIN into the pre-existing ISIN of the Company. The temporary ISIN for the equity shares of the Company is IN8881D01018. The pre-existing ISIN for the equity shares of the Company is INE881D01027. As on March 31, 2013, 99.15% of the shares of the Company were in electronic form and 99.42% of the Members held shares in electronic form. Members holding shares in physical form are requested to consider the option of holding shares in dematerialized form. 20. Address for correspondence The Company Secretary Oracle Financial Services Software Limited Oracle Park, Off Western Express Highway Goregaon (East), Mumbai 400 063 Maharashtra, India Tel +91-22- 6718 2822 Fax +91-22- 6718 4604 e-mail: investors-vp-ofss_in_grp@oracle.com website: www.oracle.com/financialservices The details of other office addresses have been mentioned in the corporate information section of the Annual Report. Oracle Financial Services Software – Annual Report 2012-2013


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    Annexure to Directors’ report To The Board of Directors Oracle Financial Services Software Limited Mumbai This is to certify that: (a) We have reviewed financial statements and the cash flow statement of Oracle Financial Services Software Limited (“the Company”) for the financial year ended March 31, 2013 and that to the best of our knowledge and belief: (i) These statements do not contain any materially untrue statement/figures or omit any material fact or contain statements/figures that might be misleading; (ii) These statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations. (b) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the financial year ended March 31, 2013 which are fraudulent, illegal or violative of the Company’s code of conduct. (c) We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have evaluated the effectiveness of the internal control systems of the Company pertaining to financial reporting and we have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies. (d) We have indicated to the auditors and the Audit Committee: (i) Significant changes in internal control over financial reporting during the financial year ended March 31, 2013, if any; (ii) Significant changes in accounting policies during the financial year ended March 31, 2013, if any; and that the same have been disclosed in the notes to the financial statements; and (iii) instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or an employee having a significant role in the Company’s internal control system over financial reporting. (e) We further declare that all Board members and Senior Management Personnel have affirmed compliance with Code of Ethics and Business Conduct for the financial year ended March 31, 2013. For Oracle Financial Services Software Limited Chaitanya Kamat Makarand Padalkar Managing Director & CEO Chief Financial Officer May 7, 2013 31


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    Auditors’ Certificate To The Members of Oracle Financial Services Software Limited We have examined the compliance of conditions of corporate governance by Oracle Financial Services Software Limited (the “Company”), for the year ended on March 31, 2013, as stipulated in clause 49 of the Listing Agreement of the said Company with stock exchange(s). The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, subject to a delay of 34 days beyond the specified time limit provided under Clause 49(I)(C)(iv) in appointing a new Independent Director on the Board, after the resignation of an existing Independent Director, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. For S. R. Batliboi & Associates LLP Chartered Accountants ICAI Firm registration number: 101049W per Amit Majmudar Partner Membership No.: 36656 Mumbai, India Date: July 11, 2013 Oracle Financial Services Software – Annual Report 2012-2013


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    Management’s discussion and analysis of financial condition and results of operations Technology in the financial services industry Banks worldwide are reexamining and realigning their current operations to remain profitable. In the wake of the global financial crisis, a wave of greater regulatory scrutiny and obligations has swept the banking industry. The long-term impact of this in terms of capital allocations, costs and profitability is significant for banks. In the backdrop of a continuing business environment of changing customer needs, competition from established brands in other domains, and a proliferation of delivery channels, the challenges banks face become sharper in relief. The way forward for banks is quite clear. To succeed, banks need to innovate irrespective of their size. And innovation in the banking industry is supported by—if not led by—technology. Limited by technology, many financial institutions are forced to adopt rigid strategies, relying on their branch networks to acquire customers, build relationships and extend their businesses. Further, any response to the changing customer needs is met by further complicating their IT landscape. By focusing too narrowly on “branch banking”—by building processes and creating products reliant on the branch as a delivery channel—many banks in evolved and emerging economies, have missed prime opportunities, which others have capitalized upon. There are number of instances of how other financial institutions approaching these challenging times with an alternative, creative mindset have succeeded. OFSS products and solutions provide precisely this edge to banks. Your Company believes that the momentum for change in the industry will continue. We see this in the abiding success and recognition we receive, year after year, for the offerings we deliver. Your Company’s products consistently win accolades from the international analyst community for its leadership and delivery capability. Banking Technology named Oracle FLEXCUBE the Readers’ Choice for Best Core Banking Product for 2012. Banks who have deployed your Company’s products have won recognition too. Mashreq Bank’ FLEXCUBE deployment won the Asian Banker Technology Award for the Best Core Banking Implementation in the Middle East. Your Company’s strategy continues to be centered on consolidation of the position in existing markets and expansion of our addressable market by launching relevant offerings to segments hereto not addressed and opening major markets. Business overview Oracle Financial Services Software Limited (‘‘OFSS’’), majority owned by Oracle, is a world leader in providing IT solutions to the financial services industry. With its experience of delivering value based IT solutions to global financial institutions, Oracle Financial Services Software understands the specific challenges that financial institutions face: the need for building customer intimacy and competitive advantage through cost-effective solutions while, simultaneously, adhering to the stringent demands of a dynamic regulatory environment. Our mission is to enable financial institutions to excel through the effective use of information technology. We offer financial institutions the world’s most comprehensive and contemporary banking applications and a technology footprint that addresses their complex IT and business requirements. Together with Oracle, we offer a comprehensive suite of offerings encompassing retail, corporate, and investment banking, funds, cash management, trade, treasury, payments, lending, private wealth management, asset management, compliance, enterprise risk and business analytics, among others. With a process-driven approach for service-oriented architecture (SOA) deployments, we offer banks the combined benefits of interoperability, extensibility, and standardization. We also offer best-of-breed functionality for financial institutions that need to operate flexibly and competitively and respond rapidly to market dynamics in a fiercely challenging business environment. We have two major business segments - the products business (comprising product licensing, consulting and support) and consulting services (comprising IT application and technology services). We also have a smaller business segment that offers business process outsourcing services to financial institutions. These segments are described in detail below: Products Oracle FLEXCUBE is a complete banking product suite for consumer, corporate, investment, private wealth management, mobile and internet banking, consumer lending, asset management and investor servicing, including payments. Oracle FLEXCUBE enables banks to standardize operations across multiple countries, transform their local operations as well as address niche business models like mobile banking, direct banking and Shariah-compliant banking. Financial institutions use Oracle FLEXCUBE to respond faster to market dynamics, define and track processes, while ensuring compliance. Oracle FLEXCUBE Enterprise Limits and Collateral Management offers a single source for managing exposure across a business portfolio. It enables centralized collateral management, limits definition, tracking and exposure measurement for effective exposure management and resource utilization. 33


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    Oracle FLEXCUBE Private Banking is a comprehensive solution for private banking. It gives wealth managers a unified view and analyses of their customers’ wealth across asset classes, and provides the added benefits of performance tracking and improved customer relationship management. The application is a comprehensive, customer centric solution that offers a wealth management portal, a customer interaction tool, and portfolio management capabilities – all of which can be integrated with the existing core banking solutions used by a bank. Oracle FLEXCUBE Investor Servicing is a process enabled transfer agency and investor servicing solution. It helps financial institutions manage the complete fund lifecycle and reduce operational costs through process automation across fund structures, intermediary hierarchies, and investors. The ISO 20022 and 15022 compliant Oracle FLEXCUBE Investor Servicing ensures enhanced STP processing through support for a wide variety of SWIFT NET 4.0 messages. With a comprehensive business rules engine for products – hedge funds, mutual funds and investment linked products, funds, and fee structures, Oracle FLEXCUBE Investor Servicing allows fund management companies to configure and launch new products rapidly. Oracle Financial Services Leasing and Lending is a family of products provides functional coverage across lending, leasing, and mortgage lifecycles for consumer, commercial, syndicated, Islamic, and SME functions. The solution supports the complete business lifecycle across origination, servicing, and collections and enables financial institutions to provide better service and minimize delinquency rates through comprehensive and flexible processing of booking, disbursement, and payment. It centralizes origination functions, enabling them to improve customer experience and reduce transactional overheads. Oracle Financial Services Analytical Applications are a complete and fully integrated portfolio of analytical solutions covering enterprise risk, performance management, regulatory compliance and customer insight. They are built upon a shared analytical infrastructure consisting of a unified financial services data model, shared analytical computations and the industry leading Oracle Business Intelligence platform. The suite of applications contains comprehensive set of point solutions that can be integrated to give a holistic view across all analytical applications. Financial institutions need an integrated approach that combines a diverse set of compliance and risk solutions to help them address not only present regulatory needs, but also emerging and future risk and regulatory requirements. The framework is rules driven, and readily adapts to change. Unlike other hard coded solutions, Oracle Financial Services Analytical Applications provide both prebuilt rules and the capability to create and modify rules. This flexibility allows financial institutions to easily create custom rules for their own analytical requirements and to cost effectively address ever changing compliance regulations. Any rule can be viewed and audited for its underlying definition to enable supervisory oversight. Oracle Banking Platform is a comprehensive suite of business applications for large global banks. Oracle Banking Platform is designed to help banks respond strategically to today’s business challenges and progressively transform their business models and processes, driving productivity improvements across both front and back offices, and reducing operating costs. The solution supports banks as they grow their businesses through new distribution strategies, including multi-brand or white labeling, to tap new markets and enterprise product origination supporting multi-product and packages to drive an increased customer-to-product ratio. Oracle Banking Platform is designed as a native service-oriented architecture (SOA) platform, helping banks implement key enterprise services, deliver on customer centricity, enrich channel capability, drive process improvement and tie it in with their existing applications and technology landscape. Through pre-integrated enterprise applications and the underlying Oracle technology stack, the solution can also help to reduce in-house integration and testing efforts, ultimately, reducing IT costs and improving time- to-market. Oracle Banking Platform provides a comprehensive suite of applications that makes the replacement of core systems viable for large banks, enabling strategic choices as well as providing a high level of flexibility and value. Oracle Banking Platform complements Oracle’s FLEXCUBE core banking product, which will continue to be sold globally to banks seeking a fully integrated banking solution, addressing the need for universal, commercial banking and international operations. Services Oracle Financial Services PrimeSourcing offers an end-to-end consulting partnership, providing comprehensive business and technology solutions that enable financial services enterprises to improve process efficiencies; optimize costs; meet risk and compliance requirements; define IT architecture; and, manage the transformation process. Consulting services are offered in the areas of business transformation, risk and compliance, program management, IT architecture, IT governance and process improvement. PrimeSourcing Value based Offerings With a singular focus on the financial services segment, PrimeSourcing has proven domain expertise across Capital Markets, Private Banking, Global Wealth Management, Corporate Banking, Retail Banking & Risk and compliance. PrimeSourcing’s service offerings cut across all the domains keeping the specific needs of each sector in perspective. PrimeSourcing’s Value based offerings are designed to provide specialized solutions for Banking & Financial Services in areas such as Access Channels, Payments, Business Intelligence, Regulatory Reporting, & Business Process Management and enabling financial institutions to address their unique needs and leverage technology innovations. PrimeSourcing Consulting Services PrimeSourcing offers end-to-end consulting services in the areas of Business & IT consulting and process improvement and transformation, Quality Consulting, SOA Strategy & Governance, IT Architecture Planning, Product Evaluation & Selection, IT Portfolio Assessment, program management, IT architecture and governance. Oracle Financial Services Software – Annual Report 2012-2013


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    PrimeSourcing Application Services PrimeSourcing provides comprehensive customized IT solutions for banking, securities and insurance those encompass the complete lifecycle of an IT application asset from conceptualization to creation and maintenance. This includes the expertise around specialized practice lines like payments, trade finance, business intelligence, CRM, Oracle Technology and Applications and testing; services include ADM Services, Testing, System Integration, implementation and Migration. Oracle Product Related Services PrimeSourcing with its extensive knowledge on Oracle Product line also offers Oracle Product related offerings to help customers make the most out of Oracle investments they have made. Our experts help in Process consulting, Surround Application integration, Reporting & Upgrade support across Banking Applications, Risk & Analytical Applications and Enterprise Applications. PrimeSourcing Technology Services PrimeSourcing offers expertise in conceptualization, design, evaluation, implementation and management of IT infrastructure for financial institutions under two service lines. First line is of Technology Management Services, covering Data Management, Mainframe Services, Application Deployment, Monitoring & Management and Risk & Security Assessment. The second service line is of Remote Infrastructure Management where PrimeSourcing manages remotely monitors and supports customer’s applications and infrastructure providing them economies of scale, arbitrage benefits while keeping the best in class processes. Oracle Business Process Outsourcing Services (BPO) Oracle Business Process Outsourcing Services (‘BPO’) offering excels in providing cost effective and high quality BPO services ranging from complex back-office work to contact center services for the banking, capital markets, insurance and asset management domains. This comprehensive ecosystem of BPO services also draws upon software applications such as Oracle FLEXCUBE and is backed by a mature process and consulting framework. The BPO offerings are ISO 9001 certified for quality management and ISO 27001 certified for information security management. Corporate development Mantas Limited, UK, wholly owned subsidiaries of Mantas Inc. was dissolved with effect from April 10, 2012. SWOT analysis Strengths: – World-leader in technology innovation with substantial annual spend on R&D – 100% focused on banks and financial services companies – Provides comprehensive suite of products that run mission critical operations – Largest number of modern core banking deployments globally – Software product based financial model with recurring revenue and high margins – Unique and beneficial strategic relationship with Oracle Weaknesses: – Exposure to various economies – Local resources in new markets Opportunities: – Global IT spend in banking set to grow to ~USD 180 billion – Ideally positioned to capitalize on key technology trends (big data, mobility, cloud, consumerization) – Consistent presence in transformation deals in Tier One banks Threats: – Competitive pressures from low cost providers – Low growth due to global economic conditions – Technology investments by banks likely to be delayed by “postponement” tendency – Geo-politic factors 35


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    Outlook Your Company strategy is to expand its market by gaining competitive edge through product differentiation. We will continue to invest heavily in product enhancements, both in terms of functional capability and technology. We will also continue to extend our reach across the world, especially in large, promising, markets, such as China and Brazil, as indeed Latin America in general. We have a focused investment plan for these new markets. Our success rate at replacing legacy core banking systems, even in complex business environments, continues to be impressive with respect to competition. Our efforts at maintaining this leadership position include expanding our footprint with our existing clients. Our partnership with many of our clients is strategic: we are well-positioned to address their changing, growing, technology needs for the long haul. Your Company’s ability to deliver unified technology platforms for both organic and inorganic expansion is proven and recognized. Our multi-country rollout capabilities for large, Tier One, banks is unmatched in the industry, and we will build on our capabilities in this area to stay ahead of the field. Your Company, along with Oracle, is well placed to address these opportunities by providing a technology stack that is complete and optimized for the industry, along with the necessary services. Internal control systems and their adequacy Oracle Financial Services Software group has in place adequate systems for internal control and documented procedures covering all financial and operating functions. These systems are designed to provide reasonable assurance with regard to maintaining proper accounting controls, monitoring economy and efficiency of operations, protecting assets from unauthorized use or losses, and ensuring reliability of financial and operational information. The Group continuously strives to align all its processes and controls with global best practices. Analysis of our consolidated financial results The following discussion is based on our audited consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in India and complying in all material respects with the Accounting Standards notified by Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The consolidated financial statements are consolidated for Oracle Financial Services Software Group that includes Oracle Financial Services Software Limited (“the Company”), its subsidiaries and associate company (together referred to as “OFSS Group” as described in Note 1 to the consolidated financial statements) (“the Group”) as at March 31, 2013. You should read the following discussion of our financial condition and results of operations together with the detailed consolidated Indian GAAP financial statements and the notes to those statements. Our fiscal year ends on March 31 of each year. Our total revenues in fiscal 2013 were ` 34,739.99 million, representing an increase of 10% from ` 31,466.76 million in fiscal 2012. The profit for the year in fiscal 2013 was ` 10,751.43 million, as against ` 9,092.73 million in fiscal 2012. Our profit margin is at 31% and 29% for the fiscal years 2013 and 2012 respectively. We define profit margins for a particular period as the ratio of profit to total revenues from operations during such period. Products business (Amounts in ` million) Year ended Year ended March 31, 2013 March 31, 2012 Products revenues 26,011.00 22,822.81 Operating expenses (15,389.88) (13,078.20) Income from operations 10,621.12 9,744.61 Operating margin 41% 43% Products revenues As of March 31, 2013, our product revenues were ` 26,011.00 million, an increase of 14% from ` 22,822.81 million during the fiscal year ended March 31, 2012. Product revenues represented 75% and 73% of total revenues for fiscal years ended 2013 and 2012, respectively. Our product revenues comprise license fees, professional fees for implementation and enhancement services and annual maintenance contract (Post Contract Support – PCS) fees for our products. License fee Our standard licensing arrangements for products provide the bank a right to use the product up to a limit on number of users or sites or such other usage metric upon the payment of a license fee. The license fee is a function of a variety of quantitative and qualitative factors, including the number of copies sold, the number of users supported, the number and combination of the modules sold and the number of sites and geographical locations supported. The licenses are perpetual, non-exclusive, personal, non-transferable and royalty free. Oracle Financial Services Software – Annual Report 2012-2013


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    Consulting fee Along with licenses for our products, our customers can also optionally avail consulting services related to the implementation of products at their sites, integration with other systems or enhancements to address their specific requirements. The customer is typically charged a service fee on either a fixed price basis or a time and material basis based on the professional efforts incurred and associated out of pocket expenses. Annual maintenance contract (PCS) fees Customers typically sign an Annual Maintenance Contract with us under which, we provide technical support, maintenance, problem resolution and upgrades for the licensed products. These support agreements typically cover a period of 12 months. The revenues generated from license fees and consulting services rendered by us depends on factors such as the number of new customers added, milestones achieved, implementation time, etc. Therefore, such revenues typically vary from year to year. The annual maintenance contracts generate steady revenues and would grow to the extent that new customers are entering a support agreement. The percentages of our revenues from these streams are as follows: Year ended Year ended March 31, 2013 March 31, 2012 License fees 14% 13% Consulting fees 59% 60% PCS arrangements 27% 27% Total 100% 100% Operating expenses The operating expenses of our product business segment consist of costs attributable to the implementation, enhancement, maintenance and continued development, including research and development efforts, of our products. These costs primarily consist of compensation expenses for all professionals working in the products business, project related travel expenses, professional fees paid to software services vendors, the cost of application software for internal use, selling and marketing expenses that consist of commissions payable to our partners, product advertising and marketing expenses and allocated overhead expenses associated with support and monitoring functions such as human resources, facilities and infrastructure expenses, quality assurance and finance and depreciation and amortization. We recognize these expenses as incurred. Research and development costs are expensed as incurred. Software product development costs are expensed as incurred unless technical feasibility of project is established, future economic benefits are probable, the Group has an intention and ability to complete and use or sell the software and the cost can be measured reliably. Software product development cost incurred subsequent to the achievement of technological feasibility are not material and are expensed as incurred. Services business (Amounts in ` million) Year ended Year ended March 31, 2013 March 31, 2012 Services revenues 7,737.45 7,821.55 Operating expenses (6,151.45) (5,866.80) Income from operations 1,586.0 1,954.75 Operating margin 21% 25% Services revenues Our services revenues represented 22% and 25% of our total revenues for the fiscal year ended March 31, 2013 and March 31, 2012. Our services revenues were ` 7,737.45 million in the fiscal year ended March 31, 2013, representing a decrease of 1% from ` 7,821.55 million in the fiscal year ended March 31, 2012. The contracts relating to our services business are either time or material contracts or fixed price contracts. The percentage of total services revenues from time and material contracts was 70% in fiscal 2013 and 75% in fiscal 2012, with the remainder of our services revenues attributable to fixed price contracts. We render services through offshore centers located in India, onsite teams operating at our customers’ premises and our development centers located in other parts of the world. Offshore services revenues consists of revenues from work conducted at our development centers in India and for Indian customers at their locations. Onsite revenues consist of work conducted at customer premises outside India and our development centers outside India. The composition of our onsite and offshore revenues is determined by the project lifecycle. Typically, the work involving the design of new systems or relating to a system rollout would be conducted onsite, while the core software development, maintenance and support activity may be conducted offshore. We received 46% and 47% of our services revenues from onsite work and 54% and 53% from offshore work during the fiscal years 2013 and 2012 respectively. 37


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    Operating expenses The operating expenses for services consists primarily of compensation expenses for our employees; cost of application software for internal use, travel expenses and professional fees paid to vendors, facilities related expenses and other overhead expenses associated with support and monitoring functions such as human resources, corporate marketing, information management systems, quality assurance and financial control and depreciation. We recognize these costs as incurred. Business Process Outsourcing (BPO) services business (Amounts in ` million) Year ended Year ended March 31, 2013 March 31, 2012 Revenues 991.54 822.40 Operating Expenses (597.77) (537.16) Income from operations 393.77 285.24 Operating margin 40% 35% Business Process Outsourcing (BPO) services revenues Our BPO services revenues represented 3% and 2% of our total revenues for the fiscal year ended March 31, 2013 and 2012 respectively. Our BPO services revenues were ` 991.54 million in the fiscal year ended March 31, 2013, an increase of 21% from ` 822.40 million in the fiscal year ended March 31, 2012. Operating expenses The operating expenses for BPO Services consist primarily of compensation expenses for our professionals, travel expenses, professional fees paid to vendors, facilities related expenses and other expenses. We recognize these costs as incurred. Geographic breakup of revenues Our overall revenues continue to be well diversified. The following table represents the percentage breakup of our revenues for our products and services business by region: Year ended March 31, 2013 Year ended March 31, 2012 Products Services Total Products Services Total Revenues Revenues Revenues Revenues Revenues Revenues North America (NA) 24% 59% 33% 27% 62% 36% Europe, Middle East, Africa (EMEA) 37% 19% 32% 40% 18% 34% Asia Pacific (JAPAC) 39% 22% 35% 33% 20% 30% Total 100% 100% 100% 100% 100% 100% Customer concentration Our operations and business depend on our relationships with a large number of customers. Our revenue from our top ten customers, as a percentage of our total revenues is at 38% for fiscal 2013 as against 36% for fiscal year 2012. The top ten customers in our services business contributed 60% of the total services revenues, and the top ten customers in our products business, contributed 40% of the total products revenues during fiscal 2013. The percentage of total revenues during fiscal years 2013 and 2012 that we derived from our largest customer, largest five customers and largest ten customers is provided in the accompanying table. In the table, various affiliates of Citigroup are classified as separate customers and the last row sets forth the percentage of total revenues we earned from the various affiliates of Citigroup with respect to our products and services business individually and with respect to our business taken as a whole. Products Revenues Services Revenues Total Revenues 2013 2012 2013 2012 2013 2012 Largest customer 18% 14% 10% 14% 14% 11% Top 5 customers 31% 24% 41% 39% 29% 25% Top 10 customers 40% 34% 60% 59% 38% 36% Citigroup and its affiliates 8% 10% 48% 50% 18% 21% Trade receivables Trade receivables as of fiscal March 31, 2013 and 2012 were ` 7,279.58 million and ` 8,972.14 million respectively. Our days sales outstanding (which is the ratio of sundry debtors to total sales in a particular year multiplied by 365) for fiscal 2013 and 2012 were Oracle Financial Services Software – Annual Report 2012-2013


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    approximately 77 and 104 respectively. The Group periodically reviews its trade receivables outstanding as well as the ageing, quality of the trade receivables, customer relationship and the history of the client. The following table represents the age profile of our trade receivables: Period in days Year ended Year ended March 31, 2013 March 31, 2012 0-180 91% 80% More than 180 9% 20% Total 100% 100% Foreign currency and treasury operations A substantial portion of our revenues is generated in foreign currencies while a majority of our expenses are incurred in Indian Rupees (INR), with the remaining expenses are incurred in various currencies mainly in US Dollars (USD), Australian Dollars (AUD), Singapore Dollars (SGD) and European currencies. Our philosophy for treasury operations is conservative and we invest funds predominantly in time deposits with well-known and highly rated Indian and foreign banks. The Group has ensured adequate internal controls over asset management, including cash management operations, credit management and debt collection. The Group also maintains funds mainly in USD, EUR, GBP, JPY and SGD bank accounts or in deposits based on comparative exchange rates, interest rates and currency requirements. The Group books forward covers from time to time in line with its treasury management philosophy. Comparison of fiscal 2013 with fiscal 2012 Revenues from operations Our total revenues in the fiscal year ended March 31, 2013 were ` 34,739.99 million, an increase of 10% over our total revenues of ` 31,466.76 million in the fiscal year ended March 31, 2012. The increase in revenues was primarily attributable to an increase in the revenues from our products business. Products revenues Our products revenues in the fiscal year ended March 31, 2013 were ` 26,011.00 million, an increase of 14% over our products revenues of ` 22,822.81 million in the fiscal year ended March 31, 2012 on the strength of large customer wins in EMEA and JAPAC. The revenues from license fees comprised 14% of the revenues, implementation and customization fees comprised 59% and Annual Maintenance Contracts comprised 27% of the revenues for the fiscal 2013. Services revenues Our services revenues represented 22% and 25% of our total revenues for the fiscal year ended March 31, 2013 and March 31, 2012. Our services revenues were ` 7,737.45 million in the fiscal year ended March 31, 2013, a decrease of 1% from ` 7,821.55 million in the fiscal year ended March 31, 2012. Revenues from time and material contracts comprised 70% of the services revenues and fixed price contracts comprised 30% for the fiscal 2013. Business Process Outsourcing (BPO) revenues Our revenues from BPO services in the fiscal year ended March 31, 2013 were ` 991.54 million, increase of 21% over our revenues from BPO services of ` 822.40 million in the fiscal year ended March 31, 2012. Other income, net Our other income in the fiscal year ended March 31, 2013, was ` 4,595.44 million, as compared to ` 4,217.49 million in the fiscal year ended March 31, 2012. The higher interest income on Bank deposits of ` 1,223.90 million and reduction in net foreign exchange gain of ` 939.70 million have primarily attributed to overall increase of ` 377.95 million in other income. 39


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    Expenses Employee costs Our employee costs increased by 14% to ` 17,243.55 million in the fiscal year ended March 31, 2013 from ` 15,186.98 million in the fiscal year ended March 31, 2012. Employee costs relate to salaries and bonuses paid to employees. Travel related expenses (net of recoveries) Our travel related expenditure increased by 14% to ` 1,645.75 million in the fiscal year ended March 31, 2013 from ` 1,445.10 million in the fiscal year ended March 31, 2012. The overall travel expenses represents 5% of revenue from operations for both the fiscal year ended March 31, 2013 and March 31, 2012. Professional fees Our professional fees related expenditure decreased by 10% to ` 1,810.51 million in the fiscal year ended March 31, 2013 from ` 2,005.03 million in the fiscal year ended March 31, 2012. The overall professional fees represents 5% and 6% of revenue from operations for the fiscal year ended March 31, 2013 and March 31, 2012 respectively. Professional fees include services hired from external consultants for various projects. Other expenses Our other expenditure increased by 8% to ` 1,848.59 million in the fiscal year ended March 31, 2013 from ` 1,718.63 million in the fiscal year ended March 31, 2012. The other expenses represent 5% of revenue from operations for both the years ended March 31, 2013 and 2012. Other expenses primarily consist of various facilities costs, application software, communication and other miscellaneous expenses. Depreciation and amortization Our Depreciation and amortization charge for the year was ` 655.02 million and ` 466.17 million for the year ended March 31, 2013 and March 31, 2012 respectively representing 2% and 1% of revenues from operations for the fiscal year ended March 31, 2013 and March 31, 2012 respectively. Exceptional item There are no exceptional items reported during the year ended March 31, 2013. During the year ended March 31, 2012, the Company settled a customer dispute for full release of all alleged claims and accordingly accounted the balance settlement amount, net of insurance claim, and disclosed the same as an exceptional item. Income taxes Our provision for income taxes in the fiscal year ended March 31, 2013 was ` 5,380.58 million, an increase of 6% over our provision for income taxes of ` 5,076.29 million in the fiscal year ended March 31, 2012. Our effective tax rate was 33% in the fiscal year ended March 31, 2013 compared to 36% in the fiscal year ended March 31, 2012. Profit for the year As a result of the foregoing factors, net profit has increased by 18% to ` 10,751.43 million in fiscal 2013 from ` 9,092.73 million in fiscal 2012. Our net profit margin has improved to 31% for the fiscal year 2013 as against 29% in the fiscal year 2012. We define profit margins for a particular period as the ratio of profit for the year to revenue from operations during such period. Liquidity and capital resources Our capital requirement relate primarily to financing the growth of our business. We have historically financed the majority of our working capital, capital expenditure and other requirements through our operating cash flow. During fiscal 2013 and 2012, we generated cash from operations of ` 11,343.52 million and ` 7,714.09 million respectively. Oracle Financial Services Software is a zero debt company. We expect that our primary financing requirements in the future will be capital expenditure and working capital requirements in connection with the expansion of our business. We believe that the cash generated from operations will be sufficient to satisfy our currently foreseeable capital expenditure and working capital requirements. Human capital We recruit graduates from leading engineering and management institutions. We also hire functional experts from the banking industry. Our employee headcount at the end of the fiscal year ended March 2013 was 9,969 as compared to the employee headcount as on March 2012 at 9,682. The blend of functional knowledge and technical expertise, coupled with in-house training and real–life, experiences in working with financial institutions make our employees unique. We enjoy cordial relationships with our employees and endeavour to give them an excellent, professionally rewarding and enriching work environment. We operate an effective performance management system, with a focus on employee development. These measures key result areas, competencies and training requirements ensuring all-round employee development. Oracle Financial Services Software – Annual Report 2012-2013


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    Risks and concerns Quantitative and Qualitative Disclosures about Market Risk Our primary market risk exposures are due to the following: – Foreign exchange rate fluctuations – Fluctuations in interest rates. As of March 31, 2013, we had Cash and Bank Balances of ` 54,710.29 million out of which ` 49,718.30 million was in interest–bearing bank deposits. Consequently, we face an exposure on account of fluctuation in interest rates. These funds were mainly invested in bank deposits of longer maturity (more than 90 days) to earn a higher rate of interest income. A substantial portion of our revenues is generated in foreign currencies while a majority of our expenses are incurred in Indian Rupees and the balance in US Dollars and European currencies. Our functional currency for Indian operations and consolidated financials is the Indian Rupee. We expect that the majority of our revenues will continue to be generated in foreign currencies for the foreseeable future and a significant portion of our expenses, including personnel costs and capital and operating expenditure, to continue to be incurred in Indian Rupees. In addition, we face normal business risks such as global competition and country risks pertaining to countries that we operate in. Analysis of our unconsolidated results The following discussion is based on our audited unconsolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in India and complying in all material respects with the Accounting Standards notified by Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. You should read the following discussion of our financial condition and results of operations together with the detailed unconsolidated Indian GAAP financial statements and the notes to those statements. Our fiscal year ends on March 31 of each year. Our total revenues in fiscal 2013 were ` 29,377.01 million, representing an increase of 13% from ` 26,058.54 million in fiscal 2012. The net income in fiscal 2013 was ` 10,292.60 million, against ` 10,892.33 million in fiscal 2012. Our net income margin in fiscal 2013 is at 35% as against 42% in fiscal 2012. We define income margins for a particular period as the ratio of profit for the year to revenue from operations during such period. Products business (Amounts in ` million) Year ended Year ended March 31, 2013 March 31, 2012 Product revenues 22,397.34 19,121.73 Operating expenses (12,327.08) (10,300.73) Income from operations 10,070.26 8,821.00 Operating margin 45% 46% Products revenues As of March 31, 2013, our product revenues were ` 22,397.34 million, an increase of 17% from ` 19,121.73 million during the fiscal year ended March 31, 2012. Product revenues represented 76% and 73% of total revenues for fiscal years ended 2013 and 2012 respectively. Our products revenues comprise license fees, professional fees for implementation and enhancement services and annual maintenance contract (Post Contract Support - PCS) fees for our products. License fee Our standard licensing arrangements for products provide the bank a right to use the product up to a limit on number of users or sites or such other usage metric upon the payment of a license fee. The license fee is a function of a variety of quantitative and qualitative factors, including the number of copies sold, the number of users supported, the number and combination of the modules sold and the number of sites and geographical locations supported. The licenses are perpetual, non-exclusive, personal, non transferable and royalty free. Consulting fee Along with licenses for our products, our customers can also optionally avail consulting services related to the implementation of products at their sites, integration with other systems or enhancements to address their specific requirements. The customer is typically charged a service fee on either a fixed price basis or a time and material basis based on the professional efforts incurred and associated out of pocket expenses. 41


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    Annual maintenance contract (PCS) fees Customers typically sign an Annual Maintenance Contract with us under which, we provide technical support, maintenance, problem resolution and upgrades for the licensed products. These support agreements typically cover a period of 12 months. The revenues generated from license fees and consulting services rendered by us depend on factors such as the number of new customers added, milestones achieved, implementation time, etc. Therefore, such revenues typically vary from year to year. The annual maintenance contracts generate steady revenues and would grow to the extent that new customers are entering into a support agreement. The percentages of our revenues from these streams are as follows: Year ended Year ended March 31, 2013 March 31, 2012 License fees 15% 12% Consulting fees 58% 61% PCS arrangements 27% 27% Total 100% 100% Operating expenses The operating expenses of our product business segment consist of costs attributable to the implementation, enhancement, maintenance and continued development, including research and development efforts, of our products. These costs primarily consist of compensation expenses for all professionals working in the products business, project related travel expenses, professional fees paid to software services vendors, the cost of application software for internal use, selling and marketing expenses that consist of, product advertising and marketing expenses and allocated overhead expenses associated with support and monitoring functions such as human resources, facilities and infrastructure expenses, quality assurance, finance, depreciation and amortization. We recognize these expenses as incurred. Research and development costs are expensed as incurred. Software product development costs are expensed as incurred unless technical feasibility of project is established, future economic benefits are probable, the Group has an intention and ability to complete and use or sell the software and the cost can be measured reliably. Software product development cost incurred subsequent to the achievement of technological feasibility are not material and are expensed as incurred. Services business (Amounts in ` million) Year ended Year ended March 31, 2013 March 31, 2012 Services revenues 6,979.67 6,936.81 Operating expenses (5,675.33) (5,248.55) Income from operations 1,304.34 1,688.26 Operating margin 19% 24 % Services revenues Our services revenues represented 24% and 27% of our total revenues for the fiscal year ended March 31, 2013 and 2012 respectively. Our services revenues were ` 6,979.67 million in the fiscal year ended March 31, 2013 and ` 6,936.81 million in the fiscal year ended March 31, 2012. The contracts relating to our services business are either time or material contracts or fixed price contracts. The percentage of total services revenues from time and material contracts was 71% in fiscal 2013 and 74% in fiscal 2012, with the remainder of our services revenues attributable to fixed price contracts. We render services through offshore centers located in India, onsite teams operating at our customers’ premises and our development centers located in other parts of the world. Offshore services revenues consists of revenues from work conducted at our development centers in India and for Indian customers at their locations. Onsite revenues consist of work conducted at customer premises outside India and our development center’s outside India. The composition of our onsite and offshore revenues is determined by the project lifecycle. Typically, the work involving the design of new systems or relating to a system rollout would be conducted onsite, while the core software development, maintenance and support activity may be conducted offshore. We received 48% of our services revenues from onsite work and 52% from offshore work during the fiscal years 2013 as against 47% and 53% respectively in the fiscal year 2012. Oracle Financial Services Software – Annual Report 2012-2013


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    Operating expenses The operating expenses for services consists primarily of compensation expenses for our software professionals; cost of application software for internal use, travel expenses, professional fees paid to software services vendors, selling, general and administrative expenses and allocated overhead expenses associated with support and monitoring functions such as human resources, corporate marketing, information management systems, quality assurance and financial control and depreciation. We recognize these expenses as incurred. Geographic breakup of revenues Our overall revenues continue to be well diversified. The following table represents the percentage breakup of our revenues for our products and services business by region: Year ended March 31, 2013 Year ended March 31, 2012 Products Services Total Products Services Total Revenues Revenues Revenues Revenues Revenues Revenues North America (NA) 22% 54% 30% 24% 57% 33% Europe, Middle East, Africa (EMEA) 39% 22% 35% 38% 18% 33% Asia Pacific (JAPAC) 39% 24% 35% 38% 25% 34% Total 100% 100% 100% 100% 100% 100% Customer concentration Our operations and business depend on our relationships with a large number of customers. Our revenues from our top ten customers, as a percentage of our total revenues are at 40% for fiscal 2013 as against 34% for fiscal year 2012. The top ten customers in our services business contributed 63% of the total services revenues and the top ten customers in our products business, contributed 42% of the total products revenues during fiscal 2013. The percentage of total revenues during fiscal years 2013 and 2012 that we derived from our largest customer, largest five customers and largest ten customers is provided in the accompanying table. In the table, various affiliates of Citigroup are classified as separate customers and the last row sets forth the percentage of total revenues we earned from the various affiliates of Citigroup with respect to our products and services business individually and with respect to our business taken as a whole. Products Revenues Services Revenues Total Revenues 2013 2012 2013 2012 2013 2012 Largest customer 18% 14% 11% 12% 14% 11% Top 5 customers 32% 25% 42% 39% 30% 27% Top 10 customers 42% 34% 63% 56% 40% 34% Citigroup and its affiliates 7% 10% 52% 53% 18% 21% Trade receivables Trade receivables as of fiscal March 31, 2013 and 2012 were ` 9,685.82 million and ` 11,442.93 million respectively. Our days sales outstanding (which is the ratio of Trade receivables to total revenue from operations in a particular year multiplied by 365) for fiscal 2013 and 2012 were approximately 120 and 160 respectively. The Company periodically reviews its trade receivables outstanding as well as the ageing, quality of the trade receivables, customer relationship and history of the client. The following table represents the age profile of our trade receivables: Period in days Year ended Year ended March 31, 2013 March 31, 2012 0-180 81% 84% More than 180 19% 16% Total 100% 100% Foreign currency and treasury operations A substantial portion of our revenues is generated in foreign currencies while a majority of our expenses are incurred in Indian Rupees (INR), with the remaining expenses are incurred in various currencies mainly in US Dollars (USD), Australian Dollars (AUD), Singapore Dollars (SGD) and European currencies. 43


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    Our philosophy for treasury operations is conservative and we invest funds predominantly in time deposits with well-known and highly rated Indian and foreign banks. The Company has ensured adequate internal controls over asset management, including cash management operations, credit management and debt collection. The Company also maintains funds in USD, EUR, GBP and INR accounts based on comparative exchange rates, interest rates and currency requirements. Comparison of fiscal 2013 with fiscal 2012 Revenues from operations Our total revenues from operations in the fiscal year ended March 31, 2013, were ` 29,377.01 million, an increase of 13% over our total revenues of ` 26,058.54 million in the fiscal year ended March 31, 2012. The increase in revenues was primarily attributable to an increase in the revenues from our products business. Products revenues Our products revenues in the fiscal year ended March 31, 2013, stood at ` 22,397.34 million, an increase of 17% over our products revenues of ` 19,121.73 million in the fiscal year ended March 31, 2012 on the strength of large customer wins in USA and JAPAC. The revenues from license fees comprised 15% of the revenues, implementation and customization fees comprised 58%, and Annual Maintenance Contracts comprised 27% of the revenues for the fiscal 2013. Services revenues Our services revenues represented 24% and 27% of our total revenues in the fiscal year 2013 and 2012. Our services revenues were ` 6,979.67 million in the fiscal year ended March 31, 2013. Revenues from time and material contracts comprised 71% of services revenues and fixed price contracts comprised 29% for the fiscal 2013. Other income, net Our other income in the fiscal year ended March 31, 2013, was ` 4,403.20 million, as compared to ` 3,750.34 million in the fiscal year ended March 31, 2012. The higher interest income on Bank deposits of ` 1,234.88 million and reduction in net foreign exchange gain of ` 680.30 million have primarily attributed to overall increase of ` 652.86 million in other income. Expenses Employee costs Our employee costs increased by 15% to ` 14,357.07 million in the fiscal year ended March 31, 2013 from ` 12,532.65 million in the fiscal year ended March 31, 2012. Employee costs relate to salaries and bonuses paid to employees in India and at overseas. Travel related expenses (net of recoveries) Our travel related expenditure increased by 15% to ` 1,238.15 million in the fiscal year ended March 31, 2013 from ` 1,079.81 million in the fiscal year ended March 31, 2012. The overall travel expenses represents 4% of Revenue from operations for both the years ended March 31, 2013 and 2012. Professional fees Our professional fees related expenditure was ` 1,345.96 million in the fiscal year ended March 31, 2013 as against ` 1,395.72 million in the fiscal year ended March 31, 2012. The overall professional fees represents around 5% of Revenue from operations. Professional fees include services hired from subsidiaries and that from external consultants for various projects. Other expenses Our other expenditure increased by 4% to ` 1,205.35 million in the fiscal year ended March 31, 2013 from ` 1,155.56 million in the fiscal year ended March 31, 2012. The other expenses represent 4% of Revenue from operations for both the years ended March 31, 2013 and 2012. Other expenses primarily consist of various facilities costs, application software, communication and other miscellaneous expenses. Oracle Financial Services Software – Annual Report 2012-2013


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    Depreciation and amortization Our Depreciation and amortization charge for the year was ` 586.08 million and ` 401.19 million for the year ended March 31, 2013 and 2012 respectively representing 2% of revenues from operations. Exceptional items, net There are no exceptional items reported during the year ended March 31, 2013. During the year ended March 31, 2012, the Company had received dividend of ` 1,833.30 million and ` 1,275 million from its wholly owned subsidiaries Oracle Financial Services Software B.V. and Oracle Financial Services Software Pte. Ltd. respectively. During the year ended March 31, 2012, the Company settled a customer dispute for full release of all alleged claims and accordingly accounted the balance settlement amount, net of insurance claim, and disclosed the same as an exceptional item. Income taxes Our provision for income tax in the fiscal year ended March 31, 2013, was ` 4,755 million as against ` 4,766.60 million in the fiscal year ended March 31, 2012. Our effective tax rate was 32% for the fiscal year ended March 31, 2013 as against 30% for the fiscal year ended March 31, 2012. Profit for the year As a result of the foregoing factors, net profit for the year ended March 31, 2013 is ` 10,292.60 million as against ` 10,892.33 million during the year ended March 31, 2012. Our net profit margin is 35% for the fiscal year 2013 as against 42% in the fiscal year 2012. We define profit margins for a particular period as the ratio of profit for the year to revenue from operations during such period. Liquidity and capital resources Our capital requirement relate primarily to financing the growth of our business. We have historically financed the majority of our working capital, capital expenditure and other requirements through our operating cash flow. During fiscal 2013 and 2012 we generated cash from operations of ` 11,461.23 million and ` 4,375.80 million respectively. Oracle Financial Services Software is a zero debt company. We expect that our primary financing requirements in the future will be capital expenditure and working capital requirements in connection with the expansion of our business. We believe that the cash generated from operations will be sufficient to satisfy our currently foreseeable capital expenditure and working capital requirements. Human capital We recruit graduates from leading engineering and management institutions. We also hire functional experts from the banking industry. Our employee headcount at the end of the fiscal year ended March 2013 was 7,817 as compared to the employee headcount as on March 2012 at 8,458. The blend of functional knowledge and technical expertise, coupled with in-house training and real life, experiences in working with financial institutions make our employees unique. We enjoy cordial relationships with our employees and endeavour to give them an excellent, professionally rewarding and enriching work environment. We operate an effective performance management system, with a focus on employee development. These measures key result areas, competencies and training requirements ensuring all-round employee development. Risks and concerns Quantitative and Qualitative Disclosures about Market Risk Our primary market risk exposures are due to the following: – Foreign exchange rate fluctuations – Fluctuations in interest rates – Fluctuations in the value of our investments. 45


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    As of March 31, 2013, we had Cash and Bank Balances of ` 50,183.44 million, out of which ` 49,314.84 million was in interest bearing bank deposits. Consequently, we face an exposure on account of fluctuation in interest rates. These funds were mainly invested in bank deposits of longer maturity (more than 90 days) to earn a higher rate of interest income. A substantial portion of our revenues is generated in foreign currencies, while a majority of our expenses are incurred in Indian Rupees and the balance in US Dollars and European currencies. Our functional currency for Indian operations is the Indian Rupee. We expect that the majority of our revenues will continue to be generated in foreign currencies for the foreseeable future and a significant portion of our expenses, including personnel costs and capital and operating expenditure, to continue to be incurred in Indian Rupees. In addition, we face normal business risks such as global competition and country risks pertaining to countries that we operate in. Oracle Financial Services Software – Annual Report 2012-2013


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    Consolidated Financials Financial statements for the year ended March 31, 2013 prepared in accordance with Indian Generally Accepted Accounting Principles (Indian GAAP) (Consolidated). 47


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    This page has been intentionally left blank. Oracle Financial Services Software – Annual Report 2012-2013

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