Annual General Meeting | Birlasoft | FY 2019-20

Good afternoon. I, Sneha Padwe, Company Secretary of your company, welcome all the members and the dignitaries to the 29th Annual General Meeting being conducted through video conferencing or other audio visual means, called VC or OAVM facility, in view of the massive outbreak of the COVID-19 pandemic, the necessity to maintain social distance, and also taking into consideration the safety of the members, and the circulars issued by the Ministry of Corporate Affairs (MCA). The 29th Annual General Meeting (AGM) of the company is being conducted through VC/OAVM facility. The facility for joining this meeting through VC/OAVM is made available for the members on a first-come, first-served basis. If the members are facing any technical issue while joining or if any support is required, you may contact the help desk of NSDL, whose details are provided in the notice of the 29th AGM of the company. I would like to confirm the presence of all the directors: Mr. Chandra Shekhar, Chief Financial Officer of the company; Mr. Shantanu Rudra, Head of Finance; Mr. Nilesh, representative BSR and Company LLP, Chartered Accountants, Statutory Auditor of the company; Ms. Nehal Kulkarni, representative of Dr. K.R. Chandratri, Practicing Company Secretary, the Secretarial Auditor of the company. Since the requisite quorum is present as per Section 103 of the Companies Act, 2013, the Annual General Meeting may be commenced. The e-voting facility is opened for members to cast their vote. I now request the Chairman to introduce the directors of the company who are visible on the screen and conduct the proceedings of this meeting. Thank you.

Good afternoon everyone. I am Chandra Khan Birla, attending this meeting from Utah.

Good afternoon everyone. This is...

Good afternoon everybody. I'm Ashok Kumar, joining the AGM from my home in Mumbai.

Good afternoon everyone. This is... and head of IS NRC during this meeting from Mumbai. Thank you.

Good afternoon everyone. I am Nandita Gurjar, Independent Director, joining in from Andhra.

Mrs. Bridler, the Register of Directors and Key Managerial Personnel and their shareholding maintained under Section 170 of the Companies Act, 2013, the Register of Contracts or Arrangements in which the directors are interested maintained under Section 189 of the Companies Act, 2013, and the relevant documents referred to in the notice are available on the website of the company for inspection by the members during the AGM. As the AGM is being held through video conference, the facility for appointment of proxies by the members is not applicable and hence the proxy register for inspection is not available. The company has a request to receive requests from a few members to register them as speakers at the meeting. Accordingly, the floor will be open to these members to ask questions or express their views. The moderator will facilitate this session once the Chairman opens the floor for questions and answers. It may be noted that the company reserves the right to limit the number of members asking questions depending on the availability of time at the AGM. The company had provided the facility to cast the votes electronically on all the resolutions set forth in the notice. Members who have not cast their votes yet through remote e-voting facility and who are participating in this meeting have an opportunity to cast the votes during the meeting through the e-voting system provided by NSDL. Members can click on the 'Go' tab on the video conference key screen to avail this feature. Over to the Chairman.

Thank you. Mr. Birla, let me just share the presentation. I hope you all are able to see the presentation. Okay, thank you again. Amita, good afternoon. Good afternoon again to all of you who have joined in the meeting. So very quickly, let me run through the presentation on how your company, Birlasoft, performed during the year. So a little bit of introduction about the CK Birla Group. As you all are aware, Birlasoft comes from CK Birla Group companies, which is a 2.4 billion dollar group, and there are more than 25,000 employees in the group and about 41 manufacturing facilities across India or across the globe, and 21 service delivery locations. The CK Birla Group has three industry clusters: the technology cluster from where Birlasoft comes from, the automotive, home and building, and healthcare and education. And these companies are strengthened by shared guiding principles and the five core values by which CK Birla Group companies live by. Okay, the highlights for the financial year 2020. I'm sure that you'll be very happy to note that today we are one Birlasoft. As you are aware, last year we merged with KPIT Technologies' IT business, and we were going through the integration process. We took that integration on priority, and today I can very proudly say that your company is one Birlasoft. We have done the integration of all the policies and the processes across the entire company. At the same time, we have rolled out the industry-aligned organization structure, which was done in the beginning of the year, but over the period we have stabilized that structure, and we have delivered a full year with that new structure. Our major focus was how do we strengthen the sales capability, and that is what was taken on priority, and we transitioned to a business and customer-centric approach where we created the structure which is very much focused on the customer's business and not just on the technologies. And as we began, we experienced that in the first two quarters there was a marginal degrowth because we went through the integration process, but after that we gave the industry-leading growth in the second half of the financial year. You all are aware that we signed a multi-services deal worth 242 million dollars total contract value with a healthcare major in the US, and that has really provided us a good platform to go and win similar deals in the future as well. And of course, the number of wins for the year was at a record high for Birlasoft, which was at 669 million dollars TCV for the entire financial year. If we look at some of the quantitative aspects of the year, for H2 over quarter three and quarter four, we delivered a much better growth than our industry peers, and we are very proud of that. And the EBITDA grew by 22% year on year despite having a flat revenue for the financial year. Cash and equivalents grew by 91 crores to 666 crores at the year end. The manpower strength, which we began at 10,268, we finished the year at 10,061 in the month of March. If you look at the DSO, we made some impressive progress on really bringing the DSO down. Our DSO in the beginning of the year was at 79 days, which was brought to 72 days, which is at par with the industry requirements. The company became completely debt-free in quarter one itself, and of course the free cash flow generation was for 258 crores. If you look at the organization, we kept on our positioning to continue to work towards strengthening our enterprise solutions capability, at the same time making our customers digital by having the strength of their solutions in the enterprise solutions space. If you look at the key highlights for the financial year, our revenue stood at 3,291 crores, which is 464 million dollars. The EBITDA stood at 392 crores, which is 55.3 million dollars, and the EBITDA margin stood at 11.9%. The profit after tax was at 224 crores, which is 31.6 million dollars, at a margin of 6.8%. The headcount, as I mentioned before, was 10,268, and net cash and cash equivalents at 665 crores or 88.4 million dollars. The net worth for the company was at 1,892 crores or 251 million dollars during the year. So that was the key highlight for the year. Let me also spend a little bit of time talking about some of the other parameters. Yeah, some of the key metrics. If we look at our client concentration, it was... The focus that we had was how do we continue to focus on selling to our existing clients and making our relationship far more valuable. So from that perspective, our 27.3% revenue comes from the top five customers, 38.1% come from the top 10 customers, and 50.8% come from the top 20 customers. That meant that we continued working on strengthening our relationship with our existing customers through cross-selling our multiple services. If you look at the breakup of the geos, Americas is at 79.1%, Europe at 10.6%, and rest of the world is at 10.3%. If you look at on the vertical side, because we made our structure vertically focused or industry focused, and there were six verticals that were created as part of our structure: the automotive stood at 13.4%, discrete manufacturing and high-tech and media stood at 18.4%, banking and financial services and insurance at 18.7%, energy and utilities at 17.8%, CPG retail and process manufacturing at 12.4%, and life sciences at 19.3%. Whereas if you look at our technology services, our SAP services stood at 17.2%, our Oracle and related services, which we also call as integrated enterprise solutions, was at 32.6%, the digital transformation at 27.9%, custom applications at 12.3%, and other horizontals at 10.0%. If you look at the overall digital revenue for us across all the horizontals, it stands at 40% during the year, which started at 38% and went to 40% during the year. Let me walk you through some of the awards and the recognition we received during the year, because one of our key focuses was that we wanted to go to the market and talk about all our services and also wanted to get acknowledged by the advisors and the analysts in the market. We worked very aggressively in order to get our presence felt. If you look at some of the awards and the recognition, we were honored with the ACE Alliance Award for 2019 by SAP for customer excellence. SAP, as you know, is a very core service for us, and we were given that award. Similarly, on the Oracle side, we won the Oracle Excellence Award for the Emerging Technologies category at the Oracle Open World in San Francisco. We were also recognized with the Emerging Technology Partner of the Year for financial year 2019 and Supply Chain Cloud Partner by Oracle. We were also recipient of the prestigious Expense Management Partner for the year 2018 at the SAP India Partner Summit. So very clearly, you can see that on the enterprise solutions, we made our presence, and both SAP and Oracle really gave us the recognition for the capability that we bring on the table. We also won the Smart Data Center Management Award in the Automation category at the seventh Data Center Summit and Awards. At the same time, as we know that e-commerce is becoming very prominent in the market because everybody is moving towards digital, SAP awarded us as Partner of the Year in the SAP Hybris Americas because that is the solution that we take to the customer and enable their e-commerce platform. At the same time, on the CSR side, the Confederation of Indian Industry signed an MOU toward the third phase of Shodhan, a crop residual management program which was initiated by Birlasoft, and we brought in many other companies into the fold and started partnering with CII, and we have been recognized for our contribution to that CSR initiative. We were also recognized with the Company with Great Managers award, and that was the award given to us in the fourth edition of Great Manager Awards. We again won the Oracle Excellence Award and the Supply Chain Management Cloud Partner for the Year with the Oracle India Partner Forum. So these are some of the awards that are there. We continue to make progress with the analysts and the advisors so that when we go to the client, there is a clear recognition by our partners also, and we go together to the market to win the business. Okay, as we all know that we are going through the COVID situation, and every single business is getting impacted through this time. If you look at right from the month of March, we were probably the first company to start working from home because we recognized that this is going to be a global pandemic, and hence we will have to be much better prepared in order to address the situation and also be enabling our clients very well. And very quickly, we shifted our people to work from home, and in the month of March itself, almost 98% of our people were working from home. So that was a very proactive method, and till date, we haven't seen any escalation with respect to any disruption in the service that we deliver to our clients. And our priority was very clearly that we continue to help our customers in recovering from the situation. During this time, we also ensure that 100% of our people are fully productive and there is zero disruption to our client business. We have seen that the impact on the business for our clients and that definitely has impact on the IT industry as well, but we have been able to protect a significant amount of impact that will come to Birlasoft, and that I am sure you will continue to see as we move forward into the next financial year. We very quickly set up in the month of March a war room which was focused both on the employees as well as on the clients so that we are able to address the situation very, very effectively, and we ensure that we take care of our employees and anything to do with their health and safety, and we successfully manage that situation for us. On the people side, of course, we issued the guidelines to our people very, very quickly so that we can very clearly explain them the new ways of working. We also provided them the help desk so that if they need any help, they can reach out to us. We continuously go and meet our employees over the web or over the video conferencing so that they remain completely engaged and remain completely productive. And we have also ensured that wherever in any of the city, if anybody is impacted due to a COVID positive situation, we provide all the guidance and help to them so that they are able to manage themselves in a much, much better way. And there are complete counseling sessions that we do with them, and there are self-help resources that we have provided to them. So all in all, I believe that we are doing very well on managing the situation, but of course we all understand that the impact is there due to this situation, and our objective is how do we reduce the impact on the business, and we continue to protect our business as well as continue to mitigate any risk that comes our way. The priorities going ahead will continue to remain on the growth, because that we believe is the fundamental need for the business to continue to grow. And hence, very quickly we have realigned our sales and delivery so that we continue to reach out to our customers and continue to deliver them effectively. We have improved our annual revenue. Last year I did talk about that one of our key focuses would be the cross-selling and improving our IoT revenue, and we moved our situation from 51 to 60 during the year, and that contributed to significant predictability of our revenue and profitability for the next financial year. We had to continue to look at that our relationship with the ISVs and OEMs is continuing with all these strengths because after the merger, there can be a change in the focus that can happen, but we wanted to ensure that we have good partnership with SAP, with Oracle, Salesforce.com, ServiceNow, Microsoft, and Amazon. So these are significant partnerships that we have, and these partnerships during the year have only strengthened further, and we can continue to see that this is providing us good growth momentum in the coming year also. We want to continue to remain as a dependable partner to our customers, and we continue to engage with them. That can be clearly seen from the various parameters that we continue to track, and I assure you that this is one focus area that each and every employee of the organization is focused on. And of course, last but not the least, or I would say that actually the most important thing is the operational rigor, because we have to continue to improve our profitability, which we did in every quarter in the previous year despite having the flat revenue, and this was only because we provided the operational rigor. And today we can very confidently say that we are improving our profitability and our operational rigor in a very, very nice way. With that, I would like to thank all of you once again for joining, and all the best, and would wish good health and safety for all of you. Thank you. Back to you, Mrs. Birla.

Thank you, ma'am. The Statutory Auditor, BSR & Company LLP, Chartered Accountants, and Secretarial Auditor, Dr. K.R. Chandratri, Practicing Company Secretary, in their respective audit reports for the financial year 2019-20, have expressed unqualified opinions. There were no observations, qualifications, or adverse remarks on the financial statements and matters which have any material bearing on the functioning of the company. I now request the Chairman to take over and conduct the items as per agenda.

Thank you, Madam Chairperson. I would now take up item number four of the ensuing Annual General Meeting, which relates to the reappointment of Mr. Chandra as a director liable to retire by rotation. The resolution reads: to appoint a director in place of Mr. Chandigan, who retires by rotation and, being eligible, offers himself for the appointment. Special business: item number five: approval of requests received from certain shareholders for reclassification of their shareholding from promoter and promoter group category to public category. Item number six: adoption of a new set of Memorandum of Association. Item number seven: approval of the waiver of recovery of excess remuneration. The text of the special businesses along with the explanatory statement is provided in the notice circulated to the members. I now hand over to Sneha.

I now request members who have registered as speakers to ask their questions and give their opinions and suggestions, if any, and kindly introduce yourselves by giving full name and folio number or DPID client ID before speaking. Each speaker member is provided three minutes to ask their questions, and they are requested to kindly keep their video on and mic on unmute. If any speaker member is facing technical issues, we will now move to the next registered speaker. To avoid repetition, the questions will be addressed at the end. Once you have asked your question, you can log off and continue to watch the proceedings. I now call upon the moderator to take the questions from the members.

Yes sir, yes sir. Respected Chairperson, I am joining from Pune. Madam, good afternoon to you all and all those who joined this virtual meeting. We did listen to your speech last year on video. Hope next year things will improve and we will get an opportunity to see you personally and converse at the next meeting of the company. I am quite happy to note a very good progress in the second year from implementation of the scheme of arrangements. Many companies take a lot of years to have smoothness in handing over and also getting into the company's strategy. You have done it in a very short time. Good. Congratulations for having captured various awards. The list is impressive, and I wish that you keep it up so that the name of Birlasoft goes all over the world. You have improved top and bottom line for continuing operations. The EPS rose by 16%. Well begun is half done. Hope it will be in two digits by 2025. Good. We are a debt-free company now. The results do bring out the fact that the work of the company did not suffer much due to lockdown. Our MD stated that he took preventive measures and started asking people to work from home, and in March itself you were quite lucky than others and did the work without any disruptions. You gave us good dividends, and we are thankful to you. The stock exchanges also note our pulse, and in view of good beginning, the rise in the stock price during July 2020 is impressive. It is now in three digits. It's a smart rise over 100 points in the last six months. A very good achievement, Madam. We would like to know total budget for capital in 2021, including capital work in progress in 2019-20 of 23.5 million, and also disclosed for what it is and its effect on the top line in 2021. Why nearly non-current investments in 2019-20? Further, it is observed that the current investments were less by 1578 million. We must invest more to get a cutting edge over the company. In view of the ease in credit terms, it is possible to get loans at competitive rates. Therefore, to control finance costs, receivables and closing cash both rose year on year. Have prudent cash management. We ought to have recovered smartly as there was no lockdown for 11 months of 2019-20. However, be vigilant on reducing the receivables in 2021 in view of the fact that the lockdown will be partially effective throughout 2020. I wish the management to show enough progress on all the three financial matters in the coming year. Madam, you are lucky. Your all managers have been awarded good manager. It's a good spirit. You are having a good team. I appreciate your team and envy your performance because with the good managers you are about to give good report. How many of our employees work on site and how many from home? You are told 98% are working, but will this continue? If it continues, the psychological problems should be addressed properly. Please address their problems. Anyone doing work from home may have certain problems. We shouldn't do it. Already your employee cost has increased, but it is quite much because they are all our... I wish you that you will turn better results in the year to come, and we look forward for results.

Um, a moderator, there are more questions.

Yes, so I'll take the next speaker please.

So the next speaker is Mr. Namin. You have now been admitted and placed in the meeting. You can now start your video and ask your question. Please.

Greetings to respected... and all the distinguished board members and management team of Birlasoft. I very much appreciate the efforts of our IR team led by Mr. Vikas Jado and Company Secretary Sneha Madam for coordinating this smooth registration and participation in this virtual AGM. I appreciate it very much. It's a great pleasure attending the AGM. I also attended the earlier 2018 AGM of KPIT. A highly successful innovation-led, sustainable growth strategy, organic or inorganic, which is creating wealth for all the shareholders. Our group is looking all the time for the growth strategies, so we like it very much, and as investors we are very much comfortable in the group and continuously investing more and more money into all the group companies. I congratulate the team for excellent set of numbers in the last financial year as well as in this quarter also, even in these challenging times, producing good set of operating profits. We have also recently tied up with Microsoft and other leading companies for our acceleration in the digital solutions to our customers. We appreciate the resilience and agility of our team. Philosophy. I have some observations and points which I would like the management to clarify, which will help us. Regarding the dividend distribution policy, our dividend distribution policy is presently going on as approved by the board of management of KPIT Technology in October 2016. So it will be now, as all the formalities of KPIT IT shareholding and dematerialized world members process is also through, we would like that our company's board should adopt a comprehensive dividend distribution policy. Not only dividend distribution policy, but comprehensive capital allocation policy which also includes dividend distribution policy as well as specific budgets for R&D expenses or emerging new technologies like cloud computing, AI, IoT, machine learning, and blockchain, which are going to be in the 5G era, going to be very much in the focus. So we should also increase our R&D expenses in the new technologies and also keep that in overall capital allocation policy, as also some other inorganic opportunities to accelerate our growth going ahead. So the adoption of capital allocation policy will be highly appreciated by the investor community. That is my first point. Second is regarding the organic and inorganic growth opportunity. As I already spoken, we have already successfully integrated the KPIT's IT services division, and it's behind us, and the success is already showing in our results and all the operational performance, as Mr. TK has already told us in the company's overall market cap and all these things. So what will be the management's medium-term outlook on growth? Are we going to do some adjacent acquisitions because we are having good cash balances? So this thing will help us in... and as the income calls and all these things, our management is saying that we may look forward in the coming two to three quarters also for the highway and also... so your views will complement all these things. And the third thing is which we all investors would like to know: as we are a traditional application development and maintenance player, yes we are already migrating to full-fledged IT and digital services. What further steps management is going to take to evolve our company, Birlasoft, into a full-fledged IT and digital services player, like all the big players, big five, TCS, Infosys, etc.? So what is our policy and outlook in the coming five years to achieve at least one billion dollar? That must be the ambition of the company. So we would like to hear your valuable views. I conclude. I wish all the very best to team Birlasoft for its future endeavors, and I propose a lot of thanks. Thank you.

Thank you very much, man. Thank you. Thank you, Namin. I'll just take the next participant.

The next question is from Mr. Vedic Sarkar. So Vedic, you have now been unmuted and placed in the meeting.

Thank you very much. Hello and good afternoon. Madam Board and thank you very much for the opportunity. I trust all of you are doing well. Birlasoft has been through two years of consolidation in terms of a very successful merger and post-merger activities, and as things stand today, the company is on course to performing very well on operational as well as financial metrics. Keeping that in perspective, and also keeping in perspective the large build-up of liquidity that Birlasoft has experienced over the past few years, it is now imperative for the board to reflect and execute on a firm plan of capital redistribution back to shareholders. Of course, this will also make sure that the company's capital efficiency, which is coming off a very low base, will be corrected and addressed from a structural perspective. I'd like to hear the Chairperson's and the board's view on this, and importantly, how it seeks to quantify in absolute terms the extent of capital redistribution back to shareholders, along with specific timelines. Just to clarify, I speak on behalf of myself and shareholders who collectively own about one percent of the outstanding equity. Thank you very much once again, and that's all.

Thanks, Vedic, for your question. Let me take the last kind of speaker.

So the next question, probably this is the last one, is from... So the next question is from this... Sudha, you have been unmuted and you can ask a question, please.

Yeah, we can hear you. Okay, please go ahead with your questions.

Good afternoon everyone. I would like to congratulate the Company Secretary and his team for sending the soft copy of the report well in advance, which is clear and transparent pictures. I would like to ask: what is the impact of COVID-19 on our current employees? Second, I also like to congratulate our company for becoming debt-free from this year. Secondly, I want to know who are our main competitors. With this, I support all the resolutions and wish the company best luck for the coming years. Thank you.

Thank you, sir.

That's pretty much all the questions we had, so forth.

Um, I'll take your questions first. You asked about the total budget for capital. Our capex is around seven and a half million dollars. The question also was around non-current investments and less current investment. Investment in our subsidiaries has been 48.6 million dollars. They didn't need any further investment in the year 2019-20. And on the less current and fewer amount of current investment, we moved our funds out of liquid mutual funds into fixed deposits in banks to avoid market volatility at this time. You had a question around the ease in credit terms and the possibility of getting loans. We don't need any loans because the company has 108 million in the bank. As our CFO is, of course, controlling the financial costs. There was a question around receivables. Yes, we're monitoring the receivables closely, and the DSO has come down from 72 days to 60 days by the end of June. Our employees, you asked about 98% are working from home. We do already have multiple wellness programs for our employees, and they are being amply and well taken care of. Mr. Bothra, your questions. The first question was around the dividend distribution policy. Yes, we are following the CK Birla Group philosophy on dividend distribution. On organic and inorganic growth, we are always looking at growth opportunities, and we're going to make strategic decisions at the appropriate time with regard to growth and investment in growth. We always invest about 85 to 90% on established technologies and spend about 10 to 15% investment in emerging technologies. Our strategy towards becoming a fully-fledged IT digital player: we already are. Our digital revenues stand at more than 40%. Our revenue from ERP and transformation programs stands at about another 35 to 40%. Our efforts have been to have a very balanced revenue quality, and we have achieved significant progress in this direction. Birlasoft is known as an enterprise solutions and digital transformation enterprise, and not support and maintenance. Mr. Vedic Sarkar, you had a question around a suggestion around utilization of cash reserves. We'll be evaluating all possible initiatives which will help the company to enhance its stakeholder wealth. And Mrs. That way, our main competitors are LTI, NIIT, Hexaware, and others. And our impact on our current employees: as I said, 98% are working from home right now. There has been no significant impact on our current employees. Our customers are happy with the way that they're working from home, and our employees have been enabled from a technology standpoint and from a wellness standpoint, so they are very well taken care of. And thank you all for your very good wishes for the company.

Thank you, Chairman. I think all the questions are answered. If any question remains unanswered, we will provide the answers over email as per the requirements of the Companies Act, 2013 and the SEBI LODR Regulations, 2015 and MCA circulars. We have provided to all the members holding shares as on the cut-off date, that is August 19, 2020, the facility to exercise their right to vote on resolutions as set out from item numbers 1 to 7 of the notice of the 29th Annual General Meeting by electronic means through remote e-voting platform provided by NSDL. The remote e-voting facility was made available to the members from Friday, August 21, 2020, 9:00 AM IST to Tuesday, August 25, 2020, 5:00 PM IST. In accordance with Sections 107 and 109 of the Companies Act, 2013, MCA circulars, and SEBI circulars, we have also provided electronic voting, that is AGM e-voting, to all the members holding shares as on the cut-off date, that is August 19, 2020, the facility to exercise their right to vote on resolutions as set out from item numbers 1 to 7 of the notice of the 29th Annual General Meeting during the meeting through NSDL. The members attending the meeting who have not cast the vote by remote e-voting can cast their vote through AGM e-voting. The Board of Directors has appointed Mr. Jaivan Bhave of J.B. Bhave & Company, Company Secretaries, as the scrutinizer to supervise the e-voting process. The resolutions set forth in the notice shall be deemed to be passed today subject to receipt of requisite number of votes. I now hand over to the Chairman.

Thank you, Mr. Birla. On behalf of the Board of Directors, I thank all of our stakeholders, our members, customers, bankers, suppliers for giving their continued support. I wish to place on record our appreciation for the committed and efficient services rendered by all of our employees and their tremendous will and passion to change with the times. As a reminder, the voting lines are still open and they'll remain open for another 15 minutes, and I request our esteemed shareholders to stay on the line and cast their vote. Thank you all for attending the meeting. I hereby declare the proceedings closed. Thank you very much, and we hope to see you next year. Thank you.

So the directors can log off now. I request all the shareholders to remain logged in as we require them for the forum.

The AGM e-voting time is over. I hereby declare the proceedings as closed. Thank you everybody for joining in.

Or you can end the meeting from your end. Just yes.