SECTION A

To capture an eventful, exciting year in its entirety might be difficult in limited space on print. However, we feel progress is best measured against our Enterprise Framework - The 6 Capital Framework. We shall now examine in some detail how we have performed in each of the six capitals, and how we will ensure that Intellect remains on the growth trajectory going forward.

i. IP CAPITAL

The completeness and richness of the Intellect product suite enables a robust business model across cross-sell and up-sell in our strategic client landscape. While our competitors usually are limited to a sliver of a single product, or address one vertical, the Intellect suite spans Consumer Banking, Transaction (Corporate) Banking, Risk and Treasury Management, and Insurance. Superior architecture translates into smooth integration with the customer's IT ecosystem.

Intellect is built on iDigital, providing a complete Digital 360 architecture to customers. The intellectual property of the Company encompasses patented technologies, frameworks and tools and L0 framework which provide a common taxonomy to business, technology providers and operations. Agile methodologies help implement our products ahead of schedule. The COPARIS framework enables design and diagnostics of robust digital architectures. The company invests around USD$ 20 million a year on research and development.

The Internet and digital technologies are transforming our world - in every walk of life and in every line of business. And Intellect has risen to the challenge with specially designed products across consumer banking, transaction banking, risk, treasury and markets, and insurance.

We have designed and invested in two world class Research & Development (R&D) centres located in Chennai & Mumbai. The R&D centre in Chennai has already been approved by Department of Scientific & Industrial Research (DSIR) as an in-house R&D centre. The approval for the Mumbai centre is under process.

Intellect provides full spectrum, fully integrated products that run in over 200 financial institutions, across the globe, across Global Consumer Banking (iGCB), Central Banking, Global Transaction Banking (iGTB), Risk, Treasury & Markets (iRTM) and Insurance (intellect SEEC).

GLOBAL TRANSACTION BANKING

Digital: Better Experience For All Business Through a Complete Set of Omnichannel Apps Providing One-Click Capabilities Tailorable to Individual Users

Payments and Cash Management: A full suite of payment capabilities to the entire customer base—retail, small and medium-sized enterprises (SMEs), large corporations and governments.

Liquidity: Best in class algorithmic liquidity management solution that can attract and retain corporate clients

Supply Chain and Trade Finance: Utilizing technology to automate the best financing programs for the various stakeholders within a supply chain, speed up transaction processing and cover the entire cycle from initiation to settlement of invoices.

Commercial Risk: Credit, Compliance & Operational Risk Management across Customer Onboarding, Origination, Enterprise, Limits and Collateral, Sanctions Screening and Exception Management.

GLOBAL CONSUMER BANKING:

Digital Core: A web-enabled feature-rich core banking software that addresses the critical need for a scalable, flexible, and secure, customer centric core banking platform.

Lending: A single, combrhensive, loan management system that supports all the financial facilities for the bank for many market segments, from Retail to Corporate.

Wealth: An integrated front, middle and back-office solution for Private Banks, Wealth Management Firms, Advisory Firms, Broker Dealers & Independent Financial Advisors.

Quantum Central Banking Solution: The specialist Core Banking Solution for the unique requirements of central banks, with advanced technology frameworks including Extreme Account Posting (XAP), Run Time Re Use (RTRU), and Look Ahead Processing (LAP) technologies.

INTELLECT SEEC:

Digital Distribution: Sell and Engage. Anywhere, anytime.

Claims: New custom-tailored SOA solutions that drive growth and innovation, increase productivity and transform user experience.

Risk Analyst: The first ever virtual assistant for underwriters. Available on the cloud.

Intellect Agent Workstation (AWX): Next generation Agent Workstation suite for Business Growth, Customer Retention and Operational Efficiency

RISK, TREASURY AND MARKETS:

OneLRM: A Combrhensive Basel III Liquidity Risk Management Platform

OneTreasury: Shifting Gears from Managing Risk to Leveraging Risk for Business Advantage

OneMarkets: A combrhensive FATCA-compliant securities services platform.

Banks of all sizes are making sizeable investments in digital initiatives in order to maintain a competitive edge. We have launched Digital Face, an offering that provides omni-channel interfaces for a selection of our products in both Corporate and Consumer Banking. This has enabled us to revive various dormant accounts in the IMEA and APAC regions. Coupled with our Canvas and Hub technology, Digital Face empowers customers to modify and rejig their portal screens.

Further, our newer businesses of UnMail, Intellect Payments and Intellect Commerce are getting into their own. At the brsent, marketing inputs are provided by the Corporate so that the respective teams are kept nimble and agile. We are seeing quite some traction for these businesses in the IMEA and APAC regions.

Among the larger LOB's, we have initiated a transformation in Risk and Treasury Management, with the Go-To-Market of three separate offerings - OneLRM, OneMarkets and OneTreasury. This will enable the respective business managers to fully concentrate on their offerings and thus ensure better visibility in the target markets.

On the other hand, we have noticed quite some overlap between similar offerings across LOB's, which can be coalesced for better throughput. We have also noticed a tendency to hurriedly customize certain aspects of the products, based on Change Requests received from customers, which does not lead to enrichment of the product per se, as it is at a tangent to the product road map. We have, therefore, constituted measures to maintain a watch on miscellaneous coding and development carried out by various teams.

ii. CUSTOMER CAPITAL

Customer Centricity is a primary motivator for Intellect. It is in fact the catalyst for Design Thinking, our greatest differentiator. Our products are uniquely customer-centric, as are our impeccable delivery and implementation frameworks. We work with customers at various stages of their technology adoption lifecycle. Over 25 of the top banks of the world, with asset sizes of over US$ 100 billion each, rely on Intellect. With over 200 customers and global validation of our prowess, we provide rich referenceability. We strengthen Customer Capital with "ahead of the curve" products, and our aggressive skin-in-the-game engagement model.

Customer Centricity leads to consistent, measurable benefits for the client, culminating in a long-term relationship with clients. Even in an age of shifting loyalties, Intellect has always been in it for the long haul. A recent, powerful case is our association with the Reserve Bank of India.

A financial inclusion drive initiated by the government of Prime Minister Narendra Modi has also significantly increased the number of government payments being processed by the Reserve Bank of India (RBI), increasing brssure on the central bank to augment its system. Intellect Design Arena has been well placed to help deal with these challenges, delivering upgrades to the RBI's payments system to allow individual state governments to go 'fully digital' with their social payment plans.

RBI scales up

"The payment platform enables the RBI as a service provider to the governments (both central and state) to handle a huge number of retail payments such as salary, pension, vendor payments, various schemes, scholarships," said Jaideep Billa, chief executive of Intellect global consumer banking.

Originally, the project was meant to handle just two to three states. However, due to the success of the system, the RBI decided to roll out the initiative nationally.

Time is of the essence

The RBI praised Intellect for its enthusiasm to deal with the tight deadlines. "Sometimes we only have a few days to integrate state governments. Intellect helps scalability happen in an instant," says Kalyan Chakravarthy, assistant general manager of the core banking system at the  RBI.

The work with the RBI has created a relationship built on trust in addition to Intellect being recognised for producing good quality systems. "There is no lag time. The system operates with real-time payments. Before, it used to take half a day to process this type of payment. Now it is instantaneous."

One of the primary yardsticks for customer-centricity is an enterprise's sensitivity to the needs of the customer and the quick response times to meet that need.

Intellect's response to the Digital Transformation requirements of customers all over the world has not only vindicated our unique 360 degree approach to Digital, but also validated our customer-centric approach. Here are some Digital-specific pursuits. -

1. Hong Leong Bank, Berhad, a leading financial services organization in Malaysia, chose Intellect as its partner to transform and digitalize its wholesale banking offerings with the Intellect Global Transaction banking (iGTB) suite. This consists of a digital omni-channel delivery

platform and rich applications across Digital Cash Management, Liquidity Management, Domestic and Foreign Payments, Trade Finance and Supply Chain Finance which will enable the bank to facilitate mass adoption of real-time digital payments amongst its Corporate clients.

2. A London based technology firm specializing in risk management and mitigation for OTC derivatives markets, chooses Intellect One LRM to provide an end-to-end bilateral market infrastructure for the margining of non-cleared OTC derivatives.

3. A leading Commercial Bank in East Africa has chosen Digital Face as  the bank's front end and Corporate Banking Exchange, a futuristic app-based front-end omni-channel Retail Banking platform to enable

Account Services, Payments, Collections and Trade Finance services for their customers.

4. One of the largest Bank and Insurance Company in North America selected Intellect SEEC as the Digital Transformation Partner. Intellect SEEC will be implementing the Digital Distribution Suite.

5. Development Bank of the Philippines (DBP), one of the largest Government Financial Institutions, chose the Intellect Digital Core (Core Banking Solution), Loans Origination & Loans Management System and end-to-end Trade Finance to transform its core banking operations.

iii. Execution Capital

Our demonstrated capability in building and delivering solutions On Time and In Full (OTIF), driven by a researched and proven Delivery Excellence Framework has enabled our associates to stick to schedules and budgets. We are also contemplating the issue of Performance and Implementation Guarantees in our engagement model that mandates that we deliver "First Time Right" and bang on schedule. We have proven transformational capabilities that take away the risk of the "Rip and Replace" approach, and ensure the progressive or smart modernization of the customer's existing platform. We utilize our unique Design Centre to foster rapid, collaborative and agile product development and deployment that crashes release and deployment cycles with transparent and visible metrics. Our robust governance framework encompasses the entire product life cycle -Manufacturing and delivery phases - covering Version Management, Release Control, Change Management, Migration, Deployment and Post Go Live Support. Our Extreme Execution Capital is delivered with the indefatigable Intellect Promise - BOTIS.

Delivery and implementation of the projects in the pipeline are going on apace. We have strengthened the delivery Units through the infusion of both senior and middle leadership, so that bandwidth issues are now a thing of the past. The immersion programme to achieve D-3 OTIF has been kick started by the Chairman and will be followed by a complete series of interactions for all Manufacturing and Service Delivery associates, so that 100% of implementations are carried out D-3 OTIF.

1. IDFC Bank, a subsidiary of IDFC Ltd., India's leading integrated infrastructure finance company, has successfully implemented the iGTB solution suite including payments, cash management, corporate banking exchange (CBX) and liquidity sweeps. This combrhensive digital solution will help enable IDFC Bank's growth, even as it introduces a differentiated form of banking.

2. A multinational banking and financial services holding company headquartered in New York went live with the iGTB Liquidity solution.

3. A large European Bank implemented Intellect Liquidity with a unique liquidity pooling overview on OCM, enabling end customers to view online real-time balance of the notional pool and that of relevant accounts participating in the pool for active decision making and regularization.

4. NABARD's implementation of Intellect's Centralized Loan Management and Accounting product went live across all its offices encompassing all lending and accounting operations to align its current and future requirements.

One of the largest micro finance organisations in India which received a banking license from the Reserve Bank of India in 2014, has successfully digitalized its domestic treasury operations in a record time of 3 months.

Commercial International Bank (CIB) the largest private-sector bank in Egypt, has gone live with Intellect Custody Solution. With the unique web-based interface implementation, CIB will be able to maximize the throughput rate while minimizing infrastructure and communication cost. Deployment was completed within a time frame of six months, automating the complete process of Custodial Services at the bank.

7. Intellect SEEC successfully delivered the first proof of concept for a digital transformation program for a major UK Insurance and Wealth company

8. One of the largest lender banks in UAE implemented Intellect's Digital Core for its India Operations, a perfect Zero defect implementation.

iv. Human Capital

The employer brand of Intellect has had no problems in attracting the best of talent.

New geographies, destiny products and unique value propositions have found champions not just among long-standing associates of our company. They have captured the imagination and ambitions of domain experts, often from the competition. This fact was illustrated in rich detail in the inaugural section of the Annual Report. These newer associates, who have joined us subsequent to the demerger and listing, have integrated into the Intellect fabric, driving tangible results for our company.

Our leadership team is stronger than ever, with industry powerhouses leading our lines of business.

Given the complexity in financial products, deep domain knowledge is critical to our business, across the dimensions of Business, operations and technology. Experienced bankers and insurance professionals, technology and process experts are part of the Intellect team that develops and deploys products.

We have recently recruited over 50 young professionals under the FUturE Leader programme or FUEL. These professionals, who have all passed out from brmier B-Schools, have been put through a detailed four week immersion programme to get them up to speed with what the Organization does. They have now been deployed in various Business Units by being seconded to the Unit Head, or the Delivery Head. This will enable them not only to get a perspective of the Unit's workings and challenges, but also enable them to get down and "dirty their hands" as part of the current Manufacturing or Service Delivery teams. We expect that over the next couple of years, these professionals, along with a few "home grown" leaders will be able to provide a stable and capable second level of leadership. They will also provide the platform for incubation of newer Units that might be formed once a family of products matures and provides more space to grow.

To transmit the messages of Design Thinking, Complexity Reduction and Design 360, we have launched the "Your Mind, Our Business" series of interactions, with a session by our Chairman for all Project Managers and above. We intend to carry this out on a regular basis so as to bring every associate on the same page on these basic concepts. Along the same lines, we have also launched the National School of Design Thinking, based out of out FT8012v Design Centre in Chennai, and helmed by Prof. Ashok Korwar and Dr. Anbu Rathinavel.

The unique Konark programme identifies and nurtures high potential, and the individuals tasked with shaping and perpetuating the culture of the Company. Our strong learning orientation ensures our continued focus on expertise building. The Intellect core leadership team has travelled the enterprise journey since its inception, and has recently been enhanced to include senior leaders from financial institutions, and global competitors to provide an optimal mix of entrebrneurship, innovation and global best practices.

v. Finance Capital

As Intellect has been successfully incubated over the past couple of years prior to the de-merger, much of its IP investment has been expensed. Intellect operates from its own brmises and facilities for product development and deployment, and has significant asset size that it can leverage. Some of the customer assets that Intellect has acquired have a potential lifecycle value over 7 - 10 years, which will ensure consistent revenue streams to the Company. The operating model is inherently  attractive that will ensure that Intellect remains stable, liquid and profitable enough to invest in the future. The business model is robust with the combination of a full spectrum product suite, balanced geographic distribution, strategic accounts and next generation technologies.

Given the inherently "lumpy" nature of the products business, we do foresee several challenges in the cash flow situation. However, as the business expands and as the number of installations increase, we expect this situation to subside on its own. As these are still early days insofar as Intellect as a product player is concerned, our expenses on Sales and Marketing would need to increase exponentially in order to improve visibility of the brand in the target markets. This will further aggravate the cash flow situation, but that does constitute a necessary investment.

vi. Brand Capital

Our brand capital is best described by what various stakeholder segments, such as customers and analysts say about us.

Competing with the best in the business, the significant strides we have taken in business and technology have been widely recognized and acknowledged by industry experts, brmier institutions and leading analysts from the world over. -

1. Intellect ranked #1 in 3 categories at IDC Financial Insights FinTech Real Results Awards - 2015 for 'future-enabling' digital transformation

2. Intellect wins 'Payment Provider of the Year' Award at Central Banking Awards 2016. Recognized second time in a row for scaling up Central Banking operations and enabling governments to go 'fully digital'.

3. Intellect Custody has been featured amongst Global Best Corporate Actions Technology vendors by Aite Group. Intellect has secured top slot in terms of awareness of vendors by Capital Markets firms.

4. Intellect Cards named "Regional Champions" and "Specialist" in Origination & Collect among Global Card Management and Transaction Processing Vendors by Celent, a research and consulting firm focused on the application of information technology in the global financial services industry.

5. Intellect Design Arena rated Leader for the 6th Straight year in Gartner's Magic Quadrant for Global Retail Core Banking

6. My Private Banking Research, an independent research firm awarded Intellect Wealth the "Leading Vendor Digital Tools for Financial Advisors 2015". This award positions Intellect as a Partner for digital transformation of banks & financial institutions.

7. Novarica's report featured Intellect Risk Analyst features amongst the TOP 10 Underwriter Workbench Systems for the US Property/Casualty Market

8. iGTB Payments featured amongst Global Top 12 Payments Vendors Worldwide in CEB Report

9. Intellect SEEC was listed as a rebrsentative vendor in Gartner 2015 report "Market Guide for P&C Insurance Underwriting Workstations, North America"

10. CEB Tower Group, the world's leading member-based advisory company in its report has awarded Intellect's iGCB Debt Manager as the 'Best in Class' for Enterprise Support

11. Intellect Design Arena featured amongst the leading Global Off-the-Shelf Mobile Banking Solution in Forrester's report titled "Choose The Right Mobile Banking Solution"

12. A leading independent research and consulting firm, Forrester has featured Intellect Underwriting Workstation with Risk Analyst in its report focused on IoT and Analytics delivering Digital Operational Excellence

13. Ovum a leading independent research firm featured Intellect's Digital Core in their report titled Ovum's Decision Matrix report for Core Banking Systems in the European Market

On the other hand, we do see an opportunity to provide our branding a more expanded platform, in the near future, so that we are able to receive our rightful share of the Americas market.

SECTION B

Financial Position Highlights

• FY16 revenue stood at Rs. 811 Cr (FY15 Rs. 609 Cr) resulting in a growth of 33% over last year.

• Intellect's digital products continue to gain acceptance in advanced markets, reflected in 43% (PY 47%) of the Company's revenue generated from US and Europe.

• Gross Margin for FY 16 stood at 52% (PY 50%)

• EBITDA stood at Rs. 27 Cr Loss (PY Rs 80 Cr Loss).

• Based on the NSE prices, market capitalization was Rs. 22,76 Cr as on 31st Mar '16 (Rs. 10,74 Cr as on 31st Mar'15).

• Winning 50 new deals during the year established the credentials of  our products in the market place: iGCB - 22, iGTB - 17, iRTM - 10, iSEEC - 1

Sources of Funds

1. Share Capital

As at 31st Mar '16, we have an Authorized share capital of Rs.55 Cr comprising of 11 Crore Equity shares of Rs.5/- each.

The issued, subscribed & paid-up capital stands at Rs.50.39Cr

(PY Rs. 50.10 cr) (10,07,78,624 equity shares of Rs 5 each). (PY 10,01,98,474 equity shares of Rs 5 each).

Associates were allotted 580,150 (PY 349,450) equity shares under  Associate Stock Option Plans during 2015-16. (The details of the options granted, outstanding and vested are provided in the notes to the consolidated financial statements in this Annual Report.)

2. Reserves and Surplus

The balance in Reserves & Surplus stood at Rs.568.66 Cr as at 31st Mar'16, (PY Rs.569.10 Cr) comprising of General Reserve at Rs.170.60 Cr (PY Rs.170.60 cr), Foreign currency translation reserve at Rs.49.34

Cr (PY Rs.36.22 cr), Securities Premium account at Rs.195.20 Cr (PY Rs.193.07 cr), Hedge reserve account at Rs.5.96 Cr (PY Rs. 4.82 cr)  and retained earnings at Rs.147.56 Cr (PY Rs. 164.39 cr)

2.1 Shareholder funds

The total shareholders' funds stood at Rs.619.05 Cr (PY Rs.619.20 cr) including Reserves & Surplus amounting to Rs.568.66 Cr (PY Rs. 569.10 cr)

3. Deferred Tax Assets / Liability

As on March 31, 2016, the company recorded net Deferred Tax Asset aggregating Rs. 6.48 Cr (PY Net Deferred Tax Liability of Rs. 5.13 cr). Deferred tax assets/ liabilities rebrsent timing differences between the financial and tax books arising out of debrciation on assets, carry forward losses and provisions for sundry debtors.

Application of Funds

4. Fixed assets

Most of the infrastructure facilities are owned by us in the form of Engineering centers and Design centers.

During the year, we have incurred a capital expenditure of Rs.79.39 cr  (Rs.13.93 cr in FY 15).

Additions of Rs.79.39 Cr (Rs. Rs.13.93 cr in FY 15) to our gross block of Fixed Assets comprise the following:

• Rs. 42.31 Cr for land & buildings (Rs. 0.89 Cr in FY 15)

• Rs. 31.23 Cr for plant, machinery, Office equipments, furniture & electrical fittings (Rs. 8.82 Cr in FY 15)

• Rs. 2.83 Cr for intangible assets (Rs. 0.63 Cr in FY 15)

• Rs. 3.02 Cr for vehicles (Rs. 3.59 Cr in FY 15)

Capital work in progress stood at Rs.65 Cr. (Rs.45 Cr. in FY 15)

5. Goodwill on Consolidation

Goodwill as at 31st March, 2016 stood at Rs. 77.85 Cr (PY Rs. 76.34 Cr).

The above rebrsent goodwill recorded in our books consequent to the acquisition of SEEC, Laser soft, Indigo Tx & SFL Properties by then Polaris Financial Technologies Ltd, prior to de-merger and now vested into our Company.

6. Sundry Debtors

As on 31st Mar'16, the company has Billed Receivables of Rs. 160.43 Cr (PY Rs. 167.07 crores) rebrsenting 63 (PY 88) days of sales outstanding against the revenue.

Sundry debtors amount to Rs. 160.43 Cr (PY Rs. 167.07 Cr) is net of  provision for doubtful debts amounting to Rs. 17.81 Cr (PY Rs. 9.40 Cr) as  at 31st Mar'16.

7. Cash & Cash Equivalents

Company has Cash & Cash Equivalents for Rs. 1,15.25 Cr (PY 2,85.19 Cr) as  at 31st Mar'16.

(Cash and Cash equivalents include the Bank balances, Fixed Deposits & B o nd s b o t h rupee accounts and foreign currency accounts and mutual fu nd i n vestments.)

Through our effective treasury management of investible cash available, the Company has also earned a treasury income of Rs. 8.44 Cr. (PY  Rs.17.01 Cr.)

8. Loans & Advances

As on Mar'16, Loans and advances were Rs. 1,03.02 Cr (PY Rs. 78.54 Cr) which majorly consists of

• Advance Tax (Net of provisions) and MAT Credit entitlements of Rs.54.12 Cr (PY Rs. 37.24 Cr)

• Loans & Advances of Rs.7.59 Cr (PY Rs. 7.65 Cr)

• Advances & Loans to Employees / others - Rs.27.23 Cr (PY Rs.21.69 Cr)

• Secured Deposits of Rs.8.74 Cr (PY Rs. 8.29 Cr)

9. Current Liabilities

Current liabilities stood at Rs. 320.26 Cr in FY16 (PY Rs. 289.13 Cr). The  details of the same are here under.

• Short term Borrowings Rs.22.91 Cr (PY Rs.7.71 Cr).

• Trade Payables Rs. 1,82.06 Cr (PY Rs.1,36.36 Cr)

• Other Current Liabilities Rs. 1,15.29 Cr (PY Rs.1,45.06 Cr).

10. Provisions

Provision at the year-end stood at Rs. 22.79 Cr (PY 17.25 Cr) mainly consists of provision for Gratuity Rs.7.38 Cr (PY Rs.5.82 Cr), provision for Leave encashment Rs. 9.38 Cr (PY Rs. 7.25 Cr ) and provision for taxation Rs 2.00 Cr and PY Rs 2.48 crs provision for other employee benefit obligations Rs. 4.03 Cr. ( PY Rs.1.70 Cr).

11. Net Current Assets

As at March 31, 2016, the net current assets were Rs.157.91 Cr

(PY Rs. 262.95 Cr) including unbilled revenue of Rs.209.96 Cr (PY Rs. 109.71 cr)

12. Cash Flow Analysis

Cash flows are reported by adjusting net profit before tax for effect of non-cash transactions, changes in working capital, income taxes paid, cash transactions of capital nature and cash transactions relating to investing and financing activities. Cash flows from operating, investing and financing activities of the Company are identified and reported separately.

Cash Flow from operating activities

Net Cash of Rs.110.81 Cr (PY Rs. 17.55 Cr) was used by the company on  operating activities in FY16. Net cash provided by operating activities was after utilization of cash for tax and working capital requirements, driven by business needs in the current year.

Cash Flow from investing activities

In FY16, the company generated Rs.42.16 Cr (PY Rs.85.16 Cr) on investing activities. The significant items of cash flow from investing activities were disposal of the investment in non trade securities, interest & dividend received, net off the cash used on purchase of fixed assets.

Cash Flow from financing activities

In FY16, the Company generated Rs.18.10 Cr PY (Rs.8.49 Cr) in financing activities. The substantial items of cash used from financing activities are for the payment of the dividend and tax on dividend during the current year.

Cash equivalents of Rs.115.25 Cr (PY Rs. 285.19 Cr) are reported as of 31st Mar '16 after considering the cash flow from operating activities, financing activities and investing activities and the short term investment balances.

SECTION C

Results of operations

1. Revenue

With 82.61% (FY 15 82.22%) revenue from export business and 17.39%  (FY 15 17.78%) revenue from domestic market, the total revenue for the year ended March 31, 2016 stands at Rs. 811 Cr (FY 15 Rs. 609 cr).

2. Other income

The Company's other income amounts to Rs. 26.10 Cr (FY 15 Rs. 27.53 cr) which comprises mainly of

• Rs.4.46 Cr (FY 15 Rs. 3.53 cr) from interest on bank deposits and others

• Rs.3.97 Cr (FY 15 Rs. 13.49 Cr) from dividend received on mutual funds

• Rs.6.08 Cr (FY 15 Rs. 4.51 cr) through miscellaneous income

• Rs.1.28 Cr (FY 15 Rs. 3.49 Cr) from profit on sale of Investments

• Rs.4.42 Cr (Fy 15 Rs. 0.07 Cr) from profit on sales of fixed assets (Net)

3. Expenditure

3.1 Employee benefit expenses

During the year our employee expenses were Rs.638.82 Cr (FY15 Rs. 531.23 Cr) at 76.34% (FY15 83.49%) of total revenue Employee expenses primarily consist of:

• Salaries & Bonus

• Contribution to Provident Fund, Superannuation and other funds, Group Gratuity scheme.

• Social security and other benefit plans for overseas employees.

• Expense on Employee Stock Option Scheme (ESOP) and Employee

Stock Purchase Plan (ESPP)

3.2 Other Expenses

Other expenses include Operating, Delivery, Sales & Marketing, General & Other Administrative expenses. The Expense primarily consists of rent, power & fuel, repairs & maintenance, travelling & communication expenses, rates & taxes, professional & legal charges, communication expenses, travel, power & fuel and repairs and maintenance costs.

4. Debrciation & Amortization

Debrciation on fixed assets is provided using the straight-line method based on rates specified in Schedule II of the Companies Act, 2013, or on estimated useful lives of assets, whichever is higher.

We have provided Rs. 20.77 Cr (FY 15 Rs. 19.01 cr) for March 31, 2016 as debrciation for the year rebrsenting 2.48% (FY 15 2.99%) of total revenues.

5. Research and Development

We have in house R&D Centre approved by DSIR in Siruseri ( Chennai) and  Goregaon ( Mumbai ) for which approval is under process.

The company is incurring expenses on various Research and Development  activities consisting of salaries and other related expenses.

We continue to focus on in house research and development efforts on  adding new features, technologies, developing new delivery methodology  and frameworks that would lead to delivery efficiencies increasing product  functionality and enhancing the ease of our products and technology.

The company has incurred cost towards New Product development which  has been recognised as Capital Work In Progress with effect from Jan  2016, in line with policy of the company approved by the Board.

6. Income Taxes

Income tax for the year amounts to Rs.6.57 Cr (FY 15 Rs.4.58 Cr.). We have provided for tax liability for our overseas entities though we reported loss on a consolidated basis. In India we have recognized deferred tax Asset to the extent of deferred tax Liability of 11.17 Cr which makes the overall tax provision negative at consolidated level.

7. Profit after tax

Net Profit / (Loss) after tax for the year 2015-16 stood at Rs. (16.84) Cr PY  (82.99 ) Cr.

8. Capital Markets

The Company got listed in NSE and BSE on 18th Dec 2014 .

The Capital Market Information relating to the company's shares such as stock exchanges in which they are listed/traded, trading volume, stock price movements etc., has been provided in the Report on Corporate Governance (under the heading "General Shareholder Information") which forms part of the Annual Report 2015-16.

9. Subsidiary Companies

For subsidiary details refer the Report on Subsidiaries Pursuant to first proviso to sub-section (3) of section 129 of Companies Act,2013 read with rule 5 of Companies (Accounts) Rules, 2014, mentioned elsewhere in the report.

SE CTION D

Strengths

Post Demerger the company Intellect is now stabilized and on its path of growth. The rich industry experience of over 29 years in the Banking, Financial Services and Insurance segment is helping it achieve higher heights. Some of the strengths are given below:

a) Intellect is among the very few companies, which has a full spectrum of technology products for banking, financial services & insurance. Most others in this space are niche players with a narrow product range. This width allows us to bring design thinking as we can span across different functionalities. This also allows us to manage the cyclicity of the sub segments in BFSI much better since we are not dependent on any single sub-segment. These are big differentiators for us.

b) A deep understanding of the BFSI vertical that has huge complexity embedded in technology. Thus, we can connect the dots between Business (Products), Operations (Process) and technology.

c) Robust cash reserves to fuel growth ambitions

d) Digital Transformation is the next big wave in banking technology. Our products are designed to enable this Digital transformation in a progressive manner because the architectural design of the Intellect suite of products has digital transformation capabilities built in it.

e) Intellect uses the India Engineering Centers in a big way. This ensures availability of the best technologists in a steady manner besides affording us a competitive advantage in costs.

f) Continuous investment in R&D to keep our product offerings updated, relevant and competitive in the market place

g) A dedicated Design Center, FT 8012, the world's first design center focused on Financial Technology, reflecting the company's commitment to continuous and impactful innovation.

h) Intellect has been cited in over 50 Analyst reports every year, reflecting rich functionality and global market acceptance of the product suite

i) Proven track record of implementing global roll outs of Products in both developed markets and growth markets. Several of these are Marquee customer accounts that serve as a role model for other banks to emulate and bring in the global best practices.

j) Significant investment in Sales and Marketing to take on the competition and create the right push for our products

Competition

As mentioned above, Intellect suite is a full spectrum banking technology product for banking, financial services & insurance. Intellect's sbrad spans across Global Transaction Banking (GTB), Global Consumer Banking (GCB), Risk and Treasury (RTM) and Insurance.

As a broad level, Intellect products compete with global players such as Temenos, Oracle Financial Services, Misys, SAP, FIS, Fundtech, ACI Worldwide and Indian competitors such as Infosys, TCS and Nucleus along with few regionally available solutions providers in different geographies. The competition is sbrad across various sub-segments of the BFSI segment based on the offerings. A segment wise analysis is given below:

1. GTB (Global Transaction Banking) - iGTB is a complete transaction banking platform. The integrated and vertical solution enables bank to support the corporate customer's needs and complexity. With banks being focused to improve the transaction banking space increased spends in this area also have increased the competition. Competitors for iGTB are Fundtech and ACI worldwide.

2. GCB (Global Consumer Banking) - iGCB spans across the entire consumer banking spectrum from Retail Banking, Private Banking to Capital Markets and Asset Management.  Competitors for iGCB are Temenos (T24), Infosys (Finacle), Oracle Financial (Flex cube)

3. RTM (Risk and Treasury Management) - iRTM is a complete front to back, cross assets solution with embedded straight through processing (STP). A boon for the trader to make best judgment of the trades with in -build risk-monitoring capability.

The IRTM space has.

• Intellect Treasury for running large treasury operations,

• Basel III with Zf Risk Visualization for proactive risk management,

• Intellect Custody delivering web based, custody,

• Intellect Brokerage enables investment services in multiples markets and exchanges ,

• Intellect MFX for Mutual funds purchase and redemption Competitors for iRTM are Mysis, SunGard and Murex.

4. INSURANCE- Intellect SEEC provides differentiated solutions in

Claims, Life Claims, Distribution, Underwriting Work Station, Business Apps and Components. Our geographical for this product is the developed markets like US and UK.

Competitors for Intellect SEEC are Guidewire and Fineos.  The Company's foray into the Payments space through iPay will  further strengthen its position as Payments business is fairly stable  business with less impact on cyclicity.

Threat

The global financial industry continues to pass through uncertain times. The tighter regulation to combat this uncertainty has led to a number of laws in different our markets. It may pose the entry barrier of localization in some of our products to incorporate these local regulations. New projects continue to face budget constraints for IT investments as the focus is still on regulatory compliance.

The operations and execution teams continuously watch for such developments and constraints to business strategy and plans. Strategy and operational plans are continuously recalibrated to minimize the impact of such threats to business objectives and goals.

The other threat is from disruptive technologies from start ups. Though our technology is quite contemporary and we continuously keep upgrading our technology, this is a threat that every technology company, especially in the products space, has to monitor and take mitigating action on a continuous basis.

Risks & Concern

Risks are evaluated under the following six categories:

a) Market risk

i) Global Economic Scenario

ii) Business Model Change

b) Exchange risk

c) Compliance risk

d) Intellectual Property Risk

e) Liability Risk

f) Tax regime changes

Internal Financial Control and their Adequacy

The Company has disclosure controls and procedures in place that are designed to provide reasonable assurance that material information relating to Intellect is disclosed on a timely basis. Management has reviewed the Company's disclosure controls and concluded that they were effective during the reporting period.

The Managing Director and the Chief Financial Officer (CFO) have evaluated the effectiveness of the Company's disclosure controls and procedures related to the brparation of Management's Discussion and Analysis and the consolidated financial statements. They have concluded that the Company's disclosure controls and procedures were effective, at a reasonable assurance level, to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities, particularly during the period in which the management's discussion and analysis and the consolidated financial statements contained in this report were being brpared.

The Company's management, with the participation of its MD and CFO, are also responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the brparation of financial statements for external purposes in accordance with Indian GAAP. Under the supervision of the MD and CFO, the Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the brparation of financial statements for external purposes in accordance with the Indian  GAAP.

The company has a robust financial control in place through a combination of internal control and processes. The controls ensure that transactions are recorded in timely manner, they are complete in all aspects, effectively utilizes the resources of the company and safeguarding the assets.

In line with Sec 134 of the Companies Act 2013, new processes were initiated for its compliance. As a first step the Testing framework was designed, next an auditing firm did the testing according to this framework over a period of 8 weeks. The Testing finding was brsented to the Statutory Auditors and to the Board of Directors. Both exbrssed satisfaction over the Internal control operating within the Company.

There have been no changes in the Company's disclosure controls or internal controls over financial reporting during FY2016 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. The Company's MD and CFO expect to certify Intellect's annual filings with the Indian securities regulatory authorities.

Also, the company has an Internal Auditing system in place handled by a reputed Chartered Accounting firm. The findings are discussed with the process owners and corrective action is taken as necessary and the report brsented to the Audit Committee.