Oracle Financial Services Software Ltd

Financial year 2023-24

Dear Members,

The Directors present their report on the business and operations of the Company along with the Annual Report and audited financial statements for the financial year 2023-24.

Financial highlights

As per Consolidated financial statements: (Amounts in Rs million)

As per Unconsolidated financial statements:

Performance

On a consolidated basis, the Company's revenue stood at Rs 63,729.61 million during the current financial year, up 12% compared to Rs 56,983.09 million of the previous financial year. The net income for the current financial year was Rs 22,193.62 million, up 23% compared to Rs 18,061.41 million of the previous financial year. On an unconsolidated basis, the Company's revenue stood at Rs 47,844.96 million during the current financial year, increase of 12% compared to Rs 42,555.81 million of the previous financial year. The net income for the current financial year was Rs 20,279.19 million, up 14% compared to Rs 17,725.08 million of the previous financial year.

A detailed analysis of the financials is given in the Management's discussion and analysis report that forms part of this Annual Report.

Dividend

The Board of Directors of the Company declared an interim dividend of Rs 240 per equity share of Rs 5 each on April 24, 2024, for the financial year ended March 31, 2024. They have not recommended any additional final dividend for the financial year 2023-24.

Transfer to reserves

The Company has not transferred any amount to the reserves during the year under review.

Particulars of loans, guarantees or investments

In terms of Section 186 of the Companies Act, 2013 ("the Act"), the particulars of loans, guarantees and investments have been disclosed in the financial statements.

Share capital

During the financial year 2023-24, the Company allotted 274,477 equity shares of face value of f 5 each to its eligible employees and Directors of the Company and its subsidiaries who exercised their stock options under the prevailing Employee Stock Option Schemes of the Company. As a result, the paid-up equity share capital of the Company as on March 31, 2024 was f 433,358,280 divided into 86,671,656 equity shares of face value of f 5 each.

Annual return

Pursuant to Section 92(3) read with 134(3) of the Act, the Annual Return (in e-form MGT-7) for the financial year ended March 31, 2024 is available on the Company's website at https://investor.ofss.oracle.com.

Directors and key managerial personnel

Pursuant to provisions of Section 152 of the Act and the Articles of Association of the Company, Ms. Kimberly Woolley (DIN: 07741017) and Mr. Vincent Secondo Grelli (DIN: 08262388), Directors of the Company, would retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. The resolutions seeking Members' approval for their re-appointment along with other required details form part of the Notice.

Changes in the Board of Directors during the year (appointment, re-appointment and retirement) -

- The Members of the Company at the Annual General Meeting held on July 27, 2023 approved the re-appointment of Ms. Jane Murphy (DIN: 08336710) as Non-Executive, Independent Director, not liable to retire by rotation, for a further term of five years with effect from January 1, 2024 up to December 31, 2028.

- Mr. Chaitanya Kamat (DIN: 00969094), retired from the position of Managing Director and Chief Executive Officer of the Company with effect from the close of business hours of October 4, 2023. The Board placed on record its appreciation for his contributions during the tenure with the Company.

- The Members of the Company vide resolutions passed through postal ballot on November 30, 2023 approved appointments of:

a. Mr. Makarand Padalkar (DIN: 02115514) as the Managing Director and Chief Executive Officer of the Company for a term of three consecutive years with effect from October 5, 2023 up to October 4, 2026, liable to retire by rotation; and

b. Mr. Gopala Ramanan Balasubramaniam (DIN: 02785489) as Non-Executive, Non-Independent Director of the Company with effect from October 5, 2023, liable to retire by rotation.

- The Members of the Company vide resolution passed through postal ballot on January 11,2024 approved appointment of Mr. Mrugank Paranjape (DIN: 02162026) as Non-Executive, Independent Director, not liable to retire by rotation, for a term of five consecutive years with effect from December 4, 2023 up to December 3, 2028.

- Mr. S Venkatachalam (DIN: 00257819) and Mr. Richard Jackson (DIN: 06447687), Independent Directors of the Company, retired as members of the Board of Directors on completion of their tenure with effect from close of business hours of March 31, 2024. The Board placed on record its appreciation for their valuable contributions and guidance during their tenure with the Company.

All the Independent Directors of the Company have submitted declarations that they meet the criteria of Independence as provided in Section 149 of the Act and Regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"). The Independent Directors have registered their names in the Independent Directors' Databank as per Rule 6 of the Companies (Appointments and Qualifications of Directors) Rules, 2014.

Key managerial personnel

Mr. Makarand Padalkar (DIN: 02115514), the Whole-time Director and Chief Financial Officer was appointed as the Managing Director and Chief Executive Officer of the Company effective October 5, 2023.

The Board of Directors of the Company at its meeting held on October 3, 2023, approved the appointment of Mr. Avadhut Ketkar as the Chief Financial Officer effective October 5, 2023.

Pursuant to provisions of Section 203 of the Act, Mr. Makarand Padalkar, Managing Director and Chief Executive Officer, Mr. Avadhut Ketkar, Chief Financial Officer and Mr. Onkarnath Banerjee, Company Secretary and Compliance Officer were the Key Managerial Personnel of the Company as on March 31, 2024.

Number of meetings of the Board

Nine meetings of the Board were held during the financial year 2023-24. For details of the meetings of the Board, please refer to the Corporate Governance Report which is a part of this Annual Report.

Board Committees

The Company has established several Board Committees as a part of best Corporate Governance practices and to comply with the requirements of the relevant provisions of the laws. The details pertaining to the Committees of the Board and their meetings during the year are included in the Corporate Governance Report which is a part of this Annual Report.

Board policies

The Company has formed following policies as required by the Act and Listing Regulations:

Related party transactions

All related party transactions entered into by the Company during the financial year 2023-24 were at an arm's length basis and in the ordinary course of business. Form AOC-2 as required under the Act is enclosed as Annexure 1 to this report.

Management's discussion and analysis report

Management's discussion and analysis report as stipulated under Regulation 34 of the Listing Regulations forms a part of this Annual report.

Risk management

The Risk Management Committee of the Board frames and monitors implementation of risk management policy for the Company and ensure its effectiveness. The Audit Committee has additional oversight in the area of financial risks and controls. The major risks identified by the Company are systematically addressed through mitigating actions on a continuing basis. The development and implementation of risk management plan have been covered in the Management's discussion and analysis report that forms part of this Annual Report.

Board evaluation

Pursuant to the provisions of the Act and Listing Regulations, the Nomination and Remuneration Committee of the Board of Directors has conducted the evaluation of the performance of the Board and its Committees based on various criteria such as composition, effectiveness of processes / meetings, information sharing, functioning, etc. The Board evaluation report for the financial year 2023-24 was adopted at the Board Meeting held on March 27, 2024.

Subsidiaries

The Company has subsidiaries in Chile, Greece, India, Mauritius, the People's Republic of China, Singapore, the Netherlands and the United States of America. The Company does not have any associate or joint venture company within the meaning of Section 2(6) of the Act.

Pursuant to provisions of Section 129(3) of the Act, a statement containing salient features of the financial statements of the Company's subsidiaries in Form AOC-1 forms part of the financial statements of the Company.

Further, pursuant to the provisions of Section 136 of the Act, the standalone and consolidated financial statements of the Company and separate annual accounts of its subsidiaries are available on the Company's website at https://investor.ofss.oracle.com.

Research and development

Research and development (R&D) is essential for driving innovation and helping customers gain an edge in their business. Because of its investments in R&D, the Company continues to be the leader in a dynamic and ever-evolving space and be relevant to the global financial services industry today and tomorrow. The Company's dedicated in-house R&D centers have produced a number of IT products that are used by banks in more than 150 countries around the world for running their critical operations. The investment the Company makes in building applications, coupled with access to Oracle's technology, provides a unique competitive edge to its offerings.

Deposits

During the financial year 2023-24, the Company has not accepted any deposits within the meaning of Sections 73 and 76 of the Act 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 regulations and related requirements as envisaged under Regulation 27 of the Listing Regulations. A separate report on Corporate Governance along with a certificate from Mr. Prashant Diwan, Practicing Company Secretary, with regard to compliance of conditions of Corporate Governance as stipulated in Regulation 34(3) of the Listing Regulations forms part of this Annual Report. A certificate from Mr. Diwan, Practicing Company Secretary & Secretarial auditor has also been received stating that none of the Directors on the Board of the Company has been debarred or disqualified from being appointed or continuing as a Director of the Company by the SEBI, MCA or any such statutory authority.

Statutory Auditors' report

There are no qualifications, reservations, adverse remarks or disclaimers in the Statutory Auditors' report.

Secretarial audit report

In terms of Section 204 of the Act and the Rules made thereunder, the Board has appointed Mr. Prashant Diwan, Practicing Company Secretary, as the Secretarial Auditor of the Company to carry out secretarial audit for the financial year 2023-24. The Secretarial Audit report is annexed as Annexure 2 to this report. The Secretarial Audit report does not contain any qualifications, reservations, adverse remarks or disclaimers.

Business responsibility and sustainability report (BRSR)

Business Responsibility and Sustainability Report pursuant to Regulation 34 of the Listing Regulations for the financial year 2023-24 that forms part of this Annual Report has been hosted on the Company's website at https://investor.ofss.oracle.com.

Employee stock option plan (ESOP)

The Members of the Company at their Annual General Meeting held on August 14, 2001 had approved grants 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 up to 12.5% of the issued and paid-up capital of the Company and approved by the Members at their Annual General Meeting held on August 18, 2011. This extended limit is an all-inclusive limit applicable to the stock options ("options") granted in the past, in force, and those that will be granted by the Company in future.

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 2002 Employees Stock Option Plan ("Scheme 2002") for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. Under the Scheme 2002, the Company granted 4,548,920 options prior to its Initial Public Offer ("IPO") in 2002 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. Under the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).

Further, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme ("Scheme 2011") on August 18, 2011 and Oracle Financial Services Software Limited Stock Plan 2014 ("OFSS Stock Plan 2014") on August 7, 2014.

As per the Scheme 2002, Scheme 2010 and Scheme 2011, each of 20% of the total options granted vest on completion of 12, 24, 36, 48 and 60 months from the date of grant. In respect of the OFSS Stock Plan 2014, each of 25% of the total options / OFSS Stock Units ("OSUs") granted vest on completion of 12, 24, 36 and 48 months from the date of grant. Any vesting is subject to continued employment with the Company or its subsidiaries. Options / OSUs have an exercise period of 10 years from the date of grant. The employee / Director pays the exercise price and applicable taxes upon exercise of vested options / OSUs.

All the above-mentioned Schemes of the Company are in compliance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 applicable from time to time. Applicable disclosures relating to Employees Stock Option Schemes, pursuant to SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, are placed on the Company's website at https://investor.ofss.oracle.com.

The details of the Company's ESOP schemes are disclosed in note 29 (b) in the notes to accounts of the unconsolidated financials of the Company that form part of this Annual Report. As at March 31,2024, there are no options outstanding under Scheme 2002 and Scheme 2010.

The summary of the options and/or OSUs granted under the Scheme 2002, Scheme 2010, Scheme 2011 and OFSS Stock Plan 2014 to eligible employees/ Directors of the Company and its subsidiaries in conformation to applicable regulations from time to time till March 31, 2024, is given below:

The details of OSUs granted to Directors and Senior Management under OFSS Stock Plan 2014 during the financial year ended March 31,2024 are as follows:

The compensation cost arising on account of grant of options and OSUs is calculated using the fair value method.

The reported profit for the financial year 2023-24 is after considering the cost of employee stock compensation of Rs 649.52 million, using fair value method on options / OSUs.

The weighted average share price for the year over which options / OSUs were exercised was Rs 5,801. Money realized on allotment of 274,477 fresh equity shares as a result of exercise of options / OSUs during the financial year 2023-24 was Rs 204.68 million. The Company has recovered from the employees / directors the perquisite tax applicable on exercise of options / OSUs. The weighted average fair value of OSUs granted during the year was Rs 4,217 calculated as per the Black Scholes valuation model, with details of features incorporated, as stated in 29 (b) in the notes to accounts of the unconsolidated financials.

Transfer of equity shares and unpaid / unclaimed dividend to Investor Education and Protection Fund

Pursuant to applicable provisions of the Act read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, ("IEPF Rules"), during the year, the Company has transferred unclaimed and unencashed dividends of f 6,344,412.00. Further, 28 corresponding equity shares on which dividends were unclaimed for seven consecutive years were transferred as per the requirements of the IEPF Rules. The details of unpaid / unclaimed amounts lying with the Company as on March 31, 2024 and the shares transferred to IEPF are available on the Company's website at https://investor.ofss.oracle.com and on the website of the Ministry of Corporate Affairs at www.iepf.gov.in.

Human resources

Employees are critical assets of the organization and their success and wellbeing is key to the Company's performance. Your Company endeavors to constantly hire and retain the best talent and be among the preferred employers in the industry. The Company constantly invests in building capabilities of its employees in the areas of technology, industry domain and soft skills; and emphasizes on building an inclusive and collaborative work culture along with systems that promote and enable high performance, offering an enriching career to the employees.

As of March 31,2024, your Company had 8,754 employees (March 31,2023 - 8,593) including employees of the subsidiaries.

Your Company has zero tolerance towards any kind of harassment, including sexual harassment, or discrimination. Employee safety, health and open culture is of paramount importance to your Company and is committed to providing a safe and respectful work environment that is free from harassment or discrimination irrespective of background of the employees. Sexual or other harassments or discrimination against applicants or employees is strictly forbidden. The Company has Prevention of Sexual Harassment policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act"). Frequent communication of this policy is done through various programs. The Company has setup Internal Complaints Committee at every location where it operates in India as per the regulations to redress and resolve any complaints arising under the POSH Act.

The details of complaints pertaining to sexual harassment that were filed, disposed of and pending during the financial year are provided in the Corporate Governance report which is a part of this Annual Report.

Corporate social responsibility

The Company has constituted Corporate Social Responsibility ("CSR") Committee in accordance with the provisions of the Act. The details of the CSR Committee are provided in the Corporate Governance Report which is a part of this Annual Report.

Pursuant to Section 135 of the Act read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, the annual report on the CSR activities for the financial year ended March 31,2024 is annexed as Annexure 3 to this report.

Internal financial controls and its adequacy

The Board has adopted adequate policies and procedures in terms of Internal Financial Controls commensurate with the size, scale and complexity of the Company's operations. Such policies and procedures ensure orderly and efficient conduct of business, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information.

The Internal Audit team monitors and evaluates the efficacy and adequacy of the internal control system commensurate with the size of the business operations of the Company, its compliance with risk management system, accounting procedures and policies at all locations of the Company and its subsidiaries. The Internal Audit team reports to the Audit Committee.

Directors' responsibility statement

As required under Section 134(5) of the Act, for the financial year ended on March 31,2024, the Directors hereby confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b. the directors have selected such accounting policies and applied them consistently and made judgements 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;

c. the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. the directors have prepared the annual accounts on a going concern basis;

e. the directors have laid down internal financial controls and that such internal financial controls are adequate and were operating effectively; and

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

Auditors

The Members of the Company have appointed M/s. S. R. Batliboi & Associates LLP, Chartered Accountants, (ICAI Firm Registration No. 101049W), as the Statutory Auditors of the Company for a term of five consecutive years from the conclusion of the 33^rd Annual General Meeting held on August 3, 2022 till the conclusion of the 38^th Annual General Meeting to be held in the year 2027, as required under Section 139 of the Act.

Reporting of frauds by auditors

During the year under review, neither the Statutory Auditors nor the Secretarial Auditor has reported to the Audit Committee under Section 143(12) of the Act any instances of fraud committed against the Company by its officers or employees.

Cost records and cost audit

Maintenance of cost records and requirement of cost audit as prescribed under the provisions of Section 148(1) of the Act are not applicable for the business activities carried out by the Company.

Material changes and commitments

There have been no material changes and commitments which affect the financial position of the Company which have occurred between the end of the financial year to which the financial statements relate and the date of this report.

Significant and material orders

During the year under review, there are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and the Company's operations in future.

Other disclosures

The details of difference between amount of the valuation done at the time of one-time settlement and the Not applicable valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof

The details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, Not applicable 2016 during the year along with their status as at the end of the financial year

The details of instance of one time settlement with any Banks or Financial Institutions Not applicable

Conservation of energy, technology absorption and foreign exchange earnings and outgo

The particulars as prescribed under sub-section (3)(m) of Section 134 of the Act and the relevant information pertaining to conservation of energy, technology absorption and foreign exchange earnings and outgo are furnished hereunder:

Conservation of energy

The Company strives to conserve energy and use energy efficient computers and illumination systems. The Company also deploys sophisticated office automation and infrastructure management equipment which optimize energy consumption. The Company continues to support Oracle's global sustainability goals of reducing waste to landfill and conserving energy.

Technology absorption

The Company regularly strives to utilize newer technologies with a view to conserve energy and create an environmentally friendly ecosystem. The initiatives taken by the Company are summarized below:

Network: The Company continues to invest in upgrading and modernizing its networks thereby increase uptime of the network infrastructure, increase capacity and enable greater collaboration. Network infrastructure is being migrated to the next generation cloud platform and network tooling; processes are being made seamless between the applications and the cloud platforms thereby enabling unified operational process, while securing the network infrastructure to provide a secure remote computing environment for our employees and customers.

Cloud deployment: The Company operates the infrastructure on a next generation cloud platform. All corporate applications are hosted on the Oracle next generation cloud. This move significantly reduces infrastructure costs as well as space and power utilization across the globe. Leveraging the cloud platform, the Company has consolidated data centers and manages increasing demand through flexible infrastructure utilization.

Business Resiliency: The Company has successfully implemented disaster recovery initiatives for critical infrastructure services. This has been adequately tested during the pandemic crisis, minor deficiencies were mitigated, and the plan has been made more efficient and effective.

Virtual presence: The Company has made significant investments in providing a near virtual working environment for its employees through multiple collaboration tools. Multifunctional and multiple methods of collaboration across geographies have enhanced business operations. This facilitates communication across the globe minimizing travel and increasing efficiencies from a support perspective by making self-service operations easier and effective. Conference room facilities have been enhanced and standardized across the organization to ensure smooth and seamless operations from any of the Company's location.

All these initiatives provide a secure, efficient and environment friendly operating environment to the employees.

Foreign exchange earnings and outgo:

Activities relating to exports; initiatives taken to increase exports; development of new export markets for products and services; and export plans: The Company has established an extensive global presence across leading markets through its sales and marketing network. The Company will continue to broaden and deepen various potential markets globally. Experienced sales and marketing specialists focus on building strong international business presence to develop new export markets for the Company.

Prospects

The banking and financial services industry is undergoing a significant transformation driven by rapid changes in technology, business environment, regulatory mandates and customer expectations. To succeed in this complex landscape, financial institutions need to demonstrate agility and innovation while undertaking digital transformation with the help of a technology partner. Your Company is at the forefront of developing state-of-the-art solutions that enhance customer experience, improve operational efficiency, and enable better risk & compliance management for financial institutions.

Your Company is a leader in the industry and invests in research and development, strategic partnerships, and is positioned as a key enabler of the digital transformation reshaping the financial services landscape.

Statement on compliance of applicable Secretarial Standards

The Company complies with all applicable mandatory provisions of Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).

Employee particulars

The information required under Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016 is given below:

For statistically relevant computation of median value of employee remuneration, employees who have served the entire 12 months in the corresponding fiscal year were considered. The expression "median" means the numerical value separating the higher half of a population from the lower half and the median of a finite list of numbers is found by arranging all the observations from lowest value to highest value and picking the middle one; and if there is an even number of observations, the median is the average of the two middle values. The remuneration used for the analysis in this section includes the details of employees and only of those Directors to whom the remuneration has been paid by the Company and excludes remuneration of the employees of overseas branches, subsidiaries, and the (perquisite) value of the difference between the fair market value and the exercise price on the date of exercise of options, to make the comparisons relevant.

i. Ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year:

**Retired with effect from close of business hours of October 4, 2023.

ii. The percentage increase in remuneration of each director, chief executive officer, chief financial officer and company secretary in the financial year:

#During the year the Whole-time Director and Chief Financial Officer was appointed as the Managing Director and Chief Executive Officer.

iii. The percentage increase in the median remuneration of employees in financial year 2024, as compared to financial year 2023:

-7%.

iv. The number of permanent employees on the rolls of the Company:

7,890 as on March 31, 2024.

v. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

During the financial year 2023-24, the average remuneration of employees other than the key managerial personnel increased by 3% over the previous year. During the same period, average remuneration of the key managerial personnel increased by 6%.

vi. Affirmation that the remuneration is as per the remuneration policy of the Company:

The remuneration is as per the remuneration policy of the Company.

The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the Members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company. Any Member interested in obtaining a copy of the same may write to the Company Secretary.

Acknowledgements

The Directors place on record their sincere thanks for the continued support and co-operation received by the Company from its stakeholders, customers, members, vendors, bankers, stock exchanges, regulatory authorities and all other stakeholders during the year. The Directors also wish to thank the Government of India, the State Governments in the jurisdictions it operates and their various agencies and departments. The Directors place on record their appreciation for the excellent contributions made by the employees of the Company through their commitment, co-operation and diligence. The Directors look forward to the long-term future with confidence.