The Board of Directors hereby submits the report of the business and operations of yourCompany along with the audited financial statements for the financial year ended March31 2017 The consolidated performance of the Company and its subsidiaries has beenreferred to wherever required.
The performance during the period ended March 31 2017 has been as under:
(' In Lakhs)
|Particulars || |
| ||Consolidated ||Standalone ||Consolidated ||Standalone |
|Total Income ||62671.31 ||27683.45 ||59824.85 ||20590.98 |
|Total Expenditure ||10116864 ||45328.09 ||51421.68 ||16246.09 |
|Profit (Loss) Before Tax ||(3849733) ||(17644.64) ||8403.17 ||4344.89 |
|Provision for Tax ||628.25 ||726.22 ||3435.57 ||1148.46 |
|Profit (Loss) after Tax ||(39125.58) ||(18370.86) ||4967.60 ||3196.43 |
|Transfer to General Reserves ||NIL ||NIL ||NIL ||NIL |
|Profit available for appropriation ||(43823.78) ||(21065.36) ||496760 ||3196.43 |
|Balance Carried to Balance Sheet ||(43823.78) ||(21065.36) ||496760 ||3196.43 |
REVIEW OF OPERATIONS
The total revenue of the Company for the financial year under review on consolidatedbasis was Rs.61925.63 Lakhs as against Rs.59483.55 Lakhs for the previous financialyear. The company clocked a net loss of Rs.43823.78 Lakhs for the financial year 2016-17as against the net profit of Rs.4967.60 Lakhs for the previous year.
On Standalone basis the total revenue of the Company for the financial year 2016-17was Rs.27508.59 Lakhs as against Rs.20448.97 Lakhs for the previous financial year. Thenet loss was'21065.36 Lakhs for the financial year 2016-17 as against the net profit ofRs.3196.43 Lakhs for the previous year.
FUTURE PROSPECTS & OUTLOOK
The Software Testing Industry is growing aggressively in double digits as per IndustryAnalysts. With the advent of digital transformation Software testing is key for anybusiness to be successful. The Company continues to equip itself technologically based onthe latest industry development. This has resulted in the Company winning huge order andthe pipeline looks very good. Overall the Company is confident of growing in line with theIndustry.
In view of the losses faced by the Company during the financial year the Board ofDirectors could not consider any dividend.
CONSOLIDATED FINANCIAL STATEMENTS
In compliance with the provisions of the Companies Act 2013 and the AccountingStandards AS-21 and AS-27 on consolidated financial statements your Directors haveprovided the consolidated financial statements for the financial year ended March 31 2017which forms part of the Annual Report.
INFORMATION ABOUT THE FINANCIAL PERFORMANCE/FINANCIAL POSITION OF THESUBSIDIARIES/BRANCHES/ASSOCIATES/JOINT VENTURES:
Your Company has two Indian wholly owned subsidiary companies (WOS) and five whollyowned foreign subsidiary companies (WOS).
Gallop Solutions Private Limited (Indian WOS)
Cigniti Software Services Private Limited (Indian WOS)
Cigniti Technologies (Canada) Inc. (Foreign WOS)
Cigniti Technologies (UK) Limited UK (Foreign WOS)
Cigniti Technologies Inc. USA (Foreign WOS)
Cigniti Technologies (Australia) Pty. Limited Australia (Foreign WOS)
Cigniti Technologies (NZ) Limited New Zealand (Foreign WOS)
Cigniti Technologies Limited South Africa (Foreign Branch)
During the year under review the two wholly owned subsidiary companies namely CignitiInc. USA and Gallop Solutions Inc. USA have been merged in to Cigniti Technologies Inc.USA wholly owned subsidiary company after obtaining all the necessary approvals from theconcerned authorities.
As per the provisions of Section 129 of the Companies Act 2013 read with Companies(Accounts) Rules 2014 a separate statement containing the salient features of thefinancial statements of the subsidiary companies is prepared in Form AOC-1 and is attachedas Annexure and forms part of this report.
In accordance with the provisions of the Companies Act 2013 the Balance sheetStatement of Profit and Loss and other documents of the subsidiary companies are beingmade available on the website of the Company.
INDIAN ACCOUNTING STANDARDS
The Ministry of Corporate Affairs vide its notification dated February 16 2015 hasnotified the Companies (Indian Accounting Standards) Rules 2015. In pursuance of the saidnotification the Company will adopt Indian Accounting Standards with effect from April 12017 The implementation of Indian Accounting Standards (IAS) is a major change process forwhich the Company has set up a dedicated team and is providing desired resources for itscompletion within the time frame. The impact of the change on adoption of said IAS isbeing assessed.
STATUTORY AUDITORS AND AUDITORS REPORT
The existing auditors M/s. P. Murali & Co. will retire at the ensuing AnnualGeneral Meeting on expiry of 3 years term. Accordingly the appointment of M/s. S RBatiliboi & Associates LLP as statutory auditors of the Company in place ofretiring auditors is placed for approval by the shareholders. The Auditors' Report forfiscal 2017 does not contain any qualification reservation or adverse remark.
The Auditors' Report is enclosed with the financial statements in this Annual Report.
The Company has adequate internal controls consistent with the nature of business andsize of the operations to effectively provide for safety of its assets reliability offinancial transactions with adequate checks and balances adherence to applicable statuesaccounting policies approval procedures and to ensure optimum use of available resources.These systems are reviewed and improved on a regular basis. It has a comprehensivebudgetary control system to monitor revenue and expenditure against approved budget on anongoing basis.
The Board has appointed M/s. Sarath & Associates Chartered Accountants Hyderabadas internal Auditors in its meeting held on May 17 2017. Deviations are reviewedperiodically and due compliance ensured. Summary of Significant Audit Observations alongwith recommendations and its implementations are reviewed by the Audit Committee andconcerns if any are reported to Board.
DIRECTOR'S RESPONSIBILITY STATEMENT:
In pursuance of Section 134 (5) of the Companies Act 2013 the Directors herebyconfirm that:
(a) In the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
(b) The Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;
(c) The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(d) The Directors had prepared the annual accounts on a going concern basis; and
(e) The Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively.
(f) The Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
Changes in Directors:
Mr. P Sudhakar and Mr. Mani Subramanian Directors have resigned from office w.e.f.May 17 2017
Mr. C. Srikanth was appointed as CEO-Global Operations positioned at CignitiTechnologies Inc. USA a wholly owned subsidiary Company and subsequently re-designated asNon-executive Director of Cigniti Technologies Limited.
The Board placed on records its sincere appreciation for the valuable contribution madeby Mr. P. Sudhakar and Mr. Mani Subramanian during their tenure as directors of theCompany.
Mr. C. V. Subramanyam will retire by rotation at the ensuing Annual General Meeting interms of Section 152 and any other applicable provisions of the Companies Act 2013 andbeing eligible offers himself for re-appointment.
Details of appointment/re-appointment of the director:
|Name of the Director ||Mr. C. V. Subramanyam |
|Date of Appointment ||03/09/1998 |
|Qualifications ||BCOM MBA LLB |
|No. of Shares held in the Company ||2958485 |
|Directorships held in other companies (excluding foreign companies) ||1. TTI CHAKKILAM TYPESETTING PRIVATE LIMITED |
| || |
| ||2. GALLOP SOLUTIONS PRIVATE LIMITED |
|Positions held in mandatory committees of other companies ||Nil |
DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS
The Company has received necessary declaration from each independent director underSection 149(7) of the Companies Act 2013 that he/she meets the criteria of independencelaid down in Section 149(6) of the Companies Act 2013 and Regulation 25 of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.
The SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 mandatedthe formulation of certain policies for all listed companies. All the policies areavailable on our website (https://www.cigniti.com/policies). The policies are reviewedperiodically by the Board and updated based on need and new compliance requirement.
|Name of the policy ||Brief Description ||Website link |
|Board Diversity Policy ||At Cigniti we believe that a truly diverse board will leverage differences in thought perspective knowledge skill regional and industry experience cultural and geographical background age ethnicity race and gender which will help us retain our competitive advantage. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. ||http://www.cigniti.com/wp- content/uploads/Board-Diversity- Policy-Final.pdf |
|Nomination and Remuneration Policy ||This policy formulates the criteria for determining qualifications competencies positive attributes and independence for the appointment of a director (executive/non-executive) and also the criteria for determining the remuneration of the directors key managerial personnel and other employees. ||http://www.cigniti.com/wp- content/uploads/Nomination- Remuneration-policy.pdf |
|Corporate Social Responsibility Policy ||The policy is framed to outline the formation of the committee which directs the Company in implementing the programs relating to education and any other program as the Board may think fit. ||http://www.cigniti.com/wp- content/uploads/CSR-Policy.pdf |
|Policy on Material Subsidiaries ||The policy is used to determine the material subsidiaries and material non-listed Indian subsidiaries of the Company and to provide the governance framework for them. ||http://www.cigniti.com/wp- content/uploads/Policy-Material- Subsidiaries.pdf |
|Related Party Transaction Policy ||The policy regulates all transactions between the Company and its related parties ||http://www.cigniti.com/wp- content/uploads/private-policy.pdf |
Corporate governance is about maximizing shareholder value legally ethically andsustainably. At Cigniti we believe a sound corporate governance is critical to enhanceand retain investor trust. The goal of corporate governance is to ensure fairnessinformation about the Company for every stakeholder. Our disclosures seek to attain thebest practices in international Corporate Governance. A separate section on CorporateGovernance for fiscal 2017 forms part of this Annual Report.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
In terms of the provisions of Regulation 34 of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 theManagement's discussion and analysis is set out in this Annual Report.
RELATED PARTY TRANSACTIONS
All related party transactions that were entered during the financial year weredisclosed in form AOC-2 and is attached as Annexure which forms part of Annual report.There were no materially significant related party transactions made by the Company withthe promoters directors key managerial personnel or other designated persons which mayhave a potential conflict with the interest of the Company at large.
Your Directors draw attention of the members to Note 30 to the financial statementwhich sets out related party disclosures and Annexure to this report.
PARTICULARS OF EMPLOYEES
A table containing the particulars in accordance with the provisions of section 197(12)of the act read with rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is appended as Annexure A to this report.
A statement containing the name of every employee employed throughout the financialyear and in receipt of remuneration of Rs.60 Lakhs or more or employed for part of theyear and in receipt of Rs.5 Lakhs or more a month under Rule 5(2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is enclosed asAnnexure B to this report.
EMPLOYEE STOCK OPTION SCHEME
Details of the options up to March 31 2017 are set out in the Annexure-C to thisreport as required under clause 12 of the Securities and Exchange Board of India(Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines 1999 andRegulation 14 of SEBI (Share Based Employee Benefits) Regulations 2014.
EXTRACT OF ANNUAL RETURN
As required pursuant to Section 92(3) of the Companies Act 2013 and rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of annual return in MGT9 is included as Annexure-D and forms part of this Report.
FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS
Independent Directors are familiarized about the Company's operations and businesses.Interaction with the Business heads and key executives of the Company is also facilitated.Detailed presentations on important policies of the Company is also made to the directors.Direct meetings with the Chairman is further facilitated to familiarize the incumbentDirector about the Company/its businesses and the group practices.
The details of familiarization programme as above are also disclosed on the Company'swebsite at http/www. cigniti.com/wp-content/uploads/SSR-Familiarisation- Programme.pdf.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of managerial personnel) Rules 2014 the Board had appointedMr. S. Sarveswar Reddy Practicing Company Secretary to undertake the secretarial audit ofthe Company for the year 201617 The report of the Secretarial Auditor is enclosed asAnnexure E and forms part of this report. The Secretarial Audit Report does not containany qualification reservation or adverse remark.
CORPORATE SOCIAL RESPONSIBILITY
With the mission to discover once again the social responsibility of developingeconomic social and environmental capital towards sustainability Cigniti crafted CSRprojects in achieving the mission. Your Company believes and strives hard in sustainabledevelopment of society in which the enterprise draws economic and natural resources byenriching its capacity in contributing to the significant positive change in the economy.The CSR committee has been formed to achieve the mission and implement the CSR objectives.
The Company has adopted the CSR policy and budget outlay of Rs.31 Lakhs has beenapproved by the Board of Directors for the year 2016-17 and the entire amount has beenspent towards the Corporate Social Responsibility programme. For the year 2017-18 theaverage profits for the preceding three financial years is Rs.42 Lakhs which has beenapproved by CSR Committee as budget outlay to be spent towards CSR program.
The details on CSR corpus and amount spent projects for which funds are utilized havebeen disclosed as part of Corporate Governance Report.
DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY TECHNOLOGY ABSORPTIONAND FOREIGN EXCHANGE EARNINGS AND OUTGO:
A. Conservation of Energy:
Your Company's operations are not energy intensive. Adequate measures have been takento conserve energy wherever possible by using energy efficient computers and purchase ofenergy efficient equipment.
B. Technology Absorption:
Your Company has not undertaken any research and development activity for anymanufacturing activity nor was any specific technology obtained from any external sourceswhich needs to be absorbed or adapted.
C. Foreign Exchange Earnings and Outgo:
|Foreign Exchange Earnings ||: Rs.2628773912/- |
|Foreign Exchange Outgo: ||' 219405149/- |
Attention of the members is drawn to Note No. 30 & 31 of Notes on financialstatements
In accordance with the provisions of Section 134 of the Act and Regulation 17 of theListing Regulations the Board has carried out evaluation of its own performance theperformance of committees of the Board namely Audit Committee Risk ManagementCommittee Stakeholders Relationship Committee and Nomination and Remuneration Committeeand also the directors individually. The manner in which the evaluation was carried outand the process adopted has been mentioned in the Corporate Governance Report.
During the year 2016-17 seven Board meetings were held the details of which are givenin the Corporate Governance Report.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Details of loans guarantees or investments made under Section 186 of the companiesAct 2013 are given in the note to the financial statements.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant and material orders passed by the regulators/courts that wouldimpact the going concern status of the Company and its future operations.
During the year your Company has allotted 1010311 equity shares of Rs.10/- each toemployees under Cigniti ESOP scheme. Consequently the paid up share capital of the Companyhas increased to Rs.265095300/- divided into 26509530 equity shares of Rs.10/- each.
Your Company has not accepted any deposits falling within the meaning of Section 73 ofthe Companies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014 during thefinancial year under review.
The properties and assets of your Company are adequately insured.
RISK MANAGEMENT POLICY
Your Company follows a comprehensive system of Risk Management. Your Company hasadopted a procedure for assessment and minimization of probable risks. It ensures that allthe risks are timely defined and mitigated in accordance with the well- structured riskmanagement process.
DISCLOSURE ABOUT COST AUDIT
Cost Audit is not applicable to your Company.
CODE OF CONDUCT FOR THE PREVENTION OF INSIDER TRADING
The Board of Directors has adopted the Insider Trading Policy in accordance with therequirements of the SEBI (Prohibition of Insider Trading) Regulation 2015 and theapplicable US Securities laws. The Insider Trading Policy of the Company lays downguidelines and procedures to be followed and disclosures to be made while dealing withshares of the Company as well as the consequences of violation. The policy has beenformulated to regulate monitor and ensure reporting of deals by employees and to maintainthe highest ethical standards of dealing in Company securities.
The Insider Trading Policy of the Company covering code of practices and procedures forfair disclosure of unpublished price sensitive information and code of conduct for theprevention of insider trading is available on our website athttp://www.cigniti.com/wp-content/ uploads/code-of-conduct-for-fair-disclosure-and-prevention-of-insider-trading.pdf.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013.
The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at workplace (Prevention Prohibition and Redressal )Act 2013. Internal Complaint Committee (ICC) has been set up to redress complaintsreceived regarding sexual harassment. All employees are covered under this policy.
Following is the summary of sexual harassment complaints received and disposed duringthe calendar year.
| No. of complaints received: ||Nil |
| No. of complaints disposed off: ||Nil |
The Board thanks its customers vendors investors and bankers for their continuedsupport during the year It places on record its appreciation of the contribution made byemployees of the company at all levels. The Board thanks the Governments of variouscountries where the company has operations. It also thanks the Government of Indiaparticularly the Ministry of Communication and Information Technology the Ministry ofCommerce the Ministry of Finance the Ministry of Corporate Affairs the Customs andExcise Departments the Income Tax Department the Reserve Bank of India the StateGovernments and other government agencies for their support and looks forward to theircontinued support in the future.
The Board also wishes to place on record their appreciation of business constituentslike SEBI BSE NSE NSDL CDSL etc. for their continued support for the growth of theCompany.
| ||For and on behalf of the Board |
| ||Cigniti Technologies Limited |
|Place: Hyderabad ||C. V. Subramanyam |
|Date: May 17 2017 ||Chairman & Managing Director |
| ||DIN: 00071378 |