To The Members
Your Directors' have pleasure in presenting before you the Twenty-Second Annual Reportof your Company together with the Audited Financial Statements for the Financial Yearended 31st March 2017.
|FINANCIAL RESULTS || || || || |
| || || || ||( in Crores) |
|Description ||Standalone ||Consolidated |
| ||Financial Year ended 31.03.2017 ||Financial Year ended 31.03.2016 ||Financial Year ended 31.03.2017 ||Financial Year ended 31.03.2016 |
|Total Income ||630.26 ||543.74 ||2561.46 ||1984.28 |
|Total Expenditure ||442.59 ||376.82 ||2328.88 ||1748.60 |
|EBITDA ||187.67 ||166.92 ||232.58 ||235.68 |
|Depreciation and Amortization Expense ||4.57 ||4.37 ||9.31 ||6.16 |
|Finance Cost ||3.99 ||3.91 ||9.05 ||7.95 |
|Profit before Tax & Exceptional Items ||179.11 ||158.64 ||214.22 ||221.57 |
|Exceptional (Income)/Expenses ||(5.65) ||- ||(7.72) ||(3.68) |
|Provision for Tax (Net) ||47.53 ||41.20 ||68.22 ||66.65 |
|Net Profit/ (Loss) ||137.23 ||117.44 ||153.72 ||158.59 |
|Appropriations: || || || || |
|Interim Dividend ||36.81 ||94.64 ||36.81 ||94.64 |
|Dividend Tax ||6.81 ||17.89 ||7.49 ||19.27 |
|Earnings Per Share (in ) ||13.05 ||11.17 ||14.62 ||15.08 |
Your Company is primarily engaged in the business of providing IT Services and SoftwareSolutions to its global customers in the USEuropeMiddleEastAsiaPacificAustraliaNewZealandandvalueadded re-selling of IT productsfrom global technology companies in India. The consolidated results of your Companyinclude operations of its Indian and Overseas Subsidiaries.
The Company has successfully completed another year of consistent performance. The yeargone by saw significant progress in the efforts to emerge as a platform-led digitalsolutions provider. During the year your Company continued to invest in the developmentof IP including products and platforms go-to-market initiatives and business developmentactivities which enabled to strengthen its client portfolio. Your Company saw an industryleading year-on-year growth in revenues of 15% in the international solutions and servicesbusiness and 39% in their Indian software products business.
Your Company continued to grow in the industry segments it operates across industryverticals of Travel Retail & Distribution and Software solutions. During the yearyour Company expanded its alliances with its strategic partners. The Company entered intothe Microsoft EnterpriseCloudAllianceandtwoofitssolutionsBrick&ClickRetailand AdvancedSupply Chain Software listed on the Microsoft Appsource application store. During theyear Sonata's unied enterprise mobility platform Halosys was granted a US patent formulti-channel delivery of augmented messages. Sonata's SAP alliance on Hybris Ecommercealso gained momentum with closer partnership in serving retail and travel industry needsand joint programs to reach customers in these verticals. The Company continued to hirenew talent to strengthen its leadership team. Investments in marketing especially injoint event and programs with alliance partners was enhanced. The year saw significantnew client wins in addition to the growth in existing customers.
The fiscal year 2017 performance reflects Sonata's journey to reposition itself as aunique "Platformation" partner that is committed to develop and deploy platformsenabling its customers to gain competitive advantage through digital transformationinitiatives.
Coming to the results both on a Standalone and Consolidated basis your Company hasshown growth and placed itself well to handle its increasing scale of operation.
Total Income has shown a growth of 16%. The Earnings before Interest taxesDepreciation and Amortization (EBITDA) stood at 30% of total income and Net Profit at 22%of total income with Earnings per share at 13.05.
Total income has shown a growth of 29%. The Earnings before Interest taxesDepreciation and Amortization (EBITDA) stood at 9% of total income and Net Profit at 6% oftotal income with Earnings per share at 14.62.
Analyzing your Company's consolidated results by the two segments it operates inInternational IT services contributed 32% of total revenues and 78% of PAT while Domesticproducts and services contributed to 68% of the total revenues and 22% of PAT.
International IT Services total revenue is 815 crores growth of 15% and $ 121 millionin US $ terms with a growth of 12% in revenues. Your Company has achieved consistentlygood results because of its focus on serving and growing its existing customers. 20 newcustomers were added throughout the Financial Year maintaining resource utilization atlevels in excess of 85% over the Financial Year under review.
Domestic products and services has showed growth of 39% in revenues. The focus in thisbusiness has always been to manage Return on Capital Employed (ROCE) which wasapproximately 31% for the year under review.
Your Company during the Financial Year under review had a stronger Consolidated BalanceSheet and has approximately 311 crores of cash and cash equivalents (net) showing Returnon Capital employed (ROCE) of 25.30% and Earnings per share at 14.62 per share.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report as required under Schedule V of theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 is disclosed separately in this Annual Report.
DIVIDEND / TRANSFER TO RESERVES
Considering the better liquidity position of your Company the Directors are pleased torecommend payment of a final dividend of 5.50 per equity share @ 550% on par value ofRe.1/- each subject to the approval of the shareholders at the forthcoming Annual GeneralMeeting (AGM) which along with the interim dividend of 3.50 per equity share adds upto atotal dividend of 9.00 per equity share for Financial Year 2016-17.
If approved the final dividend will be paid to all those equity shareholders whosenames appear on the Register of Members of the Company on 4th August 2017 andto those whose names appear as beneficial owners in the records of the National SecurityDepository Limited and Central Depository Services (India) Limited on the said date.
Your Company has not transferred any amounts to reserve for the Financial Year ended 31stMarch 2017.
The paid up share capital of your Company is 105159306 divided into 105159306equity shares of 1/- each. Your Company has not come out with any issue (public rights orpreferential) during the Financial Year under review.
During the year under review the Board of Directors met four times. The Meetings wereheld on 23rd May 2016 8th August 2016 2nd November2016 and 3rd February 2017.
DIRECTORS AND KEY MANANGERIAL PERSONNEL
Mr. Viren Raheja (DIN 00037592) Director retires by rotation and being eligibleoffers himself for re-appointment at the ensuing Annual General Meeting (AGM). Briefprofile of Mr. Viren Raheja is given in the notes to the Notice of the ensuing AGM.
During the Financial Year under review Ms Priya Manoj Jaswani Company Secretary alsodesignated as a Key Managerial Personnel resigned from the services of the Company witheffect from 7th October 2016.
Subsequently Mr. Kundan K Lal was appointed as a Company Secretary and designated asa Key Managerial Personnel of your Company with effect from 2nd November 2016.Mr. Lal is a Member of the Institute of Company Secretaries of India since the year 2001and holds a degree in Law from University of Delhi. He has about 18 years of experience inthe Legal Corporate Governance and Secretarial functions. Over the span of 18 years hehas served various organizations engaged in Engineering Manufacturing IT and EmergingGrowth Technology companies in the field of Corporate & Secretarial Legal LabourIndirect Taxation Real estate Intellectual Property setting up units in DTA and SEZand Litigation Matters. During the year under review the Board re-appointed Mr P SrikarReddy (DIN 00001401) Managing Director and CEO of your Company for a further period ofthree years with effect from 14th February 2017 as per the recommendation ofthe Nomination and Remuneration Committee and subject to approval of the Shareholders atthe ensuing AGM of your Company. Brief profile of Mr P Srikar Reddy is given in the notesto the Notice of the ensuing AGM.
Your Company has laid down procedures to be followed for familiarizing the IndependentDirectors with your Company their roles rights responsibilities in your Company and toimpart the required information and training to enable them to contribute significantly toyour Company.
Your Company has received necessary declarations from the Independent Directors underSection 149(7) of the Companies Act 2013 that they meet the criteria of theirIndependence laid down in Section 149(6) of the Companies Act 2013.
DIRECTOR'S RESPONSIBILITY STATEMENT
In pursuance of Section 134(3)(c) read with 134(5) of the Companies Act 2013 theDirectors hereby confirm that: a) in the preparation of the Annual Accounts theapplicable Accounting Standards had been followed along with proper explanation relatingto material departures; b) the Directors had selected such accounting policies and appliedthem consistently and made judgments and estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs of the Company at the end of theFinancial Year and of the profit and loss of the Company for that period; c) the Directorshad taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of this Act 2013 for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities; d) the Directorshad prepared the Annual Accounts on a going concern basis; e) the Directors had laid downInternal Financial Controls to be followed by the Company and that such Internal FinancialControls are adequate and were operating effectively; and f) the Directors had devisedproper systems to ensure compliance with the provisions of all applicable laws and thatsuch systems were adequate and operating effectively
MATERIAL CHANGES AND COMMITMENTS
There has been no material change and commitment affecting the financial position ofyour Company between the end of the Financial Year under review and date of this Report.
The Audit Committee comprises of Mr. B K Syngal (Chairman) Mr. Pradip P Shah Mr. S BGhia Mr S N Talwar and Ms Radhika Rajan as its members. During the Financial Year theBoard nominated Mr S N Talwar and Ms Radhika Rajan as members of the Committee. TheCommittee met four times during the year under review and all its recommendations wereaccepted by the Board.
Your Company has established Vigil Mechanism which provides for direct access to theChairperson of the Audit Committee in cases that require reporting about the unethicalbehaviour actual or suspected fraud or violation of code of conduct laid down by yourCompany. This mechanism is governed by Vigil Mechanism Policy which covers unethicalbehaviour actual or suspected fraud theft bribery misappropriation of Company fundsfinancial reporting violations misuse of intellectual property mismanagementsignificant environmental safety or product quality issues discrimination or harassmentincluding sexual harassment Insider Trading actual or potential conflicts of interestviolation of Company's rules Company's Policies or violation of Code of Conduct of theCompany.
NOMINATION AND REMUNERATION COMMITTEE & STAKEHOLDERS RELATIONSHIP COMMITTEE
The Nomination and Remuneration Committee comprises of Mr. S. N. Talwar(Chairman) Mr. Viren Raheja Mr. B K Syngal and Mr.
S B Ghia as its members. The Committee has laid down a policy for remuneration ofDirectors KMP and other Employees. A copy of the Policy forms part of this Report as ANNEXUREI.
The Stakeholders Relationship Committee comprises of Mr. S B Ghia (Chairman) Mr. PSrikar Reddy and Ms. Radhika Rajan as its members.
DIVIDEND DISTRIBUTION POLICY
As required under SEBI (LODR) Regulations 2015 your Company has established DividendDistribution Policy. A copy of the Policy forms part of this Report as ANNEXURE II.
The Consolidated Accounts of your Company and its Subsidiaries viz. Sonata InformationTechnology Limited Sonata Software North Amercia Inc. USA (formerly known as OshoreDigital Services Inc) Sonata Software GmbH Germany Sonata Europe Limited UK SonataSoftware FZ LLC Dubai Sonata Software (Qatar) LLC and Rezopia Inc. USA HalosysTechnologies Inc. USA and Interactive Business Information Systems Inc. USA (I.B.I.S.)duly audited are presented as part of this Report in accordance with the Companies Act2013 Accounting Standard 21 and the Listing Agreement with the Stock Exchanges whereverapplicable. The statement pursuant to the proviso of section 129(3) of the Companies Act2013 containing salient features of the Financial Statement of the Company's Subsidiariesin Form AOC-1 is given in ANNEXURE III.
The Accounts of the Subsidiaries audited for the purpose of consolidation shall beplaced on your Company's website and made available for inspection by any Shareholder atthe Company's Registered Office and at the respective registered offices of the Subsidiarycompanies. Copies can be made available on request to the shareholders of the Company.
Your Company's Subsidiaries are continuously developing its operations globally.I.B.I.S Inc. one of the Subsidiaries offered its services in newer segments such as adebt management and collection software platform and a healthcare provider. On themobility front your Company is developing a series of apps on the Halosys Inc. platformfor a Silicon Valley start-up to make the Company Mobile First' and are augmenting atalent pool for various long term projects for a leading US based bank with operationsin more than 70 countries.
Your Company has a "Policy for determining Material Subsidiaries" so thatyour Company could identify such Subsidiaries and set out a governance framework for them.The Policy is put up on the website athttp://www.sonata-software.com/sites/default/files/PolicyonDeterminingMaterialSubsidiries.pdf.
EMPLOYEE STOCK OPTION PLAN "ESOP"
Your Company has an Employee Stock Option Plan 2013 (Plan) in accordance with the SEBI(Share Based Employee Benefits) Regulations 2014. The principal objectives of this Planare to:
Attract retain and motivate talented and critical Employees;
Encourage Employees to align individual performance with the Group's objectives;
Reward Employee performance with ownership in proportion to their contribution;and
Align Employee interest with those of the Group.
Mr. P Srikar Reddy Managing Director & CEO who was granted Options to purchaseequivalent shares under the Plan had during the Financial Year under review exercised75000 Options at an exercise price of 18.10 per share. Further 75000 Options of yourCompany have been vested in him as on 31st March 2017 which have not as ondate of this Report been exercised by him.
During the Financial Year under review Mr. Ranganath Puranik Chief Growth Officer wasgranted an Option to purchase 160000 ESOP shares of the Company to be vested equallyover a period of 4 years subject to terms and conditions as set forth in the ESOP Plan2013 of the Company. Accordingly the first tranche of 40000 Options shall vest in himfor exercise on 7th August 2017.
Pursuant to the requirements of the Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulations 2014 a certificate has been issued by the Auditors of theCompany confirming that the Plan has been implemented in accordance with the saidRegulations and in accordance with the resolution passed by the members of the Company. Acopy of the Certificate shall be placed before the Shareholders for inspection at theensuing Annual General Meeting. As required under the Securities and Exchange Board ofIndia (Share Based Employee Benefits) Regulations 2014 the applicable disclosures as on31st March 2017 are uploaded on the website of the Companywww.sonata-software.com.
The Board had appointed Mr. Sriram Parthasarathy Practising Company Secretary as theSecretarial Auditor for the Financial Year 2016-17. The Secretarial Audit Report for theFinancial Year ended 31st March 2017 is annexed to this Report as ANNEXUREIV. The report does not contain any qualification reservation or adverse remark.
The provisions of Companies (Cost Records and Audit) Rules 2014 are not applicable toyour Company.
QUALIFICATIONS IN AUDIT REPORTS
Your Company confirms that there are no qualifications in the Statutory Auditors'Report and the Secretarial Audit Report for the year under review.
The Auditors are liable to retire at the conclusion of 22nd AGM. Hence theBoard on 29th May 2017 on proposal of the Audit Committee recommendedappointment of Deloitte Haskins & Sells LLP Chartered Accountants Bengaluru (FirmRegistration No. 117366W) as Statutory Auditors of the Company in place of DeloitteHaskins and Sells (FRN 008072S) due to its re-structuring which belongs to same network offirm from the conclusion of Twenty Second (22nd) AGM till conclusion of TwentySeventh (27th) AGM subject to the approval of the Shareholders at the ensuingAGM.
Your Company has complied with the provisions of the Secretarial Standard 1 & 2issued by the Institute of Company Secretaries of India.
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 formMGT 9 is annexed to this Report as ANNEXURE V.
Your Company continues to enhance customer satisfaction by aligning its processes toindustry standards and best practices. During the year under review your Company'squality management system was upgraded to ISO 9001:2015. Your Company also underwentsurveillance audits successfully for ISO 20000-1 (IT Service Management) and ISO 27001(Information Security).
Your Company continues to enhance the effectiveness of its delivery. Your Company gotre-appraised successfully for CMMI at the highest maturity level (CMMI-DEV v1.3 Level 5).
The year under review also saw a greater focus on tools and automation in order toenhance the effectiveness and efficiency of the delivery processes.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO
(A) Conservation of energy
Though your Company does not have energy intensive operations being in the servicessector every endeavor has been made to ensure the optimal usage of energy avoid wastageand conserve energy. As an ongoing process your Company continued to undertake thefollowing measures to minimize the usage of energy by adaption of new technology andinnovation.
Using energy-efficient computers and equipment with the latest technologieswhich would help in conservation of energy;
Installation of sensors at work space area resulting in lights automaticallygetting switched off in areas not in use;
Control measures at HVAC vertical to create advanced air cooling since HVACcontributes 70% of the energy utilization;
Installation of LCD/LED monitors (energy efficient) in place of normal CRTmonitors thereby saving energy;
Turning off air conditioners during non-peak hours and on weekends; and operating only one elevator in buildings having two elevators after 7 pm.
During the year under review some of the steps taken and practices followed by yourCompany and its employees towards energy conservation include the following:
Installation of new technology air conditioners with built in inverter optionwhich has better air circulation and reduces energy consumption up to 20% compared to thenormal air conditioners;
As an environment sustainability initiative UVGI (ultraviolet germicidalirradiation) has been installed in our HVAC systems in Global Village and Hyderabadfacilities. This has resulted in the improvement of IAQ (Indoor Air Quality) upwards by70% and reduction of power consumption up to 10%. The life span of the cooling coil of theAHU increases thereby reducing maintenance costs in the long run;
Replacing CFL with LED lightings in corridors & conference rooms; and
Air-conditioning staggered mode of operation resulting in reduction in fuelconsumption.
As the cost of energy consumed by your Company forms a very small portion of the totalcosts the financial impact of these measures is not material.
(B) Technology absorption
During the Financial Year under review your Company focused its efforts and builtcompetencies in areas of Mobility Omni channel commerce Analytics and Cloud. DedicatedCompetency teams were setup for each of these. Your Company developed and acquired IPs andplatforms specific for industry verticals and business processes.
(C) Foreign exchange earnings and outgo
During the Financial Year under review 89% of the revenue came from exports ofdeveloped software and related services to clients in USA UK Australia Germany UAEJapan Singapore Denmark and Europe. Foreign Exchange outgo on account of travellingprofessional and legal charges subsistence/living costs overseas salaries capitalgoods etc was 96 crores and Foreign Exchange inflow on account of export of softwareservices (net) goods and other operating revenues was 529 crores.
Customers today seek more efficient and effective operations along with technologybased innovation and business transformation before they make any technology investments.Your Company has been successful in growing the size of existing teams as well as branchinto newer divisions within these customers.
Your Company has not accepted any deposits from the public under Chapter V of theCompanies Act 2013 during the year under review.
HUMAN RESOURCES MANAGEMENT
During the Financial Year under review your Company and its employees were part offollowing activities:
Senior Leadership Development through customised programs on BusinessLeadership Design Thinking & sponsoring leaders to Strategic Leadership Programs withB-schools.
Took the Sonata Reimagined concept to the next phase through the Platformationconcept.
The competency framework created last year was reviewed for its refined usagefor performance management & development and compensation.
Organized several employee engagement & Corporate Social Resonsibilityevents across our facilities enabling employees to engage participate contribute and dotheir bit to our society the Go Green Initiative in the Global Village Officementoring the Entrepreneurship case presenters at CEDI program in NIT Trichy support tothe Chennai / Tamil Nadu ood victims supporting the NGOs as part of the Daan Utsavprogram creating the e-commerce platform for Industree Crafts Foundation and a designrepository and platform for Women's Weave.
Further every year your Company organizes an Annual Communications Meet"ACM" where:
Your Managing Director along with his Leadership team shared the Companystrategy plans & key focus areas. In sync with the Go Digital theme this year theACM went digital and was telecast from the Head Office to all locations.
Unveiled your Company's future way of working under the Platformation concept.
The ACM enabled employees to develop a sense of purpose vision and helped them alignand give a deep sense of belonging to the organization's strategy plans and objectives.
DISCLOSURES AS REQUIRED UNDER SECTION 22 OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE(PREVENTION PROHIBITION AND REDRESSAL) ACT 2013
Your Company is committed to provide a healthy environment to all employees thatenables them to work without the fear of prejudice and gender bias. Your Company has inplace a Prevention of Sexual Harassment (POSH) Policy in line with the requirements ofSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.
Your Company through this Policy has constituted a committee and has established agrievance procedure for protection against victimization. The Policy is available onintranet for the employees to access as and when required. No complaint was received underthis Policy during the Financial Year 2016-17.
DETAILS OF ADEQUACY OF INTERNAL CONTROL SYSTEM
Sonata has deployed adequate Internal Control Systems (ICS) in place to ensure a smoothfunctioning of its business. The processes and the systems are reviewed constantly andchanged to address the changing regulatory and business environment.
The Control Systems provide a reasonable assurance of recording the transactions of itsoperations in all material aspects and of providing protection against misuse or loss ofCompany's assets. The ERP system has helped in further strengthening the ICS that are inplace.
The existing ICS and their adequacy have been reviewed extensively during the yearunder review by Internal Auditors and Statutory Auditors. The Internal Financial ControlSystems related policies and procedures have been tested by the Statutory Auditors andInternal Auditors during the year. They have expressed their satisfaction with regard tothe adequacy and effectiveness of the financial control systems in place to address riskmanagement and mitigation strategies.
SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNAL
During the year under review there were no significant and material orders passed bythe Regulators or Courts or Tribunals impacting the going concern status of your Companyand its future operations.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
During the Financial Year under review your Company had given Inter Corporate Depositsat prevailing bank lending rate to its Wholly owned Subsidiary Sonata InformationTechnology Ltd. for meeting its working capital requirements. The balance outstanding ason 31st March 2017 is NIL. The maximum amount outstanding at any point of timeduring the Financial Year has been 88.8 crores.
Also your Company has given Corporate Guarantees on behalf of Subsidiaries forfacilitating its business needs. The outstanding amount as on 31st March 2017is as below:
Name of the Subsidiary Amountin Crores
Sonata Software North America Inc. USA 58.37SonataInformationTechnologyLimitedIndia102.28
Your Company's Risk Management practice seeks to sustain the long term vision andmission of your Company. It continuously evaluates the various risks surrounding thebusiness and seeks to review and upgrade its risk management process. Your Boardconstantly formulates strategies directed at mitigating these risks which get implementedat the Executive Management level and a regular update is provided to the Board.
CORPORATE SOCIAL RESPONSIBILTY (CSR)
During the Financial Year your Company has spent ` 175.96 lakhs towards CSRactivities.
Your Company has a Policy on CSR and as part of its implementation program identifiedand participated in the following initiatives:
Remained committed to NIT Trichy CEDI to promote entrepreneurship and innovationamongst students. Company currently has three projects incubated which have completed ayear and have also identified three more new Projects that have been given seed fund forthis Year.
Developed a Back-End Invoicing Module for the e-commerce platform to facilitatedirect interaction between craftspeople and their customers for the Industry's CraftsFoundation who operate the Mother Earth chain with an aim to improve the livelihood ofartisans by providing access to Markets with the latest technologies.
Partnered with the Indian Institute of Science Bengaluru to help students topursue new research initiatives at the Department & to effectively transmit theexcitement of computer science research through targeted student outreach programs and tomaterially upgrade the pedagogical infrastructure resulting in potent learningenvironments.
Sonata is supporting a programme with RIVER Foundation that addresses today'seducational challenges with a unique "School in a box" - a (MGML) multi-grademulti-level methodology kit & Digital learning with an integrated curriculum that ismade relevant to the local needs. The current platform is under development stage and isplanned to be rolled out by RIVER in the Schools in Chittoor & Telangana.
The Annual Report on CSR in the prescribed format is enclosed to this Report as ANNEXUREVI.
BUSINESS RESPONSIBILITY REPORT
The SEBI (Listing Obligation and Disclosure Requirements) Regulations 2015 mandatesinclusion of the Business Responsibility Report (BRR) as part of the Annual Report for top500 listed entities based on market capitalization. In compliance with the said Regulationand in view of green initiative BRR for the Financial Year ended 31st March 2017 hasbeen hosted on the Company's website at www. sonata-software.com. The BRR contains adetailed report on Business Responsibilities vis--vis the nine principles of theNational Voluntary Guidelines on Social Environmental and Economic Responsibilities ofBusiness framed by the Union Ministry of Corporate Affairs. Any shareholder interested inobtaining a copy may write to the Company Secretary at the Registered Office of theCompany.
RELATED PARTY TRANSACTIONS
The policy on related party transactions is available on the Company's website athttp://www.sonata-software.com/sites/default/files/ PolicyonRelatedpartyTransactions.pdf
Particulars of the Contracts or Arrangements with Related Parties referred to inSection 188(1) in the format specified as Form AOC- 2 forms part of this Report as ANNEXURE VII.
JUSTIFICATION FOR ENTERING INTO RELATED PARTY TRANSACTIONS
All the Related Party Transactions entered into by your Company with the RelatedParties including rendering of services sharing of expenses providing of inter-corporateloans and guarantees to its Subsidiaries are in the ordinary course of business and arecarried out at arm's length pricing.
During the Financial Year under review as mandated by the Companies Act 2013 yourCompany conducted an exercise to evaluate the performance of the Board Committees of theBoard Chairman of the Board Individual Directors and the Independent Directors. As partof the evaluation process individual criteria for each of the exercise was formulated.From these formal questionnaire listing various parameters on which each of thecategories were required to be evaluated was shared with each member of the Board /Committee / Director. They were then required to rate individually on each of theparameters on a performance scale of 1-4. The average scores were then arrived at toconclude the performance/ contributions of the relevant evaluation.
The outcome of the process was used to list out areas and categorize them as exemplarysatisfactory or areas that required improvement. Thereafter corrective measures wererecommended for implementation with immediate effect.
REMUNERATION TO DIRECTOR AND EMPLOYEES
Details / Disclosures of ratio of Remuneration to each Director to the medianemployee's remuneration and details of remuneration paid to Employees is given as ANNEXURE VIII.
LISTING WITH STOCK EXCHANGES
Your Company confirms that it has paid the Annual Listing Fees for the Financial Year2016-17 to NSE and BSE where your Company's shares are listed.
Your Company has taken adequate steps to adhere to all the stipulations laid down inSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. A report onCorporate Governance is provided in this Annual Report.
Certificate from Mr. P Sriram a practising Company Secretary Proprietor of P. Sriram& Associates confirming the compliance with the conditions of Corporate Governance asstipulated under the said Regulations is attached to this report.
Your Directors would like to place on record their gratitude for all the guidance andco-operation received from all its clients vendors bankers financial institutionsbusiness associates advisors regulatory and government authorities. Your Directors alsotake this opportunity to thank all its shareholders and stakeholders for their continuedsupport and all the Sonatians for their valuable contribution and dedicated service.
FOR AND ON BEHALF OF THE BOARD
SONATA SOFTWARE LIMITED
PRADIP P SHAH
Date: 29th May 2017
NOMINATION AND REMUNERATION POLICY
This Policy is formulated by the Nomination and Remuneration Committee of the Companyand all its Subsidiaries including but not limited to Sonata Information Technology LtdSonata Europe Limited Sonata Software North America Inc. etc.to attract motivate andretain high-calibre senior executives/ directors in a competitive market who possess therequired core competencies professional backgrounds and skill sets in line with thenature and identity of the Company and its business. This Policy reflects the Company'sobjectives for good corporate governance as well as sustained long-term value creation forstakeholders.
The policy is framed in terms of section 178 of the Companies Act 2013 and Securitiesand exchange Board of India (Listing Obligations And Disclosure Requirements) Regulations2015 and amendments made thereto.
1) "Act" means the Companies Act 2013 (as amended or modified from time totime) and applicable rules prescribed thereunder;
2) "Company" means M/s. Sonata Software Limited and its Subsidiary SonataInformation Technology Limited.
3) "Board" means the Board of Directors of the respective Company
4) "Director" means the Director appointed to the Board of the respectiveCompany.
5) "Committee" means Nomination and Remuneration Committee of M/s. SonataSoftware Limited and M/s Sonata Information Technology Limited as constituted orreconstituted by the Board of the respective Company.
6) "Independent Director" means a Director referred to in Section 149(6) ofthe Act.
7) "Key Managerial Personnel" (KMP) means-
The Chief Executive Officer or the Managing Director or the Manager;
The Company Secretary;
The Whole-time Director;
The Chief Financial Officer
8) "Policy" means this Nomination and Remuneration Policy.
9) "Senior Management Personnel" (SMP)means personnel of the Company in cadreSenior Vice President and above.
Note: i) Unless the context otherwise requires words and expressions used in thisPolicy and not defined herein but defined in the Act shall have the meaning respectivelyassigned to them therein.
ii) Words imparting the singular shall include the plural and vice versa. Wordsimparting a gender include every gender.
SONATA SOFTWARE LIMITED
The objectives and purpose of this Policy are as follows:
To lay down criteria and terms and conditions with regard to identifying personswho are qualified to become Directors (executive and non-executive) and persons who may beappointed in Senior Management and Key Managerial positions and to determine theirRemuneration.
To determine remuneration based on the Company's size financial position andtrends and practices on Remuneration prevailing in peer companies in the softwareindustry.
To carry out evaluation of the performance of Directors as well as KMP and SMP.
To provide them reward linked directly to their performance and potentialrelating to the Company's operations.
1) This Policy is applicable to Directors (executive and non-executive); KMP and SMP ofSonata Software Limited.
2) This Policy is also applicable to the subsidiaries to the extent required under theapplicable laws.
5] EFFECTIVE DATE
In the context of the aforesaid objectives this Policy has been formulated by theCompany and adopted by the Board of Directors of the Company on 30th September2014 and this date will be deemed to be the effective date of this Policy. The same wasmodified in the board meeting held on 3rd February 2017.
6] CONSTITUTION OF THE COMMITTEE
The Committee which is inter alia responsible for recommending the Remuneration forDirectors KMP and SMP comprises of following Directors:
a) Sonata Software Limited
i) Mr. S. N. Talwar Chairman (Non Executive Independent Director)
ii) Mr. S. B. Ghia Member (Non-Independent Non Executive Director)
iii) Mr. B. K. Syngal Member (Non Executive Independent Director)
iv) Mr. Viren Raheja Member (Non Independent Non Executive Director)
b) Sonata Information Technology Limited
i) Mr Brijendra Kumar Syngal Chairman (Non Executive Independent Director)
ii) Mr Srikar Palem Reddy Member (Non-Independent Non Executive Director)
iii) Ms Radhika Govind Rajan Member (Non Executive Independent Director) TheBoard has the power to reconstitute the Committee consistent with the Company's policiesand applicable statutory requirement.
7] MATTERS TO BE DEALT WITH AND RECOMMENDED TO THE BOARD BY THE COMMITTEE
The Committee shall:
Formulate the criteria for determining qualifications positive attributes andindependence of a Director;
Identify persons who are qualified to become Director and persons who may beappointed in Key Managerial and Senior Management positions in accordance with thecriteria laid down in this Policy; and
Recommend to the Board appointment and removal of Directors KMPs and SMPs.
8] CRITERIA FOR APPOINTMENT AND REMOVAL OF DIRECTORS KMPs AND SMPs
8.1] Appointment criteria and qualifications:
8.1.1 The Committee shall identify and ascertain the integrity qualificationexpertise and experience of the person who is proposed for appointment as Director KMP orSMP and recommend to the Board about such proposed appointment.
8.1.2 A person should possess adequate qualification expertise and experience for theposition he is considered for appointment. The Committee has the discretion to decidewhether qualification expertise and experience possessed by a person is sufficient /satisfactory for the concerned position.
8.1.3 The Company shall not appoint or continue the employment of any person asManaging Director whole-time Director or Manager who is below the age of twenty one yearsor who has attained the age of seventy years. Provided that the term of the person holdingthe described position may be extended beyond the age of seventy years with the approvalof shareholders by passing a special resolution which shall be based on the explanatorystatement annexed to the notice for such motion indicating the justification for extensionof appointment beyond the age of seventy years.
8.2] Term / Tenure:
8.2.1 Managing Director/whole-time Director/Manager:
The Company shall not appoint or employ at the same time a Managing Director anda Manager;
The Company shall not appoint or re-appoint any person as a Managing Director ora whole-time Director or a Manager for a term exceeding five years at a time. Providedthat no re-appointment shall be made earlier than one year before the expiry of his term.
8.2.2 Independent Director:
An Independent Director shall hold office for a term up to five consecutiveyears on the Board of the Company and will be eligible for re-appointment on passing of aspecial resolution by the Company in this regard.
No Independent Director shall hold office for more than two consecutive termsbut such Independent Director shall be eligible for appointment after expiry of threeyears of ceasing to become an Independent Director of the Company. Provided that anIndependent Director shall not during the said period of three years be appointed in orbe associated with the Company in any other capacity either directly or indirectly.However if a person who has already served as an Independent Director for 5 (Five) yearsor more in the Company as on 1st October 2014 or such other date as may bedetermined by the Committee as per regulatory requirement he shall be eligible forappointment for one more term of 5 (Five) years only.
At the time of appointment of an Independent Director it should be ensured thatnumber of Boards on which such Independent Director serves is restricted to seven listedcompanies as an Independent Director and three Listed companies as an Independent Directorin case such person is serving as a whole-time Director in any Listed company.
A whole-time KMP of the Company cannot hold the office in any other company except inits Subsidiary at the same time. However a Managing Director of the Company can hold theoffice in one another company provided such appointment is approved by a resolution passedat a meeting of the Board of Directors with the consent of all the Directors present atthe meeting and of which meeting and of all the resolutions to be moved thereat specificnotice has been given to all the Directors then in India.
The Committee shall diligently carry out annual evaluation of performance of everyDirector KMP and SMP on the basis of the criteria(s) laid down by the Committee or theCompany or under the Act if applicable.
Due to the reasons for any disqualification prescribed under the Act or under any otherapplicable Acts rules and regulations the Committee may recommend to the Board withreasons recorded in writing for removal of a Director KMP or SMP and such removal shallbe in compliance with the Act or any other applicable Acts rules and regulations.
The Director KMP and SMP shall retire as per the applicable provisions of the Act andin accordance with the applicable policy of the Company. The Committee or the Board willhave the discretion to retain the Director KMP and SMP in the same position /Remuneration or otherwise even after their attaining of retirement age for the benefit ofthe Company.
9] TERMS OF REMUNERATION FOR THE DIRECTOR KMP AND SMP
9.1.1 The Remuneration payable to the Director KMP and SMP will be determined by theCommittee and recommended to the Board for approval.
9.1.2 The Committee shall have the power to determine the Remuneration and commissionto be paid to the Director which shall be in accordance with the provisions laid down inthe Articles of Association of the Company and the Act.
9.1.3 Increments to the existing Remuneration/compensation structure may be recommendedby the Committee to the Board which should be within the slabs approved by theShareholders in the case of Whole-time Director.
9.1.4 Where any insurance is taken by the Company on behalf of its Directors KMP andSMP for indemnifying them against any liability the premium paid on such insurance shallnot be treated as part of the Remuneration payable to any such personnel. Provided that ifsuch personnel is proved to be guilty the premium paid on such insurance shall be treatedas part of the Remuneration.
9.1. 5 Compensation:
The Director KMP and SMP at the discretion of the Committee may be entitled to fixedPay on a monthly or yearly basis which may be divided into Basic Performance Bonus HouseRent Allowance Medical Allowance Grade Allowance etc. Appointment letter or contractwill form the basis of eligibility of such pay/ allowances.
To continually enhance the standard of living of the Director KMP and SMP and toensure continual long term engagement the Committee may extend benefits/welfarefacilities such as group mediclaim insurance policy long service award and such otherbenefits that the Committee deems fit to the Director KMP and SMP in accordance with theHR policies of the Company.
9.2] Remuneration to Executive Director KMP and SMP: 9.2.1 Fixed pay:
The Executive Director KMP and SMP shall be eligible for a monthly Remuneration as maybe approved by the Board on the recommendation of the Committee. The break-up of the payscale and quantum of perquisites including employer's contribution to provident fundpension scheme medical expenses etc. shall be decided and approved by the Board on therecommendation of the Committee and approved by the shareholders and Central Governmentwhenever necessary.
9.2.2 Minimum pay:
If in any Financial Year the Company has no profits or its profits are inadequatethe Company shall pay remuneration to its Managing Director Whole-time Director andManager in accordance with the provisions of Schedule V of the Act.
9.2.3 Provisions for excess Remuneration:
If any Whole-time Director draws or receives directly or indirectly by way ofRemuneration any such sums in excess of the limits prescribed under the Act or without theprior sanction of the Central Government where required he shall refund such sums to theCompany and until such sum is refunded hold it in trust for the Company. The Companyshall not waive recovery of such sum refundable to it unless permitted by the CentralGovernment.
9.3] Remuneration to Non- Executive / Independent Director: 9.3.1. Remuneration: Ifrequired Non-executive/Independent Directors may be paid Remuneration which shall befixed as per the slabs and conditions as deemed fit by the Committee and which shall be inaccordance with the Articles of Association of the Company and the Act.
9.3.2 Sitting Fees:
The Non- Executive / Independent Director shall receive Remuneration by way of fees forattending Meetings of Board or Committee thereof. Provided that the amount of such feesshall not exceed Rupees One lakh per Meeting of the Board or Committee or such amount asmay be prescribed by the Central Government from time to time. 9.3.3 Commission:Commission may be paid within the monetary limit approved by shareholders CentralGovernment subject to the limit prescribed under the Companies Act 2013 and the rulesmade thereunder.
9.3.4 Stock Options:
An Independent Director and any Director who either himself or through his relative orthrough any Body Corporate directly or indirectly holds more than ten percent of theoutstanding equity shares of the Company shall not be entitled to any stock option of theCompany.
The Committee or the Board reserves its right to amend or modify this Policy in wholeor in part at any time without assigning any reason whatsoever.
DIVIDEND DISTRIBUTION POLICY
The Securities and Exchange Board of India ("SEBI") vide its Notificationdated July 8 2016 has issued SEBI (Listing Obligations and Disclosure Requirements)(Second Amendment) Regulations 2016 ("Regulations"). The Regulations mandatetop 500 listed entities based on market capitalization to formulate a dividenddistribution policy which shall be disclosed in their annual reports and on theirwebsites. It is in this context that the Dividend Distribution Policy("Policy")is being framed and implemented.
The regulation prescribes that the dividend distribution policy shall include thefollowing parameters: the circumstances under which the shareholders of the listedentities may or may not expect dividend; the financial parameters that shall beconsidered while declaring dividend; internal and external factors that shall beconsidered for declaration of dividend; policy as to how the retained earningsshall be utilized; and parameters that shall be adopted with regard to variousclasses of shares: Provided that if the listed entity proposes to declare dividend on thebasis of parameters in addition to clauses (a) to (e) or proposes to change suchadditional parameters or the dividend distribution policy contained in any of theparameters it shall disclose such changes along with the rationale for the same in itsannual report and on its website.
2. Objective of the Policy
This Policy is framed in accordance with the requirement under Regulation 43A of theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)(Second Amendment)Regulations 2015 (including any amendments thereof).
The Board of Directors of the Company ("Board") recommends dividenddistribution based on the following factors:
Current year profits and outlook in line with the development of internal andexternal environment.
Operating cash flows and treasury position keeping in view the total debt toequity ratio.
Possibilities of alternate usage of cash e.g. capital expenditure anticipatedinvestments in Merger &Acquisitions Amalgamations Corporate Restructuring andworking capital requirements for current and projected periods etc. with potential tocreate greater value for shareholders.
Providing for unforeseen events and contingencies with financial implications.
Internal and/or external factors.
Retained earnings may be used for corporate actions in accordance withapplicable law and for investments towards growth of business.
The Board may declare interim dividend(s) or special dividend(s) as and when theyconsider it fit and recommend final dividend to the shareholders for their approval inthe general meeting of the Company.
The dividend distribution shall be in accordance with the applicable provisions of theCompanies Act 2013 Rules framed thereunder SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and other legislations governing dividends and theArticles of Association of the Company as in force and as amended from time to time.
4. Circumstances under which the shareholders of the listed entities may notexpect dividend
The Board may choose not to recommend a dividend if there are important strategicpriorities which require large investments or uncertainties in the business performance inthe near to medium term.
5. Effective Date
The Policy as approved by the Board of Directors shall be effective 3rdFebruary 2017.
This Policy shall be subject to review as may be deemed necessary by the Board ofDirectors.
Statement containing salient features of the financial statement ofsubsidiaries/associate companies/joint ventures
(Pursuant to first proviso to sub-section (3) of section 129 read with rule 5 ofCompanies (Accounts) Rules 2014 - Form AOC-I)
|Part "A": Subsidiaries || || || || || || || || ||Amount in ` |
|Name of the subsidiary ||Sonata Information Technology Ltd. ||Sonata Software North America Inc. ||Sonata Software FZ LLC ||Sonata Software GmbH ||Sonata Europe Ltd. UK ||Sonata Software (Qatar) LLC ||Rezopia Inc. ||Halosys Technologies Inc. ||Interactive Business Information Systems Inc. |
|1 Reporting period for the subsidiary concerned if different from the holding company's reporting period ||Same Reporting Period ||Same Reporting Period ||Same Reporting Period ||Same Reporting Period ||Same Reporting Period ||Same Reporting Period ||Same Reporting Period ||Same Reporting Period ||Same Reporting Period |
| || || || || || || || || || |
| || || || || || || || || || |
|2 Reporting currency ||INR ||USD ||USD ||EURO ||GBP ||USD ||USD ||USD ||USD |
|3 Exchange rate as on the last date of the relevant Financial year in the case of foreign subsidiaries ||- ||USD = 64.85 ||USD = 64.85 ||Euro = 69.31 ||GBP = 80.92 ||USD = 64.85 ||USD = 64.85 ||USD = 64.85 ||USD = 64.85 |
| || || || || || || || || || |
| || || || || || || || || || |
| || || || || || || || || || |
| || || || || || || || || || |
|4 Share capital ||33753940 ||19455000 ||8827934 ||1732750 ||199092331 ||3571938 ||5577 ||4056043 ||32441213 |
|5 Reserves and surplus ||1307509901 ||209877233 ||(39086457) ||17783668 ||269806539 ||(26083124) ||1964177 ||(61207635) ||(86430588) |
| || || || || || || || || || |
|6 Total assets ||5737355697 ||1931435267 ||116398487 ||21439909 ||538265355 ||2144706 ||75791159 ||36293537 ||153579840 |
|7 Total Liabilities ||4396091856 ||1702103035 ||146657010 ||1923491 ||69366485 ||24655892 ||73821405 ||93445128 ||207569216 |
|8 Investments ||- ||874019442 ||- ||- ||- ||- ||- ||- ||- |
|9 Turnover ||17341481275 ||4083294134 ||192851060 ||25182933 ||316887980 ||- ||95682198 ||729563 ||382341787 |
|10 Profit / (Loss) before taxation ||509220042 ||57957872 ||(69204613) ||6389828 ||4212533 ||(4824581) ||11055304 ||(18213817) ||(36508280) |
| || || || || || || || || || |
|11 Provision for taxation ||172809531 ||4495997 ||- ||3071740 ||3592848 ||- ||- ||(95459) ||20850702 |
| || || || || || || || || || |
|12 Profit / (Loss) after taxation ||336410511 ||53461874 ||(69204613) ||3318087 ||619685 ||(4824581) ||11055304 ||(18118358) ||(57358982) |
| || || || || || || || || || |
|13 % of shareholding ||100 ||100 ||100 ||100 ||100 ||49 ||60 ||100 ||100 |
1) For foreign subsidiaries the amounts in reporting currency have been converted to `at the closing exchange rate of 31st March 2017. 2) Proposed dividend from anyof the subsidiary is "NIL".
Part "B": Associates and Joint Ventures
Statement pursuant to Section 129 (3) of the Companies Act 2013 related to AssociateCompanies and Joint Ventures
There are no associate companies and joint ventures during the current Financial Yearunder review.
P SRIKAR REDDY
Managing Director & CEO
VP - Finance & Accounts
PRADIP P SHAH
Chief Financial Officer
KUNDAN K LAL
Date: 29th May 2017