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Cigniti Technologies Ltd.

BSE: 534758 Sector: IT
NSE: CIGNITITEC ISIN Code: INE675C01017
BSE 00:00 | 22 Jun 554.10 1.70
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563.00

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594.00

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535.00

NSE 00:00 | 22 Jun 554.40 2.95
(0.53%)
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563.80

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595.00

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OPEN 563.00
PREVIOUS CLOSE 552.40
VOLUME 163808
52-Week high 594.00
52-Week low 250.00
P/E 28.52
Mkt Cap.(Rs cr) 1,553
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 563.00
CLOSE 552.40
VOLUME 163808
52-Week high 594.00
52-Week low 250.00
P/E 28.52
Mkt Cap.(Rs cr) 1,553
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Cigniti Technologies Ltd. (CIGNITITEC) - Auditors Report

Company auditors report

To the Members of Cigniti Technologies Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of CignitiTechnologies Limited ("the Company") which comprise the Balance Sheet as atMarch 312020 the Statement of Profit and Loss including the Statement of OtherComprehensive Income the Cash Flow Statement and the Statement of Changes in Equity forthe year then ended and notes to the standalone financial statements including a summaryof significant accounting policies and other explanatory information (hereinafter referredto as the "Standalone Financial Statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Financial Statements give the information requiredby the Companies Act 2013 as amended ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at March 312020 its profit includingother comprehensive income its cash flows and the changes in equity for the year ended onthat date.

Basis for Opinion

We conducted our audit of the Standalone Financial Statements in accordance with theStandards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the 'Code of Ethics' issuedby the Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the Standalone Financial Statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Financial Statements for the financial yearended March 31 2020. These matters were addressed in the context of our audit of theStandalone Financial Statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters. For each matter below our description ofhow our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Standalone Financial Statements section ofour report including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the Standalone Financial Statements. The results of our audit proceduresincluding the procedures performed to address the matters below provide the basis for ouraudit opinion on the accompanying Standalone Financial Statements.

Key audit matters How our audit addressed the key audit matter
Impairment assessment of investment in subsidiary (as described in note 4 of the Standalone Financial Statements)
As at March 31 2020 the Company has investment of Rs. 5549.49 lakhs in Cigniti Technologies Inc. USA which is tested for impairment annually using discounted cash-flow models of subsidiary's recoverable value compared to the carrying value. Our audit procedures included the following:
The determination of recoverable amounts of the Company's investments in the subsidiary relies on management's estimates of forecast of future cash flows and their judgment with respect to the forecast of the subsidiary's future performance. • We tested the design implementation and operative effectiveness of management's key internal controls over investment impairment assessment;
The inputs to the impairment testing model include: • We assessed the methodology applied by the Company in its impairment analysis. In making this assessment we also evaluated the competence professional qualification objectivity and independence of Company's specialists involved in the process;
• Projected revenue growth operating margins and operating cash-flows in the years 1-5; • With the assistance of a specialist we assessed the assumptions around the key drivers of the cash flow forecasts including discount rates expected growth rates and terminal growth rates used in consideration of the current and estimated future economic conditions;
• Stable long-term growth rates beyond five years and in perpetuity; and
• Discount rates that represent the current market assessment of the risks specific to the subsidiary taking into consideration the time value of money.
The financial projections basis which the future cash flows have been estimated consider the impact of the economic uncertainties arising from COVID-19 on the discount rates and the projected growth rates and the terminal values and subjecting these variables to sensitivity analysis. • We assessed the recoverable value headroom by performing sensitivity testing of key assumptions used including the impact of COVID-19;
The impairment testing is considered a key audit matter because the assumptions on which the tests are based are highly judgmental and are affected by future market and economic conditions which are inherently uncertain and because of the materiality of the balance to the financial statements as a whole. • We discussed potential changes in key drivers as compared to previous year/ actual performance with management in order to evaluate whether the inputs and assumptions used in the cash flow forecasts were suitable;
• We tested the arithmetical accuracy of the models;
• We assessed the related disclosures as described in note 4 to the financial statements.
Allowance for credit losses for trade receivables including unbilled revenue (as described in note 36A and of the Standalone Financial Statements)
As at March 31 2020 the Company has outstanding trade receivables and unbilled revenue of Rs. 7576.23 lakhs. The Company has determined the allowance for credit losses based on the ageing status and historical loss experience adjusted to reflect current and estimated future economic conditions. In addition to the historical pattern of credit loss the Company has considered the likelihood of increased credit risk and consequential default considering emerging situations due to COVID-19. Our audit procedures included the following:
We considered this as key audit matter due to the materiality of the amounts and significant estimates and judgements as stated above. • We tested the design implementation and operative effectiveness of management's key internal controls over allowance for credit losses;
• We assessed the completeness and accuracy of the information used in the estimation of probability of default and tested historical payment records correspondence with customers and subsequent collection of the customers' balances;
• We performed analysis of ageing of receivables tested the mathematical accuracy and computation of the allowance for credit losses;
• We assessed the allowance for expected credit loss made by management including the possible effect from the pandemic relating to COVID-19.

Other Information

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included Board's Report in the Annual report butdoes not include the Standalone Financial Statements and our auditor's report thereon.

Our opinion on the Standalone Financial Statements does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone Financial Statements our responsibilityis to read the other information and in doing so consider whether such other informationis materially inconsistent with the Standalone Financial Statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.

Responsibilities of Management for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these Standalone Financial Statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Standalone FinancialStatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the Standalone Financial Statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the StandaloneFinancial Statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these Standalone Financial Statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the StandaloneFinancial Statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe Standalone Financial Statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the StandaloneFinancial Statements including the disclosures and whether the Standalone FinancialStatements represent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the Standalone Financial Statementsfor the financial year ended March 31 2020 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act we report that:

(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;

(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;

(c) The Balance Sheet the Statement of Profit and Loss including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;

(d) In our opinion the aforesaid Standalone Financial Statements comply with theAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended;

(e) On the basis of the written representations received from the directors as on March312020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312020 from being appointed as a director in terms of Section 164 (2) of theAct;

(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these Standalone Financial Statements and theoperating effectiveness of such controls refer to our separate Report in "Annexure2" to this report;

(g) In our opinion the managerial remuneration for the year ended March 312020 hasbeen paid/provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;

(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company does not have any pending litigations which would impact its financialposition;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

For S.R. BATLIBOI & ASSOCIATES LLP
Chartered Accountants
ICAI Firm registration number: 101049W/E300004
per Shankar Srinivasan
Partner
Place: Hyderabad Membership Number: 213271
Date: May 7 2020 UDIN: 20213271AAAAAV1974

Annexure 1 to the Independent Auditors' Report of even date on the Standalone FinancialStatements of Cigniti Technologies Limited

Re: Cigniti Technologies Limited ('the Company')

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.

(b) Property plant and equipment have been physically verified by the managementduring the year and no material discrepancies were identified on such verification.

(c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are held in thename of the Company.

(ii) The Company's business does not involve inventories and accordingly therequirements under paragraph 3(ii) of the Order are not applicable to the Company andhence not commented upon.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theAct. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of the Order are notapplicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to usprovisions of section 186 of the Act in respect of investments made have been compliedwith by the Company. The Company has not given any loans /guarantees/ provided security towhich the provisions of section 185 and 186 of the Act apply.

(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable and hence notcommented upon.

(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under Section 148(1) of the Act for theservices of the Company and hence not commented upon.

(vii)(a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund employees' state insurance income-tax goods andservice tax and other statutory dues applicable to it. The provisions relating to salestax duty of custom duty of excise and cess are not applicable to the Company.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax goods andservice tax and other statutory dues were outstanding at the year end for a period ofmore than six months from the date they became payable.

(c) According to the information and explanations given to us there are no dues ofincome tax goods and service tax and cess which have not been deposited on account of anydispute.

(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowing to a bank.The Company did not have any outstanding loans or borrowing dues in respect of a financialinstitution or to government or dues to debenture holders during the year.

(ix) According to the information and explanations given by the management the Companyhas not raised any money way of initial public offer/ debt instruments and term loanshence reporting under clause (ix) is not applicable to the Company and hence notcommented upon.

(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or no fraud on the Companyby the officers and employees of the Company has been noticed or reported during the year.

(xi) According to the information and explanations given by the management themanagerial remuneration has been paid/provided in accordance with the requisite approvalsmandated by the provisions of section 197 read with Schedule V to the Act.

(xii) In our opinion the Company is not a Nidhi Company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company and hence not commented upon.

(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 of Actwhere applicable and the details have been disclosed in the notes to the financialstatements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe Company and hence not commented upon.

(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in section 192 of the Act.

(xvi) According to the information and explanations given to us the provisions ofsection 45IA of the Reserve Bank of India Act 1934 are not applicable to the Company andhence not commented upon.

For S.R. BATLIBOI & ASSOCIATES LLP
Chartered Accountants
ICAI Firm registration number: 101049W/E300004
per Shankar Srinivasan
Partner
Place: Hyderabad Membership Number: 213271
Date: May 7 2020 UDIN: 20213271AAAAAV1974

Annexure 2 to the Independent auditor's report of even date on the Standalone FinancialStatements of Cigniti Technologies Limited

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of CignitiTechnologies Limited ("the Company") as of March 312020 in conjunction with ouraudit of the Standalone Financial Statements of the Company for the year ended on thatdate.

Management's Responsibility for Internal Financial Controls

The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these Standalone Financial Statementsbased on our audit. We conducted our audit in accordance with the Guidance Note on Auditof Internal Financial Controls Over Financial Reporting (the "Guidance Note")and the Standards on Auditing as specified under section 143(10) of the Act. to the extentapplicable to an audit of internal financial controls and both issued by the Institute ofChartered Accountants of India. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls over financial reporting withreference to these Standalone Financial Statements was established and maintained and ifsuch controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to theseStandalone Financial Statements and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding ofinternal financial controls over financial reporting with reference to these StandaloneFinancial Statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the Financial Statements whether dueto fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls over financialreporting with reference to these Standalone Financial Statements.

Meaning of Internal Financial Controls Over Financial Reporting with reference to theseStandalone Financial Statements

A company's internal financial control over financial reporting with reference to theseStandalone Financial Statements is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accountingprinciples. A company's internal financial control over financial reporting with referenceto these Standalone Financial Statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting withreference to these Standalone Financial Statements

Because of the inherent limitations of internal financial controls over financialreporting with reference to these Standalone Financial Statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these Standalone Financial Statements to future periods are subject to the risk thatthe internal financial control over financial reporting with reference to these StandaloneFinancial Statements may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these Standalone Financial Statementsand such internal financial controls over financial reporting with reference to theseStandalone Financial Statements were operating effectively as at March 31 2020 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.

For S.R. BATLIBOI & ASSOCIATES LLP
Chartered Accountants
ICAI Firm registration number: 101049W/E300004
per Shankar Srinivasan
Partner
Place: Hyderabad Membership Number: 213271
Date: May 7 2020 UDIN: 20213271AAAAAV1974