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 2018. The consolidated performance of the Company and its subsidiaries has beenreferred to wherever required.
The performance during the period ended March 31 2018 has been as under:
| || ||(Rs. in Lakhs) |
|Particulars ||2017-2018 ||2016-2017 |
| ||Consolidated ||Standalone ||Consolidated ||Standalone |
|Total Income ||69417.15 ||24617.58 ||61949.48 ||27494.85 |
|Total Expenditure ||66123.16 ||21793.55 ||100646.48 ||45339.17 |
|Profit (Loss) Before Tax ||3293.99 ||2824.03 ||(38697.00) ||(17844.32) |
|Provision for Tax ||76.66 ||282.96 ||785.69 ||883.66 |
|Profit (Loss) after Tax ||3217.33 ||2541.07 ||(39482.69) ||(18727.98) |
|Other Comprehensive Income Net of Tax ||73.27 ||(129.92) ||412.26 ||143.98 |
|Total Comprehensive Income ||3144.06 ||2670.09 ||(39894.95) ||(18871.96) |
|Balance Carried to Balance Sheet ||3144.06 ||2670.99 ||(39894.95) ||(18871.96) |
REVIEW OF OPERATIONS:
The total revenue of the Company for the financial year under review on consolidatedbasis was Rs. 69417.15 lakhs as against Rs. 61949.48 lakhs for the previousfinancial year. The company recorded a net profit of Rs. 3217.33 lakhs for the financialyear 2017-18 as against the net loss of Rs. 39482.69 lakhs for the previous year.
On Standalone basis the total revenue of the Company for the financial year 2017-18was Rs. 24617.58 lakhs as against Rs. 27494.85 lakhs for the previous financial year.The net profit for the financial year 2017-18 is Rs. 2541.07 Lakhs as against the netloss of Rs. 18727.98 lakhs for the previous year.
FUTURE PROSPECTS & OUTLOOK
In the wake of Digital Transformation wave organizations of all sizes globally arewitnessing rapid changes in the psyche of their digitally-empowered and omni-channelcustomers. Increasing product quality expectations with declining patience levels ismandating the need to deliver a premium customer experience assuring software quality athigh speeds. We at Cigniti are the World's largest Independent Quality Engineering companybringing the power of AI to Agile and DevOps to accelerate the Digital Transformation forour clients. With our current positioning and market leadership in Quality Engineering wefind ourselves in an extremely favourable spot in the ecosystem and on an aggressivegrowth path.
In the past two years the profile of testing services industry has changed; it is nolonger about undertaking testing in a more professional way based on employing careertesters only. It is also about scale automation and adoption of rapid developmentmethodologies. Leading industry analysts such as Gartner Forrester NelsonHall and othershave reiterated that specialized testing services market will continue to grow. And we areseeing this acceptance across all geographies which are translating into business dealwins for us. Analysts also have continued to recognize us as Leaders in the QualityEngineering space.
To maintain our position as leaders in Quality Engineering we continue to forge newerpartnerships while foraying into diverse new industry verticals and sub-verticals in anattempt to increase not just the breadth but also the depth of our presence. Our newlyappointed board of directors armed with multi-decades of industry experience are playinga crucial role in shaping our vision and aligning the organization to stay relevant in themarket. We have continued to get 4/4 on Client satisfaction index from a huge majority ofour customers and this strong trust of clients is helping us win new business mostly inform of client referrals which are culminating into multimillion-dollar accounts.
These are exciting times for Cigniti with a very strong business revenue pipelineheightened focus on sales and marketing while we continue to file new patents for ourproprietary innovation & intellectual property. We have aggressive targets for growthand profitability and look forward to a great year ahead.
Though the Company made profits for the current year there are unabsorbed carryforward losses hence your Directors regret their inability to recommend dividend for theyear under review. However once the reserves are build and your Company achieves theleadership position a generous Dividend policy can be adopted.
The company has not transferred any amount to the reserves.
CONSOLIDATED FINANCIAL STATEMENTS
In compliance with the provisions of the Companies Act 2013 and the Indian AccountingStandards (Ind AS) 110 on consolidated financial statements your Directors have providedthe consolidated financial statements for the financial year ended March 31 2018 whichforms part of the Annual Report.
INFORMATION ABOUT THE FINANCIAL PERFORMANCE / FINANCIAL POSITION OF THE SUBSIDIARIES /BRANCHES / ASSOCIATES / JOINT VENTURES:
Your Company has four wholly owned foreign subsidiary companies (WOS) one Indianwholly owned subsidiary companies (WOS) and one foreign Branch.
Cigniti technologies Inc. Usa (Foreign Wos) Cigniti technologies (Canada) Inc.(Foreign Wos) Cigniti technologies (UK) Limited UK (Foreign Wos) Cigniti technologies(australia) pty. Limited australia (Foreign Wos) Gallop solutions private Limited (IndianWos) Cigniti technologies Limited south africa (Foreign Branch)
During the year under review Cigniti Software Services Private Limited a wholly ownedsubsidiary Company has been struck o_ from the records of Ministry of Corporate Affairs byRegistrar of Companies Hyderabad due to inactivity. There were no business operationscarried out in this subsidiary. Also the Company was unable to reach out to the erstwhileDirectors for regularising the records. As there is no utility value in the said Companyand the investments made during the earlier years were negligible the Board of Directorsof the Holding Company Cigniti Technologies Limited approved the proposal of writing o_the investments and removing the Company from Subsidiary list.
Further the Board of Directors of the Holding Company M/s. Cigniti Technologies Limitedhas considered the proposal of management for shutting down the operations of CignitiTechnologies (New Zealand)
Limited New Zealand a wholly owned subsidiary Company as there is no adequatevisibility for the line of business operated by the Company. Also considering theCompany's expansion strategy in the America and the Europe region and also to eliminatethe burning of cash the Board approved the proposal of the Management for closure ofCigniti Technologies (New Zealand) Limited New Zealand a wholly owned subsidiaryCompany.
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 has adopted the Indian Accounting Standards with effect fromApril 01 2017. Accordingly the Company has restated and reported the financials for theprevious year as per Indian Accounting Standards.
STATUTORY AUDITORS AND AUDITORS REPORT
In the previous Annual General meeting (19th AGM) the Company has appointedM/s. S R Batiliboi & Associates LLP as statutory auditors of the Company to holdoffice until the conclusion of 24th Annual General meeting of the Company. TheCompany has already received a letter from them to the effect that their ratification ifmade by the shareholders would be with in the prescribed limits and that they are notdisqualified for re-appointment with in the meaning of Companies Act 2013 and otherapplicable provisions. The Board of Directors recommended their re-appointmentratification for the financial year 2018-19.
The Auditors' Report for the financial year 2017-18 is enclosed with the financialstatements in this Annual Report. Further the report does not contain any qualificationsor comments.
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 applicablestatutes accounting policies approval procedures and to ensure optimum use of availableresources. These systems are reviewed and improved on a regular basis. It has acomprehensive budgetary control system to monitor revenue and expenditure against approvedbudget on an ongoing basis.
The Board has appointed M/s. Sarath & Associates Chartered Accountants Hyderabadas internal Auditors in its meeting held on May 21 2018. 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 devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
(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:
During the year under review Mr. Ram Krishna Agarwal Mr. Phaneesh Murthy and Ms.Nooraine Fazal were appointed as Additional Directors w.e.f 30.06.2017 and Mr. SrinathBatni w.e.f. 24.08.2017 in the category of Independent Directors to hold office up to theensuing Annual General meeting of the Company. In line with the requirements of theCompanies Act 2013 it is therefore proposed to appoint existing additional directors asIndependent Directors on the Board of the Company for a term up to five consecutive years.Notice has been received from a Member proposing candidature of the aforesaid Directorsfor the office of Independent Directors of the Company. In the opinion of the Board theyfulfill the conditions specified in the Companies Act 2013 and the Rules made thereunderfor appointment as Independent Directors of the Company.
Further Mr. K. Ch. Subba Rao was appointed as Independent Director by members in theAnnual General Meeting held on 19.09.2014 in terms of Section 149 of the Companies Act2013 in the category of Non-Executive & Independent Director' for a term of 5years up to 31.03.2019. The Board proposed to redesignate Mr. K. Ch. Subba Rao asNon-Executive Director and recommended the same for your approval.
Mr. C. Srikanth will retire by rotation at the ensuing Annual General Meeting in termsof Section 152 and any other applicable provisions of the Companies Act 2013 and beingeligible offers himself for re-appointment.
Details of appointment/re-appointment of the director:
|S. No. ||Name of the Director ||Date of Appointment ||Qualifications ||No of shares held ||Directorships held in other companies |
|1 ||Ram Krishna Agarwal ||30/6/2017 ||Chartered Accountant ||Nil ||1. Bengal NRI Complex Ltd |
| || || || || ||2. South City Projects (Kolkata) Limited |
| || || || || ||3. SREI Infrastructure Finance Limited |
| || || || || ||4.RKA Advisory Services Private Limited |
| || || || || ||5. Electro Steel Castings Ltd |
| || || || || ||6.Emami Cement Limited |
|2 ||Phaneesh Murthy ||30/6/2017 ||B'Tech in Mechanical Engineering MBA from IIM Ahmedabad ||Nil ||1. Global Edge Software Limited |
| || || || || ||2. Igate Technology Services Private Limited |
| || || || || ||3. PM Ventures Private Limited |
| || || || || ||4.P M Health & Life Care Private Limited |
|3 ||Nooraine Fazal ||30/6/2017 ||Masters degree in Management from Boston University ||Nil ||Nil |
|4 ||Srinath Batni ||24/8/2017 ||Masters in mechanical engineering ||Nil ||1. Global Edge Software Limited |
| || || || || ||2. Axiscades Engineering Technologies Limited |
| || || || || ||3. Axilor Ventures Private Limited |
|5 ||K. Ch. Subba Rao ||21/5/2018 ||Master of Science ||25000 ||1. Inspiria-Const & Developers Private Limited |
| || || || || ||2. Pixetron Video Display Solutions Private Limited |
|6 ||C. Srikanth ||16/9/2013 ||MS in computer science PG in Management Program ||2500000 ||1. Gallop Solutions Private Limited |
| || || || || ||2. Aasaanpay Solutions India Private Limited |
| || || || || ||3. Tvarita Capital Private Limited |
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 ofindependence laid down in Section 149(6) of the Companies Act 2013 and Regulation 25 ofSEBI (Listing Obligations 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/investors/ policies). The policies arereviewed periodically by the Board and updated based on need and new compliancerequirement.
|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. ||https://www.cigniti.com/ investors/Policies/board- diversity- policy.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. ||https://www.cigniti. com/investors/ Policies/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. ||https://www.cigniti. com/investors/ Policies/ corporate social responsibility 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. ||https://www.cigniti. com/investors/ Policies/ Material subsidiaries.pdf |
|Related Party Transaction Policy ||The policy regulates all transactions between the Company and its related parties ||https://www.cigniti. com/investors/ Policies/ Related party transaction 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 2018 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 34 to the financialstatement which 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 31st March 2018 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.
FAMILIARISATION 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 familiarisation programme held in FY 2017-18 are also disclosedon the Company's website at https://www.cigniti.com/investors/familiarisation programme.
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 secretarialaudit of the Company for the year 2017-18. The report of the Secretarial Auditor isenclosed as Annexure E and forms part of this report. The Secretarial Audit Report doesnot contain any 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. 42 Lakhs has beenapproved by the Board of Directors for the year 2017-18 and the entire amount has beenspent towards the Corporate Social Responsibility programme. For the year 2018-19 theaverage profits for the preceeding three financial years is Rs. 41.45 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 Out Go:
Foreign Exchange Earnings: Rs. 2304505930/-
Foreign Exchange Outgo: Rs. 91643492/-
MECHANISM FOR EVALUATION OF THE BOARD
Evaluation of all Board members is performed on an annual basis. The evaluation isperformed by the Board Nomination and Remuneration Committee and Independent Directorswith specific focus on the performance and effective functioning of the Board andIndividual Directors.
In line with Securities and Exchange Board of India Circular No.SEBI/HO/CFD/CMD/CIR/P/2017/004 dated January 5 2017 and the Companies Amendment Act2017 the Company adopted the recommended criteria by Securities and Exchange Board ofIndia.
The Directors were given evaluation forms of the following:
(i) Evaluation of Board;
(ii) Evaluation of Committees of the Board; (iii) Evaluation of Independent Directors;(iv) Evaluation of Chairperson;
(v) Evaluation of Non-Executive and Non-Independent Directors; and
(vi) Evaluation of Managing Director.
The Directors were requested to give following ratings for each criteria:
2. satisfactory; and
3. very satisfactory.
The Directors have sent the duly filled forms to Nomination & Remunerationcommittee. Based on the evaluation done by the Directors the Committee has prepared areport and submitted the Evaluation Report. Based on the report the Board of Directorshas informed the rankings to each Director and also informed that the performance ofDirectors is satisfactory and they are recommended for continuation as Directors of theCompany.
During the year 2017-18 five 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 738499 equity shares of Rs. 10/- each toemployees under Cigniti ESOP scheme. Consequently the paid up share capital of theCompany has increased to Rs. 272480290/- divided into 27248029 equity sharesof Rs. 10/- each.
Your Company has not accepted any deposits falling within the meaning of Sec.73 of theCompanies 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. Further the Directorshave been adequately covered under D & o policy.
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(https://www.cigniti.com/investors/ insider-trading-policy.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.
The following is the summary of sexual harassment complaints received and disposedduring the calendar year.
| No. of complaints received: ||Nil |
| No. of complaints disposed off: ||Nil |
The Board thanks customers vendors investors and bankers for their continued supportduring 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 its appreciation of business constituents likeSEBI BSE NSE NSDL CDSL etc. for their continued support for the growth of the Company.
| ||For and on behalf of the Board |
| ||Cigniti Technologies Limited |
|Place: Hyderabad ||C.V. Subramanyam |
|Date: May 21 2018 ||Chairman & Managing Director |
| ||DIN: 00071378 |