The Board of Directors hereby submits the report of the business andoperations of your Company along with the audited financial statements for the financialyear ended March 31 2019. The consolidated performance of the Company and itssubsidiaries has been referred to wherever required.
The performance during the period ended 31st March 2019 has been asunder:
| || || || ||(Rs. In Lakhs) |
|Particulars ||2018-2019 ||2017-2018 |
| ||Consolidated ||Standalone ||Consolidated ||Standalone |
|Total Income ||84332.10 ||28991.49 ||69385.93 ||24617.58 |
|Total Expenditure ||70109.17 ||22274.23 ||66091.94 ||21793.55 |
|Profit (Loss) Before Tax ||14222.93 ||6717.26 ||3293.99 ||2824.03 |
|Provision for Tax ||(512.83) ||745.83 ||76.66 ||282.96 |
|Profit (Loss) after Tax ||14735.76 ||5971.43 ||3217.33 ||2541.07 |
|Transfer to General Reserves ||0 ||0 ||0 ||0 |
|Profit available for appropriation ||14735.76 ||5971.43 ||3217.33 ||2541.07 |
|Balance Carried to Balance Sheet ||14735.76 ||5971.43 ||3217.33 ||2541.07 |
STATE OF AFFAIRS/COMPANY'S PERFORMANCE:
Software has become an integral part of our lives. Your Company'svision is to help companies improve the quality of software being delivered worldwide.More than 40% of the software development efforts are spent in testing. By focusing on aniche like software testing your Company hopes to make a mark in the IT industry. YourCompany aims to be thought leaders in software testing using a combination of onsiteconsulting off shore test execution and application of tools and frameworks that willreduce the number of post release defects and do it faster. The total revenue of theCompany for the financial year under review on consolidated basis was Rs. 84332.10 lakhsas against Rs. 69385.93 lakhs for the previous financial year. The company recorded a netprofit of Rs. 14735.76 lakhs for the financial year 2018-19 as against the net profit ofRs. 3217.33 lakhs for the previous year. On Standalone basis the total revenue of theCompany for the financial year 2018-19 was Rs. 28991.49 lakhs as against Rs. 24617.58lakhs for the previous financial year. The net profit for the financial year 2018-19 isRs. 5971.43 Lakhs as against the net profit of Rs. 2541.07 lakhs for the previous year.
During the period under review and the date of Board's Reportthere was no change in the nature of Business.
FUTURE PROSPECTS & OUTLOOK
In the wake of Digital Transformation wave Organizations of all sizesglobally are witnessing rapid changes in the psyche of their digitally-empowered andomni-channel customers. Increasing product quality expectations with declining patiencelevels is mandating the need to deliver a premium customer experience assuring softwarequality at high speeds. New age digital businesses require outstanding QE services thatare driven by AI and automation and built for a DevOps environment. We at Cigniti are theWorld's largest Independent Quality Engineering company bringing the power of AI toAgile and DevOps to accelerate the Digital Transformation for our clients. LeveragingAI-driven Quality Engineering Cigniti is assisting the digital transformation efforts oforganizations by assuring high quality at high speed. With our current positioning andmarket leadership in Quality Engineering we find ourselves in an extremely favorable spotin the ecosystem and on an aggressive growth path. In the past few years the profile oftesting services industry has changed; it is no longer about undertaking testing in a moreprofessional way based on employing career testers only. It is also about scaleautomation and adoption of rapid development methodologies. Leading industry analysts suchas Gartner Forrester Nelson Hall and others have reiterated that specialized testingservices market will continue to grow. And we are seeing this acceptance across allgeographies which are translating into business deal wins for us. Analysts also havecontinued to recognize us as Leaders in the Quality Engineering space.
Cigniti's practical approach with AI-powered continuous testingplatforms provide a strongly differentiated value add to our clients. To maintain ourposition as leaders in Quality Engineering we continue to forge newer partnerships whileforaying into diverse new industry verticals and sub-verticals in an attempt to increasenot just the breadth but also the depth of our presence. Our newly appointed board ofdirectors armed with multi-decades of industry experience are playing a crucial role inshaping our vision and aligning the organization to stay relevant in the market. We havecontinued to get 4/4 on Client satisfaction index from a majority of our customers andthis strong trust of clients is helping us win new business mostly in form of clientreferrals which are culminating into multimillion-dollar accounts. These are excitingtimes for Cigniti with a very strong business revenue pipeline heightened focus on salesand marketing while we continue to file new patents for our proprietary innovation &intellectual property. We have aggressive targets for growth and profitability and lookforward to a great year ahead.
MATERIAL CHANGES & COMMITMENT AFFECTING THE FINANCIAL POSITION OFTHE COMPANY
There are no material changes and commitments affecting the financialposition of the Company which have occurred between the end of the financial year and thedate of this report.
Though the Company made profits for the current year there areunabsorbed carry forward losses hence your Directors regret their inability to recommenddividend for the year under review. However once the reserves are build and your Companyachieves the leadership position a generous Dividend policy can be adopted.
TRANSFER TO RESERVES
Your Company has not transferred any amount to reserves during the yearunder review and proposes to retain the entire amount in its Statement of Profit andLoss/retained earnings.
CONSOLIDATED FINANCIAL STATEMENTS
In compliance with the provisions of the Companies Act 2013 and theIndian Accounting Standards (Ind AS) 110 and Ind-AS 28 on consolidated financialstatements your Directors have provided the consolidated financial statements for thefinancial year ended March 31 2019 which forms part of the Annual Report.
INFORMATION ABOUT THE FINANCIAL PERFORMANCE/FINANCIAL POSITION OF THESUBSIDIARIES/BRANCHES/ASSOCIATES/JOINT VENTURES:
Your Company has four wholly owned foreign subsidiary companies (WOS)one Indian wholly owned subsidiary companies (WOS) and two foreign Branches.
Cigniti Technologies Inc. USA (Foreign WOS) Cigniti Technologies(Canada) Inc. (Foreign WOS) Cigniti Technologies (UK) Limited UK (Foreign WOS) CignitiTechnologies (Australia) Pty. Limited Australia (Foreign WOS) Gallop Solutions PrivateLimited (Indian WOS) Cigniti Technologies Limited South Africa (Foreign Branch) CignitiTechnologies Limited Dubai (Foreign Branch)
As per the provisions of Section 129 of the Companies Act 2013 readwith Companies (Accounts) Rules 2014 a separate statement containing the salientfeatures of the financial statements of the subsidiary companies is prepared in FormAOC-1 and is attached as Annexure-A and forms part of this report.
In accordance with the provisions of the Companies Act 2013 theBalance sheet Statement of Profit and Loss and other documents of the subsidiarycompanies are being made available on the website of the Company i.e. www.cigniti.com.
The members of the Company at their Annual General Meeting held on 30thJune 2017 have appointed M/s. S R Batiliboi & Associates LLP as statutory auditorsof the Company to hold office until the conclusion of 24th Annual General meeting of theCompany. Further your Directors have appointed M/s. Sarath
& Associates Chartered Accountants Hyderabad as internal Auditorsin its meeting held on 21st May 2018. Deviations are reviewed periodically and duecompliance ensured. Summary of Significant Audit Observations along with recommendationsand its implementations are reviewed by the Audit Committee and concerns if any arereported to Board.
Further the Cost Audit is not applicable to your Company.
AUDITORS' REPORT AND SECRETARIAL AUDITORS' REPORT
The statutory auditors' report and secretarial auditors'report do not contain any qualifications reservations or adverse remarks.
During the year the statutory auditors and secretarial auditor havenot reported any instances of frauds committed in the Company by its officers or Employeesto the Audit Committee under section 143(12) of the Companies Act.
Report of the secretarial auditor is given as an Annexure F which formspart of this report.
DIRECTOR'S RESPONSIBILITY STATEMENT:
In pursuance of section 134 (5) of the Companies Act 2013 the Boardof Directors hereby confirm that:
(a) In the preparation of the annual accounts the applicableaccounting standards have been followed and there are no material departures; (b) Theyhave selected such accounting policies and applied them consistently and made judgmentsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of the company at the end of the financial year and of the profit andloss of the company for that period; (c) They have taken proper and sufficient care forthe maintenance of adequate accounting records in accordance with the provisions of thisAct for safeguarding the assets of the company and for preventing and detecting fraud andother irregularities; (d) They have prepared the annual accounts on a going concern basis;and (e) They have laid down internal financial controls to be followed by the company andthat such internal financial controls are adequate and operating effectively.
(f) They have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
Further there are no qualifications reservations or adverse remarksmade by the Statutory Auditors/Secretarial Auditors in their respective reports.
DIRECTORS AND KEY MANAGERIAL PERSONNEL:
None of the directors of the company are disqualified under theprovisions of the Companies Act 2013 (Act') or under the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015. All Independent Directors haveprovided confirmations as contemplated under section 149(7) of the Act.
In accordance with the provisions of the Companies Act 2013 andArticles of Association of the Company Mr. K. Ch. Subba Rao Non-Independent andNon-Executive Director retires by rotation and being eligible offers himself forre-appointment. During the year Mr. K. Ch. Subba Rao was re-designated as aNon-Executive Non-Independent Director w.e.f. 21st May 2018. As per the requirements ofRegulation 36(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 (as amended) and Clause 1.2.5 of the Secretarial Standard 2 (Revised) as issued bythe Institute of Company Secretaries of India a statement containing the requisitedetails of Mr. K. Ch. Subba Rao seeking re-appointment is given below:
|Name ||Shri K. Ch. Subba Rao |
|DIN ||01685123 |
|Date of Birth ||01/02/1956 |
|Age ||63 years |
|Profile ||Mr. K. Ch. Subba Rao is a post graduate in science and has got varied experience in Real Estates and other related activities. He has 3 decades of rich experience in real estate and logistic business. He is a successful entrepreneur who co-founded one of South India's largest transport and logistics organization which continues to grow stronger since inception. |
|Qualification ||Master of Science |
|Experience and Expertise in specific function area ||Business and General Administration |
|Terms and conditions of appointment ||Appointed w.e.f. 21st May 2018 as Non-Executive Non Independent |
|or re-appointment along with details of remuneration sought to be paid. ||Director liable to retire by rotation as per the provisions of the Companies Act 2013 (as amended) |
|Remuneration last drawn by such person ||Nil |
|Date of first appointment on the Board ||01/12/2003 |
|Membership/Chairmanship of Committees of the || |
| ||Nil |
|Board of Directors of the Company || |
|Other Directorships and Membership of other ||Inspiria-Const & Developers Private Limited |
|Boards ||Pixetron Video Display Solutions Private Limited |
DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS
The Company has received necessary declaration from each independentdirector under Section 149(7) of the Companies Act 2013 that he/she meets the criteriaof independence laid down in Section 149(6) of the Companies Act 2013 and Regulation 25of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND OTHERDETAILS
The Company's policy on directors' appointment andremuneration and other matters provided in section 178(3) of the Act have been disclosedin the Corporate Governance report which forms part of the Directors' Report.
Corporate Governance is about maximizing shareholder value legallyethically and sustainably. At Cigniti we believe a sound corporate governance iscritical to enhance and retain investor trust. The goal of corporate governance is toensure fairness information about the Company for every stakeholder. Our disclosures seekto attain the best practices in international Corporate Governance. A separate section onCorporate Governance 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 andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 the Management's discussion and analysis is set out in this Annual Report.
RELATED PARTY TRANSACTIONS
During the year none of the transactions with related parties werecovered under the scope of section 188(1) of the Act. Information on transactions withrelated parties pursuant to section 134(3)(h) of the Act read with rule 8(2) of theCompanies (Accounts) Rules 2014 are given in Form AOC-2 and is enclosed as Annexure-B.
PARTICULARS OF EMPLOYEES
A table containing the particulars in accordance with the provisions ofsection 197(12) of the act read with rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is appended as Annexure-C to thisreport.
A statement containing the name of every employee employed throughoutthe financial year and in receipt of remuneration of Rs. 60 lakhs or more or employed forpart of the year and in receipt of Rs. 5 lakhs or more a month under Rule 5(2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is enclosedas Annexure-C to this report.
EMPLOYEE STOCK OPTION SCHEME
During the year the company had granted options under Cigniti ESOPscheme 2015. Details of the options up to 31st March 2019 are set out in the Annexure-D tothis report 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 andrule 12(1) of the Companies (Management and Administration) Rules 2014 an extract ofannual return in MGT 9 is included as Annexure-E and forms part of this Report and isdisclosed on website of the Company at https://www.cigniti.com/investors
FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS
Independent Directors are familiarized about the Company'soperations and businesses. Interaction with the Business heads and key executives of theCompany is also facilitated. Detailed presentations on important policies of the Companyis also made to the directors. Direct meetings with the Chairman is further facilitated tofamiliarize the incumbent Director about the Company/its businesses and the grouppractices.
The details of familiarisation programme held in FY 2018-19 are alsodisclosed on the Company's website athttps://www.cigniti.com/investors/familiarisation programme.
DISCLOSURE OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS
The Internal Financial Controls with reference to financial statementsas designed and implemented by the Company are adequate. The Company maintains appropriatesystem of internal control including monitoring procedures to ensure that all assets aresafeguarded against loss from unauthorized use or disposition. Company policiesguidelines and procedures provide for adequate checks and balances and are meant toensure that all transactions are authorized recorded and reported correctly.
During the period under review there is no material or seriousobservations have been noticed for inefficiency or inadequacy of such controls.
CORPORATE SOCIAL RESPONSIBILITY
With the mission to discover once again the social responsibility ofdeveloping economic social and environmental capital towards sustainability Cigniticrafted CSR projects in achieving the mission. Your Company believes and strives hard insustainable development of society in which the enterprise draws economic and naturalresources by enriching its capacity in contributing to the significant positive change inthe economy. The CSR committee has been formed to achieve the mission and implement theCSR objectives.
An elaborate report on CSR is published elsewhere in this annualreport.
DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGYTECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
A. Conservation of Energy:
Your Company's operations are not energy intensive. Adequatemeasures have been taken to conserve energy wherever possible by using energy efficientcomputers and purchase of energy efficient equipment.
B. Technology Absorption:
Your Company has not undertaken any research and development activityfor any manufacturing activity nor was any specific technology obtained from any externalsources which needs to be absorbed or adapted.
C. Foreign Exchange Earnings and Out Go:
Foreign Exchange Earnings: Rs. 2914966692/-
Foreign Exchange Outgo: Rs. 148962536/-
MECHANISM FOR EVALUATION OF THE BOARD
Evaluation of all Board members is performed on an annual basis. Theevaluation is performed by the Board Nomination and Remuneration Committee andIndependent Directors with specific focus on the performance and effective functioning ofthe Board and Individual 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 for the following: (i)Evaluation of Board; (ii) Evaluation of Committees of the Board; (iii) Evaluation ofIndependent 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 eachcriteria:
2. Satisfactory; and
3. Very satisfactory.
The Directors have sent the duly filled forms to Nomination &Remuneration committee. Based on the evaluation done by the Directors the Committee hasprepared a report and submitted the Evaluation Report. Based on the report the Board ofDirectors has informed the rankings to each Director and also informed that theperformance of Directors is satisfactory and they are recommended for continuation asDirectors of the Company.
COMMITTEES OF THE BOARD
As on March 31 2019 the Board had five committees: the AuditCommittee the Nomination & Remuneration Committee the Stakeholder RelationshipCommittee the Risk Management Committee and Corporate Social Responsibility Committee.
A detailed note on the composition of the board and its committees isprovided in the Corporate Governance report.
During the year 2018-19 four Board meetings were held the details ofwhich are given in the Corporate Governance Report.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Details of loans guarantees or investments made under section 186 ofthe companies Act 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 theregulators/courts that would impact the going concern status of the Company and its futureoperations.
During the year your Company has allotted 416240 equity shares ofRs. 10/- each to employees under Cigniti ESOP scheme. Consequently the paid up sharecapital of the Company has increased to Rs.276642690/- divided into 27664269 equityshares of Rs. 10/- each.
Your Company has not accepted any deposits falling within the meaningof Sec.73 of the Companies Act 2013 read with Companies (Acceptance of Deposits) Rules2014 during the financial year under review.
The properties and assets of your Company are adequately insured.Further the Directors have been adequately covered under D&O policy.
RISK MANAGEMENT POLICY
Your Company follows a comprehensive system of Risk Management. YourCompany has adopted a procedure for assessment and minimization of probable risks. Itensures that all the risks are timely defined and mitigated in accordance with thewell-structured risk management process.
Details of the familiarization programme of the independent directorsare available on the website of the Company (https://www.cigniti.com/investors/familiarisation programme).
Policy for determining material subsidiaries of the Company isavailable on the website of the Company (https://www.cigniti.com/investors/Policies).
Policy on dealing with related party transactions is available on thewebsite of the Company (https:// www.cigniti.com/investors/Policies).
The Company has formulated and published a Whistle Blower Policy toprovide Vigil Mechanism for employees including directors of the Company to report genuineconcerns. The provisions of this policy are in line with the provisions of the section177(9) of the Act and Regulation 46 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 (https://www.cigniti.com/investors/Policies).
CODE OF CONDUCT FOR THE PREVENTION OF INSIDER TRADING
The Board of Directors has adopted the Insider Trading Policy inaccordance with the requirements of the SEBI (Prohibition of Insider Trading) Regulation2015 and the applicable U.S Securities laws. The Insider Trading Policy of the Companylays down guidelines and procedures to be followed and disclosures to be made whiledealing with shares of the Company as well as the consequences of violation. The policyhas been formulated to regulate monitor and ensure reporting of deals by employees and tomaintain the highest ethical standards of dealing in Company securities.
The Insider Trading Policy of the Company covering code of practicesand procedures for fair disclosure of unpublished price sensitive information and code ofconduct for the prevention of insider trading is available on our website(https://www.cigniti.com/ investors/Code of conduct for prohibition of InsiderTrading.pdf).
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE(PREVENTION PROHIBITION AND REDRESSAL) ACT 2013.
The Company has in place an Anti-Sexual Harassment Policy in line withthe requirements of The Sexual Harassment of Women at workplace (Prevention Prohibitionand Redressal) Act 2013. Internal Complaint Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. All employees are covered under thispolicy.
The following is the summary of sexual harassment complaints receivedand disposed during the calendar year.
No. of complaints received: Nil
No. of complaints disposed o : Nil
The Board thank customers vendors investors and bankers for theircontinued support during the year. It places on record its appreciation of thecontribution made by employees of the company at all levels. The Board thanks thegovernments of various countries where the company has operations. It also thanks theGovernment of India particularly the Ministry of Communication and InformationTechnology the Ministry of Commerce the Ministry of Finance the Ministry of CorporateAffairs the Customs and Excise Departments the Income Tax Department the Reserve Bankof India the State Governments and other government agencies for their support andlooks forward to their continued support in the future.
The Board also wishs to place on record their appreciation of businessconstituents like SEBI BSE NSE NSDL CDSL etc. for their continued support for thegrowth of the Company.
For and on behalf of the Board
Cigniti Technologies Limited
C. V. Subramanyam
Chairman & Managing Director DIN: 00071378