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Intellect Design Arena Ltd.

BSE: 538835 Sector: IT
NSE: INTELLECT ISIN Code: INE306R01017
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VOLUME 100634
52-Week high 892.00
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P/E 39.87
Mkt Cap.(Rs cr) 8,880
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OPEN 634.40
CLOSE 634.45
VOLUME 100634
52-Week high 892.00
52-Week low 185.95
P/E 39.87
Mkt Cap.(Rs cr) 8,880
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Intellect Design Arena Ltd. (INTELLECT) - Director Report

Company director report

To the members

We are pleased to present the 10th Annual Report on our business and operations for theyear ended 31st March 2021 of Intellect Design Arena Limited ("Company"). Thisis our Seventh year of business operations.

1. Results of operations

(In Rs. Millions except EPS data)

Standalone

Consolidated

Description

Year ended March 31

2021 2020 2021 2020
Income (Including Other Income & exceptional item if any) 10186.08 7693.73 15101.41 13788.97
Expenses (Excluding Depreciation Finance charges & Including exceptional item if any) 7385.17 7247.56 11426.45 12760.48
Profit/(Loss) before Interest Depreciation & Tax (PBIDTA) 2800.91 446.17 3674.96 1028.49
Finance Charges 74.98 158.03 91.74 173.67
Depreciation & amortization 500.14 485.65 767.14 689.57
Net Profit/(Loss) Before Tax (excluding share of profit/(Loss) from Associate Companies) 2225.79 (197.51) 2816.08 165.25
Provision for tax including Deferred Tax 153.26 115.25 254.51 50.90
Net Profit/(Loss) after tax 2072.53 (312.76) 2561.57 114.35
Add/(Less): Share of Profit/(Loss) on Associate Companies - - 84.79 62.11
Net Profit/(Loss) 2072.53 (312.76) 2646.36 176.46
Re-measurement gains/(losses) on defined benefit plans (10.54) (26.09) (10.32) (26.23)
Exchange differences on translation of foreign operations - - (7.03) 151.54
Net movement on cash flow hedges 527.45 (287.06) 527.45 (287.06)
Other comprehensive income for the year net of tax 516.91 (313.15) 510.10 (161.75)
Total comprehensive income for the year net of tax (before considering Non controlling Interest) 2589.44 (625.91) 3156.46 14.71
Less: Non Controlling Interest - - 15.28 27.58
Total comprehensive income for the year net of tax 2589.44 (625.91) 3141.18 (12.87)
EPS
Basic Rs. 15.63 (2.37) 19.82 1.21
Diluted Rs. 15.42 (2.37) 19.55 1.19

Table No. 1.1

Function wise classification of statement of consolidated Profit and Loss

(In Rs. Millions)

Year Ended

PARTICULARS March 31 2021 March 31 2020
INCOME
Income from software product license and related services 14992.00 13509.00
EXPENDITURE
Software development expenses 6646.00 6987.00
Selling and marketing & General and administrative expenses 3836.00 4555.00
Research & Engineering expenses 933.00 1219.00
Total Expenditure 11415.00 12760.00
EBITDA 3576.00 748.00
Depreciation/Amortisation (767.00) (690.00)
Finance Charges (92.00) (174.00)
Hedge Impact (17.00) (40.00)
Other Income/Expenses 182.00 366.00
Profit/(Loss) before Tax 2882.00 211.00
Provision for taxation (255.00) (51.00)
Profit/(Loss) after tax 2628.00 160.00

Table No. 1.2

2. State of Company's Affairs

The consolidated revenue of the Company for the year ended March 31st 2021 stood atRs.15101.41 Millions as against Rs.13733.52 Millions for the previous year and there isan increase in the revenue to the tune of 9.96%. The consolidated Net Profit/(Loss) forthe fiscal year ended March 31st 2021 stood at Rs. 2646.36 Millions as against theprevious year's Net Profit/(Loss) of Rs. 176.46 Millions. The Consolidated Reserves andSurplus as of 31st March 2021 stood at Rs.13263.51 Millions as against Rs. 9788.44Millions as of March 31st 2020. For the financial year ended 2020-2021 the Company hasnot transferred any amount to the reserves.

3. Material Changes and Commitments

There were no material changes and commitments from the end of the financial year tillthe date of this report.

4. COVID-19

The COVID pandemic has disrupted the lives of millions across the world. It's effecthas been felt by everyone regardless of their position. Your Company's top priority isthe physical and emotional wellbeing of its employees. The Company has taken severalinitiatives to support its employees and their families during the pandemic likeorganising Doctor on call facilities Isolation/Quarantine facilities medical helplineAmbulance Services Vaccination for 45+ and other support. The Company has set up adedicated Covid Response Team which helps employees and their families with the abovefacilities. The Company has also organised counselling and self-help services to supportits employees in maintaining their mental & emotional health.

With the work from home approach the Company has been able to provide continuousservices to all the customers across the globe. This approach has strengthened thecustomers' confidence in the Company. Our stakeholders have expressed their appreciationfor ensuring that business continues despite the challenging conditions.

5. Subsidiaries

Details of Subsidiary Companies Joint Venture and Associate Companies and theirfinancial position.

Your Company has 22 (12 direct and 10 step down) Subsidiary Companies and 2 associatesas on March 31 2021. The information as required under the first provision to sub-section(3) of Section 129 is given in Form AOC-1 in Annexure [1]. During the year under reviewtwo subsidiaries were incorporated

i.e. Intellect Design Arena (Mauritius) Limited was incorporated as wholly ownedsubsidiary of Intellect Design Arena FZ-LLC Dubai (Intellect Dubai). Intellect Dubai isthe wholly owned subsidiary of Intellect Design Arena Limited. Intellect Design ArenaLimited GmBH Germany was incorporated as wholly owned subsidiary of Intellect DesignArena Limited.

6. Cash Reserves

Your Company has cash reserve of Rs. 2616.45 Millions.

7. Share Capital

The paid-up Capital of the Company was increased to Rs. 664.87 Million through shareallotments made against exercise of Options (635733 equity shares) under theASOP/ISOP/IIPS Schemes comprising of 132974363 equity shares at a face value of Rs.5/- each as on March 31 2021.

The details of all the stock option plans including terms of reference and therequirements are set out in Annexure 2.

8. Corporate Governance

Your Company has been complying with the provisions of Corporate Governance asstipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015(referred as "Listing Regulations"). A separate report on Corporate Governancealong with the Auditors' Certificate on Compliance of the Corporate Governance norms asstipulated under Chapter IV of the Listing Regulations and Management Discussion &Analysis forming part of this report is provided elsewhere in this Annual Report.

9. Transfer to Investor Education and Protection Fund

As required under the provisions of Section 125 and other applicable provisions ofCompanies Act 2013 (hereinafter "the Act") dividends that remainunpaid/unclaimed for a period of seven years are to be transferred to the accountadministered by the Central Government viz: Investor Education and Protection

Fund ("IEPF"). Any person claiming to be entitled to the amount transferredto IEPF may apply to the Investor Education and Protection Fund Authority (IEPFAuthority) by submitting an online application in Form IEPF-5 available on the websitewww.iepf.gov.in along with the fee specified by the IEPF Authority. The Company has notdeclared any dividend so far hence the above provisions are not applicable to ourCompany. Keeping in view the growth of the business your Directors do not recommend anydividend for the financial year ended 2020 - 2021.The Dividend Distribution Policy interms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015 ("SEBI Listing Regulations") isuploaded on the Company's website.

The weblink of the Dividend Distribution Policy ishttps://www.intellectdesign.com/investor/general/2018-apr-dividend-distribution-policy.pdf.

10. Conservation of energy technology absorption foreign exchange earnings and outgo

The particulars as prescribed under Section 134 (3) (m) of the Companies Act 2013 readwith Rule 8 of the Companies (Accounts) Rules 2014 are set out in Annexure 3 of thisReport.

11. Particulars of employees

(a) The statement containing particulars of employees as required under Section 197(12) of the Companies Act 2013 read with Rule 5 (2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 does not form part of this report. Interms of Section 136 of the Act the same is open for inspection during working hours atthe registered office of your company. A copy of this statement may be obtained by themembers by writing to the Company Secretary.

(b) The ratio of remuneration of each director to the median remuneration of theemployees of the company and other details in terms of Section 197 (12) of the CompaniesAct 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are part of this report as Annexure 4.

12. Directors' responsibility statement as required under Section 134 (5) of theCompanies Act 2013

Pursuant to the provisions of Section 134 (3) (c) of the Companies Act 2013 theDirectors of your Company confirm that:

a) In the preparation of the Annual Accounts the applicable accounting standards havebeen followed along with the proper explanation relating to material departures;

b) The Directors have selected such accounting policies applied them consistently andmade judgements 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 of the company for that period;

c) The Directors have 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 have prepared the Annual Accounts on a "going concernbasis"; and

e) The Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively.

f) The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

13. Board Meetings Board of Directors Key Managerial Personnel & Committees ofDirectors

(a) Board Meetings:

The Board of Directors of the Company met 5 times during the year 2020-21. The detailsof various Board Meetings are provided in the Corporate Governance Report. The gapintervening between two meetings of the board is as prescribed in the Act.

(b) Changes in Executive Directors Non- Executive Directors & Key ManagerialPersonnel

• During the year under review Mr. Abhay Anant Gupte was appointed as anadditional director (Independent Category) Subsequently he was regularised as anIndependent Director by the Shareholders in the 9th AGM held on 21st August 2020 for aperiod of five (5) years w.e.f. June 15 2020.

• Mr. Arun Jain was re-appointed as a Managing Director at the conclusion of 09thAnnual General meeting to hold office for a period of 5 (five) years w.e.f August 212020 and his term will expire at the closure of 14th AGM.

• The second term of Ms. Aruna Krishnamurthy Rao as an Independent Director endedat the conclusion of 9th Annual General Meeting of the Company held on August 21 2020.

• Mr. Anil Kumar Verma was re-appointed as a Whole-time Director for a period of 5(Five) years with effect from 1st February 2021 subject to the approval of Centralgovernment and shareholders.

Apart from this there was no other change in the composition of the Board and KMPs.

(c) Re-Appointment

As per Article 34 (l) of the Articles of Association of the Company one third of theDirectors are liable to retire by rotation at the Annual General Meeting of the Company.Mr. Anil Verma Whole-time Director is liable to retire by rotation and offers himself forre-appointment.

Further he has been reappointed as a whole time Director for a period of 5 (Five)years with effect from 1st February 2021 subject to the approval of Central governmentand shareholders.

Mr. Arun Jain was re-appointed as a Managing Director at the 09th Annual Generalmeeting to hold office for a period of 5 (five) years w.e.f August 21 2020 and his termexpires at the closure of 14th AGM.

(d) Independent Directors

Ms. Aruna Krishnamurthy Rao was re-appointed as an Independent Director at the 6th AGMheld on 21st August 2017 for a second term of three (3) years and her second term as anIndependent Director ended at the conclusion of 09th Annual General Meeting of the Companyheld on August 21 2020.

Mr. Arun Shekhar Aran was re- appointed as an Independent Director at the 8th AGM heldon 21st August 2019 for a second term of five (5) years.

Ms. Vijaya Sampath was appointed an Independent Director w.e.f. October 25 2018 forthe first term of 5 years and was regularised at the AGM held on 21st August 2019.

Mr. Abhay Anant Gupte was appointed as an Additional Director (Independent Category) ofthe Company at the Board Meeting held on June 15 2020. Subsequently he was regularisedas an Independent Director in the 9th AGM held on 21st August 2020 for a period of five(5) years w.e.f. June 15 2020.

No Directors resigned during the year 2020-2021.

The Company has received necessary declarations from each Independent Director of theCompany under Section 149 (7) of the Companies Act 2013 that they meet the criteria ofindependence as laid down in Section 149 (6) of the Act and in accordance with SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015. Further noIndependent Director is a non-Independent Director of another Company on the Board onwhich any non-independent Director of the listed entity is an Independent Director and nodirector has been debarred by any order/judgement of any regulator in force.

(e) Details of remuneration to Directors:

The information relating to remuneration of directors as required under Section 197(12)of the Act is given elsewhere in the report.

(f) Board Committees

The Company has the following Board Committees:

1. Audit Committee

2. Nomination Remuneration & Compensation Committee

3. Stakeholders' Relationship Committee

4. Corporate Social Responsibility Committee

5. Risk Management Committee

Sub-committees:

1. Share Transfer Committee

2. Cyber Security Committee

The composition of each of the above Committees their respective role andresponsibility is as detailed in the Report of Corporate Governance.

The policy framed by the Remuneration and Compensation Committee under the provisionsof Section 178(4) of the Act is as below:

(g) Remuneration policy

The remuneration policy of the Company has been so structured as to match the markettrends of the IT industry. The Board in consultation with the Nomination and Remuneration& Compensation Committee decides the remuneration policy for Directors. The Companyhas made adequate disclosures to the members on the remuneration paid to the Directorsfrom time to time. Remuneration/ Commission payable to Directors is determined by thecontributions made by the respective Directors for the growth of the Company.

The remuneration policy of the Company and other matters as required under Section 178sub-section 3 of the Act can be accessed throughhttps://www.intellectdesign.com/investor/general/remuneration-policy.pdf. There has beenno change in the policy since the last fiscal year. We affirm that the remuneration paidto the Directors are as per the terms laid out in the remuneration policy of the Company.

(h) Board Evaluation

As required under the provisions of Section 134 (3) (p) and SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 the Board has carried out an annualperformance evaluation of its own performance and that of its committees and individualdirectors. The manner in which such performance evaluation was carried out is as under:

The performance evaluation framework is in place. Prof. Ashok Korwar was appointed toevaluate the performance of the Directors and made a presentation to the Board summarisingthe views and suggestions made by the individual Directors and the Board. The performanceof the Board was evaluated on the basis of criteria such as the Board composition andstructure effectiveness of Board processes information and functioning etc.

The performance of the committees was evaluated by the Board after seeking inputs fromthe committee members on the basis of criteria such as the composition of committeeseffectiveness of committee meetings etc.

The Board and the Nomination Remuneration and Compensation Committee reviewed theperformance of Individual Directors on the basis of criteria such as exercise ofresponsibilities in a bona fide manner in the interest of the Company striving to attendmeetings of the Board of Directors/Committees of which he/she is a member/generalmeetings participating constructively and actively in the meetings of theBoard/committees of the Board etc.

In a separate meeting of independent directors held on March 22 2021 performance ofNon-Independent Directors performance of the Chairman of the Company and the performanceof the Board as a whole were evaluated.

(i) Vigil Mechanism

The Company has established a whistle-blower policy and also a mechanism for Directorsand employees to report their concerns. The details of the same is explained in theCorporate Governance Report.

(j) Related Party Transactions

All related party transactions that were entered during the financial year were onarm's length basis and were in the ordinary course of business. There are no othermaterially significant related party transactions made by the Company with PromotersDirectors Key Managerial Personnel or other designated persons which may have a potentialconflict with the interest of the Company at large. The details of the related partytransactions as required under Section 134 (3) (h) read with Rule 8 of the Companies(Accounts) Rules 2014 is attached as Annexure 5.

14. Auditor reports and auditors

Statutory Auditors:

M/s. S.R. Batliboi & Associates LLP Chennai Chartered Accountants have beenappointed at the Annual General Meeting held on 21st August 2019 to hold office asstatutory auditors until the conclusion of the 13th Annual General Meeting of the Company.There are no qualifications or adverse remarks in the Auditor's Report for the financialyear ended 31st March 2021.

Secretarial Auditors:

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 Secretarial Audit hasbeen carried out by M/s SAE & Associates LLP Practising Company Secretaries andtheir report is annexed as Annexure 6. There are no qualification or adverse remarks inthe Secretarial Audit report for the financial year ended 31st March 2021.

Cost Records and Cost Audit:

Maintenance of cost records and requirements of cost audit as prescribed under Section148(1) of the Companies Act 2013 are not applicable for the business activities carriedout by the Company.

15. Fixed Deposits

Our Company has not accepted any deposits during the financial year and as such noamount of principal or interest was outstanding as on 31st March 2021.

16. Reporting of fraud:

During the year under review there were no instances of fraud as required to bereported by the Statutory Auditors/Secretarial auditors of the Company.

17. Social Connect Ullas Trust

The social initiative arm of Intellect that integrates our associates with the largercommunity to experience the joy of mentoring and interacting with young minds in thecountry. This 23 year young movement over the years has ignited 17+ lakh young mindsacross 8 States and 2 Union Territories. As for the impactful journey this was madepossible by the extraordinarily committed associate volunteer mentors (from Intellect ourclients and other corporates) partners from Civil Society Organizations and youth fromcolleges - all united by the common purpose of shaping the thinking of adolescent youngminds.

The Primary motive of the Trust continues to be - to ignite young minds and nurturethem during their most vulnerable space in life (adolescence). This is accomplishedthrough seeding the "Can Do" spirit encouraging them to dream big withconviction positive role model influences and enrichment programs delivered by mentorsto nurture them towards achieving their potential and their dreams.

Highlights of this Academic Year:

For Ullas the year 2020 turned out to be one of creative opportunity the year of manyfirsts - we looked beyond thought boundary less while holding true to our vision of"igniting young minds". Our repurposed programs from across the States we workin brought cheer all around and reaffirmed our belief in the "Can Do" spirit.

• Enrichment program curriculum: The entire curriculum of Summit (20 moduleweekend enrichment program) was revisited for virtual delivery using the lens of DesignThinking all the while staying true to the essence and ethos of the program. Theredesigned curriculum which included interactive games quizzes videos engagementactivities and take away for the students to work on and submit was extremely wellreceived by the students and their mentors. Parents and siblings who attended thesevirtual sessions also shared their appreciation.

• Virtual Summit reach: Ullas continued to nurture the dreams of 3500+ studentsfrom 429 schools across 5 states (Delhi NCR Haryana Maharashtra Tamil Nadu andTelangana). Despite the digital inequity we had an average of near 80% attendance acrossour virtual classrooms.

• Career Guidance Sessions: Ullas in partnership with Civil Society OrganizationIndia Literacy Project (ILP) delivered career guidance sessions to Grade 10 11 and 12Young Achievers. This truly helped alleviate the anxiety of the students and providedtheir parents and them great clarity on the possible streams and options inclusive ofonline admissions (into colleges) during the Covid year.

• Higher Education Scholars: In a very first of its kind engagement Ullasconducted virtual selection and review interviews for Higher Education Scholars again withour volunteers - Friends of Ullas. An unique opportunity for these Scholars to refinetheir online interviewing skills. 70 Scholars were on-boarded in the year 2020-21 fromvarious streams across Chennai Delhi and Hyderabad taking the count of our Scholars tobeyond 200.

• E-Mentoring/e-Learning Sessions: Interesting virtual learning/ mentoringsessions were planned and delivered with the help of Alumni Intellectians and Friends ofUllas from across the globe. 25+ sessions were scheduled over 8 months ranging fromMindful Living to Meditation to Acing your presentations to Personal Branding and more.We even had Scholars across Chapters participate in the first ever virtual walk through ofDesign Center and virtual Design Thinking session. New avenues opened up!

• Generosity of Spirit: The pandemic initially shook us and left us wondering howto proceed with our high touch point face to face interventions with young minds. Duringthe wellness check-in calls with our Young Achievers we recognized the need for us tocontinue our interventions - a space for young minds and Scholars to come together tolearn to interact to transform to share their minds and to be themselves. And that isexactly what the ONE team of - mentors/volunteers fondly known as Friends of Ullas ourAlumni Higher Education Scholars and Team Ullas collaborated to put together the aboveprograms - virtually! Despite the blurring boundaries of personal and professional timeduring WFH different time zones across the globe volunteers and Scholars generously gavetheir time late evenings and weekends to mentor students - as per them this was their highpoint during these strange times to be able to GIVE!

Year 2020-21 truly was an extraordinary year that helped us reaffirm and deliver on ourcore purpose and that by working together with the "Can Do" spirit the toughestof times can be overcome together!

18. Audit Committee Recommendation

During the year all the recommendations of the Audit Committee were accepted by theBoard. The Composition of the Audit Committee is as described in the Corporate GovernanceReport.

19. Annual Return

Pursuant to Section 92 (3) read with Section 134 (3) (a) of the Companies Act 2013the Annual Return in Form MGT 7 shall be placed on the website of the company atwww.intellectdesign.com/investor-relations after the conclusion of the 10th Annual GeneralMeeting.

20. Significant & Material Orders passed by the Regulators or Courts

During the Financial Year 2020-21 no order has been passed by any regulatoryauthorities or Courts.

21. Particulars of Loans Guarantees and Investments u/s 186*

Investments made during the year 2020-21: NIL

• The Company has not granted Loans and Guarantees under Section 186 of theCompanies Act 2013

22. Risk Management Policy

Being a pioneer in the Intellectual Property-led Business in India the company iscontinuously focussing and committing itself to have a Risk Management system suited forthe Products business.

Towards this the Board has formed a Risk Management Committee with Directors theChief Financial Officer the Chief Risk Officer and CEO's as members of the committee. TheCommittee works to mitigate any inherent risks faced by the Business and to meet theincreasing demand of Customer's liability through different means within the overallframework listed below:

Risk Management Framework Objective

The Organisation is subject to certain risks that may affect our ability to operatemay disrupt our business model due to changes in competitive landscape changes inTechnology which may render our capabilities obsolete and thus hamper our ability toserve our Customers and protect assets. These risks could adversely affect Customerprojects Employees Shareholders liability to Third

Party and risks to Property among others. Controlling these risks through a formalprocess is necessary for the well-being of the Organisation and its Stakeholders. TheOrganisation's Risk Policy facilitates identification of these Risks on a continuous basisand proposes mitigation measures. Our risk policy aims to minimise adverse impact of theserisks on the Company's growth Profit margins and People engagement besides RegulatoryCompliance. Risk Management has been made an integral part of the Organisation byencouraging Risk Awareness among employees.

Risk Management Framework

The Risk Management Committee of the Board of Directors oversees the Risk Managementprocess under the overall direction of the Board of Directors. The Risk ManagementCommittee consists of the Board of Directors Chief Financial Officer & the Chief RiskOfficer. The Organisation uses BELIEF (Brand End Customer Leadership IntellectualProperty Execution & Finance) framework for its risk classification.

Risk Management Process

Risk Management is a continuous and developing process which runs throughout theOrganisation's strategy and the implementation of that strategy. The Risk Management helpsthe Organisation to proactively manage uncertainties in the internal and externalenvironment limit the negative impacts and benefit on the opportunities. The processincludes risk identification risk evaluation risk prioritisation risk mitigation riskmonitoring & review.

Some of the major risks are classified using BELIEF framework as follows:

Table No. 1.3 BRAND

1. Reputation Risk:

The brand/reputation risk may arise in case of issues around product implementationcustomer relationships & escalations etc. Risk may accentuate due to increased use ofsocial media & other internet-based applications in the corporate world. The risk ismitigated by adoption of Product Delivery & Customer Excellence processes to manageimplementations & relationships effectively.

END CUSTOMER

2. Business Risk

2.1 Business Concentration Risk

The company is specialised in BFSI space and could face the risk of concentration in asingle space. Significant reliance on a particular product customer segments orgeography may heighten the risk of revenue loss & consequential impact on theprofitability in case of adverse conditions such as customer exit volatile geopoliticalscenarios sector-specific slowdown etc. However this risk is mitigated to a largeextent by fairly diversifying the concentration across lines of business market segments& geographies.

The company has presence in all the 4 sub-segments of BFSI namely Corporate BankingRetail Banking Capital Markets and Insurance. These 4 sub-segments have different boomand bust cycle and therefore protect the Company. Further the Company has multipleproducts and client base to further de-risk the product/business concentration. TheCompany mitigates its geography concentration risk by having its presence across differentgeographies.

2.2 Business Model Risk

With increased usage of cloud hosting across the industry a strategic shift fromTraditional License/AMC-based model to Cloud model may pose risk to the Company's existingbusiness model. The Company keeps a close eye on the changing business model scenario andtakes appropriate required actions. A certain portion of our revenue is already derivedfrom the Cloud model through SaaS & subscription.

2.3 Market Competition Risk

The company faces competition from large multinational companies local companies inthe geography in which we operate and Indian product companies. While many of these areestablished companies the startups may also disrupt our business. This may pose achallenge to maintain or sustain the business growth or profitability in the long run.

The Company makes focussed investments in R&D with continuous evaluations ofproduct endurance across segments/geographies to keep products relevant & competitivein the marketplace. Ongoing efforts made to enhance the customer experience throughdeployments of innovative products competitive pricing through operational efficienciescost optimisation measures & improved implementations with minimal number of defectshelps us to stay ahead in the innovation curve.

2.4 Contractual Compliance Risk

Product development companies are exposed to legal risk arising from Infringement of IPright and non-performance of contractual obligation. Further risk may accentuate in casecontract formulations are not commensurate to the Organisation's risk appetitecommitments delivery capabilities and customer expectations. The Company has establisheda strong process to review and appraise all contracts. As a policy it restricts itsobligation under each contract. The Company has adequate Insurance to mitigate againstrisk of Errors and Omissions Commercial General Liabilities etc.

3. LEADERSHIP

People Risk

The Company operates in niche BFSI product space which requires people with specialisedskills as against mass recruitment that was followed in Services business. The Companyminimises the risk through in-depth in-house training & recruitment from top-endEngineering colleges and B-schools.

Background Checks (BGC) is mandated for all new employees and is audited from time totime.

4. INTELLECTUAL PROPERTY:

4.1 Information & Cyber Security Risk:

Internal & external cyber threats if not appropriately managed can potentiallyresult in data leakage source code compromise etc. which may significantly disrupt coreoperations & may damage the Company's brand image/reputation. The risk is mitigatedthrough Information & Cyber Security Forum and the Central Security Group whichadminister the Information & Cyber security programme for the Organisation. MoreoverCyber liability insurance is obtained to safeguard against any loss arising out of anysecurity breaches.

4.2 Data Protection & Privacy

The confidential data of the customers/associates are subject to data privacy laws ofvarious states. Procedures to effectively handle the confidentiality & privacy if notrobust can lead to data breaches. The risk gets accentuates on account of heightenedregulations or guidelines such as GDPR and widespread usage of emerging technologies usedto enhance customer experience which pose challenges to protect data & the privacyelements. The risk is mitigated by putting data authorisation process in place and makingprovisions for necessary guidance for the delivery teams with data security practices.GDPR-related compliance reviews are facilitated for applicable business/functional teams.

4.3 Intellectual Property Rights Infringement Risk:

a) IP protection:

The Company may face challenges to protect the Intellectual property rights which arepivotal for its revenue generation. The risk is mitigated through registration of IPs inthe countries having robust protection laws.

b) Risk of use of "Open Source" Software

"Open Source" Software may be used in some of our solutions. Failure to abidewith the terms of the open source licenses could have a negative impact on our business.The risk is mitigated through adoption of the open source policy which facilitates toidentify monitor review report & thereby facilitate restricted & acknowledgedusage of the open source software's on ongoing basis.

EXECUTION:

5.1 New Country Entry Risk

Failure to effectively study evaluate identify analyze & address the countryspecific risks at the time of entry into a particular geography could adversely affectlong term interests of the organisation. Any new business opportunity in a new country issubject to a Country risk assessment which helps in developing a robust knowledge platformand also to understand the local conditions and business culture at the early stages ofthe business & design adequate risk mitigation measures to facilitate business in newcountries.

5.2 Cloud Infrastructure Management Risk:

With increased cloud adaptability requirements to have highly skilled resources tomanage cloud environments unique contractual agreements with the customers & cloudservice providers ensuring adequacy of security measures by the service providersheightened regulations like GDPR the company is exposed to a risk of SLA/securitybreaches by cloud service providers which may result in financial implications (impositionof fines & penalties) or reputation damage. The risk is mitigated by defining theCloud governance framework to consistently manage cloud environments across the lines ofbusinesses. Periodic reviews are performed to assess the security internal controls DRbackup processes SLAs service contracts etc. with cloud service providers.

5.3 Product Implementation Risk

Delays errors or omissions in implementations could hamper our delivery capabilitiesleading to multiple risks such as delay in collections violation of contractualcommitments fines/penalties and damage to Brand image. The risk is mitigated throughdelivery excellence processes & continuous monitoring & reporting ofimplementations through use of various tools. Further Company adequately insures itselffor any liabilities arising on account of errors & omissions or any delays.

5.4 Compliance Risk - Subsidiary Compliance Reporting

Inadequate or non compliances to the material laws & regulations applicable in therespective countries having business presence may lead to fines/penalties/ closure of theoffices resulting in revenue loss. The risk is mitigated through a well structuredframework using UnMail the Company's Enterprise Social Network for Subsidiary ComplianceReporting. The respective Operations Directors ensure uploading of the Compliance reports(suitably customized for each Subsidiary) on a quarterly basis. This process enhances thecontrol and improves statutory compliance in each jurisdiction.

5.5 Fraud Risk:

Mechanisms to prevent detect measure monitor & report the potential collusiontouch points fraud events or criminal hackings if not robust may result in revenueleakage financial losses or the reputation damage for the Company. To mitigate the riskpotential fraud areas are assessed as part of regular audit programmes. Risks associatedwith potential fraud for identified design gaps are reported to the Internal AuditCommittee with suitable action plans. Further Crime insurance cover is obtained tosafeguard against any direct financial loss arising out of fraudulent activities byassociates

5.6 Business Continuity Risk:

In light of current pandemic scenario arising on account of Covid19 the significanceof business continuity is of paramount importance. The Business continuity plans forpeople processes & technology if not robust or inadequate may create challenges tomanage unforeseen crisis or events such as natural or man made calamities/disasters &may disrupt the business performance. The risk is managed by designing appropriaterecovery strategies/business continuity plans. Dedicated teams monitor the adequacy of thebusiness continuity arrangements. Periodic testing & simulations carried out on anannual basis.

FINANCIAL

6.1 Foreign Exchange/Currency Fluctuations Risk

The company earns a large portion of its revenue in foreign currencies and is exposedto the risk of currency movements. To mitigate this risk the company follows a 2 stepstrategy.

• As the first step quotation in foreign currencies is restricted to few selectedmajor currencies. Quotation in any other currency is highly controlled.

• The second leg of this strategy is to hedge the foreign earnings aftersubtracting the local expenses.

6.2 Larger Order to Cash cycle and Liquidity Risk

Our customer being large Banks and Financial Institutions the credit worthiness is incomfort even though the cycle is long. The percentage of bad debts is also minimal. Sincethe Products business has a long order to cash cycle delays in conversion of REB intoinvoicing or recovery of the billed invoices from the clients/customers may result instrain over the company to meet their working capital requirements recurring fixed &direct costs which may require increased borrowings finance charge and thereby impact theCompany's profitability. The risk is mitigated by Arrangement of required credit linesthrough various Banks regular monitoring of ageing of receivables/REB balances by themanagement and robust recovery & follow-ups mechanisms with clients/ customers.

The company has identified Liquidity Risk as an area to monitor. The Financeorganization headed by the CFO monitors the liquidity position consisting of cash and nearcash instruments on a continuous basis.

6.3 Internal Financial Control (IFC)

The company has to comply with additional controls enforced by Section 134 of theCompanies Act 2013. This is to report on the Internal Financial Control in the DirectorsReport and also by the Statutory Auditors. Key Internal controls over financial reportingif not designed identified & operate effectively may result in mis-statements goingunnoticed and impact the true & fair view of the financial/operational results of theCompany. To comply with this the company assesses the existing control environmentthrough regular internal & statutory audits and ensures that the requirements arecomplied.

Risk Mitigation through Insurance

The company has appointed a Global leader for Risk & Insurance advisory to adviceon the risk and insurance coverage. The following Insurance coverage is taken to mitigaterisks.

1. Errors & Omissions Insurance - To safeguard against any loss arising of anerror negligent act or omission which would result in failure in performing theprofessional services or duties for others.

2. Cyber Liability Insurance - To safeguard against any loss arising out of a securitybreach and or privacy breach that would result in sensitive or unauthorized data orinformation being lost or compromised.

3. Crime Insurance - To safeguard against any direct financial loss of property moneyor securities arising out the fraudulent activities committed by the employee or incollusion with others.

4. Directors & Officers Liability Insurance - To safeguard against any loss arisingout of a wrongful act made by the Directors Officers and Employees of the organizationwith reference to the company's business operations and activities.

5. Commercial General Liability Insurance - To safeguard against Third Party bodilyinjury or property damage arising out of our business operations.

6. Standard Fire & Special Perils Insurance - To protect the company's Assets(movable & immovable Assets) from the risk of Fire or Perils.

23. Corporate Social Responsibility

The Company has formed Corporate Social Responsibility Committee on 15th October 2014and reconstituted on 24th July 2019 and August 05 2020. Following are the members of theCommittee:

a) Mr. Anil Kumar Verma - Chairman

b) Ms. Aruna Krishnamurthy Rao - Member (ceased w.e.f. August 21 2020)

c) Mr. Abhay Anant Gupte - Member (inducted as a Member w.e.f. August 21 2020 asre-constituted by the Board in its Meeting held on August 5 2020)

d) Mr. Arun Jain - Member

As per Section 135 of the Companies Act 2013 a company meeting the applicabilitythreshold needs to spend at least 2% of its average net profits for the immediatelypreceding three financial years on CSR activities. However the Company as a responsiblecorporate citizen has risen above itself to make contributions of more than 2% in thearea of education through Ullas Trust (implementing agency). The details of the policydeveloped and implemented by the Company is given as a part of annual report on CSR asAnnexure 7.

24. Secretarial Standards

The Company complies with all applicable mandatory secretarial standards as issued bythe Institute of Company Secretaries of India.

25. Disclosure as required under Section 22 of Sexual Harassment of Women at Workplace(Prevention Prohibition and 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. The Internal Complaints Committee ("ICC") has been set up to redressthe complaints received regarding sexual harassment. All employees are covered under thispolicy.

The following is the summary of the complaints received and disposed off during thefinancial year 2020-21:

a) No. of complaints filed during the year: NIL

b) No. of complaints disposed during the year: NIL

c) No. of complaints pending as at end of the financial year: NIL

26. Listing Fees

The Company confirms that it has paid the annual listing fees for the year 202021 toboth the National Stock Exchange of India Limited and BSE Limited.

27. Certifications

Your Directors would like to appreciate the achievements of the Quality Departmentwhich enabled your Company to get certified at CMMi level 5 by CMMI Institute USA for itsGlobal Consumer Banking (iGCB) business. Your Directors would also like to appreciate theachievements of Cards Business team and Corporate Security Group for PCI - DSScertification and the achievements of iSEEC business team and Corporate Security Groupfor SOC 2 certification for Insurance products.

28. Change in Registrar and Transfer Agent (RTA)

The Board of Directors at its meeting held on March 23 2020 approved the change inRegistrar and Share Transfer Agent from M/s. Kfin Technologies Private Limited Hyderabad(formerly known as M/s.Karvy Fintech Private Limited) to Cameo Corporate Services LimitedChennai. Depositories vide their approval letters dated July 13 2020 have confirmed thetransfer of database and electronic connectivity and to commence the services of CameoCorporate Services Limited w.e.f.July 14 2020.

29. Acknowledgment

Your Directors take this opportunity to express the gratitude to all investorsclients vendors bankers Regulatory and Government authorities Stock Exchanges andbusiness associates for their cooperation encouragement and continued support extended tothe Company. Your Directors also wish to place on record their appreciation to theAssociates for their continuing support and unstinting efforts in ensuring an excellentall-round operational performance at all levels.

By Order of the Board
For Intellect Design Arena Limited
Place: Chennai Arun Jain
Date : May 10 2021 Chairman and Managing Director
DIN:00580919

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