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Intellect Design Arena Ltd.

BSE: 538835 Sector: IT
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OPEN 108.00
52-Week high 292.00
52-Week low 44.00
Mkt Cap.(Rs cr) 1,428
Buy Price 107.25
Buy Qty 6.00
Sell Price 112.00
Sell Qty 1000.00
OPEN 108.00
CLOSE 107.15
52-Week high 292.00
52-Week low 44.00
Mkt Cap.(Rs cr) 1,428
Buy Price 107.25
Buy Qty 6.00
Sell Price 112.00
Sell Qty 1000.00

Intellect Design Arena Ltd. (INTELLECT) - Director Report

Company director report

To the members

We are pleased to present the 7th Annual Report on our business and operations for theyear ended 31st March 2018 of Intellect Design Arena

Limited ("Company"). This is our fourth year of business operations.

1. Results of operations (In Rs. Lakhs except EPS data)
Standalone Consolidated
Description Year ended March 31
2018 2017 2018 2017
Income (Including Other Income) 70281.50 54843.56 111396.89 94770.28
Expenses (Including exceptional items) 62889.52 57145.46 101490.89 93837.23
Profit/(Loss) before Interest 7391.98 (2301.90) 9906.00 933.06
Depreciation & Tax (PBIDTA)
Finance Charges 1373.13 1052.30 1382.62 1130.24
Depreciation & amortization 2513.54 2260.71 2653.49 2413.99
Net Profit/(Loss) Before Tax 3505.31 (5614.91) 5869.89 (2611.17)
Provision for tax including 220.43 - 702.98 283.63
Deferred Tax
Net Profit/(Loss) after tax 3284.88 (5614.91) 5166.91 (2894.79)
Add / (Less): Share of Profit / - - 504.05 656.22
(Loss) on Associate Companies
Net Profit / (Loss) 3284.88 (5614.91) 5670.96 (2238.58)
Re-measurement gains/(losses) on defined benefit plans 37.60 (187.44) (11.99) (194.16)
Exchange differences on translation of foreign operations - - 1333.54 (13.99.70)
Net movement on cash flow hedges (1814.18) 1223.97 (1814.18) 1223.97
Other comprehensive income for the year net of tax (1776.58) 1036.53 (492.63) (369.89)
Total comprehensive income for the year net of tax 1508.30 (4578.38) 5178.33 (2608.47)
Attributable to : Equity shareholders of the Parent - - 417.98 (2608.47)
Less: Non Controlling Interest - - 998.34 -
Basic Rs. 2.79 (5.24) 3.97 (2.09)
Diluted Rs. 2.72 (5.24) 3.87 (2.09)

Table No. 1.1

Function wise classification of statement of consolidated Profit and Loss

In Rs. lakhs
Year Ended
PARTICULARS March 31 2018 March 31 2017
Income from software product license and related services 108729.07 91357.50
Software development expenses 54898.30 46326.00
Selling and marketing & General and administrative expenses 37662.45 39102.94
Research & Engineering expenses 7244.46 7192.08
Provision for Debts and Write Offs 1060.48 1233.16
Total Expenditure 100865.69 93854.18
EBITDA 7863.38 (2496.68)
Depreciation / Amortisation 2653.49 2413.99
Finance Charges 1382.62 1130.24
Profit / (Loss) before other income / minority interest 3827.26 (6040.91)
Other Income including exceptional items 2042.65 3235.56
Minority Interest / Share of profit / (loss ) of Associate Companies 504.05 656.24
Profit / (Loss) before tax 6373.96 (2149.11)
Provision for taxation 702.98 (283.63)
Profit / (Loss) after tax 5670.98 (2432.74)
Net movement on cash flow hedges &
Exchange differences on translation of foreign operations 492.63 (175.73)
Total comprehensive income for the year net of tax 5178.35 (2608.47)

Table No. 1.2

2. State of Company's affairs

The consolidated revenue of the Company for the year ended March 31st 2018 stood atRs.108729.07 lakhs as against Rs. 91357.50 Lakhs for the previous year and delivered agrowth of 19%. The consolidated Net Profit/(Loss) for the fiscal year ended March 31st2018 stood at Rs. (5670.96) lakhs as against the previous year's Net Profit/(Loss) ofRs.(2238.58) Lakhs. The Consolidated

Reserves and Surplus as of 31st March 2018 stood at Rs.78434.19 Lakhs as against Rs.54747.69 Lakhs as of March 31st 2017. For the financial year ended 2017-2018 the Companyhas not 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. Subsidiaries

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

Your Company has 23 (13 direct and 10 step down) subsidiary companies and 3 AssociateCompanies for the financial year ended on March 31st 2018. The information as requiredunder the first proviso to sub-section (3) of Section 129 is given in Form AOC-1 inAnnexure [1].

5. Cash & Cash Equivalents

Your Company's has cash reserve of Rs. 17001.20 lakhs.

6. Share Capital

The paid-up Capital of the Company was increased to Rs.62.76 Crs through shareallotments made against exercise of Options (659502 equity shares) under the ASOP Schemesand rights issue (23135710 equity share) comprising of 125529084 equity shares ofRs.5/- each as on March 31st 2018. The details of all the stock option plans includingterms of reference and the requirements are set out in Annexure 2.

7. Corporate Governance

Your Company has been complying with the provisions of Corporate Governance asstipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015(Listing Regulations). A separate report on Corporate Governance along with Auditors'certificate on compliance of the Corporate Governance norms as stipulated under Chapter IVof the Listing Regulations and Management Discussion & Analysis forming part of thisreport are provided elsewhere in this Annual Report.

8. 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 transferred to IEPFmay apply to the Investor Education and Protection Fund Authority (IEPF Authority) bysubmitting an online application in Form IEPF-5 available on the website with fee specified by the IEPF Authority.. The Company had not declared any dividendso far hence the above provisions are not applicable to our Company. Keeping in view ofthe growth of the business your Director does not recommend any dividend for the financialyear ended 2017 2018.

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

The particulars as prescribed under Section 134(3)(m) of the Act read with Rule 8 ofthe Companies (Accounts) Rules 2014 are set out in the Annexure 3 to this Report.

10. Particulars of employees

(a) The statement containing particulars of employees as required under Section 197(12)of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 forms part of this report. In terms of Section 136 ofthe Act the same is open for inspection during working hours at the Registered office ofyour company. A copy of this statement may be obtained by the members by writing to theCompany Secretary of your Company. (b) The Ratio of remuneration of each director to themedian remuneration of the employees of the company and other details in terms of Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are forming part of this report as Annexure 4.

11. 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 hadbeen followed along with proper explanation relating to material departures;

b) The Directors have selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true`and fair view of the state of affairs of the company at the end of the financial year andof the loss 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".

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.

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

(a) Board Meetings:

The Board of Directors of the Company met 9 times during the year 2017-18. 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 & Key Managerial Personnel

During the year under review Mr. Arun Jain was re-appointed as a Managing Director ofthe Company at the 6th AGM held on 21st August 2017 for a period of 3 years upto theconclusion of 9th AGM of the company to be held in the calendar year 2020.

(c) Re-Appointment

As per Article 34(l) of the Articles of Association of the Company one third of theDirectors were liable to retire by rotation at the 6th AGM of the Company held on 21stAugust 2017. Mr. Anil Kumar Verma Director was liable to retire by rotation and offeredhimself for re-appointment and the same was approved by the members of the Company. Mr.Anil Kumar Verma who is also an executive director was reappointed as executive directorby the Board with effect from 1st February 2018 for a further period of 3 years subjectto the approval of the shareholders. The resolution for the said reappointment is formingpart of the notice of this AGM.

(d) Independent Directors

Mr. V. Balaraman and Ms. Aruna Krishnamurthy Rao were re- appointed as IndependentDirectors at the 6th AGM held on 21st August 2017 for a period of two (2) years and three(3) years respectively upto the conclusion of 8th AGM and 9th AGM respectively. Mr. ArunShekhar Aran was appointed as independent director at the 5th AGM held on 21st July 2016for a period of three (3) years till the conclusion of 8th Annual General meeting. NoDirectors resigned during the year 2017-2018.

The Company has received necessary declarations from each Independent Director of theCompany under Section 149(7) of the Act that they meet the criteria of independence aslaid down in Section 149(6) of the Act.

(e) Details of remuneration to Directors: The information relating to remunerationof directors as required under Section 197(12) of the Act is given elsewhere in thereport.

(f) Board Committees

The Company has the following Committees of the Board:

1. Audit Committee

2. Nomination and Remuneration & Compensation committee

3. Stakeholders' Relationship committee

4. Corporate Social Responsibility committee 5. Risk Management Committee


1. Share transfer 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 in order to match themarket trends of the IT industry. The Board in consultation with the Nomination andRemuneration & Compensation Committee decides the remuneration policy for Directors.The Company has made adequate disclosures to the members on the remuneration paid toDirectors from time to time. Remuneration/ Commission payable to Directors is determinedby the contributions 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 is available. There has been no change in the policy since thelast fiscal year. We affirm that the remuneration paid to the Directors is as per theterms laid out in the remuneration policy of the Company.

Weblink of the Nomination and remunerationpolicy

(h) Board Evaluation

As required under the provisions of Section 134(3)(p) and the Listing Regulations theBoard has carried out an annual performance evaluation of its own performance and that ofits committees and individual directors and the manner in which such performanceevaluation was carried out is as under: The performance evaluation framework is in placeand the performance of the board was evaluated by the board after seeking inputs from allthe directors on the basis of criteria such as the board composition and structureeffectiveness 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 and RemunerationCommittee reviewed the performance of individual directors on the basis of criteria suchas exercise of responsibilities in a bona fide manner in the interest of the Companystriving to attend meetings of the Board of Directors/ Committees of which he/she is amember/ general meetings participating constructively and actively in the meetings of theBoard /committees of the Board etc. In a separate meeting of independent directorsperformance of non-independent directors the Chairman of the Company and the board as awhole was evaluated.

(i) Vigil Mechanism

The Company has established a whistle-blower policy and also established a mechanismfor directors and employees to report their concerns. The details of the same is explainedin the Corporate 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) r/w Rule 8 of the Companies (Accounts)Rules 2014 is attached as Annexure [5].

13. Auditors

Statutory Auditors: S.R. Batliboi & Associates LLP Chennai CharteredAccountants who are the Financial Auditors of the Company hold office as statutoryauditors until the conclusion of the 8th Annual General Meeting of the meeting to be heldin the Calendar year 2019. Their appointment is subject to ratification by the members atthe 7th Annual General Meeting. There are no qualification or adverse remarks in theAuditors Report for the financial year ended 31st March 2018.

Secretarial Auditors: Pursuant to the provisions of Section 204 of the CompaniesAct 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 Secretarial Audit has been carried out by Mr. S Eshwar Practising CompanySecretary and his report is annexed as Annexure [6]. There are no qualification oradverse remarks in the Secretarial Audit report for the financial year ended 31st March2018.

14. 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 March 31 2018.

15. Social Connect Ullas Trust

A Social initiative started in 1997 with an aim to integrate associates with the largercommunity to enable them to enjoy the bliss of working with young minds in the countrycontinues to grow into a movement exemplifying the power of inclusive CSR. A seed of anidea sowed in 1997 to "ignite Young Minds" has grown into a movement across 5states in the country powered by belief that we are making a difference! In its 20 yearjourney the Ullas movement has grown beyond our associate community to include committedpartners to the cause of igniting young minds. These partners include family and friendsof our associates associates from our clients Civil Society Organizations and youthfrom colleges in the districts of Tamil Nadu all united by the common purpose of shapingthe thinking of adolescent young students.

Over the 2 decades Ullas has awarded merit scholarships to more than 54000 studentsacross Chennai Delhi Hyderabad Mumbai and Pune. While the merit scholarships recognizetheir academic excellence these "Young Achievers" as they are called receiveweekend enrichment programs aptly titled as SUMMIT delivered by our associate communitythrough packaged modules of 5 interventions of 3 hours each - 15 magical hours per yearover the four year period of the child's association with Ullas. This academic year over6100 children from Corporation Government and Government-Aided schools in five citiesChennai Delhi Hyderabad Mumbai and Pune attended these intervention programs that aidnot just with life skills but also in designing their thinking. Under the rural re-connectprogram "Touch The Soil" 2.5 lakh young minds were ignited with the power of"CAN DO" and "Planning" with the active engagement and support of over1800 volunteers across 105 districts in 5 states.

Ullas Chennai

Ullas Trust celebrated its 20th Annual workshop on Sep 24th 2017 at The MadrasUniversity Centenary Hall in Chennai. The workshop was all about Igniting Young Minds andcelebrating our very own Ullas Alumnus (our Higher Education Scholars) of over 200+ since2003. The workshop saw over 3000 grade IX X and XI Ullas Young Achievers from 218 -Corporation Government and Government-Aided schools who not only participated in theaspirational "CAN DO" workshop but also were awarded the Ullas Young AchieversMerit Scholarships. Nearly 100 Ullas Alumnus (Ullas Higher Education Scholars) since 2003came onstage to share their joy at being a part of the 2 decade celebration of "BeingUllas"! The workshop saw real life role models Smt. Valarmathi N Deputy DirectorPDMSA Indian Space Research Organization; Shri. Ganesh Kumar Executive Director ReserveBank of India; Dr. Ruchi Gupta MD MPH

Associate Professor of Pediatrics and Medicine Northwestern University Feinberg Schoolof Medicine share their life journey - events and incidents that shaped them inspire andinteract with the students. Continuing its endeavor of recognizing and EncouragingExcellence in Education (EEE) 3 schools one each from corporation government andgovernment aided were awarded the EEE award. Associate volunteers conducted the weekendenrichment program (SUMMIT) across 7 venues in the city (including our corporate offices)covering over 3684 young achievers from grade 9-12. As part of the Touch The Soilprogram over 350 volunteers visited 445 schools in the 32 districts of TN igniting over1.68 lakh grade 9-12 students conducting the Diary of Dreams and Planning workshop. Atotal of 4251 scholarships were given to toppers in grade 9 and 10 in the districtschools. During this academic year Ullas inducted 63 Higher Education Scholars (25professional stream and 38 arts and science students) while continuing to support anoverall of 220 Higher Education Scholars who come back as mentors to the incoming UllasYoung Achievers. These Higher Education Scholars not only inspire their juniors but alsodazzle the associate mentors with their commitment and thirst to pay it forward! Ullascontinues to sponsor Easy Learning English (ELE) program of Vidyarambam Trust (VT) forgrade 6 to 8 students in over 25 schools in 5 districts of TN. Vidyarambam Akkas alsodeliver our SUMMIT interventions to over 1500 grade 9 and 10 students in 21 schoolsfurther extending the engagement with these young minds! In the spirit of partnering withlikeminded partners to reach as many young minds in schools Talent Quest for India Trust(TQI) a student volunteer body movement has taken the SUMMIT Level 1 2 3 and 4interventions to over 10000 students (grade 910 11 and 12) in 27 schools across 21districts of TN through their army of over 350 college student volunteers from nearly 50different colleges. The third edition of Ullas Confluence was held in Feb 2018 tocelebrate and recognize these young TQI volunteer mentors from various colleges across thedistricts who are giving back selflessly. Common purpose and intent unites these partnerswith Ullas in reaching not just the students from the urban schools but also rural schoolsenabling dreams and aspirations!

Ullas Mumbai

Mumbai Ullas chapter conducted the "CAN DO" workshop on 2nd December atMahakavi Kalidas Natyamandir celebrating over 540 young achievers from 24 schools (14Municipal and 10 Govt-Aided schools). The interactive workshop encouraged the students todream big and dream big with conviction. Associate volunteers including over 50volunteers from our client partner - Morgan Stanley conducted SUMMIT in the chapterschools during the weekends reaching out to a total of 1010 students between grade 9 and10. As part of the Touch The Soil program 111 volunteers visited 121 schools in 14districts covering 18912 grade 9 and 10 students with 1042 scholarships for the toppersin 9th and 10th and conducting the Diary of Dreams and Planning workshop for the youngminds.

Ullas Hyderabad

In Hyderabad 288 students enthusiastically participated in the Annual "CANDO" Workshop on November 11th 2017. The Young Achievers enthralled everyone withtheir rendering of Saraswathi Vandanam and cultural performances. The Diary of Dreamsworkshop was very interactive and enabled students to share their aspirational dreams.SUMMIT classes also saw our associate volunteers conduct the weekend intervention programfor 288 grade 9 students and 271 grade 10 students at 9 school chapters. As part of theTouch the Soil initiative over 112 associate volunteers their family and friends went inteams to 219 schools in 32 districts conducting the "CAN DO" and Planningworkshop for 32027 students along with 1979 merit scholarships for deserving grade 9 and10 students.

Ullas Delhi

Ullas NCR chapter conducted the Annual CAN DO workshop on 18th November 2017 atChinmaya Mission New Delhi. 267 grade 9 young achievers from 20 government andgovernment-aided schools were inducted into the portals of Ullas Trust. The workshop alsosaw 45+ associate volunteers who cheered and supported the young achievers. The weekendenrichment program SUMMIT was conducted by our associate volunteers in school chapters andour corporate office for over 800 young achievers (grade 9 to 12) and was received verywell by the students and their school authorities. As part of the Touch The Soilinitiative 37 volunteers travelled to 14 districts of NCR reaching 11639 students ofgrade 9-12 from 41 schools inspiring and igniting young minds delivering the Diary theDiary of Dreams workshop and Planning workshop and also with a merit scholarship to 355toppers in 9th and 10th.

Ullas Pune

Ullas Pune Chapter continued its engagement with 4 schools this year. The Annual Diaryof Dreams workshop was conducted on Dec 2nd 2017 for incoming young achievers coveringover 200 eager students across three locations. A total of 80 scholarships were awarded inthe urban schools as part of the SUMMIT program. Associate volunteers along with familyand friends conducted the subsequent weekend enrichment programs in the schools over 8weekends covering over 800 grade 9 and 10 students. As part of the Touch The Soilinitiative 40 volunteers went to 8 districts covering 66 district schools reaching 12236students from grade 9 and 10 with the diary of dreams and planning workshop. 606scholarships were given to 5 toppers each from grade 9 and 10 in these 53 schools.Stepping into its 21st year the Ullas movement continues to be strengthened not just byour associates but also their family and friends and strong like-minded partners drivenby the common purpose of "igniting young minds" and seeding the "CANDO" spirit.

16) 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.

17) Extract of Annual Return

The details forming part of the extract of the Annual Return in Form MGT 9 is annexedherewith as Annexure [7].

18) Significant & Material Orders passed by the Regulators or Courts

During the Financial Year 2017-18 no order has been passed by any regulatoryauthorities or Courts.

19) Particulars of Loans Guarantees and Investments u/s 186* Investments made duringthe year 2017-18:

SL. no. Name of the Investee Currency Face Value Amount in FCY Amount in Lacs
1 Intellect Design Arena Pte Ltd Singapore SGD 1 1418000 655.19
2 Intellect Design Arena Limited Kenya KSHS 1000 20770000 131.98

Table No. 1.3

* The Company has not granted Loans and Guarantees under Section 186 of the CompaniesAct 2013

20) 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. Every potential risk has designated risk owners who are responsiblefor risk treatment as per the Risk management policy. Towards this the Board has formed aRisk Management Committee with Directors the Chief Financial Officer & the Chief RiskOfficer as members of the committee. The Committee works to mitigate any inherent risksfaced by the Business and to meet the increasing demand of Customer's liability throughdifferent means within the overall framework listed below.

Risk Management Framework Objective

The Organization 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 amongothers. Controlling these risks through a formal process is necessary for the well beingof the Organization and its stakeholders.

The organization's Risk policy identifies these Risks on a continuous basis andproposes mitigation measures. Our risk policy aims to minimize adverse impact of theserisks on Company's growth Profit margins and People engagement besides RegulatoryCompliance. Risk Management has been made an integral part of the Organization byencouraging Risk Awareness among employees.

Risk Management Framework

The Audit Committee of the Board of Directors oversees the Risk Management process doneby the Risk Committee under the overall direction of the Board of Directors. The RiskManagement Committee consists of the Board of Directors Chief Financial Officer & theChief Risk Officer.

Risk Management Process

Risk Management is a continuous and developing process which runs throughout theOrganization's strategy and the implementation of that strategy. The Risk Management helpsthe organization to proactively manage uncertainties in the internal and externalenvironment and to limit the negative impacts and benefit on the opportunities.

Some of the Major risks and risk mitigation measures can be grouped in the followingfour categories:

1. Business Risk 2. Operational Risk 3. Financial Risk 4. Legal & Compliance Risk 5. Risks Emanating from Data Privacy & Regulations
Business Segment Concentration Recruitment - difficulty in finding specialized skill Foreign Exchange Geo Subsidiary Compliance Reporting Data Protection & Privacy
Business Model New Country Entry Risk Risk due to Large Order to Cash cycle and Liquidity Risk Intellectual Property Protection Risk
Geography Concentration Competition Use of "Open Source" Software Implementation Challenges Large Cycle Time for Sales & Implementation Internal Financial Control (IFC) implementation Contractual Compliance

Table No. 1.4

1. Business Risk

1.1. Business Segment Concentration

The company is specialized in BFSI space and could face the risk of concentration in asingle space. However this risk is mitigated to a large extent because the company haspresence in all the 4 sub segments of BFSI namely Corporate Banking Retail BankingCapital Markets and Insurance. These 4 sub segments have different boom and bust cycle andtherefore protect the company. The Company‘s foray into the Payments space throughiPay will further reduce this risk as Payments business is fairly stable business withless impact on cyclicity.

1.2 Business Model

Our Revenue model is based on Products Business with its License and AMC revenues.There is a possibility that increasing share of business starts to come from Cloud Modelrather than License & AMC Model. This may pose a risk to our Business Model. TheCompany keeps a close eye on the changing business scenario. A certain portion of ourrevenue is already derived from the Cloud model. Should Cloud model get precedence overLicense model the company has the wherewithal to shift the business model.

1.3 Geographic Concentration

Intellect is present across different Geographies which we internally classify as WorldI World II World III countries. World I is Rich countries World II is Middle Incomecountries and World III is the Emerging world. The risk gets mitigated by being present inall the three worlds as the demand from these countries varies across segments andbalances the cyclic nature of business.

1.4 Competition

The company faces competition from large Multinational companies local companies inthe geography in which we operate and Indian Product companies. While many of thesecompanies are established companies the start ups may also disrupt our business. With aview to stay ahead of the competition an analysis of these competitions in the 4sub-segments and the 3 Worlds is done on a continuous basis. Another lever to mitigatethis risk is the Investments made in R&D which helps us to remain ahead in theinnovation curve.

2. Operational Risk

2.1 Recruitment

The company operates in niche BFSI product space which requires people with specializedskill as against mass recruitment that was followed in Services business. The Companyminimizes the risk through in-depth in-house training & recruitment from top endEngineering colleges and B Schools. Background Checks (BGC) is mandated for all new hirersand is audited from time to time.

2.2 New Country Entry Risk

For any new business opportunity in a new country a Country risk assessment clearancefrom the CRO is a must. Country risk assessments during entry and subsequent mitigationmeasures help in developing a robust knowledge platform and also to understand the localconditions and business culture at the early stages of the business.

2.3 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.

2.4 Implementation Challenges

Delays in implementation could hamper our delivery capabilities leading to multiplerisks such as delay in Collection Contractual commitments Penalties and Brand image.

2.5 Large Cycle Time for Sales & Implementation

Our businesses have large sales & implementation cycles. Often they involvesignificant capital commitment by the Company. Resources are utilized to meet thecustomer's requirements like completing Proof of Concept or customization. All thisentails significant resources before full revenue is realised. In the event the Clientopts out during the process of evaluation this could have adverse effect on ouroperations.

3. Financial Risk

3.1 Foreign Exchange

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.

3.2 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 the company has identified LiquidityRisk as an area to monitor. The Finance organization headed by the CFO monitors theliquidity position consisting of cash and near cash instruments on a continuous basis.

4. Legal & Compliance Risks

4.1 Subsidiary Compliance Reporting

A well structured framework has been instituted in UnMail the Company's EnterpriseSocial Network for Subsidiary Compliance Reporting. The respective Operations Directorsensure uploading of the Compliance reports (suitably customized for each Subsidiary) on aquarterly basis. This process enhances the control and improves statutory compliance ineach jurisdiction.

4.2 Intellectual Property Protection Risk

Difficulties in protecting out IP in some countries that are pivotal for generatingrevenues are mitigated by registration of the IP in countries that have safe IP protectionlaws.

4.3 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. To comply with this the company appointed areputed Chartered Accountant firm to assess the existing control environment and ensurethat the requirements are complied.

4.4 Contractual Compliance

Product development companies are exposed to legal risk arising from Infringement of IPright and Non performance of contractual obligation. The company has established a strongprocess to review and appraise all contracts. As a policy it restricts its obligationunder each contract. The company has adequate Insurance to militate against risk of Errorsand Omissions Commercial General Liability.

5. Risks emanating from Data Privacy & Regulations

5.1 Data Protection & Privacy

New Regulations such as GDPR are evolving and may have impact that we cannot foreseetoday. Courts of different countries may interpret these laws differently. These may posenew type of risks for our business. Countries such as US & India are in the process ofdeveloping regulations like GDPR. Full impact will be known in the coming years.

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 an errornegligent act or omission which would result in failure in performing the professionalservices 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.

21) Corporate Social Responsibility

Company has formed Corporate Social Responsibility Committee on October 15th 2014 andfollowing are the members to the Committee :-

a) Mr. Anil Kumar Verma Chairman of the Committee

b) Ms. Aruna Rao Member of the Committee

c) Mr. Arun Jain Member of the Committee

d) Mr. V. Balaraman Member of the Committee The Company is not required to contributetowards Corporate Social Responsibility (CSR) as the average profits of the previousthree financial years is negative. However the Company as a responsible corporate citizenhas emerged itself to make contributions in the area of education to Ullas Trust. TheCompany for making contributions to Ullas Trust had sought the approval of theshareholders in its previous AGM held on 21st July 2016 and the same was approved by theshareholders. The details of the policy developed and implemented by the Company is givenas a part of annual report on CSR as Annexure 8

22) 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 duringthe financial year 2017-18:

a) No. of complaints received: NIL
b) No. of complaints disposed NIL

23) Listing Fees

The Company confirms that it has paid the annual listing fees for the year 2018-19 toboth National Stock Exchange of India Limited and Bombay Stock Exchange Limited.

24) 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 its Digital Technology Platforms and also on ISO 27001:2013(Information Security Management Systems.

25) 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 06 2018 Chairman and Managing Director
DIN: 00580919