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Sonata Software Ltd.

BSE: 532221 | NSE: SONATSOFTW |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE269A01021 | SECTOR: Computers - Software Medium & Small

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Annual Report

For Year :
2018 2017 2016 2015 2014 2013 2012 2011 2010

Director’s Report

To the Members,

The Directors have pleasure in presenting before you the Twenty-Third Annual Report of your Company together with the Audited Financial Statements for the Financial Year ended 31st March, 2018.

FINANCIAL RESULTS

(Rs. in Lakhs)

Description

Standalone

Consolidated

Financial Year ended 31.03.2018

Financial Year ended 31.03.2017

Financial Year ended 31.03.2018

Financial Year ended 31.03.2017

Total Income

73,047

62,494

249,939

241,789

Total Expenditure

52,755

44,341

222,296

217,923

EBITDA

20,292

18,153

27,643

23,866

Depreciation and Amortization Expense

500

401

1,241

1,088

Finance Cost

17

399

480

928

Profit before Tax & Exceptional Items

19,775

17,353

25,922

21,850

Exceptional (Income)/Expenses

(49)

(565)

(115)

(772)

Provision for Tax (Net)

4,696

4,589

6,824

6,930

PAT before Non - Controlling Interest

15,128

13,329

19,213

15,692

Non - Controlling Interest

-

-

40

(62)

PAT after Non - Controlling Interest

-

-

19,253

15,630

Earnings Per Share (in Rs.)

14.57

12.85

18.54

15.07

BUSINESS PERFORMANCE

Your Company is primarily engaged in the business of delivering IT services and software solutions to its customers across the globe including the US, Europe, Middle-East, Asia- Pacific, Australia and New Zealand. Besides, the Company also distributes and re-sells products from global technology companies present in India. The Company’s consolidated results comprises operations of Indian and Overseas Subsidiaries and operates under two distinct heads International IT services (IITS) and Domestic Products and Services (DPS).

The Financial Year 2017-18 witnessed the results of recent internal improvement programs and also reflected the positivity of the macro environment. The Company took significant strides in creating enhanced value for shareholders. During the financial year, the Company explored new growth opportunities and performed significantly well in both the domestic as well as international markets. It was reflected in PAT with growth of 28% in IITS and 6% in DPS business, respectively.

During the Financial Year, your Company continued to provide business solutions wrapped with IPs. The revenues through this strategy has resulted in a quicker growth and margin expansions.

This is a major differentiator for Sonata and forms the base of our Platformation strategy. The term ‘Platformation’ is now officially owned by your Company as it has been trademark registered in Singapore and applied for in the USA and India. Besides, your Company continued to invest in differentiated IP and platforms across industry verticals of Travel, Retail, Distribution and software solutions.

There are several other notable achievements during the financial year. These include:

- Registered and trademarked the enterprise digital platform for retail-Brick and Click in India for retail vertical

- Acquired the copyright of TRANSIT software in India for the travel vertical

- Acquired copyright registration for RETINA software in India

- Added fourth industry solution - HALOSYS - on Microsoft Appsource platform

Your Company further organised first Sonata Hackathon - Hack Aata 2017 that saw a participation of over 50 teams across Bengaluru, Hyderabad and UK offices. As a part of marketing initiative, your Company partnered with NASSCOM India Leadership Forum 2018 as a Gold Sponsor hosting a panel discussion on Platforms as a driver of digital success and conducted client leadership summit in USA-Sonata Spark 2017.

The performance reflects Sonata’s journey to reposition itself as a unique technology solutions provider that is committed to develop an emerging breed of platforms, thus enabling its customers to gain competitive advantage through the Company’s future-ready digital transformation initiatives. Sonata’s differentiated Platformation solutions, better alignment with alliance partners and stronger investments in sales and marketing will lead to stronger new business development.

Coming to the results, both on a Standalone and Consolidated basis your Company has shown growth and placed itself well to handle its increasing scale of operation.

A detailed analysis of Company’s operations in terms of performance in markets, manufacturing activities, business outlook, risks and concerns forms part of the Management Discussion and Analysis, a separate section of this Annual Report.

Standalone Financials

Total Income has shown a growth of 17%. The Earnings before Interest, taxes, Depreciation and Amortization (EBITDA) stood at 28% of total income and Net Profit at 21% of total income with Earnings per Share at Rs.14.57.

Consolidated Financials

Total income has shown a growth of 3%. The Earnings before Interest, taxes, Depreciation and Amortization (EBITDA) stood at 11% of total income and Net Profit at 8% of total income with Earnings per Share at Rs.18.54.

Analyzing your Company’s consolidated results by the two segments it operates in, International IT services contributed 38% of total revenues and 81% of PAT while Domestic products and services contributed to 62% of the total revenues and 19% of PAT.

International IT Services total revenue is Rs.92,850 lakhs growth of 13% and $ 144 million in US$ terms with a growth of 18% in revenues. Your Company has achieved good results consistently because of its focus on serving and growing its existing customers, new customer additions of 32 throughout the Financial Year, and maintaining resource utilization at levels in excess of 85% over the Financial Year under review.

Domestic products and services has showed growth of 6% in PAT. The focus in this business has always been to manage Return on Capital Employed (ROCE), which was approximately 24% for the year under review.

Your Company during the Financial Year under review had a stronger consolidated Balance Sheet and has approximately Rs.50,931 lakhs of cash and cash equivalents (net of borrowing), showing Return on Capital employed (ROCE) of 30% and Earnings per share at Rs.18.54 per share.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report as required under Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is disclosed separately in this Annual Report.

DIVIDEND / TRANSFER TO RESERVES

Considering the better liquidity position of the Company, your Directors are pleased to recommend payment of a final dividend of Rs.6.75/- per equity share @675% on par value of Rs.1/- each, subject to the approval of the shareholders at the forthcoming Annual General Meeting, which along with the interim dividend of Rs.3.75/- per Equity Share adds up to a total dividend of Rs.10.50/per equity share for Financial Year 2017-18.

Your Company has not transferred any amount to reserve for the Financial Year ended 31st March, 2018.

The paid up Share Capital of your Company is Rs.105,159,306 divided into 105,159,306 equity shares of Rs.1/- each. Your Company has not come out with any issue (public, rights or preferential) during the Financial Year under review.

BOARD MEETINGS

During the Financial Year under review, the Board of Directors met 4 times. The Meetings were held on 29th May, 2017, 14th August, 2017, 13th November, 2017 and 7th February, 2018.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. S B Ghia (DIN: 00005264) Director, retires by rotation and being eligible, offers himself for re-appointment at the ensuing Annual General Meeting (AGM). Brief profile of Mr. S B Ghia is provided in the notes to the Notice of the ensuing AGM.

INDEPENDENT DIRECTORS

Your Company has laid down procedures to be followed for familiarizing the Independent Directors with your Company, their roles, rights, responsibilities in your Company and to impart the required information and training to enable to them contribute significantly to your Company.

Your Company has received necessary declarations from the Independent Directors under Section 149(7) of the Companies Act, 2013 that they meet the criteria of their Independence laid down in Section 149(6) of the Companies Act, 2013.

DIRECTOR’S RESPONSIBILITY STATEMENT

In pursuance of Section 134(3)(c)read with 134(5) of the Companies Act, 2013, the Directors hereby confirm that:

a) in the preparation of the Annual Accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

b) the Directors had selected such accounting policies and applied them consistently and made judgments 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 and of the profit and loss of the Company for that period;

c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors had prepared the Annual Accounts on a going concern basis;

e) the Directors, had laid down Internal Financial Controls to be followed by the Company and that such Internal Financial Controls are adequate and were operating effectively; and

f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

MATERIAL CHANGES AND COMMITMENTS

There has been no material change and commitment affecting the financial position of your Company between the end of the Financial Year under review and date of this Report.

AUDIT COMMITTEE

The Audit Committee comprises of Mr. B K Syngal (Chairman) and Mr. Pradip P Shah, Mr. S B Ghia, Mr. S N Talwar and Ms. Radhika Rajan as its members. The Committee met 4 times during the year under review and all its recommendations were accepted by the Board.

Your Company has established Vigil Mechanism which provides for direct access to the Chairperson of the Audit Committee in cases that require reporting about the unethical behaviour, actual or suspended fraud or violation of code of conduct laid down by your Company. This mechanism is governed by Vigil Mechanism Policy which covers unethical behaviour, actual or suspected fraud, theft, bribery, misappropriation of Company funds, financial reporting violations, misuse of intellectual property, mismanagement, significant environmental, safety or product quality issues, discrimination or harassment including sexual harassment, Insider Trading, actual or potential conflicts of interest, violation of Company’s rules, Company’s Policies or violation of Code of Conduct of the Company.

NOMINATION AND REMUNERATION COMMITTEE & STAKEHOLDERS RELATIONSHIP COMMITTEE

The Nomination and Remuneration Committee comprises of Mr. S N Talwar (Chairman) and Mr. Viren Raheja, Mr. B K Syngal and Mr. S B Ghia as its members. The Committee has laid down a Policy for remuneration of Directors, KMP and other Employees. A copy of the Policy forms part of this Report as ANNEXURE I.

The Stakeholders Relationship Committee comprises of Mr. S B Ghia (Chairman) and Mr. P Srikar Reddy and Ms. Radhika Rajan as its members.

DIVIDEND DISTRIBUTION POLICY

As required under SEBI (LODR) Regulations, 2015, your Company has established Dividend Distribution Policy with effect from 3rd February, 2017. The Dividend Distribution Policy is available on the website of the Company https://www.sonata-software.com/sites/ default/fjles/reports/DIVIDEND0/o20DISTRIBUTION0/o2QPOUCY.pdf

SUBSIDIARY COMPANIES

The Consolidated Accounts of your Company and its Subsidiaries viz., Sonata Information Technology Limited, Sonata Software North Amercia Inc., USA (formerly known as Offshore Digital Services Inc), Sonata Software GmbH, Germany, Sonata Europe Limited, UK, Sonata Software FZ LLC, Dubai, Sonata Software (Qatar) LLC and Rezopia Inc., USA, Halosys Technologies Inc., USA and Interactive Business Information Systems Inc., USA (I.B.I.S) duly audited are presented as part of this Report in accordance with the Companies Act, 2013, Ind AS 110 and the Listing Agreement with the Stock Exchanges, wherever applicable. The statement pursuant to the proviso 129(3) of the Companies Act, 2013, containing salient features of the Financial Statement of the Company’s Subsidiaries in Form AOC-1 is provided in ANNEXURE II.

The Accounts of the Subsidiaries audited for the purpose of consolidation shall be placed on your Company’s website and made available for inspection by any shareholder at the Company’s Registered Office and at the respective registered offices of the Subsidiary companies. Copies can be made available on request, to the shareholders of the Company.

Your Company has a “Policy for determining Material Subsidiaries’; so that your Company could identify such Subsidiaries and set out a governance framework for them. The Policy is put up on the website at https://www.sonata-software.com/corporate-governance-policies.

EMPLOYEE STOCK OPTION PLAN “ESOP”

Your Company has an Employee Stock Option Plan, 2013 (Plan) in accordance with the SEBI (Share Based Employee Benefits) Regulations, 2014. The principal objectives of this Plan are to:

- Attract, retain and motivate talented and critical Employees;

- Encourage Employees to align individual performance with the Group’s objectives;

- Reward Employee performance with ownership in proportion to their contribution; and

- Align Employee interest with those of the Group.

Mr. P Srikar Reddy, Managing Director & CEO who was granted Options to purchase equivalent shares under the Plan, had during the Financial Year under review, exercised 75,000 Options of your Company at an exercise price of Rs.18.10 per Share, which were vested on him as on 31st March, 2017. Further Mr. Prasanna Oke, Chief Financial Officer was granted Options to purchase equivalent shares under the Plan, had during the Financial Year under review, exercised 30,000 Options of your Company at an Exercise Price of Rs.165.75 per share, which were vested in him as on 19th May, 2016.

During the Financial Year under review, Mr. P Srikar Reddy, Managing Director & CEO of the Company was granted an Option to purchase 60,000 ESOP Shares of the Company to be vested equally over a period of the contract period, subject to terms and conditions as set forth in the ESOP Plan, 2013 of the Company. Accordingly, the first tranche of 20,000 Options shall vest on him for exercise on 28th May, 2018.

Also during the Financial Year under review, Mr. Vikas Gurugunti, Chief Operating Officer of the Company was granted an Option to purchase 75,000 ESOP Shares of the Company to be vested equally over a period of 4 years, subject to terms and conditions as set forth in the ESOP Plan, 2013 of the Company. Accordingly, the first tranche of 18,750 Options shall vest in him for exercise on 12th November, 2018.

Pursuant to the requirements of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, a Certificate has been issued by the Statutory Auditors of the Company confirming that the Plan has been implemented in accordance with the said Regulations and in accordance with the resolution of the Company in the General Meeting. A copy of the Certificate shall be placed before the shareholders for inspection at the ensuing Annual General Meeting.

As required under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, the applicable disclosures as on 31st March, 2018 are uploaded on the website of the Company at www.sonata-software.com.

SECRETARIAL AUDIT

The Board had appointed Mr. Vijayakrishna K T, Practising Company Secretary as the Secretarial Auditor for the Financial Year 2017-18. The Secretarial Audit Report for the Financial Year ended 31st March, 2018 is annexed to this Report as ANNEXURE III.

COST AUDIT

The provisions of Companies (Cost Records and Audit) Rules, 2014 are not applicable to your Company.

QUALIFICATIONS IN AUDIT REPORTS

Your Company confirms that there are no qualifications in the Statutory Auditor’s Report and the Secretarial Audit Report for the year under review.

STATUTORY AUDITORS

M/s Deloitte Haskins & Sells, LLP, Chartered Accountants, Bengaluru, (Firm Registration No. 117366W) were appointed as Statutory Auditors of the Company from the conclusion of Twenty Second (22nd) Annual General Meeting (AGM) till the conclusion of Twenty Seventh (27th) AGM subject to ratification of their appointment at every Annual General Meeting by the members. However, the members may note that pursuant to The Companies (Amendment) Act, 2017 the requirement of ratification of the appointment of the Statutory Auditors in every Annual General Meeting has been omitted, and therefore the Company is not seeking ratification.

SECRETARIAL STANDARDS

Your Company has complied with the provisions of the Secretarial Standard 1 & 2 issued by the Institute of Company Secretaries of India.

EXTRACT OF ANNUAL RETURN

Pursuant to the provisions of Section 92(3) of the Companies Act, 2013 read with Rule 12 (1) of the Companies (Management and Administration) Rules, 2014, an extract of Annual Return in form MGT 9 is annexed to this Report as ANNEXURE IV.

QUALITY

Your Company continues to enhance customer satisfaction by aligning its processes to industry standards and best practices. During the year under review, your Company successfully underwent surveillance audits for ISO 9001-2015 (Overall Quality Management System), ISO 20000-1 (IT Service Management) and ISO 27001 (Information Security).

Your Company continues to enhance the effectiveness of its delivery to all the customers. After successful CMMI re-appraisal towards the end of last year, your Company formally received the CMMI-DEV v1.3 Level 5 Re-certification in April of this Financial Year. Your Company continues to drive Processes to maintain adherence to this Industry gold standard.

In terms of Customer Satisfaction, your Company has been able to achieve an Overall Aggregated Score of 4.1 out of a possible Top Score of 5 this year.

The Financial Year under review achieved the targeted renewed approach to Customer Value Delivery using defined Process-based methodology. There was a greater focus on Tools and Automation, in order to enhance the effectiveness and efficiency of delivery to our customers.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO

(A) Conservation of energy

Though your Company does not have energy intensive operations being in the services sector, the Company is always on the lookout for energy efficient measures for operation, and values conservation of energy through usage of latest technologies & innovation for improving productivity and quality of products and services. Every endeavour has been made to ensure the optimal usage of energy, avoid wastage and conserve energy. As an ongoing process the Company continued to undertake the following energy conservation measures to minimize the usage of energy

- Deployment of energy-efficient computers and sophisticated office automation and management equipment with the latest technologies, which optimizes conservation of energy.

- Installing LED lights which reduces electricity consumption.

- Installation of sensors at work space area resulting in lights automatically getting switched off in areas not in use.

- Continuous monitoring of floor areas after normal working hours and switching off lights

- Turning off air conditioners during non-peak hours and on weekends

- Installing of Energy Meters for closed monitoring of AHU run hours on daily basis.

- Regular UPS and AC plant maintenance to ensure efficient working of the equipment.

During the year under review, some of the steps taken and practices followed by your Company and its employees, towards energy conservation include the following:

- Installation of new technology air conditioners with built in inverter option which has better air circulation and reduces energy consumption up to 20% compared to the normal air conditioners

- Replacing the CFL based lighting to LED based lighting in phases which will give immense savings in Electricity consumption.

- Air-conditioning staggered mode of operation resulting in reduction in fuel consumption

As the cost of energy consumed by your Company forms a very small portion of the total costs, the financial impact of these measures is not material.

(B) Technology absorption

During the Financial Year under review, your Company focused its efforts and built competencies in areas of Mobility, Omni Channel Commerce, Analytics and Cloud. Dedicated Competency teams were setup for each of these. Your Company has progressed well with its proprietary model of achieving digital transformation called Platformation. Your Company continued to invest in differentiated IP and platforms across industry verticals of Travel, Retail, Distribution and software solutions.

(C) Foreign exchange earnings and Outgo

During the Financial Year under review, 91% of the revenue was generated from exports of developed software and related services to clients in USA, UK, Australia, Germany, UAE, Japan, Singapore, Denmark and Europe.

Foreign Exchange outgo on account of travelling, professional and legal charges, subsistence/living costs, overseas salaries, capital goods, etc was Rs.8,713 Lakhs and Foreign Exchange inflow on account of export of software services (net), goods and other operating revenues was Rs.62,635 Lakhs.

Customers today seek more efficient and effective operations along with technology based innovation and business transformation before they make any technology investments. Your Company has been successful in growing the size of existing teams, as well as branch into newer divisions within these customers.

PUBLIC DEPOSITS

Your Company has not accepted any deposits from the public which falls under Chapter V of the Companies Act, 2013 during the year under review.

HUMAN RESOURCES MANAGEMENT

During the financial year under review, your Company and its employees were part of the following activities:

- Senior Leadership Development through customised programs on Business Leadership, Design Thinking & sponsoring leaders to Strategic Leadership Programs with B-schools.

- Renewed focus on culture change by imbibing Design Thinking principles and mindset in all customer facing and managerial roles. Trained 250 Sonatians on Design Thinking. Management has been able to conduct workshops with customers and reap huge benefits from this exercise. Clients came forward with their testimonials of the benefits of Design Thinking approach used by the Company.

- With a belief that charity begins at home, your Company has digitized its campus hiring through a Platform.

- Organized several employee engagement & CSR events across our facilities enabling employees to engage, participate, contribute and do their bit to the society: Partnership with IIIT Bangalore for evangelization of Technology for Digital Transformation and Research, creating the e-commerce platform for Industree Crafts Foundation, promoted education to the vision and hearing impaired -contributed to Sense International India, a Centre for Deaf and Blind in Bengaluru; partnered with Wildlife Conservation Trust to provide advanced level of education for children studying in the buffer zones of Bandipur Tiger Reserve by creating a digital learning platform to hold the lesson repository and provide collaboration tools between all stakeholders of the project; created Digital enabled Learning Platform for River Foundation; Supported traditional Handloom through IT expertise - Developed an ecommerce online portal for Handloom students to popularise traditional weaving techniques and sell their products; Supported CEDI NIT, Trichy and Chitrika in creating a new website with better UI/UX functionalities for their existing websites and lastly supported CUPA to help sustain and extend animal welfare activities with increasing degrees of excellence.

- Your Company was one among the Top 3 Finalists in the CSR Category of the Heroes of Bengaluru Competition. There were 50 nominations for the CSR Category & your Company’s CSR program (River Foundation - Digital enabled Learning Platform) was in the Top 3 for 2018 competition.

Further, every year your Company organizes an Annual Communications Meet “ACM” where:

- Your Managing Director along with his Leadership Team shared the Company strategy, plans & key focus areas. The telecast this Financial Year was widely viewed across the locations. The Platformation concept took a new meaning for the Company with the crystallization of the concept through a video launched by your Company. the ACM enabled employees to develop a sense of purpose, vision and helped them align and give a deep sense of belonging to the organization’s strategy, plans & objectives.

DISCLOSURES AS REQUIRED UNDER SECTION 22 OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Your Company is committed to provide a healthy environment to all employees that enables them to work without the fear of prejudice and gender bias. Your Company has in place a Prevention of Sexual Harassment (POSH) Policy in line with the requirements of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Your Company through this Policy has constituted a Committee and has established a grievance procedure for protection against victimization. The Policy is available on intranet for the employees to access as and when required. No complaints were received under this Policy during the Financial Year 2017-18

DETAILS OF ADEQUACY OF INTERNAL CONTROL SYSTEM

Sonata Internal Control Systems (ICS) are commensurate with its size and the nature of its operations. The ICS have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with the applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorization, and ensuring compliance with corporate policies. The processes and the systems are reviewed constantly and changed to address the changing regulatory and business environment.

The existing ICS and their adequacy have been reviewed during the year by Internal Auditors and Statutory Auditors. They have expressed their satisfaction with regard to the adequacy and effectiveness of the financial control systems in place to address risk management and mitigation strategies.

The Audit Committee reviews the reports submitted by Internal Auditors and Statutory Auditors. Suggestions for improvement on ICS are considered and the corrective actions are undertaken.

SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNAL

During the year under review, there were no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of your Company and its future operations.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

During the Financial Year under review, your Company had given Inter Corporate Deposits at prevailing bank lending rate to its Wholly Owned Subsidiary, Sonata Information Technology Limited for meeting its working capital requirements. The balance outstanding as on 31st March, 2018 is (NIL). The maximum amount outstanding at any point of time during the Financial Year has been Rs.12,105 Lakhs.

Also, your Company has given Corporate Guarantees on behalf of Subsidiaries for facilitating its business needs. The outstanding amount as on 31st March, 2018 is as below:

Name of the Subsidiary Amount in Rs. Lakhs

Sonata Software North America Inc., USA 5,865

Sonata Information Technology Limited, 10,276

India

RISK MANAGEMENT

Your Company’s Risk Management practice seeks to sustain the long term vision and mission of your Company. It continuously evaluates the various risks surrounding the business and seeks to review and upgrade its risk management process. To further the endeavour, your Board constantly formulates strategies directed at mitigating these risks which get implemented at the Executive Management level and a regular update is provided to the Board.

CORPORATE SOCIAL RESPONSIBILTY (CSR)

During the Financial Year, your Company has spent Rs.210 Lakhs towards CSR activities.

Your Company has a Policy on CSR and as part of its implementation program, identified and participated in the following initiatives:

- Remained committed to NIT Trichy CEDI to promote entrepreneurship and innovation amongst students. Company currently has six Projects incubated which have completed 3 years and have also identified two more new Projects that have been selected for seed fund for this Year.

- Developed a Back-End Invoicing Module for the e-commerce platform “Hastti” to facilitate direct interaction between craftspeople and their customers for the Industry’s Crafts Foundation. Currently Industree Crafts Foundation are using the Platform to Beta test with a limited audience and will Go live once they get the Producer units on boarded with Inventory and Products to sell through the Platform. The overall objective is to be able to build sustainable livelihoods for creative producers & improve livelihood of artisans by providing access to Markets with the latest technologies.

- Partnered with the Indian Institute of Science, Bengaluru to help students to pursue new research initiatives at the Department & to effectively transmit the excitement of computer science research through targeted student outreach programs, and to materially upgrade the pedagogical infrastructure, resulting in potent learning environments.

- Your Company is supporting a programme with RIVER Foundation that addresses today’s educational challenges with a unique “School in a box” - a multi-grade multi-level (MGML) methodology kit & Digital learning, with an integrated curriculum that is made relevant to the local needs. The current platform is deployed by RIVER foundation and has been rolled out by RIVER in the Schools in Chittoor & Telangana

- Your Company is supporting CEDI NITT and Chitrika in creating a new website with better UI/UX functionality for their existing websites.

- Your Company is supporting CUPA to help sustain and extend animal welfare activities with increasing degrees of excellence.

The Annual Report on CSR in the prescribed format is enclosed to this Report as ANNEXURE V.

BUSINESS RESPONSIBILITY REPORT

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, mandates inclusion of the Business Responsibility Report (BRR) as part of the Annual Report for top 500 Listed entities based on market capitalization. In compliance with the Regulation, BRR forms part of the Annual Report and is available on the Company’s website at www.sonata-software.com. The BRR contains a detailed report on Business Responsibilities vis-a-vis the nine principles of the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business framed by the Union Ministry of Corporate Affairs. Any shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Office of the Company.

RELATED PARTY TRANSACTIONS

The Policy on related party transactions is available on the Company’s website at http://www.sonata-software.com/sites/ default/files/Policy on Related party Transactions.pdf

Particulars of the Contracts or Arrangements with related parties referred to in Section 188(1) in the format specified as Form AOC-2 forms part of this Report as ANNEXURE - VI.

JUSTIFICATION FOR ENTERING INTO RELATED PARTY TRANSACTIONS

All the Related Party Transactions entered into by your Company with the Related Parties including rendering of services, sharing of expenses, providing of inter-corporate loans and guarantees to its subsidiaries are in the ordinary course of business and are carried out at arm’s length pricing.

FORMAL ANNUAL EVALUATION

During the Financial Year under review, as mandated by the Companies Act, 2013, your Company conducted an exercise to evaluate the performance of the Board, Committees of the Board, Chairman of the Board, Individual Directors and the Independent Directors. As part of the evaluation process, individual criteria for each of the exercise was formulated. From these, formal questionnaire listing various parameters on which each of the categories were required to be evaluated was shared with each member of the Board / Committee / Director. They were then required to rate individually on each of the parameters on a performance scale of 1-4. The average scores were then arrived at to conclude the performance/ contributions of the relevant evaluation.

The outcome of the process was used to list out areas and categorize them as exemplary, satisfactory, or areas that required improvement. Thereafter, corrective measures were recommended for implementation with immediate effect.

REMUNERATION TO DIRECTORS AND EMPLOYEES

Details / Disclosures of ratio of Remuneration to each Director to the median employee’s remuneration and details of remuneration paid to employees is given as ANNEXURE - VII.

A statement comprising the names of top 10 employees in terms of remuneration drawn and every person employed throughout the year, who were in receipt of remuneration in terms of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms an integral part of this report. However the same is not being sent along with this annual report to the members of the company in line with the provision of Section 136 of the Companies Act, 2013. Members who are interested in obtaining these particulars may write to the Company Secretary at the Registered Office of the Company. The aforesaid annexure is also available for inspection by the Members at the Registered Office of the Company, 21 days before and upto the date of the ensuing Annual General Meeting during the business hours on working days.

LISTING WITH STOCK EXCHANGES

Your Company confirms that it has paid the Annual Listing Fees for the Financial Year 2017-18 to NSE and BSE where your Company’s shares are listed.

CORPORATE GOVERNANCE

Your Company has taken adequate steps to adhere to all the stipulations laid down in SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015. A report on Corporate Governance is provided in this Annual Report.

A Certificate from Mr. Parameshwar G. Bhat, a practising Company Secretary, confirming the compliance with the conditions of Corporate Governance as stipulated under the said Regulations is attached to this report.

ACKNOWLEDGEMENTS

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from all its clients, vendors, bankers, financial institutions, business associates, advisors, regulatory and government authorities. Your Directors also take this opportunity to thank all its shareholders and stakeholders for their continued support and all the Sonatians for their valuable contribution and dedicated service.

FOR AND ON BEHALF OF THE BOARD

SONATA SOFTWARE LIMITED

Place: Mumbai PRADIP P SHAH

Date: 22nd May, 2018 CHAIRMAN

Director’s Report