Dear Members,
Your Directors have pleasure in presenting the Twenty-Ninth (29th) Board's Report of your Company together with the Audited Standalone and Consolidated Financial Statements for the financial year ended 31 st March, 2024. The consolidated performance of the Company and its subsidiaries has been referred to wherever required.
FINANCIAL RESULTS
Your Company's financial performance (standalone and consolidated) for the financial year ended 31 st March, 2024 is summarized below:
in Lakhs
Standalone
Consolidated
Description
STANDALONE FINANCIALS
Total income has shown a growth of 19%. The Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) stood at 32% of Total Income and Net Profit at 28% of Total Income with Earnings Per Share at 12.93.
CONSOLIDATED FINANCIALS
Total Income has shown a growth of 16%. The EBITDA stood at 10% of Total Income and Net Profit at 4% of Total Income with Earnings Per Share at 11.12.
Analyzing your Company's consolidated results by the two spheres it operates in, International IT Services contributed 31% of total revenues and 66% (before exceptional items) of Profit After Tax (PAT) while Domestic products and services contributed to 69% of the total revenues and 34% of PAT.
International IT Services total revenue is 267,958 lakhs, growth of 39.5% Y-o-Y and $ 323.6 million in
US $ terms with a growth of 34.3% in revenues. Your Company has managed to declare good results consistently because of its focus on serving and growing its existing customers, addition of 45 new customers throughout the Financial Year, and maintaining resource utilization at 87.4% over the Financial Year under review The Domestic IT Products business grew by 7% on Y-o-Y basis to 5,950.5 crore.
Your Company during the Financial Year had a stronger consolidated Balance Sheet and has approximately
85,376 Lakhs of cash and cash equivalents, showing Return on Capital Employed (ROCE) of 28.8% (before exceptional items) and Earnings Per Share at 11.12.
The Audited Standalone and Consolidated Financial Statements of your Company, which form a part of this Annual Report, have been prepared in accordance with Indian Accounting Standards ("Ind AS") prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015, as amended.
BUSINESS PERFORMANCE
FY24 was another year of industry-leading growth despite challenging macroeconomic conditions, geopolitical issues, and slowing down in tech spending across geographies in select verticals. In FY24, we surpassed US$ 1 billion in consolidated revenue. Our objective is to be one of the fastest-growing modernization engineering company with a goal to achieve revenue of US$1.5 billion by the end of FY26 at an International IT Services business EBITDA level of low-20s. We remain optimistic about our long-term vision and growth prospects.
Our big bets and continued investments are yielding significant results, positioning us well for future growth.
The team is committed to accelerating the growth curve and building scale in terms of large clients, deals, markets, partnerships and talent.
We have continued to witness significant growth in 'Harvest Verticals' - Retail & Manufacturing, Telecom, Media &Technology (TMT) and 'Invest Verticals' - Banking, Financial Services, and Insurance (BFSI) & Healthcare and Life Science (HLS), where we foresee strong growth opportunities over the next 3-5 years.
During the year, we expanded our services in Mexico, Egypt and Malaysia; adding three new geographies to enhance our global reach and responsiveness to clients. We also consolidated our subsidiaries of GBW, Encore and Scalable under one Sonata company.
We continued to deepen our partnerships with leading hyper-scalers like Microsoft, AWS, Salesforce, ServiceNow and Snowflake. These joint GTMs (Go To Market) are enabling us to enhance our footprint across Cloud, Data, AI and Generative AI. Achieving Select Tier partner status from Snowflake further enables us to accelerate digital transformation for our joint customers. Sonata made incredible progress towards the strategic initiatives and large deals:
We launched Harmoni.AI, a Responsible-first AI capability, providing a suite of industry solutions, service delivery platforms, and accelerators using generative AI. With over 70% of our engineers trained in these technologies, we are well-positioned to deliver tailored AI solutions to our clients. We have a pipeline of over
USD$65 million in AI across 90+ clients and prospects, expecting 20% of our revenue from AI services in next 3 years. We became Microsoft's only SI Launch Partner (from India) for Microsoft Fabric, an advanced data analytics platform. Our dedicated team of over 300 data engineers is enabling customers to leverage this new end-to-end analytics SaaS platform, with significant demand build-up since its launch.
We secured multiple large deals across our focus verticals, with 3.2x increase in our large deal pipeline and 14 large deals closed during the year. These strategic modernization deals span a decade and involve end-to-end modernization and transformation, leveraging our expertise in Azure, AWS, Enterprise Data, Hyper-Automation,
Cloud optimization, and CRM.
Quant Systems Inc., our historic acquisition, provided us a strong foothold in HLS and BFSI verticals, enhancing our capabilities in Enterprise Data Analytics, Cloud modernization, Cyber security, Salesforce, Data Privacy,
Adobe, and Digital & Mobile App solutions. Quant is now fully integrated into your Company.
Sonata is a people-focused and talent-conscious company. We are recognized as the most preferred workplace in IT/ITES for 2023-24. We continued to invest in capability building with upskilling, cross-training, and certifications. Last year we had launched Sonata Career Academy for Learning Excellence (SCALE) to offer access to vast content and opportunities for Sonatians to learn using the latest technologies and remain relevant. It continues to thrive, with a 45% increase in enrollment and 42% of employees achieving Sonata UEP Certification. Our commitment to diversity and inclusion is evident in our Global D&I Council's efforts to reach 35% gender diversity by FY26, with significant strides in senior management roles. Our SWAN (Sonata Woman Advocacy Network) initiative has expanded globally, and 93% of our new engineer trainees are women, reflecting our dedication to building a global and diversified workforce.
INDUSTR y RECOgNITION
The Company has been named as the "Best Governed Company, Listed Segment: Emerging Category" at the 23rd ICSI National Awards for "Excellence in Corporate Governance".
The Company is featured in Major Contender Category in EverestPeakMatrix Assessment for Lending IT services 2023. The Company is recognized in HFS Horizons as Enterprise Innovator for Generative AI Enterprise Services, Disruptor for Life Science Service Providers 2023, and as Trailblazer for Low Code Services 2023.
In terms of Financial performance, despite an uncertain macroeconomic environment, your Company, reported strong revenue growth in both the International IT Services and Domestic IT Products segments. The International
IT Services business witnessed a growth of 40% on Y-o-Y basis to 2,679.6 crore, and the Domestic IT Products business grew by 7% on Y-o-Y basis to 5,950.5 crore. A detailed analysis of the Company's business performance also forms part of the Management Discussion and Analysis, a separate section in this Annual Report.
HUMAN RESOURCE MANAgEMENT
Your Company continues to make investments in attracting and onboarding quality talent across levels and locations including new geographies such as Egypt, Malaysia and Mexico.
FY 24 assumes significance for your Company for being recognized as the Most Preferred Employer (IT/ITES) 2023-2024. This award is testimony to our people-centric philosophy and practices including investments in upskilling.
Our Return-to-Work program saw a very significantly large percentage of team members returning to office, mostly in a hybrid mode. This gave an impetus to increased in-person interactions, camaraderie, teamwork and belongingness.
We made significant strides in furthering our D&I charter including the launch of the D&I policy, SWAN employee resource groups, manager training and policies.
As your Company continues to scale and grow, it was important to clarify and convey our Ways of Working towards customers, team members, partners and other stakeholders through our AGILE framework which stands for Action, Growth, Integrity, Learning and Empathy.
With GenAI becoming an area of focus, we designed and deployed capability building programs at multiple levels to build a ready talent pool through trainings and certifications. In addition, to accelerate AI adoption within the Company, a tool was built and deployed to assist employees with queries and other information. Further details are provided elsewhere in the Annual Report.
CyBER SECURITy INITIATIVES
Your Company is dedicated to enhancing cyber awareness through training sessions and by offering cyber security materials (PDFs, presentations, videos) on its internal portal. Additionally, online information security quizzes are conducted for employees. Every new Sonata employee receives cyber security training as part of onboarding, ensuring all employees are equipped with cyber awareness.
INFORMATION SECURITy & PRIVACy
Information security and privacy are foundational to our operations. Your Company prioritizes information security to ensure the confidentiality, integrity, and availability of our systems and data. It maintains a well-established Information Security Management System (ISMS) to manage and control information security risks effectively. Our ISMS encompasses policies, procedures, and organizational structures designed to protect our assets and meet regulatory and client security requirements.
Your Company holds key certifications and including: assessments,
ISO 27001 Certified for Information Security Management System (ISMS).
ISO 20000 Certified for IT Service Management.
CMMi Assessed for maturity in development and service delivery processes.
Entity-wide SOC 2: Comprehensive assessment coveringsecurity,availabilityandconfidentiality.
These certifications underscore our commitment to best practices and continuous improvement in managing information security risks, ensuring a secure environment for our clients and stakeholders.
Additionally, a detailed analysis of our operations, market performance, business outlook, risks, and senior leadership perspectives is included in the Management Discussion and Analysis section of this Annual Report, providing valuable insights for stakeholders.
MANAgEMENT DISCUSSION AND ANALySIS REPORT
Management Discussion and Analysis Report as required under Regulation 34 and Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, amended from time to time (the "Listing Regulations"), is disclosed separately in this Annual Report.
DIVIDEND / TRANSFER TO RESERVES
In line with the practice of rewarding members, based on your Company's performance and future outlook, the Directors are pleased to recommend a final dividend of 4.4/- per equity share (post bonus issue) at 440% on par value of shares of 1/- each. This recommendation is subject to the approval of the shareholders at the ensuing Annual General Meeting ("AGM") and shall be subject to deduction of income tax at source.
The final dividend is in addition to the interim dividend. Your Board has already declared an interim dividend of 7/- per equity share (pre-bonus issue), which was paid out on 22nd November, 2023.
The total dividend for FY 2024 amounts to 7.9 /- per equity share (post bonus issue) and would involve a total cash outflow of 22,154 lakhs. The total dividend for FY 2023 was 15.75 /- per equity share and involved a total cash outflow of 22,083 lakhs.
If approved by the Members at the ensuing AGM, the final dividend will be paid on or after 13th August, 2024 to all those equity shareholders whose names appear on the Register of Members of your Company on
26th July, 2024 and to those whose names appear as beneficial owners in the records of the National Security Depository Limited and Central Depository Services (India) Limited on the said date.
Your Company has not transferred any amounts to reserve for the Financial Year ended 31st March, 2024. The dividend paid and recommended is in accordance with the Company's Dividend Distribution Policy.
DIVIDEND DISTRIBUTION POLICy
As required under Regulation 43A of the Listing Regulations, your Company has Dividend Distribution Policy.
The Policy is available on the website of the Company at https://www.sonata-software.com/about-us/investor-relations/corporate-governance.
SHARE CAPITAL CHANgES PURSUANT TO BONUS ISSUE
During the year under review, the Board of Directors at their meeting held on 25th October, 2023, recommended issue of bonus equity shares, in the proportion of 1:1, i.e., 01 (One) new fully paid-up equity share for every 01 (One) existing fully paid-up equity share held. This bonus issue was approved by the shareholders vide a resolution dated 30th November, 2023 passed through postal ballot. Consequently 140,212,408 bonus shares were allotted on 13th December, 2023 to members whose names appeared on the register of members as on 12th December, 2023, being the record date fixed for this purpose.
Pursuant to the aforesaid issue of Bonus Shares, the Issued, Subscribed and Paid-up Equity Share Capital of your Company was increased from 140,212,408/- (Rupees One Hundred Forty Million, Two Hundred Twelve Thousand, Four Hundred & Eight only) divided into 140,212,408 (One Hundred Forty Million, Two Hundred Twelve Thousand, Four Hundred & Eight) Equity Shares of face value of 1/- each (Rupee One only) to 280,424,816/- (Rupees Two Hundred Eighty Million, Four Hundred Twenty-Four Thousand, Eight Hundred & Sixteen only) divided into 280,424,816 (Two Hundred Eighty Million, Four Hundred Twenty-Four Thousand, Eight Hundred & Sixteen) Equity Shares of face value of 1/- (Rupee One only) each due to allotment of 140,212,408 (One Hundred Forty Million, Two Hundred Twelve Thousand, Four Hundred & Eight) Equity Shares of face value of 1/- (Rupee One only) each.
BOARD MEETINgS
During the year under review, the Board of Directors met six (6) times. The meetings were held on 3rd May, 2023, 13th May, 2023, 29th July, 2023, 25th October, 2023, 1st February, 2024 and 21st February, 2024. The maximum interval between any two meetings did not exceed one hundred twenty (120) days, as prescribed under the Companies Act, 2013 (the "Act").
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
AGM. The Board of Directors, pursuant to the recommendation of the Nomination and Remuneration Committee, has recommended his re-appointment by the members at the ensuing AGM.
Pursuant to the recommendation of the Nomination and Remuneration Committee, the Board of Directors appointed Mr. Surin Shailesh Kapadia (DIN: 00770828) and Ms. Mona Ninad Desai (DIN: 03065966), as Additional Director(s) designated as Independent Director(s) of the Company for a term of 5 (five) consecutive years with effect from 7thMay, 2024 till 6 thMay, 2029, respectively, and also proposed re-appointment of Mr. Sanjay K Asher as an Independent Director for a second term of five consecutive years w.e.f. 8th August, 2024 till 7thAugust, 2029, subject to the approval of the shareholders of the Company.
Mr. Pradip Shah and Ms. Radhika Rajan will cease to be Directors of the Company with effect from 10th August,
2024 and 12th August, 2024, respectively, upon completion of their second tenure as Independent Directors. The Board places on record its sincere appreciation for their invaluable contribution and guidance steering the Company towards growth and success.
POLICy ON DIRECTORS' APPOINTMENT AND REMUNERATION
The Company's policy on appointment and remuneration of Directors is available on the Company's website at https://www.sonata-software.com/about-us/investor-relations/corporate-governance. The qualifications, positive attributes, independence and skills of the Directors are covered in the Corporate Governance Report which is a part of this Report.
INDEPENDENT DIRECTORS
Your Company has laid down and followed procedures for familiarizing the Independent Directors with your Company regarding their roles, rights, responsibilities and to impart the required information and training to enable them to contribute significantly to your Company.
As required under Section 149(7) of the Act, all the Independent Directors on the Board of your Company have given their respective declarations that they fulfill and meet the criteria of independence as laid down in Section 149(6) of the Act, read with Regulation 16(1)(b) and Regulation 25(8) of Listing Regulations. There has been no change in the circumstances during the year under review affecting their status as Independent Directors of your Company. The list of key skills, expertise, and core competencies of the Board, including the Independent
Directors, is provided elsewhere in this Annual Report.
The Independent Directors have confirmed that they have complied with the Company's Code of Conduct during the year under review. They have also further confirmed that they have registered their names in the Independent Directors' Databank.
DIRECTORS' RESPONSIBILITy STATEMENT
As stipulated under the provisions contained in Section 134(3)(c) read with 134(5) of the Act, the Directors, based upon the information and explanations obtained by them as also documents made available to them and to the best of their knowledge and belief, hereby confirm that: a) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures; b) the Directors have 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 your Company at the end of the Financial Year and of the profit and loss of your Company for that period; c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities; d) the Directors have prepared the Annual Accounts on a going concern basis; e) the Directors have laid down Internal Financial Controls to be followed by your Company and that such
Internal Financial Controls are adequate and were operating effectively; and f) the Directors have 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
During the year under review and upto the date of this Report, there has been no material change and commitment affecting the financial position of your Company.
AMALgAMATION OF ENCORE I.T. SERVICES SOLUTIONS PRIVATE LIMITED WITH yOUR COMPANy
The Board of Directors on 7th May 2024, approved the Scheme of Amalgamation of Encore I.T. Services
Solutions Private Limited ("Encore"), a wholly-owned subsidiary, with your Company. Intimation was submitted to the Stock Exchanges on the same date. The amalgamation petition will be filed before the concerned Hon'ble NCLTs Bench for the same. This amalgamation aims to achieve operational efficiencies, reduce administrative costs and enhance strategic focus. The Appointed Date under the Act, for the amalgamation is 1st April, 2024, whereas the Effective Date will be upon filing certified copies of the NCLT orders to the concerned Registrar of
Companies. The shares of Encore held by your Company will be cancelled and no new shares of your Company shall be issued or allotted to any person whatsoever in lieu thereof. All assets & liabilities and employees of Encore will transfer to your Company upon the Scheme coming into effect. Encore's authorized share capital will also merge with the authorised share capital of your Company. Further, as per the provisions of the Act, Encore will stand dissolved without winding up upon the Scheme coming into effect.
AUDIT COMMITTEE
Pursuant to the provisions of Section 177 of the Act and Regulation 18 of Listing Regulations, the Audit Committee of the Board as at 31st March, 2024, comprised of Mr. Pradip P Shah, Chairman, Mr. S B Ghia, Ms. Radhika Rajan and Mr. Sanjay Asher as its Members. The Committee met Six (6)times during the year under review and recommendations made by the Audit Committee, during the Financial Year have been accepted by the Board.
NOMINATION AND REMUNERATION COMMITTEE & STAKEHOLDERS RELATIONSHIP COMMITTEE
Pursuant to the provisions of Section 178 of the Act and Regulation 19 of Listing Regulations, the Nomination and Remuneration Committee of the Board as at 31st March, 2024, comprised of Mr. Sanjay Asher, Chairman,
Mr. Viren Raheja and Mr. Pradip P Shah as its members. The Committee has laid down a policy for remuneration of Directors, KMP and other Employees. A copy of the Policy is available on the website of your Company https://www.sonata-software.com/about-us/investor-relations/corporate-governance.
The composition of the Nomination and Remuneration Committee comprises of independent and non-executive directors. The Committee met four (4) times during the year under review.
Pursuant to the provisions of Section 178 of the Act and Regulation 20 of Listing Regulations, the Stakeholders Relationship Committee of the Board as at 31st March, 2024, comprised of Mr. S B Ghia, Chairman, Mr. P Srikar Reddy, Ms. Radhika Rajan and Mr. Samir Dhir as its members. The Committee met four (4) times during the year under review.
CORPORATE SOCIAL RESPONSIBILITy COMMITTEE
The Corporate Social Responsibility Committee as at 31st March, 2024, comprised of Ms. Radhika Rajan, Chairperson, Mr. P Srikar Reddy, Mr. S B Ghia and Mr. Samir Dhir as its members. The Committee met four
(4) times during the year under review. The brief outline of the Corporate Social Responsibility (CSR) Policy of your Company and the initiatives undertaken by your Company on CSR activities during the year are set out in Annexure III of this Report as prescribed in the Companies (Corporate Social Responsibility Policy) Rules,
2014, as amended.
RISK MANAgEMENT COMMITTEE
The Risk Management Committee as at 31st March, 2024, comprised of Mr. Pradip P Shah, Chairman, Mr. Viren Raheja, Mr. P Srikar Reddy and Mr. Samir Dhir as its members. The Committee met three (3) times during the year under review.
The terms of reference of all Committees of the Board and the details of attendance in their respective meetings are set out in the Corporate Governance Report forming part of the Annual Report.
RISK MANAgEMENT
Your Company's Risk Management framework, strategies & practice seeks to sustain the long-term vision and mission of your Company. Your Company continuously evaluates the various risks surrounding the business and seeks to review and upgrade its risk management strategies and process to mitigate the risks. To further endeavor, 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.
Further, the detailed discussions on risks and concerns perceived by the Management and the strategies thereof are enumerated in Management Discussion and Analysis, which forms part of the Annual Report.
VIgIL MECHANISM
Your Company has established a Vigil Mechanism and Whistle Blower Mechanism for receiving and redressing complaints from employees and Directors, as per the provisions of Section 177(9) and (10) of the Act. Regulation 22 of the Listing Regulations and Regulation 9A of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.
The said Mechanism which, 'inter alia', also provides for direct access to the Chairperson of the Audit
Committee in cases that require reporting about the unethical behaviour, actual or suspected 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's 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 your Company.
Further, your Company has prohibited discrimination, retaliation, or harassment of any kind against any employee who reports under the Vigil Mechanism or participates in the investigation. There were no complaints received during the year under review under this Policy. The Audit Committee periodically reviews the functioning of this mechanism. No personnel of your Company were denied access to the Audit Committee.
The Vigil Mechanism Policy can be accessed through https://www.sonata-software.com/about-us/investor-relations/corporate-governance.
SUBSIDIARy COMPANIES, ASSOCIATES AND JOINT VENTURES
As on 31st March, 2024 your Company had 26 subsidiaries (including Gapbuster Limited and Gapbuster Europe Limited which have been hived up and in process of closure). The statement pursuant to the Section 129(3) of the Companies Act, 2013, containing salient features of the Financial Statements of your Company's Subsidiaries in Form AOC-1 is given in ANNEXURE I of the report. Audited financial statements together with related information and other reports of each of the subsidiary companies have also been placed on the website of your Company at www.sonata-software.com.
The Consolidated Financial Statements of your Company and its Subsidiaries viz., Sonata Information
Technology Limited, India, Sonata Software Solutions Limited, India, Encore I.T. Services Solutions Private Limited, India, Sonata Software North America Inc., USA, Sonata Software Intercontinental Limited, Ireland, Sonata Software GmbH, Germany, Sonata Europe Limited, UK, Sonata Software (Qatar) LLC, Qatar, Sonata Australia Pty Ltd. (formerly known as Scalable Data Systems Pty Ltd.), Australia, Sonata Software LLC, (formerly known as Sopris Systems LLC), USA, Encore Software Services Inc., USA, Sonata Software Canada Limited, Canada, Sonata Latin America S. de R.L. de C.V, Mexico, GAPbuster Limited., UK, GAPbuster Europe Limited, UK,
GAPbuster Inc., USA, GAPbuster Worldwide Pty Limited, Australia, Sonata Software Japan KK (formerly known as Kabushiki Kaisha GAPbuster Japan), Japan, Sonata Software (Shanghai) Co. Ltd. (formerly known as GAPbuster China Co. Ltd.), China, Sonata Software Worldwide Malaysia Sdn. Bhd. (formerly known as GAPbuster Worldwide Malaysia Sdn. Bhd.), Malaysia, Quant Systems Inc., USA, Quant Cloud Solutions Private Limited, India and Quant Systems CRC Inc. Sociedad de Responsabilidad Limitada (CRC LLC), Costa Rica, Woodshed LLC, USA duly audited/ unaudited/reviewed are presented as part of this Report in accordance with the Act, Ind-AS 110 and the Listing Regulations, wherever applicable.
During the year under review, your Company has incorporated a subsidiary in Malaysia named Sonata Software Malaysia Sdn. Bhd.
Your Company has a "Policy for determining Material Subsidiaries" as required under Listing Regulations 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/about-us/investor-relations/corporate-governance.
In terms of the said Policy as per financial statement for the year ended 31 st March, 2024, Sonata Information Technology Limited and Sonata Software North America Inc., USA, are considered as material subsidiaries whose income exceeds 10% of the consolidated income of your Company in the financial year 2023-24. Further details on the subsidiary monitoring framework have been provided as part of the Corporate Governance report.
EMPLOyEE STOCK OPTION PLAN ("ESOP")
Your Company has an Employee Stock Option Plan, 2013 in accordance with the SEBI (Share Based Employee Benefits) Regulations, 2014, as amended. 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.
Pursuant to the requirements of the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("ESOP Regulations"), a Certificate has been issued by the Secretarial Auditor of your Company confirming that the Plan has been implemented in accordance with the said
Regulations and in accordance with the resolution of your Company in the General Meeting.
As required under the ESOP Regulations, the applicable disclosures regarding the details of options granted, number of shares arising as a result of exercise of options, etc., as on 31st March, 2024 are uploaded on the website of your Company www.sonata-software.com.
During the year under review, your Company has issued bonus options under Employee Stock Option Plan, 2013, pursuant to issuance of Bonus Equity Shares of the Company.
SECRETARIAL AUDIT
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had appointed Mr. Parameshwar G Hegde, Practicing Company Secretary as the Secretarial Auditor for the Financial Year 2023-24 to conduct Secretarial
Audit of your Company. The Secretarial Audit Report in Form MR-3 for the Financial Year ended 31st March, 2024 is annexed to this Report as ANNEXURE II. The Report does not contain any qualifications, reservations or adverse remarks.
MAINTENANCE OF COST RECORDS AND APPOINTMENT OF COST AUDITOR
For the year under review, the provisions of Companies (Cost Records and Audit) Rules, 2014 were not applicable to your Company.
STATUTORy AUDITORS
B S R & Co. LLP, Chartered Accountants, Bengaluru, (Firm Registration No. 101248W/W-100022) were appointed as Statutory Auditors of your Company from the conclusion of Twenty Seventh (27th) Annual General Meeting (AGM) held on 24th June, 2022, till conclusion of Thirty Second (32nd) AGM to be held in the calendar year 2027, as required under Section 139 of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014. For the year under review, the Statutory Auditors have confirmed that they satisfy the independence criteria required under the Companies Act, 2013.
The Auditors' Report contains ‘Unmodified Opinion' on the financial statements (standalone and consolidated) of your Company, for the year ended 31st March, 2024 and there are no qualifications, reservations or adverse remarks in their report.
REPORTINg OF FRAUDS By AUDITORS
During the year under review, neither the Statutory Auditors nor the Secretarial Auditor have reported to the
Audit Committee under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against your Company by its officers or employees.
SECRETARIAL STANDARDS
During the year under review, your Company has complied with all the applicable provisions of the Secretarial
Standard 1 on Meetings of the Board of Directors & Secretarial Standard 2 on General Meetings issued by the
Institute of Company Secretaries of India.
ANNUAL RETURN
Pursuant to Section 92(3) and Section 134(3)(a) of the Companies Act, 2013, your Company has placed a copy of the Annual Return as at 31st March, 2024 on its website at https://www.sonata-software.com/about-us/investor-relations/corporate-governance under heading Shareholders information.
INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to the provisions of Section 124 (5) of the Companies Act, 2013 and IEPF rules, during the year under review, your Company has transferred the unclaimed and un-encashed dividends of 61,65,824. Pursuant to the provisions of Section 124 (6) of the Companies Act, 2013 and IEPF rules, 4,96,072 corresponding equity shares of 1/- each on which dividends were unclaimed for seven consecutive years were transferred as per the requirements of the IEPF Rules. The details of the resultant benefits arising out of said shares already transferred to the IEPF, year-wise amounts of unclaimed / un-encashed dividends lying in the unpaid dividend account up to the year, and the corresponding equity shares, which are liable to be transferred, are provided in the Shareholder information section of the Corporate Governance report and are also available on our website, at https://www.sonata-software.com/about-us/investor-relations/corporate-governance.
The Company has appointed a Nodal Officer under the provisions of IEPF, the details of which are available on the website of your Company at https://www.sonata-software.com/about-us/investor-relations.
KEy AWARDS AND RECOgNITIONS
During the year under review, your Company was felicitated with the following key awards and recognitions:
Analyst Recognitions:
Disruptor in HFS Horizons for Data Modernization 2023.
Major Contender in Everest Group Peak Matrix for Dynamics 365 Services 2023.
Aspirant in Everest Group Peak Matrix for Cloud Services North America 2023.
Aspirant in Everest Group Peak Matrix for Cloud Services Europe 2023.
Disruptor in HFS Horizons - Retail and CPG Service Providers, 2023.
Aspirant in Everest Group Peak Matrix for Supply chain IT Transformation Services for Retail and CPG 2023.
Major Contender in Everest Group Peak Matrix for Lending IT services 2023.
Enterprise Innovator in HFS Horizons Generative Enterprise services 2023.
Disruptor in HFS Horizons Life Science services 2023.
Enterprise Innovator in HFS Horizons Low Code services 2023.
HR Awards:
Most Preferred Workplace 2023-24 in IT/ITeS by Team Marksmen for our distinctive work practices and workplace culture.
Corporate Governance :
Winner of ‘Best Governed Company Listed Segment: Emerging Category' 2023 by the Institute of
Company Secretaries of India (ICSI) for Excellence in Corporate Governance.
Business :
Member of the prestigious Inner Circle for Microsoft Business Applications for 2023/2024.
Member of Microsoft AI Council.
Member of NASSCOM AI Council.
Member of NASSCOM AWS Council.
CSR and Sustainability Awards:
Received Bronze Medal from EcoVadis ESG Rating assessor for the company's ESG performance in FY23.
Adjudged runner-up for Outstanding Demonstration of Sustainability by @INFHRA, India's premier industry body for the workplace fraternity.
Received Certificate of Appreciation by ICSI Business Responsibility and Sustainability Awards, 2023
CONSERVATION OF ENERgy, TECHNOLOgy ABSORPTION AND FOREIgN EXCHANgE OUTgO
A. Conservation of energy
The Company commits itself to energy saving, as stated in its Sustainability Policy, and is tirelessly trying to improve Energy saving within facilities. Being in the services sector, the Company does not have significant energy-intensive operations, but it has always sought ways to run more effectively and preserve energy, including the use of modern technology and innovation. Every effort has been made to increase energy efficiency, reduce waste, and save energy. Our Company continues to adopt the following energy-saving activities as part of a continuous practice of energy conservation:
Operational optimization of engineering equipment during non-operational hours.
Provided low-flow aerators for all hand washbasin sensor taps & provision of low-flow faucets at pantry & cafeteria dishwashing area.
For AHUs provided back damper's which gets closed when one of the AHUs is switched off. This avoids the air leakage.
Insulating the AHU area from the rest of the areas to increase the effective usage of cooling and to increase efficiency.
Space Temperature Set-points changed to 24 C.
Optimizing DG A-Check frequency for reduction of emissions.
Ensure complete removal of dead loads during weekends, including turning off or unplugging heating elements of vending machines, switching off lighting circuits, and cutting off all manually operated loads.
Renewable energy is used for the electricity requirement of Sonata Global Village offices in Bengaluru
This is a testament to the Company's commitment to reducing the carbon footprint.
The washroom water management system named HUIDA helps to reduce the water consumption signifi cantly.
B. Technology absorption
During the year under review, Sonata intensified its efforts to strengthen competencies in emerging technologies such as Dynamics, AI, and Data, with a focus on modernization services. Our strategic priorities encompass large deal constructs, multi-cloud capabilities, modernization of data infrastructures, and cloud services. Central to our approach is the Modernization Engineering Framework, which empowers enterprises to build digital businesses, interconnected platforms, and ecosystems, delivering measurable benefits across efficiency, agility/growth, and future-readiness.
We enhanced our delivery models to integrate AI throughout software development and deployment processes, leveraging the innovative AI platform, Harmoni.Ai. This suite of tools automates various tasks, streamlining modernization initiatives. Sonata's Responsible First approach uniquely positions us to guide enterprises in adopting Generative AI for sustained advantages, recognized by clients, partners, and analysts. Our leadership in this area is underscored by membership in Microsoft's AI Partner Council, a distinction held by select global partners.
Our largest practice, Dynamics, expanded into continuous modernization and compete migrations, which will remain focal points in the upcoming fiscal period. We have cultivated expertise in Microsoft Fabric, a cornerstone of our data modernization offerings, making Sonata one of the leading global partners in this domain. We have also revamped our service portfolio to include modern engineering services, supporting customers in their Digital Assurance and DevOps journeys with an AI-driven approach, utilizing assets like
IntellQA. Strategic investments in new capabilities such as ERPs, global business services, and automation underscore our commitment to innovation and client success.
C. Foreign exchange earnings and Outgo
During the year under review, 91% of the revenue came from exports of developed software and related services to clients mainly in USA, UK, Europe, Australia, Germany, UAE and Japan.
Foreign Exchange outgo on account of travelling, professional and legal charges, subsistence/living costs, overseas salaries, capital goods, etc. was 14,637 Lakhs and Foreign Exchange inflow on account of export of software services (net), goods and other operating revenues was 86,352 Lakhs.
PUBLIC DEPOSITS
During the year under review, your Company has not accepted any deposits from the public under Chapter V of the Companies Act, 2013.
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. The Company has in place a gender neutral Prevention of Sexual Harassment (POSH) Policy and framework in line with the requirements of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act"). Your Company through this Policy has constituted an
Internal Committee (IC) for Redressal of complaints and mechanisms to prevent victimisation. Following are some of the programs and initiatives in place to train Employees and the IC for POSH during the year.
1. Each Employee is required to undergo a mandatory e-learning module on ‘Prevention of Sexual Harassment at Workplace'.
2. All new joiners are trained in person on Prevention of Sexual Harassment during their induction program.
3. The IC Members are provided relevant training by an external expert.
4. The IC conducts quarterly meetings to monitor preventive measures and review complaints, if any.
5. The POSH Policy is available on the intranet portal for the employees to access as and when required.
6. Information about the Penal consequences of sexual harassment and information about the IC members and their contact details are available on the intranet portal and at conspicuous places in the office.
Annual Report has been filed with the relevant authorities as required under the POSH Act. No complaints were received under this Policy during the Financial Year 2023-24.
INTERNAL FINANCIAL CONTROLS
Internal Financial Controls are an integrated part of the risk management process, addressing financial and financial reporting risks. The controls are commensurate with the size and nature of Company's operations. The internal financial controls have been embedded in the respective business processes.
Assurance on the effectiveness of internal financial controls is done through management reviews and review by internal auditors and statutory auditors during the course of their audits. The internal financial controls provide reasonable assurance that they are designed effectively with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance with Company's policies. The Audit Committee reviews the reports submitted by Internal Auditors, consider suggestions for improvement and thereafter take corrective actions.
Sonata's Management assessed the effectiveness of the Company'sinternal control over financial reporting as on 31st March, 2024, B S R & Co. LLP, the Statutory Auditors have audited the financial statements included in this Annual Report and have issued an attestation report on the Company's Internal Control over financial reporting.
The Audit Committee also meets Statutory and Internal Auditors to ascertain, inter alia, their views on the adequacy of internal control systems and keeps the Board of Directors informed of its observations periodically. Based on its evaluation, the Audit Committee has concluded that, as of 31st March, 2024, the Company's internal financial controls were adequate and operating effectively.
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 any 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, 2024 is Nil. The maximum amount outstanding at any point of time during the Financial Year has been 10,370 Lakhs.
Also, your Company has given Corporate Guarantees on behalf of Subsidiaries for facilitating their business needs. The outstanding amount as on 31st March, 2024 is as below:
Name of the Subsidiary
CORPORATE SOCIAL RESPONSIBILTy (CSR)
The CSR policy is formulated by the Corporate Social Responsibility Committee and approved by the Board of Directors of the Company. The policy can be accessed at https://www.sonata-software.com/about-us/investor-relations/corporate-governance.
During the Financial Year, your Company has spent 3,22,91,449/- towards CSR activities. Your Company has a CSR Policy in place and as part of its implementation program(s), it has identified and participated in the following initiatives:
Your Company has supported Agastya International Foundation for their project - "STEP". Sonata has provided technical assistance for the development of the Student-Teacher Engagement Platform (STEP). This platform helps teachers to effectively engage with their students in rural areas through a chat platform for interaction. Your Company has helped the Industree Crafts Foundation to build an Online Repository for Artisans to keep their designs and products. Sonata has provided technical assistance for the development of enhancements in the "Industree" online portal. The portal has been created and has a centralised Master Bank that maintains information about artisans and their artworks across India. Furthermore, Sonata has provided technical assistance for the development and enhancement in "Industree-Seller" and Channel App.
Your Company supported the Academy of Family Physicians of India (AFPI) for developing and enhancing its website for more features and effective organizational operation. Creating a platform for a repository for establishing the digital footprint of research scholars and training doctors in rural areas.
Your Company assisted ISDM (Indian School of Development Management) in providing technical assistance for the redesign of the existing ISDM website into a new website that will serve as a digital reflection of ISDM as an institution, encompassing all of its various facets, from the post-graduate program to strategic capacity building to research and building the body of knowledge on development management to the centers of excellence. ISDM acknowledges the need to 'professionalize' the leadership and management of social purpose organizations (SPOS).
The Report on CSR in the prescribed format is enclosed in this Report as Annexure III.
BUSINESS RESPONSIBILITy AND SUSTAINABILITy REPORT
Pursuant to Regulation 34(2)(f) of the Listing Regulations, your Company's Business Responsibility and
Sustainability Report ("BRSR") forms part of the Annual Report. The BRSR includes details on performance against the nine principles of the National Guidelines on Responsible Business Conduct and a report under each principle, which is divided into essential and leadership indicators. The said report comprehensively covers your
Company's philosophy and describes the initiatives taken by the Company from an environmental, social and governance perspective on corporate social responsibility, its sustainability activities pertaining to efforts on conservation of environment, conducting green awareness events, its commitment towards society, enhancing primary education, initiatives and activities taken up as part of this philosophy for the year 2023-24.
Environmental, Social and Governance (ESG): Your Company has launched ESG initiatives. The CSR Committee discharges oversight responsibility on matters related to organization wide ESG initiatives, priorities, and leading ESG practices. The quarterly review and progress made on ESG are reported to the Board of Directors every quarter, the details on ESG are given elsewhere in the Annual Report.
RELATED PARTy TRANSACTIONS
The policy on Related Party Transactions is available on your Company's website at https://www.sonata-software.com/about-us/investor-relations/corporate-governance.
All Related Party Transactions are placed on a quarterly basis before the Audit Committee and the Board for approval. Prior omnibus approval of the Audit Committee and the Board is obtained for the transactions which are foreseeable and of a repetitive nature. Particulars of the contracts or arrangements with related parties referred to in Section 188(1) of the Act, in the format specified asForm AOC- 2 forms part of this Report as
ANNEXURE – IV.
Pursuant to Regulation 23(9) of the Listing Regulations, your Company has filed the disclosures on Related Party Transactions in prescribed format with the Stock Exchanges.
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 basis.
BOARD EVALUATION
During the year under review, as mandated by the Companies Act, 2013 and Listing Regulations, Annual
Evaluation was conducted by the Board of its own performance and that of its committees and individual Directors and the Independent Directors. As part of the evaluation process, individual criteria for each of the exercise was formulated. The said criteria specified certain parameters like attendance, acquaintance with business, communication inter se between board members, effective participation, domain knowledge, compliance with code of conduct, vision and strategy, benchmarks established by global peers etc., which is in compliance with applicable laws, regulations and guidelines. 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 and also provide feedback based on ratings.
In a separate meeting of Independent Directors, performance of Non-Independent Directors, the Board as a whole and Chairman of the Company was evaluated, taking into account the views of Executive Directors and Non-Executive Directors. Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated.
The outcome of the Board Evaluation for the financial year 2023-24 was discussed by the Independent Directors/ Board/Committee. The Board of Directors of the Company noted the actions taken in improving Board effectiveness based on feedback given in the previous year. Further, the Board also noted areas requiring more focus in the future, which include Board diversity, Strategy discussion on succession planning, and Risk management.
REMUNERATION TO DIRECTORS AND EMPLOyEES
The policy on remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the
Corporate Governance Report, which is a part of this report and is also available on the Company's website at https://www.sonata-software.com/about-us/investor-relations/corporate-governance.
Details / Disclosures of ratio of Remuneration of each Director to the median employee's remuneration and details of remuneration paid to Employees is given as ANNEXURE – V.
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 your 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 investor@sonata-software.com and these documents will be made available for inspection electronically from the date of circulation of this Annual Report up to the date of AGM i.e. 6th August, 2024.
CORPORATE gOVERNANCE
Your Company is committed to ensure the highest standards of Corporate Governance and adheres to the Corporate Governance requirements set out by the Securities and Exchange Board of India ("SEBI"). Your Company has also implemented best governance practices. The report on Corporate Governance as stipulated under the Listing Regulations forms part of the Annual Report.
A Certificate from Mr. Parameshwar G Hegde, Practicing Company Secretary, confirming the compliance with the conditions of Corporate Governance as stipulated under the Listing Regulations is attached to this report.
OTHER DISCLOSURES
a) Your Company confirms hat it has paid the Annual Listing Fees for the year 2023-24 to National Stock Exchange of India Limited (NSE) and BSE Limited where its shares are listed. b) Your Company has not issued shares with differential voting rights and sweat equity shares during the year under review. c) There are no proceedings initiated/pending against your Company under the Insolvency and Bankruptcy Code, 2016 which materially impact the business of the Company. d) There were no instances where your Company required the valuation for one time settlement or while taking the loan from any Banks or Financial institution.
ACKNOWLEDgEMENTS
Your Directors take this opportunity and place on record their gratitude for all the guidance and co-operation received from all its clients, investors, vendors, bankers, financial institutions, business associates, advisors, regulatory and government authorities. Your Directors also thank all its Shareholders and Stakeholders for their continued support, and look forward to their continued support in the future and all the Sonatians for their valuable contribution and dedicated service. The consistent growth was made possible by their hard work, solidarity, co-operation and support.