Home  »  Company  »  Sonata Software  »  Quotes  »  Directors Report
Enter the first few characters of Company and click 'Go'

Directors Report of Sonata Software Ltd.

Mar 31, 2017

To The Members,

Your Directors'' have pleasure in presenting before you the Twenty-Second Annual Report of your Company together with the Audited Financial Statements for the Financial Year ended 31st March, 2017.

Your Company is primarily engaged in the business of providing IT Services and Software Solutions to its global customers in the US, Europe, Middle East, Asia Pacific, Australia, New Zealandand value added re-selling of IT products from global technology companies in India. The consolidated results of your Company include operations of its Indian and Overseas Subsidiaries.

FINANCIAL RESULTS

(Rs. in Crores)

Description

Standalone

Consolidated

Financial Year ended 31.03.2017

Financial Year ended 31.03.2016

Financial Year ended 31.03.2017

Financial Year ended 31.03.2016

Total Income

630.26

543.74

2,561.46

1,984.28

Total Expenditure

442.59

376.82

2,328.88

1,748.60

EBITDA

187.67

166.92

232.58

235.68

Depreciation and Amortization Expense

4.57

4.37

9.31

6.16

Finance Cost

3.99

3.91

9.05

7.95

Profit before Tax & Exceptional Items

179.11

158.64

214.22

221.57

Exceptional (Income)/Expenses

(5.65)

-

(7.72)

(3.68)

Provision for Tax (Net)

47.53

41.20

68.22

66.65

Net Profit/ (Loss)

137.23

117.44

153.72

158.59

Appropriations:

Interim Dividend

36.81

94.64

36.81

94.64

Dividend Tax

6.81

17.89

7.49

19.27

Earnings Per Share (in Rs.)

13.05

11.17

14.62

15.08

BUSINESS PERFORMANCE

The Company has successfully completed another year of consistent performance. The year gone by saw significant progress in the efforts to emerge as a platform-led digital solutions provider. During the year, your Company continued to invest in the development of IP including products and platforms, go-to-market initiatives and business development activities which enabled to strengthen its client portfolio. Your Company saw an industry leading year-on-year growth in revenues of 15% in the international solutions and services business and 39% in their Indian software products business.

Your Company continued to grow in the industry segments it operates across industry verticals of Travel, Retail & Distribution and Software solutions. During the year, your Company expanded its alliances with its strategic partners. The Company entered into the Microsoft Enterprise Cloud Alliance and two of its solutions Brick & Click Retail and Advanced Supply Chain Software listed on the Microsoft Appsource application store. During the year, Sonata''s unified enterprise mobility platform Halosys was granted a US patent for multi-channel delivery of augmented messages. Sonata''s SAP alliance on Hybris Ecommerce also gained momentum with closer partnership in serving retail and travel industry needs and joint programs to reach customers in these verticals. The Company continued to hire new talent to strengthen its leadership team. Investments in marketing, especially in joint event and programs with alliance partners, was enhanced. The year saw significant new client wins in addition to the growth in existing customers.

The fiscal year 2017 performance reflects Sonata''s journey to reposition itself as a unique "Plat formation" partner that is committed to develop and deploy platforms enabling its customers to gain competitive advantage through digital transformation initiatives.

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.

Standalone Financials

Total Income has shown a growth of 16%. The Earnings before Interest, taxes, Depreciation and Amortization (EBITDA) stood at 30% of total income and Net Profit at 22% of total income with Earnings per share at Rs. 13.05.

Consolidated financials

Total income has shown a growth of 29%. The Earnings before Interest, taxes, Depreciation and Amortization (EBITDA) stood at 9% of total income and Net Profit at 6% of total income with Earnings per share at Rs. 14.62.

Analyzing your Company''s consolidated results by the two segments it operates in, International IT services contributed 32% of total revenues and 78% of PAT while Domestic products and services contributed to 68% of the total revenues and 22% of PAT.

International IT Services total revenue is Rs. 815 crores, growth of 15% and $ 121 million in US $ terms with a growth of 12% in revenues. Your Company has achieved consistently good results because of its focus on serving and growing its existing customers. 20 new customers were added throughout the Financial Year, maintaining resource utilization at levels in excess of 85% over the Financial Year under review.

Domestic products and services has showed growth of 39% in revenues. The focus in this business has always been to manage Return on Capital Employed (ROCE), which was approximately 31% for the year under review.

Your Company during the Financial Year under review had a stronger Consolidated Balance Sheet and has approximately Rs. 311 crores of cash and cash equivalents (net), showing Return on Capital employed (ROCE) of 25.30% and Earnings per share at Rs. 14.62 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 your Company, the Directors are pleased to recommend payment of a final dividend of Rs. 5.50 per equity share @ 550% on par value of Re.1/- each, subject to the approval of the shareholders at the forthcoming Annual General Meeting (AGM), which along with the interim dividend of Rs. 3.50 per equity share adds up to a total dividend of Rs. 9.00 per equity share for Financial Year 2016-17.

If approved, the final dividend will be paid to all those equity shareholders whose names appear on the Register of Members of the Company on 4th August, 2017 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, 2017.

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 year under review, the Board of Directors met four times. The Meetings were held on 23rd May, 2016, 8th August, 2016, 2nd November, 2016 and 3rd February, 2017.

DIRECTORS AND KEY MANANGERIAL PERSONNEL

Mr. Viren Raheja (DIN 00037592) Director, retires by rotation and being eligible, offers himself for re-appointment at the ensuing Annual General Meeting (AGM). Brief profile of Mr. Viren Raheja is given in the notes to the Notice of the ensuing AGM.

During the Financial Year under review, Ms Priya Manoj Jaswani, Company Secretary, also designated as a Key Managerial Personnel, resigned from the services of the Company with effect from 7th October, 2016.

Subsequently, Mr. Kundan K Lal, was appointed as a Company Secretary and designated as a Key Managerial Personnel of your Company with effect from 2nd November, 2016. Mr. Lal is a Member of the Institute of Company Secretaries of India since the year 2001 and holds a degree in Law from University of Delhi. He has about 18 years of experience in the Legal, Corporate Governance and Secretarial functions. Over the span of 18 years he has served various organizations engaged in Engineering, Manufacturing, IT and Emerging Growth Technology companies in the field of Corporate & Secretarial, Legal, Labour, Indirect Taxation, Real estate, Intellectual Property, setting up units in DTA and SEZ, and Litigation Matters.

During the year under review the Board re-appointed Mr. P Srikar Reddy (DIN 00001401), Managing Director and CEO of your Company for a further period of three years with effect from 14th February, 2017 as per the recommendation of the Nomination and Remuneration Committee and subject to approval of the Shareholders at the ensuing AGM of your Company. Brief profile of Mr. P Srikar Reddy, is given 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 them to 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), Mr. Pradip P Shah, Mr. S B Ghia, Mr. S N Talwar and Ms Radhika Rajan as its members. During the Financial Year the Board nominated Mr. S N Talwar and Ms Radhika Rajan as members of the Committee. The Committee met four 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 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 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), 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), 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. A copy of the Policy forms part of this Report as ANNEXURE II.

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, Accounting Standard 21 and the Listing Agreement with the Stock Exchanges, wherever applicable. The statement pursuant to the proviso of section 129(3) of the Companies Act, 2013, containing salient features of the Financial Statement of the Company''s Subsidiaries in Form AOC-1 is given in ANNEXURE III.

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''s Subsidiaries are continuously developing its operations globally. I.B.I.S Inc., one of the Subsidiaries offered its services in newer segments such as a debt management and collection software platform and a healthcare provider. On the mobility front, your Company is developing a series of apps on the Halosys Inc. platform for a Silicon Valley start-up to make the Company ''Mobile First'' and are augmenting a talent pool for various long term projects, for a leading US based bank, with operations in more than 70 countries.

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 http://www.sonata-software.com/sites/default/files/Policy_on_ Determining_Material_Subsidiries.pdf.

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 at an exercise price of Rs. 18.10 per share. Further, 75,000 Options of your Company have been vested in him as on 31st March, 2017 which have not as on date of this Report been exercised by him.

During the Financial Year under review, Mr. Ranganath Puranik, Chief Growth Officer was granted an Option to purchase 1,60,000 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 40,000 Options shall vest in him for exercise on 7th August, 2017.

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 Auditors of the Company confirming that the Plan has been implemented in accordance with the said Regulations and in accordance with the resolution passed by the members of the Company. 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, 2017 are uploaded on the website of the Company www.sonata-software.com.

SECRETARIAL AUDIT

The Board had appointed Mr. Sriram Parthasarathy, Practicing Company Secretary as the Secretarial Auditor for the Financial Year 2016-17. The Secretarial Audit Report for the Financial Year ended 31st March, 2017 is annexed to this Report as ANNEXURE IV. The report does not contain any qualification, reservation or adverse remark.

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 Auditors'' Report and the Secretarial Audit Report for the year under review.

STATUTORY AUDITORS

The Auditors are liable to retire at the conclusion of 22nd AGM. Hence the Board on 29th May, 2017 on proposal of the Audit Committee recommended appointment of Deloitte Haskins & Sells, LLP, Chartered Accountants, Bangalore, (Firm Registration No. 117366W) as Statutory Auditors of the Company, in place of Deloitte, Haskins and Sells (FRN 008072S) due to its re-structuring which belongs to same network of firm, from the conclusion of Twenty Second (22nd) AGM till conclusion of Twenty Seventh (27th) AGM subject to the approval of the Shareholders at the ensuing AGM.

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

As required pursuant to Section 92(3) of the Companies Act, 2013 and 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 V.

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''s quality management system was upgraded to ISO 9001:2015. Your Company also underwent surveillance audits successfully for ISO 20000-1 (IT Service Management) and ISO 27001 (Information Security).

Your Company continues to enhance the effectiveness of its delivery. Your Company got re-appraised successfully for CMMI at the highest maturity level (CMMI-DEV v1.3, Level 5).

The year under review also saw a greater focus on tools and automation, in order to enhance the effectiveness and efficiency of the delivery processes.

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, every endeavor has been made to ensure the optimal usage of energy, avoid wastage and conserve energy. As an ongoing process your Company continued to undertake the following measures to minimize the usage of energy by adaption of new technology and innovation.

- Using energy-efficient computers and equipment with the latest technologies, which would help in conservation of energy;

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

- Control measures at HVAC vertical to create advanced air cooling since HVAC contributes 70% of the energy utilization;

- Installation of LCD/LED monitors (energy efficient) in place of normal CRT monitors, thereby saving energy;

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

- operating only one elevator in buildings having two elevators after 7 pm.

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;

- As an environment sustainability initiative, UVGI (ultraviolet germicidal irradiation) has been installed in our HVAC systems in Global Village and Hyderabad facilities. This has resulted in the improvement of IAQ (Indoor Air Quality) upwards by 70% and reduction of power consumption up to 10%. The life span of the cooling coil of the AHU increases thereby reducing maintenance costs in the long run;

- Replacing CFL with LED lightings in corridors & conference rooms; and

- 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 developed and acquired IPs and platforms specific for industry verticals and business processes.

(C) Foreign exchange earnings and outgo

During the Financial Year under review, 89% of the revenue came 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. 96 crores and Foreign Exchange inflow on account of export of software services (net), goods and other operating revenues was Rs. 529 crores.

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 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 following activities:

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

- Took the Sonata Reimagined concept to the next phase through the Plat formation concept.

- The competency framework created last year was reviewed for its refined usage for performance management & development and compensation.

- Organized several employee engagement & Corporate Social Responsibility events across our facilities enabling employees to engage, participate, contribute and do their bit to our society -the Go Green Initiative in the Global Village Office, mentoring the Entrepreneurship case presenters at CEDI program in NIT Trichy, support to the Chennai / Tamil Nadu flood victims, supporting the NGOs as part of the Daan Utsav program, creating the e-commerce platform for Industree Crafts Foundation and a design repository and platform for Women''s Weave.

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. In sync with the Go Digital theme, this year, the ACM went digital and was telecast from the Head Office to all locations.

- Unveiled your Company''s future way of working under the Plat formation concept.

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 and 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 complaint was received under this Policy during the Financial Year 2016-17.

DETAILS OF ADEQUACY OF INTERNAL CONTROL SYSTEM

Sonata has deployed adequate Internal Control Systems (ICS) in place to ensure a smooth functioning of its business. The processes and the systems are reviewed constantly and changed to address the changing regulatory and business environment.

The Control Systems provide a reasonable assurance of recording the transactions of its operations in all material aspects and of providing protection against misuse or loss of Company''s assets. The ERP system has helped in further strengthening the ICS that are in place.

The existing ICS and their adequacy have been reviewed extensively during the year under review by Internal Auditors and Statutory Auditors. The Internal Financial Control Systems, related policies and procedures have been tested by the Statutory Auditors and Internal Auditors during the year. 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.

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 Ltd. for meeting its working capital requirements. The balance outstanding as on 31st March, 2017 is NIL. The maximum amount outstanding at any point of time during the Financial Year has been Rs. 88.8 crores.

Also, your Company has given Corporate Guarantees on behalf of Subsidiaries for facilitating its business needs. The outstanding amount as on 31st March, 2017 is as below:

Name of the Subsidiary Amount in Rs. Crores

Sonata Software North America Inc., USA 58.37

Sonata Information Technology Limited, India 102.28

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. 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. 175.96 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 three projects incubated which have completed a year and have also identified three more new Projects that have been given seed fund for this Year.

- Developed a Back-End Invoicing Module for the e-commerce platform to facilitate direct interaction between craftspeople and their customers for the Industry''s Crafts Foundation, who operate the Mother Earth chain with an aim to improve the livelihood of artisans by providing access to Markets with the latest technologies.

- Partnered with the Indian Institute of Science, Bangalore 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.

- Sonata is supporting a programme with RIVER Foundation that addresses today''s educational challenges with a unique "School in a box" - a (MGML) multi-grade multi-level methodology kit & Digital learning , with an integrated curriculum that is made relevant to the local needs. The current platform is under development stage and is planned to be rolled out by RIVER in the Schools in Chittoor & Telangana.

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

BUSINESS RESPONSIBILITY REPORT

The SEBI (Listing Obligation 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 said Regulation and in view of green initiative, BRR for the Financial Year ended 31st March, 2017 has been hosted 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 - VII.

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.

BOARD 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 DIRECTOR 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 - VIII.

LISTING WITH STOCK EXCHANGES

Your Company confirms that it has paid the Annual Listing Fees for the Financial Year 2016-17 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.

Certificate from Mr. P Sriram, a practising Company Secretary, Proprietor of P. Sriram & Associates, 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: 29th May, 2017 CHAIRMAN

To The Members,

The Directors have pleasure in presenting before you the Seventeenth Annual Report of your Company together with the Audited Financial Statements for the Financial Year ended March 31, 2017.

FINANCIAL RESULTS

(Rs. in Crores)

Description

Financial Year ended 31.03.2017

Financial Year ended 31.03.2016

1.

Total Income

1,741.10

1,259.37

2.

Total Expenditure

1,684.83

1,204.63

3.

EBITDA

56.27

54.74

5.

Depreciation & Amortization Expense

0.58

0.36

4.

Finance Cost

6.84

6.30

5.

Profit before Tax and Exceptional Items

48.85

48.08

6.

Exceptional item [Interest income on Income Tax refund]

2.07

3.68

7.

Provision for Tax (Net)

17.28

17.85

8.

Profit after Tax

33.64

33.91

9.

Earnings in Rs. per share

99.67

100.47

BUSINESS PERFORMANCE

Your Company has posted encouraging results for the Financial Year ended 31st March, 2017. Your Company has reported an all-time high revenue of Rs. 1,741 Crores in the Financial Year under review with a growth of 38% due to focus on new technology areas like Cloud, Analytics, Big Data, Appliances, etc. EBIDTA, before Exceptional Items, have seen a growth of 3% and PAT is flattish due to competitive market place and additional investments in new technology offerings and sales force which will help in differentiating us from the competition and help growth in the future. The focus in this business has always been to manage Return on Capital Employed, which was 31% for the Financial Year.

Your Company''s business has two broad lines:

A. PRODUCTS

During the year under review, your Company has focused on digital transformation for customers in the area of technology infrastructure services and worked on new age technologies like Cloud, Social & Analytics. Your Company has been awarded the best partner for the year from companies like Microsoft, Oracle and SAP. Our focus on the Security SI business has started giving results and we have been awarded as the best partners for the year from security players like Symantec and Force Point. Also, our focus on security appliances like Palo Alto and Check Point have seen good potential in the enterprise customer space. Your Company has continued focus on the cloud and have been appointed as a Cloud Service Provider by Microsoft for India, Singapore and Dubai markets.

B. SERVICES

During the year under review, your Company has grown its engagement across all its existing clients as well as acquired new ones. Sonata as a group continues to lead with the innovative solutions and platforms like Brick & Click, ASCS, Halosys etc as its go-to-market strategy. As a result, your Company have also been able to build a deeper relationship with its existing clients as well as our principals. Your Company has conducted an event specifically for the long standing customers which was very well received. The Management plans to make this an annual affair.

OUTLOOK IN BUSINESS

Your Company will continue to focus on bringing in high value products to Indian market and will continue to look for potential tie ups with leading OEMs from different countries. Your Company will be working on large digital transformation projects with customers which will help the organization to gain more stickiness with the customers.

DIVIDEND / TRANSFER TO RESERVES

During the Financial Year under review, your Company had declared and paid First Interim dividend of Rs. 5/- per equity share and Second Interim Dividend of Rs. 5 /- per equity share, thereby, aggregating to a total dividend of Rs.10/- per equity share (Previous Year Rs. 20 /- per equity share of face value Rs. 10 /- each).

Your Company has not transferred any amounts to reserve for the Financial Year ended March 31, 2017.

The paid up share capital of your Company is Rs. 33,753,940 divided into 3,375,394 equity shares of Rs. 10 /- each. Your Company has not come out with any issue (public, rights or preferential) during the Financial Year under review.

BOARD MEETINGS

During the year under review, the Board of Directors met 4 (Four) times. The Board Meetings were held on the following dates - 23rd May, 2016, 8th August, 2016, 2nd November, 2016 and 3rd February, 2017.

BOARD OF DIRECTORS AND OTHER MANAGERIAL PERSONNEL

During the year under review the Board re-appointed Mr Sujit Mohanty (DIN 00001404), Whole-time Director of your Company for a further period of five years with effect from 1st December, 2016 as per the recommendation of the Nomination and Remuneration Committee and subject to approval of Shareholders at the ensuing Annual General Meeting (AGM) of the Company. Also, Mr. Sujit Mohanty, retires by rotation and being eligible, offers himself for reappointment at the ensuing AGM. Brief profile of Mr Sujit Mohanty, is given in the notes to the Notice of the ensuing AGM.

Ms. Priya Manoj Jaswani, Company Secretary of the Company had resigned w.e.f 7th October, 2016.

During the year under review, Company has not appointed any Director.

DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS

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

DIRECTORS'' RESPONSIBILITY STATEMENT:

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

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

- 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;

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

- the Directors had prepared the Annual Accounts on a going concern basis; and

- 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 financial position between the end of the Financial Year and date of this Report.

AUDIT COMMITTEE

The Audit Committee currently comprises of Mr. B K Syngal (Chairman), Mr. P Srikar Reddy and Ms. Radhika Rajan as its members. The Committee met 4 (Four) times during the year under review and all its recommendations were accepted by the Board.

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee comprises of Mr. B K. Syngal (Chairman), Mr. P Srikar Reddy and Ms. Radhika Rajan as its members. The Committee met once during the year under review. Sonata Software Limited (Holding company) has formulated and adopted a group policy for remuneration of Directors, KMP and other Employees which extends to your Company. This policy forms part of this Report as ANNEXURE I.

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

The Corporate Social Responsibility Committee comprises of Mr. B K. Syngal (Chairman), Mr. P Srikar Reddy and Ms. Radhika Rajan as its members. The Committee met 2 (Two) times during the year under review.

QUALIFICATIONS IN AUDIT REPORTS

Your Company confirms that there is no qualification in the Statutory Auditors'' Report and Secretarial Audit Report for the year under review.

STATUTORY AUDITORS

The Board on 29th May, 2017 on proposal of the Audit Committee has recommended appointment of Deloitte Haskins & Sells, LLP, Chartered Accountants, Bangalore, (Firm Registration No. 117366W) as Statutory Auditors of the Company, in place of Deloitte, Haskins and Sells (FRN 008072S) due to its re-structuring which belongs to same network of firm, from the conclusion of Seventeenth (17th) Annual General Meeting (AGM) till conclusion of Twenty Second (22nd) AGM subject to the approval of the Shareholders at the ensuing AGM.

SECRETARIAL AUDIT

Secretarial Audit Report as provided by Mr. Sriram Parthasarathy, Practicing Company Secretary is annexed to this Report as Annexure II.

COST AUDIT

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

SECRETARIAL STANDARDS

Your Company has complied with the provisions of the Secretarial Standards 1 and 2, which were issued by the Institute of Company Secretaries of India.

EXTRACT OF ANNUAL RETURN

As required pursuant to Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in MGT 9 is annexed as a part of this Annual Report as Annexure III.

RECOGNITION

During the year under review, your Company were felicitated with following recognitions:

SAP APJ Partner Excellence Award 2017 - Top Sell Partner of the Year

SAP APJ Partner Excellence Award 2016 - MVAR Partner of the Year

2016 Microsoft - Country Partner of the Year India

2016 Microsoft - Finalist for Hybrid Cloud and Infrastructure Platform Award

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO:

(A) CONSERVATION OF ENERGY

Though your Company does not have energy intensive operations, every endeavor has been made to ensure the optimal usage of energy, avoid wastage and conserve energy. As an ongoing process, your Company continued to undertake the following measures to conserve energy:

- Using energy-efficient computers and equipment with the latest technologies, which would help in conservation of energy;

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

- Installation of LCD/LED monitors (energy efficient) in place of normal CRT monitors, thereby saving energy.

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 continued its focus on the new technology areas of Cloud, Mobility and Analytics and created separate units for Cloud SI & Security SI businesses as well as our Own IP sales in the Indian market.

(C) FOREIGN EXCHANGE EARNINGS AND OUTGO:

During the Financial Year under review, Foreign Exchange outgo on account of Travelling, Royalty, Import of traded products, etc. wasRs.31.46 Crores and Foreign Exchange inflow on account of software services rendered and sales of traded products exports wasRs.33.83 Crores.

PARTICULARS OF EMPLOYEES

Information as required under the provisions of Rules 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is not applicable to your Company.

PUBLIC DEPOSITS

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

QUALITY MANAGEMENT

Your company has been focusing on enhancing customer satisfaction

by adopting the best practices from the industry. As a part of continual process improvement, Sales MIS processes have been automated so as to minimize the effort spent as well as eliminate human errors. Opportunity and Demand management process is also being streamlined with customized application workflows.

During the year under review, your Company successfully completed the up gradation of its quality management system to ISO 9001:2015.

HUMAN RESOURCES MANAGEMENT

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

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

- Took the Sonata Reimagined concept to the next phase through the Platformation concept. Further, every year your Company organizes an Annual Communications Meet "ACM" where:

- Mr. P Srikar Reddy, Director along with his Leadership team shared the company strategy, plans & key focus areas. In sync with the Go Digital theme, this year, the ACM went digital and was telecasted from the Head Office to all locations.

- Unveiled your Company''s future way of working under the Platformation concept.

DETAILS OF ADEQUACY OF INTERNAL CONTROL SYSTEM

Sonata has an adequate Internal Financial Control Systems in place which ensures the smooth functioning of its businesses. All the internal processes and the systems are reviewed periodically and amended, wherever required, to address the changing regulatory and business environments.

The Internal Control Systems provide a reasonable assurance of recording the transactions of its operations in all material aspects and of providing protection against misuse or loss of Company''s assets. The ERP system in Sonata has also helped in further strengthening the internal financial control systems.

The existing Internal Financial Control Systems, related policies and procedures have been tested and reviewed by both the internal and statutory auditors during the year. They have expressed their satisfaction with regard to the adequacy and effectiveness of the internal financial control systems in place to address risk management and mitigation strategies.

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 has taken Inter Corporate Deposits at prevailing bank lending rate from its Holding Company, Sonata Software Ltd. for meeting its working capital requirements. The balance outstanding as on March 31, 2017 is NIL. The maximum amount outstanding at any point of time during the Financial Year has beenRs.88.8 crores.

Also, your Company has taken Corporate Guarantees from its Holding Company, Sonata Software Ltd. for facilitating its business needs. The outstanding amount as on March 31, 2017 is as below:

Name of the Party

Amount in Rs.Crores

IBM India Ltd.

5.00

Microsoft Corporation (India) Pvt. Ltd.

97.28

RISK MANAGEMENT:

The Risk Management practices of Sonata seek to sustain our long term vision and mission. The Company continuously evaluates the various types of risks surrounding the business and seeks to establish robust risk management processes and their continuous review. The Board also assesses the risks surrounding the businesses of the company and formulates strategies directed at mitigating these risks. The Management of the company establishes appropriate policies and processes which are directed at mitigating the risks to the business objectives.

CORPORATE SOCIAL RESPONSIBILTY “CSR":

During the Financial Year, your Company has spentRs.0.80 crores towards CSR activities.

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

- A Green Future - Partnered with "Pangea Econet" as part of save the environment program to plant Trees in Chintamani District of Karnataka. Totally 3000 Sapling was planted I Go Green for Sonata". Another program was rolled out by the employees of planting trees at our Global Village campus - large number of Sonatians participated in the event demonstrating Company''s commitment to the environment and society.

- Promote education to the impaired-Contributed to Sense International India, a Centre for Deaf and Blind in Bangalore;

- Preservation of Wildlife - Partnered with WCT to provide advanced level of education for children studying in the buffer zones of Bandipur tiger reserve;

- Scholarships for economically challenged engineering students

- Partnered with SKVMA Trust to support technical education for economically challenged students in the backward districts of Karnataka and

- Support traditional Handloom through IT expertise - Develop an ecommerce online portal for Handloom students to empower traditional weaving techniques and sell their products

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

VIGIL MECHANISM & SEXUAL HARRASMENT

Your Company shares a group Vigil Mechanism policy formulated and adopted by Sonata Software Limited (Holding Company). This policy provides a secure framework to report genuine concerns about 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, actual or potential conflicts of interest, violation of company''s rules, Company''s policies or violation of Code of Conduct of your Company. The said policy has been communicated to the employees

Sonata Software Limited (Holding company) has formulated and adopted a policy on ''Prevention of Sexual Harassment'' which is in line with the requirements of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. This policy extends to your Company and through this policy, complaints are monitored by a committee duly constituted for protection against victimization. No complaints were received under this policy during the Financial Year 2016-17.

The Company affirms that no employee has been denied access to the Audit Committee during the Financial Year 2016-17.

RELATED PARTY TRANSACTIONS:

Particulars of Contracts or Arrangements with Related parties referred to in Section 188(1) - details provided in format AOC-2 as Annexure V.

JUSTIFICATION FOR ENTERING INTO RELATED PARTY TRANSACTIONS:

During the year under review your Company has availed Inter Corporate Deposits at prevailing bank lending rate from its Parent Company, Sonata Software Ltd. for meeting its working capital requirements.

Also, your Company has obtained Corporate Guarantees on its behalf from its Parent Company, Sonata Software Ltd, for facilitating its business needs.

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 INFORMATION TECHNOLOGY LIMITED

Place : Mumbai P SRIKAR REDDY

Date : 29th May, 2017 CHAIRMAN


Mar 31, 2016


The Directors'' have pleasure in presenting before you the Twenty-first Annual Report of your Company together with the Audited
Financial Statements for the Financial Year ended 31 March, 2016.

FINANCIAL RESULTS

Rs, in Crores

Standalone Consolidated

Finacial Finacial Financial Financial
Year ended Year ended Year edned Year ended
31.03.2016 31.03.2015 31.03.2016 31.03.2015

Total Income 543.74 498.52 1,984.28 1702.00

Total Expenditure 376.82 338.35 1,748.60 1514.49

EBITDA 166.92 160.17 235.68 187.51

Depreciation
and Amortization
Expense 4.37 5.22 6.16 6.07

Finance Cost 3.91 1.14 7.95 2.76

Profit before
Tax & Exceptional
Items 158.64 153.81 221.57 178.68

Exceptional
(Income)/Expenses - - (3.68) (3.22)

Provision for
Tax (Net) 41.20 36.34 66.65 48.62

Minority Interest - - - 0.42

Net Profit/ (Loss) 117.44 117.47 158.59 133.70

Appropriations:

Proposed/Final
Dividend - 44.69 - 44.69

Interim Dividend 94.64 28.92 94.64 28.92

Provision for
Dividend Tax 17.89 13.44 19.27 14.50

Transfer to
General Reserve - 12.00 - 14.50

Earnings Per
Share (in fi) 11.17 11.17 15.08 12.71

BUSINESS PERFORMANCE

Your Company is primarily engaged in the business of providing IT Services and Solutions to its customers in the US, Europe,
Middle East, Asia Pacific and Distribution of Software Products in India. The consolidated results of your Company include
operations of its Indian and Overseas Subsidiaries and are best explained and analyzed under the two distinct segments of:

a) International IT Services;

b) Domestic Products and Services.

The year gone by was strategically eventful for the Company. During the year your Company acquired and successfully completed
the integration of Halosys Technologies Inc., a mobility platform solution and Interactive Business Information Systems Inc
(I.B.I.S. Inc.) a leading Distribution and Supply Chain solutions provider on Dynamics in the US. During the year, the Company
developed new industry specific solutions like Brick & Click Retail solution for the retail vertical and also continued to extend
Rezopia Travel Experience Management platform which helped the Company to position/strategize itself as the IP led solutions
provider across key verticals of Travel, Retail, Distribution and ISV.

During the Financial Year that ended on 31st March, 2016, your Company continued its growth in the industry and segment by
concentrating on its core strength and prudently expanding its geographic spread, industry focus and product portfolio. All these
have resulted in your Company getting recognized as ''Strategic partner of choice'' by many customers.

Your Company continued to remain focused on quick adoption to the disruptive technologies such as hybris, dynamics AX Retail,
cloud, analytics, mobility, BI and ecommerce. The year under review saw a lot of action on the people front. Sonata''s leadership
team was significantly enhanced with new leaders joining into steer our vertical and digital initiatives. The addition of talent
from the newly acquired entities also went a long way to strengthen the company''s footprint in specific technologies such as
Mobility and Dynamics. Your Company will continue to invest in its talent and develop IP based solutions which can be game
changer in the verticals of choice and strength.

This focused approach was invigorated by our persistent approach to the value statement of "Go Deeper", essentially meaning go
deeper into a customer to emerge higher in what we do for them. Your Company continues to build on its traditional vertical of
strength - Travel and Outsourced Product Development


(OPD) while entering new verticals like Retail, Distribution and CPG (Consumer Products & Goods). While strengthening existing
partnerships with large firms such as Microsoft, IBM, your Company forged new partnerships with leading technology firms and
solution providers. Your Company has also strengthened sales team across various geographies and continues to do so, to drive the
engine of growth in the years to come.

Significant steps taken by your Company during the Financial Year under review were:

- Strengthening business in existing geographies and expanding onto others like Australia, France and thereby creating a
diversified geographical mix;

- Scaling up its focus area the Company acquired Halosys Technologies Inc., a mobility platform solution provider, based in
California and I.B.I.S. Inc., a leading Distribution and Supply Chain solutions provider on Dynamics in the US, to strengthen its
footprint as an industry specific digital solutions provider.

- Opening of new SEZ unit in our Global Village campus, Bengaluru;

- Investing in Marketing and Branding;

- Strengthening the Sales, Account Management, Alliances and Product Management processes and teams;

- Further strengthening the Senior Management capabilities through additions in key positions such as –Head of Sales, Head of
Competencies, Vertical, etc;

- Rezopia travel platform continued to maintain its salience as a leading travel technology solution with a silver award for
online travel booking category at the Travel Weekly Magellan Awards 2015;

- For retail vertical, your Company went live with Brick & Click Retail solution on Microsoft Dynamics AX for both online and
offline retailers;

- In ISV vertical your Company launched two new offerings and also started a cloud consulting offerings called Cloud Assessment
Services;

- Developed a range of horizontal platforms such as Unified Data Analytics Platform, DevOps and CloudOps platform to offer a base
of emerging technology solutions that can be extended and integrated for industry specific applications;

- Participating in various Travel & Retail Industry events across the globe to showcase Company''s expertise.

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.

Standalone Financials

Total income has shown a growth of 8%. The Earnings before Interest, taxes, Depreciation and Amortization (EBITDA) stood at 33%
and Net Profit at 23% with Earnings per share at Rs,11.17.

Consolidated financials

Total income has shown a growth of 17%, EBIDTA a growth of 26% and Net Profit witnessed a growth of 19% when compared to the
previous Financial Year.

Analyzing your Company''s consolidated results by the two segments it operates in, International IT services contributed 36% of
total revenues and 79% of PAT while Domestic products and services contributed to 64% of the total revenues and 21% of PAT.

International IT Services total revenue is Rs, 707 crores, growth of 17% and $ 108 million in US$ terms with a growth of 10% in
revenues, 22% in EBIDTA and 15% in PAT. Your Company has managed to declare good results consistently because of its focus on
serving and growing its existing customers, new customer additions of 26 through 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 14% in revenues, 42% in EBITDA and 34% in PAT. The focus in this business has
always been to manage Return on Capital Employed (ROCE), which was approximately 36% for the year under review.

Your Company during the Financial Year under review had a stronger consolidated Balance Sheet and has approximately Rs, 176
crores of cash and cash equivalents, showing Return on Capital employed (ROCE) of 30.40% and growth in Earnings per share from
Rs,12.71 per share to Rs, 15.08 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 the Annual Report.

DIVIDEND / TRANSFER TO RESERVES

Your Company has not declared a final dividend.

Your Company paid first interim dividend of Rs, 3.50/- per equity share and the second interim dividend of Rs, 5.50/- per equity
share adds up to a total dividend of Rs, 9/- per equity share (Previous Year - Rs, 7/- per equity share of Rs, 1/- each).

BOARD MEETINGS

During the year under review, the Board of Directors met six times. The Meetings were held on 19th May, 2015; 5th August, 2015;
2nd November, 2015; 6th November, 2015; 9th February, 2016 and 9th March, 2016.

DIRECTORS AND KEY MANANGERIAL PERSONNEL

Mr. M D Dalal retires by rotation and is eligible for re- appointment. However, Mr. M. D. Dalal has expressed his desire not to
seek re-appointment due to personal reasons. The Board has considered not to fill up the vacancy caused thereby.

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 them contribute significantly to your Company.

Your Company has received necessary declaration 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.

DIRECTORS'' RESPONSIBILITY STATEMENT

In pursuance of Section 134 (3)© and 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 the Companies 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 AFFECTING FINANCIAL POSITION BETWEEN THE END OF FINANCIAL YEAR AND DATE OF REPORT

There have been no material changes and commitments affecting financial position between the end of the Financial Year under
review and date of report.

AUDIT COMMITTEE

The Audit Committee comprises of Mr. B K Syngal (Chairman), Mr. Pradip P Shah and Mr. S B Ghia as its members. The Committee met
four 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 behavior, 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 behavior, 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 & SHAREHOLDERS RELATIONSHIP COMMITTEE

The Nomination and Remuneration Committee comprises of Mr. Suresh Talwar (Chairman), 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), Mr. P Srikar Reddy and Mr. M D Dalal as its
members.

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 IBIS Inc, USA
duly audited are presented as part of this Report in accordance with the Companies Act, 2013, Accounting Standard 21 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 given 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 Holding and Subsidiary companies.

Your Company continued to invest in Enterprise Mobility and through its Wholly owned Subsidiary company Sonata Software North
America Inc., acquired a 100% stake in Halosys Inc., a California USA headquartered company which provides single unified
enterprise mobility enablement technology. The acquisition had been done for an upfront payment of $2 million and earn out of $3
million payable over the period of next 3 years. The acquisition helps the combined entities to deliver comprehensive mobility
solution to customers, enhancing the capability to deliver digital transformation initiatives to customers.

Your Company had through its Wholly owned Subsidiary Company Sonata Software North America Inc., acquired a 100% stake in a U.S
based I.B.I.S. Inc., a Georgia Corporation which has a strategic partnership with Microsoft for the Dynamics Solution and
delivers world – class supply chain solutions, including its proprietary Advanced Supply Chain Software solution. The acquisition
was aimed to strengthen your Company''s footprint globally in the Retail industry. The acquisition had been done for an upfront
payment of $8.6 million in cash and $ 5.4 million as earn-outs payable over two calendar years ending 2017. During the year
under review Sonata and I.B.I.S. Inc. jointly showcased its Digital transformation technologies at convergence 2015 EMEA which
was held in Barcelona, Spain between 30th November, 2015 and 2nd December, 2015.

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 http://www.sonata- software.com/corporate governance.

EMPLOYEE STOCK OPTION PLAN "ESOP"

Your Company has an Employee Stock Option Plan, 2013 (Plan) in accordance with the SEBI Guidelines. 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 fi 18.10 per share. Further,
75,000 Options of your Company have been vested in him as on 31st March, 2016 which have not as on date of this Report been
exercised by him.

During the Financial Year under review, Mr. Prasanna Oke, Chief Financial Officer was granted an Option to purchase 120,000 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 30,000 Options shall vest in him for exercise on 19 May, 2016.

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 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, 2016 are uploaded on the website of the Company www.sonata-software.com.

SECRETARIAL AUDIT

Secretarial Audit report as provided by Mr. Sriram Parthasarathy, Practicing Company Secretary 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 is no qualification in the Statutory Auditors'' Report and the Secretarial Audit report for the
year under review.

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

As required pursuant to Section 92(3) of the Companies Act, 2013 and 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.

RECOGNITION

During the year under review, your Company and its subsidiaries were felicitated with following recognitions:

- Silver Award for online travel booking category at the Travel Weekly Magellan Awards 2015

- Microsoft Best Vendor Award for 2015

- ''Marketing Partner of the Year'' for 2014 from SAP

- ''LAR Partner of the Year 2015'' award from Microsoft

- Recognized as a leader for product engineering for two categories, Enterprise Software and Consumer Software, by Zinnov, a
leading consulting organization

Your Company participated and sponsored events across globe including SAPPHIRE Now, Arabian Travel Market, Etail Core New York
and RetechCon to connect with our customers.

Your Company also conducted Annual Communication Meet in Bengaluru and Hyderabad locations with the theme Future Ready.

Your Company also participated in leading events and conferences which included the Microsoft Dynamics Industry Partner Industry
Partner Summit at California and the Zinnov Confi uence for ISVs at California.

During the year under review the Company participated and sponsored more than dozen events which help to build brand Sonata
globally.


QUALITY

Your Company continues to achieve customer delight by adopting best practices from the industry as well as proven quality models.
During the year under review, your Company successfully completed the recertification audit of its Quality Management System
under ISO 9001:2008 and ISO 20000-1:2011 (IT Service Management). Additionally, your Company underwent organization-wide
surveillance audit under ISO 27001:2013 (Information Security).

Your Company continues to strive for continual improvement. The focus for the year under review was risk management. Existing
risk management processes were enhanced and also a few new processes were introduced. Hierarchy-based risk real time dashboards
were introduced so as to facilitate timely intervention of higher level management and remedial action.

Your Company continues to adhere to the high maturity practices of CMMI. Usage of process and prediction models for proactive
monitoring and timely corrective action has resulted in timely delivery with optimal effort.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO

(A) Conservation of energy

Though your Company does not have energy intensive operations, every endeavor 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 measures to
conserve energy:

- Using energy-efficient computers and equipment with the latest technologies, which would help in conservation of energy.

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

- Control measures at HVAC vertical to create advanced air cooling since HVAC contributes 70% of the energy utilization

- Installation of LCD/LED monitors (energy efficient) in place of normal CRT monitors, thereby saving energy

- Usage of LED lighting in common areas

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

- Consolidation of facilities

- Operating only one elevator in buildings having two elevators after 7 pm

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 of normal flushing system in washrooms which

consumes about 10-15 liters per flush with new technology based ones which consume 1 to 1.5 liters per flush

- As an environment sustainability initiative, UVGI (ultraviolet germicidal irradiation) has been installed in our HVAC systems
in Global Village and Hyderabad facilities. This has resulted in the improvement of IAQ (Indoor Air Quality) upwards by 70% and
reduction of power consumption up to 10%. The life span of the cooling coil of the AHU increases thereby reducing maintenance
costs in the long run

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, Digital and Cloud. Dedicated Competency teams were setup for each of these. Your Company developed a
range of horizontal platforms such as Unified Data Analytics Platform, DevOps and CloudOps platform to officer a base of emerging
technology solutions that can be extended and integrated for industry specific applications. For an existing travel client in
Europe, your Company is providing cloud based maintenance and support services for their SAP Cloud4Customer service for the first
time.

(C) Foreign exchange earnings and Outgo

During the Financial Year under review, 88% of the revenue came 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, 65 crores and Foreign Exchange inflow on account of export of software services (net), goods and other
operating revenues was Rs, 443 crores.

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.

During the Financial Year under review, your Company acquired Halosys Technologies Inc. and IBIS Inc in USA to strengthen its
footprint as an industry specific digital solutions provider. Your Company leveraged its acquisitions to build and roll out
industry specific IT platforms and solutions such as Brick & Click Retail, Rezopia Travel Experience platform and Advanced Supply
Chain Software. During the year the Company also featured a retail and distribution solution on Azure Lifecycle Services platform
showcasing its capability to offier cloud platform based IT solutions. It continued to strengthened its business in France,
Australia and other operational geographies by winning several new clients across regions. A robust sales team with Senior
leadership at the helm of affairs has been sufficiently enabled to venture into all possible market opportunities across all
geographies.


PUBLIC DEPOSITS

Your Company has not accepted any deposits from the public during the year under review.

HUMAN RESOURCES MANAGEMENT

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

- Welcoming the employees of the two acquired entities – Halosys Technologies Inc. and IBIS Inc – and ensuring they were
assimilated well into Sonata.

- Senior Leadership Development through customised programs on Strategic Business Leadership, key developmental interventions
through Executive Coaching, & Sponsoring leaders to Strategic Leadership Programs with B-schools.

- The competency framework created last year was implemented in phases – using it for compensation and performance management
this year.

- Organized several employee engagement & CSR events across our facilities enabling employees to engage, participate, contribute
and do their bit to our society – the Go Green Initiative in the Global Village Office, mentoring the Entrepreneurship case
presenters at CEDI program in NIT Trichy, support to the Chennai / Tamil Nadu flood victims, supporting the NGOs as part of the
Daan Utsav program

- Held a case study contest within the organization to unveil and share the shining examples of excellence that made a huge
customer impact

- Upgraded head office with initiatives such as transformer enhancement and external painting; also expanded workstation space in
Global Village.

- Conducted ERT training & mock fire drill in Bengaluru facilities for the preparedness for any fire eventualities.

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.

- Unveiled your Company''s future way of working under the Sonata Remained banner.

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 2015-16.

DETAILS OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS

Sonata has deployed adequate Internal Control Systems (ICS) in place to ensure a smooth functioning of its business. The
processes and the systems are reviewed constantly and changed to address the changing regulatory and business environment.

The Control Systems provide a reasonable assurance of recording the transactions of its operations in all material aspects and of
providing protection against misuse or loss of Company''s assets. The ERP system has helped in further strengthening the ICS that
are in place.

The existing ICS and their adequacy have been reviewed extensively during the year under review by Internal Auditors, Statutory
Auditors and External Consultants. They have expressed an opinion that the ICS is adequate and functioning effectively. The
Control Systems, related policies and procedures have been tested by the Statutory Auditors and Internal Auditors during the
year. 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.

SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There is no significant and material order passed by the Regulators or Courts, during the year under review.

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 Ltd. for meeting its working capital requirements. The balance
outstanding as on 31st March, 2016 is Rs, 1.9 crores. The maximum amount outstanding at any point of time during the Financial
Year has been Rs, 99.6 crores.

Also, your Company has given Corporate Guarantees on behalf of Subsidiaries for facilitating its business needs. The outstanding
amount as on 31st March, 2016 is as below:

Name of the Subsidiary Amount in Rs, Crores

Sonata Software North America Inc., USA 59.6

Sonata Information Technology Limited, India 104.4

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
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)

Your Company has in pursuance to the provisions of Section 135 and Schedule VII of the Companies Act, 2013, during the Financial
Year under review, constituted a CSR Committee of the Board of Directors to (a) formulate and recommend a CSR policy, (b)
recommend the amount of expenditure to be incurred on the CSR activities and (c) monitor implementation of the CSR policy from
time to time.

Accordingly, your Company has adopted a Policy on CSR and as part of its implementation program, identified and participated in
the following initiatives during the year under review:

Remained committed to NIT Trichy CEDI to promote entrepreneurship and innovation amongst students reached multiple colleges and
received over a hundred applications for incubation support.

Developed an e-commerce platform to facilitate direct interaction between craftspeople and their customers for the INDUSTREE
Foundation, who operate the Mother Earth chain with an aim improve the livelihood of artisans with the latest technologies.

"I Go Green for Sonata" initiative of planting trees at our Global Village campus - large number of Sonata''s participated in the
event demonstrating company''s commitment to the environment and society.

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

RELATED PARTY TRANSACTIONS

The Policy on Related Party Transactions is available on the Company''s website at http://www.sonata- software.com/corporate
governance.

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 DIRECTOR 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.

LISTING WITH STOCK EXCHANGES

The Company confirms that it has paid the Annual Listing Fees for the year 2015-16 to NSE and BSE where the 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 elsewhere in this Annual Report.

Certificate from Mr. P Sriram, a practicing Company Secretary, Proprietor of P. Sriram & Associates, confirming the compliance
with the conditions of Corporate Governance as stipulated under the said Regulations Agreement is attached to this report.

AUDITORS

M/s Deloitte Haskins & Sells, Chartered Accountants, (ICAI Registration No. 008072S), Bengaluru, Statutory Auditors of the
Company retire at the conclusion of the forthcoming AGM and are eligible for re-appointment.

ACKNOWLEDGMENTS

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 Sonata''s for
their valuable contribution and dedicated service.

FOR AND ON BEHALF OF THE BOARD

SONATA SOFTWARE LIMITED

Place : Mumbai PRADIP P SHAH

Date : 23rd May, 2016 CHAIRMAN


Mar 31, 2015

To the Members,

The Directors have pleasure in presenting before you the Twentieth Annual Report of your Company together with the Audited Financial Statements for the Financial Year ended 31st March, 2015.

FINANCIAL RESULTS

(Rs in Crores) Standalone Description Financial Year Financial Year ended ended 31st Mar 2015 31st Mar 2014

Total Income 498.52 351.09

Total expenditure 338.35 274.69 EBITDA 160.17 76.40

Depreciation and Amortization Expense 5.22 7.39

Finance Cost 1.14 0.17

Profit before Tax and Exceptional Items 153.81 68.84

Exceptional (Income)/ Expenses - -

Provision for Tax (Net) 36.34 15.00

Minority Interest - -

Net Profit/(Loss) 117.47 53.84

Appropriations: Proposed / Final Dividend 44.69 28.92

Interim Dividend 28.92 10.52

Provision for Dividend Tax 13.44 6.27

Transfer to General Reserve 12.00 6.00

Earnings in Rs per share 11.17 5.12

(Rs in Crores) Consolidated Description Financial Year Financial Year ended ended 31st Mar 2015 31st Mar 2014

Total Income 1702.00 1576.62

Total expenditure 1514.49 1466.30 EBITDA 187.51 110.32

Depreciation and 6.07 7.96 Amortization Expense

Finance Cost 2.76 2.43

Profit before Tax and 178.68 99.92 Exceptional Items

Exceptional (Income)/ (3.22) (7.15) Expenses

Provision for Tax (Net) 48.62 29.35

Minority Interest 0.42 0.04

Net Profit/(Loss) 133.70 77.77

Appropriations: Proposed / Final 44.69 28.92 Dividend

Interim Dividend 28.92 10.52

Provision for Dividend Tax 14.50 7.13

Transfer to General Reserve 14.50 8.00

Earnings in Rs per share 12.71 7.40

business performance

Your Company is primarily engaged in the business of providing IT Services and Solutions to its customers in the US, Europe, Middle East and Asia Pacific and Distribution of Software Products in India. The consolidated results of your Company include operations of its Indian and Overseas Subsidiaries and are best explained and analyzed under the two distinct segments of:

a) International IT Services;

b) Domestic Products and Services.

On an overall basis, for the Financial Year that ended on 31st March, 2015, we are very pleased to report that your Company had the best growth in the industry and segment which helped in setting new records in all metrics of financial performance at a consolidated basis and also in each of the individual business segments it operates in.

This remarkable growth coupled with a strong Balance Sheet has been the result of your Company''s focus on geographic expansion, deeper engagement with our customers and being

vendor of choice in their transformational IT Roadmaps, quick adoption to the disruptive technologies such as hybris, cloud, analytics, mobility and ecommerce. Further our growth for the current year was fuelled by the customer focused solutions in the areas of our strength such as Retail & Travel and customer centres of excellence. Your Company further strengthened the leadership position in the Travel industry with the acquisition of Rezopia Inc., USA during the current Financial Year under review. Your Company continues to invest in its talent and develop IP based solutions which can be game changer in the verticals of choice and strength.

The above focused approach was invigorated by adopting the value statement of "Go Deeper", essentially meaning go deeper into a customer to emerge higher in what we do for them. Your Company continues to build on its traditional vertical of strength - Travel, and Outsourced Product Development (OPD) while entering new verticals like Retail and CPG (Consumer Products & Goods). While strengthening existing partnerships with large firms such as Microsoft, IBM, your Company forged new partnerships with leading technology firms and solution

providers. Your Company has also strengthened sales team across various geographies and continues to do so, to drive the engine of growth in the years to come.

Significant steps taken by your Company during the Financial Year which supported its solid financial performance and which we believe will have a continued positive effect on your Company were:

- Strengthening business in existing geographies and expanding onto others like France and thereby creating a diversified geographical mix;

- Investing in next generation IP based solutions by acquiring Rezopia Inc., USA and businesses of Xyka Software Private Limited, India;

- Investing in Marketing and Branding;

- Opening of ''Customer Experience Centre'' in our Global Village campus, Bengaluru;

- Strengthening the Sales, Account Management, Alliances and Product Management processes and teams;

- Further strengthening the Senior Management capabilities through additions in key positions such as - Head of Technology, Human Resource, etc. and

- Participating in various Travel & Retail Industry events across the globe to showcase Company''s expertise

Our greatest asset is our people. They build lasting relationships with our customers and are key to the continued success and growth of our business. We continue to enhance our employee capability with continued investments in hiring the best, imparting training in areas of improvement of soft skills, management, technology and our domains of focus.

Coming to the results, both on a Standalone and Consolidated basis your Company has shown growth in all its financial metrics.

Standalone financials

Total income has shown a growth of 42%, Earnings before Interest, taxes, Depreciation and Amortisation (EBITDA) a growth of 110% and Net Profit witnessed a growth of 118% with Earnings per share at Rs.11.17 when compared to the previous Financial Year.

Consolidated financials

Total income has shown a growth of 8%, EBIDTA a growth of 70% and Net Profit witnessed a growth of 72% when compared to the previous Financial Year.

Analysing your Company''s consolidated results by the two segments it operates in, International IT services contributed 36% of total revenues and 81% of PAT while Domestic products and services contributed to 64% of the total revenues and 19% of PAT.

International IT Services total revenue is Rs. 607 crores, growth of 25% and $ 98 million in US$ terms with a growth of 25% in

revenues, 78% in EBIDTA and 85% in PAT. Your Company has managed to declare such record results consistently on account of its focus on serving and growing its existing customers, new customer additions of 21 through the Financial Year, and maintaining resource utilization at levels in excess of 85% over the Financial Year.

Domestic products and Services has showed growth of 1% in revenues, 35% in EBIDTA and 31% in PAT. The focus in this business has always been to manage Return on Capital Employed, which was approximately 37% for the year.

Your Company during the Financial Year under review had a stronger consolidated Balance Sheet and has approximately Rs. 239 crores of cash and equivalents, showing Return on Capital employed of 33% and growth in earnings per share from Rs. 7.4 per share to Rs.12.71 per share.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report as required under clause 45(viii) (D)(1) of the Listing Agreement is disclosed separately in the Annual Report.

dividend / transfer to reserves

Considering the record profits and the better liquidity position of your Company, your Directors are pleased to recommend payment of a final Dividend of Rs. 4.25 per equity share (@ 425 % on par value of Rs. 1/- each) subject to the approval of shareholders at the forthcoming Annual General Meeting, which along with the first interim Dividend of Rs. 1.75 /- per equity share and the second interim dividend of Rs. 1 /- per equity share adds up to a total dividend of Rs. 7/- per equity share ( Previous Financial Year - Rs. 3.75/- per equity share of Rs. 1/- each).

If approved, the final Dividend will be paid to all those Equity Shareholders, whose names appear on the Register of Members of your Company on 23rd July, 2015 and to those whose names appear as beneficial owners in the records of National Securities Depository Ltd and Central Depository Services (India) Ltd., as on the said date.

Your Company proposes to transfer Rs. 12,00,00,000 (Rupees Twelve Crores) to the general reserve.

BOARD Meetings

During the Financial Year under review, the Board of Directors met six times. The Meetings of the Board were held on 26th May, 2014, 11th August, 2014, 8th September, 2014, 7th November, 2014, 6th February, 2015 and 31st March, 2015.

DIRECTORS AND KEY MANANGERIAL pERSONNEL

Mr. S B Ghia, 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 given in the notes to the Notice of the ensuing AGM.

During the FinancialYear under review, Ms Radhika Rajan was appointed as an Additional Director to fulfil the requirement of appointing a Woman Independent Director on the Board of your Company and now it is proposed to appoint her for a period of five years at the ensuing Annual General Meeting. Mr Suresh Talwar, Mr Pradip P Shah and Mr B K Syngal were appointed during the Financial Year as Independent Directors for a consecutive term of five years from the date of the previous AGM and shall not be liable to retire by rotation.

Mr Venkatraman N, Chief Financial Officer, also designated as a Key Managerial Personnel, had resigned from the services of the Company with effect from 9th April, 2015, for personal reasons.

Subsequently, Mr. Prasanna Oke has been appointed as the Chief Financial Officer and designated as a Key Managerial Personnel of your Company with effect from 19th May 2015. Mr. Prasanna Oke is a graduate from University of Pune and holds an MBA Degree from the Indian Institute of Management, Ahmedabad. He has over 20 years of experience across functions like Finance, Operations, Sales and M&A. Over the years, Mr. Prasanna has been associated with Companies such as ITW Signode, MBL India, Dragoco, and Ness Technologies. Prior to joining your Company, he worked with Globalshiksha.com as the Chief Operating Officer.

INDEPENDENT DIRECTORS

During the Financial Year under review, 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 them contribute significantly to your Company.

Your Company has received necessary declaration 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.

DIRECTORS'' RESPONSIBILITY STATEMENT:

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

(a) in the preparation of the annual accounts for the Financial Year ended 31st March, 2015, 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 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 AFFECTING FINANCIAL POSITION BETWEEN THE END

of financial year and date of report

There have been no material changes and commitments affecting financial position between the end of the Financial Year and date of report.

audit COMMITTEE

The Audit Committee comprises of Mr B K Syngal (Chairman), Mr Pradip P Shah and Mr S B Ghia as its members. The Committee met five times during the Financial Year under the review and all its recommendations were accepted by the Board.

Your Company has established Vigil Mechanism which provides for direct access to the Chairman 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 covers questionable financial or accounting matters and reporting fraudulent financial information to the shareholders, the government, the financial markets or any other legal authorities.

NOMINATION AND REMuNERATION COMMITTEE & Stakeholders RELATIONSHIp COMMITTEE

During the Financial Year under review, your Company has reconstituted the Nomination and Remuneration Committee and the Stakeholders Relationship Committee, in line with the requirements of the Companies Act, 2013 and the Listing Agreements entered into with the Stock Exchanges.

The present composition of the Nomination and Remuneration Committee includes Mr Suresh Talwar (Chairman), Mr Viren Raheja, Mr B K Syngal and Mr S B Ghia as its members. The Nomination and Remuneration 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), Mr P Srikar Reddy and Mr M D Dalal as its members.

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, Qatar and Rezopia Inc, USA duly audited are presented as part of this Report in accordance with Accounting Standard 21 and the Listing Agreement with the Stock Exchanges, wherever applicable. The statement pursuant to the proviso to section 129(3) of the Companies Act, 2013, containing salient features of the financial statement of the Company''s Subsidiaries in Form AOC-1 is given in ANNEXURE II.

The audited accounts of subsidiaries (including overseas sub- sidiaries) 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 Holding and Subsidiary Companies.

During the Financial Year under review your Company''s application for closure of Sonata Technology Solutions (India) Limited, a wholly owned subsidiary Company in India under Fast Track Exit Scheme was approved.

Your Company had through its wholly owned subsidiary Company Sonata Software North America Inc., acquired a strategic controlling stake in Rezopia Inc., the first cloud based end to end reservations, contracts, operations and distribution management systems platform for travel providers, headquartered in California, USA. The acquisition was aimed at enabling both Companies to leverage mutual strengths and opportunities in serving emerging IT solution needs in the global Travel industry. In a separate transaction, your Company also acquired the businesses of Xyka India Pvt. Ltd. which is a primary service provider to Rezopia''s platform.

During the Financial Year under review, your Company has formulated and adopted a "Policy for determining Material Subsidiaries", so that your Company could identify such subsidiaries and set out a governance framework for them. A copy of the Policy forms part of this Report as ANNEXURE III.

EMPLOYEE STOCK OPTION PLAN "ESOP"

During the Financial Year under review, your Company has adopted a new Employee Stock Option Plan , 2013 (Plan) to align its existing employee benefit scheme in accordance with the SEBI Guidelines. The principal objectives of this Plan are to:

(a) attract, retain and motivate talented and critical Employees;

(b) encourage Employees to align individual performance with the Group''s objectives;

(c) reward Employee performance with ownership in proportion to their contribution;

(d) 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, exercised 1,50,000 (One Lakh Fifty Thousand) options of your Company at an excercise price of '' 18.10 per share. Further, 75,000 options of your Company have been vested in him as on 31st March, 2015 which have not as on the date of this Report been exercised by him.

Pursuant to the requirements of the SEBI Guidelines, a certificate has been issued by the Auditors of your Company confirming that the Plan has been implemented in accordance with the Regulations and in accordance with the resolution of the Company in the Nineteenth Annual General Meeting. A copy of the Certificate shall be placed before the Shareholders for inspection at the ensuing Annual General Meeting.

SECRETARIAL AUDIT

Secretarial Audit report as provided by Mr Praveen Kumar D, Practising Company Secretary is annexed to this Report as ANNEXURE IV.

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 for the Financial Year.

However, qualifications were observed by the Secretarial Auditor in his Report to which the Board has shared the following explanations:

Qualification 1: In respect of compliance under the provisions of the Special Economic Zone, Act, 2005, the Company has not registered the Lease Deed entered into with the Developer as per the terms of conditions of approval mentioned in the initial Letter of Approval dated 7th March, 2008 and the non-compliance continues even during the Financial Year under review.

Response 1: Your Company has entered into various Lease Deeds floor wise at different points of time depending upon requirement of space and now that entire building is occupied by the Company, it is in the process of consolidating all these lease deeds into one and the same would be duly registered during the current year.

Qualification 2: In respect of compliance under the provisions of the Foreign Exchange Management Act 1999 and the Rules and Regulations made thereunder, the Company has belatedly filed, the Annual Return on Foreign Liabilities and Assets for FY 2013-14 on May 11, 2015, which was supposed to be filed on or before July 15, 2014.

Response 2: Your Company has filed within due dates Annual Performance Reports ("APR") duly certified by the Auditors with RBI with regard to all its overseas subsidiaries and mistakenly understood that with the filing of APRs (which essentially also

captures about the foreign assets/liabilities), there would not be a separate requirement to file Annual Return on Foreign Liabilities and Assets with RBI. However, after realizing that these returns are reviewed by two separate departments of RBI and that it is required to be filed, your Company immediately took steps to file the same.

SECRETARIAL STANDARDS

Though during the Financial Year under review, none of the Secretarial Standards have been notified by Central Government. However, your Company has voluntarily complied with some of the provisions of the Secretarial Standards issued by the Institute of Company Secretaries of India.

EXTRACT OF ANNUAL RETURN

As required pursuant to Section 92(3) of the Companies Act, 2013 and 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 V.

RECOGNITION

During the Financial Year under review, your Company and its subsidiaries were felicitated with followings recognitions:

a) "SAP Pinnacle Award" for SME Value- Added Reseller of the Year;

b) "SAP Partner of the Year- General Business" for significant contributions made in developing and growing partnerships with SAP and driving customer success;

c) "2014 Microsoft Country Partner of the Year", recognized for providing outstanding solutions and services, as well as demonstrating excellent subsidiary engagement in India at the World Partner Conference in Washington DC;

d) "LSP Partner of the Year and Alliance Partner of the Year"

awards at the Microsoft Partner Summit.

Further, your Company was also shortlisted as finalist for the "Namma Bengaluru 2014" award under Corporate Social Responsibility category.

Also, your Company took active participation in the community services for the Financial Year under review. The employees actively participated in "Daan Utsav" - an annual ''Joy of Giving Week'' program that helped your Company collect funds for CSR initiatives spanning contributions to flood relief for Jammu & Kashmir and disadvantaged children. This way, your Company helped foundations like Goonj, Ankura, Manonanda, Ananthashishu Nivasa and Bosco Mane. The Blood Donation camps were also a big success which were organized across locations.

Your Company was also instrumental in partnering with the Centre for Entrepreneurship Development and Incubation at NIT Trichy to fund student innovation and entrepreneurship programs.

QUALITY

Your Company continues to achieve customer delight by adopting best practices from the industry as well as proven quality models. During the Financial Year under review, your Company successfully completed the re-appraisal of its delivery processes and achieved Level 5 of CMMI, v1.3. The project delivery teams are implementing the practices for ensuring predictable delivery and project success and take mid-course corrective actions as required.

Your Company continued to adhere to enterprise-wide ISO certification for ISO 20000:2011 (Service Management), ISO 9001:2008 (Quality Management) and the Security Management Standard ISO 27001:2005.

Knowledge Management (KM) process is strengthened in all strategic accounts by setting up the KM portal and promoting KM practices aligned to the Customer-specific Center of Excellence. Process Automation is planned to improve the efficiency in delivery lifecycle.

As a part of its ongoing quality assurance philosophy, your Company is enhancing the effectiveness of the delivery by strengthening its delivery excellence function.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO:

(A) Conservation of energy:

Though your Company does not have energy intensive operations, every endeavour has been made to ensure the optimal usage of energy, avoid wastage and conserve energy. As an ongoing process your Company continued to undertake the following measures to conserve energy:

- Using energy-efficient computers and equipment with the latest technologies, this would help in conservation of energy.

- Installation of sensors at work space area.

- Control measures at HVAC vertical to create advanced air cooling since HVAC contributes 70% of the energy utilization.

- Installation of LCD/LED monitors (energy efficient) in place of normal CRT monitors, thereby saving energy.

- Usage of LED lighting in common areas.

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

- Consolidation of facilities.

- Operating only one elevator in buildings having two elevators after 7 pm.

During the Financial 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 LED lights to replace CFL''s in lift lobby areas & conference rooms to optimize power consumption.

- Installation of LED lights in newly commissioned production areas and new projects like the CEC

- Individual controls for lighting systems

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 also entered into alliances with global technology leaders in these areas that helped in absorption of technology competencies. Key benefits in technology include development of Retina - Analytics solution for Retail companies. Your Company also developed suite for process engineering tools called ADEPT, that helps reduce costs and improve quality of end products.

(C) Foreign Exchange earnings and Outgo

During the Financial Year under review, 91.54% of the revenue came 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. 52.34 crores and Foreign Exchange inflow on account of export of software services (net), Dividend and other operating revenues was Rs. 416.65 crores.

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.

During the Financial Year under review, your Company has in line with its expansion plans, become operational in the new geographies like France by leveraging its existing connection with Global Alliance Partners like SAO, Microsoft and also working towards finding new customer connects in these Geographies. Apart from this your Company has identified a strong set of prospective customers globally based on research and data

analysis and has strategized plans for converting these prospects into wins. A robust sales team with Senior leadership at the helm of affairs has been sufficiently enabled to venture into all possible market opportunities across all geographies.

public deposits

Your Company has not accepted any deposits from the public during the Financial Year under review.

human resources management

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

- Career Planning & Development initiative where employees shared their aspirations & the organization worked towards the realization by aligning opportunities to aspirations, key developmental interventions & providing employees with the required support & infrastructure;

- Senior Leadership Development through a 360° feedback process, key developmental interventions through Executive Coaching, Leadership Development Program & Sponsoring Key leaders to Strategic Leadership Programs with B-schools;

- An organization-wide Employee Engagement Survey seeking feedback from employees on how we can make Sonata a Great Place to work;

- Constituting location HR teams and local leadership Councils to address feedback received from the Employee Engagement Survey;

- A Culture Audit to strengthen Organizational transformation;

- Competency framework - Creation of a comprehensive framework along with the competency dictionary;

- Annual review of Compensation & Benefits to aligning it to the Industry and administering it globally;

- Organized several employee engagement & CSR events across our facilities enabling employees to engage, participate, contribute and do their bit to our society and

- Your Company launched the new Rewards & Rewards Program to create a recognition and appreciation culture to ensure a positive reinforcement of behaviours of caring and respect aligned with a strong focus on our business strategy for customer success and corporate responsibility.

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

- Your Managing Director & CEO along with his Leadership team shared the Company strategy, plans & key focus areas

- Unveiled your Company''s compelling Vision that inspires, engages, energizes and empowers Sonatians, which brings us together to work as a team to collaborate and achieve excellence.

- Your Company shared the organizational DNA [Deeper Nurtured Attributes] which is important for all Sonatians to imbibe, nurture and demonstrate in our all actions enabling us to achieve excellence as Individuals & teams

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 REDRESSAU 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 the 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.

details of adequacy of internal financial controls

Your Company has deployed adequate Internal Control Systems (ICS) in place to ensure a smooth functioning of its business. The processes and the systems are reviewed constantly and changed to address the changing regulatory and business environment. The Control Systems provide a reasonable assurance of recording the transactions of its operations in all material aspects and of providing protection against misuse or loss of Company''s assets.

The ERP system which your Company had implemented has helped in further strengthening the ICS that are in place.

The existing ICS and their adequacy are frequently reviewed and improved upon to meet the changing business environment. The internal auditors periodically review the internal control systems, policies and procedures for their adequacy, effectiveness, and continuous operation for addressing risk management and mitigation strategies.

particulars of loans, guarantees or

INVESTMENTS

During the Financial Year under review, your Company has given Inter Corporate Deposits at prevailing bank lending rate

to its Wholly owned subsidiary, Sonata Information Technology Ltd. for meeting its working capital requirements. The balance outstanding as on 31st March 2015 is ''NIL''. The maximum amount outstanding at any point of time during the Financial Year has been Rs.97.35 crores.

Also, your Company has given Corporate Guarantees on behalf of Sonata Information Technology Ltd. for facilitating its business needs. The outstanding amount as on 31st March, 2015 is as below:

Amount in Name of the Party Rs crores

Microsoft Regional Sales Corporation 12.5

Microsoft Corporation (India) Pvt. Ltd. 50.0

IBM India Ltd. 5.0

risk MANAGEMENT POLICY :

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 ungrade 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 POLICY (CSR):

Your Company has in pursuance to the provisions of Section 135 and Schedule VII of the Companies Act, 2013, during the Financial Year, constituted a CSR Committee of the Board of Directors to (a) formulate and recomend a CSR policy, (b) recomend the amount of expenditure to be incurred on the CSR activities and (c) monitor implementation of the CSR policy from time to time.

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

- A Green Future - Partnered with Pangea Econet to plant and nurture tress across the Country

- Enable Heritage through IT - Partnered with Indian National Trust for Art and Cultural Heritage (Intach) to develop software solutions to help them promote the awareness for Heritage buildings & promote national art and culture

- Promote education to the impaired - Contributed to Sense International India, a Centre for Deaf and Blind in Bangalore

- Empower through IT - Partnered with NIT Trichy to establish technology incubation centers to aide Technology Institutions to encourage student innovation and entrepreneurship in the youth

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

RELATED PARTY TRANSACTIONS :

During the Financial Year under review, in line with the requirements of the Listing Agreement entered with the Stock Exchanges, your Company has formulated a Policy on materiality of Related Party transactions and for dealing with such transactions. A copy of the Policy forms part of this Report as ANNEXURE VII.

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 - VIII.

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 director 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 - IX.

LISTING WITH SToCK EXCHANGES:

Your Company confirms that it has paid the Annual Listing Fees for the Financial Year 2014-15 to NSE and BSE where the Company''s Shares are listed.

corporate governance and shareholders

INFORMATION:

Your Company has taken adequate steps to adhere to all the stipulations laid down in Clause 49 of the Listing Agreement. A report on Corporate Governance is provided elsewhere in this Annual Report.

Certificate from the Statutory Auditors of your Company confirming the compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to this report.

auditors

M/s Deloitte Haskins & Sells, Chartered Accountants, (ICAI Registration No. 008072S), Bangalore, Statutory Auditors of your Company were appointed as Auditors from the conclusion of the previous Annual General Meeting (AGM) to the conclusion of the fourth consecutive AGM, subject to ratification of their appointment by the Members at every AGM held after this AGM) and accordingly, a resolution proposing ratification of their appointment is being submitted to the Shareholders at the ensuing AGM.

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.

Place : Mumbai Date : 19th May, 2015

for and on behalf of the board sonata software limited

PRADIP P SHAH CHAIRMAN


Mar 31, 2013

TO THE MEMBERS OF SONATA SOFTWARE LIMITED

The Directors have pleasure in presenting the Eighteenth Annual Report of your Company together with the Audited Statement of Accounts for the financial year ended 31st March, 2013.

FINANCIAL RESULTS

(Rs.in Crores) Standalone Consolidated Description Year ended Year ended Year ended Year ended Year ended 31.03.2013 31.03. 2012 31.03. 2013* 31.03. 2012** 31.03.2012#

Total Income 243.49 237.30 1317.29 1043.67 1580.87

Total Expenditure 210.02 206.24 1257.80 1008.88 1519.17

EBIDTA 33.47 06 59.49 34.79 61.70

Depreciation & Amortization Expense 9.73 10.77 10.08 10.98 45.91

Finance Cost 0.05 0.01 5.89 6.74 11.81

Profit / (Loss) Before Tax 23.69 20.28 43.52 17.07 3.98

Exceptional Item 11.89

Provision for Tax (Net) 7.93 5.37 13.56 6.48 9.42

Share of earnings in affiliates 2.32

Minority Interest 0.04 0.03 12.42

Net Profit / (Loss) 15.76 14.91 30.00 10.56 (2.59)

Appropriations:

Proposed / Final Dividend 13.14 2.63 13.14 2.63 2.63

Interim Dividend 5.26 5.26 5.26 5.26 5.26

Provision for Dividend Tax 3.09 1.28 3.09 1.28 1.28

Transfer of Capital Redemption Reserve 18.67

Transfer to General Reserve 1.60 1.50 1.60 1.50 1.50

* These numbers are for the Continuing operations, and thus, are after the de-consolidation of the financials of TUI InfoTec GmbH the erstwhile step-down subsidiary of the Company. The 50.1% shareholding in the TUI InfoTec GmbH was divested on 30th September, 2012.

** Re-casted numbers of previous year excluding results of TUI InfoTec GmbH. Re-cast done for effective comparison between the continuing business in the current year to the previous.

# Audited numbers for the year ended 31st March, 2012.

BUSINESS PERFORMANCE

Your Company is engaged in the business of providing IT Services and solutions to its customers in the US, Europe, Middle East and Asia Pacific and distribution of software products in India through its subsidiary Sonata Information Technology Limited ("SITL").

During the year of 2012, your Company''s consolidated results covered its three lines of business : (a) Software Services

(b) Domestic Products and Services and (c) the Joint Venture - TUI InfoTec GmbH, Germany. The financial position of the Company during the said year that ended on 31st March, 2012, had been adversely impacted by the results of its loss making German subsidiary, TUI InfoTec GmbH and losses in its Domestic products and Services business carried on through SITL, and a tough business environment in its Software Services business in the key markets of US and Europe. Your Company had reported a consolidated loss in the year.

Reporting on the results for the year that ended on 31st March, 2013, we are pleased to state that your Company in its consolidated financials of its continuing business consisting of two business lines of (a) Software Services and (b) Domestic Products and Services has reported an all-time high in revenues. Your Company has also returned to making profits.

Your Company achieved the above turnaround through:

a) Divestment of its loss making Joint Venture - TUI InfoTec GmbH;

b) Completely restructuring the Domestic products and services business by re-aligning and changing the product mix and controlled write offs; and

c) Stabilising the Software services business and subsequently driving growth and profitability in the same.

Your Company while seeking to achieve the above had to face unfavourable and wild currency fluctuations and weak economic situation at home and in its overseas markets.

The theme for the year that ended was Stability and Growth. Your Company achieved these through investments in its existing customers and building on its existing vertical strengths. To drive value for customers, your Company invested in the new technology areas of Mobility, Analytics, Cloud and Social media. The sales team was energised and supported through investments in existing geographies. In addition to strengthening existing partnerships and alliance with large technology majors like Microsoft, HP, IBM, Oracle and SAP, your Company struck new alliances with new technology companies like TIBCO (for enterprise social media), Hybris (e-commerce), etc.

Your Company divested its shareholding in TUI InfoTec GmbH to TUI Travel Plc, a large customer of the Company. The sale was made for a total composite consideration of upto € 12 million payable on a deferred basis on achieving certain milestones. Further transaction benefits were that your Company was released from certain payment obligations of € 3.5 million, the buyer taking over losses of the TUI InfoTec GmbH till 30th September, 2012 and TUI Travel Plc according your Company the status of "preferred partner and vendor" for IT Services for the Group.

Coming to the results, on a standalone basis your Company has shown growth in Total income of 3%, a growth of 8% in Earnings before Interest, Taxes, Depreciation and Amortization, a growth of 16% in Profits before taxes and Net profit growth of 6%. The above results are despite foreign exchange losses of Rs. 18 crores during the year as against a gain of Rs. 3.6 crores in previous year. Your Company has been able to declare these results primarily aided by the sales growth, improved operations and billability.

Consolidated revenues in continuing operations have recorded highest ever revenues since inception at Rs. 1,318 crores, a growth of 26%. Breaking away from the previous year, your Company has returned to a situation of healthy profits at Rs. 30 crores which represents 184% growth over previous year,

The Software Services business contributed approximately Rs. 21 crores of the total profits of the Company which represents a flat growth. But for the wild foreign currency fluctuations and the resulting losses, this business has made substantial progress in terms of best billability and realization. Inspite of a Foreign Exchange losses to the extent of 19 Crores, compared to a gain of Rs. 6 crores in the previous year which is a Rs. 25 crore swing, the Software Services business was able to maintain the momentum, due to improved sales, better utilization and innovation. Investments made in the business and the strategy charted out by the Company will definitely catapult the Company into higher growth trajectory in the coming days.

The Domestic Products and Services business had a highest ever revenue this year since inception, showed a revenue growth of 23% over previous year. Focus on quality of business, robust credit review and better margins has led the company to swing back to profits of Rs. 9.5 crores representing a growth of 197%. The Company has made significant progress in addressing the major concerns, i.e. quality of business and profitability. Recent changes to Income Tax laws address the difficulties faced by us and the industry. The company hopes to settle the tax issues which have been a major concern for the business.

DIVIDEND / TRANSER TO RESERVES

Considering the better liquidity position of the company, your Directors are pleased to recommend payment of a final dividend of Rs. 1.25/- per equity share (@125% on par value of Rs. 1/- each), subject to the approval of shareholders at the forthcoming Annual General Meeting, which along with the interim dividend of Rs. 0.50/- per equity share adds upto a total dividend of Rs. 1.75/- per equity share (Previous year - Rs. 0.75 /- per equity share of Rs. 1/- each).

If approved, the final dividend will be paid to all those equity shareholders whose names appear on the Register of Members of the Company on 29th July, 2013 and to those whose names appear as beneficial owners in the records of National Securities Depository Ltd and Central Depository Services (India) Ltd. as on the said date.

Your Company proposes to transfer Rs. 16,000,000/- (10% of the net profits for the year) to the general reserve.

QUALITY

Your Company continues to focus on improving the service delivery to its customers by enhancing the effectiveness of processes. During the year under review, your Company has aligned its ITIL processes with the requirements of the latest version of the standard ISO 20000-1: 2011 as well as successfully completed the re-certification audit. During the re-certification audit, the external auditors have expressed their satisfaction about the awareness and professionalism of employees in implementing the best practices of ITIL.

Focusing on the people dimension, your Company has charted a program for improving project management effectiveness by way of acquainting its project managers with the practical aspects of managing programs / projects, including soft skills. These training programs are being delivered by a renowned process expert.

In line with its focus on customers, your Company has formed Centers of Excellence (CoE) that would build customer-specific competencies to cater to its key customers. These CoEs seek to achieve progressively higher levels of maturity through a well defined process.

LISTING / LISTING FEES

Your Company''s equity shares are listed on Bombay Stock Exchange Ltd and National Stock Exchange of India Ltd, exchanges having nation-wide terminals.

The Annual listing fees for the year under review has been paid to Bombay Stock Exchange Ltd and National Stock Exchange of India Ltd, where your Company''s shares are listed.

SUBSIDIARY COMPANIES

The statement pursuant to Section 212(1)(e) of the Companies Act, 1 956 in respect of subsidiaries is attached. The Consolidated Accounts of your Company and its subsidiaries viz., Sonata Information Technology Ltd, Sonata Technology Solutions (India) Limited, Sonata Software North America Inc., USA (formerly known as Offshore Digital Services Inc), Sonata Software GmbH, Germany, Sonata Europe Ltd, UK, Sonata Software FZ LLC, Dubai and Sonata Software (Qatar) LLC duly audited by the Statutory Auditors are presented as part of this Report in accordance with Accounting Standard 21 and the Listing Agreement with the Stock Exchanges, wherever applicable.

The Ministry of Corporate Affairs vide General Circular No. 2/2011 dated 8th February, 2011 has provided an exemption to Companies subject to certain conditions from attaching the audited accounts of subsidiary companies. Accordingly, the audited accounts of the above mentioned overseas subsidiary companies are not attached and your Company has complied with all the conditions of aforesaid circular.

The audited accounts of overseas subsidiaries will be made available for inspection by any shareholder at the Company''s Registered office and at respective registered offices of overseas subsidiary companies. Copies can be made available, on request to the shareholders of the holding and subsidiary companies.

During the year, your Company has voluntarily wound up Abisko Development Limited, a wholly owned subsidiary Company incorporated in Cyprus as there were no transactions in the Company for several years.

The Company''s subsidiary, Sonata GMBH Europe Limited had sold its 50.1% shareholding in TUI InfoTec back to TUI Travel PLC for a total composite consideration of upto € 12 million payable on a deferred basis on achieving certain milestones and additionally release from certain obligations of € 3.5 million.

RECOGNITION

During the year under review, your Company was recognised as the ''Most Innovative Partner of the Year'' by Hybris Software; featured in leadership zone of Zinnov''s GSPR 2012 Report for its niche R&D services in two key categories - Independent Software Vendors (ISVs) and Consumer Software Service Providers; and was also featured in Forrester''s report "Navigating the Microsoft Services Landscape" as a leading provider of Microsoft AX and Azure Services.

CORPORATE GOVERNANCE

As required under Clause 49 of the Listing Agreement with Stock Exchanges, a Report on Corporate Governance is provided elsewhere in this Annual Report along with the Auditors'' Certificate on the compliance thereof.

During the year under review, your Company has not specifically adopted the voluntary guidelines of ''Corporate Governance Voluntary Guidelines 2009'' though the Company has been practicing some of them.

SECRETARIAL COMPLIANCE REPORT

As a reflection of your Company''s commitment to transparency, the Board is pleased to enclose the Secretarial Compliance Report for the financial year 2012-13, as part of this Directors'' Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Your Directors, to the best of their knowledge and belief, state that the Company maintains proper accounting records which disclose with reasonable accuracy, the financial position of the Company,

Further, your Directors state that these accounting records have formed the basis for the preparation of financial statements of the Company in compliance with the provisions of the Companies Act, 1956, including any amendments thereto.

Your Directors also confirm that the financial statements of the Company are prepared in such a manner to give a true and fair view of the state of affairs of the Company as at the end of 31st March, 2013 and of the profit of the Company for the year to that date.

Your Directors state that in preparing the aforesaid financial statements of the Company, appropriate accounting policies have been consistently applied and supported by reasonable and prudent judgements and estimates, whilst applicable accounting standards have been followed and that these financial statements have been prepared on "going-concern basis".

Further, your Directors to the best of their knowledge and belief, state that appropriate internal control systems are in place which are reasonably expected to safeguard the assets of the Company and to prevent and detect fraud and irregularities.

ENERGY CONSERVATION, RESEARCH & DEVELOPMENT, FOREIGN EXCHANGE

The particulars, as prescribed under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, with regard to conservation of energy, research & development and foreign exchange earnings & outgo are set out in the annexure attached to this Report.

Your Company has nothing to report on Technology absorption, adaptation and innovation.

PUBLIC DEPOSITS

Your Company has not accepted any deposits from the public during the year under review.

HUMAN RESOURCE MANAGEMENT

Particulars of employees as required under the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 2011, is attached to this Report.

COMMUNITY SERVICE

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

- Your Company is working with the Teach a Class Foundation to fund and provide educational "hotspot" devices which help bridge the gap in quality education by using technology, These education hotspot devices are wireless router cum storage devices that can be accessed online or offline by any device with browser capability, and are provided with a tablet and projector, along with training to the teachers, to the schools. Currently, your Company is also working with Bhumi and Hope, its long term NGO partners for educational ventures.

- Sonatians came together in October to participate in the Joy of Giving Week festival. Employee contributions and enthusiasm made this event a great success. Some of the contributions made are:

Across Sonata offices, special lunch, gift vouchers / solar LED lamps were given to internal support staff.

Blood Donation camp was organised in Sonata Bangalore locations in conjunction with Rotary Bangalore.

Employees donated time and money to a number of causes like development of underprivileged children, street children and orphans and to those individuals afflicted with leprosy. Donation of school uniforms, stationary, water purifiers, gifts, computer accessories etc were also made to a number of Government Schools and orphanages in different parts of Bangalore.

Employees donated solar LED lamps to Hyderabad Council for Human Welfare, which houses and educates 60 street children and 240 solar LED lamps to Rasoolpura Government School in Hyderabad.

Daily utilities were donated to Government Crisis Centre for Women, a temporary shelter home for women, in Bangalore.

Donations were made to Sumanahalli Society in Bangalore, housing leprosy patients, to build homes and finance the education of their children.

Providing a separate Early Intervention Program for children with Autism, Down''s Syndrome, Cerebral Palsy, Mental Retardation, Attention Deficit Hyper Activity and Specific Learning Disability, to afford special care at Ankura Foundation, Bangalore.

GO GREEN INITIATIVES

Being a socially responsible corporate citizen, your Company has launched important initiatives within the organization to promote a Greener planet. It has aligned its IT agenda with mission-critical sustainability goals in order to increase energy efficiency and productivity while reducing carbon footprint. Through environmentally sustainable IT systems, efficient use of computing and other resources, minimized use of hazardous materials, and enhanced recycling and biodegradation of defunct products, your Company has increased its IT eco-efficiency while cutting down costs.

Below are some of the initiatives that corroborate your Company''s commitment to a Greener planet:

1. Virtualization: Partnered with global leaders like Microsoft and VMWare to implement virtualization products that help in consolidation of multiple applications on one physical server, thus reducing the server footprint and trimming down carbon emissions.

2. Reduce power consumption: In its operations uses energy saving / efficient equipment, optimal usage of air- conditioners, etc

3. Optimal usage of paper: Encourages employees to minimize actual printing of documents, provides the facility of Document sharing machines, uses recycled papers for printing its annual reports, actively participates in MCA''s green initiatives

4. Noise and e-waste management: All Diesel Generator systems are insulated with acoustic fabric to maintain the noise levels at less than 75 db. Waste generated are disposed off scientifically in compliance with the hazardous waste management procedures.

5. Water: Rainwater harvesting is being implemented at its development centers, preventive maintenance scheduled to check the plumbing lines for leakage and arrest, etc

6. Planting: A sapling is planted every-time it greets its customers / associates.

DIRECTORS

Mr B K Syngal and Mr M D Dalal, Directors, retire by rotation and being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting (AGM). Brief profiles of these Directors are given in the notes to the Notice of the ensuing AGM.

AUDITORS

M/s Deloitte Haskins & Sells, Chartered Accountants, Bangalore, Statutory Auditors of the Company retire at the forthcoming AGM and have expressed their willingness to continue as Statutory Auditors for the financial year 2013-14 and accordingly, a resolution proposing their appointment is being submitted to the shareholders at the ensuing AGM.

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

Place : Mumbai Pradip P Shah

Date : 30th May, 2013 Chairman


Mar 31, 2012

TO THE MEMBERS OF SONATA SOFTWARE LIMITED

The Directors have pleasure in presenting the Seventeenth Annual Report of your Company together with the Audited Statement of Accounts for the financial year ended 31st March, 2012.

FINANCIAL RESULTS

(Rs. in Crores)

Standalone Consolidated

Description

Year ended Year ended Year ended Year ended

31.03.2012 31.03.2011 31.03.2012 31.03.2011

Total Income 233.73 255.97 1577.60 1410.95

Total Expenditure 213.45 191.68 1585.51 1298.24

Profit Before Tax 20.28 64.29 (7.91) 112.71

Total Tax Expense 5.37 2.43 9.42 16.71

Share of earnings in affiliates - - 2.32 0.40

Minority Interest (12.42) 10.79

Net Profit 14.91 61.86 (2.59) 85.61

Appropriations:

Proposed Dividend 2.63 10.52 2.63 10.52

Interim Dividend 5.26 10.52 5.26 10.52

Provision for Dividend Tax 1.28 3.45 1.28 3.45

Transfer to General Reserve 1.50 7.00 1.50 7.00

BUSINESS PERFORMANCE

Your Company is primarily engaged in the business of providing IT Services and Solutions to its customers in the US, Europe, Middle East and India. During the year, the Company faced challenges due to quick changes in top management and the continued softening in the business environment in Europe where it has a significant presence through its Joint Venture with TUI Infotec GmbH. Fluctuating currency trends also has had a role to play in the overall performance of your Company.

On a standalone basis, the Company has shown a drop in total income of 9% and drop in profits by approximately Rs 47 crores. The drop in revenues was primarily due to the loss of a large customer for whom the Company had established a dedicated offshore development centre in India and also on account of reduction in business from Europe and its Joint Venture, TUI Infotec GmbH. The sharp drop in revenues by about Rs 22 crores, had an effect on utilization and consequently on the profits. People and other direct costs increased by about Rs 7 crores, currency gains showed a negative swing of approximately Rs 13 crores and overheads increased by approximately Rs 5 crores contributing to the swing in profits by Rs 47 crores.

During the year the Company underwent two major changes in its leadership. Mr B Ramaswamy resigned from his position as President & Managing Director and took on the role of a Chief Mentor (Consultant). He was succeeded by Mr Sanjay Viswanathan, Managing Director & CEO with effect from17th August, 2011. Subsequently, Mr Sanjay Viswanathan also resigned from the Company on 14th February, 2012 and the Board of Directors on the same day appointed Mr Srikar Reddy, a Company veteran, as the Managing Director & CEO of the Company. Srikar has been with the Company since inception and his mandate is to bring in stability followed by growth.

The Consolidated financials show a growth in total income of Rs 167 crores a growth of 12% on a year over year basis. On a consolidated basis the Company has incurred losses primarily on account of the TUI Infotech GmbH, the Company's German Joint Venture. The Consolidated financials cover the three business lines of the Company - (a) the Software Services business, (b) Domestic Products and Services and (c) our Joint Venture - TUI Infotec, Germany. The three business lines of the Company have unique business rhythms, profitability and growth trends.

The Software Services business contributed approximately Rs 21 crores (previous year Rs 66 crores) of the total profits of the Company. The drop in profits in this segment is largely the same as what was explained for the Standalone financials above.

The Domestic Products and Services business showed a revenue growth of 32% contributing significantly to the overall revenues of the Company. However, during the year the Company restructured product business within this segment by re-aligning the product mix leading to some write offs and consequent losses. The products business had a drop in margins by about Rs 18 crores. The Services business had revenues of Rs 22 crores showing a growth of 50%. The Company is seeing significant traction in the services segment and this will be the area of focus going forward. The Interest burden in the Domestic business segment was at Rs 10 crores an increase of almost 80%. The interest cost is primarily on account of domestic tax regulations which have a significant impact on the working capital of the business. The Company has made significant progress in addressing the above issues and is poised for a sustainable performance in 2013.

The third business segment of the Company is TUI Infotec GmbH, the Company's Joint Venture in Germany. TUI Infotec is the significant provider of service to the TUI Group which is a multi- billion euro enterprise focused on the European tourism sector. The continuing softening of the economy in Euro zone has had a direct impact on the tourism business and consequently on our Joint Venture. The Joint Venture showed revenue de-growth of Rs 12 crores i.e. 2%. EBITDA of the Joint Venture was Rs 16 crores a drop of Rs 48 crores over the previous year. Costs, both direct and Indirect have shown an increase of Rs 36 crores which coupled with drop in revenues have contributed to the EBITDA drop of approximately Rs 48 crores. During the year, the Joint Venture undertook certain measures to manage costs and offered a voluntary retirement program as per German Laws. Costs of such program are not an immediate cash outflow and they are deferred over a period such that the savings and costs are matched. However, as per German accounting standards provisions have to be made in the financial statements as soon as an employee opts for the package. Provisions for such restructuring costs were approximately Rs 12 crores. The other increase in costs were on account of increase in payroll costs, sub-contractor costs and other pass through costs such as purchased hardware and software. The revenue guarantee to the Joint Venture by TUI AG expired in December, 2011. Your Company is working alongside the management of the Joint Venture to address the issues at the Joint Venture and is confident of reaching a solution.

DIVIDEND

Your Directors are pleased to recommend payment of a final dividend of Rs 0.25/- per equity share (@25% on par value of Rs 1/- each), subject to the approval of shareholders at the forthcoming Annual General Meeting, which along with the interim dividend of Rs 0.50/- per equity share adds upto a total dividend of Rs 0.75/- per equity share (Previous year - Rs 2/- per equity share of Rs 1/- each).

If approved, the final dividend will be paid to all those equity shareholders whose names appear on the Register of Members of the Company on 2nd July, 2012 and to those whose names appear as beneficial owners in the records of National Securities Depository Ltd and Central Depository Services (India) Ltd as on the said date.

QUALITY

During the year under review, your Company has been assessed at SEI CMMI-Level 5 (v1.2) for its delivery operations. The assessment recognizes your Company's capability to provide high quality software solutions through robust software development processes and signifies the commitment towards delivery excellence, process maturity and service quality ensuring timely and best-in-class solutions for its customers globally.

The quality organization has been re-organized into Delivery Excellence teams, enabling improvement in delivery and customer satisfaction within each Business Unit and Corporate Quality Assurance team driving organizational initiatives and excellence in Support Functions. The delivery processes have undergone substantial refinement, so as to be lean, flexible yet effective.

Risk management process has been enhanced to minimize the adverse impact of risks related to delivery.

The sustenance of quality culture has been demonstrated during surveillance audits under the standards ISO 9001:2008, ISO 20000-1:2005 and ISO 27001.

Your Company plans to formalize its processes towards Environmental Management (EMS), by aligning to the best practices prescribed by ISO 14001.

LISTING / LISTING FEES

Your Company's equity shares are listed on Bombay Stock Exchange Ltd and National Stock Exchange of India Ltd., exchanges having nation-wide terminals.

The Annual listing fees for the year under review has been paid to Bombay Stock Exchange Ltd and National Stock Exchange of India Ltd., where your Company's shares are listed.

SUBSIDIARY COMPANIES

The statement pursuant to Section 212(1)(e) of the Companies Act, 1956 in respect of subsidiaries is attached except for Abisko Development Ltd, Cyprus which is being wound up voluntarily as there have been no transactions in that Company for the last several years. The Consolidated Accounts of your Company and its subsidiaries viz., Sonata Information Technology Ltd, Sonata Software North America Inc., USA (formerly known as Offshore Digital Services Inc), Sonata Software GmbH, Germany, Sonata Europe Ltd, UK, Sonata Software FZ LLC, Dubai, Sonata Software (Qatar) LLC and TUI InfoTec GmbH, Germany duly audited by the Statutory Auditors are presented as part of this Report in accordance with Accounting Standard 21 and the Listing Agreement with the Stock Exchanges, wherever applicable.

Your Company has been exempted by the General Circular No. 2/2011 dated 8th February, 2011 issued by the Ministry of Corporate Affairs from attaching the audited accounts of subsidiary companies for the financial year ended 31st March, 2012. Accordingly, the audited accounts of the above mentioned overseas subsidiary companies are not attached. However, they are available on the Company's website www.sonata-software.com.

The audited accounts of overseas subsidiaries have been made available for inspection by any shareholder at the Company's Registered Office and at respective Registered Offices of overseas subsidiary companies. Copies can be made available, on request to the shareholders of the holding and subsidiary companies at any point of time.

Your Company has incorporated a wholly owned subsidiary company, Sonata Technology Solutions India Limited on 12th April, 2012, for the purpose of starting new services and products business for Asia-Pacific Region, primarily in India.

RECOGNITION

Zinnov Management Consulting Pvt. Ltd, a leading globalisation advisory firm, has recognized your Company for its excellence in providing Software/ISV R&D and Cloud Computing Services to global customers. Based on a comprehensive study conducted across R&D service providers, Sonata featured both under the Software/ISV as well as Cloud Computing verticals in Zinnov's "Execution Zone".

CORPORATE GOVERNANCE

As required under Clause 49 of the Listing Agreement with Stock Exchanges, a Report on Corporate Governance is provided elsewhere in this Annual Report along with the Auditors' Certificate on the compliance thereof.

During the year under review, your Company has not specifically adopted the voluntary guidelines of 'Corporate Governance Voluntary Guidelines 2009', though the Company has been practicing some of them.

SECRETARIAL COMPLIANCE REPORT

As a reflection of your Company's commitment to transparency, the Board is pleased to enclose the Secretarial Compliance Report for the financial year 2011-12, as part of this Directors' Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Your Directors, to the best of their knowledge and belief, state that the Company maintains proper accounting records which disclose with reasonable accuracy, the financial position of the Company.

Further, your Directors state that these accounting records have formed the basis for the preparation of financial statements of the Company in compliance with the provisions of the Companies Act, 1956, including any amendments thereto.

Your Directors also confirm that the financial statements of the Company are prepared in such a manner to give a true and fair view of the state of affairs of the Company as at the end of 31st March, 2012 and of the profit of the Company for the year to that date.

Your Directors state that in preparing the aforesaid financial statements of the Company, appropriate accounting policies have been consistently applied and supported by reasonable and prudent judgements and estimates, whilst applicable accounting standards have been followed and that these financial statements have been prepared "on going-concern basis".

Further, your Directors to the best of their knowledge and belief, state that appropriate internal control systems are in place which are reasonably expected to safeguard the assets of the Company and to prevent and detect fraud and irregularities.

ENERGY CONSERVATION, RESEARCH & DEVELOPMENT, FOREIGN EXCHANGE

The particulars, as prescribed under Section 217(1 )(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, with regard to conservation of energy, research & development and foreign exchange earnings & outgo are set out in the annexure attached to this Report.

Your Company has nothing to report on Technology absorption, adaptation and innovation.

PUBLIC DEPOSITS

Your Company has not accepted any deposits from the public during the year under review.

PERSONNEL

Particulars of employees as required under the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 2011, is attached to this Report.

COMMUNITY SERVICE

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

- New Year e-Greeting Cards made from paintings done by students at Rasoolpura Government High School and the Hope Foundation. This initiative served the dual objective of a green, pollution - free environment by saving on paper, as well as supporting the cause of the NGOs.

- Literacy-Palooza - a Book Donation Campaign with a mission to give children from low-income families the opportunity to read and own their own books.

- Aging hardware devices which consume more power are

being replaced with new energy efficient devices - in order to reduce overall consumption of energy,

- Work spaces and common areas in our buildings are fitted with environment-friendly material. Wood interiors are minimized to 11% of the total project at Global Village, Sonata's Development Centre in Bangalore.

- Rainwater harvesting is being implemented at Global Village & Richmond Road Offices.

- Sonata's Development Centre at Global Village, Bangalore, leverages sewage treatment plant and water recycling facilities in the campus.

- Inter-office shuttle vehicles / buses between Sonata offices are deployed to ensure employees use a common transport system and avoid the use of individual vehicles.

- In an endeavor to make its offices paperless and save paper, use of paper cups has been discontinued and replaced with reusable demitasse cups.

DIRECTORS

Mr S B Ghia and Mr Pradip P Shah, Directors, retire by rotation and being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting (AGM). Brief profiles of these Directors are given in the notes to the Notice of the ensuing AGM.

During the year, Mr B Ramaswamy, President and Managing Director resigned from the services of the Company on 16th August, 2011. Mr Sanjay Viswanathan was inducted as an Additional Director and designated as Managing Director & CEO with effect from 17th August, 2011. Subsequently, at the meeting of the Board of Directors held on 1 4th February, 201 2 citing personal reasons Mr Sanjay Viswanathan resigned. The Board of Directors at the same meeting appointed Mr P Srikar Reddy who was then the Deputy Managing Director & COO as the Managing Director & CEO with immediate effect, subject to approval of the shareholders.

AUDITORS

M/s N M Raiji & Co., Chartered Accountants, Mumbai, Statutory Auditors of the Company, retire at the forthcoming AGM and have expressed their willingness to continue as Statutory Auditors for the financial year 2012-13 and accordingly, a resolution proposing their appointment is being submitted to the AGM.

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

Place : Mumbai Pradip P Shah

Date: 24th May, 2012 Chairman


Mar 31, 2011

The Directors have pleasure in presenting the Sixteenth Annual Report of your Company together with the Audited Statement of Accounts for the financial year ended 31st March, 2011.

FINANCIAL RESULTS

(Rs. in Crores)

Standalone Consolidated Description Year ended Year ended Year ended Year ended 31.03.2011 31.03.2010 31.03.2011 31.03.2010

1. Total Income 256.10 241.37 1,411.10 1,393.29

2. Total Expenditure 191.81 179.66 1,298.39 1,278.08

3. Profit before Tax 64.29 61.71 112.71 115.21

4. Provision for Tax 10.70 10.50 25.00 28.77

5. MAT credit (8.28) (8.99) (8.28) (8.99)

6. Share of earnings in affiliates - - 0.40 (1.54) Minority Interest (10.79) (14.01)

7. Net Profit 61.86 60.20 85.61 79.87

8. Appropriations :

Proposed Dividend 10.52 8.41 10.52 8.41

Interim Dividend 10.52 9.46 10.52 9.46

Provision for Dividend Tax 3.45 3.01 3.45 3.01

Transfer to General Reserve 7.00 7.00 7.00 7.00

BUSINESS PERFORMANCE

Your Company is primarily engaged in the business of providing IT services and solutions to its customers in the US, Europe, Middle East and India. The financial results of the Company both on standalone and consolidated basis have been encouraging despite headwinds faced in terms of weaker than expected economic recovery in the Companys primary markets of US and Europe and fluctuating currency trends. On the standalone front, the Companys revenue has grown by 6% on a year over year basis and profit before tax has shown a growth of 4%. The focus during the year had been to continuously invest in improving our delivery practices and enhance our relationships with our existing customers to deliver higher value.

The Consolidated financials show a revenue growth of 1 % on a year over year basis with a corresponding growth in net profits of 7%. The Consolidated financials cover the three business lines of the Company-(a) the Software Services business, (b) Domestic Products and Services and (c) our Joint venture - TUI InfoTec, Germany. The three business lines of the Company have unique business rhythms, profitability and growth trends.

The Software services contribution to the profits of the Company is a massive 77% of the profits and 21 % of the consolidated revenues. This business line continues to show high traction in terms of revenue and profit growth.

The Domestic business accounts for 43% of consolidated revenues and 10% of profits. In this business, focus is on improvement of margins, increase revenues from services vis-a-vis product re-sale revenues. TUI InfoTec-our German JV accounts for 36% of consolidated revenues and our share of profits in the JV (50.1%) contributes to 13% of consolidated profits. The JVs focus is to continue building its business within the TUI Group and also foray into the Central European markets to acquire third party customers outside of the TUI Group.

DIVIDEND

Your Directors are pleased to recommend payment of a fina dividend of Re.1/- per equity share (@100% on par value of Re.1/- each), subject to the approval of shareholders at the forthcoming Annual General Meeting, which along with the interim dividend of Re.1/- per equity share adds up to a total dividend of Rs.2/- per equity share (Previous year - Rs.1.70/- per equity share of Re.1/- each). If approved, the final dividend will be paid to all those equity shareholders, whose names appear on the Register of Members of the Company on 9th June, 2011 and to those whose names appear as beneficial owners in the records of National Securities Depository Ltd and Central Depository Services (India) Ltd as on the said date.

QUALITY

During the year under review, your Company has crossed few important milestones related to Quality Management System. Foremost of them is the ISO 27001 certification which testifies your Companys commitment to delivering solutions with an eye on information security. This enhances customer confidence in your Companys delivery since standard encompasses "Confidentiality", "Integrity" and "Availability". Your Company has also stayed focused on improving the quantitative aspect of project management - a critical requirement for achieving high level of process maturity. There is great emphasis laid on leveraging innovations and broad basing them so as to achieve better performance. Alignment with SEI-CMMI best practices is complete and formal certification activity to confirm highest maturity level is underway.

Your Company also continued its efforts towards achieving excellence in project management through training and certification. Your Company is looking forward to achieving greater milestones in the quality journey in the current year.

LISTING / LISTING FEES

Pursuant to Regulation 7 of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009, your Companys equity shares have been voluntarily delisted from Bangalore Stock Exchange Ltd ("BgSE") with effect from November 26, 2010 as there was no trading of Companys equity shares in the BgSE for past several years. However, your Companys equity shares will continue to be listed on Bombay Stock Exchange Ltd and National Stock Exchange of India Ltd, exchanges having nationwide terminals. There was no change in the capital structure of the Company post delisting from BgSE.

The Annual listing fee for the year under review has been paid to Bombay Stock Exchange Ltd and National Stock Exchange of India Ltd, where your Companys shares are listed.

SUBSIDIARY COMPANIES

The statement pursuant to Section 212(1 )(e) of the Companies Act, 1956 in respect of subsidiaries is attached except for Abisko Development Ltd, Cyprus which is being wound up voluntarily as there have been no transactions in that company for the last several years. The Consolidated Accounts of your Company and its subsidiaries viz., Sonata Information Technology Ltd, Sonata Software North America Inc., USA (formerly known as Offshore Digital Services Inc), Sonata Software GmbH, Germany, Sonata Europe Ltd, UK, Sonata Software FZ LLC, Dubai and TUI InfoTec GmbH, Germany are presented as part of this Report in accordance with Accounting Standard 21.

Your Company has been exempted by the Ministry of Corporate Affairs, vide letter No.47/98/2011-CL-lll dated February 9, 2011 from attaching the audited accounts of overseas subsidiary companies for the financial year ended March 31, 2011. Accordingly, the audited accounts of the above mentioned overseas subsidiary companies are not attached. However, they are available on the Companys website www.sonata-software.com.

The audited accounts of overseas subsidiaries have been made available for inspection by any investor at the Companys Registered office. Copies can be made available, on request to the investors of the holding and subsidiary companies at any point of time.

RECOGNITION

As per the industry rankings released by NASSCOM for FY 2009- 10, your Company was ranked among the Top 20 IT Software and Service Exporters in India for the third consecutive year. Your Company also featured in the list of Top Outsourced Product Development Vendors brought out by Global Services Media for FY 2009-10. Your Company was also listed among Global Services Top 100 Companies that define Global Outsourcing for FY 2009-10.

For FY 2009-10, your Company was ranked among Top 50 companies by Dataquest, based on a nationwide survey across more than 1000 IT companies in India.

CORPORATE GOVERNANCE

As required under Clause 49 of the Listing Agreement with Stock Exchanges, a Report on Corporate Governance is provided elsewhere in this Annual Report along with the Auditors Certificate on the compliance thereof.

During the year under review, your Company has not adopted any of the voluntary guidelines of Corporate Governance Voluntary Guidelines 2009 .

SECRETARIAL COMPLIANCE REPORT

As a reflection of your Companys commitment to transparency, the Board is pleased to enclose the Secretarial Compliance Report for the financial year 2010-11, as part of this Directors Report.

DIRECTORS RESPONSIBILITY STATEMENT

Your Directors, to the best of their knowledge and belief, state that the Company maintains proper accounting records which disclose with reasonable accuracy, the financial position of the Company.

Further, your Directors state that these accounting records have formed the basis for the preparation of financial statements of the Company in compliance with the provisions of the Companies Act,1956, including any amendments thereto.

Your Directors also confirm that the financial statements of the Company are prepared in such a manner to give a true and fair view of the state of affairs of the Company as at the end of 31 st March, 2011 and of the profit of the Company for the year to that date.

Your Directors state that in preparing the aforesaid financial statements of the Company, appropriate accounting policies have been consistently applied and supported by reasonable and prudent judgements and estimates,whilst applicable accounting standards have been followed and that these financial statements have been prepared on going-concern basis.

Further, your Directors to the best of their knowledge and belief, state that appropriate internal control systems are in place which are reasonably expected to safeguard the assets of the Company and to prevent and detect fraud and irregularities.

ENERGY CONSERVATION, RESEARCH & DEVELOPMENT, FOREIGN EXCHANGE

The particulars, as prescribed under Section 217(1 (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, with regard to conservation of energy, research & development and foreign exchange earnings & outgo are set out in the annexure attached to this Report.

Your Company has nothing to report on Technology absorption, adaptation and innovation.

PUBLIC DEPOSITS

Your Company has not accepted any deposits from the public during the year under review.

PERSONNEL

Particulars of employees as required under the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 2011, is attached to this Report.

COMMUNITY SERVICE

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

- New Year e-Greeting Cards made from paintings done by students at Rasoolpura Government High School and the Hope Foundation. This initiative served the dual objective of a green, pollution - free environment by saving paper, as well as supporting the cause of the NGOs

- Wall Calendars created with the paintings done by Hope and BHUMI children to increase awareness about the NGO partners

- Funds collection campaign organized to sponsor the salaries of English and Computer teachers at the Rasoolpura Government High School, Hyderabad

DIRECTORS

Mr.S.N.Talwar, Mr.Viren Raheja and Mr.P.Srikar Reddy, Directors, retire by rotation and being eligible offer themselves for re- appointment at the ensuing Annual General Meeting (AGM). Brief profiles of these Directors are given in the notes to the Notice of the ensuing AGM.

AUDITORS

M/s N.M.Raiji & Co., Chartered Accountants, Mumbai, Statutory Auditors of the Company retire at the forthcoming AGM and have expressed their willingness to continue as Statutory Auditors for the financial year 2011-12 and accordingly, a resolution proposing their appointment is being submitted to the AGM.

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 investors and stakeholders for their continued support and all the Sonatians for their valuable contribution and dedicated service.

For and on behalf of the Board

Pradip P Shah Chairman

Place: Mumbai Date : 20thApril, 2011


Mar 31, 2010

The Directors have pleasure in presenting the Fifteenth Annual Report of your Company together with the Audited Statement of Accounts for the financial year ended 31st March, 2010.

FINANCIAL RESULTS

(Rs. in Crores)

Standalone Consolidated

Description Year ended Year ended Year ended Year ended 31.03.2010 31.03.2009 31.03.2010 31.03.2009

1. Total Income 241.37 244.63 1,393.29 1,602.12

2. Total Expenditure 179.66 188.09 1,278.08 1,489.52

3. Profit before Tax 61.71 56.54 115.21 112.60

4. Provision for Tax 10.50 9.30 28.77 28.28

5. MAT credit (8.99) (6.12) (8.99) (6.12)

6. Share of earnings in affiliates -- - (1.54) 0.25

Minority Interest (14.01) (14.13)

7. Net Profit 60.20 53.36 79.88 76.56

8. Appropriations :

Proposed Dividend 8.41 - 8.41 -

Interim Dividend 9.46 15.77 9.46 15.77

Provision for Dividend Tax 3.01 2.68 3.01 2.68

Transfer to General Reserve 7.00 6.00 7.00 6.00

BUSINESS PERFORMANCE

Your Company is primarily engaged in the business of providing IT Services and solutions to its customers in US, Europe, Middle East and India. The financial results of the Company both on standalone and consolidated basis have been very encouraging despite the challenges faced in terms of unfavorable currency movements and depressed business conditions in our primary markets of US and Europe. On a standalone basis, vastly improving margins despite revenues remaining flat bear testimony to improvements in our delivery practices and the strategy of focusing on existing customers to deliver higher value.

Consolidated financials cover our Software Services business covered above and two additional business of - Domestic Products and Services business and our Joint venture – TUI Infotec, in Germany. Our consolidated revenues showed a drop as we continue to focus on revenue quality and profitability in our domestic business rather than just revenue growth and on account of moving of onsite work from TUI Infotec in Germany to offshore. Profitability in the above businesses have also shown an improvement on a year over year basis.

DIVIDEND

Your Directors are pleased to recommend payment of a final dividend of Re.0.80/- per equity share (@80% on par value of Re.1/- each), subject to the approval of shareholders, which along with the interim dividend of Re.0.90 per equity share adds upto a total dividend of Rs.1.70/- per equity share (Previous year - Rs.1.50/- per equity share of Re.1/- each).

If approved, the final dividend will be paid to all those equity shareholders whose names appear on the Register of Members of the Company on 9th June, 2010 and to those whose names appear as beneficial owners in the records of National Securities Depository Ltd and Central Depository Services (India) Ltd as on the said date.

ERP IMPLEMENTATION

During the year, the Company and its subsidiaries went live on an integrated, Enterprise Resource Management system. The new system replaces legacy systems in the areas of Finance, Human Resources, Project Accounting and scheduling. Improved metrics management, internal controls and information availability on a real time basis are what we expect from the system.

QUALITY

During the year under review, your Companys quality processes continued to evolve and upgrade inline with business needs. New certification – ISO 20000-1 was achieved which will directly enhance our service offering in the growing Infrastructure Management Services. Application development, testing and implementation services continue to adapt and benefit from best practices of CMMI processes. Improved techniques of project management using data / metrics have been the focus area during the year under review. Further, all efforts are being made to reach higher levels of process maturity by partnering with industry leading consultants.

New initiatives taken up during the year under review in the area of Information Security supported the business in line with industry and customer expectations. Efforts are underway to achieve benchmark certification of ISO 27000.

Another area of focus during the year under review has been Project Management excellence. Training and certifying key managers will enable project teams in delivering better.

LISTING FEES

The Annual listing fees for the year under review has been paid to Bombay Stock Exchange Ltd, National Stock Exchange of India Ltd and Bangalore Stock Exchange Ltd, where your Companys shares are listed.

SUBSIDIARY COMPANIES

In March, 2010, your Companys wholly-owned subsidiary Offshore Digital Services Inc., changed its name to “Sonata Software North America Inc”.

The statement pursuant to Section 212(1)(e) of the Companies Act, 1956 in respect of subsidiaries is attached except for Abisko Development Ltd, Cyprus which is being wound up voluntarily as there have been no transactions in that company for the last several years. The Consolidated Accounts of your Company and its subsidiaries viz., Sonata Information Technology Ltd, Sonata Software North America Inc., USA (formerly known as Offshore Digital Services Inc), Sonata Software GmbH, Germany, Sonata Europe Ltd, UK, Sonata Software FZ LLC, Dubai and TUI InfoTec GmbH, Germany are presented as part of this Report in accordance with Accounting Standard 21.

Your Company has applied for exemption to the Ministry of Corporate Affairs from attaching the audited accounts of overseas subsidiary companies for the financial year ended 31st March, 2010. Accordingly, the audited accounts of the above mentioned overseas subsidiary companies are not attached. However, they are available on the Companys website www.sonata-software.com.

The audited accounts of overseas subsidiaries have been made available for inspection by any investor at the Companys Registered office. Copies can be made available, on request to the investors of the holding and subsidiary companies at any point of time.

RECOGNITION

As per the industry rankings released by NASSCOM for FY08-09, your Company was ranked among the Top 20 IT Software and Service Exporters in India for the second consecutive year. In a comprehensive industry study conducted by Zinnov Management Consulting Pvt. Ltd across service providers from China, India and Eastern Europe, your Company has been ranked among Top 10 R&D Services players globally. Your Company has also been ranked 6th in the Software Products segment by Zinnov. Zinnov is a leading management consulting company providing services in the area of Offshore Advisory, Market Expansion and Human Capital Optimization to Fortune 1000 companies. The rating reinforces your Companys leadership position in the industry and is a testimony of its ability to provide innovative solutions that deliver real business results. Your company was also recognized as Microsoft Gold Certified Partner for Business Intelligence.

Your Company was a winner in the Deloitte Technology Fast 500 Asia Pacific 2009 program. The program recognize the fastest growing and most dynamic technology companies in Asia Pacific region.

CORPORATE GOVERNANCE

As required under Clause 49 of the Listing Agreement with Stock Exchanges, a Report on Corporate Governance is provided elsewhere in this Annual Report along with the Auditors Certificate on the compliance thereof.

During the year, the Ministry of Corporate Affairs, Government of India had published Corporate Governance Voluntary Guidelines 2009. The Company is reviewing these guidelines.

SECRETARIAL COMPLIANCE REPORT

As a reflection of your Companys commitment to transparency, the Board is pleased to enclose the Secretarial Compliance Report for the financial year 2009-10, as part of this Directors Report.

DIRECTORS RESPONSIBILITY STATEMENT

Your Directors, to the best of their knowledge and belief, state that the Company maintains proper accounting records which disclose with reasonable accuracy, the financial position of the Company.

Further, your Directors state that these accounting records have formed the basis for the preparation of financial statements of the Company in compliance with the provisions of the Companies Act, 1956, including any amendments thereto.

Your Directors also confirm that the financial statements of the Company are prepared in such manner to give a true and fair view of the state of affairs of the Company as at the end of 31st March, 2010 and of the profit of the Company for the year to that date.

Your Directors state that in preparing the aforesaid financial statements of the Company, appropriate accounting policies have been consistently applied and supported by reasonable and prudent judgements and estimates, whilst applicable accounting standards have been followed and that these financial statements have been prepared on going-concern basis.

Further, your Directors to the best of their knowledge and belief, state that appropriate internal control systems are in place which are reasonably expected to safeguard the assets of the Company and to prevent and detect fraud and irregularities.

ENERGY CONSERVATION, RESEARCH & DEVELOPMENT, FOREIGN EXCHANGE

The particulars, as prescribed under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, with regard to conservation of energy, research & development and foreign exchange earnings & outgo are set out in the annexure attached to this Report.

Your Company has nothing to report on Technology absorption, adaptation and innovation.

PUBLIC DEPOSITS

Your Company has not accepted any deposits from the public during the year under review.

PERSONNEL

Particulars of employees as required under the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, is attached to this Report.

COMMUNITY SERVICE

During the year under review, your Company partnered with NGOs BHUMI and Hope Foundation for re-habilitating the flood affected people in Raichur, Karnataka and in Rajoli Village, Kurnool District, Andhra Pradesh and for this cause an amount of Rs.15 Lacs was contributed by the Company and its employees.

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

- As a conscious step towards a Greener Earth, this New Year e- Greeting Cards were made from paintings done by students at Rasoolpura Government High School and the Hope Foundation. This initiative of going green differently is in support of a pollution-free environment by saving paper and to stand by the cause of NGOs.

- Wall Calendars were created with the paintings done by Hope and BHUMI children to increase awareness about our NGO partners.

- Funds collection campaign was organized to sponsor salaries of English and Computer teacher of Rasoolpura Government High School, Hyderabad.

- Donated 10 computers to the charitable institutions for education of the students through the Rotary Bangalore East.

DIRECTORS

Mr.M.D.Dalal and Mr.B.K.Syngal, Directors, retire by rotation and being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting (AGM). Brief profile of these Directors are given in the notes to the Notice of the ensuing AGM.

AUDITORS

M/s N.M.Raiji & Co., Chartered Accountants, Mumbai, Statutory Auditors of the Company retire at the forthcoming AGM and have expressed their willingness to continue as Statutory Auditors for the financial year 2010-11 and accordingly, a resolution proposing their appointment is being submitted to the AGM.

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 investors and stakeholders for their continued support and all the Sonatians for their valuable contribution and dedicated service.

For and on behalf of the Board

Place : Bangalore Pradip P Shah

Date : 19th April, 2010 Chairman

Find IFSC