Cyient Ltd Management Discussions.

Global Economy

2017 has been a tumultuous year marked by geopolitical tensions, and deep political divisions in many countries and natural disasters and accidents.

However, on the economic front the year ended on a strong note with GDP showing the broadest cyclical upswing since start of the decade. The global economy grew by 3.8 percent in 2017. The US economy grew by 2.3 percent in 2017, an upswing from 1.5 percent in 2016. Eurozone witnessed a growth of 2.5 percent the fastest growth since 3 percent in 2007. Emerging economies witnessed a growth of 4.5% through the year. The economic upstick in 2017 was a result of multiple factors and unique events, from stabilizing energy and commodities prices, improved business confidence based on hopes for fiscal stimulus and tax reforms by the Trump administration and cyclical recovery in Europe and policy driven growth stimulus in China.

In FY 19, the growth is expected to move upto 3.9 percent supported by strong momentum, favorable market situation and favorable financial conditions and due to expansionary fiscal policy in the United States.

Aerospace and Defense

Aerospace and Defence industry is expected to grow by 10% driven by strong commercial aircraft order backlog. With Boeing and Airbus ramping up their narrow body production we expect to continue to witness risk of supply chain disruptions. Defense spending both in the U.S. and Europe is expected to continue to support demand.

Aerospace and Defence Business Unit (BU) witnessed a moderate growth through the year driven by growth in emerging accounts. We also continued to witness strong rise in demand for risk sharing business models from our clients.

Also, to further strengthen our Design- Build- Maintain strategy we acquired B&F design Inc. B&F is a Connecticut based tooling and precision manufacturing company. Their expertise in design and manufacturing of engine assembly equipment, repair and tooling, engine factory modernization, and automation equipment will help us create a differentiated value proposition centered on tooling and precision engineering.

As a testimony of our focus on continuous improvement and innovation we were awarded with the two prestigious awards from Pratt & Whitney: the "Productivity Savings and Cost Avoidance Award" and the "Supplier Productivity Innovation Award." This is the fifth year in a row that Cyient has won the Supplier Productivity Innovation Award. This year we also won the "Boeing Supplier of the Year Award" fourth time in six years. We were also placed in the "Winners Circle" in the HfS A&D Engineering Services Blueprint 2017.

For FY19, we expect a robust growth backed by strong order backlog and a healthy pipeline in Manufacturing, Aftermarket and Avionics. We also see significant opportunities in our DLM

business. As part of our S3 strategy, we continue to invest in digital technology and are building solutions to addres specific business problems.

Transportation

Rail Transportation industry has outperformed the industry growth forecasts, supported by strong growth in Rolling Stock and Signaling. With these segments as our core focus areas, the general long term outlook for Transportation BU remains very positive. Our value proposition continues to resonate quitewell with the key industry trends ofinternationalization, consolidation and digitization.

The Transportation BU witnessed a strong growth in FY 18 driven by growth in key clients and new wins. We won the prestigious Rail & Road Transport Award (earlier Land Transport Award) and Best Railway Signalling Design Company 2018 during the year. Zinnov Zones for Product Engineering Services positioned Cyient in the "Leadership Zone" in Transportation industry in 2017. This is the sixth time in a row that we have been placed in the leadership zone.

Backed by strong industry performance, long-term client engagements and healthy opportunity pipeline, we expect strong growth through the year in FY 19. Our engagements with leading OEMs remain strong with continued growth forecast. In addition, our emerging engagements are expected to contribute to our future growth and strategic expansion. Strategy execution continues to be a key focus area with investments earmarked to exploit opportunities across segments. We will further accelerate our investments in the emerging areas of Digitalization and Design Led Manufacturing which we believe will consolidate our leadership position in this industry. FY19 will also see us invest significantly in strengthening our leadership layers, broadening our offerings and exploring new business models.

Industrial, Energy and Natural Resources

The oil and gas industry is expected to continue its slow recovery as upstream companies increase production. The outlook for drilling and oil field services companies is also positive as upstream capital spending and the global rig count continue to increase. On the mining front there is expected to be an upturn in the next one to two years despite weak commodity prices. A large number of big projects and expansions are expected to go live from 2020. Exploration is expected to grow in emerging countries and even in the US.

The Industrial, Energy and Natural Resources BU witnessed a business growth of 2.9% in FY18. The growth in the business was driven by strong performance in key accounts across Oil and Gas, Mining and OffHighway Equipments.

We expect a broad based growth in FY 19 driven by continued focus on executing our strategy. We will focus on key strategic offerings around connected equipment, asset management, plant engineering and digital twin solutions for capital projects. We also see opportunities in predictive analytics, manufacturing engineering and connected equipments.

Semiconductor

The global Semiconductor industry is expected to grow by 7.5% driven by growth in the memory sector, adoption of AI, 5G and Autonomous vehicles. With increasing costs of new chip-fabrication plants and need for efficiencies at scale the trend of consolidation is expected to continue.

The Semiconductor, IoT and Analytics BU witnessed a growth of 11.6% in FY18 driven by growth in key accounts. Over the year we made good progress in setting up verification and validation lab for key clients. We also started working with a number of new clients.

This year we made two key investments. First was the acquisition of Ansem N.V. which specializes in advanced analog, radio frequency and mixed-signal integrated circuit design.

AnSem N.V. specializes in advanced analog, radio frequency, and mixed-signal integrated circuit design.

This acquisition will allow us to offer turnkey ICs- from concept circuit to final production. With this acquisition, Cyient can help clients develop smart analog sensors to capture data while leveraging our IoT and analytics capabilities.

We also signed a definitive agreement to acquire 100% ownership of Cyient Insights Private Limited (Cyient Insights), we earlier owned 51% stake in the company. This investment will allow us to provide integrated engineering and analytics soltuions for our clients.

Our outlook for FY19 continues to be positive based on various opportunities in the Semiconductor space. We also continue to build and attract a strong talent pipeline in these areas to bolster our mixed signal solutions offerings. Our strategic focus in FY19 continues to be to make progress in our solutions business with focus on turnkey smart analog solutions for automotive, industrial, medial, smart home, smart grid etc., embedded systems for connected cars, and design services for automotive, industrial, consumer.

Medical Technology and Healthcare

The global Healthcare industry is forecasted to register a stable growth rate of 4.8% during FY 2018.The industry will witness adoption of popular digital health technology solutions such as artificial intelligence (AI), Internet of Medical Things (IoMT), Big Data analytics, and robotics across select healthcare segments.

The Medical and Healthcare BU witnessed a growth of 20.7% in FY18. The growth in the business was driven by manufacturing services as part of our Design Build maintain strategy. Over the year the BU has enhanced rigor on solutions by focusing on key industry segments of diagnostic imaging, orthopedics, in-vitro diagnostics, and cardiology. This year we also added one large orthopedic client and continue to see similar opportunities across other prospective clients. We are also developing two innovative products in solutions the cardiology and diagnostics segments both of these products directly support our vision of advancing technology to make high-quality healthcare solutions accessible and, affordable.

We also signed a partnership with Xynteo, an international advisory firm, as a partner organization in India 2022, a

business-led coalition committed to creating a new model of growth by the 75th year of Indias independence. As part of this coalition, we will focus on incubating and scaling projects aimed at delivering technology-enabled healthcare solutions, primarily focused on the diagnostics space in India.

Our outlook for FY 19 looks strong with focus on building new clients and developing solutions across the industry.

Communications

The Communications industry is witnessing a strong growth. Mobile data traffic is growing by more than 50% per year and wireline traffic is increasing by about 20% adding to the growth of the industry. Along with this demand for real-time voice, data and video is manifold and is encouraging telecom service providers to under take large network extensions and upgrading networks. Our strategy to provide a end to end solution with PBOT framework has been received very well

The strategy to provide a end to end solution with the PBOT framework has been received very well with our clients globally. With this framework, we have expanded our service portfolio to design, build, operate and transform. This helped us achieve leadership position with some of our key clients globally.

We have invested on developing solutions around IOT, RPA and Open Source technologies to ensure the processes are automated and network works efficiently. We play significant role in supporting major programs globally for most of CSPs worldwide around fibre design and roll out, small cell design and deployments, cloud infrastructure and analysing network data for better business decision making.

We expect the grow momentum to continue through the year and we intend to continue to invest in key technologies and skills to evolve into an integral part of CSPs transformation journey.

Utilities and Geospatial

The Utilities industry continues to witness growth, as utility companies make large investments in grid modernization, distributed generation, field force automation, and Advanced Metering Infrastructure (AMI) to support their operations. The global geospatial market also continues to grow as location data is becoming critical for many diverse businesses and applications. There is increasing focus on mobile solutions as well as AR/ VR, 3D, and indoor-mapping.

The Utilities & Geospatial BU witnessed a growth of 8.1% in FY18 driven by growth across key geographies.Our IP based solutions for the Utility market is generating strong interest in clients. To compliment our analytics capabilities, we have partnered with Elpis Squared, a U.S.-based startup software company, providing innovative machine learning meter and voltage signature technology. Our joint solutions will enhance the role of data in supporting electric utilities Advanced Distribution Management Systems and Asset Management Programs.

As part of our S3 strategy, we continue to invest in digital technology and are building IP-based solutions for the Utility market. For FY19, we expect growth to be driven by new clients in Utilities and through solution selling.

New Business Accelerator

To leverage new technology and to drive non linearity in our business we started a new business unit called the "New Business Accelerator (NBA)." This group focuses on identifying and commercializing new solutions with an emphasis on emerging technology and innovation. NBA operates as an internal incubator and offers an intensive, startup-like environment to develop technology led solutions. NBA invests in and collaborates with academia, enterprise, and expert networks to bring compelling, innovative ideas to life. It is an endeavor to consistently improve the brands competitiveness and its value for stakeholders. As part of this initiative we are currenty working on a number of solutions projects.

Business Outlook for FY 19

The business landscape is continuously changing with increasing focus on innovation and technology. This transition lays before us immense opportunities. As an organization we will strive towards our aspirations without compromising on our core values.

We are confident of delivering a strong year of performance in FY 19 with double digit growth across our services and the DLM business.

Threats, Risks and Concerns

Risk description Risk impact Risk mitigation
Moving up the value stack- We will need to move up the value stack by refining the space we play in to remain relevant in the increasingly competitive market Have well defined ambition to move from being a services provider to a solutions driven partner for our clients. To drive this transition we have layout a framework (AGILE framework) to drive
Employee upskilling With rampant technological changes and focus on innovation there is a need to upskill associates to be able to compete and meet our clients expectations There is a continuous focus on reskilling/upskilling employees through emphasis on trainings and development and motivation through rewards and recognitions.
Competition risks In this highly competitive environment, there may be severe impact on margins due to pricing pressures There is focus on providing higher value and differentiated services We are also getting into new business models.
Integration risks in Mergers & Acquisitions Inappropriate acquisitions or mismanaged integration may result in failure to achieve the strategic objectives of the acquisition There is a dedicated team monitoring the postmerger integration with well laid out plans. There is a periodic review of the activities and the same are reported to the Board
Data privacy and cyber security With increasing emphasis on data privacy and new data privacy policies across the world (such as GDPR) we need to strenthen our data security processes and policies The Company has a stringent Cyber Security policy. Also as a company, we have in place firewalls, data encryption, data backup mechanism, patches etc. We are also making internal process changes to adher to new policies.
Compliance risks Being a global company, we are exposed to laws and regulations of multiple countries The Company has an in-house compliance team which monitors global compliances. The team receives updates on changes in regulations from specialist consultants and circulates the same internally.

Human Resources

We strive to maintain our position as the employer of choice. Our human resources (HR) team, is aligned with the companys vision ofDesigning Tomorrow Together works towards attracting, retaining, and nurturing high-quality talent. We consistently try to incorporate healthy (appropriate/competitive) talent management practices across all HR functions, from recruiting the best talent to providing new learning, and growth opportunities. Our continued focus is to create an environment with high employee engagement that, in turn, leads to improved client experience and success.

Cyients HR strategy for FY18 concentrated on four key pillars: (1) building organisational capabilities, (2) talent acquisition, (3) talent mobility, and (4) systems. The HR team is supporting the successful acquisition and integration of B&F, New Tech, and Polo. In addition, the team increased the number of associates participating in our corporate leadership programs.

Headcount and Retention

In FY2018, Cyients headcount grew to 14,762 associates, including the addition of Jan Radtke Vice President and Head - New Business Accelerator (NBA) and Andrew Smith, Vice President, Transportation - EMEA. Cyient recently initiated the New Business Accelerator (NBA), wherein the organization will invest in emerging technologies, focus on fostering innovation, and develop IP to improve positioning with customers. Jan Radtke Vice President and Head - New Business Accelerator (NBA), will lead this new business unit and spearhead the journey to innovation and business excellence.

We added around 3,736 new associates to our workforce. With our focus on nurturing and retaining quality talent, we achieved a retention rate of83.94%.

Our global workforce is spread across three regions: 84% in the Asia Pacific, 12% in North America, and 4% in Europe and the Middle East. Cyient has always had a good mix of local hires in our countries of operation and we will continue to accelerate this focus in the coming years, to achieve hiring morethan 80%ofnewtalentlocally.

Attrition Voluntary

2015- 1619.55%

2016- 17 20.51%

2017- 1816.06%

TalentAcquisition

Highlights of our talent acquisition process:

Cyient initiated a "Train and Hire" model for certain entry- level skills to allow the early career hires to undergo basic training, while they are still at campus and ensure that they are job ready.

We introduced and validated online aptitude and psychometric assessments to help optimize qualityoftalent intake.

Our recruiting team achieved an 86% on-time fill rate for open positions with a 40% increase in the regular hiring process as compared to FY17.

Employee referrals contributed to over 13% of the new hires, which reflects the strong engagement and commitment of our associates towards the organization. Filled 23% positions through InternalJob Posting.

Talent Acquisition

Highlights of our talent acquisition process:

Cyient initiated a "Train and Hire" model for certain entry- level skills to allow the early career hires to undergo basic training, while they are still at campus and ensure that they are job ready.

We introduced and validated online aptitude and psychometric assessments to help optimize qualityoftalent intake.

Our recruiting team achieved an 86% on-time fill rate for open positions with a 40% increase in the regular hiring process as compared to FY17.

Employee referrals contributed to over 13% of the new hires, which reflects the strong engagement and commitment of our associates towards the organization. Filled 23% positions through InternalJob Posting.

Employee Engagement

At Cyient, employee engagement is at the heart of our vision and we are focused on creating a culture that fosters innovation and collaboration. We strive to be the employer of choice by offering an environment in which all our people can thrive.

Engagement Score

2016 61%

2017 63%

2018 60%

Global IndustryAverage:58%

We engage our associates through a variety of activities and some of the changes made in our methods of engagement are highlighted below:

MagnifiCyient: Rewards and Recognition Platform that promotes a culture of peer recognition through non-monetary rewards. Enthusiastically embraced by the associates, this platform has,

82% unique users on the Platform

GEO Reward saturation trend positive

High usage of non-monetary appreciation notes -

On-demand Analytics and MIS access, enabled to all budget owners forfasterand quickerdecision making

Social features allow other members in team to like/comment on each reward, which are now posted on the dashboard as soon as they are awarded. These rewards and recognition posts can also be shared on external social media platforms like Facebook, Twitter, and LinkedIn.

Numerous coveted monetary awards like Most Valuable Performer Bronze, Silver, and Gold for Individuals and Teams; and the Star Performer awards recognize exceptional and organization-wide contribution by associates were introduced. These monetary awards offer recognition to associates in the form of redeemable points, which make it easy to use for associates across GEOs without the currency conversion barrier.

Increased Focus on Wellness

The health and well-being of our associates has always been an area of significant focus for Cyient. In FY2018, several new health and wellness initiatives were launched to foster the well-being of our associates.

India -

E-Kincare App: Wellness app launched in collaboration with Ekincare in January 2018, for our associates in India, which offers

Health risk assessment Digitized medical records

Customized fitness challenges and Diet plan based on HRA Access to free online Doctor Consultation

Marathon participation: Cyient sponsored two marathons across India, with participation from over 600 associates, located in Vizag, and Hyderabad.

APAC

Cyient Singapore participated in the Corporate Challenge of the National Steps Challenge, a physical activity campaign initiated by the Health Promotion Board to encourage Singapore residents to be more physically active every day, anytime and anywhere.

Cyient Singapore participated in the SIA Charity Run 2017 The Float at Marina Bay, on October 8, 2018.

NAM

EMEA

Learning and Development

Learning and Development was merged as a HR function in 2014, and our focus on leader-led learning and building a learning organization has been reflecting over the years, and continued even in 2017.

We are exploring new channels of learning and to ensure a unified onboarding experience to all our associates, we launched the Digital Induction Platform in December 2017. Providing ease of access and uniform training material, ensures that the vision of One Cyient is achieved.

Mandatory compliance trainings for all the new joining associates are made available to them in the initial period of joining at convenience

More than 26,000 hours of digital learning and 100,000+ Instructor led training (ILT) hours were recorded over the past year.

Talent Review

Succession planning (Talent Review) focuses on fostering leadership development to meet the growing leadership needs of the organization. It involves identifying potential roles that promising individuals can grow into and lay a path for progression. This ensures that we elevate our existing associates to a leadership role within the organization, when the need arises, rather than having to bring in an external resource.

Leadership Programs

Business Leader Program (BLP) and Emerging Leader Program (ELP)"The Business Leader Program (BLP) and Emerging Leader Program (ELP) are Leadership development flagship program for enabling the development of associates who have displayed the potential to handle responsibilities at strategic levels in the organization. The Business Leader Program (BLP) and the Emerging Leader Program (ELP) received over 400 nominations globally for high-performance associates in FY2018. Duration of the programs ranges from 8 to 10 months, including week-long training workshops, Action Learning Projects, and Coaching support.

Selected participants were immersed in a five-day offsite residential program aimed at honing their management skills and gaining a strategic view aligned to their role requirements. Each day comprised of interaction with the Executive Leader at Cyient. The trainer-led sessions on design thinking, entrepreneurship and intrapreneurship, stakeholder management, and solution thinking for BLP and Business modeling, Innovation and Change Management for ELP provided food for thought to participants whereas group activities aimed at improving networking and team bonding.

The "Leader-as-a-Coach" model is being used to provide coaching/mentoring support to ELP and BLP participants on the execution of their respective development plans. Action learning projects, which can help participants put their workshop learnings to practice and generate great value for the organization.

New Leader Program (NLP)

The First Time Manager program was rebranded as New Leader Program (NLP) and the sessions extended to beyond India in the past year. A series of NLP sessions were organized in Australia, EMEA, and North America, to ensure all our qualifying associates receive the leadership training they need.

Awards and Recognitions Singapore -

TAFEP Recognized and awarded Cyient Singapore as an Organization thathas adopted the Tripartite Standards for term contract employees, flexible work arrangements, grievance handling and, recruitment practices.

East Hartford -

Cyient won two prestigious awards from Pratt & Whitney for 2017: the Productivity Savings and Cost Avoidance Award and the Supplier Productivity Innovation Award. This is the fifth year in a row that Cyient has won the Supplier Productivity Innovation Award, a testimony of the companys focus on nurturing an innovation-driven culture and developing disruptive, cutting-edge solutions.

India -

Cyient was honored with the Golden Peacock Award for Risk Management (GPARM) by the Institute of Directors. The award came as a recognition for developing a robust risk management process based on industry standards and proven best practices.

Cyient was recognized by the CII Industrial Innovation Awards 2017 as one of the Top 26 Innovative Organizations in India. CII Industrial Innovation Awards recognize and celebrate innovative Indian enterprises and budding start-ups across industry segments on an annual basis.

Cyient recognized as Leaders in Corporate Innovation by Indo-American Chamber of Commerce (IACC). The Leaders in Corporate Innovation award recognises businesses that have developed and employed innovative techniques for optimization of cost and operations. Cyient demonstrated excellence in all the parameters including promoting the concept of innovation among its associates and achieving business objectives.

Australia -

Cyient Receives 2017 Acomm Award for Services to Industry - Professional Services. This award recognizes Cyients commitment to develop communication technology engineers of tomorrow. Cyient was nominated for its community development platform, the Cyient Graduate Program & Western Sydney University Partnership in Blacktown, Australia, which is an exclusive engineering program that was established in 2015. The partnerships aim is to up-skill engineering graduates with on-the-job training, while sharing practical industry knowledge with the Greater Western Sydney community.

D&I

Diversity and Inclusion

At Cyient, we believe that only by making our organization diverse and inclusive can we achieve our brand promise of Designing Tomorrow Together.

As a workplace that is home to a diverse group of individuals from different backgrounds and experiences, Cyient is able to effectively market to all groups of consumers, from a wide range of racial and ethnic backgrounds, gender, age and sexual orientation. In turn, we are able to gain a competitive edge, by offering more solutions to customers because of new skills, ideas and processes.

Our mission is to create and ensure organizational policies, practices, procedures, and behaviors are conducive to recruiting, retaining, and developing a diverse, high- performing workforce that draws from all segments of society and values fairness, diversity and inclusion. As part of this mission, we will also ensure that all stakeholders (clients, associates, investors, partners, and society) are inclusive of the above policies, practices, and procedures.

D&I Resource Groups: With representation throughout the regions we serve, our D&I Resource Groups are driving focus on key areas of diversity, including gender, disability, veterans affairs, cultural awareness, and health and wellness. Our D&I groups are working hard to increase diversity awareness at Cyient, plan educational events, and drive important policy and program changes.

Mentorship Program for Female Leaders: Mentorship is an effective way to develop individuals and provide them with the tools necessary to perform at their highest capability. At Cyient, we are investing in the development and advancement of female leaders through a formal mentorship program.

Recruiting: Our global recruiting teams are setting recruiting and hiring baselines to ensure a higher number of diverse candidates and associates. They have implemented a policy to provide candidate resumes that mask name, gender, age and any other demographic information for senior managerial roles. In addition, our recruiters are investing in tools and developing relationships with organizations to better target diverse populations (e.g., tools that connect to veterans pools and local disabilities groups).

Development: To further educate our associates on the importance of diversity and inclusion, we are investing in awareness training for all associates. Additional D&I trainings on disability, mental health, speaker series and female leadership will also be created. Furthermore, by March 31, 2019, 75 managers will go through a rigourous management training that will focus on building more inclusive leaders.

Internal Controls and adequacy

The Companys global presence across multiple countries and large associate strength makes it imperative for us to have a robust internal controls framework. The Company has in place adequate systems of internal control commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial

and operational information, complying with applicable statutes, safeguarding assets from unauthorized use or losses, executing transactions with proper authorization and ensuring compliance of corporate policies. The Company has a well-defined manual for delegation of authority for approving revenue and expenditure. The Company uses SAP system, globally, to record data for accounting, consolidation and management information purposes, which connects to different locations for exchange of information.

M/s Ernst & Young LLP carried out the internal audit for the financial year 2017-18 based on an internal audit plan, which is reviewed each year in consultation with the statutory auditors (M/s Deloitte Haskins & Sells) and the Audit Committee. The internal audit process is designed to review the adequacy of internal control checks and covers all significant areas of the companys global operations.

The Company has an Audit Committee of the Board of Directors, the details of which have been provided in the corporate governance report.

The Audit Committee reviews audit reports submitted by the internal auditors. Suggestions for improvement are considered and the audit committee follows up on the implementation of corrective actions. The committee also meets the Companys statutory auditors to ascertain, inter alia, their views on the adequacy of internal control systems in the Company and keeps the board of directors informed of its key observations from time to time.

The statutory auditors have also independently audited the internal financial controls overfinancial reporting as on March 31,2018 and have opined that adequate internal controls over financial reporting are existing and that such controls were operating effectively.

Enterprise Risk Management (ERM)

The Company has an organization-wide ERM framework. The framework is based on best-in-class standards and covers various operations of the Company as well as key criteria like Financial risks, Reputation risks, Regulatory risks, Employee risks and Customer risks. The audit of ERM is periodically carried out by Ernst & Young LLP, the companys internal auditors and a report is presented to the Audit Committee. The risk management practices include risk assessment, monitoring, reporting, mitigation and integration with Companys planning.

Investor Engagement

The Company communicates the business outlook, strategies and new initiatives to its investors in a regular and structured manner. We believe that communication with the investor community is as important as timely and reliable financial performance. We engage multiple communication channels for this purpose. The Companys dedicated investor relations department, along with the companys senior management team, participate in various road shows and investor conferences. The Company hosts an annual Investor Day at its premises. The Company also engages an external agency to carry out an independent Investor Satisfaction Survey and the results of the survey are analysed and improvements are implemented. There has been an iprovement in the survey results over last year.

Whitsle-blower policy

Cyient firmly believes in Values FIRST (FIRST = Fairness, Integrity, Respect, Sincerity, Transparency) and the organization-wide Whitsle-Blower policy is a step towards ensuring transparency and accountability. The Company believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. This allows stakeholders to expose any kind of information or activity that is deemed illegal, unethical, or not correct within the company that is either private or public. The stakeholder can approach the Ombudsman, without fear, to report any wrong-doing, impropriety or malpractice within the company.

Shareholder Value Creation

As a resultofoursignificantgrowth in revenue and profitover the last 6 years, dividend payout has substantially improved from 17.2% in FY 13 to 41% in FY18. The Company has consistenly generated free cash flow (FCF) for the business in last 3 years with an increased focus on working capital management, tax optimization and prudent capex strategy. These improvements in business performance also resulted in increase in market capitalization. Our market capitalization has shown CAGRof-61% in Iast5years.

Revenue Growth

The Company has witnessed strong revenue growth of 12.9% Y-o-Y in $ terms and 11.7% in constant currency basis. It has also sustained robust revenue growth momentum in the last 5 years with an impressive compounded annual growth rate (CAGR) of 26%. The revenue for the Company is driven by focus on a well-diversified business and geography portfolio.

Revenue by Operating Segments

The Company had been operating by three different Operating Segments and each of the unit have grown strongly across all the geographies and industry segments.

Revenue by Geography

The Company has delivered robust growth across all geographies. Asia Pacific (APAC) has recorded significant growth of 16% in $ terms and EMEA has grown by 22% in $ terms due to Cyient sustained investment in market develooment.

Business Free Cash Flow (FCF) Generation

The Company has achieved consistent generation in free cash flow (FCF) capabilities of the business in Iast3years.

In FY18, the Company generated Free Cash Flow (FCF) at 2,706Mn(FY17 3,712 Mn).

The Companys FCF as % of operating profit decreased from 65% in FY17 to 39% in FY18, due to consumption of cash in DLM business and increase in DSO. The Company is confident of continued improvement in FCF with specific focus on days sales outstanding, achieving better working capital and optimizing the capital expenditure.

Days Sales Outstanding (DSO)

The Companys DSO is inline with the best in the industry and stands at 80 days in FY 18 compared to 73 days in FY 17. The Company is confident of reduction in DSO in the coming years.

*DSO Calculation: Total receivables at the end of quarter/ (Quarterly Annualized Revenue*90)

Tax Rate

The effective tax rate for the organization has increased by 150 bps from 24.2% in FY17 to 25.7% in FY18, mainly due to phase-offofsome units in Special Economic Zone (SEZ) from 100% to 50% tax bracket.

Capex

The Company ended the FY18 with capital expenditure of 1,271 Mn, which is 3.2% of total revenue.

Net worth

Net worth of the Company has grown by 48% in last 5 years from 18,441 Mn to 23,422 Mn mainly attributed to the profitable growth in each of the last years, driven by both organic and inorganic initiatives.

Return to investors

Dividend payment trend for the Company has improved substantially in last 5 years. The dividend payout for the Company stands at 41%. The dividend for the full year at 13/ share- highest ever.

Market Capitalization

Market capitalization of the Company has improved significantly in last 5 years. The market capitalization of the Company has grown from 18,989 Mn in FY 2014 to 78,237 Mn in FY2018.

FINANCIAL PERFORMANCE FOR THE YEAR 2017-18 (CONSOLIDATED)

The financial results of Cyient Limited under Indian AS discussed below are for the Consolidated results of Cyient Limited and its subsidiaries, which includes the performance of its subsidiaries, joint venture and associate. Preparation and presentation of such consolidated financial statements depicts comprehensively the performance of the Cyient group of companies and is more relevant for understanding the overall performance of Cyient. Standalone results of Cyient excludes the performance of its subsidiaries, joint venture and associate. This part of the Management Discussion and Analysis refers to the consolidated financial statements of Cyient ("the Company") and its subsidiaries, joint venture and associate referred to as "the Group". The discussion should be read in conjunction with the consolidated financial statements and related notes to the consolidated accounts of Cyientfortheyearended March 31, 2018.

FINANCIAL RESULTS (CONSOLIDATED)

Particulars

Mn

% of Revenue

Mn

% of Revenue

Revenue from operations

39,175

100%

36,065

100%

Other income

1,519

3.9%

932

2.6%

Total income

40,694

36,997

Expenses
Employee benefits expense

21,877

55.8%

20,490

56.8%

Cost of materials consumed

3,272

8.3%

2,852

7.9%

Changes in inventories of finished goods & work in progress

-201

-0.5%

-110

0.3%

Excise duty on sale of goods

36

0%

207

0.6%

Operating, administration and other expenses

8,837

22.6%

7,854

21.8%

Finance Costs

204

0.5%

172

0.5%

Depreciation

1,052

2.7%

953

2.6%

Total expenses

35,077

89.5%

32,418

89.9%

Particulars

Mn

% of Revenue

Mn

% of Revenue

Profit before tax, share of profit of associate and minority interest

5,617

14.3%

4,579

12.7%

Exceptional Items

50

0.1%

261

0.7%

Profit after exceptional items and before tax

5,567

14.2%

4,318

12.0%

Tax expense

1,380

3.5%

1,045

2.9%

Profit after tax, before share of profit in associate company and minority interest

4,187

10.6%

3,273

9.1%

Share of profit from associate company &Joint Venture

-156

-0.3%

123

0.3%

Share of non-controlling interest

23

0.05%

42

0.1%

Net Profit attributable to the shareholders

4,054

10.3%

3,438

9.5%

ANALYSIS

Revenue

Revenue grew by 8.63% in rupee terms and by 12.9% in US$ terms. The growth in constant currency is 11.7%. Growth was recorded across all geographies and we witnessed highest ever contribution by our Top 20 customers.

Other income

Other income for FY 18 was at 1,519 Mn as compared to 932 Mn in FY 17. Increase in other income is primarily on account of increase in treasury income and gains on foreign exchange forward contracts.

The movement of Rupee against major currencies was as follows:

YE March 2018

YE March 2017

USD

65.10

64.50

64.82

67.04

EUR

80.09

75.43

69.25

73.59

GBP

91.32

85.51

80.87

87.70

Employee benefits expense

Employee benefits expense includes salaries which have fixed and variable components, contribution to retirement and other funds and staff welfare expenses.

Employee benefits expense as % of revenue from operations stands at 55.8% for FY18 as compared to 56.8% in FY17. Despite the increase in headcount we have been able to control the cost approximately.

Operating, administration and other expenses

YE March 2018

YE March 2017

Mn

% of Revenue

Mn

% of Revenue

Rent

796

2.1

682

1.9

Travel

1,337

3.4

1,260

3.5

Subcontracting charges

2,825

7.2

2,382

6.6

Repairs and maintenance

972

2.5

904

2.5

Others

2,907

7.4

2,626

7.3

Total

8,837

22.6

7,854

21.8

Other operating expenses have been flat as percentage of revenue.

Finance costs

Finance costs has remained constant at 0.5% as a percentage of revenue.

Depreciation

Depreciation remained constant as a percentage of revenue at2.7% for FY18 compared to 2.6% for FY17.

Exceptional item

Exceptional item for FY 18 relates to loss on divestment of its investment of 49% shareholding in Infotech Aerospace Services Inc., Puerto Rico, an associate Company.

Exceptional item for FY 17 relates to stock compensation expense towards issue of Restricted Stock Options (RSU) to eligible employees on the occasion of the companys silver jubilee anniversary.

Tax expense

The effective tax rate ("ETR") has increased from 24.2% in FY 2017 to 25.7% in FY 2018 mainly due to phase-off of some units in Sepcial Economic Zone (SEZ) from 100% to 50% tax bracket.

The "Tax Cuts and Jobs Act", also known as the "US Tax Reforms" was signed into a law on December 22, 2017. The most significant change brought by this law is the reduction of US corporate tax rates from 35% to 21%.

This will help in bringing down the ETR in the coming years, apart from other initiatives.

Share of profit from associate company & Joint Venture

The Share of profit from associate company and joint venture has decreased from 123 Mn in FY 17 to (156) Mn in FY 2018.

During FY 18, the Company has recognized a loss of 160 Mn as share of loss from associate incurred up to the date of divestment in Infotech Aerospace Services Inc. due to hurricane in Puerto Rico.

During FY 18, the Company has recognized 4 Mn as a share of profit fromjoint venture.

Net Profit attributable to the shareholders

The net profit has increased by 18% Y-oY. Itstands at 4,054 MnforFY 18.

BALANCE SHEET AS AT MARCH 31, 2018 (CONSOLIDATED)

31-Mar-18

31-Mar-17

EQUITY AND LIABILITIES
Shareholders funds
Share capital

563

563

Reserves and surplus

22,879

20,636

Total - Shareholders funds

23,442

21,199

Non-current liabilities
Long-term borrowings and liabilities

1,009

759

Long-term provisions

898

813

Deferred tax liabilities (net)

356

302

Total - Non-current liabilities

2,263

1,874

Current liabilities
Short-term borrowings

1,780

1,159

Trade payables

3,813

3,922

Other current liabilities

2,483

2,551

Short-term provisions

545

659

Total - Current liabilities

8,621

8,291

TOTAL - EQUITY AND LIABILITIES

34,326

31,364

ASSETS
Non-current assets
Property, plantand equipment

4,941

4,497

Goodwill

3,549

3,278

Non-current investments

298

1,032

Deferred tax assets (net)

321

101

Other non-current assets

1,761

1,766

Total - Non-current assets

10,870

10,674

Current assets
Inventories

1,312

935

Current investments

1,130

925

Trade receivables

6,913

6,496

Cash and cash equivalents

9,807

8,781

Other current assets

4,294

3,553

Total - Current assets

23,456

20,690

TOTAL ASSETS

34,326

31,364

Share capital

The Company has only one class of shares - equity shares of par value of 5 each. The Authorised share capital of the Companywas 278,000,000 equityshares.

During the year ended March 31, 2018, the Company allotted 29,662 equityshares of 5/- each, consequent to the exercise of the stock options by the associates of the Company under the Associate Stock Option Plan.

During the previous year, the Company granted Restricted Stock Units (RSU) to its eligible associates on the occasion of the Companys silver jubilee anniversary celebrations. These RSUs werevested on March 30,2018.

Reserves and Surplus

Reserves and surplus as at March 31, 2018 stood at 22,879 Mn as compared to 20,636 Mn as atMarch 31, 2017.

Securities premium account increased by 13 Mn on account of premium on issue of ASOPs.

Balance in profit and loss, after appropriation of dividend, stood at 13,584 Mn ( 11,433 Mn as at March 31, 2017).

Foreign currency translation reserve increased from 223 Mn as at March 31, 2017 to 549 Mn as at March 31, 2018, due to movement in exchange rates of currencies during the year. Use of different exchange rates for translation (income & expenses at average rates and assets & liabilities at closing rates) gives rise to exchange difference which is accumulated in foreign currency translation reserve.

Borrowings

The long term borrowings increased from 759 Mn as at March 31, 2017 to 1,009 Mn as atMarch 31, 2018.

The short-term borrowings increased from 1,159 Mn as at March 31, 2017 to 1,780 Mn as atMarch 31, 2018.

The borrowings have increased mainly due to acquisitions during the year to facilitate better arbitrage and lower cost of capital.

Trade payables

Trade payables consist of payables towards purchase of goods and services and stood at 3,813 Mn as at March 31, 2018 ( 3,922 Mn as at March 31, 2017).

Short-term provisions

Short term provisions decreased from 659 Mn as at March 31, 2017 to 545 Mn as at March 31, 2018 due to payment of advance taxes against the tax provision.

Property, plant and equipment

Increase of 444 Mn in property, plant and equipment is primarily attributable towards the additions of computer software, infrastructure facilities and assets acquired from an acquisition. Further, Company has entered into an agreement with a third party, wherein it was granted technology license to develop, test and commercially utilise the benefits from such testing and development activity. Development costs incurred during the year ended March 31, 2018 was 180 Mn and the same are included in intangible assets under development.

Goodwill

Goodwill represents the excess of purchase consideration over netassets ofacquired subsidiaries.

On January 24, 2018, the Company acquired 100% of equity interest in B&F Design Inc.(B&F) through its wholly owned subsidiary Cyient Defense Services Inc. B&F has an area of expertise in design and manufacturing of precision engine assembly equipment, repair tooling, machining of fixtures and gauges, and engine factory modernization services primarily for aerospace and defense industry.

Goodwill as at March 31,2018 stood at 3,549 Mn ( 3,278 Mn as at March 31, 2017) and the increase is due to acquisition of B&F Design Services Inc.

Non-current investments

During the year, the Company entered into a definitive agreement to divest its entire 49% shareholding in its associate company, Infotech Aerospace Services Inc. ("IASI") Puerto Rico for a consideration of 114 Mn. The closing conditions for the divestment were concluded on December 08, 2017. Upon divestment, the resultant loss of 50 Mn was recognized in the consolidated financial statements and disclosed as an exceptional item. Further, the Company also received 589 Mn from IASI towards dividend pertaining to earlier years.

During the year, the entire shareholding of VIOS Medical Instruments Inc. ("VIOS") was acquired by Murata Manufacturing Co. Limited ("Murata"), Japan, as part of a plan of its merger. The Company received shares of Murata on October 13, 2017 as consideration in lieu of its shares held in VIOS and accordingly recognized the gain of 166 Mn as a part of its investment.

Decrease in non-current investments is mainly on account of disposal of associate company, Infotech Aerospace Services Inc. of 914 Mn.

Cash and cash equivalents

As at March

As at March

31, 2018

31, 2017

Cash and bank balances

9,807

8,781

Investment in Mutual funds

1,130

925

Total

10,937

9,706

Cash and bank balances have increased from 8,781 Mn as at March 31, 2017 to 9,807 Mn as at March 31,2018, mainly due to generation of cash during the year.

Investment in mutual funds, have increased from 925 Mn as at March 31, 2017 to 1,130 Mn as at March 31, 2018. The company deploys its surplus funds in investments in debt- based mutual funds in line with an approved policy.

This was the highest ever cash position with continued healthy cash generation despite one acquisition and increased dividend payout.

Trade receivables

The trade receivables have increased from 6,496 Mn as at March 31, 2017 to 6,913 Mn as at March 31, 2018 mainly due to increase in business.

Other current assets

Other current assets have increased from 3,553 Mn as at March 31, 2017 to 4,294 Mn as at March 31, 2018, primarily due to increase in unbilled revenue during the year. The Company regularly monitors unbilled revenue, separately as well as collectively along with trade receivables.