Sonata Software Ltd Management Discussions

This Management Discussion and Analysis (MD&A) pertains to Sonata Software Limited (Sonata, or the Company) and its subsidiaries on a consolidated basis, unless otherwise stated. The MD&A should be read in conjunction with the companys financial statements included herein and the notes hitherto. The financial statements have been prepared in accordance with the Generally Accepted Accounting Principles in India (GAAP) to comply with the Indian Accounting Standards specified under Section 133 of and other relevant provisions of the Companies Act, 2013 as applicable. The companys management accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner the form and substance of transactions and reasonably present the companys state of affairs and profits for the year.

Introduction

In FY24, Sonata Software achieved one of the best Y-o-Y growth, while the world, industry and our peer companies faced strong headwinds globally. Sonatas revenue crossed USD 1B mark and the Market Capitalization soared by 160%, crossing the USD 2B mark. We added many marquee logos and overperformed in our Quant and Encore acquisitions. The secret sauce being our Modernization-driven big bets, our Play Big mindset, and agility and system thinking, which enables us to accelerate time to market for our clients.

Despite macro and industry level headwinds, opportunities continue to remain buoyant for modernization, consolidation, and in new technology areas. We continued investing in front-end sales, tech consulting talent, ecosystem partnerships, and focus geographies and verticals. With our commitment to delivering best-in-class service, we swiftly established centers in Mexico and Malaysia to meet the time-zone needs of our clients and are now ready to operate centers in Egypt and Poland as well. Also, we strengthened our partnerships with Microsoft, AWS, Salesforce, Google, and key industry partners.

To strengthen our brand, we brought our subsidiaries – Sonata Encore, Sonata Scalable and Sonata GBW under one umbrella brand – Sonata Software. This move will allow us to leverage Sonata Softwares global reputation and ensure our stakeholders get seamless experience with us.

Recognition and accolades kept us steadfast. We were honored with the Microsoft Inner Circle Membership three times over. We also received the 2023 "Best Governed Company Listed Segment: Emerging Category" Award from the Institute of Company Secretaries of India (ICSI) for Excellence in Corporate Governance. Sonata also featured in the reports of leading analyst firms like Everest Group and HFS for its cutting-edge Offerings in GenAI, Cloud Modernization, Data Modernization and Dynamics Modernization space.

Sonata got recognized as the Most Preferred Workplace 2023-24 in the IT/ITeS segment, a testament to our ongoing commitment to create an employee-centric workplace.

We remain committed to our ESG goals. Recognition by EcoVadis – The worlds most trusted Business Sustainability ratings, is testimony of the positive strides we have made in establishing ESG policies, robust governance, measurable impact, and disclosures.

Global Macro Environment

With disinflation and steady growth, the risks to global growth are balanced.

Projections indicate a decline in global headline inflation, expected to reach 5.8% in 2024 and further decrease to 4.4% in 2025. This disinflationary trend, coupled with sustained growth, has mitigated the likelihood of a hard landing, resulting in a balanced risk profile for global growth. The likelihood of a hard landing has receded due to disinflation and steady growth. On the upside, faster disinflation could lead to further easing of financial conditions. Conversely, on the downside, new commodity prices spike from geopolitical shudders such as continued attacks in the Red Sea, alongside supply disruptions or prolonged underlying inflation, which may prolong tight monetary conditions. Distresses in the property sector in China or disruptive turns to tax hikes and spending cuts in other regions could also cause growth disappointments.

With inflation declining and economies better able to absorb effects of fiscal tightening, there is a need for renewed focus on fiscal consolidation to rebuild budgetary capacity, raise revenue for new spending priorities, and curb the rise of public debt.

Global IT spending is expected to witness sustained growth in the upcoming year.

In 2024, IT services will continue to grow and will emerge as the largest segment of IT spending for the first time. It is anticipated that spending on IT services will increase by 8.7%, reaching a significant milestone of USD 1.5 trillion. Enterprises will continue to find more uses for technology. IT services have moved from the back office to front office and are now revenue-producing activities. As the demand for IT spending is expected to remain strong in various sectors, there is no plateau in enterprise IT spending.

Global IT spending forecast

	2023 Spending	2023 Growth	2024 Spending	2024 Growth
	(USD Bn)	(%)	(USD Bn)	(%)
Data Center Systems	243	7.1	261	7.5
Devices	700	-8.7	732	4.6
Software	913	12.4	1,029	2.7
IT Services	1,381	5.8	1,501	8.7
Communications	1,440	1.5	1,473	2.3
Services
Overall IT	4,678	3.3	4,997	6.8

Sonata: Continued Focus Across Verticals and Markets to Drive Modernization

USA

As part of our growth strategy, we have structured our USA region into:

• Invest Verticals: Banking, Financial Services and Insurance (BFSI), and Healthcare and Life Sciences (HLS). • Harvest Verticals: Retail, Manufacturing and Distribution (RMD) and Technology, Media and Telecom (TMT).

Banking, Financial Services and Insurance (BFSI)

In FY24, the BFSI industry had to navigate through the challenges of a slowing global economy and rising interest rates. Banks continue to be stressed around finding new ways to generate income while managing costs. There is an increased focus around customer retention, optimizing cost and driving innovation.

Sonata is well positioned to work with the clients and prospects in BFSI industry to drive their key priorities forward.

Some of the key focus areas are:

Enhance Customer Experience

Sonatas Customer360 offering provides a holistic view of customer interactions across diverse banking products and channels (structured and unstructured). Our solution serves as a centralized hub for aggregating and analyzing customer data and utilizes advanced analytics and AI to generate actionable insights. Banks are able to drive targeted marketing campaigns, personalized recommendations, and tailored product offerings for their customers.

Drive Operational Efficiency

Sonata has developed a GenAI assisted Unique Modernization Framework that is revamping the entire lending and mortgage process. The prebuilt accelerators and lending specific data models are driving faster document validation and credit decisioning for banks.

Enhanced Cybersecurity and Regulatory Compliance

Sonatas GenAI powered regulatory framework is helping banks address their GRC needs across geographies. We have also partnered with leading industry experts to ensure banks are adhering to the growing number of regulations that they have to comply with.

Overall, Sonata continues to align its services around the priorities driving the BFSI industry and we are fully committed to serving our customers through their digital transformation journey.

Healthcare and Life Sciences (HLS)

Healthcare and Life Sciences organizations face several macroeconomic challenges, including sluggish pipelines, pricing pressures, and rising operational costs. To address these challenges, enterprises in the HLS sectors are adopting strategies to optimize costs, enhance productivity, and gain a foothold in the marketplace.

Some of the key focus areas are:

Enhancing Topline: Accelerating Drug Discovery

We are leveraging GenAI-powered intelligent assistants to support their R&D scientists in the drug discovery process. These intelligent assistants provide curated information and insights, expediting the drug discovery process and reducing the time to market for new drugs.

Optimizing Bottomline: Driving Operational Efficiency

We recognize the cost pressures faced by HLS organizations and to address these challenges, we offer AI-based solutions such as Pharma 4.0, powered by Harmoni.AI and IntellQA. These AI solutions are designed to streamline workflows, minimize waste, and enhance regulatory processes, ultimately leading to cost reduction across the board.

Improving Patient Outcomes

We collaborated with Digital Health (DxP) companies to develop innovative solutions that empower healthcare professionals. These solutions aim to provide informed decision-making, superior care, and overall cost reduction.

Ensuring Regulatory Compliance and Security

Our GenAI-powered GxP framework and SDLC platform simplify compliance processes in the HLS sector, while our data-driven risk and compliance framework assesses and enhances security posture, ensuring adherence to regulatory standards.

In essence, our ongoing investment in these areas underscores our commitment to supporting HLS companies in navigating the evolving landscape while delivering tangible value and driving positive outcomes for all stakeholders involved.

Retail, Manufacturing and Distribution (RMD)

Retailers are currently navigating unprecedented changes in the industry. The evolution of customer journeys has led to non-linear and infinite paths to purchase, necessitating the creation of connected, personalized, and adaptive experiences throughout. Sonata refers to this approach as Connected Retail. We are enabling retailers to reimagine their business models, modernize their technology landscape, and transform customer experiences across the pre-shop, shop, and post-shop journey. This modernization journey is anchored in our structured platform approach, helping deliver ubiquitous and omnichannel customer experience.

Sonata is delivering the Connected Retail experience by bringing together all the elements in the journey of change, leveraging data, and the retail industry cloud. Here are the key areas we focus on:? Modernizing legacy POS platforms to enhance customer experience at the point of purchase ? Digitizing operations, in-store customer and associate experience ? Transforming commerce for rapid adoption of D2C and brand propositions ? Creating resilience in supply chains through data-driven visibility and certainty solutions ? Accelerating fulfillment through intelligent order and inventory management

The Manufacturing and Distribution industry is constantly evolving and adapting to innovative business models to keep up with changing demands and ongoing digital disruption. The goal is to fully realize the benefits of a connected ecosystem and improve operational efficiency. Operational efficiency is a critical driver for manufacturers to stay ahead in the digital age. An agile supply chain, with real-time visibility and insights into the entire distribution network from sourcing to storage to delivery, is a key enabler of efficient operations. In addition to operational efficiency, understanding end consumer behavior and personalizing their experience has become the norm to gain and sustain customer loyalty. Manufacturers need to embrace a platform-oriented approach and leverage new digital technologies to efficiently manage the supply chain ecosystem, which consists of different players such as suppliers, distributors, franchisees, retailers, stockists, logistics providers, and consumers. By adopting a platform-oriented approach, manufacturers can enable each player in the ecosystem to perform at their best. Sonata brings together deep experience, industry-ready platforms, and a unique Platformation^TM approach to help industrial and consumer goods manufacturers stay competitive in the digital era. Our solutions focus on digital distribution platforms and enable manufacturers to establish an adaptive distribution network that can withstand changing market dynamics and embrace new distribution models.

Technology, Media and Telecom (TMT)

The Technology, Media and Telecom (TMT) sector is experiencing significant digital transformation, driven by shifting consumer behaviors and technological advancements.

Cloud computing continues to serve as a cornerstone, with significant investments aimed at bolstering scalability, cost efficiency, and data security. This is particularly critical for telecom firms managing expansive networks and copious data volumes, and media companies heavily reliant on streaming and digital platforms.

Data analytics and Artificial Intelligence (AI) continue to play pivotal roles, empowering TMT firms to enhance customer experiences, personalize content, and extract valuable insights into consumer behavior. Generative AI is gaining traction and its unique expectations and demands are shaping how TMT companies develop products and services with AI-driven personalization, recommendation systems, engineering tool sets and development practices.

The proliferation of IoT devices underscores the necessity for robust infrastructure to support data processing and analysis. Edge computing has emerged as a key solution, enabling TMT companies to process data closer to the source, reducing latency and enhancing real-time decision-making capabilities.

Some of the key focus areas are:

a. Infuse AI, Machine Learning and Generative AI to transform the engineering process and development of products and platforms for our clients. b. Create products and platforms that improve customer experiences by improving the customer life cycle management. c. Enhance developer productivity by using tools and accelerating development and reducing time to market. d. All pervasive data products to be used across the organizations.

Microsoft Global Account

Sonata Software is a trusted partner of Microsoft, one of our platinum accounts and part of our Top 5 accounts. Over the past 30 years, Sonata has offered a wide range of services and solutions for Microsoft across various domains and technologies. These include Business Applications, Data & AI (Azure), Digital & App Innovation (Azure), Infrastructure (Azure), Modern Work, and Security. We leverage our deep expertise, industry knowledge, and best practices to deliver value-added and innovative solutions for our customers.

We are proud and excited to be the only Indian SI partner for the launch of Microsoft Fabric. We strongly believe Fabric is pathbreaking in what it can do for customers who are modernizing their global data estate. We bring a complete set of complementary capabilities in terms of IPs as well as capacities across the globe to help customers modernize their data estate and adopt this platform faster.

Sonata Software is honored to be a member of the Microsoft AI Partner Council, a select group of partners driving the adoption of AI solutions on Microsoft Azure. As part of this partnership, Sonata Softwares Harmoni.AI platform integrates with Microsoft Azure AI services, enabling enterprises to accelerate their AI journey. In addition, we remain committed to delivering excellent customer service and support and are honored to be a finalist for the Customer Marvel awards in the Microsoft Annual Supplier Awards for 2023.

Sonata Software has a global presence with a network of delivery centers in India, US, Canada, Mexico and Malaysia, and is ready to operate centers in Egypt and Poland as well. This extensive network positions Sonata to collaborate with Microsoft on a global scale. We have a strong and diverse team of Microsoft certified professionals who can deliver high-quality and cost-effective solutions for our customers, while our robust and agile delivery model ensures timely and seamless execution of projects.

We look forward to continuing our fruitful and strategic partnership with Microsoft in the coming years and exploring new opportunities and challenges together.

UK and Ireland

The UK IT services market, valued at approximately ?60B, is among the largest and most mature in region. It is poised for robust growth driven by digital transformation, cloud adoption, and evolving business needs. Sonata UK has been leveraging its modernisation engineering heritage with investments in advanced technologies such as AI, Cloud, Data, and Analytics to meet customer needs. The challenging macroeconomic climate has prompted our customers to reassess their operating models and enhance productivity to fund differentiated customer experiences.

Sonata is well-positioned to deliver business transformation by capitalising on these trends across various market segments, including BFSI, HLS, RMD and TMT. Sonatas domain-centric approach, combined with global best practices and right-shoring of talent, positions us as a trusted navigator for our clients through:

Digital Transformation Initiatives

• Adoption of Advanced Technologies: Utilizing AI and Machine Learning to improve operational efficiency and customer experience.

• Modernisation of Legacy Systems: Upgrading outdated systems to modern IT infrastructures.

Cloud Computing

• Shift to Cloud Services: Enhancing scalability, cost savings, and flexibility through cloud solutions.

• Hybrid and Multi-Cloud Strategies: Optimizing workloads and ensuring business continuity.

Data Analytics and Big Data

• Data-Driven Decision Making: Leveraging big data and analytics for informed decision-making.

• AI and Machine Learning: Employing predictive analytics and automation.

Outsourcing and Managed Services

• Cost Optimization: Reducing costs by outsourcing IT functions.

• Access to Expertise: Providing specialized skills and advanced technologies through managed services.

Through digital transformation, cloud computing, data analytics, and managed services,

Sonata is enabling customers in UK to enhance productivity and deliver superior customer experiences.

Europe

In FY24, the Europe region transitioned into a distinct business unit, driven by the need to capitalize on the burgeoning business opportunities with enhanced focus and dedication. Throughout the year, Europe celebrated significant achievements, including securing a large deal with its largest new client, marked by a global deployment of Dynamics 365 across the clients global entities.

Another notable milestone was the breakthrough entry into the telecommunications industry by securing strategic engagements of one of Europes largest Telecom companies. This expansion signals a pivotal moment, with expectations of growth in our telecom business across Europe in the years to come.

Since the introduction of Microsoft Fabric, Sonata in Europe has actively engaged with Microsoft in Nordics region and plans to extend this collaboration across continental Europe in Q1 and Q2 of FY25. The markets response to Sonatas offerings in Automation, AI, and Data & Analytics has shown notable growth throughout FY24, with further increases in demand anticipated.

Microsoft remains a crucial partner for Sonata Europe, with solid partnerships established in Sweden and Germany and gaining traction across continental Europe. Additionally, Sonatas partner organization in Europe has successfully positioned Sonata as a European partner for Snowflake, receiving positive feedback in the European market.

In a strategic move during Q4, Sonata Europe announced its investment in establishing a new nearshore development center located in Poland. This development center aims to meet the escalating demands for business transformation, modernization, and cost optimization initiatives from global clients in Europe. It underscores Sonatas commitment to strategic investment in the rapidly expanding field of Generative AI.

ANZ

The ANZ market is shaped by a mix of opportunities and challenges. The opportunities are digital transformation, creating resilient supply chains, cybersecurity, remote work and sustainability. The challenges being, slow economic recovery, rising cost of product and services, longer decision-making cycles and geopolitical uncertainty.

Sonatas strategic focus in this market is to capitalize on these opportunities and provide solutions to neutralize the existing challenges for clients within the RMD sectors. The key highlights of these verticals include a robust e-commerce sector, omnichannel integration, data analytics for personalization, supply chain optimization, and the adoption of contactless shopping technologies.

Our execution strategy is centered around the following:

• Providing optimization-led Modernization services across Applications, Data and Infrastructure to bring in better customer & employee experiences and improve business processes.

• Bringing in digital transformation to clients through GenAI and Automation to help them reduce cost of operations and improve overall engagement with their stakeholders.

• Work closely with our strategic partners to bring constant value to our clients through innovative solutions like Microsoft Fabric and other cost take-out offerings.

• Changing the revenue mix from a project-centric business to a more annuity-based business to ensure more predictable revenue projections and focus on large deals.

• Growing existing clients and targeting prospects in RMD and investing in selected BFSI prospects.

The execution of this strategy commits us to investing in the focused sectors and in the development of IP and tools to help service our clients more cost effectively.

APAC

India has emerged as a popular destination for Global In-house Centers (GICs) in the APAC region. This is due to several factors, including a large pool of skilled talent, favourable government policies, cost benefits, and a robust IT infrastructure. Many companies have established their GICs in India to take advantage of these benefits.

Sonata recognizes the growth potential in the APAC region and is strategically leveraging its local delivery and sales capabilities to script its growth story. We have been traditionally engaged with established GICs for Professional Services and Managed Services requirements. However, Sonata aims to elevate its play by focusing on innovative models for larger revenue share:

• Build Operate Transfer (BOT) model for GICs who want to establish captives in India.

• Roll out a rebadging/takeover and run proposition for captives.

Sonata is a dominant force in product sales in India, with a strong presence in large enterprise accounts. The company is leveraging its strong India business relationships and capabilities to unlock the growth potential and establish a strong foothold in the APAC market. Also, we are actively building strong partnerships in the region and are focused on localizing the solutions and service offerings to meet the specific requirements.

Sonata CX

At Sonata CX (formerly known as GBW), the strategy continues to focus on the use of advanced analytics and actionable insights to drive customer experience via our proprietary omnichannel platform that measures and evaluates every customer touchpoint. We maintain a unique ability to combine physical and digital measurement capabilities anywhere in the world, which enables the provision of greater insights and understanding for our clients and their teams.

In FY24, we were thrilled to announce the successful implementation of our omnichannel platform, which integrates data from multiple sources, empowering our clients to access multitude of insights through our analytics engine. These insights enable stakeholders to make more informed decisions, aiming to enhance customer experience and gain deeper insights into the Return on Investment (ROI) between CX and operational metrics.

Furthermore, we have also incorporated data and analysis from social media and research panels to further enhance our evaluation of the customer journey, ensuring our clients can access insights that enable better business decisions.

Operational Review

During FY24, we successfully acquired new clients across various industries. Our GTM solutions around

Modernization of Cloud & Data, Automation, Managed Services, Dynamics 365 Transformation have helped these clients achieve their business goals.

International Business

In FY24, Sonatas international business demonstrated resilience and achieved a 39.5% Y-o-Y growth rate. Our industry-leading growth rate is a testament to the success of our below mentioned strategy:

1. Verticalized USA Operations

We were able to deliver more value to our clients by moving into vertical structure of: a. Harvest Verticals - RMD and TMT b. Invest Verticals - BFSI and HLS

The success of Sonatas strategy refresh in FY24 has contributed to scaling our business with existing clients and delivering new services to them.

2. Market Focus: As part of our strategic expansion plans in Europe Market, our delivery center in Krak?w, Poland is ready to start its operations. This nearshore center will support the growing demands for business transformation, Modernization, and cost optimization initiatives, for our global clients.

3. Large Deals: Our unparalleled focus to win large deals with existing and new clients has been key for our growth in FY23. We won over 14 large deals in FY24 providing diverse services to our existing and new clients. This is the bedrock for us to build on and win many more deals in the upcoming years.

4. Modernization Services: Our clients have found our suite of Modernization services relevant and aligned to their strategy. This has helped us construct deals to provide digital Modernization services which improves consumer experience & growth of their business coupled with cost take-out deals which helps in improving efficiencies and funding the transformation journey.

Key Large Deals by Sonata in FY24

Deal 1

The client is a large Home Improvement Retail Corporation in the United States. The client faced challenges in modernizing their core systems and generating efficiencies across their inbound and outbound supply chain due to non-performance from an incumbent partner. Our client evaluated multiple prospective vendors and chose Sonata as a strategic partner for standardization and modernization. This deal is for a 5-year tenure with continuous modernization to transform their supply chain operations.

Deal 2

The client is an American Multinational Technology Corporation. The client was looking to improve and expand end-customer experience and consumer success using their products and services in modern Data using AI and ML. Sonata partnered with the customer to provide efficient solutions catering to the end user requirement, leveraging strong domain expertise in supporting multilingual end customers.

Deal 3

The client is an American Transportation Services Company specializing in shipping. The client was looking for a reliable partner who could help maintain their applications and infrastructure footprint across all lines of business and support them in their digital transformation journey. Sonata will provide development/modernization services on cutting-edge technologies and automation.

Deal 4

The client is a leading Network Service Provider powering global connectivity for new media providers, telecom carriers and enterprises. Sonata signed a large multi-year contract to transform their core business and financial processes leveraging Cloud, Data, and our Harmoni.AI platform. We are delighted with this win, as our Harmoni.AI platform with its Responsible-first approach helped us differentiate against the competition.

Deal 5

The client is a premier Third-Party Logistics Company that provides supply chain solutions. We are going to build and maintain their logistics solutions across all lines of businesses including Transportation, Distribution, Fulfilment and Warehousing. We won this contract against stiff competition by leveraging our strong Data Analytics, Cloud, Architecture, and Engineering capabilities.

Deal 6

We won a large multi-year contract with Europes largest Multinational Leisure, Travel, and Tourism Company. The scope of the contract includes Cloud and Data Modernization, Application Modernization, strategic implementation of transformation programs, and innovation through Sonatas Solution and Innovation Hubs. As a part of the project, we will build and maintain Digital Hub to enhance customer experience and improve operational efficiency.

Deal 7

Client is a leading provider of Industrial Steel Mill Services for steelmakers around the world. The client wanted to modernize their existing trading platform with a next-gen, scalable and robust trading platform to drive growth and business value. Sonata proposed a solution to develop and implement a Next-Gen Trading Platform. This solution will enable the client to streamline its trading operations by providing a centralized platform for trade execution, position monitoring, and risk management.

India Business

Sonata Information Technology Limited (SITL) had yet another stellar year, where our customer focus and technology expertise saw us winning several deals and deployments. Overall, our India business grew by 7.4% in revenue and 18.6% in Gross Contribution (GC). Most of our existing customers across a range of industries renewed their large, multi-year contracts with us. The growth in existing customers also came through contracts for supply, implementation and integration of additional licenses and new technology products.

Many of the Indian enterprises, PSUs and startups selected Sonata as their chosen partner for procuring, setting up, integrating & utilizing their hyperscaler platforms to set up SMART Workplaces, to build their business platforms, to move their businesses to cloud platforms, to run their business 24/7 on cloud/hybrid environment and to improve their organizations efficiency.

System Integration Business

SITLs System Integration business grew 82.3% in terms of GC. We have executed several large Hybrid & Cloud system integration projects at our BFSI, Manufacturing customers.

Case Study 1

Sonata was a system integrator for a multinational public sector bank in Asia with 13,000 branches & 14,000 ATMs. Sonata implemented their Mobile Application Infra Augmentation project to achieve 50,000 logins, increased high availability and improved end user experience after the augmentation. Sonata conducted a comprehensive assessment of their existing platform and delivered detailed project plan for project execution. We have supplied and installed IBM and DELL Servers, Storage, and Firewall. We configured IBM power virtualization, VMware virtualization, configured high availability, F5 Velos implementation, augmenting existing applications and databases. Also, IBM spectrum and Tape Library implementation for backup and recovery.

Case Study 2

Sonata Software served as a system integrator for an Indian public sector bank and financial services company. The bank is the 10^th largest public sector bank in India by total assets and was ranked 1948 in the Forbes Global 2000 list in 2018. Additionally, it was ranked 80 on the Fortune India 500 list in 2020. Sonata implemented the MIS and ADFS Project for the bank to achieve seamless login and reporting. We supplied and configured servers, storage, and operating systems software.

Security Business

Sonata Information Technology Limited (SITL) enjoyed yet another outstanding year marked by our unwavering customer-centric approach and deep technological expertise, resulting in numerous successful contracts and deployments. Our India operation witnessed a remarkable growth of 7% in revenue and 16% in GC. Particularly outstanding was the exceptional performance of SITLs cybersecurity division, with revenue soaring by 81.93% compared to the previous year, and GC increasing by 78.11% over the same period.

We celebrated the successful renewal of multi-year contracts with several of our longstanding clients spanning across various industries. Moreover, the expansion within our existing customer base, characterized by increased license adoption and introduction of new products, exceeded 10% year-on-year. Additionally, we are thrilled to report a significant uptick of over 20% in the number of customers benefiting from Sonatas professional and Managed Services.

SITL: Expert Cybersecurity Consulting for Hybrid and Multi-Cloud Environments

SITL is a leading cybersecurity consulting partner with proven expertise in securing customers hybrid and multi-cloud environments. We combine industry best practices with a focus on consolidation and streamlining existing security measures. This ensures optimal protection for customers hybrid infrastructure while minimizing costs and operational complexity. SITL collaborates closely with clients to tailor cybersecurity solutions that perfectly address their specific needs.

Beyond Security: A Comprehensive IT Services Portfolio

SITLs reach extends beyond cybersecurity. We offer a diverse portfolio of IT services catering to the needs of enterprises in the Indian market. These services include:

• Infrastructure Operations

• IT Governance, Risk & Compliance

• Cybersecurity Advisory

• Business Continuity

• Information Intelligence

• Software Asset Management (SAM)

• Cloud Security Consolidation

Case Study 1: Endpoint Security and Asset Management for Major Public Sector Bank

Client: Multinational public sector bank headquartered in South India with 3,220 branches.

Challenge: The bank needed to strengthen its endpoint protection and asset management for its 25,000+ users to combat security threats, comply with regulations, and reduce costs.

SITL Solution: SITL acted as the banks cybersecurity consultant, implementing and maintaining endpoint protection and asset management solutions. This helped the bank:

• Fortify its defences against threats.

• Ensure adherence to relevant compliance standards.

• Optimize security expenses.

SITLs Approach:

• Performed a comprehensive assessment of the existing security platform.

• Delivered a detailed project plan for seamless execution.

• Deployed and maintained Broadcom and Zoho ManageEngine solutions.

• Provided ongoing facility management, including monitoring and environmental protection.

Case Study 2: Hybrid Data Availability & DR for Leading Private Sector Bank

Client: Second-largest private sector bank in India with 131,000 employees.

Challenge: The bank required a robust Hybrid Data Availability and Disaster Recovery (DR) solution to safeguard their critical data and support data management and compliance efforts. SITL Solution: SITL implemented a Hybrid Data Availability and DR solution for the banks critical data. This empowered the bank to: • Ensure high availability of crucial information.

• Implement effective disaster recovery procedures. • Enhance data management and compliance.

SITLs Approach:

• Implemented and maintained a Hybrid Data Availability & DR solution. • Deployed Veritas backup solutions within the banks environment.

Case Study 3: 360? Threat Mitigation for Large Public Sector Bank

Client: One of the largest public sector banks in India with 86,000 employees.

Challenge: The bank sought to bolster its overall cybersecurity posture, encompassing threat mitigation, proactive protection, and ongoing environment maintenance and compliance. SITL Solution: SITL acted as the cybersecurity consultant, collaborating with bank leaders to implement a comprehensive 360? threat mitigation strategy. This strategy offered the bank:

• Enhanced protection against a wide range of cyber threats.

• Proactive security measures to prevent attacks.

• Continuous environment maintenance and compliance adherence.

SITLs Approach:

• Collaborated with bank leaders to understand their security needs.

• Implemented and maintained a robust security environment using Broadcom and Veritas solutions.

• Ensured ongoing compliance with relevant regulations.

Delivery Excellence

GenAI Adoption

Sonata Software is driving the adoption of GenAI across its top accounts and projects to enhance productivity, quality, cycle time, cost efficiency and customer retention. Leveraging Sonatas Responsible-first AI Platform, Harmoni.AI, the company aims to demonstrate tangible business growth by integrating AI capabilities into its service offerings. Furthermore, Sonata has undertaken a comprehensive capability development initiative to equip its workforce with GenAI expertise through Level 1 and Level 2 training and certification programs. Progress of GenAI adoption is at various stages of maturity among different business unit and accounts.

Process Maturity & Certifications

With its focus on innovation and excellence, Sonata has achieved significant milestones in quality assurance and process maturity. The company has been successfully appraised at Maturity Level 5 on the new version of CMMI 2.0 DEV, marking the fifth consecutive appraisal at the highest maturity level. This appraisal, conducted by QAI Global Services, acknowledges Sonatas commitment to implementing innovative practices such as Behavior Driven Development (BDD) and automation initiatives, resulting in faster delivery and superior product quality.

We have successfully completed the ISO9001: 2015 2^nd Surveillance Audit for Sonata Software Ltd. by Bureau Veritas. ISO27001 1^st Surveillance-cum-Site addition audit with inclusion of Encore IT Services Solutions Chennai was successfully completed under One Sonata Umbrella for ISO27001 Certification.

For Sonata Information Technology Limited (SITL), we have successfully completed the 2^nd surveillance audit for ISO27001:2013 and ISO20000-1:2018. The annual progress audit for Azure Expert MSP Certification has been completed successfully.

Knowledge Sharing

To foster a culture of knowledge sharing and celebration, Sonata has introduced initiatives such as VISTAS (Victory Stories at Sonata) application and Sonata Stories communication platform. These platforms facilitate the sharing of success stories and recognition of employees contributions to customer success, thereby fostering employee engagement and motivation. Key people who contributed for case study submission were trained through a professional business storytelling partner. A monthly communication series to publicize the celebration of Sonatians contribution success stories for the customers is continuing.

Reuse

Additionally, Sonata has launched K-Harness, a reusable Asset Management Application, to streamline asset management processes and improve productivity across projects and competency teams. By providing a centralized platform for submitting, searching, and tracking reusable assets. The application is designed to provide a collated view of all reusable assets within Sonata and aimed at improving productivity and accelerating delivery timelines with consistent quality.

Customer Satisfaction

Customer satisfaction remains a top priority for Sonata, as reflected in its impressive, aggregated Customer Satisfaction (CSAT) score of 4.3 out of 5. We have engaged with professional third-party survey partners to conduct Net Promoter Score (NPS) surveys, ensuring an independent assessment of client perceptions and experiences. This would underscore Sonatas commitment to understanding client needs and delivering value-added services besides benchmarking performance against the industry leaders.

Project Excellence

For a Global leader in Conveying, Power Transmission and Fluid Power Solutions, Sonata Software has deployed a streamlined digital solution using Dynamics 365 finance and operations modules, featuring over 10 automated interfaces, intricate one-dimension cut production processes, and dynamic bill of material calculation for configurable customer orders. This solution has optimized inventory and raw material consumption, enhanced yields and reducing scrap, standardization and optimization of business processes and enhanced average response time for customer queries on pricing, discounts, and shipping schedules.

Sonata Software has designed, developed and deployed a Dynamics 365 F&O based transformative solution with simple but elegant flat file integrations for trading partners, along with AI-Builder for OCR and SKs e-Treasury Automation Suite for a US based largest food distribution cooperative network. The client was having a 30-year-old AS400 system that was becoming very expensive to operate and very limiting in terms of expansion capabilities and solution provided following benefits: Modernized platform with enhanced user experience, interactive real-time data reports and seamless integration with banking systems.

For a leading German leisure, travel and tourism company, Sonata Software has implemented a Managed Service solution based on AWS Managed Apache Airflow (MWAA) which reduced substantial operational and maintenance overheads and provided a highly scalable, available, and resilient infrastructure, built to handle large workloads and spikes in demand and significantly reduced overall cost by pay for actual usage "pricing model".

For an American multinational corporation manufacturing medical devices, pharmaceutical, and consumer packaged goods, Sonata Software has created an Automation Suite using robust framework for Laboratory Information Management System for frequent test execution and overnight execution of full regression to provide consistent and reliable test results. The customer is observing significant reduction in test scripts execution time and effort, resulting in huge savings.

For a cloud-based learning and human capital management software company, Sonata Software has established various PODs and supports their LMS and Edcast Products by modernizing the user experience, enhancing accessibility experience to specially enabled persons adhering to WCAG standards, reducing the sustenance backlog, and enabling speedy response time for their customer issues and new product features.

For a leading consumer products company specializing in manufacturing of kitchen and household essentials, Sonata Software has established a GenAI Center of Excellence to harness the power of GenAI and automation for real-time insights and make data-driven strategies for driving better customer experience and operations. We deployed GenAI based solutions for Trade Deals Analysis and Call Transcripts Analysis, demonstrating the potential of GenAI to optimize operations. Delivered a dedicated platform (Playground) for employees to learn, test, and collaborate within a secure framework by integrating Harmoni.AI, Sonatas Responsible-first AI framework for GenAI projects use Microsoft Azure OpenAI and AWS Bedrock.

For a large Canadian tire dealer and automotive service provider, Sonata Software deployed a robust and innovative solution for integration of EPOS payment terminals with Dynamics 365 using Azure cloud services to work with existing hardware with enhance security and minimal latency in handling high volume transactions, slashed average transaction times to an impressive 2.5-4 seconds, facilitating a faster and more seamless business operation and achieved significant savings by reducing POS Service time almost by 100% and was able to support increasing customer queue resulting in substantial reductions in RDS CALs & license costs.

Marketing Initiatives

Brand is the most valuable intangible asset for a company and FY24 witnessed significant strides to position Sonata Software as a leading Modernization Engineering company, powered by our unique Platformation^TM framework.

Highlights of Strategic Brand-enhancing Initiatives during FY24.

As part of ‘One Sonata initiative, we completed the brand roll out across our subsidiaries: Sonata Encore, Sonata Scalable and Sonata GBW. They now operate under the umbrella brand - Sonata Software. One of the key advantages of operating under one umbrella brand is that it allows us to leverage the reputation and goodwill that an umbrella brand enjoys, across the globe. Also, this move makes our marketing spends more cost-efficient.

Sonata Software made a significant marketing push around Sonata Harmoni.AI, and its offering in GenAI space. Our Responsible-first AIs positioning resonated well amongst the leading enterprises, globally.

Sonata Software launched a high decibel campaign around Microsoft Fabric to gain first-mover advantage. Fabric is a data analytics platform, for the era of AI.

Sonata Softwares new website, designed and executed by the internal creative team, received significant attention and appreciation from the stakeholders.

Sonata Software received multiple recognitions from leading analyst firms like Everest Group, HFS for its solutions in GenAI, Cloud Modernization, Data Modernization, and Dynamics space.

Sonata organized its bespoke event in USA, UK, Ireland, Europe and ANZ. It also participated in Industry events in USA to increase mindshare and demand among clients and prospects.

Sonata Softwares Official LinkedIn handle witnessed a 50% jump in followers. Our posts on LinkedIn enjoyed industry-best engagement rate i.e., 200 likes per 1 Lakh followers vis-?-vis industry average of 40-50 likes.

Sonata Softwares Careers section, on its corporate website, witnessed 186% jump in traffic.

Sonatas press coverage witnessed multi-fold increase in the Tier 1 publications of India.

Marketing supported multiple org-wide initiatives like D&I, Sonata Spark, Sonata Tech Fest, Sonata 5K Marathon to build mindshare, interest and participation among Sonatians.

Sonata Softwares ‘Play Big campaign caught the imagination of the stakeholders, both internally and externally.

Thought leadership articles, authored by our CTO, CDO, CHRO and key SMEs (Subject Matter Experts) in Cloud, Data and GenAI space, got published in India and USA.

Our Annual Report 2022-23 bagged Gold at Big Bang Awards for its Design.

Human Capital Development

Our commitment to invest in human capital development to fuel growth, continues in the form of attracting, retaining and skilling talent. During FY24, our company had a net addition of ~200 talent. Further, several key leaders across different functions were onboarded globally to further strengthen our leadership pipeline, which set us on course to deliver our strategic growth objectives. We also invested significantly in training and skilling of our talent pool.

Key Additions to the Senior Leadership Team During FY24

Sharmila Sherikar	Shiva Venkata Subramaniam Gade
SVP, Head – Corporate Development	Head (Delivery) – Platinum Accounts
Sanjeev Bathla
Head (Sales) – Platinum Accounts

Learning and Development

Recognizing the importance of continuous learning and upskilling of talent in todays context, our company launched Sonata University in partnership with some of the best content and platform partners making available world-class learning programs of high quality. Twenty tech academies aligned with industry-relevant competencies were created under Sonata University. These learning journeys cater to role-specific skills and certification requirements of our people for both existing and emerging digital technologies like AI, Data, Cloud, Microsoft Fabric. Sonatas case study on these digital skilling Initiatives has been shortlisted for the NASSCOM compendium.

Our signature Unified Engineering Programs (UEPs) continue to train, assess and certify technology professionals who help customers with their Modernization programs. The digital full-stack Unified Engineering Programme (UEP 2.0) with more than 1280 modules was launched in Q3 with specific focus on AI and GenAI. More than 95% of eligible employees are currently pursuing these journeys.

Five academies for professional skills including managerial and leadership were created with curated learning journeys added to meet the critical soft/behavioral skill requirements of team members.

It is a matter of great pride that as per the latest report shared by Skillsoft, whose e-learning platform we have signed up for, our company ranks higher than its peer companies on almost all parameters. Our registered learner participation rate is three times that of our peers; average badges per learner is twice that of our peers; certification programs accessed by learners is twice that of our peers to name a few. Around 85% of those registered are active users. In addition, more than a quarter of our talent have gained reputed external certifications in FY24. We continue to invest heavily in training our campus recruits through an extended program for faster readiness.

Our Top Talent Development program called A.I.M. Higher Program was inaugurated during the fiscal year with a formal program to Attract, Inspire and Modernize talent to develop them into well-rounded management professionals who can take up higher roles. Similarly, the Engagement Leadership Program (ELP) has been designed and implemented to identify and groom top talent for key business roles.

Diversity and Inclusion

We made significant strides in furthering our D&I charter under the able guidance of the Global D&I Council. D&I policy was launched and programs and practices have been put in place to increase gender and ethnic diversity; significant efforts and attention from the leadership team ensures regular review on how the D&I Policy and strategy are being implemented. In FY24, our company engaged an independent external agency to assess the effectiveness of Diversity and Inclusiveness policies and practices. It was heartening to note that the survey reported a remarkable score of 85/100 as the inclusion score with respectful culture, managers promoting diversity and inclusion, commitment to career development and valuing diverse opinions and perspectives as the top-most performing parameters.

Our continued focus on building a diverse talent pipeline resulted in more than 30% of talent onboarded being gender/ethnically diverse. In addition to this, we take pride in having a geographically diverse workforce with talent belonging to more than 18 nationalities.

We have significantly increased the representation of women colleagues in the Middle Management and Senior Management cadres this fiscal year.

We further established the global structure and regional chapters for SWAN (Sonata Women Advocacy Network). SWAN serves as a platform for women colleagues within Sonata to connect, empower each other, and advocate for equity and equality in the workplace. Through SWAN, we are building allyship and creating a supportive community where everyone feels valued and heard. The SWAN network has now gone global with chapters being opened in every continent.

The International Womens Day celebrations were a hallmark with overwhelming participation across the board and rave reviews. Led by SWAN, we celebrated International Womens Day with a week-long series of events this year, focusing on the theme of #InspireInclusion. The celebration included a fireside chat discussing challenges, solutions, and allyship in promoting equity and inclusion. A Women Appreciation Week recognized the achievements of women professionals, and an on-ground bonding event was attended by large number of women Sonatians across various locations. The events provided opportunities for networking, bonding, and sharing experiences, emphasizing the importance of inclusion, equity, and empowerment for women in the workplace.

Playing Fair, a specially designed training program for managers to increase awareness about biases at the workplace and how to minimize them, was conducted across the organization.

Corporate Social Responsibility

Our Focus Areas

Our overall CSR vision aims to enhance value creation in the community by promoting sustained growth in society and the community through Sonatas services, conduct, and initiatives. The CSR vision aims to operate the business in an economically, socially, and environmentally sustainable manner while recognizing the interests of all stakeholders, including the community. We hold the belief that all sustainable objectives are interconnected. Actions taken in one realm inevitably impact outcomes in others; therefore, development should strive to harmonize social, economic, and environmental sustainability. Our focus areas include:

Diversity and Inclusion: Our commitment to D&I shines through our comprehensive societal initiatives. From educational and healthcare support to livelihood interventions, we champion inclusivity, fostering a more diverse and equitable society where everyone can thrive and contribute to collective prosperity. We have provided telecare healthcare support to LGBTQ community, special education to hearing-impaired students, mental health support to underprepared community etc.

Digital Skilling: As a technology-driven enterprise, we prioritize empowering underprivileged students with essential digital skills. Through tailored programs encompassing Java development, data analytics, and cybersecurity, we cultivate a pool of skilled individuals, bridging the digital divide and equipping them for successful careers in the evolving tech landscape.

Environment: Our dedication to environmental conservation is evident in our impactful CSR projects. From extensive tree plantation efforts to the development of sustainable forests, water conservation initiatives, and wildlife preservation endeavors, we are committed to safeguarding our planet for future generations, ensuring a harmonious balance between progress and ecological preservation.

Highlights of Projects Aimed at Achieving Sustainability Goals

Centum Foundation: This initiative focuses on promoting diversity and inclusion through IT skills training. With 500 beneficiaries, including women and differently-abled individuals, the project aims to enhance employability among underserved youth. By fostering diversity in the IT sector, it strives to create a more inclusive and equitable workforce.

WOTR: Under this project, the emphasis lies on water conservation through watershed management. The impact is substantial, with 74.24 million liters of additional water harvesting potential established. Over 65 hectares of land now have irrigation potential, benefiting 450 individuals. Improved agricultural productivity has elevated the annual income of rural communities by 10%.

Farmers for Forest: The project, facilitated by the Efficient Ecosystem Protection Association, focuses on planting 5000 trees in Nrityagram. The impact is significant, with an estimated sequestration of 3000 tonnes of carbon dioxide over 20 years, equivalent to nearly 150 tonnes annually. Additionally, biodiversity in the area has surged by 200%, incorporating vulnerable and endangered species into the ecosystem.

Agastya International Foundation: This project spearheads the development of the Welearn App, providing technical assistance. The project brings practical education to rural school students, bridging educational gaps. With an impressive 290,183 beneficiaries, the app facilitates widespread access to quality learning resources, empowering students for a brighter future.

Industree Crafts Foundation: This initiated the development of an online repository, the Co-Create app, for artisans to store their designs and products. This endeavor fosters the preservation of cultural heritage by documenting traditional art forms. Moreover, it empowers artisans by offering a platform to highlight their work, enhancing their visibility and creating economic opportunities.

Segment-wise Overview

The company is engaged in providing IT services and solutions to customers globally, with a presence in the USA UK, Europe, ANZ, APAC, and distribution of software products in India. The companys consolidated operations include Indian and overseas subsidiaries under two distinct segments:

?International IT Services contributed 31% of total revenues and 66% (before exceptional items) of PAT

?Domestic Products and Services contributed 69% of the total revenues and 34% (before exceptional items) of PAT

During the year, the International IT Services revenues stood at 267,958 Lakhs (USD 323.6M) an increase of 39.5% on Y-o-Y basis. Domestic products & services revenues stood at 595,054 lakhs. The total consolidated revenue stood at 861,306 lakhs a growth of 16% on Y-o-Y basis.

The company added 45 new logos during the year across verticals and regions in the International Services segment.

From a geographical perspective, Sonata Softwares services revenues were contributed by different regions. The USA accounted for 70% of the services revenues, followed by Europe (including the UK) contributing 14%, and the Rest of the World (RoW) making up the remaining balance. In terms of verticals, HLS contributed 12% of the revenues, TMT contributed 30%, RMD contributed 36%, Emerging contributed 6%, and the remaining 17% came from the BFSI sector.

Financial Overview

Consolidated Financial Highlights

The Company is engaged in the business of providing IT Services and Solutions to its customers in the USA, UK, Europe, ANZ, APAC, and distribution of software products in India. The Companys consolidated operations include Indian and Overseas subsidiaries under the two distinct segments.

Below are the Consolidated Financial Highlights:

Particulars	2023-24	2022-23	Y-o-Y
	( in Lakhs)	( in Lakhs)	Growth
Total Income	873,861	751,994	16%
Revenue	861,306	744,912	16%
EBITDA	85,298	67,495	26%
Interest & Depreciation	21,694	7,767	179%
PAT	30,850	45,190	-32%
EPS	11.12	16.29	-32%

Total Income: Total income increased by 16% from 751,994 lakhs in 2022-23 to 873,861 lakhs in 2023-24 largely owing to the increase in revenue from international IT services and domestic products & services.

EBITDA: The EBITDA margin stood at 10% in 2023-24.

Profit After Tax: The Net Profit margin was at 4% in 2023-24.

Interest and Borrowings: The interest cost for the year 2023-24 is 8,501 lakhs, out of which interest expense on lease liability as per Ind AS 116 is 871 lakhs. The Company had a net cash balance of 85,376 lakhs (including investment in Mutual Funds and net of bank borrowing repayable in one year).

Capital Employed: The Capital Employed is 208,059 lakhs in 2023-24. The Return on Average Capital

Employed (RoCE) for the year ended 31^st March, 2024 was reported at 29% as against 35% for the year ended 31^st March, 2023.

Net Worth: The net worth is 140,629 lakhs in 2023-24. The Return on Average Net Worth (RONW) for the year ended 31^st March, 2024 was reported at 23% as against 38% for the year ended 31^st March, 2023.

Fixed Assets: The Companys fixed assets which includes property, plant, equipment, intangibles and goodwill is 178,232 lakhs as at 31^st March, 2024 and accumulated depreciation/amortization as at 31^st March, 2024 is 19,229 lakhs.

Standalone Financial Highlights

Particulars	2023-24	2022-23	Y-o-Y
	( in Lakhs)	( in Lakhs)	Growth
Total Income	128,434	108,054	19%
Revenue	95,030	92,086	3%
EBITDA	40,582	28,964	40%
Interest & Depreciation	2,605	2,547	2%
PAT	35,880	22,037	63%
EPS	12.93	7.94	63%

Total Income: Income increased by 19% from 108,054 lakhs in 2022-23 to 128,434 lakhs in 2023-24. EBITDA: EBITDA increased by 40% from 28,694 lakhs in 2022-23 to 40,582 lakhs in 2023-24. Profit After Tax: Profit after Tax increased 63% from 22,037 lakhs in 2022-23 to 35,880 lakhs in 2023-24.

Interest and Borrowings: The interest cost for the year 2023-24 is 492 lakhs, out of which interest expense on lease liability as per Ind AS 116 is 372 lakhs. The Company had a Net Cash balance of 8,852 lakhs (including investment in Mutual Funds net of borrowings.

Capital Employed: The Capital Employed is 70,672 lakhs in 2023-24. The Return on Average Capital

Employed (RoCE) for the year ended 31^st March, 2024 was reported at 57% as against 39% for the year ended 31^st March, 2023.

Net Worth: The Net Worth is 70,668 lakhs in 2023-24. The Return on Average Net Worth (RONW) for the year ended 31^st March, 2024 was reported at 57% as against 39% for the year ended 31^st March, 2023.

Property, Plant and Equipment: The Companys fixed assets which include property, plant, equipment and goodwill is 7,004 lakhs as of 31^st March, 2024 and accumulated depreciation/amortization as at 31^st March 2024 is 3,769 lakhs.

Risks and Concerns

1. Volatile Global Political and Economic Situation

The current state of global politics and economics is marked by volatility. A significant portion of the companys revenue is tied to the discretionary spending of its clients, which in turn is influenced by their business outlook. Instances of political disruption or economic instability on a global scale can impact businesses worldwide, potentially leading to a decrease in client spending and limiting opportunities for revenue growth.

To address these challenges, Sonata is taking proactive measures by collaborating closely with clients and prospects as they reassess their strategies for geographic diversity and workload distribution. This collaborative effort aims to ensure business continuity in the face of uncertainties. Where feasible, negotiations are underway to explore offshoring and near-shoring opportunities, thereby optimizing operational efficiency and mitigating the impact of geopolitical and economic fluctuations.

2. Client Concentration

Client concentration risk refers to the potential threat posed by a disproportionate amount of revenue being generated from a limited number of clients.

To address this concern, the company has adopted a multi-faceted approach. Firstly, it has diversified its client base across various geographical locations, thus reducing reliance on any single client. Moreover, the Company continually monitors concentration risk within its direct core business and takes necessary steps to mitigate it.

3. Cyber and Privacy Risk

The industry faces increasing cyber threats from sophisticated attackers, including cyber criminals and nation-states.

To protect against these risks, the Company has implemented IT security frameworks based on NIST and deployed several technology solutions such as: 1. Endpoint protection and Endpoint detection to ensure a secure end-user environment.

2. Protection from internet threats by using a cloud-based SASE. 3. Additional email protection using AI-powered threat Intelligence. 4. Threat-hunting capability using SIEM.

5. Sonata has implemented organizational technical controls in line with ISO 27001 standards, certified for ISO 27001 since 2010, and Soc2 Type2 Assessed.

6. Additionally, a dedicated function focuses on employee security awareness programs to mitigate human error.

Despite global cyber incidents, the Companys operations remain unaffected due to these proactive and defensive measures.

4. The Transformative Impact of the Artificial Intelligence (AI) Revolution on Corporate Operations is Reshaping Traditional Business Practice

Generative AI has brought human-like ability and is poised to transform many areas of business. Sonata looks at this as an opportunity and has taken significant steps to build differentiated capabilities, IPs and partnerships. GenAI, while bringing significant opportunities, also brings a new set of challenges for enterprise-wide adoption primarily around Data Privacy, IP, ethic, trust among others. To address this, Sonata has introduced Harmoni.AI as a Responsible-first approach. Sonata has also introduced a 4D framework to assess maturity and consult clients on their journey. Harmoni.AIs enterprise platform will be used to design and deploy Responsible-first AI foundation, including building and management of data, hybrid LLM, deployment and fine tuning, building assets for AI-first process for Finance, HR, Legal and Marketing along with solutions for the verticals. We have trained significant employees on AI to enable them. Sonata is also a part of Microsofts AI Council and is in partnerships with leading institutes.

Outlook

In FY25, we anticipate three tailwinds and one potential headwind. The tailwinds include large deals, GenAI, and Microsoft Fabric, which are expected to contribute positively to our ambitious goals. However, there is a potential headwind due to softness in the BFSI vertical. We expect to stay in the top 25% of quartile performance in revenue and the top 10% of margin performance.

FY25 will witness a big push on our new bets – GenAI and Microsoft Fabric – while continuing to prioritize our "Invest Verticals" in BFSI and HLS while scaling presence in the RMD and TMT verticals.

With multitudes of opportunities across our key markets, we will make investments in our talent and infrastructure, both near shore and offshore, to enable the Modernization journey of our clients and to continue to deliver the industrys best-in-class growth for our company.

We will continue to build innovative solutions, forge strategic partnerships, improve client relations, and focus on employee wellness.

Internal Control Systems

Our company has a proper and adequate system of internal controls. These controls ensure transactions are authorized, recorded, and reported correctly and assets are safeguarded and protected against loss from unauthorized use or disposition.

An extensive program of internal audits and management reviews supplements the process of the internal financial control framework.

To maintain its objectivity and independence, the Internal Auditor reports to the Chairperson of the Audit Committee of the Board.

The Audit committee defines the scope and authority of the Internal Auditor. The Internal Auditor monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating systems, accounting procedures, and policies at all locations of the Company and its subsidiaries.

Based on the report of the Internal Auditor, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and the necessary corrective actions are presented to the Audit Committee.

The internal financial control framework design ensures that the financial and other records are reliable for preparing financial and other statements. In addition, the Company has identified and documented the key risks and controls for each process that has a relationship to the financial operations and reporting. The internal financial control framework entails the following:

Authorization, Recording, and Reporting: Ensuring all transactions are properly authorized, accurately recorded, and reported in compliance with accounting standards and regulatory requirements.

Safeguarding of Assets: Implementing controls to protect assets against loss, theft, or unauthorized use, including physical assets, financial assets, and intellectual property.

Compliance with Regulatory Requirements: Adhering to all applicable laws, regulations, and standards relevant to the industry and geographic locations in which the company operates, including those set forth by regulatory bodies such as the Securities and Exchange Board of India (SEBI).

Accuracy of Financial Reporting: Emphasizing the accuracy and integrity of financial reporting, including compliance with accounting principles and disclosure requirements prescribed by regulatory authorities.

Risk Management: Identifying, assessing, and managing risks that could potentially impact the achievement of business objectives, including financial, operational, and strategic risks.

Board Oversight: Providing oversight of the internal control system by the Board of Directors, including regular review and assessment of its effectiveness and responsiveness to emerging risks.

Segregation of Duties: Implementing proper segregation of duties to prevent conflicts of interest and fraud, with clear delineation of responsibilities among different individuals or departments involved in financial transactions and reporting.

Information Technology Controls: Implementing controls over information technology systems and data management processes to safeguard against cybersecurity threats, data breaches, and unauthorized access to sensitive information.

Internal Audit Function: Describing the structure and responsibilities of the internal audit function, including its role in independently assessing the adequacy and effectiveness of internal controls and providing recommendations for improvement.

Training and Awareness: Providing ongoing training and awareness programs to employees at all levels to ensure understanding of internal control policies and procedures and promote a culture of compliance and ethical behavior.

Continuous Improvement: Emphasizing the importance of regularly reviewing and enhancing the internal control system to adapt to changing business environments, emerging risks, and regulatory requirements.

External Assurance: Obtaining external assurance mechanisms or certifications to provide additional credibility to the internal control system, such as SOC reports, ISO certifications, or external audit opinions on internal controls over financial reporting.

At regular intervals, internal teams test identified key controls. The internal auditors also perform an independent check of the effectiveness of key controls in identified areas of internal financial control reporting. The Statutory Auditors Report includes a report on the internal financial controls over financial reporting.