November 17, 2017

Cyient Limited
Summary of rated instruments
Instruments* Rated amount (Rs. crore) Rating Action
Corporate Governance Practices NA CGR2+; assigned
*Instrument details are provided in Annexure-1

Rating action
ICRA has assigned a rating of CGR2+ (pronounced C G R two plus) for the Corporate Governance
practices of Cyient Limited (“Cyient” / “the company”). The rating of CGR2 implies that, in ICRA’s
current opinion, the rated company has adopted and follows such practices, conventions and codes as
would provide its financial stakeholders a high level of assurance on the quality of corporate governance.
The “+” sign suffixed to the rating symbol indicates a relatively higher standing within the category.
ICRA’s opinion, as expressed by the rating, however, is not a certificate of statutory compliance or a
comment on the rated company’s future financial performance, credit rating or stock price.

ICRA’s service of Corporate Governance Rating (CGR) seeks to evaluate an organisation’s business
conduct and practices and the quality of disclosure standards in terms of fairness and transparency from
the perspective of financial stakeholders. The corporate governance practices prevalent in an organisation
reflect the distribution of rights and responsibilities among its different participants – such as the Board,
management, shareholders and other financial stakeholders – and the rules and procedures laid down and
followed for making decisions on corporate affairs. However, the emphasis of ICRA’s CGR is on
substance over form. The variables analysed include ownership structure, governance structure, Board
structure and processes, audit control and risk, stakeholder relationships and transparency & disclosure.

Rationale
The assigned rating draws comfort from Cyient’s sound corporate governance practices and proactive
compliance; its active and articulate board comprising of well-diversified and healthy mix of Independent
directors; healthy board practices; robust governance structure; the company’s high transparency and
disclosure standards; and its active stakeholder engagement. In ICRA’s opinion, the key areas for
improvement in Cyient’s corporate governance practices include reducing absenteeism in board meetings;
forming a separate risk committee; having an independent Chairman for the board and avoiding
interlinkage in boards.

Key rating drivers

Positives
- Well diversified board by skill set and experience – Cyient’s board is reasonably sized for its scale
of operations. It has nine members, comprising of six independent directors. The independent
directors bring with them diverse knowledge and experience spanning various businesses, helping in
enriching discussions during board meetings.
- Detailed discussions in board meetings – The discussions at the board meetings appear to be in-
depth with emphasis on strategic issues - detailed presentations are made by the management to
facilitate interaction. The board also has six sub-committees – including four mandatory and two
voluntary committees; and ICRA observes strong involvement of the committees in the decision
making processes. Cyient also has an annual strategy meet during which the Board discusses the
future roadmap and other issues of strategic importance with the senior management.

- Robust governance structure; succession planning in place – At the board level, there is a
demarcation between the roles of the Chairman and Managing Director & Chief Executive Officer
(MD&CEO). Cyient also has a dedicated lead independent director. Further, the key board
committees comprise only of independent directors, while the other committees are led by
independent directors. Below the board, Cyient has a strong senior management team in place. While
the robust governance structure supports Cyient in efficient decision making, currently, ICRA
understands from its discussions that the company has also been proactive in succession planning for
the Board and various management positions, the latter being through various leadership
programmes.

- High level of stakeholder engagement; healthy value creation – Apart from the timely results and
quarterly performance calls, Cyient also engages investors through road shows in several cities across
the globe and a dedicated investors’ day – when investors have interactions with heads of various
business units. Further, the company has high standards of disclosures and gives annual revenue
growth and profit margin guidance. ICRA also draws comfort from Cyient’s focus on core
businesses; conservative debt levels; and steady value creation for shareholders - as evident from the
company’s comfortable Return on Capital Employed (RoCE) and consistent dividend payouts over
the years.

- Transparent ownership pattern – As on Sep 30, 2017, the promoters held only 22.2% stake,
indicating a healthy and transparent ownership pattern. Of the public shareholding, about 50.1% of
the total stake was held by Foreign Institutional Investors (FIIs) and about 11.9% was held by mutual
funds.

- Proactive compliance with good governance practices – The board has two voluntary committees
for strategy & client engagement and diversity & inclusion to facilitate covering issues in the specific
areas in detail. Among other proactive compliances, the board also a lead independent director, a
woman independent director and a maximum age limit of 70 years for the directors. The critical board
committees have higher than mandated number of independent directors. Also, the company was
engaged in several activities before they became mandatory such as publishing business sustainability
reports, e-voting for shareholders, apportioning a part of profits for CSR and performing secretarial
audits.

Areas for improvement

- Need for a separate risk committee – Cyient currently has a combined audit and risk board
committee. Though there is an internal risk committee comprising of members from the senior
management team, ICRA opines that Cyient’s board discussions on risk are currently limited, and that
a separate risk committee would facilitate more robust risk evaluation and policy framing at the board
level.
- Reduce absenteeism in board meetings – Cyient had relatively low board meeting attendance
percentage of 66% in FY2017 and 74% for FY2016. While the absenteeism was on account of
unavoidable circumstances and a large proportion of the absent directors participated through audio
webex or provided their inputs on critical issues, ICRA opines that minimal absenteeism (less than
5%) in board meetings would facilitate improving the quality of board room discussions and decision
making.

- Presence of an independent Chairman – Though ICRA’s discussions reveal that the board has
adequate level of independence in spirit, despite the executive Chairmanship, it is a good governance
practice for the board to have an independent Chairman.

- Avoidance of Interlinkage in Boards – One of the executive directors of Cyient is a member of a

Board and audit committee of a company where an independent director of Cyient is a promoter. This
could result in conflict of interest and prevent independent decision making; and thus, avoidance of
the same is imperative.

Analytical approach:
For arriving at the rating, ICRA has applied its rating methodology as indicated below.

Links to applicable criteria:

Corporate Governance rating methodology

About the company:

Headquartered in Hyderabad and having over 13,000 employees, Cyient Limited (Cyient/”the company”,
earlier Infotech Enterprises Limited) is primarily engaged in engineering services. The company has eight
strategic business units namely, aerospace & defence; transportation; industrial, energy and natural
resources; semiconductor, Internet of Things (IoT) and analytics; medical and healthcare; utilities &
geospatial; communications; and design led manufacturing (DLM). Cyient has operations across the
globe and derives close to 60% of its revenues from Americas and about 20% each from Asia Pacific and
Europe, Middle East & Africa. As on March 31, 2017, the company had ten subsidiaries, one JV, one
associate company and nine step down subsidiaries – all engaged in similar business as the parent and
operating in different geographies.

Key financial indicators – Not applicable

Status of non-cooperation with previous CRA: Not applicable

Any other information: Not applicable

Rating history for last three years:
Table 2
Chronology of Rating history for the past
Current rating (FY2018)
S. three years
Instrument
No. Amount rated
Type Nov 2017 - - -
(Rs. crore)
Corporate Governance Practices CGR2+ - - -

Complexity level of the rated instrument:

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly
Complex". The classification of instruments according to their complexity levels is available on the
website www.icra.in
Annexure-1
Instrument Details
Instruments Date of Coupon Maturity Amount rated Current CGR rating
issuance rate (Rs. crore)
Corporate Governance Practices CGR2+
Source: Cyient Limited
 Contact Details
Analyst Contacts

Subrata Ray Pavethra Ponniah

+91 22 2433 1086 +91 44 4596 4314
subrata@icraindia.com pavethrap@icraindia.com

Vinutaa S
+91 44 4596 4305
vinutaa.s@icraindia.com

Relationship Contact

Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and
financial services companies as an independent and professional investment Information and Credit
Rating Agency.
Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a
Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock
Exchange. The international Credit Rating Agency Moody’s Investors Service is ICRA’s largest
shareholder.
For more information, visit www.icra.in

© Copyright, 2017, ICRA Limited. All Rights Reserved

Contents may be used freely with due acknowledgement to ICRA
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to
a process of surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current
opinion on the relative capability of the issuer concerned to timely service debts and obligations, with reference to the instrument
rated. Please visit our website www.icra.in or contact any ICRA office for the latest information on ICRA ratings outstanding.
All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable, including
the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While
reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any
warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy,
timeliness or completeness of any such information. Also, ICRA or any of its group companies may have provided services other
than rating to the issuer rated. All information contained herein must be construed solely as statements of opinion, and ICRA
shall not be liable for any losses incurred by users from any use of this publication or its contents.
Registered Office
ICRA Limited
1105, Kailash Building, 11th Floor, 26, Kasturba Gandhi Marg, New Delhi 110001
Tel: +91-11-23357940-50, Fax: +91-11-23357014

Corporate Office
Mr. Vivek Mathur
Mobile: +91 9871221122
Email: vivek@icraindia.com

Building No. 8, 2nd Floor, Tower A, DLF Cyber City, Phase II, Gurgaon 122002
Ph: +91-124-4545310 (D), 4545300 / 4545800 (B) Fax; +91- 124-4050424

Mumbai Kolkata
Mr. L. Shivakumar Mr. Jayanta Roy
Mobile: +91 9821086490 Mobile: +91 9903394664
Email: shivakumar@icraindia.com Email: jayanta@icraindia.com

3rd Floor, Electric Mansion A-10 & 11, 3rd Floor, FMC Fortuna
Appasaheb Marathe Marg, Prabhadevi 234/3A, A.J.C. Bose Road
Mumbai—400025, Kolkata—700020
Board : +91-22-61796300; Fax: +91-22-24331390 Tel +91-33-22876617/8839 22800008/22831411,
Fax +91-33-22870728
Chennai Bangalore
Mr. Jayanta Chatterjee Mr. Jayanta Chatterjee
Mobile: +91 9845022459 Mobile: +91 9845022459
Email: jayantac@icraindia.com Email: jayantac@icraindia.com

5th Floor, Karumuttu Centre 'The Millenia'

634 Anna Salai, Nandanam Tower B, Unit No. 1004,10th Floor, Level 2 12-14, 1 & 2,
Chennai—600035 Murphy Road, Bangalore 560 008
Tel: +91-44-45964300; Fax: +91-44 24343663 Tel: +91-80-43326400; Fax: +91-80-43326409
Ahmedabad Pune
Mr. L. Shivakumar Mr. L. Shivakumar
Mobile: +91 9821086490 Mobile: +91 9821086490
Email: shivakumar@icraindia.com Email: shivakumar@icraindia.com

907 & 908 Sakar -II, Ellisbridge, 5A, 5th Floor, Symphony, S.No. 210, CTS 3202, Range
Ahmedabad- 380006 Hills Road, Shivajinagar,Pune-411 020
Tel: +91-79-26585049, 26585494, 26584924; Fax: Tel: + 91-20- 6606 9999; Fax: +91-20-25561231
+91-79-25569231
Hyderabad
Mr. Jayanta Chatterjee
Mobile: +91 9845022459
Email: jayantac@icraindia.com

4th Floor, Shobhan, 6-3-927/A&B. Somajiguda, Raj

Bhavan Road, Hyderabad—500083
Tel:- +91-40-40676500