STANDARD OPERATING PROCEDURE FOR CONTRACTS TO BE SIGNED BY IPL

SOP: 1

MEMO NO. CMD/FY18/..

DATE: APRIL 3, 2017

 I. DEFINITION OF A CONTRACT

Any document to be signed on behalf of IPL, committing the resources of the company for
delivery of a product or completion of a service within a period of time, whether involving or
not Earnest Money Deposits, payment of premia for Insurance of the client, penalty clauses for
non-delivery or delayed completion or any other clause to be agreed upon that will have a
financial or reputational impact on IPL, is considered a Contract.

II. TYPES OF CONTRACT

Any contract which involves a total gross sales value (the amount which will be invoiced by IPL)
of Rs.200,000 (Two Lakhs) is classified as Type A (Small Contract).

Any contract which involves a total gross sales value of Rs 200,001 to 10,00,000 (Ten Lakhs) is
classified Type B (Medium Contract).

Any contract which involves a total gross sales value of Rs.10,00,001 + (Ten Lakhs Plus) is
classified Type C (Large Contract).

III. PROCESSES AND PROCEDURES TO BE ADHERED TO FOR CONTRACTS

Work and Process Flow for Contracts

For Type A: 1.Receiver of the contract document or the P&L Owner for the Product or Service
2.Study the document in detail and determine the risk profile in writing, work out a
profitability 3. Discuss with the CEO 4. Make modifications as required 5. Obtain the
CEOs written approval and obtain the CEOs signature.

For Type B and C: Steps 1 and 2 as for Type A. Step 3: Send the contract document, the risk
profile and the profitability to Manager, Finance 4. Set up date for discussion between the
P&L Owner, Manager Finance and the CEO for discussion 5. In cases where the impact of the
penanlty/non-performance clause or the financial charges is likely to be more than 40% on the
Gross Margin of the company (Invoice value minus the Cost of Sales), a clear risk mitigation
strategy has to be identified by the P&L Owner, discussed with the Manager, Finance and
included in the set of documents on the project 6. After discussion, make changes if needed
and obtain CEOs written approval and signature.

For Type C only: In addition to the six steps for Types B and C: Seek an appointment with the
CMD for a meeting and discussion. This meeting should comprise of The P&L Owner, the
Manager Finance and the CEO. For Type C contracts, the approval of the CMD is mandatory.
The CMD might defer the approval or decide to escalate it to the Board, case to case.
In all three cases, where technology has a strong impact on costs or where specific technology
expense as a Cost of Sales element is involved, the Manager, technology support also should
be involved in all the discussions and be a signatory to the project document,

IV. DOCUMENTATION REQUIRED

All discussions and approvals will be on written documents. The documents in the minimum
profile are:

1. A background paper prepared by the P&L Owner

2. Risk profile as prepared by the P&L Owner. If the downside risk in any Type A
project/contract exceeds 40% of the gross margin of that project, the Manager Finance
and Accounts will have to be present for the discussion with the CEO. The impact
assessment and the mitigation strategy should be identified by the P&L Owner, written
down, discussed with the Manager, Finance and Accounts and the CEO.
3. A Profitability sheet worked out by the P&L Owner (as per the format in VIII) and
counter signed by the Manager, finance and Accounts for correctness and
comprehensiveness.
4. Approval sheet ( as per the format in IX)
5. Any other pertinent document

Any proposals without the above documents will be considered not authorized by IPL and any
signing of contracts without the documents in place will be considered malfeasance on the part
of the P&L Owner.

V. FINAL PLACE MENT OF DOCUMENTS

After the approval of the CEO or CMD as the case may be, the entire set of documents in
original will be in the custody of the Manager, Finance and Accounts. The P&L Owner should
keep a photocopy of the documents, after approval for reference during the discharge of the
work pertinent to the Contract..

VI. TITLING AND NUMBERING OF THE FILE

The P&L Owner, while initiating the proposal will give a title to the project and will allocate a
number which will be, the name of the project, the name of the P&L Division, the running serial
number of that division and the business year. Eg. Project Euphoria/JGate/3/FY 18.

VII. AUTHORISED SIGNATORY

For all the types of contracts, the CEO will be the authorized signatory.

VIII. THE APPROVAL SHEET

APPROVALS

P&L Owner:

Any Comments/Notes:

Name:

Signature:

Date:

Manager, Finance and Accounts: Technolgy

Any Comments/Notes: Comments/Notes:

Name: Name:

Signature: Signature:

Date: Date:

CEO

Any comments/Notes:

Name:

Signature:

Date:

CMD

Comments/Notes concurrent with final approval:

Signature:

Date:
 IX. FORMAT FOR PROFITABILITY

Name and number of the Project:

Contract document to be signed up by:

Type of Contract:

Profitability

PARTICULARS AMOUNT IN Rs.

Outsourced services ..

Equipment hire ..

Travel specific to the project (other than sales):

Finance charges on EMD or any such:

Any other:

TOTAL COST OF SALES

Gross Revenue:

Gross Margin Rs.:

Gross margin %:

P&L Divisions Expense %:

Shared Expenses %:

EBITA:Rs.

EBITA %:

Signatures
P&L Owner Manager Finance and
Name: Name:

Signature: Signature;

Date: Date:

X. PRIMARY PURPOSE OF THE SOP NO.1

The operating Managers of IPL, as a basic prerequisite of their job function need to foresee,
assess and prevent any negative impact on the financials or reputation of the company, in
the process of carrying out their business activities. This will be possible only through
creation of effective internal controls and methods for deploying abundant precaution,
definition of processes and procedures and adherence to those unexceptionably.

Since our business involves responding to tenders, signing contracts and such other
documents, it is a prerequisite that we sign such documents after a thorough study of the
contractual obligations, assessment of the downside risks and discussion on prevention of
any negative impacts or mitigation of contingent risks. These are best done by a group of
responsible managers in the organization together in a meeting, supported by robust
documentation.