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Notes to Accounts of Birlasoft Ltd.
Mar 31, 2025
13.1 Terms and rights attached to equity shares
The Company has only one class of shares referred to as equity shares having a par value of '' 2 each. Each shareholder of equity shares is entitled to one vote per share and an equal right to dividend.
13.2 The dividend proposed to be distributed to equity shareholders for the year ended 31 March 2025 by the Board of Directors in their meeting held on 28 May 2025 is '' 4/- per share (Previous year '' 4/- per share) and is subject to the approval of the shareholders in the ensuing Annual General Meeting.
(i) Capital redemption reserve
Represents the nominal amount of:
a) Preference share capital: on redemption of 400,000, 0.01% cumulative redeemable preference shares.
b) Equity share capital: On buy-back of 7,800,000 fully paid equity shares of '' 2/- each in earlier years.
The reserve can be utilised in accordance with the provisions of Section 69 of the Companies Act, 2013.
(ii) Amalgamation reserve
Represents the amount credited on account of cancellation of stock options issued pursuant to the scheme of amalgamation and acquisition.
(iii) Securities premium reserve
Securities premium is used to record the premium received on issue of shares. It is utilized in accordance with the provisions of the Companies Act, 2013.
(iv) Share based payment reserve
The Company has established various equity-settled share based payment plans for certain categories of employees of the Company. Refer note 39 for further details.
(v) Share application money pending allotment
The Company has established various equity-settled share based payment plans for certain categories of employees of the Company. This pertains to application money received from employees pending allotment and issue of shares under share based payment scheme.
(vi) Retained earnings
Retained earnings are the profits/(loss) that the Group has earned/incurred till date, less any transfers to general reserve, dividends or other distributions paid to shareholders. Retained earnings include re-measurement loss / (gain) on defined benefit plans, net of taxes that will not be reclassified to Statement of Profit and Loss.
29.2 Fair value hierarchy
Financial assets and liabilities include cash and cash equivalents, other balances with banks, trade receivables (including unbilled), other financial assets, trade payables and other financial liabilities whose fair values approximate their carrying amounts largely due to the short term nature of such assets and liabilities. Fair value of lease liabilities including Finance lease receivable approximate its carrying amounts, as lease liabilities are valued using the discounted cash flow method.
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This level of hierarchy include Company''s over the counter (OTC) derivative contracts.
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following methods and assumptions were used to estimate the fair values:
i) The fair value of the quoted bonds and mutual funds are based on price quotations at reporting date.
low as the company enters into derivative contracts with reputed banks. As per Ind-AS 109 : Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain.
The carrying amount of trade and other receivables and other financial assets represents the maximum credit exposure. i. Trade receivables and Lease Receivables
The management has established accounts receivable policy under which customer accounts are regularly monitored. The Company has a dedicated sales team at each geography which is responsible for collecting dues from the customer within stipulated period. The management reviews status of critical accounts on a regular basis.
29.3 Financial risk management
The Board of Directors has overall responsibility for the establishment and oversight of the Company risk management framework. The Board of Directors has established the Risk Management Committees, which is responsible for developing and monitoring the Company''s risk management policies.The Company has exposure to the following risks arising from financial instruments.
a. Credit risk
Credit risk is the risk of financial losses to the Company if a customer or counterparty to financial instruments fails to discharge its contractual obligations and arises primarily from the Company''s receivables from customers amounting to '' 2591.7 million and '' 3607.97 million and unbilled revenue amounting to '' 124.46 million and '' 155.96 million and Finance Lease Receivable amounting to ''302.66 and '' Nil as on 31 March 2025 and 31 March 2024 respectively. To manage this, the Company periodically assesses the key accounts receivable balances. Credit risk on derivative instruments is generally
iii. Cash and bank balances
The Company held cash and bank balances of '' 1738.76 million and '' 855.89 million as on 31 March 2025 and 31 March 2024 respectively. The cash and bank balances are held with banks which have high credit ratings assigned by international credit rating agencies.
iv. Guarantees
The Company''s policy is to provide financial guarantees on behalf of subsidiaries. The Company has issued the guarantees to certain banks in respect of credit facilities granted to its subsidiaries. There are nil external borrowings in subsidiaries as on 31 March 25 and 31 March 24.
v. Investment
The Company invests surplus funds in mutual fund schemes, Index funds, bonds and fixed deposits with Banks and Financial Institutions. The mutual funds are regulated by Securities and Exchange Board of India(SEBI). The Company manages the risk through diversification and by placing limits on individual instruments. Investments of surplus funds are made only with approved counterparties having a good market reputation and within credit limits assigned to each counterparty.
b. Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.
The Company has a view of maintaining liquidity and to take minimum possible risk while making investments. In order to maintain liquidity, the Company invests its excess funds in short term liquid assets like liquid mutual funds and bonds.
c. Market risk
Market risk is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
i. Foreign currency risk
Significant portion of the Company''s revenues are in foreign currencies, while a significant portion of the costs are in Indian rupee i.e. functional currency of the Company. The foreign currencies to which the Company is majorly exposed to are US Dollars, Euros and Pound Sterling.
The Company evaluates net exchange rate exposure based on current revenue projections and expected volatility in the market and covers its exposure up to 75% on net basis. For this purpose the Company uses foreign currency derivative instruments such as forward covers to mitigate the risk. The counterparty to these derivative instruments is a bank. The Company has designated certain derivative instruments as cash flow hedge to mitigate the foreign exchange exposure of highly probable forecasted cash flows.
b. Derivative assets and liabilities designated as cash flow hedges and fair value hedges
In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than in Indian rupees. The counter party to the Company''s foreign currency contracts is a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments (sales orders) and highly probable forecast transactions. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
Remuneration includes share based payments to Angan Guha '' 431.72 million (previous year Nil), to Kamini Shah '' Nil million
(previous year Nil), to Sneha Padve '' Nil million (previous year '' 6 million).
Terms and Conditions
(i) Remuneration excludes provision for employee benefits as separate actuarial valuation for the directors, key management personnel and their relatives is not available.
(ii) All transactions with these related parties are priced on an arm''s length basis. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash.
31 Disclosure as per the requirement of section 22 of the Micro, Small and Medium Enterprise DevelopmentAct, 2006:
a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31 March 2025 is '' 3.45 million (trade payable: '' 3.45 million; payables in respect of fixed assets '' Nil million) [(Previous year - '' 22.25 million) (trade payable: '' 21.03 million; payables in respect of fixed assets '' 1.22 million)]. Estimated interest due thereon is Nil (Previous year Nil).
b. Amount of payments made to suppliers beyond the appointed date during the year is '' 47.07 million (Previous year -'' 55 million). Interest paid thereon is '' Nil (Previous year - '' Nil) and the estimated interest due and payable thereon is '' 1.11 million (Previous year - '' 1.30 million).
c. The amount of interest due and payable for the period of delay in making payment but without adding the interest specified under the Micro, Small and Medium Enterprises Development Act, 2006 is '' Nil.
d. The amount of estimated interest accrued and remaining unpaid as at 31 March 2025 is '' 6.53 million (Previous year '' 5.42 million).
e. The amount of further estimated interest due and payable for the period from 1 April 2025 to actual date of payment or 28 May 2025 (whichever is earlier) is '' Nil.
The Company classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue.
A receivable is a right to consideration that is unconditional upon passage of time. Revenue for time and material contracts are recognized as related services are performed. Revenue for fixed price maintenance and support services contracts is recognized on a straight line basis over the period of the contract. Revenues in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration is unconditional upon passage of time.
Revenue recognition for fixed price contracts is based on percentage of completion method. Invoicing to the clients is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from the timing of billing the customers. Unbilled revenue for fixed price contracts is classified as non-financial asset as the contractual right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Unsatisfied (or partially satisfied) performance obligations are subject to variability due to several factors such as terminations, changes in scope of contracts, periodic revalidations of the estimates, economic factors (changes in currency rates, tax laws etc).
The unearned revenue primarily relate to the advance consideration received on contracts entered with customers for which no work is performed at the reporting date, and therefore revenue will be recognized when rights become unconditional.
While disclosing the aggregate amount of transaction price yet to be recognised as revenue towards unsatisfied (or partially) satisfied performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and material, outcome based and event based contracts.
33 Details of employee benefits as required by Ind-AS 19 - âEmployee benefitsâ are as under:1 Defined contribution plan - Provident fund
Amount recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is '' 735.49 million (Previous year '' 679.22 million )
Defined benefit plan - Funded
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Gratuity is a benefit to an employee in India based on 15 days of last drawn salary for each completed year of service with a vesting year of 5 years.
These defined benefit plans expose the Company to actuarial risks, such as longevity risk and interest rate risk.
34 Segment information
Where a financial report contains both consolidated financial statements and separate financial statements of the parent, segment information needs to be presented only in case of consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements.
The Company has lease contracts for office buildings and vehicles. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. The average period of lease is 8 years for office premises and 3 years for vehicles.
The Company also has certain leases of buildings / guest houses with lease terms of 12 months or less and with low value. The Company has applies the âshort-term lease'' and âlease of low-value assets'' recognition exemptions for these leases.
The Company entered into an arrangement with its customers where the Company will provide "End User Device Services" including supply of hardware (laptops, desktops and accompanying peripherals) as well as financing which addresses deployment, support, management and asset recovery at the end of the useful life of the asset. Based on the evaluation of the terms and condition of the arrangement such as lease term constituting the major part of the economic life of the asset, the fair value of the asset and that it has transfer significant risk and rewards in these assets to the customer, the lease arrangement has been classified as finance lease.
(i) Goods and Services Tax and Service tax matters
a. The Company has filed an appeal before Central Excise and Service Tax Appellate Tribunal against the order received from Commissioner of Central Excise & Service Tax, Pune I for the period April 2014 to March 2015 demanding service tax on:
- ''169.34 million (Previous year '' 169.34 million) towards Service Tax on the amount received by branches from overseas clients on behalf of the Company, under the head âBusiness Auxiliary Services''.
- '' 13.07 million (Previous year '' 13.07 million) towards the amount of expenditure made in foreign currency.
b. The Company has filed an appeal before Commissioner (Appeals) against the order received from Assisstant Commissioner, Central GST, Hyderabad for the period April 2018 to March 2020 demanding GST on:
- '' 7.56 million (Previous year '' 0 million) towards availing ineligible input tax credit.
c. The Company has filed an appeal before Central Excise and Service Tax Appellate Tribunal against the order received from Commissioner (Appeals - I), Central Excise & Service Tax, Pune for the period April 2010 to June 2012 demanding service tax on:
- '' Nil million (Previous year ''4.79 million) towards the amount of expenditure against reimbursement of expenses.
d. Department has filed an appeal against the Company in the following cases:
- '' 469.65 million (Previous year '' 469.65 million) towards Service Tax on the amount received by branches from overseas clients on behalf of the Company for the period October 2006 to March 2014, under the head âBusiness Auxiliary Services'' and expenditure made in foreign currency in respect of category II and III services with the Hon''ble Supreme Court of India.
- '' 28.60 million (Previous year '' 28.60 million) towards Service Tax refund granted for the period April 2006 to March 2008 with the Hon''ble Bombay High Court.
(ii) Income tax matters
The Income Tax Department has filed appeals for various years with Hon''ble Delhi High Court predominantly contesting a) the set off of losses of STP unit against Non STP unit b) deduction claimed by the Company u/s 10A of the Income-tax Act, 1961 and c) the Arm''s Length Price of the transactions entered with the related parties. The disputed tax amount is '' 235.93 million (previous year '' 601.90 million).
The Company has filed appeals with various appellate authorities for different assessment years. The key items for which appeals are filed are a) allowabilty of deduction claimed by the Company u/s 10A of the Income-tax Act, 1961 b) deduction under section 36 of the Income-tax Act, 1961, with respect to deposit of dues c) disallowance of rent equalization reserve d) tax withholding obligations e) disllowance of section 80G claim and f) Arm''s Length Price of the transactions entered with the related parties. The disputed tax amount is '' 174.81 million (previous year '' 90.80 million).
(iii) Other matters
These matters pertain to the Transferor Company acquired pursuant to the composite scheme.
a. '' 1947 million (previous year '' 19.47 million)(excluding interest) arising out of the Order passed by District Magistrate/Collector, Gautam Budha Nagar, imposing stamp duty of '' 12.98 million for alleged short payment of stamp duty along with penalty of '' 6.49 million in respect of the office space taken (since vacated) at D-195 , Sector 63 , Noida, Gautam Budha Nagar, Uttar Pradesh, India, by erstwhile Birlasoft (India) Ltd. (now merged with and into Birlasoft Limited ). The matter has been remanded back by Hon''ble Supreme Court to Hon''ble Allahabad High Court for hearing it afresh. The matter is presently pending before Hon''ble Allahabad High Court.
b. '' 7.20 million (previous year '' 7.20 million) (excluding interest) arising out of the Order passed by Additional District Magistrate/Collector, Gautam Budha Nagar, imposing stamp duty of '' 6.20 million for alleged short payment of stamp duty along with penalty of '' 1.00 million in respect of the office space taken (since vacated) at H-9, Sector 63 , Noida, Gautam Budha Nagar, Uttar Pradesh, India, by erstwhile Birlasoft (India) Ltd. ( now merged with and into Birlasoft Limited). The Company has filed a Writ petition before Hon''ble Allahabad High Court for quashing of the Order .
c. '' 1.08 million (previous year '' 1.08 million) arising out of the Demand Notice issued by Tamil Nadu Electricity Board, Chennai on account of purported short levy due to tariff difference. The Company has filed a Writ petition before the Hon''ble Madras High Court at Chennai, challenging such a demand. The Court heard the Arguments and directed the respondent Board TNEB to file appropriate petition before the Tamil Nadu Electricity Regulatory Commission for appropriate order passed by the Commission. Case disposed on 26.08.2019. It is found that TNEB has not yet filed any application to that effect. Further, none of the other similar consumers such as Birlasoft have approached the TNERC. Once TNEB files an application before the TNERC and Birlasoft receives notice of the said application further proceedings will take place. There is yet not any finality on the alleged demand.
Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for:
a. Property, plant and equipment - '' 13.03 million(Net of capital advances '' Nil million)[Previous Year '' 39.72 million(Net of capital advances '' Nil million)].
b. Intangibles - '' 1.72 million(Net of capital advances '' Nil million) [Previous Year '' Nil(Net of capital advances '' Nil million)].
c. For lease commitments, refer note 35.
39 Share based payments1 Employee Stock Option Plan - 2006
The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in July 2006 and in August 2006, respectively. Pursuant to this approval, the Company instituted ESOP 2006, Plan in October, 2006. The Nomination and Remuneration Committee of the Board of Directors of the Company ("the NRC") administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
The weighted average remaining contractual life are as follows:
The weighted average remaining contractual life is not given as there are no options outstanding as on 31 March 2025.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2025 and 31 March 2024.
The Company recorded an employee compensation cost of '' Nil (Previous year '' Nil million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility.
2 Employee Stock Option Plan - 2015
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in April 2015 and August 2015, respectively. Pursuant to this approval, the Company instituted ESOP 2015 Plan in August 2015. The Nomination and Remuneration Committee of the Board of Directors of the Company ("the NRC") administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2025 and 31 March 2024.
The Company recorded an employee compensation cost of '' Nil (Previous year '' Nil million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility.
Employee Stock Option Plan- 2006 and Employee Stock Option Plan- 2015 (Share based payment schemes of the Company) were administered by the Employee Welfare Trust (EWT). Under the Composite scheme of arrangement, 2019, the EWT was transferred to KPIT Technologies Limited (erstwhile KPIT Engineering Limited). Hence, Company has not done any further allotments against exercise of these options, as the same has been already allotted EWT during the previous years.
3 Employee Stock Option Plan - 2019
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in February 2019. Pursuant to this approval, the Company instituted ESOP 2019 Plan in February 2019. The Nomination and Remuneration Committee of the Board of Directors of the Company (âthe NRC") administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such option. Option Granted under ESOP 2019 shall vest not earlier than minimum period of 1 (One) year and not later than maximum period of 3 (Three) years from the date of Grant. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The weighted average remaining contractual life are as follows:
The weighted average remaining contractual life is not given as there are no options outstanding as on 31 March 2025.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2025 and 31 March 2024.
The Company recorded an employee compensation cost of '' Nil (Previous year - Nil) in the Statement of Profit and Loss. The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility.
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in November 2019. Pursuant to this approval, the Company instituted Share Incentive Plan 2019 in November 2019. The Nomination and Remuneration Committee of the Board of Directors of the Company ("the NRC") administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such option. The vesting of the options is 50% and 50% of total options granted after end of second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The Company recorded an employee compensation cost of '' 58.63 million (Previous year '' 35.26 million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility.
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in November 2019. Pursuant to this approval, the Company instituted Share Incentive Plan 2019 in November 2019. The Nomination and Remuneration Committee of the Board of Directors of the Company (âthe NRC") administers this Plan. Each Restricted Stock Unit carries with it the right to purchase one equity share of the Company. The Units have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such unit. The vesting of the options is 50% and 50% of total units granted after end of second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2025 and 31 March 2024.
The Company recorded an employee compensation cost of '' Nil million (Previous year '' 1.10 million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility.
The Board of Directors and the shareholders of the Company approved Birlasoft Share Incentive Plan 2022 ("SIP 2022") at their meetings held on May 23, 2022 and August 3, 2022. The Nomination and Remuneration Committee of the Board of Directors of the Company (âthe NRC") implements and administers this SIP 2022 Plan. Each Performance Stock Unit (âPSU") / Restricted Stock Unit (âRSU") collectively referred to as âAwards" carries with it the right to be converted into one equity share of the Company. The PSUs/RSUs have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of Awards. The vesting criteria of the Awards is determined by the NRC and is provided to employee in the Letter of Grant. The maximum exercise period is 4 years from the date of vesting.
42 The Company has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software, except that audit trail feature is not enabled for certain changes made using privileged/ administrative access rights to the application (SAP RISE) and/or the underlying database (SAP HANA). Further no instance of audit trail feature being tampered with was noted in respect of the accounting software where the audit trail has been enabled. Additionally, the audit trail of prior year has been preserved by the Company as per the statutory requirements for record retention to the extent it was enabled and recorded in the respective year.
(iii) The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) The Company has not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
(vi) The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(vii) The Company has non-fund based working capital facilities from banks on the basis of security of current assets. The quarterly returns or statements of current assets filed by the Company with banks are in agreement with the books of accounts.
(viii) The Company has not been declared willful defaulter by any bank or financial institution or government or any government authority.
(ix) The Company has not advanced or loaned or invested funds to any other person(s) or entity(is), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
b) Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(x) The Company has not received any fund from any person(s) or entity(is), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
b) Provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
Unutilised fund of '' 0.11 million in the project as on 31 March 2025. The Company will be transferring this unspent amount to the PM cares Fund within the prescribed statutory timelines.
During the FY 2023-24, the Company identified and initiated ongoing projects amounting to '' 11.72 million, the duration of which is upto 12 months. The said amount being unspent as on 31 March 2024, has been transferred subsequently to the Unspent CSR Account on 17 April 2024, as required by Section 135(6) of the Companies Act, 2013.
45 Previous year figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification/ disclosure.
Mar 31, 2024
12.1 Terms and rights attached to equity shares
The Company has only one class of shares referred to as equity shares having a par value of '' 2 each. Each shareholder of equity shares is entitled to one vote per share and an equal right to dividend.
12.2 The dividend proposed to be distributed to equity shareholders for the year ended 31 March 2024 by the Board of Directors in their meeting held on 29 April 2024 is '' 4.00/- per share (Previous year '' 2.00 per share) and is subject to the approval of the shareholders in the ensuing Annual General Meeting.
12.3 During the year 2022-23, the Company had bought back 7,800,000 fully paid equity shares of '' 2 each for an aggregate amount of '' 3,900 million being 2.79% of the total paid up equity share capital at '' 500 per equity share (âBuyback''). Subsequent to the buyback, Capital redemption reserve of '' 15.6 million was created to the extent of share capital extinguished. Premium on buyback of '' 3,884.4 million was utilised from securities premium reserve. The transaction cost of buy-back of '' 55.4 million and corresponding tax on buy-back of '' 788.95 million were offset from retained earnings in previous year.
12.4 In the event of liquidation of the Company, the holders of equity shares will be entitled to receive a share in the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
12.9 Shares reserved for issue under options
Details of shares reserved under share based payment plans is disclosed in note 35.
12.10 Capital Management
The Company''s objective is to safeguard its ability to continue as a going concern and to maintain investor, creditor and market confidence and to maximize shareholder value. In order to fulfil its objective, the management of the Company monitors the return on capital as well as the level of dividends to ordinary shareholders.
(i) Capital redemption reserve
Represents the nominal amount of:
a) Preference share capital: on redemption of 400,000, 0.01% cumulative redeemable preference shares.
b) Equity share capital: On buy-back of 7,800,000 fully paid equity shares of '' 2/- each in earlier years.
The reserve can be utilised in accordance with the provisions of Section 69 of the Companies Act, 2013.
(ii) Amalgamation reserve
Represents the amount credited on account of cancellation of stock options issued pursuant to the scheme of amalgamation and acquisition.
(iii) Securities premium reserve
Securities premium is used to record the premium received on issue of shares. It is utilized in accordance with the provisions of the Companies Act, 2013.
(iv) Share based payment reserve
The Company has established various equity-settled share based payment plans for certain categories of employees of the Company. Refer note 35 for further details.
(v) Share application money pending allotment
The Company has established various equity-settled share based payment plans for certain categories of employees of the Company. This pertains to application money received from employees pending allotment and issue of shares under share based payment scheme.
26.2 Fair value hierarchy
Financial assets and liabilities include cash and cash equivalents, other balances with banks, trade receivables (including unbilled), other financial assets, trade payables and other financial liabilities whose fair values approximate their carrying amounts largely due to the short term nature of such assets and liabilities. Fair value of lease liabilities approximate its carrying amounts, as lease liabilities are valued using the discounted cash flow method.
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This level of hierarchy include Company''s over the counter (OTC) derivative contracts.
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following methods and assumptions were used to estimate the fair values:
i) The fair value of the quoted bonds and mutual funds are based on price quotations at reporting date.
with reputed banks. As per Ind AS 109 : Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain.
The carrying amount of trade and other receivables and other financial assets represents the maximum credit exposure. i. Trade receivables
The management has established accounts receivable policy under which customer accounts are regularly monitored. The Company has a dedicated sales team at each geography which is responsible for collecting dues from the customer within stipulated period. The management reviews status of critical accounts on a regular basis.
26.3 Financial risk management
The Board of Directors has overall responsibility for the establishment and oversight of the Company risk management framework. The board of directors has established the Risk Management Committees, which is responsible for developing and monitoring the Company''s risk management policies. The Company has exposure to the following risks arising from financial instruments.
a. Credit risk
Credit risk is the risk of financial losses to the Company if a customer or counterparty to financial instruments fails to discharge its contractual obligations and arises primarily from the Company''s receivables from customers amounting to '' 3,607.97 million and '' 2,202.02 million and unbilled revenue amounting to '' 155.96 million and '' 151.41 million as on 31 March 2024 and 31 March 2023 respectively. To manage this, the Company periodically assesses the key accounts receivable balances. Credit risk on derivative instruments is generally low as the Company enters into derivative contracts
iii. Cash and bank balances
The Company held cash and bank balances of '' 855.89 million and '' 2,652.27 million as on 31 March 2024 and 31 March 2023 respectively. The cash and bank balances are held with banks which have high credit ratings assigned by international credit rating agencies.
iv. Guarantees
The Company''s policy is to provide financial guarantees on behalf of subsidiaries. The Company has issued the guarantees to certain banks in respect of credit facilities granted to its subsidiaries. There are Nil external borrowings in subsidiaries as on 31 March 2024 and 31 March 2023.
v. Investment
The Company invests surplus funds in mutual fund schemes, bonds and fixed deposits. The mutual funds are regulated by Securities and Exchange Board of India (SEBI). The Company manages the risk through diversification and by placing limits on individual instruments. Investments of surplus funds are made only with approved counterparties having a good market reputation and within credit limits assigned to each counterparty.
b. Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.
The Company has a view of maintaining liquidity and to take minimum possible risk while making investments. In order to maintain liquidity, the Company invests its excess funds in short term liquid assets like liquid mutual funds and bonds.
The Company monitors its cash and bank balances periodically in view of its short term obligations associated with its financial liabilities.
In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than in Indian rupees. The counter party to the Company''s foreign currency contracts is a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments (sales orders) and highly probable forecast transactions. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
Market risk
Market risk is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
i. Foreign currency risk
Significant portion of the Company''s revenues are in foreign currencies, while a significant portion of the costs are in Indian rupee i.e. functional currency of the Company. The foreign currencies to which the Company is majorly exposed to are US Dollars, Euros and Pound Sterling.
The Company evaluates net exchange rate exposure based on current revenue projections and expected volatility in the market and covers its exposure up to 75% on net basis. For this purpose the Company uses foreign currency derivative instruments such as forward covers to mitigate the risk. The counterparty to these derivative instruments is a bank. The Company has designated certain derivative instruments as cash flow hedge to mitigate the foreign exchange exposure of highly probable forecasted cash flows.
28 Disclosure as per the requirement of section 22 of the Micro, Small and Medium Enterprise Development Act, 2006:
a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31 March 2024 is '' 22.25 million (trade payable: '' 21.03 million; payables in respect of fixed assets '' 1.22 million) [(Previous year - '' 12.09 million) (trade payable: '' 11.63 million; payables in respect of fixed assets '' 0.47 million)]. Estimated interest due thereon is Nil (Previous year Nil).
b. Amount of payments made to suppliers beyond the appointed date during the year is '' 55 million (Previous year - '' 73.09 million). Interest paid thereon is Nil (Previous year - Nil) and the estimated interest due and payable thereon is '' 1.30 million (Previous year - '' 1.09 million).
c. The amount of interest due and payable for the period of delay in making payment but without adding the interest specified under the Micro, Small and Medium Enterprises Development Act, 2006 is Nil.
d. The amount of estimated interest accrued and remaining unpaid as at 31 March 2024 is '' 5.42 million (Previous year '' 4.16 million).
e. The amount of further estimated interest due and payable for the period from 1 April 2024 to actual date of payment or 30 April 2024 (whichever is earlier) is Nil.
29 Disclosures as per Ind AS 115 - Revenue from Contract with Customersa. Disaggregation of revenue from contracts with customers
Set out below is the disaggregation of the Companyâs revenue from contracts with customers
The Company classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue.
A receivable is a right to consideration that is unconditional upon passage of time. Revenue for time and material contracts are recognized as related services are performed. Revenue for fixed price maintenance and support services contracts is recognized on a straight line basis over the period of the contract. Revenues in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration is unconditional upon passage of time.
Revenue recognition for fixed price contracts is based on percentage of completion method. Invoicing to the clients is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from the timing of billing the customers. Unbilled revenue for fixed price contracts is classified as non-financial asset as the contractual right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivables are non-interest bearing and generally have a credit period of 60 days.
The unearned revenue primarily relate to the advance consideration received on contracts entered with customers for which no work is performed at the reporting date, and therefore revenue will be recognized when rights become unconditional.
While disclosing the aggregate amount of transaction price yet to be recognised as revenue towards unsatisfied (or partially) satisfied performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and material, outcome based and event based contracts.
Unsatisfied (or partially satisfied) performance obligations are subject to variability due to several factors such as terminations, changes in scope of contracts, periodic revalidations of the estimates, economic factors (changes in currency rates, tax laws etc).
30 Details of employee benefits as required by Ind AS 19 - âEmployee benefits are as underâ:1 Defined contribution plan - Provident fund
Amount recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is '' 679.22 million (Previous year '' 626.9 million).
Defined benefit plan - Funded
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Gratuity is a benefit to an employee in India based on 15 days of last drawn salary for each completed year of service with a vesting period of 5 years.
These defined benefit plans expose the Company to actuarial risks, such as longevity risk and interest rate risk.
The Company recognizes contract fulfilment cost as an asset if those costs specifically relate to a contract or to an anticipated contract, the costs generate or enhance resources that will be used in satisfying performance obligations in future; and the costs are expected to be recovered. The asset so recognized is amortized on a systematic basis consistent with the transfer of goods or services to customer to which the asset relates.
Where a financial report contains both consolidated financial statements and separate financial statements of the parent, segment information needs to be presented only in case of consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements.
(i) Service tax matters
a. The Company has filed an appeal before Central Excise and Service Tax Appellate Tribunal against the order received from Commissioner of Central Excise & Service Tax, Pune I for the period April 2014 to March 2015 demanding service tax on:
- ''169.34 million (Previous year '' 169.34 million) towards Service Tax on the amount received by branches from overseas clients on behalf of the Company, under the head âBusiness Auxiliary Services.
- '' 13.07 million (Previous year '' 13.07 million) towards the amount of expenditure made in foreign currency.
b. The Company has filed an appeal before Central Excise and Service Tax Appellate Tribunal against the order received from Commissioner (Appeals - I), Central Excise & Service Tax, Pune for the period April 2010 to June 2012 demanding service tax on:
- '' 4.79 million (Previous year '' 4.79 million) towards the amount of expenditure against reimbursement of expenses.
c. Department has filed an appeal against the Company in the following cases:
- '' 469.65 million (Previous year '' 469.65 million) towards Service Tax on the amount received by branches from overseas clients on behalf of the Company for the period October 2006 to March 2014, under the head âBusiness Auxiliary Services'' and expenditure made in foreign currency with the Hon''ble Supreme Court of India.
- '' 28.60 million (Previous year '' 28.60 million) towards Service Tax refund granted for the period April 2006 to March 2008 with the Hon''ble Bombay High Court.
(ii) Income tax matters
The Income Tax Department has filed appeals for various years with Hon''ble Delhi High Court predominantly contesting a) the set off of losses of STP unit against Non STP unit b) deduction claimed by the Company u/s 10A of the Income-tax Act, 1961 and c) the Arm''s Length Price of the transactions entered with the related parties. The disputed tax amount is '' 601.90 million (previous year '' 601.90 million).
The Company has filed appeals with various appellate authorities for different assessment years. The key items for which appeals are filed are a) allowabilty of deduction claimed by the Company u/s 10A of the Income-tax Act, 1961 b) deduction under section 36 of the Income-tax Act, 1961, with respect to deposit of dues and c) disllowance of section 80G claim. The disputed tax amount is '' 90.80 million (previous year '' 108.75 million).
(iii) Other matters
These matters pertain to the Transferor Company acquired pursuant to the composite scheme.
a. '' 19.47 million (previous year '' 19.47 million)(excluding interest) arising out of the Order passed by District Magistrate/Collector, Gautam Budha Nagar, imposing stamp duty of '' 12.98 million for alleged short payment of stamp duty along with penalty of '' 6.49 million in respect of the office space taken (since vacated) at D-195 , Sector 63 , Noida, Gautam Budha Nagar, Uttar Pradesh, India, by erstwhile Birlasoft (India) Ltd. (now merged with and into Birlasoft Limited ). The matter has been remanded back by Hon''ble Supreme Court to Hon''ble Allahabad High Court for hearing it afresh. The matter is presently pending before Hon''ble Allahabad High Court.
b. '' 7.20 million (previous year '' 7.20 million) (excluding interest) arising out of the Order passed by Additional District Magistrate/Collector, Gautam Budha Nagar, imposing stamp duty of '' 6.20 million for alleged short payment of stamp duty along with penalty of '' 1.00 million in respect of the office space taken (since vacated) at H-9, Sector 63 , Noida, Gautam Budha Nagar, Uttar Pradesh, India, by erstwhile Birlasoft (India) Ltd. (now merged with and into Birlasoft Limited). The Company has filed a Writ petition before Hon''ble Allahabad High Court for quashing of the Order.
c. '' 1.08 million (previous year '' 1.08 million) arising out of the Demand Notice issued by Tamil Nadu Electricity Board, Chennai on account of purported short levy due to tariff difference. The Company has filed a Writ petition before the Hon''ble Madras High Court at Chennai, challenging such a demand. The Court heard the Arguments and directed the respondent Board TNEB to file appropriate petition before the Tamil Nadu Electricity Regulatory Commission for appropriate order passed by the Commission. Case disposed on
26.08.2019. It is found that TNEB has not yet filed any application to that effect. Further, none of the other similar consumers such as Birlasoft have approached the TNERC. Once TNEB files an application before the TNERC and Birlasoft receives notice of the said application further proceedings will take place. There is yet not any finality on the alleged demand.
2 Provision for decommissioning liability
As per Ind AS 37, the Company has made provision for future lease restoration expense of '' 3.58 million (Previous year '' 4.23 million) in respect leased premises in Noida and Hyderabad. The same is expected to be utilized at the end of the lease period in 2024 and 2026.
Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for:
a. Property, plant and equipment - '' 39.72 million (Net of capital advances Nil) [Previous Year '' 156.68 million (Net of capital advances '' 3.9 million)].
b. Intangibles - Nil (Net of capital advances Nil) [Previous Year '' 0.74 million (Net of capital advances Nil)].
35 Share based payments1 Employee Stock Option Plan - 2006
The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in July 2006 and in August 2006, respectively. Pursuant to this approval, the Company instituted ESOP 2006, Plan in October, 2006. The Nomination and Remuneration Committee of the Board of Directors of the Company ("the NRC") administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2024 and 31 March 2023.
The Company recorded an employee compensation cost of Nil (Previous year Nil) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
2 Employee Stock Option Plan - 2015
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in April 2015 and August 2015, respectively. Pursuant to this approval, the Company instituted ESOP 2015 Plan in August 2015. The Nomination and Remuneration Committe of the Board of Directors of the Company (âNRC") administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2024 and 31 March 2023.
The Company recorded an employee compensation cost of Nil (Previous year Nil) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
Employee Stock Option Plan- 2006 and Employee Stock Option Plan- 2015 (Share based payment schemes of the Company) were administered by the Employee Welfare Trust (EWT). Under the Composite scheme of arrangement, 2019, the EWT was transferred to KPIT Technologies Limited (erstwhile KPIT Engineering Limited). Hence, Company has not done any further allotments against exercise of these options, as the same has been already allotted EWT during the previous years.
3 Employee Stock Option Plan - 2019
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in February 2019. Pursuant to this approval, the Company instituted ESOP 2019 Plan in February 2019. The Nomination and Remuneration Committee of the Board of Directors of the Company (âthe NRC") administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such option. Option Granted under ESOP 2019 shall vest not earlier than minimum period of 1 (One) year and not later than maximum period of 3 (Three) years from the date of Grant. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2024 and 31 March 2023.
The Company recorded an employee compensation cost of Nil (Previous year Nil) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in November 2019. Pursuant to this approval, the Company instituted Share Incentive Plan 2019 in November 2019. The Nomination and Remuneration Committee of the Board of Directors of the Company ("the NRC") administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such option. The vesting of the options is 50% and 50% of total options granted after end of second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The Company recorded an employee compensation cost of '' 35.26 million (Previous year '' 74.83 million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in November 2019. Pursuant to this approval, the Company instituted Share Incentive Plan 2019 in November 2019. The Nomination and Remuneration Committee of the Board of Directors of the Company (âthe NRC") administers this Plan. Each Restricted Stock Unit carries with it the right to purchase one equity share of the Company. The Units have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such unit. The vesting of the options is 50% and 50% of total units granted after end of second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2024 and 31 March 2023.
The Company recorded an employee compensation cost of '' 1.1 million (Previous year '' 9.62 million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
The Board of Directors and the shareholders of the Company approved Birlasoft Share Incentive Plan 2022 ("SIP 2022") at their meetings held on May 23, 2022 and August 3, 2022. The Nomination and Remuneration Committee of the Board of Directors of the Company (âthe NRC") implements and administers this SIP 2022 Plan. Each Performance Stock Unit (âPSU")/Restricted Stock Unit (âRSU") collectively referred to as âAwards" carries with it the right to be converted into one equity share of the Company. The PSUs/RSUs have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of Awards. The vesting criteria of the Awards is determined by the NRC and is provided to employee in the Letter of Grant. The maximum exercise period is 4 years from the date of vesting.
The weighted average share price of the options exercised under Share Incentive Plan - 2022 (RSU) on the date of exercise during the year was '' 792.18 (Previous year Nil).
38 The Company has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software, except that audit trail feature is not enabled for certain changes made using privileged/ administrative access rights to the application (SAP RISE) and/or the underlying database (SAP HANA). Further no instance of audit trail feature being tampered with was noted in respect of the accounting software.
39 The Company received whistle blower allegations in September 2023 and February 2024 alleging improper conducts of certain employees. The Management is taking steps to understand and assess these allegations. Pending final outcome thereof no adjustment to the financial statements have been identified till the reporting date.
40 Other Statutory Information
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(iii) The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) The Company has not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
(vi) The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(vii) The Company has non-fund based working capital facilities from banks on the basis of security of current assets. The quarterly returns or statements of current assets filed by the Company with banks are in agreement with the books of accounts.
(viii) The Company has not been declared willful defaulter by any bank or financial institution or government or any government authority.
(ix) The Company has not advanced or loaned or invested funds to any other person(s) or entity(is), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or
b) Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(x) The Company has not received any fund from any person(s) or entity(is), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
b) Provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
During the year, the Company identified and initiated ongoing projects amounting to '' 11.72 million, the duration of which is upto 12 months. The said amount being unspent as on 31 March 2024, has been transferred subsequently to the Unspent CSR Account on 17 April 2024, as required by Section 135(6) of the Companies Act, 2013.
42 Previous year figures have been regrouped/reclassified wherever necessary to correspond with the current year''s classification/ disclosure.
Mar 31, 2023
12.1 The Company has only one class of shares referred to as equity shares having a par value of '' 2 each. Each shareholder of equity shares is entitled to one vote per share and an equal right to dividend.
12.2 The dividend proposed to be distributed to equity shareholders for the year ended 31 March 2023 by the Board of Directors in their meeting held on 8 May 2023 is '' 2/- per share (Previous year '' 3.00 per share) and is subject to the approval of the shareholders in the ensuing Annual General Meeting.
12.3 The Board of Directors at its meeting held on 23 May 2022, had approved a proposal to buy-back upto 7,800,000 fully paid equity shares of '' 2/- each of the Company for an aggregate amount not exceeding '' 3,900 million being 2.79% of the total paid up equity share capital at '' 500/- per equity share, on a proportionate basis through the tender offer route using the Stock Exchange mechanism (âBuyback''). Subsequently, the members of the Company approved the Buyback through postal ballot by e-voting on 30 June 2022. Letter of Offer was sent to eligible members holding shares as on the record date i.e. 15 July 2022. The tendering period for the Buyback was concluded on 26 August 2022. The Company bought back 7,800,000 equity shares out of the shares that were tendered by eligible shareholders and extinguished the equity shares on 6 September 2022. Capital redemption reserve of '' 15.6 million was created to the extent of share capital extinguished. Premium on buyback of '' 3,884.4 million was utilised from securities premium reserve. The transaction cost of buy-back of '' 55.4 million and corresponding tax on buy-back of '' 788.95 million were offset from retained earnings.
12.4 In the event of liquidation of the Company, the holders of equity shares will be entitled to receive a share in the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
25.2 Fair value hierarchy
Financial assets and liabilities include cash and cash equivalents, other balances with banks, trade receivables, loans, unbilled revenue, other financial assets, trade payables and other financial liabilities whose fair values approximate their carrying amounts largely due to the short term nature of such assets and liabilities. Fair value of lease liabilities approximate its carrying amounts, as lease liabilities are valued using the discounted cash flow method.
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This level of hierarchy include Company''s over the counter (OTC) derivative contracts.
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
25.3 Financial risk management
The board of directors has overall responsibility for the establishment and oversight of the Company risk management framework. The board of directors has established the Risk Management Committees, which is responsible for developing and monitoring the Company''s risk management policies. The Company has exposure to the following risks arising from financial instruments.
a. Credit risk
Credit risk is the risk of financial losses to the Company if a customer or counterparty to financial instruments fails to discharge its contractual obligations and arises primarily from the Company''s receivables from customers amounting to '' 1693.6 million and '' 2705.48 million and unbilled revenue amounting to '' 151.41 million and '' 197.29 million as on 31 March 2023 and 31 March 2022 respectively. To manage this, the Company periodically assesses the key accounts receivable balances. Credit risk on derivative instruments is generally low as the company enters into derivative contracts with reputed banks. As per Ind-AS 109 : Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain.
The carrying amount of trade and other receivables and other financial assets represents the maximum credit exposure. i. Trade receivables
The management has established accounts receivable policy under which customer accounts are regularly monitored. The Company has a dedicated sales team at each geography which is responsible for collecting dues from the customer within stipulated period. The management reviews status of critical accounts on a regular basis.
iii. Cash and bank balances
The Company held cash and bank balances of '' 267417 million and '' 1556.32 million as on 31 March 2023 and 31 March 2022 respectively. The cash and bank balances are held with banks which have high credit ratings assigned by international credit rating agencies.
iv. Guarantees
The Group''s policy is to provide financial guarantees on behalf of subsidiaries. The Group has issued the guarantees to certain banks in respect of credit facilities granted to its subsidiaries. There are nil external borrowings in subsidiaries as on 31st Mar 23 and 31st Mar 22.
v. Investment
The Company invests surplus funds in mutual fund schemes, bonds and fixed deposits. These mutual funds are regulated by Securities and Exchange Board of India(SEBI)
b. Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.
The Company has a view of maintaining liquidity and to take minimum possible risk while making investments. In order to maintain liquidity, the Company invests its excess funds in short term liquid assets like liquid mutual funds and bonds. The Company monitors its cash and bank balances periodically in view of its short term obligations associated with its financial liabilities.
c. Market risk
Market risk is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
i. Foreign currency risk
Significant portion of the Company''s revenues are in foreign currencies, while a significant portion of the costs are in Indian rupee i.e. functional currency of the Company. The foreign currencies to which the Company is majorly exposed to are US Dollars, Euros and Pound Sterling.
The Company evaluates net exchange rate exposure based on current revenue projections and expected volatility in the market and covers its exposure up to 75% on net basis. For this purpose the Company uses foreign currency derivative instruments such as forward covers to mitigate the risk. The counterparty to these derivative instruments is a bank. The Company has designated certain derivative instruments as cash flow hedge to mitigate the foreign exchange exposure of highly probable forecasted cash flows.
For the year ended 31 March 2023, every 1% appreciation / depreciation of the exchange rate between respective foreign currencies and the Indian rupee would impact the operating margins by approximately 0.30 %/(0.30)%.
For the year ended 31 March 2022, every 1% appreciation / depreciation of the exchange rate between respective foreign currencies and the Indian rupee would impact the operating margins by approximately 045 % / (0.45) %.
ii. Derivative assets and liabilities designated as cash flow hedges
In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than in Indian rupees. The counter party to the Company''s foreign currency contracts is a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments (sales orders) and highly probable forecast transactions. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
25.4 The Company has not advanced or loaned or invested funds to any other person(s) or entity(is), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or
b) Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries
25.5 The Company has not received any fund from any person(s) or entity(is), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
b) Provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
(i) Capital redemption reserve
Represents the nominal amount of:
a) Preference share capital: on redemption of 400,000, 0.01% cumulative redeemable preference shares.
b) Equity share capital: On buy-back of 7,800,000 fully paid equity shares of '' 2/- each.
(ii) Amalgamation reserve
Represents the amount credited on account of cancellation of stock options issued pursuant to the scheme of amalgamation and acquisition.
(iii) Securities premium reserve
Securities premium is used to record the premium received on issue of shares. It is utilized in accordance with the provisions of the Companies Act, 2013.
(iv) Share based payment reserve
The Company has established various equity-settled share based payment plans for certain categories of employees of the Company. Refer note 36 for further details.
28 Disclosure as per the requirement of section 22 of the Micro, Small and Medium Enterprise Development Act, 2006:
a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31 March 2023 is '' 12.09 million (trade payable: '' 11.63 million; payables in respect of fixed assets '' 0.47 million) (Previous year - '' 6716 million) (trade payable: '' 51.65 million; payables in respect of fixed assets '' 15.51 million). Estimated interest due thereon is Nil (Previous year Nil).
b. Amount of payments made to suppliers beyond the appointed date during the year is '' 73.09 million (Previous year -'' 123.34 million). Interest paid thereon is '' Nil (Previous year - '' Nil) and the estimated interest due and payable thereon is '' 1.09 million (Previous year - '' 1.09 million).
c. The amount of interest due and payable for the period of delay in making payment but without adding the interest specified under the Micro, Small and Medium Enterprises Development Act, 2006 is '' Nil
d. The amount of estimated interest accrued and remaining unpaid as at 31 March 2023 is '' 416 million (Previous year '' 3.07 million).
e. The amount of further estimated interest due and payable for the period from 1 April 2023 to actual date of payment or 30 April 2023 (whichever is earlier) is '' Nil
The Company classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue.
A receivable is a right to consideration that is unconditional upon passage of time. Revenue for time and material contracts are recognized as related services are performed. Revenue for fixed price maintenance and support services contracts is recognized on a straight line basis over the period of the contract. Revenues in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration is unconditional upon passage of time.
Revenue recognition for fixed price contracts is based on percentage of completion method. Invoicing to the clients is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from the timing of billing the customers. Unbilled revenue for fixed price contracts is classified as non-financial asset as the contractual right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
c. Performance Obligation
While disclosing the aggregate amount of transaction price yet to be recognised as revenue towards unsatisfied (or partially) satisfied performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and material, outcome based and event based contracts.
Unsatisfied (or partially satisfied) performance obligations are subject to variability due to several factors such as terminations, changes in scope of contracts, periodic revalidations of the estimates, economic factors (changes in currency rates, tax laws etc).
1 Defined contribution plan - Provident fund
Amount recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is '' 626.9 million (Previous year '' 502.08 million )
2 Defined benefit plan Defined benefit plan - Funded
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Gratuity is a benefit to an employee in India based on 15 days of last drawn salary for each completed year of service with a vesting period of 5 years.
These defined benefit plans expose the Company to actuarial risks, such as longevity risk and interest rate risk.
The difference between the future minimum lease rental commitments towards non-cancellable operating leases and finance leases reported as at March 31, 2020 compared to the lease liability as accounted as at April 1, 2020 is primarily due to inclusion of present value of the lease payments for the cancellable term of the leases, reduction due to discounting of the lease liabilities as per the requirement of Ind AS 116 and exclusion of the commitments for the leases to which the Company has chosen to apply the practical expedient as per the standard.
The company does not face significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
(i) Service tax matters
a. The Company has filed an appeal before Central Excise and Service Tax Appellate Tribunal against the order received from Commissioner of Central Excise & Service Tax, Pune I for the period April 2014 to March 2015 demanding service tax on:
- '' 169.34 million (Previous year '' 169.34 million) towards Service Tax on the amount received by branches from overseas clients on behalf of the Company, under the head âBusiness Auxiliary Services''.
- '' 13.07 million (Previous year '' 13.07 million) towards the amount of expenditure made in foreign currency in respect of category II and III services.
b. The Company has filed an appeal before Central Excise and Service Tax Appellate Tribunal against the order received from Commissioner (Appeals - I), Central Excise & Service Tax, Pune for the period April 2010 to June 2012 demanding service tax on:
- '' 4.79 million (Previous year '' 4.79 million) towards the amount of expenditure against reimbursement of expenses.
c. Department has filed an appeal against the Company in the following cases:
- '' 469.65 million (Previous year '' 469.65 million) towards Service Tax on the amount received by branches from overseas clients on behalf of the Company for the period October 2006 to March 2014, under the head âBusiness Auxiliary Services'' and expenditure made in foreign currency in respect of category II and III services with the Hon''ble Supreme Court of India
- '' 28.60 million (Previous year '' 28.60 million) towards Service Tax refund granted for the period April 2006 to March 2008 with the Hon''ble Bombay High Court
(ii) Income tax matters
The Income Tax Department has filed appeals for various years with Hon''ble Delhi High Court predominantly contesting
a) the set off of losses of STP unit against Non STP unit b) deduction claimed by the Company u/s 10A of the Income-tax Act, 1961 and c) the Arm''s Length Price of the transactions entered with the related parties. The disputed tax amount is '' 601.90 million (previous year '' 601.90 million).
The Company has filed appeals with various appellate authorities for different assessment years. The key items for which appeals are filed are a) allowabilty of deduction claimed by the Company u/s 10A of the Income-tax Act, 1961
b) deduction under section 36 of the Income-tax Act, 1961, with respect to deposit of dues c) disallowance of rent equalization reserve d) tax withholding obligations e) disllowance of section 80G claim and f) Arm''s Length Price of the transactions entered with the related parties. The disputed tax amount is '' 108.75 million (previous year '' 95.78 million).
(iii) Other matters
These matters pertain to the Transferor Company acquired pursuant to the composite scheme.
a. '' 19.47 million (previous year '' 19.47 million)(excluding interest) arising out of the Order passed by District Magistrate/Collector, Gautam Budha Nagar, imposing stamp duty of '' 12.98 million for alleged short payment of stamp duty along with penalty of '' 6.49 million in respect of the office space taken (since vacated) at D-195 , Sector 63 , Noida, Gautam Budha Nagar, Uttar Pradesh, India, by erstwhile Birlasoft (India) Ltd. (now merged with and into Birlasoft Limited ). The matter has been remanded back by Hon''ble Supreme Court to Hon''ble Allahabad High Court for hearing it afresh. The matter is presently pending before Hon''ble Allahabad High Court.
b. '' 7.20 million (previous year '' 7.20 million) (excluding interest) arising out of the Order passed by Additional District Magistrate/Collector, Gautam Budha Nagar, imposing stamp duty of '' 6.20 million for alleged short payment of stamp duty along with penalty of '' 1.00 million in respect of the office space taken (since vacated) at H-9, Sector
63, Noida, Gautam Budha Nagar, Uttar Pradesh, India, by erstwhile Birlasoft (India) Ltd. ( now merged with and into Birlasoft Limited). The Company has filed a Writ petition before Hon''ble Allahabad High Court for quashing of the Order .
c. '' 1.08 million (previous year '' 1.08 million) arising out of the Demand Notice issued by Tamil Nadu Electricity Board, Chennai on account of purported short levy due to tariff difference. The Company has filed a Writ petition before the Hon''ble Madras High Court at Chennai, challenging such a demand. The Court heard the Arguments and directed the respondent Board TNEB to file appropriate petition before the Tamil Nadu Electricity Regulatory Commission for appropriate order passed by the Commission. Case disposed on 26.08.2019. It is found that TNEB has not yet filed any application to that effect. Further, none of the other similar consumers such as Birlasoft have approached the TNERC. Once TNEB files an application before the TNERC and Birlasoft receives notice of the said application further proceedings will take place. There is yet not any finality on the alleged demand.
1 Employee Stock Option Plan - 2006
The Board of Directors and the shareholders of the Group approved another Employees Stock Option Plan at their meeting in July 2006 and in August 2006, respectively. Pursuant to this approval, the Group instituted ESOP 2006, Plan in October, 2006. The compensation committee of the Group administers this Plan. Each option carries with it the right to purchase one equity share of the Group. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2023 and 31 March 2022.
The company recorded an employee compensation cost of '' Nil (Previous year '' Nil million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
2 Employee Stock Option Plan - 2015
The Board of Directors and the shareholders of the Group approved another Employee Stock Option Plan at their meeting in April 2015 and August 2015, respectively. Pursuant to this approval, the Group instituted ESOP 2015 Plan in August 2015. The compensation committee of the Group administers this Plan. Each option carries with it the right to purchase one equity share of the Group. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
The Company recorded an employee compensation cost of '' Nil (Previous year '' Nil million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
Employee Stock Option Plan- 2006 and Employee Stock Option Plan- 2015 (Share based payment schemes of the Company) were administered by the Employee Welfare Trust (EWT). Under the Composite scheme of arrangement, 2019, the EWT was transferred to KPIT Technologies Limited (erstwhile KPIT Engineering Limited). Hence, Company has not done any further allotments against exercise of these options, as the same has been already allotted EWT during the previous years.
3 Employee Stock Option Plan - 2019
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in February 2019. Pursuant to this approval, the Company instituted ESOP 2019 Plan in February 2019. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such option. Option Granted under ESOP 2019 shall vest not earlier than minimum period of 1 (One) year and not later than maximum period of 3 (Three) years from the date of Grant. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The Group recorded an employee compensation cost of '' Nil (Previous year - Nil) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
4 Share Incentive Plan - 2019
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in November 2019. Pursuant to this approval, the Group instituted Share Incentive Plan 2019 in November 2019. The compensation committee of the Group administers this Plan. Each option carries with it the right to purchase one equity share of the Group. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such option. The vesting of the options is 50% and 50% of total options granted after end of second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The Group recorded an employee compensation cost of '' Nil million (Previous year '' 50.45 million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
5 Share Incentive Plan - 2019
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in November 2019. Pursuant to this approval, the Group instituted Share Incentive Plan 2019 in November 2019. The compensation committee of the Group administers this Plan. Each Restricted Stock Unit carries with it the right to purchase one equity share of the Group. The Units have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such unit. The vesting of the options is 50% and 50% of total units granted after end of second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The Group recorded an employee compensation cost of '' Nil million (Previous year '' 34.46 million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
6 Share Incentive Plan - 2022
The Board of Directors and the shareholders of the Company approved Birlasoft Share Incentive Plan 2022 ("SIP 2022") at their meetings held on May 23, 2022 and August 3, 2022. The Nomination and Remuneration Committee of the Board of Directors of the Company (âthe NRC") implements and administers this SIP 2022 Plan. Each Performance Stock Unit (âPSU") / Restricted Stock Unit (âRSU") collectively referred to as âAwards" carries with it the right to be converted into one equity share of the Company. The PSUs/RSUs have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of Awards. The vesting criteria of the Awards is determined by the NRC and is provided to employee in the Letter of Grant. The maximum exercise period is 4 years from the date of vesting.
39 Other Explanatory Information
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) The Company does not have any transactions with companies struck off.
(iii) The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) The Company has not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961
(vi) The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(vii) The Company has non-fund based working capital facilities from banks and financial institutions on the basis of security of current assets. The quarterly returns or statements of current assets filed by the group with banks and financial institutions are in agreement with the books of accounts.
(viii) The Company has not been declared willful defaulter by any bank or financial institution or government or any government authority.
Reason for shortfall
During the year, the Company identified and initiated an ongoing project amounting to INR 12.36 million, the duration of which is 13 months. The said amount being unspent as on 31 March 2023, has been transferred to the Unspent CSR Account on 26 April 2023, as required by Section 135(6) of the Companies Act, 2013
41 Previous year figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.
Mar 31, 2022
Financial assets and liabilities include cash and cash equivalents, other balances with banks, trade receivables, loans, unbilled revenue, other financial assets, trade payables and other financial liabilities whose fair values approximate their carrying amounts largely due to the short term nature of such assets and liabilities. Fair value of lease liabilities approximate its carrying amounts, as lease liabilities are valued using the discounted cash flow method.
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This level of hierarchy include Company''s over the counter (OTC) derivative contracts.
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
25.3 Financial risk management
The board of directors has overall responsibility for the establishment and oversight of the Company risk management framework. The board of directors has established the Risk Management Committees, which is responsible for developing and monitoring the Company''s risk management policies. The Company has exposure to the following risks arising from financial instruments.
a. Credit risk
Credit risk is the risk of financial losses to the Company if a customer or counterparty to financial instruments fails to discharge its contractual obligations and arises primarily from the Company''s receivables from customers amounting to '' 2705.48 million and '' 2130.43 million and unbilled revenue amounting to '' 197.29 million and '' 214.53 million as on 31 March 2022 and 31 March 2021 respectively. To manage this, the Company periodically assesses the key accounts receivable balances. Credit risk on derivative instruments is generally low as the company enters into derivative contracts with reputed banks. As per Ind-AS 109 : Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain.
The carrying amount of trade and other receivables and other financial assets represents the maximum credit exposure.
i. Trade receivables
The management has established accounts receivable policy under which customer accounts are regularly monitored. The Company has a dedicated sales team at each geography which is responsible for collecting dues from the customer within stipulated period. The management reviews status of critical accounts on a regular basis.
iii. Cash and bank balances
The Company held cash and bank balances of '' 1556.32 million and '' 2498.25 million as on 31 March 2022 and 31 March 2021 respectively. The cash and bank balances are held with banks which have high credit ratings assigned by international credit rating agencies.
iv. Guarantees
The Group''s policy is to provide financial guarantees on behalf of subsidiaries. The Group has issued the guarantees to certain banks in respect of credit facilities granted to its subsidiaries. There are nil external borrowings in subsidiaries as on 31st March 22.
v. investment
The Company invests surplus funds in mutual fund schemes. These mutual funds are regulated by Securities and Exchange Board of India(SEBI)
b. Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.
The Company has a view of maintaining liquidity and to take minimum possible risk while making investments. In order to maintain liquidity, the Company invests its excess funds in short term liquid assets like liquid mutual funds and bonds. The Company monitors its cash and bank balances periodically in view of its short term obligations associated with its financial liabilities.
c. Market risk
Market risk is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
i. Foreign currency risk
Significant portion of the Company''s revenues are in foreign currencies, while a significant portion of the costs are in Indian rupee i.e. functional currency of the Company. The foreign currencies to which the Company is majorly exposed to are US Dollars, Euros and Pound Sterling.
The Company evaluates net exchange rate exposure based on current revenue projections and expected volatility in the market and covers its exposure up to 75% on net basis. For this purpose the Company uses foreign currency derivative instruments such as forward covers to mitigate the risk. The counterparty to these derivative instruments is a bank. The Company has designated certain derivative instruments as cash flow hedge to mitigate the foreign exchange exposure of highly probable forecasted cash flows.
For the year ended 31 March 2022, every 1% appreciation / depreciation of the exchange rate between respective foreign currencies and the Indian rupee would impact the operating margins by approximately 0.45 % / (0.45) %.
For the year ended 31 March 2021, every 1% appreciation / depreciation of the exchange rate between respective foreign currencies and the Indian rupee would impact the operating margins by approximately 1.39% / (1.39)%.
ii. Derivative assets and liabilities designated as cash flow hedges
In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than in Indian rupees. The counter party to the Company''s foreign currency contracts is a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments (sales orders) and highly probable forecast transactions. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
25.4 The Company has not advanced or loaned or invested funds to any other person(s) or entity(is), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
b) Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries
25.5 The Company has not received any fund from any person(s) or entity(is), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
b) Provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
Remuneration excludes provision for employee benefits as separate actuarial valuation for the directors, key management personnel and their relatives is not available.
All transactions with these related parties are priced on an arm''s length basis.
As the company and CK Birla Corporate Services Limited use the same âCK Birla'' brand and are disclosed as being part of the same âGroup'' on the website operated by CK Birla Corporate Services Limited, from a good governance perspective the transaction is being reported as a ârelated party transaction'' under the applicable accounting standards.
(i) Capital redemption reserve
Represents the nominal amount of the preference share capital on redemption of 400,000, 0.01% cumulative redeemable preference shares.
(ii) Amalgamation reserve
Represents the amount credited on account of cancellation of stock options issued pursuant to the scheme of amalgamation and acquisition.
(iii) securities premium reserve
Securities premium is used to record the premium received on issue of shares. It is utilized in accordance with the provisions of the Companies Act, 2013.
(iv) share based payment reserve
The Company has established various equity-settled share based payment plans for certain categories of employees of the Company. Refer note 38 for further details.
28 disclosure as per the requirement of section 22 of the micro, small and medium enterprise development ACT, 2006:
a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31 March 2022 is '' 6716 million (trade payable: '' 51.65 million; payables in respect of fixed assets '' 15.51 million) (Previous year - '' 31.93 million) (trade payable: '' 18.95 million; payables in respect of fixed assets '' 12.98 million). Estimated interest due thereon is Nil (Previous year '' 0.11).
b. Amount of payments made to suppliers beyond the appointed date during the year is '' 123.34 million (Previous year - '' 110.35 million). Interest paid thereon is '' Nil (Previous year - '' Nil) and the estimated interest due and payable thereon is '' 1.09 million (Previous year - '' 1.87 million).
c. The amount of interest due and payable for the period of delay in making payment but without adding the interest specified under the Micro, Small and Medium Enterprises Development Act, 2006 is '' Nil.
d. The amount of estimated interest accrued and remaining unpaid as at 31 March 2022 is '' 3.07 million (Previous year '' 1.98 million).
e. The amount of further estimated interest due and payable for the period from 1 April 2021 to actual date of payment or 30 April 2021 (whichever is earlier) is '' Nil.
*The interest is not accrued.
The Company classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue.
A receivable is a right to consideration that is unconditional upon passage of time. Revenue for time and material contracts are recognized as related services are performed. Revenue for fixed price maintenance and support services contracts is recognized on a straight line basis over the period of the contract. Revenues in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration is unconditional upon passage of time.
Revenue recognition for fixed price contracts is based on percentage of completion method. Invoicing to the clients is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from the timing of
c. Performance Obligation
While disclosing the aggregate amount of transaction price yet to be recognised as revenue towards unsatisfied (or partially) satisfied performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and material, outcome based and event based contracts.
Unsatisfied (or partially satisfied) performance obligations are subject to variability due to several factors such as terminations, changes in scope of contracts, periodic revalidations of the estimates, economic factors (changes in currency rates, tax laws etc).
31 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY IND-AS 19 - âEMPLOYEE BENEFITSâ ARE AS UNDER:
1 defined contribution plan - provident fund
Amount recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is '' 502.08 million (Previous year '' 365.03 million ).
2 defined benefit plan
defined benefit plan - unfunded
During the previpus year, company has transitioned from un-funded to funded plan for defined benefit plan.
defined benefit plan - funded
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Gratuity is a benefit to an employee in India based on 15 days of last drawn salary for each completed year of service with a vesting period of 5 years.
These defined benefit plans expose the Company to actuarial risks, such as longevity risk and interest rate risk.
a. The discount rate is based on prevailing yields of Indian Government Securities as at the Balance Sheet date for the estimated term of the obligation.
b. Salary escalation rate: The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors.
c. Assumptions regarding future mortality rates are the rates as given under Indian Assured Lives Mortality (2006-08) Ultimate.
Where a financial report contains both consolidated financial statements and separate financial statements of the parent, segment information needs to be presented only in case of consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements.
1 Contingent liabilities
A. Taxes and guarantees
|
sr. No. |
particulars |
31 march 2022 |
31 march 2021 |
|
1 |
Outstanding bank guarantees in routine course of business |
96.88 |
129.45 |
|
2 |
Income tax matters (Refer note (ii)) |
697.68 |
693.19 |
|
3 |
VAT matters |
- |
6.42 |
|
4 |
Service tax matters (excluding interest and penalty)(Refer note (i)) |
685.45 |
685.45 |
|
5 |
Other matters (Refer note (iii)) |
27.75 |
35.15 |
The difference between the future minimum lease rental commitments towards non-cancellable operating leases and finance leases reported as at March 31, 2020 compared to the lease liability as accounted as at April 1, 2020 is primarily due to inclusion of present value of the lease payments for the cancellable term of the leases, reduction due to discounting of the lease liabilities as per the requirement of Ind AS 116 and exclusion of the commitments for the leases to which the Company has chosen to apply the practical expedient as per the standard.
The company does not face significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
Note:
(i) Service tax matters
a. The Company has received a show cause cum demand notice from Commissioner of Central Excise & Service Tax, Pune I for the period April 2014 to March 2015 demanding service tax relating to:
- '' 169.34 million (Previous year '' 169.34 million) towards Service Tax on the amount received by branches from overseas clients on behalf of the Company, under the head âBusiness Auxiliary Services''.
- '' 13.07 million (Previous year '' 13.07 million) towards the amount of expenditure made in foreign currency in respect of category II and III services.
b. The Company has received a show cause notice from Commissioner of Central Excise & Service Tax, Pune I for the period April 2010 to June 2012 demanding service tax relating to:
- '' 4.79 million (Previous year '' 4.79 million) towards the amount of expenditure against reimbursement of expenses.
The Company has filed an Appeal with Customs, Excise and Service Tax Appellate Tribunal, Mumbai for all the above matters.
c. Department has filed an appeal against the Company in the following cases:
- '' 469.65 million (Previous year '' 469.65 million) towards Service Tax on the amount received by branches from overseas clients on behalf of the Company for the period October 2006 to March 2014, under the head âBusiness Auxiliary Services'' and expenditure made in foreign currency in respect of category II and III services with the Hon''ble Supreme Court of India.
- '' 28.60 million (Previous year '' 28.60 million) towards Service Tax refund granted for the period April 2006 to March 2008 with the Hon''ble Bombay High Court.
(ii) Income tax matters
The Income Tax Department has filed appeals for various years with Hon''ble Delhi High Court predominantly contesting a) the set off of losses of STP unit against Non STP unit b) deduction claimed by the Company u/s 10A of the Income-tax Act, 1961 and c) the Arm''s Length Price of the transactions entered with the related parties. The disputed tax amount is '' 601.90 million.
The Company has filed appeals with various appellate authorities for different assessment years. The key items for which appeals are filed are a) allowabilty of deduction claimed by the Company u/s 10A of the Income-tax Act, 1961 b) deduction under section 36 of the Income-tax Act, 1961, with respect to deposit of dues c) disallowance of rent equalization reserve d) tax withholding obligations and e) Arm''s Length Price of the transactions entered with the related parties. The disputed tax amount is '' 95.78 million.
(iii) Other matters
These matters pertain to the Transferor Company acquired pursuant to the composite scheme.
a. '' 19.47 million (excluding interest) arising out of the Order passed by District Magistrate/Collector, Gautam Budha Nagar, imposing stamp duty of '' 12.98 million for alleged short payment of stamp duty along with penalty of '' 6.49 million in respect of the office space taken (since vacated) at D-195 , Sector 63 , Noida, Gautam Budha Nagar, Uttar Pradesh, India, by erstwhile Birlasoft (India) Ltd. (now merged with and into Birlasoft Limited). The matter has been remanded back by Hon''ble Supreme Court to Hon''ble Allahabad High Court for hearing it afresh. The matter is presently pending before Hon''ble Allahabad High Court.
b. '' 7.20 million (excluding interest) arising out of the Order passed by Additional District Magistrate/Collector, Gautam Budha Nagar, imposing stamp duty of '' 6.20 million for alleged short payment of stamp duty along with penalty of '' 1.00 million in respect of the office space taken (since vacated) at H-9, Sector 63 , Noida, Gautam Budha Nagar, Uttar Pradesh, India, by erstwhile Birlasoft (India) Ltd. ( now merged with and into Birlasoft Limited). The Company has filed a Writ petition before Hon''ble Allahabad High Court for quashing of the Order .
c. '' 1.08 million arising out of the Demand Notice issued by Tamil Nadu Electricity Board, Chennai on account of purported short levy due to tariff difference. The Company has filed a Writ petition before the Hon''ble Madras High Court at Chennai, challenging such a demand. The matter is presently pending before the Hon''ble Madras High Court.
3 Commitments:
Estimated amount of contracts remaining to be executed on capital account and not provided for:
a. Property, plant and equipment - '' 387.56 million (Previous Year '' 105.22 million)
b. Intangibles - '' 23.42 million (Previous Year '' Nil)
1 Employee Stock Option Plan - 2006
The Board of Directors and the shareholders of the Group approved another Employees Stock Option Plan at their meeting in July 2006 and in August 2006, respectively. Pursuant to this approval, the Group instituted ESOP 2006, Plan in October, 2006. The compensation committee of the Group administers this Plan. Each option carries with it the right to purchase one equity share of the Group. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2022 and 31 March 2021.
The company recorded an employee compensation cost of '' Nil (Previous year '' Nil million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
2 Employee Stock Option Plan - 2015
The Board of Directors and the shareholders of the Group approved another Employee Stock Option Plan at their meeting in April 2015 and August, 2015, respectively. Pursuant to this approval, the Group instituted ESOP 2015 Plan in August 2015. The compensation committee of the Group administers this Plan. Each option carries with it the right to purchase one equity share of the Group. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2022 and 31 March 2021.
The Company recorded an employee compensation cost of '' Nil (Previous year '' Nil million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
3 Employee Stock Option Plan - 2019
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in February 2019. Pursuant to this approval, the Company instituted ESOP 2019 Plan in February 2019. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such option. Option Granted under ESOP 2019 shall vest not earlier than minimum period of 1 (One) year and not later than maximum period of 3 (Three) years from the date of Grant. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of options under the plan for the year ended 31 March 2022 and 31 March 2021.
The Group recorded an employee compensation cost of Nil (Previous year '' 21.70 million) in the Statement of Profit and Loss.
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in November 2019. Pursuant to this approval, the Group instituted Share Incentive Plan 2019 in November 2019. The compensation committee of the Group administers this Plan. Each option carries with it the right to purchase one equity share of the Group. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such option. The vesting of the options is 50% and 50% of total options granted after end of second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in November 2019. Pursuant to this approval, the Group instituted Share Incentive Plan 2019 in November 2019. The compensation committee of the Group administers this Plan. Each Restricted Stock Unit carries with it the right to purchase one equity share of the Group. The Units have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the face value of shares as on date of grant of such unit. The vesting of the options is 50% and 50% of total units granted after end of second and third year respectively from the date of grant. The maximum exercise period is 4 years from the date of vesting.
The Group recorded an employee compensation cost of '' 50.45 million (Previous year '' 14.28 million) in the Statement of Profit and Loss.
Reason for shortfall
During the year, the Company identified and initiated an ongoing project amounting to INR 20.00 million, the duration of which is 18 months. The said amount being unspent as on March 31, 2022, has been transferred to the Unspent CSR Account on April 6, 2022, as required by Section 135(6) of the Companies Act, 2013.
40 Previous year figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.
Mar 31, 2018
30.
(i) The above loan is secured by way of first charge by way of hypothecation of Company''s entire book debts, both present and future, on pari passu basis, carrying an average interest rate upto 6 months LIBOR plus 0.58% p.a.
(ii) The loan from other than banks was secured by way of first and exclusive charge on fixed assets acquired under the loan arrangement. This loan has been repaid during the year.
(iii) Information about Company''s exposure to interest rate risk, foreign currency risk & liquidity risk is disclosed in note 30.
Note:
(i) Information about the Company''s exposure to interest rate risk, foreign currency risk and liquidity risk is disclosed in note 30.
30.2 Fair value hierarchy
Financial assets and liabilities include cash and cash equivalents, other balances with banks, trade receivables, loans, unbilled revenue, other financial assets, trade payables and other financial liabilities whose fair values approximate their carrying amounts largely due to the short term nature of such assets and liabilities.
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table presents fair value hierarchy of financial assets and liabilities as on 31 March 2018:
* Since denominated in '' million.
Valuation technique and significant unobservable inputs:
Level 2:
(i) Derivative financial assets are valued based on inputs that are directly or indirectly observable in the market.
(ii) Borrowings and loans given are valued using the discounted cash flow method, the net cash flows expected to be generated are discounted using the cost of borrowing that are directly or indirectly observable in the market.
Level 3:
Valuation techniques Significant unobservable inputs
For valuation of investment in equity instruments, discounted - Budgeted revenue growth rate (5%) cash flow method is used to capture the present value of
expected future economic benefits. Under the discounted cash - Weighted average cost °f capital (19%) flow method, the net cash flows expected to be generated are discounted using the weighted average cost of capital.
Significant increase in discount rates and spreads above risk free rate, in isolation would result in lower fair values. A significant increase in volatility in revenue growth rates will result in higher fair value.
30.3 Financial risk management
The board of directors has overall responsibility for the establishment and oversight of the Company risk management framework. The board of directors has established the Risk Management Committees, which is responsible for developing and monitoring the Company''s risk management policies.
The Company has exposure to the following risks arising from financial instruments:
a. Credit risk
Credit risk is the risk of financial losses to the Company if a customer or counterparty to financial instruments fails to discharge its contractual obligations and arises primarily from the Company''s receivables from customers amounting to Rs, 5,477.33 million and Rs, 5,005.65 million and unbilled revenue amounting to Rs, 464.50 million and Rs, 323.71 million as on 31 March 2018, 31 March 2017 respectively. To manage this, the Company periodically assesses the key accounts receivable balances. As per Ind-AS 109 : Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain.
The carrying amount of trade and other receivables and other financial assets represents the maximum credit exposure. i. Trade receivables
The management has established accounts receivable policy under which customer accounts are regularly monitored. The Company has a dedicated sales team at each geography which is responsible for collecting dues from the customer within stipulated period. The management reviews status of critical accounts on a regular basis.
c. Market risk
Market risk is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
i. Foreign currency risk
Significant portion of the Company''s revenues are in foreign currencies, while a significant portion of the costs are in Indian rupee i.e. functional currency of the Company. The foreign currencies to which the Company is majorly exposed to are US Dollars, Euros and Pound Sterling.
The Company evaluates net exchange rate exposure based on current revenue projections and expected volatility in the market and covers its exposure up to 75% on net basis. For this purpose the Company uses foreign currency derivative instruments such as forward covers to mitigate the risk. The counterparty to these derivative instruments is a bank. The Company has designated certain derivative instruments as cash flow hedge to mitigate the foreign exchange exposure of highly probable forecasted cash flows.
ii. Derivative assets and liabilities designated as cash flow hedges
In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than in Indian rupees. The counter party to the Company''s foreign currency contracts is a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments (sales orders) and highly probable forecast transactions. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
The following are the outstanding GBP/USD/EUR: INR Currency Exchange Contracts entered into by the Company which has been designated as Cash Flow Hedges:
31 Other equity
(i) Capital reserve
Any profit or loss on purchase, sale, issue or cancellation of the Company''s own equity instruments is transferred to capital reserve.
(ii) Capital redemption reserve
Represents the nominal amount of the preference share capital on redemption of 400,000, 0.01% cumulative redeemable preference shares.
(iii) Amalgamation reserve
Represents the amount credited on account of cancellation of stock options issued pursuant to the scheme of amalgamation and acquisition.
(iv) Securities premium reserve
Securities premium is used to record the premium received on issue of shares. It is utilized in accordance with the provisions of the Companies Act, 2013.
(v) Share based payment reserve
The Company has established various equity-settled share based payment plans for certain categories of employees of the Company. Refer note 42 for further details.
32 Disclosure as per the requirement of section 22 of the Micro, Small and Medium Enterprise Development Act, 2006:
a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31 March 2018 is Rs, 0.99 million (Previous year - Rs, 0.46 million). Estimated interest due thereon is Rs, Nil (Previous year - Rs, Nil).
b. Amount of payments made to suppliers beyond the appointed date during the year is Rs, 0.74 million (Previous year - Rs, 0.34 million). Interest paid thereon is Rs, Nil (Previous year - Rs, Nil) and the estimated interest due and payable thereon is Rs, 0.01 million (Previous year - Rs, 0.00 million).
c. The amount of estimated interest accrued and remaining unpaid as at 31 March 2018 is Rs, 0.68 million (Previous year -Rs, 0.67 million).
d. The amount of further estimated interest due and payable for the period from 1 April 2018 to actual date of payment or 20 April 2018 (whichever is earlier) is Rs, 0.00 million.
35 Details of employee benefits as required by Ind-AS 19 - "Employee benefits" are as under:
1 Defined contribution plan - Provident fund
Amount recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is Rs, 278.34 million (Previous year Rs, 240.07 million)
2 Defined benefit plan
i) The defined benefit plan comprises gratuity, which is un-funded.
ii) Actuarial gains and losses in respect of defined benefit plans are recognized in the Other Comprehensive Income (OCI).
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Gratuity is a benefit to an employee in India based on 15 days last drawn salary for each completed year of service with a vesting period of five years.
These defined benefit plans expose the Company to actuarial risks, such as longevity risk and interest rate risk.
37 Related party disclosures
A. Relationship between the parent and its subsidiaries:
Relationship Name of related party
Subsidiary Companies KPIT Technologies (UK) Limited
(Direct holding) Kpit Infosystems Incorporated, USA
KPIT Technologies France SAS
KPIT (Shanghai) Software Technology Co. Limited, China
KPIT Technologies Netherlands B.V.
SYSTIME Computer Corporation, USA
KPIT Infosystems ME FZE, Dubai
Impact Automotive Solutions Limited
KPIT Engineering Limited (w.e.f 08 January 2018)
Subsidiary Companies KPIT Technologies GmbH, Germany (Through KPIT Technologies (UK)
(Indirect holding) Ltd)
KPIT medini Technologies AG (Through KPIT Technologies GmbH, Germany)*
KPIT Solutions GmbH (Through KPIT Technologies GmbH, Germany)
Sparta Consulting Inc., USA (Through KPIT Infosystems Incorporated, USA)
KPIT Technologies Soluqoes EM Informatica Ltda. (Through KPIT Infosystems Incorporated, USA)
MicroFuzzy KPIT TECNOLOGIA LTDA, Brazil (Through SYSTIME Computer Corporation, USA)
KPIT Technologies Corporation, Canada (Through SYSTIME Computer Corporation, USA)
MicroFuzzy Industrie-Elektronic GmbH, Germany (w.e.f. 01 December 2016 through KPIT Technologies GmbH, Germany)
Associate Yantra Digital Services Private Limited, India (w.e.f. 05 October 2016
and upto 31 January 2018 through Impact Automotive Solutions Limited)
Joint Venture Yantra Digital Services Private Limited, India (w.e.f. 01 February 2018
through Impact Automotive Solutions Limited)****
* During previous year, KPIT Technologies GmbH sold the investment in KPIT medini Technologies AG, its subsidiary company. The transaction resulted in loss of control with effect from November 1, 2016.
B. List of Key Management Personnel:
Key Management Personnel Mr. S.B.(Ravi) Pandit Executive Director
(KMP) Mr. Kishor Patil Executive Director
Mr. Sachin Tikekar Executive Director Dr. Raghunath Anant Mashelkar(upto 23 August 2017) Independent Director
Ms. Lila Poonawalla Independent Director
Prof. Alberto Sangiovanni Vincentelli Independent Director
Mr. Sanjay Kukreja (upto 15 September 2017) Non- executive Director
Mr. Anant Talaulicar Independent Director
Mr. Adi Engineer Independent Director
Mr. B V R Subbu Non- executive Director
Dr. Klaus Blickle (w.e.f. 24 January 2018) Non- executive Director
Mr. Nickhil Jakatdar (w.e.f. 24 January 2018) Independent Director
Mr. Anil Patwardhan Chief Financial Officer
Ms. Sneha Padve Company Secretary
C. List of other related parties with whom there are transactions
Relative of KMP Mr. Chinmay Pandit
Ms. Jayada Pandit Mr. Shreyas Patwardhan Enterprise over which KMP have significant influence KP Corporate Solutions Limited
Proficient FinStock LLP Kirtane & Pandit LLP
40 The Company has received recognition from Department of Scientific and Industrial Research, Ministry of Science and Technology DSIR on 1 April 2014 for its Research and Development (R&D) facility at its premises in Hinjewadi which is effective from 1 April 2014 to 31 March 2018. During the year, the R&D facility is approved for the purpose of section 35(2AB) of the Income Tax Act, 1961, from 1 April 2014 to 31 March 2018.
Research and development expenditure debited to the Statement of Profit and Loss aggregating to Rs, 199.11 million (Previous year Rs, 188.53 million) has been incurred by the Company and disclosed under appropriate account heads. Out of total R & D expenditure incurred during the year Rs, 141.94 million (Previous year Rs, 125.61 million) is towards eligible R & D expenditure under section 35 (2AB). Also refer note 43.
The Company has set up a new facility for its R & D activities. Total capital expenditure on this facility is as follows, which is disclosed in respective fixed assets blocks: the period October 2006 to March 2015 demanding service tax relating to:
- Rs, 169.34 million (Previous year Rs, 524.11 million) towards Service Tax on the amount received by branches from overseas clients on behalf of the Company, under the head ''Business Auxiliary Services''.
- Rs, 46.56 million (Previous year Rs, 117.88 million) towards the amount of expenditure made in foreign currency in respect of category II and III services.
- Rs, 4.79 million (Previous year Rs, 4.79 million) towards the amount of expenditure against reimbursement of expenses from April 2010 to June 2012.
The Company has filed an Appeal in the Mumbai Tribunal.
b. The Company has received a show cause cum demand notice from Directorate General of Central Excise Intelligence Mumbai for the period October 2006 to March 2012 challenging the correctness of service tax input credit availed and correctness of discharge of service tax liability.
The contingent liability in respect of this notice is Rs, 90.47 million (Previous year Rs, 90.47 million).
3. Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for:-
a. Property, plant and equipment - Rs, 171.00 million (31 March 2017 Rs, 240.97 million).
b. Intangible assets - Rs, 8.94 million (31 March 2017 Rs, 26.98 million).
42 Share based payments
1 Employee Stock Option Plan - 2004
The Board of Directors and the shareholders of the Company approved the Employees Stock Option Plan at their meeting in August 2001 and in September 2001, respectively. Pursuant to this approval, the Company instituted ESOP 2004, Plan in July, 2004. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 33%, 33% and 34% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
Number and weighted average exercise prices of options granted, exercised and cancelled/lapsed during the financial year
The fair value of each option granted during the year is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of option under the plan for the year ended 31 March 2018 and 31 March 2017.
The Company recorded an employee compensation cost of Rs, Nil (Previous year Rs, Nil) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
2 Employee Stock Option Plan - 2006
The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in July 2006 and in August 2006, respectively. Pursuant to this approval, the Company instituted ESOP 2006, Plan in October, 2006. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
Number and weighted average exercise prices of options granted, exercised and cancelled/lapsed during the financial year
The Company recorded an employee compensation cost of Rs, 13.21 million (Previous year Rs, 29.52 million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
3 Employee Stock Option Plan - 2014
The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in February 2014 and in April 2014, respectively. Pursuant to this approval, the Company instituted ESOP 2014 Plan in April 2014. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price of Rs, 2 per option. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
The Company recorded an employee compensation cost of Rs, 0.15 million (Previous year Rs, 0.31 million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
4. Employee Stock Option Plan - 2015
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in April 2015 and August, 2015, respectively. Pursuant to this approval, the Company instituted ESOP 2015 Plan in August 2015. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
During the year ended March 31, 2018 and March 31, 2017, the company has claimed weighted tax deduction on eligible research and development expenditures based on the approval received from Department of Scientific and Industrial Research (DSIR) on June 2, 2011 which has been renewed till March 2018. The weighted tax deduction is equal to 150% of such expenditures incurred.
Additionally, the company benefits from the tax holiday available for units set up under the Special Economic Zone Act, 2005(SEZ). Accordingly, units in designated SEZ are eligible for a deduction of 100 percent of profits or gains derived from the export of services for the first five years from the financial year in which the unit commenced the provision of services and 50 percent of such profits or gains for a further five years. Certain tax benefits are also available for a further five years subject to the unit meeting defined conditions. The tax holiday period being currently available to the Company expires in various years through fiscal 2025. From April 1, 2011 units set up under SEZ scheme are subject to Minimum Alternate Tax (MAT).
The credit relating to temporary differences during the year ended March 31, 2018 are primarily on account of provision for doubtful debts & bad debts, provision for gratuity & property,plant and equipment . The charge relating to temporary differences during the year ended March 31, 2017 are primarily on account of property, plant and equipment and provision for doubtful debts partially offset by credit on account of provision for gratuity and leave encashment.
44 Other disclosures and explanatory notes
1 The Company was required to spend Rs, 45.93 million towards Corporate Social Responsibility. During the year the Company has spent and paid Rs, 27.17 million (Previous year Rs, 25.61 million) towards Corporate Social Responsibility, in various activities as specified in Schedule VII of the Companies Act, 2013, read with the Rules there under, as direct spend for purposes other than construction/acquisition of any asset.
Also, refer Annexure 7 of the Director''s Report.
2 The Board of Directors of the Company at its meeting held on 29 January, 2018 have approved a draft composite scheme ("Draft Scheme") for: (a) amalgamation of Birlasoft (India) Limited ("Birlasoft") with the Company ("Proposed Merger"); and (b) demerger of the engineering business of the Company into KPIT Engineering Limited ("KEL"), a wholly owned subsidiary of the Company, ("Proposed Demerger"), to be renamed as KPIT Technologies Limited, in terms of the Draft Scheme and an implementation agreement, and other agreements that are executed between the Company, Birlasoft and other parties. During the year, the Company has incurred expenditure of '' 163.19 million towards enabling the execution of this transaction. The Company is in progress to obtain approvals from various regulatory authorities.
3 During the year, the Company has infused further equity of '' 367.50 million in its wholly owned subsidiary, Impact Automotive Solutions Limited.
4 The Company has consolidated the KPIT Technologies Limited Employee Welfare Trust.
5 During the year, the Company has sold of its entire stake in Sankalp Semiconductors Private Limited. The gain on disposal is recorded under exceptional items in the Statement of Profit and Loss.
6 The Company has established a system of maintenance of information and documents as required by the transfer pricing legislation under Section 92-92F of the Income Tax Act, 1961. The Company is in the process of updating the documentation for the Financial Year 2017-2018.
The management is of the opinion that international transactions are at arm''s length and accordingly the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expenses and that of provision for taxation.
Mar 31, 2017
Notes:
(i) The ECB loan consists of loan secured by pari passu charge over Company''s Land and Building located at Plot No. 35,36 & 45, MIDC area of Rajiv Gandhi Infotech Park, Phase I, Hinjawadi excluding charge over R&D Centre developed in the premises. The term loan carries interest rate of 6 months LIBOR 220 basis points. The ECB loan is repayable in eight equal semi-annual installments of USD 2.5 million each up to November 2017. The principal amount of loan outstanding as at the Balance Sheet date is USD 5 million.
(ii) The ECB loan consist of loan secured by pari passu charge over Company''s Land and Building located at Plot No. 17, Rajiv Gandhi Infotech Park, Phase III, Hinjawadi. The term loan carries interest rate of 6 months LIBOR 160 basis points. The ECB loan is repayable in eight equal semi-annual installments of USD 2.5 million each, with a moratorium of 1 year, up to March 2021. The principal amount of loan outstanding as at the Balance Sheet date is USD 20 million.
(iii) Other term loans from bank are secured against fixed assets obtained under the loan arrangement. The loan carries interest up to 10.10 % p.a. and is repayable in equated monthly installments of'' 0.28 million each up to October 2020.
(iv) Term loan from other than banks is secured by way of first and exclusive charge on fixed assets acquired under the loan arrangement. The loan is repayable in two equal installments of Rs, 8.70 million each, up to May 2017.
(v) Term loan from other than banks consist of unsecured loan, carrying interest rate of 3%. The repayment of loan will start from October 2018 up to October 2027.
(vi) Information about the Company''s exposure to interest rate risk, foreign currency risk and liquidity risk is disclosed in note 31.
Notes:
(i) The above loan is secured by way of first charge by way of hypothecation of Company''s entire book debts, both present and future, on pari passu basis, carrying an average interest rate up to 6 months LIBOR plus 1% p.a.
(ii) The loan carried interest rate up to 6 months LIBOR plus 0.75% p.a. The loan was repaid during the previous year.
(iii) The invoices raised by the Company are discounted with bankers which are unsecured by nature.
(iv) The loan from other than banks is secured by way of first and exclusive charge on fixed assets acquired under the loan arrangement. The loan is repayable in four equal installments of'' 13.03 million each, up to May 2017.
(v) Information about the Company''s exposure to interest rate risk, foreign currency risk and liquidity risk is disclosed in note 31.
Note:
(i) Information about the Company''s exposure to interest rate risk, foreign currency risk and liquidity risk is disclosed in note 31.
1 Fair value hierarchy
Financial assets and liabilities include cash and cash equivalents, other balances with banks, trade receivables, loans, unbilled revenue, other financial assets, trade payables and other financial liabilities whose fair values approximate their carrying amounts largely due to the short term nature of such assets and liabilities.
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table presents fair value hierarchy of assets and liabilities measured at fair value as on March 31, 2017 :
Level 2:
(i) Derivative financial assets are valued based on inputs that are directly or indirectly observable in the market.
(ii) Borrowings are valued using the discounted cash flow method, the net cash flows expected to be generated are discounted using the cost of borrowing that are directly or indirectly observable in the market.
Level 3:
Valuation techniques Significant unobservable inputs
For valuation of investment in equity instruments, discounted - Budgeted revenue growth rate (5%) cash flow method is used to capture the present value of expected future economic benefits. Under the discounted cash " Weighted average cost of capital (19^ flow method, the net cash flows expected to be generated are discounted using the weighted average cost of capital.
Significant increase in discount rates and spreads above risk free rate, in isolation would result in lower fair values. A significant increase in volatility in revenue growth rates will result in higher fair value.
4 Financial risk management
The board of directors has overall responsibility for the establishment and oversight of the Company risk management framework. The board of directors has established the Risk Management Committees, which is responsible for developing and monitoring the Company''s risk management policies.
The Company has exposure to the following risks arising from financial instruments :
a. Credit risk
Credit risk is the risk of financial losses to the Company if a customer or counterparty to financial instruments fails to discharge its contractual obligations and arises primarily from the Company''s receivables from customers amounting to Rs, 5,005.65 million, '' 3,648.21 million and Rs, 4,690.91 million and unbilled revenue amounting to Rs, 323.71 million, Rs, 309.32 million and Rs, 433.66 million as on 31 March 2017, 31 March 2016 and 01 April 2015 respectively. To manage this, the Company periodically assesses the key accounts receivable balances. As per Ind-AS 109 : Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain.
The carrying amount of trade and other receivables and other financial assets represents the maximum credit exposure, i. Trade receivables
The management has established accounts receivable policy under which customer accounts are regularly monitored. The Company has a dedicated sales team at each geography which is responsible for collecting dues from the customer within stipulated period. The management reviews status of critical accounts on a regular basis.
iii. Cash and bank balances
The Company held cash and bank balances ofRs, 1,380.29 million, Rs, 2,198.04 million and Rs, 1,805.72 million as on
31 March 2017, 31 March 2016 and 01 April 2015 respectively. The cash and bank balances are held with banks which have high credit ratings assigned by international credit rating agencies.
iv. Guarantees
The Company''s policy is to provide financial guarantees only on behalf of subsidiaries. The Company has issued the guarantees to certain banks in respect of credit facilities granted to its subsidiaries.
b. Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.
The Company has a view of maintaining liquidity and to take minimum possible risk while making investments. In order to maintain liquidity, the Company invests its excess funds in short term liquid assets like liquid mutual funds. The Company monitors its cash and bank balances periodically in view of its short term obligations associated with its financial liabilities.
c. Market risk
Market risk is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
i. Foreign currency risk
Significant portion of the Company''s revenues are in foreign currencies, while a significant portion of the costs are in Indian rupee i.e. functional currency of the Company. The foreign currencies to which the Company is majorly exposed to are US Dollars, Euros and Pound Sterling.
The Company evaluates net exchange rate exposure based on current revenue projections and expected volatility in the market and covers its exposure up to 75% on net basis. For this purpose the Company uses foreign currency derivative instruments such as forward covers to mitigate the risk. The counterparty to these derivative instruments is a bank. The Company has designated certain derivative instruments as cash flow hedge to mitigate the foreign exchange exposure of highly probable forecasted cash flows.
Exposure to Currency Risk
The following is the Company''s exposure to currency risk from financial instruments as of 31 March 2017:
For the year ended 31 March 2017, every 1% appreciation / depreciation of the exchange rate between respective foreign currencies and the Indian rupee would impact the operating margins by approximately 0.60% / (0.60)%.
For the year ended 31 March 2016, every 1% appreciation / depreciation of the exchange rate between respective foreign currencies and the Indian rupee would impact the operating margins by approximately 0.66% / (0.66)%.
ii. Derivative assets and liabilities designated as cash flow hedges
In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than in Indian rupees. The counter party to the Company''s foreign currency contracts is a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments (sales orders) and highly probable forecast transactions. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
A change of 50 basis points in interest rates at the reporting date would have increased or decreased finance costs by '' 8.10 million (Previous year'' 9.95 million).
5 Other equity
(i) Capital reserve
Any profit or loss on purchase, sale, issue or cancellation of the Company''s own equity instruments is transferred to capital reserve.
(ii) Capital redemption reserve
Represents the nominal amount of the preference share capital on redemption of 400,000, 0.01% cumulative redeemable preference shares.
(iii) Amalgamation reserve
Represents the amount credited on account of cancellation of stock options issued pursuant to the scheme of amalgamation and acquisition.
(iv) Securities premium reserve
Securities premium is used to record the premium received on issue of shares. It is utilized in accordance with the provisions of the Companies Act, 2013.
(v) Share based payment reserve
The Company has established various equity-settled share based payment plans for certain categories of employees of the Company. Refer note 43 for further details.
6 As at 31 March 2017 the Company has received an amount ofRs, Nil (31 March 2016 Rs, 0.63 million and 01 April 2015 Rs, 7.65 million) towards share application money for shares Nil (31 March 2016 - 13,644 shares and 01 April 2015 - 105,108 shares) at a premium of Rs, Nil (31 March 2016 Rs, 0.60 million and 01 April 2015 Rs, 7.44 million).
7 Disclosure as per the requirement of section 22 of the Micro, Small and Medium Enterprise Development Act, 2006:
a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31 March 2017 is Rs, 0.46 million (Previous year - Rs, 20.61 million) including unpaid amounts ofRs, Nil (Previous year -Rs, Nil) outstanding for more than 30 days. Estimated interest due thereon is Rs, Nil (Previous year - Rs, Nil).
b. Amount of payments made to suppliers beyond the appointed date during the year is Rs, 0.34 million (Previous year -Rs,44.63 million). Interest paid thereon is Rs, Nil (Previous year - Rs, Nil) and the estimated interest due and payable thereon is Rs, 0.00 million (Previous year - Rs, 0.64 million).
c. The amount of estimated interest accrued and remaining unpaid as at 31 March 2017 is Rs, 0.67 million (Previous year -Rs, 0.67 million).
d. The amount of further estimated interest due and payable for the period from 1 April 2017 to actual date of payment or 20 April 2017 (whichever is earlier) is Rs, Nil.
8 Details of employee benefits as required by Ind-AS 19 - "Employee benefits" are as under:
1 Defined contribution plan - Provident fund
Amount recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is Rs, 240.07 million (Previous yearRs, 223.93 million)
2 Defined benefit plan
i) The defined benefit plan comprises gratuity, which is un-funded.
ii) Actuarial gains and losses in respect of defined benefit plans are recognized in the Other Comprehensive Income (OCI).
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Gratuity is a benefit to an employee in India based on 15 days last drawn salary for each completed year of service with a vesting period of five years.
These defined benefit plans expose the Company to actuarial risks, such as longevity risk and interest rate risk.
a. The discount rate is based on prevailing yields of Indian Government Securities as at the Balance Sheet date for the estimated term of the obligation.
b. Salary Escalation Rate: The estimates of future salary increases takes into account the inflation, seniority, promotion and other relevant factors.
c. Assumptions regarding future mortality rates are the rates as given underlndian Assured Lives Mortality (2006-08) Ultimate. Sensitivity Analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation bythe amounts shown below.
9 Segment information
Where a financial report contains both consolidated financial statements and separate financial statements of the parent, segment information needs to be presented only in case of consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements.
10 Related party disclosures
A. Relationship between the parent and its subsidiaries:
Relationship Name of related party
Subsidiary Companies KPIT Technologies (UK) Limited
(Direct holding) KPIT Infosystems Incorporated, USA
KPIT Technologies France
KPIT (Shanghai) Software Technology Co. Limited, China KPIT Technologies Netherlands B.V SYSTIME Computer Corporation, USA KPIT Infosystems ME FZE, Dubai Impact Automotive Solutions Limited SubsidiaryCompanies KPIT Technologies GmbH, Germany (Through KPIT
(Indirect holding) Technologies (UK) Ltd)
KPIT medini Technologies AG (Through KPIT Technologies GmbH, Germany)1
KPIT Solutions GmbH (Through KPIT Technologies GmbH, Germany)
CPG Solutions, LLC USA (merged w.e.f 1 January 2016 with KPIT Infosystems Incorporated, USA)
Sparta Consulting Inc., USA (Through KPIT Infosystems Incorporated, USA)
KPIT Technologies Solugoes EM Informatica Ltda. (Through KPIT Infosystems Incorporated, USA)
Integrated Industrial Information Inc. (merged w.e.f 1 January 2016 with KPIT Infosystems Incorporated, USA) MicroFuzzy KPIT TECNOLOGIA LTDA, Brazil (Through SYSTIME Computer Corporation, USA)
KPIT Technologies Corporation (Through SYSTIME Computer Corporation, USA)
MicroFuzzy Industrie-Elektronic GmbH (w.e.f. 01 December 2016 Through KPIT Technologies GmbH, Germany)
B. List of Key Management Personnel:
Key Management Personnel (KMP) Mr. S.B.(Ravi) Pandit Executive Director
Mr. Kishor Patil Executive Director
Mr. Sachin Tikekar Executive Director
Dr. Raghunath Anant Mashelkar Independent Director
Ms. Lila Poonawalla Independent Director
Prof. Alberto Sangiovanni Vincentelli Independent Director
Mr. Sanjay Kukreja Non- executive Director
Mr. Dwayne Allen (up to 12 March 2016) Alternate Director
Mr. Anant Talaulicar Independent Director
Mr. Adi Engineer Independent Director
Mr. BVR Subbu Non- executive Director
Mr. Anil Patwardhan Chief Financial Officer
Mr. Swaminathan R (up to 21 July 2015) Company Secretary
Ms. Sneha Padve (w.e.f 22 July 2015) Company Secretary
C. List of other related parties with whom there are transactions
Relative of KMP Mr.ChinmayPandit
Ms. Jayada Pandit Mr. Shreyas Patwardhan
Enterprise overwhich KMP have significant influence KP Corporate Solutions Limited
Proficient FinStock LLP Kirtane & Pandit LLP
11 The Company has received recognition from Department of Scientific and Industrial Research, Ministry of Science and Technology DSIR on 1 April 2014 for its Research and Development (R&D) facility at its premises in Hinjawadi which is effective from 1 April 2014 to 31 March 2018. During the year, the R&D facility is approved for the purpose of section 35(2AB) of the Income Tax Act 1961 from 1 April 2014 to 31 March 2017.
Research and development expenditure debited to the Statement of Profit and Loss aggregating to Rs, 188.53 million (Previous year Rs, 92.34 million) has been incurred by the Company and disclosed under appropriate account heads. Out of total R&D expenditure incurred during the year Rs, 125.61 million (Previous yearRs, 78.00 million) is towards eligible R&D expenditure under section 35 (2AB). Also refer note 44.
Based on this approval, a tax benefit on the weighted deduction under section 35(2AB) of the Income Tax Act 1961 amounting to Rs, 27.99 million (Previous yearRs, 98.51 million) pertaining to earlier years has been considered in the current financial year.
The Company has set up a new facility for its R&D activities, construction of which was completed on 1 March 2015. Total capital expenditure on this facility is as follows, which is disclosed in respective fixed assets blocks:
Note: (i) Service tax matters
a. The Company has received a show cause cum demand notice from Commissioner of Central Excise & Service Tax,
Pune I for the period October 2006 to March 2015 demanding service tax relating to:
- Rs, 524.11 million (Previous year Rs, 354.78 million) towards Service Tax on the amount received by branches from overseas clients on behalf of the Company, under the head ''Business Auxiliary Services''.
- Rs, 117.88 million (Previous year Rs, 104.80 million) towards the amount of expenditure made in foreign currency in respect of category II and III services.
- Rs, 4.79 million (Previous year Rs, 4.79 million) towards the amount of expenditure against reimbursement of expenses from April 2010 to June 2012.
The Company has filed an Appeal in the Mumbai Tribunal.
b. The Company has received a show cause cum demand notice from Directorate General of Central Excise Intelligence Mumbai for the period October 2006 to March 2012 challenging the correctness of service tax input credit availed and correctness of discharge of service tax liability.
The contingent liability in respect of this notice is Rs, 90.47 million (Previous yearRs, 90.47 million).
12. Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for:-
a. Tangible assets - Rs, 240.97 million (31 March 2016 Rs, 380.16 million and 01 April 2015 Rs, 153.66 million).
b. Intangible assets - Rs, 26.98 million (31 March 2016 Rs, 22.67 million and 01 April 2015 Rs, 8.17 million).
13 Stock option plans
1 Employee Stock Option Plan- 2004
The Board of Directors and the shareholders of the Company approved the Employees Stock Option Plan at their meeting in August 2001 and in September 2001, respectively. Pursuant to this approval, the Company instituted ESOP 2004, Plan in July, 2004. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 33%, 33% and 34% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date ofvesting.
The fair value of each option granted during the year is estimated on the date of grant using Black and Scholes option pricing model. There has been no grant of option under the plan for the year ended 31 March 2017 and 31 March 2016.
The Company recorded an employee compensation cost ofRs, Nil (Previous yearRs, Nil) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
14 Employee Stock Option Plan - 2006
The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in July 2006 and in August 2006, respectively. Pursuant to this approval, the Company instituted ESOP 2006, Plan in October, 2006. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date ofvesting.
The weighted average market price of the options exercised under Employees Stock Option Scheme -2006 on the date of exercise during the year was Rs, 143.38 (Previous yearRs, 119.19)
The Company recorded an employee compensation cost ofRs, 29.52 million (Previous yearRs, 28.34 million) in the Statement of Profit and Loss.
The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.
15 Employee Stock Option Plan - 2014
The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in February 2014 and in April 2014, respectively. Pursuant to this approval, the Company instituted ESOP 2014 Plan in April 2014. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price of Rs, 2 per option. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
16 Employee Stock Option Plan - 2015
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in April 2015 and August, 2015, respectively. Pursuant to this approval, the Company instituted ESOP 2015 Plan in August 2015. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.
The weighted average market price of the options exercised under Employees Stock Option Scheme -2015 on the date of exercise during the year was Rs, Nil (Previous yearRs, Nil)
During the year ended March 31, 2017 and March 31, 2016, the Company has claimed weighted tax deduction on eligible research and development expenditures based on the approval received from Department of Scientific and Industrial Research (DSIR) on June 2, 2011 which has been renewed effective April 2014. The weighted tax deduction is equal to 200% of such expenditures incurred. Also refer note 41.
Additionally, the Company benefits from the tax holiday available for units set up under the Special Economic Zone Act, 2005(SEZ). Accordingly, units in designated SEZ are eligible for a deduction of 100 percent of profits or gains derived from the export of services for the first five years from the financial year in which the unit commenced the provision of services and 50 percent of such profits or gains for a further five years. Certain tax benefits are also available for a further five years subject to the unit meeting defined conditions. The tax holiday period being currently available to the Company expires in various years through fiscal 2025. From April 1, 2011 units set up under SEZ scheme are subject to Minimum Alternate Tax (MAT).
The charge relating to temporary differences during the year ended March 31, 2017 are primarily on account of provision for doubtful debts & bad debts partially offset by credit on account of property, plant and equipment and provision for gratuity and leave encashment. The charge relating to temporary differences during the year ended March 31, 2016 are primarily on account of property, plant and equipment and provision for doubtful debts partially offset by credit on account of provision for gratuity and leave encashment.
17 Other disclosures and explanatory notes
1 The Company was required to spend Rs, 46.42 million towards Corporate Social Responsibility. During the year the Company has spent and paid Rs, 25.61 million (Previous year Rs, 18.62 million) towards Corporate Social Responsibility, in various activities as specified in Schedule VII of the Companies Act, 2013, read with the Rules there under, as direct spend for purposes other than construction/acquisition of any asset.
Also, refer Annexure 7 of the Director''s Report.
The Company has received amounts aggregating to '' 24,500 for transactions which are not permitted. These transactions pertain to settlements of advances till 30 December 2016 during the course of business.
2B A customer has filed a legal suit against the Company and its subsidiaries seeking various damages not less than USD 50 million pertaining to services on an ERP implementation contract. The subsidiary has filed a counter claim against the customer seeking compensatory damages, relief, costs, etc. The matter is currently pending with the United States District Court. The Company and its subsidiaries continues to pursue its claim for damages and defend against the customer''s claims. Based on its internal assessment, the Company is confident of being able to defend its exposure on this case.
18 The Company has consolidated the KPIT Technologies Limited Employee Welfare Trust.
19 The Company has established a system of maintenance of information and documents as required by the transfer pricing legislation under Section 92-92F of the Income Tax Act, 1961. The Company is in the process of updating the documentation for the Financial Year 2016-2017.
The management is of the opinion that international transactions are at arm''s length and accordingly the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expenses and that of provision for taxation.
Mar 31, 2016
Notes:
(i) The ECB loan consist of loan secured by pari passu charge over
Company''s Land and Building located at Plot No. 35, 36 & 45, MIDC area
of Rajiv Gandhi Infotech Park, Phase I, Hinjawadi excluding charge over
R&D Centre developed in the premises. The term loan carries interest
rate of 6 months LIBOR 220 basis points. The ECB loan is repayable in
eight equal semi-annual installments of USD 2.5 million each upto
November 2017. The principal amount of loan outstanding as at the
Balance Sheet date is USD 10 million.
(ii) The ECB loan consist of loan secured by pari passu charge over
Company''s Land and Building located at Plot No. 17, Rajiv Gandhi
Infotech Park, Phase III, Hinjawadi. The term loan carries interest
rate of 6 months LIBOR 160 basis points. The ECB loan is repayable in
eight equal semi-annual installments of USD 2.5 million each, with a
moratorium of 1 year, upto March 2021. The principal amount of loan
outstanding as at the Balance Sheet date is USD 20 million.
(iii) Other term loans from bank are secured against fixed assets
obtained under the loan arrangement. The loan carries interest upto
10.25% p.a. and is repayable in equated monthly installments of Rs.
0.17 million each upto August 2018.
(iv) Term loan from other than banks is secured by way of first and
exclusive charge on fixed assets acquired under the loan arrangement.
The loan is repayable in two equal installments of Rs. 8.70 million
each, upto May 2017.
28. (A) Interim dividend was declared by the Board of Directors by
passing a circular resolution on 31 March, 2016. The interim dividend
distributed to equity shareholders for the period is Rs. 217.25 million
(including amount of Rs. 10.64 million on the shares held by employee
welfare trust) i.e. Rs. 1.10 per share (Previous year - Rs. NIL).
(B) The Company declares and pays dividends in Indian rupees. The
dividend proposed to be distributed to equity shareholders for the
period is Rs. 217.25 million i.e. Rs. 1.10 per share. (Previous year
Rs. 216.33 million i.e. Rs. 1.10 per share). The dividend proposed by
the Board of Directors is subject to the approval of the shareholders
in the ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive a share in the remaining assets of
the Company, after distribution of all preferential amounts. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
1. As at 31 March, 2016 the Company has received an amount of Rs.
0.63 million (Previous year Rs. 7.65 million) towards share application
money for 13,644 shares (Previous year 105,108 shares) at a premium of
Rs. 0.60 million (Previous year Rs. 7.44 million). The share
application money was received for proposed issue under the Employee
Stock Option Plan of 2004 and 2006 at fair market value. The Company
has sufficient authorized share capital to cover the allotment of these
shares.
2. Disclosure as per the requirement of Section 22 of the Micro, Small
and Medium Enterprise Development Act, 2006:
a. Principal amount payable to Micro and Small Enterprises (to the
extent identified by the Company from available information) as at 31
March, 2016 is Rs. 20.61 million (Previous year Rs. 0.13 million)
including unpaid amounts of Rs. Nil (Previous year Rs. Nil) outstanding
for more than 30 days. Estimated interest due thereon is Rs. Nil
(Previous year Rs. Nil).
b. Amount of payments made to suppliers beyond the appointed date
during the year is Rs. 44.63 million (Previous year Rs. 0.02 million).
Interest paid thereon is Rs. Nil (Previous year Rs. Nil) and the
estimated interest due and payable thereon is Rs. 0.64 million
(Previous year Rs. 0.00 million).
c. The amount of estimated interest accrued and remaining unpaid as at
31 March, 2016 is Rs. 0.67 million (Previous year Rs. 0.03 million).
d. The amount of further estimated interest due and payable for the
period from 1 April, 2016 to actual date of payment or 20 April, 2016
(whichever is earlier) is Nil.
3. 1) Details of Derivative Instruments (for hedging)
A) Cash flow hedges: In accordance with its risk management policy and
business plan the Company has hedged its cash flows. The Company enters
into derivative contracts to offset the foreign currency risk arising
from the amounts denominated in currencies other than in Indian rupees.
The counter party to the Company''s foreign currency contracts is a
bank. These contracts are entered into to hedge the foreign currency
risks of firm commitments and highly probable forecast transactions.
The Management has assessed the effectiveness of its hedging contracts
outstanding as on 31 March, 2016 as required by AS-30 ''Financial
Instruments : Recognition and Measurement'' and accordingly recognized a
mark-to-market gain of Rs. 51.59 million (Previous year gain of Rs.
55.26 million) in the Hedging Reserve.
4. Details of Employee benefits as required by Accounting Standard 15
(Revised) Employee benefits are as under:
1. Defined contribution plan - Provident fund
Amount recognized as an expense in the Statement of Profit and Loss in
respect of defined contribution plan is Rs. 223.93 million (Previous
year Rs. 190.18 million)
2. Defined benefit plan
i) Actuarial gains and losses in respect of defined benefit plans are
recognized in the Statement of Profit and Loss.
ii) The defined benefit plan comprises of gratuity, which is un-funded.
5. Segment information
Where a financial report contains both consolidated financial
statements and separate financial statements of the parent, segment
information needs to be presented only in case of consolidated
financial statements. Accordingly, segment information has been
provided only in the consolidated financial statements.
6. Lease transactions
1) Finance leases
The Company has taken vehicles under finance lease for a period ranging
from 3 to 4 years. Upon payment of all sums due towards the agreement,
the Company has the option of acquiring the Vehicles. During the lease
period, the Company can neither sell, assign, sublet, pledge, mortgage,
charge, encumber or part with possession of the assets, nor create or
allow to create any lien on the vehicles taken on lease.
7. The Company has received recognition from Department of Scientific
and Industrial Research, Ministry of Science and Technology DSIR on 1
April, 2014 for its Research and Development (R&D) facility at its
premise in Hinjawadi which is effective from 1 April, 2014 to 31 March,
2018. During the year, the R&D facility is approved for the purpose of
Section 35(2AB) of the Income Tax Act, 1961 from 1 April, 2014 to 31
March, 2017.
R&D expenditure debited to the Statement of Profit and Loss aggregating
to Rs. 92.34 million (Previous year Rs. 124.60 million) has been
incurred by the Company and disclosed under appropriate account heads.
Out of total R&D expenditure incurred during the year Rs. 78.00 million
(Previous year Rs. 78.21 million) is towards eligible R&D expenditure
under Section 35(2AB) of the Income Tax Act, 1961.
Based on this approval, a tax benefit on the weighted deduction under
Section 35(2AB) of the Income Tax Act, 1961 amounting to Rs. 98.51
million (Previous year Rs. Nil) pertaining to earlier years has been
considered in the current financial year.
8. Stock option plans
1. Employee Stock Option Scheme (ESOS) - 1998 (through KPIT
Technologies Limited Employee Welfare Trust)
The Board of Directors and Shareholders of the Company approved
Employees Stock Option Scheme -1998 at their meetings in November 1998.
A compensation committee comprising of independent directors of the
Company administers the ESOS Plan. Each option carries with it the
right to purchase one hundred equity share of the Company. All options
have been granted at a pre-determined rate of Rs. 2.5 per share.
2. Employee Stock Option Plan- 2004
The Board of Directors and the shareholders of the Company approved the
Employees Stock Option Plan at their meeting in August 2001 and in
September 2001, respectively. Pursuant to this approval, the Company
instituted ESOP 2004, Plan in July, 2004. The compensation committee of
the Company administers this Plan. Each option carries with it the
right to purchase one equity share of the Company. The Options have
been granted to employees of the Company and its subsidiaries at an
exercise price that is not less than the fair market value. The vesting
of the options is 33%, 33% and 34% of total options granted after end
of first, second and third year respectively from the date of grant.
The maximum exercise period is 5 years from the date of vesting.
3. Employee Stock Option Plan - 2006
The Board of Directors and the shareholders of the Company approved
another Employees Stock Option Plan at their meeting in July 2006 and
in August 2006, respectively. Pursuant to this approval, the Company
instituted ESOP 2006, Plan in October, 2006. The compensation committee
of the Company administers this Plan. Each option carries with it the
right to purchase one equity share of the Company. The Options have
been granted to employees of the Company and its subsidiaries at an
exercise price that is not less than the fair market value. The vesting
of the options is 30%, 30% and 40% of total options granted after end
of first, second and third year respectively from the date of grant.
The maximum exercise period is 5 years from the date of vesting.
4. Employee Stock Option Plan - 2014
The Board of Directors and the shareholders of the Company approved
another Employees Stock Option Plan at their meeting in February 2014
and in April 2014, respectively. Pursuant to this approval, the Company
instituted ESOP 2014 Plan in April 2014. The compensation committee of
the Company administers this Plan. Each option carries with it the
right to purchase one equity share of the Company. The Options have
been granted to employees of the Company and its subsidiaries at an
exercise price of Rs. 2 per option. The vesting of the options is 30%,
30% and 40% of total options granted after end of first, second and
third year respectively from the date of grant. The maximum exercise
period is 5 years from the date of vesting.
5. Employee Stock Option Plan - 2015
The Board of Directors and the shareholders of the Company approved
another Employee Stock Option Plan at their meeting in April 2015 and
August, 2015, respectively. Pursuant to this approval, the Company
instituted ESOP 2015 Plan in August 2015. The compensation committee of
the Company administers this Plan. Each option carries with it the
right to purchase one equity share of the Company. The Options have
been granted to employees of the Company and its subsidiaries at an
exercise price that is not less than the fair market value. The vesting
of the options is 30%, 30% and 40% of total options granted after end
of first, second and third year respectively from the date of grant.
The maximum exercise period is 5 years from the date of vesting.
9. Other disclosures and explanatory notes
1. The Company has established a system of maintenance of information
and documents as required by the transfer pricing legislation under
Section 92-92F of the Income Tax Act, 1961. The Company is in the
process of updating the documentation for the Financial Year 2015-2016.
The management is of the opinion that is international transactions are
at arm''s length and accordingly the aforesaid legislation will not have
any impact on the financial statements, particularly on the amount of
tax expenses and that of provision for taxation.
2. Final dividend
The Company allotted 493,066 equity shares against exercise of options
by the employees, after 31 March, 2015 and before the Book closure for
the Annual General Meeting held for financial year 2014-15. The Company
paid dividend of Rs. 0.51 million on these shares as approved by the
shareholders at the Annual General Meeting held on 19 August, 2015.
3. The Company has consolidated the KPIT Technologies Limited Employee
Welfare Trust.
4. During the previous year ended 31 March 2015, the Company merged
its wholly owned subsidiary KPIT Global Solutions Limited vide scheme
of amalgamation approved by Hon''ble High Court of Bombay via order
dated 28 August, 2014 with effective date from 1 April 2013.
5. The tax expense for the previous year includes credit of Rs. 72.43
million for matters pertaining to earlier years.
6. During the year, the Company has spent Rs. 18.62 million (Previous
year Rs. 10.77 million) towards Corporate Social Responsibility.
7. Previous year''s figures have been regrouped / reclassified wherever
necessary to correspond with current year''s classification /
disclosure.
8. As per the amended rules on Companies (Accounting Standards) Rules,
2006, notified by the Central Government, the proposed dividend will
not be recorded as a liability as at the period end (amended AS-4 -
Contingencies and Events occurring after Balance Sheet date). The
Company believes that the Companies (Accounting Standards) Rules, 2016
will apply for the accounting periods commencing on or after 1 April
2016. Accordingly, the Company has recorded Rs. 262.66 million as
liability for proposed dividend (including corporate dividend tax) as
at 31 March, 2016.
Mar 31, 2015
1. The Company declares and pays dividends in Indian rupees. The
dividend proposed to be distributed to equity shareholders for the
period is Rs. 216,328,324 i.e Rs. 1.10 per share. (Previous year -Rs.
213,479,428 i.e Rs. 1.10 per share). The dividend proposed by the Board
of Directors is subject to the approval of the shareholders in the
ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive a share in the remaining assets of
the Company, after distribution of all preferential amounts. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
2. As at 31st March, 2015 the Company has received an amount ofRs.
7,652,081 (Previous yearRs. 14,844,492) towards share application money
for 105,108 shares (Previous year 325,438 shares) at a premium ofRs.
7,441,865 (Previous yearRs. 14,193,616). The share application money was
received for proposed issue under the Employee Stock Option Plan of
2004 and 2006 at fair market value. The Company has sufficient
authorized share capital to cover the allotment of these shares.
3. Contingent liabilities and Commitments (i) Contingent liabilities
Particulars As at As at
March, 2015 31 March, 2014
1 Outstanding Bank Guarantees in routine
course of business 157,773,538 191,719,175
2 Corporate Guarantee provided by the
Company for loan availed by 600,900,000 961,440,000
KPIT Infosystems Inc. USA
3 Corporate Guarantee provided by the
Company for loan availed by 62,590,800 NIL
KPIT Infosystems ME FZE, UAE
4 Income tax matters 34,728,933 64,552,955
5 VAT matters 2,216,664 -
6 Service tax matters 554,858,243 343,766,261
(ii) Commitments
Estimated amount of contracts remaining to be executed on capital
account and not provided for:-
a. Tangible assets - Rs. 153,656,070 (Previous yearRs. 8,274,858).
b. Intangible assets - Rs. 8,171,651 (Previous yearRs. 75,345,325).
4. Disclosure as per the requirement of section 22 of the Micro, Small
and Medium Enterprise Development Act, 2006:
a. Principal amount payable to Micro and Small Enterprises (to the
extent identified by the Company from available information) as at 31st
March 2015 is Rs. 129,095 (Previous year - Rs. Nil) including unpaid
amounts ofRs. Nil (Previous year - Rs. 59,562) outstanding for more than 30
days. Estimated interest due thereon is Rs. Nil (Previous year -Rs.
15,188).
b. Amount of payments made to suppliers beyond the appointed date
during the year is Rs. 17,694 (Previous year - Rs.Nil). Interest paid
thereon is Rs. Nil (Previous year - Rs. Nil) and the estimated interest due
and payable thereon is Rs.87 (Previous year - Rs. Nil).
c. The amount of estimated interest accrued and remaining unpaid as at
31st March 2015 is Rs. 30,590 (Previous year - Rs. 30,503).
d. The amount of estimated interest due and payable for the period from
1st April 2015 to actual date of payment or 20th April 2015 (whichever
is earlier) is Nil.
5. Remittances in foreign currency to non-resident shareholders on
account of dividends
The Company remits dividend byway of currency drafts equivalent to the
dividend amount in Indian Rupees to registered foreign shareholders of
the Company as per mandate given by them. The details of dividend
remitted during the year are as follows:
6. (1) Details of Derivative Instruments (for hedging)
A) Cash flow hedges: In accordance with its risk management policy and
business plan the Company has hedged its cash flows. The Company enters
into derivative contracts to offset the foreign currency risk arising
from the amounts denominated in currencies other than in Indian rupees.
The counter party to the Company's foreign currency contracts is a
bank. These contracts are entered into to hedge the foreign currency
risks of Arm commitments and highly probable forecast transactions. The
Management has assessed the effectiveness of its hedging contracts
outstanding as on 31 March 2015 as required by AS-30 'Financial
Instruments : Recognition and Measurement' and accordingly recognized a
mark - to -market profit ofRs. 55,260,541(Previous year profit ofRs.
82,768,635) in the Hedging Reserve.
B) The following are the outstanding GBP/USD/EUR: INR Currency Exchange
Contracts entered into by the Company which has been designated as Cash
Flow Hedges as on 31 March 2015:
7. Details of Employee benefits as required by Accounting Standard 15
(Revised) Employee benefits are as under:
1 Defined contribution plan - Provident fund
Amount recognized as an expense in the Statement of Profit and Loss in
respect of defined contribution plan is Rs.190,175,507 (Previous year Rs.
132,153,063)
2 Defined benefit plan
i) Actuarial gains and losses in respect of defined benefit plans are
recognized in the Statement of Profit and Loss.
ii) The defined benefit plan comprises of gratuity, which is un-funded.
Gratuity is a benefit to an employee in India based on 15 days last
drawn salary for each completed year of service with a vesting period
of five years.
8. Segment information
Where a financial report contains both consolidated financial
statements and separate financial statements of the parent, segment
information needs to be presented only in case of consolidated
financial statements. Accordingly, segment information has been
provided only in the consolidated financial statements.
9. Related party disclosures
A. Name of the related party and nature of relationship where control
exists:
Relationship Name of related party
Subsidiary Companies KPIT Technologies (UK) Limited (erstwhile KPIT
Infosystems Limited)
(Direct holdin ) KPIT Infosystems Inc., USA
KPIT Technologies France (erstwhile
KPIT Infosystems, France)
KPIT (Shanghai) Software Technology
Co. Limited, China
KPIT Technologies Netherlands B.V
(erstwhile KPIT Infosystems
Netherlands B.V.)
SYSTIME Computer Corporation, USA
KPIT Infosystems ME FZE, Dubai
Impact Automotive Solutions Limited
Subsidiary Companies KPIT Technologies GmbH, Germany (Through KPIT
Technologies (UK) Ltd)
thirlRs. 1 KPIT medini Technologies AG
(erstwhile IKV Technologies AG, Germany)
(Through KPIT n irec o ing Technologies GmbH,
Germany)
KPIT Solutions GmbH (erstwhile HD Solutions
GmbH, Germany) (Through KPIT Technologies
GmbH, Germany) CPG Solutions, LLC USA
(Through KPIT Infosystems Inc. USA)
Sparta Consulting Inc., USA (Through KPIT
Infosystems Inc. USA)
KPIT Technologies Soluqoes Em Informatica
Ltda. (erstwhile KPIT Infosystem (Brasil)
Servicos De Technologia e Participacoes
Ltda.) (Through KPIT Infosystems Inc. USA)
Integrated Industrial Information Inc.
(Through KPIT Infosystems Inc. USA)
SYSTIME Global Solutions LTDA, Brazil
(Through SYSTIME Computer Corporation, USA)
KPIT Technologies Corporation
(erstwhile SYSTIME Global Solutions Inc.,
Canada) (Through SYSTIME Computer
Corporation, USA)
Associate Company GAIA System Solution Inc (till 12 March,
2014)
B. List of other related parties with whom there are transactions in
the current year:
Relationship Name of related party
Key Management Personnel (KMP) Mr.S.B.(Ravi) Pandit
Mr. Kishor Patil
Mr. Sachin Tikekar
Mr.Anil Patwardhan
Mr.Swaminathan R
Relative of KMP Mr.Chinmay Pandit
Mrs. Jayada Pandit
Mr. Shreyas Patwardhan
Enterprise over which KMP has
significant influence KP Corporate Solutions Limited
10. Lease transactions
1) Finance leases
The Company has taken vehicles under finance lease for a period ranging
from 3 to 4 years. Upon payment of all sums due towards the agreement,
the Company has the option of acquiring the Vehicles. During the lease
period, the Company can neither sell, assign, sublet, pledge, mortgage,
charge, encumber or part with possession of the assets, nor create or
allow to create any lien on the vehicles taken on lease.
Reconciliation between future minimum lease payments and their present
values under finance lease as at the yearend is as follows :
2) Operating leases
Obligations towards non-cancellable operating Leases:
The Company has taken facilities on lease in Bangalore and Pune. The
future lease payments for these facilities are as under:
11. Research and development expenditure debited to the Statement of
Profit and Loss aggregating to Rs. 78,205,605 (Previous year Rs.
61,312,373) has been incurred by the Company and disclosed under
appropriate account heads.
The Company has received approval from Department of Scientific and
Industrial Research, Ministry of science and technology DSIR on 2 June
2011 for its Research and Development (R&D) facility at its premise in
Hinjewadi which is effective from 1 April 2014 to 31 March 2018.
The Company's spend on itsR&D activities are as follows :
12. Details of provisions and movements in each class of provisions as
required by the Accounting Standard 29 - Provisions, Contingent
liabilities and Contingent assets
Warranty
The Company has an obligation byway of warranty to maintain the
software during the period of warranty, which may vary from contract to
contract, from the date of sale of license of software to Tier I
suppliers. The movement in the said provision is as under:
13. Stock option plans
1 Employee Stock Option Scheme (ESOS) - 1998 (through KPIT Technologies
Limited Employee Welfare Trust)
The ESOS was approved by the Board of Directors of the Company on 23
November 1998 and thereafter by the shareholders on 30 November 1998. A
compensation committee comprising of independent directors of the
Company administers the ESOS Plan. Each option carries with it the
right to purchase one hundred equity share of the Company. All options
have been granted at a pre-determined rate of Rs.2.5 per share.
Number of options granted, exercised and cancelled/lapsed during the
financial year
2 Employee Stock Option Plan- 2004 (through KPIT Technologies Limited
Employee Welfare Trust)
The Board of Directors and the shareholders of the Company approved the
Employees Stock Option Plan at their meeting in August 2001 and in
September 2001, respectively. Pursuant to this approval, the Company
instituted ESOP 2004, Plan in July, 2004. The compensation committee of
the Company administers this Plan. Each option carries with it the
right to purchase one equity share of the Company. The Options have
been granted to employees of the Company and its subsidiaries at an
exercise price that is not less than the fair market value. The vesting
of the options is 33%, 33% and 34% of total options granted after end
of first, second and third year respectively from the date of grant.
The maximum exercise period is 3 years from the date ofvesting.
3 Employee Stock Option Plan - 2006 (through KPIT Technologies Limited
Employee Welfare Trust)
The Board of Directors and the shareholders of the Company approved
another Employees Stock Option Plan at their meeting in July 2006 and
in August 2006, respectively. Pursuant to this approval, the Company
instituted ESOP 2006, Plan in October, 2006. The compensation committee
of the Company administers this Plan. Each option carries with it the
right to purchase one equity share of the Company. The Options have
been granted to employees of the Company and its subsidiaries at an
exercise price that is not less than the fair market value. The vesting
of the options is 30%, 30% and 40% of total options granted after end
of first, second and third year respectively from the date of grant.
The maximum exercise period is 3 years from the date ofvesting.
4 Employee Stock Option Plan - 2014 (through KPIT Technologies Limited
Employee Welfare Trust)
The Board of Directors and the shareholders of the Company approved
another Employees Stock Option Plan at their meeting in February 2014
and in April 2014, respectively. Pursuant to this approval, the Company
instituted ESOP 2014 Plan in April 2014. The compensation committee of
the Company administers this Plan. Each option carries with it the
right to purchase one equity share of the Company. The Options have
been granted to employees of the Company and its subsidiaries at an
exercise price that is not less than the fair market value. The vesting
of the options is linked to continued association with the Company. The
options would vest not earlier than one year and not later than five
years from the date of grant. The maximum exercise period is 3 years
from the date of vesting.
The compensation cost of stock options granted to employees has been
accounted by the Company using the intrinsicvalue method.
Had the compensation cost for the Company's stock based compensation
plan been determined as per fair value approach (calculated using Black
Scholes Options Pricing Model), the Company's Profit after Tax would be
lower by Rs. 57,995,092 (Previous YearRs. 50,064,078) and earnings per
share as reported would be lower as indicated below:
14. Disclosure of interest in joint venture
During the year, the Company has purchased the remaining stake in
itsjoint venture Impact Automotive Solutions Limited with effect from 1
July, 2014. The interest of the Company as at 31 March, 2014 and its
percentage of holding is given below:
15. Other disclosures and explanatory notes
1. The Company has established a system of maintenance of information
and documents as required by the transfer pricing legislation under
Section 92-92F of the Income Tax Act 1961. The Company is in the
process of updating the documentation for the Financial Year 2014-2015.
The management is of the opinion that is international transactions are
at arm's length and accordingly the aforesaid legislation will not have
any impact on the financial statements, particularly on the amount of
tax expenses and that of provision for taxation.
2. Final dividend
The Company allotted 802,768 equity shares against exercise of options
by the employees, after 31 March, 2014 and before the Book closure for
the Annual General Meeting held for financial year 2013-14. The Company
paid dividend of Rs. 924,184 on these shares as approved by the
shareholders at the Annual General Meeting held on 25 July, 2014.
3. The Company has consolidated the KPIT Technologies Limited Employee
Welfare Trust.
4. During the previous year the Company had disinvested its stake in an
associate forRs. 122,410,304.
5. During the previous year ended 31 March, 2014, the Company merged
its wholly owned subsidiary Sparta Infotech India Private Limited vide
scheme of amalgamation approved by Hon'ble High Court of Bombay via
order dated 30 January, 2014 with effective date from 1 April, 2012
6. The Hon'ble High Court of Bombay has approved the Scheme of
Amalgamation of KPIT Global Solutions Limited, a wholly owned
subsidiary, with the Company, vide order dated 28 August, 2014 and
therefore, KPIT Global Solutions Limited has ceased to exist as a
separate company. KPIT Global Solutions Limited became wholly owned
subsidiary upon payment of consideration for the balance equity shares
of the company during the quarter ended 30 June, 2013.
a) Details of the scheme
i. With effect from the appointed date and subject to the provisions
hereof and such other corrections and adjustments as may, in the
opinion of the Board of Directors of the Transferee Company, be
required and except to the extent required by the law, all the assets
and liabilities including reserves, if any, of the Transferor Company
shall be recorded in the books of the Transferee Company at the book
values as recorded in the books of the Transferor Company as per
Accounting Standard 14 - Accounting for Amalgamations following pooling
of interest method.
ii. The balance in reserves and surplus account of the Transferor
Company as on the Appointed Date shall be transferred to the
corresponding reserves in the Transferee Company. In other words,
identity of reserves of the Transferor Company shall be preserved.
iii. The balance of the Profit and Loss Account of the Transferor
Company should be aggregated with the balance of the Profit and Loss
Account of the Transferee Company.
iv. In case of any difference in the accounting policy between the
Transferor Company and the Transferee Company, the impact of the same
till the Appointed Date will be quantified and adjusted in the Reserves
to ensure that the financial statements of the Transferee Company
reflect the financial position on the basis of consistent accounting
policy.
v. The difference between the value of the investment in the books of
the Transferee Company for the equity and preference shares in the
Transferor Company and the amount recorded as Share Capital in the
books of the Transferor Company will be debited to Reserves.
Accordingly, the Company has debited General reserve to the extent
available i.e. Rs.1,386,966,443 and the balance ofRs. 1,362,021,042 has
been debited to the Statement of Profit and Loss.
Details of assets and liabilities acquired on amalgamation and
treatment of the difference between the net assets acquired and the
cost of investment.
Pursuant to the said scheme of amalgamation, all assets and liabilities
including intangible assets of KPIT Global Solutions Limited have got
amalgamated with KPIT Technologies Limited. Resultant excess
consideration paid towards acquisition of KPIT Global Solution
Limited's established customers and their business in JD Edward space,
customer's contracts from manufacturing vertical and market accepted
and tested JD Edwards Practice knowhow along with the market reputation
built by them over years and acceptance it enjoyed along with goodwill
and JDE practice know howwas Rs. 1,885,780,717 arising on the appointed
date.
As mentioned above, the Hon'ble High Court of Bombay has approved the
Scheme of Amalgamation of KPIT Global Solutions Limited with the
Company, vide Order dated 28 August 2014. Accordingly, the figures for
the current year include the annual figures of KPIT Global Solutions
Limited and as such are not comparable to the previous year figures.
As the effective date of amalgamation for accounting purpose is 1 April
2013, the profits aftertax of KPIT Global Solutions Limited for the
year ended 31 March 2014, have been recorded in the Company's Statement
of Profit and Loss.
7. The tax expense for the current period includes credit ofRs.
72,425,476 for matters pertaining to earlier years.
7A. The Company has spent Rs. 10,769,669 during FY 2014-15 towards
Corporate Social Responsibility.
8. Previous year's figures have been regrouped / reclassified wherever
necessary to correspond with current year's classification /
disclosure.
Mar 31, 2013
Company Overview
The Company provides software and IT enabled services to its clients.
The Company predominantly provides services in Automotive, Energy &
Utilities and Industrial Equipment Industry.The Company''s registered
office is in Pune and it has subsidiaries across the globe.Most of the
revenue is generated from the export of services.
1. The Company declares and pays dividends in Indian rupees. The
dividend proposed to be distributed to equity shareholders for the
period is Rs. 173,533,679 i.e. Rs. 0.90 per share. (Previous Year - Rs.
124,560,013/- i.e. Rs. 0.70 per share). The dividend proposed by the
Board of Directors is subject to the approval of the shareholders in
the ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive any of the remaining assets of the
company, after distribution of all preferential amounts. However, no
such preferential amount exists currently. The distribution will be in
proportion to the number of equity shares held by the shareholders.
2. As at 31st March, 2013 the Company has received an amount of Rs.
935,432 (Previous Year Rs. 1,053,845) towards share application money
for 32,898 shares (Previous Year 34,016 shares) at a premium of Rs.
869,636 (Previous Year Rs. 985,813). The share application money was
received for proposed issue under the Employee Stock Option Plan of
2004 and 2006 at fair market value. The Company has sufficient
authorized share capital to cover the allotment of these shares.
3. Contingent Liabilities and Commitments:
(i) Contingent Liabilities:
S. Particulars FY 2012-13 FY 2011-12
No.
1 Outstanding Bank Guarantees in
routine course of business 137,371,181 37,543,486
2 Corporate Guarantee provided by the
Company for loan taken by KPIT 870,228,800 818,504,000
Infosystems Inc. USA of USD
16,000,000.
3 Income tax matters (Refer (a) below) 65,387,760 23,236,507
4 VAT matters(Refer (b) below) 4,741,566 27,673,199
5 Service Tax matters (Refer (c) below) 309,605,627 NIL
a. Income tax Matters
AY 2005-2006
This relates to erstwhile KPIT Cummins Infosystems(Bangalore) Private
Ltd which has been merged with the company with effect from 1st April
2007.
The Company has filed an appeal with the Income Tax Appellate Tribunal
(ITAT),Bangalore,against an order dated December 17,2007 from Assistant
Commissioner of Income Tax for a demand of Rs. 3,055,945/- AY 2006-07
This relates to the case of erstwhile KPIT Cummins Infosystems
(Bangalore) Pvt Ltd (KPIT Bangalore). which has been merged with the
Company effective 1st April 2007.
The Company has filed an appeal on 2nd November 2011,with the Income
Tax Appellate Tribunal (ITAT),Bangalore against an order dated 28th
July,2011 from Commissioner of Income Tax (Appeals)-I,Bangalore.The
total demand raised is Rs. 5,903,204/- vide this order,which is
adjusted against refund for subsequent year i.e , A.Y.2007-08.
AY 2007-08
This relates to KPIT Cummins Infosystems Ltd.
The Company proposes to file an appeal with the Commissioner of Income
Tax (Appeals) Circle 11(1),Pune,against an order from Assistant
Commissioner of Income Tax,Circle11(1),Pune for a demand of Rs.
4,025,020/-.
AY 2008-09
This relates to the cases of erstwhile KPIT Cummins Global Business
Solutions Ltd. which has been merged with the Company effective March
1, 2011.
The Company has filed an appeal on 24th January,2013 with the Income
Tax Appellate Tribunal (ITAT) against the draft assessment order passed
by Dispute Resolution Panel, Pune for proposed demand of Rs.
20,407,386/-.
AY 2009-10
- This relates to KPIT Cummins Infosystems Ltd.
The company has received the Draft Assessment Order from Assistant
Commissioner Of Income Tax Circle 11(1) proposing an increase in the
taxable income as per normal provisions of the Income Tax Act,1961 by
Rs. 8,448,450/-.The Company has computed a reduction of Rs. 2,871,630
(tax thereon) in its MAT Credit, as a result of the said Draft
Assessment Order.
The Company proposes to file an appeal with Dispute Resolution Panel.
- This relates to the cases of erstwhile KPIT Cummins Global Business
Solutions Ltd. which has been merged with the company effective March
1, 2011.
The Company has received the Draft Assessment Order passed by Assistant
Commissioner Of Income Tax Circle11(1) order on 1st April, 2013. The
contingent liability in respect of this order is Rs. 29,124,575/- (net
of provision)
The Company proposes to file an appeal with Dispute Resolution Panel.
b. VAT
FY 2011-12
The Company has received a demand notice of Rs. 4,741,566/- from the
Deputy Commissioner of Commercial Taxes disallowing VAT input credit.
The Company has filed an appeal with the Joint Commissioner of
Commercial Taxes (Appeal) - 4 on 24th January, 2013.
c. Service Tax Case
The Company has received a show cause cum demand notice from
Commissioner of Central Excise & Service Tax, Pune I for the period
October 2006 to December 2011 demanding service tax relating to :
- Rs. 172,961,546/- towards Service Tax on the amount received by
branches from overseas clients on behalf of the Company,under the head
''Business Auxiliary Services''
- Rs. 136,644,081/- towards the amount of expenditure made in foreign
currency in respect of category II and III services.
The Company has filed an Appeal in the Mumbai Tribunal.
(ii) Commitments:
Estimated amount of contracts remaining to be executed on capital
account and not provided for:-
a. Tangible Assets - Rs. 14,396,377 (Previous Year Rs. 57,543,172/-).
b. Intangible Assets - Rs. 3,536,853(Previous Year Rs. 9,122,263/-).
(iii) Other Commitments:
As per the share purchase agreement already entered into by the company
the balance payout based on performance targets would be approximately
Rs. 1,026,540,000/-
4. Disclosure as per the requirement of section 22 of the Micro,
Small and Medium Enterprise Development Act, 2006:
a. Principal amount payable to Micro and Small Enterprises (to the
extent identified by the Company from available information) as at 31st
March, 2013 is Rs. 508,732/- (Previous Year - Rs. 378,767/-) including
unpaid amounts of Rs. 59,562/- (Previous Year - Rs. 14,442 outstanding
for more than 30 days. Estimated interest due thereon is Rs. 15,188/-
(Previous Year - Rs. 289/-).
b. Amount of payments made to suppliers beyond the appointed date
during the year is Rs. 4,370/- (Previous year - Rs. 118,128/-).
Interest paid thereon is Rs. Nil (Previous Year - Rs. Nil) and the
estimated interest due and payable thereon is Rs. 127(Previous year -
Rs. 2,363/-).
c. The amount of estimated interest accrued and remaining unpaid as at
31st March, 2013 is Rs. 15,315/-(Previous Year - Rs. 2,652/-)
d. The amount of estimated interest due and payable for the period
from 1st April, 2013 to actual date of payment or 20th April, 2013
(whichever is earlier) is Rs. 936/-.
5. (1)Details of Derivative Instruments (for hedging):
A. Cash Flow hedges: In accordance with its risk management policy and
business plan the Company has hedged its cash flows. The Company enters
into Derivative contracts to offset the foreign currency risk arising
from the amounts denominated in currencies other than the Indian rupee.
The counter party to the Company''s foreign currency contracts is
generally a bank. These contracts are entered into to hedge the foreign
currency risks of firm commitments and highly probable forecast
transactions. The Management has assessed the effectiveness of its
hedging contracts outstanding as on March 31, 2013 as required by AS-30
and accordingly the MTM loss of Rs. 240,009,938 /-(Previous year Rs.
479,380,362/-) is recognized in the Hedging Reserve. Further the
assessment of effectiveness as performed by the management of the
Company is also confirmed by an independent expert.
B. The following are the outstanding GBP/USD/EUR: INR Currency
Exchange Contracts entered into by the Company which has been
designated as Cash Flow Hedges as on March 31, 2013:
6. Details of Employee benefits as required by Accounting Standard 15
(Revised) Employee benefits are as under :
1. Defined Contribution Plan - Provident Fund
Amount recognized as an expense in the Statement of Profit and Loss in
respect of defined contribution plan is Rs. 106,946,678(Previous Year
Rs. 103,425,942/-)
2. Defined Benefit Plan
i) Actuarial gains and losses in respect of defined benefit plans are
recognized in the Statement of Profit and Loss.
ii) The defined benefit plan comprises of gratuity.
7. Segment Information:
Where a financial report contains both consolidated financial
statements and separate financial statements of the parent, segment
information needs to be presented only in case of consolidated
financial statements. Accordingly, segment information has been
provided only in the consolidated financial statements.
8. Lease Transactions:
1. Finance lease:
The Company has taken Vehicles under Finance Lease for a period ranging
from 3 to 4 years. Upon payment of all sums due towards the agreement,
the Company has the option of acquiring the Vehicles. During the lease
period, the Company can neither sell, assign, sublet, pledge, mortgage,
charge, encumber or part with possession of the assets, nor create or
allow to create any lien on the Vehicles taken on Lease.
9. Research and Development expenditure debited to the Statement of
Profit and Loss aggregating to Rs. 55,225,455/-(Previous Year Rs.
73,977,401/-) has been incurred by the Company and disclosed under
appropriate account heads.
10. Disclosure of interest in joint venture as per AS 27:
The Company has the following joint ventures as on 31st March, 2013 and
its percentage holding is given below:
11. Stock Option Plans:
1. Employee Stock Option Scheme (ESOS) - 1998 (through Employee
Welfare Trust)
The ESOS was approved by the Board of Directors of the Company on
November 23, 1998 and thereafter by the shareholders on November 30,
1998. A compensation committee comprising of independent directors of
the Company administers the ESOS Plan. Each option carries with it the
right to purchase one hundred equity share of the Company. All options
have been granted at a pre- determined rate of Rs. 2.5 per share.
2. Employee Stock Option Plan- 2004
The Board of Directors and the shareholders of the Company approved the
Employees Stock Option Plan at their meeting in August 2001 and in
September 2001, respectively. Pursuant to this approval, the Company
instituted ESOP 2004, Plan in July, 2004. The compensation committee of
the Company administers this Plan. Each option carries with it the
right to purchase one equity share of the Company.The Options have been
granted to employees of the Company and its subsidiaries at an exercise
price that is not less than the fair market value. The vesting of the
options is 33%, 33% and 34% of total options granted after end of
first, second and third year respectively from the date of grant. The
maximum exercise period is 3 years from the date of vesting.
3. Employee Stock Option Plan - 2006
The Board of Directors and the shareholders of the Company approved
another Employees Stock Option Plan at their meeting in July 2006 and
in August 2006, respectively. Pursuant to this approval, the Company
instituted ESOP 2006, Plan in October, 2006. The compensation committee
of the Company administers this Plan. Each option carries with it the
right to purchase one equity share of the Company.The Options have been
granted to employees of the Company and its subsidiaries at an exercise
price that is not less than the fair market value.The vesting of the
options is 30%, 30% and 40% of total options granted after end of
first, second and third year respectively from the date of grant. The
maximum exercise period is 3 years from the date of vesting.
12. Other Disclosures and Explanatory Notes:
1. The Board has approved a transfer of Rs. 10,000,000/- (Previous
Year Rs. 27,200,000/-) towards KPIT Cummins Infosystems Limited
Community Foundation Reserve. This Reserve would be utilized for
various community benefit schemes as may be approved by the Management.
The Board has approved a transfer of Rs. 100,000,000/- (Previous Year
Rs. 100,000,000/-) towards KPIT Cummins Technology Fund. This fund
would be utilized to drive high end innovative technology initiatives
for promoting green growth and energy conservation, which will
successively benefit the Company.
The Board has approved a transfer of Rs. 100,000,000/- (Previous Year
Rs. 100,000,000/-) towards KPIT Employees'' Welfare Fund. This Fund
would be utilized to promote welfare of its employees in various forms
such as Medical, Education, Housing, Holiday homes, Recreation
facilities, Activities related to Sports, Music Research, and Artistic
Pursuits etc.
2. a. The Company, during the year, has acquired additional 18.5%
stake in SYSTIME Global Solutions Ltd., world''s largest J D Edwards
solution provider and Oracle Platinum Partner under share purchase
agreement. Subsequently, total shareholding in the acquired Company is
76%.
b. During the FY 2012-13, the Company has acquired 5,477,889 equity
shares in Sparta Infotech India Private Limited, from its step- down
subsidiary Sparta Consulting Inc, USA. Sparta Infotech India Private
Limited has therefore become a 100% direct subsidiary of the Company.
c. Considering the financial position of the associate and as a
prudent accounting practice,the company during the year, has recognised
100% impairment on its investment in GAIA System Solution Inc amounting
to Rs. 98,151,970/-which is in line with provisions of AS 13
"Accounting for Investments".
3. The Company has received approval from Department of Scientific and
Industrial Research, Ministry of Science and Technology DSIR on 2nd
June 2011 for its Research and Development (R&D) facility at its
premise in Hinjewadi.
(a) Revolo
Revolo is an intelligent, plug-in, parallel hybrid fuel saving solution
which can be installed on wide range of four wheelers with engine
capacity varying from 700cc to 3000cc (both gasoline & diesel engines).
The solution brings in important benefits to end consumer in terms of
fuel efficiency improvement, emission reduction and travel cost
reduction. The product is made of sub-systems that include the battery
pack, a motor, motor controller which are controlled by intelligent
algorithms to manage engine variations and help reduce fuel cost and
cut down on harmful greenhouse gas emissions from IC engine powered
vehicles. The product has been extensively and successfully tested at
national laboratories. Revolo is the most frugal hybrid solution
available at a much lower cost point.
(b) Infotainment
In-Vehicle Infotainment (or sometimes also referred to In-Car
Infotainment in case of passenger cars), is hardware and software
system installed into a car (or even other forms of transportation), to
provide audio / video entertainment together with convenience features
such as hands-free telephony, navigation, vehicle information display
and vehicle function control e.g. climate control. It includes
traditional tuner or radio as well as next generation digital radio and
video broadcast services. The user can bring audio / video content into
car via CD, USB or smartphones. Infotainment systems also include an
option of Rear Seat Entertainment for the rear seat passengers. Future
infotainment systems will also provide Internet connectivity to bring
in content from social network services and Internet based
entertainment sources (e.g. Internet radio) into the car.
4. During the FY 2011-12, the Company had transferred its diversified
financial services (DFS) division in entirety to Infrasoft Technologies
under the business transfer agreement. During the FY 2012-13, Company
has accounted Rs. 54,700,000/- as income based on milestone achieved
per terms of agreement.
During the FY 2011 -12, the company had entered into a business
partnership with Sankalp Semiconductor Pvt Ltd for the Hardware
Business of Semiconductor Solutions Group (SSG). This agreement has
been further amended in the FY 2012-13. The Company has accounted
income of Rs. 24,970,113/- in FY 2012-13 as per the terms of amended
agreement.
5. The Company has allotted 12,960,000 shares to Van Dyck, CX Partners
Fund 1 Limited and AAJV Investment Trust at a price of Rs.125 per
equity share on a preferential basis.The proceeds of the issue will be
utilized for bona fide business purposes and for funding the growth and
operations of the Company and/or its subsidiaries, to meet the working
capital and capital expenditure requirements of the Company/
subsidiaries and for investment in subsidiaries and joint ventures.
There has been no utilization of the proceeds till 31st March 2013. The
unutilized balance of Rs. 1,620,000,000/-is invested in Mutual Funds.
6. KPIT Cummins Infosystems (Bangalore) Pvt. Ltd. (KPIT Bangalore) was
merged with KPIT Cummins Infosystems Limited (the Company) in the year
2007. Employees of erstwhile KPIT Bangalore who were on the rolls at
31st March, 2007 (being the date of merger) were also transferred to
the Company. The gratuity liability of these employees was funded with
Kotak Mahindra Old Mutual Life Insurance Limited. This fund balance of
Rs. 13,362,848/- (Previous Year Rs. 12,244,464/-) is also transferred
to the Company and is disclosed separately under "Other Non-Current
Assets."
7. Final Dividend
The Company allotted 368,182 equity shares against exercise of options
by the employees, after 31st March, 2012 and before the Book closure
for the Annual General Meeting held for FY 2011-12. The Company paid
dividend of Rs. 258,030 on these shares and tax on dividend of Rs.
42,621 as approved by the shareholders at the Annual General Meeting
held on 27th July 2012.
8. Previous year''s figures have been regrouped / reclassified
wherever necessary to correspond with current year''s classification /
disclosure.
Mar 31, 2012
Company Overview
The Company provides software and IT enabled services to its clients.
The Company predominantly provides services in Automotive, Energy &
Utilities and Industrial Equipment Industry. Most of the revenue is
generated from the export of services.
(i) 11,582,682 equity shares (Previous Year 5,675,903) of Rs 2 each are
reserved for issuance towards outstanding employee stock option granted
(Refer Note 44)
(ii) Aggregate number of equity shares allotted as fully paid-up by way
of bonus shares for the period of five years immediately preceding the
Balance Sheet date - 88,971,438 (Previous Year 44,181,453)
(iii) Also refer note 26
1. The Company declares and pays dividends in Indian rupees. The
dividend purpose to be distributed to equity share holders for the
period is Rs 124,560,013/- i.e. Rs 0.70 per share. (Previous Year - Rs
61,504,390/- i.e. Rs 0.70 per share). The dividend proposed by the Board
of Directors is subject to the approval of the shareholders in the
ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive any of the remaining assets of the
Company, after distribution of all preferential amounts. However, no
such preferential amount exists currently. The distribution will be in
proportion to the number of equity shares held by the shareholders.
2. As at 31st March, 2012 the Company has received an amount of Rs
1,053,845 (Previous Year Rs 2,609,762) towards share application money
for 34,016 shares (Previous Year 41,385 shares) at a premium of Rs
985,813 (Previous Year Rs 2,526,992). The share application money was
received for proposed issue under the Employee Stock Option Plan of
2004 and 2006 at fair market value. The Company has sufficient
authorized share capital to cover the allotment of these shares.
3. Contingent Liabilities and Commitments:
(i) Contingent Liabilities:
Sr. Particulars FY 2011-12 FY 2010-12
No.
1 Outstanding Bank Guarantees in routine
course of business 37,543,486 32,297,391
2 Corporate Guarantee provided by the
Company for loan taken by KPIT 818,504,000 -
Infosystems Inc. USA of USD 16,000,000
3 Income tax matters (Refer (a) below) 23,236,507 14,398,014
4 VAT matters (Refer (b) below) 27,673,199 27,673,199
a. Income Tax Cases
1. AY 2006-07
- This relates to the cases of erstwhile KPIT Cummins Infosystems
(Bangalore) Private Limited (KPIT Bangalore) which has been merged with
the Company effective April 1, 2007.
The Company has filed an appeal with the Income Tax Appellate Tribunal
(ITAT), Bangalore, against an Order dated 28th July, 2011 from
Commissioner of Income Tax (Appeals) - I, Bangalore. The total demand
raised is Rs 5,903,204/- vide this order, which is adjusted against
refund for subsequent year, i.e. A.Y. 2007-08.
2. AY 2007-08
- This relates to the cases of erstwhile KPIT Cummins Global Business
Solutions Ltd. which has been merged with the Company effective March
1, 2011.
An appeal relating to income tax dues amounting to Rs 2,699,576 has been
filed before Commissioner of Income Tax (Appeals) - I, Pune.
The Company and its advisers believe that the above matters would be
decided in favor by higher appellate authorities.
3. AY 2008-09
- This relates to the cases of erstwhile KPIT Cummins Global Business
Solutions Ltd. which has been merged with the Company effective March
1, 2011.
The Company has filed an appeal with Dispute Resolution Panel on 30th
January, 2012 against the draft assessment order passed by Assistant
Commissioner of Income Tax, Circle 11(1), Pune for proposed demand of Rs
13,977,983.
- This relates to KPIT Cummins Infosystems Limited
The Company has filed an appeal with Dispute Resolution Panel on 30th
January, 2012 against the draft assessment order passed by Assistant
Commissioner of Income Tax, Circle 11(1), Pune, for proposed demand of
Rs 655,744/-
a. VAT Matters
1. FY 2005-06 to FY 2008-09
During the previous year, the Company had filed an appeal with the
Joint Commissioner of Commercial Taxes - (Appeals) - 2 against an order
received from the Asst. Commissioner of Commercial Taxes dated December
28, 2010. The demand raised vide this order is Rs 18,261,484/-. The
Company has paid the entire amount towards this demand.
2. FY 2009-10
During the previous year, the Company had filed a writ petition in
Karnataka High Court against the notice received u/s 39(1) of KVAt Act,
2003 from Deputy Commissioner of Commercial Taxes (DCCT) dated February
23, 2011. The demand raised vide this notice is Rs 9,411,715/-.
During the current year, High Court has reviewed the petition and has
directed DCCT to pass a revised order taking into consideration the
favorable decision by the Divisional Bench of Karnataka High Court in
case of Sasken Communication Technologies Ltd.
The order from DCCT is awaited.
The Company and its advisors believe that the above matters would be
decided in favor of the Company considering the Karnataka High
Court's decision on a similar matter.
(ii) Commitments:
Estimated amount of contracts remaining to be executed on capital
account and not provided for:-
a. Tangible Assets - Rs 57,543,172/- (Previous Year Rs 19,586,026/-).
b. Intangible Assets - Rs 9,122,263/- (Previous Year Rs 4,555,716/-).
(iii) Other Commitments:
The company, during the year, has acquired 57.5% stake in Systime
Global Solutions Pvt. Ltd. As per the share purchase agreement, the
Company has to make a payment of Rs 405,000,000/- towards fixed
consideration in the year 2012-13 and a maximum additional
consideration based on performance targets of Rs 959,040,000/- in the
subsequent years for acquisition of the balance stake.
4. Disclosure as per the requirement of section 22 of the Micro,
Small and Medium Enterprise Development Act, 2006:
a. Principal amount payable to Micro and Small Enterprises (to the
extent identified by the Company from available information) as at 31st
March, 2012 is Rs 378,767/- (Previous Year - Rs 321,895/-) including
unpaid amounts of Rs 14,442/- (Previous Year - Rs Nil) outstanding for
more than 30 days. Estimated interest due thereon is Rs 289/- (Previous
Year - Rs Nil).
b. Amount of payments made to suppliers beyond 30 days during the year
is Rs 118,128/- (Previous year - Rs Nil). Interest paid thereon is Rs Nil
(Previous Year - Rs Nil) and the estimated interest due and payable
thereon is Rs 2,363/- (Previous year - Rs Nil).
c. The amount of estimated interest accrued and remaining unpaid as at
31st March, 2012 is Rs 2,652/-. (Previous Year - Rs Nil)
d. The amount of estimated interest due and payable for the period
from 1st April, 2012 to actual date of payment or 20th April, 2012
(whichever is earlier) is Rs 144/-.
5. (1) Details of Derivative Instruments (for hedging)
A) Cash Flow hedges: In accordance with its risk management policy and
business plan the Company has hedged its cash flows. The Company enters
into Derivative contracts to offset the foreign currency risk arising
from the amounts denominated in currencies other than the Indian rupee.
The counter party to the Company's foreign currency contracts is
generally a bank. These contracts are entered into to hedge the foreign
currency risks of firm commitments and highly probable forecast
transactions. The Management has assessed the effectiveness of its
hedging contracts outstanding as on March 31, 2012 as required by AS-30
and accordingly the MTM loss of Rs 479,380,362/- (Previous year Rs
136,241,095) is recognized in the Hedging Reserve. Further the
assessment of effectiveness as performed by the management of the
Company is also confirmed by an independent expert.
6. Details of Employee benefits as required by Accounting Standard 15
(Revised) Employee benefits are as under:
1. Defined Contribution Plan - Provident Fund
Amount recognized as an expense in the Statement of Profit and Loss in
respect of defined contribution plan is Rs 103,425,942/- (Previous year
Rs 88,977,353/-)
2. Defined Benefit Plan
i) Actuarial gains and losses in respect of defined benefit plans are
recognized in the statement of profit and loss.
ii) The defined benefit plans comprises of gratuity.
Gratuity is a benefit to an employee based on 15 days last drawn salary
for each completed year of service.
7. Segment Information:
Where a financial report contains both consolidated financial
statements and separate financial statements of the parent, segment
information needs to be presented only in case of consolidated
financial statements. Accordingly, segment information has been
provided only in the consolidated financial statements.
8. Lease Transactions:
1) Finance lease:
The Company has taken Vehicles under Finance Lease for a period ranging
from 3 to 4 years. Upon payment of all sums due towards the agreement,
the Company has the option of acquiring the Vehicles. During the lease
period, the Company can neither sell, assign, sublet, pledge, mortgage,
charge, encumber or part with possession of the assets, nor create or
allow to create any lien on the Vehicles taken on Lease.
b) The Company has issued 88,971,438 bonus shares in the ratio of 1:1
in its Extra Ordinary General Meeting held on 1st March, 2012. These
bonus shares were allotted on 15th March, 2012. The EPS figures for the
previous year have been reworked to give effect of this allotment of
bonus shares, as required by the Accounting Standard (AS) 20 -
"Earning per share".
9. Research and Development expenditure debited to the Statement of
Profit and Loss aggregating to Rs 73,977,401/- (Previous Year Rs
132,347,834/-) has been incurred by the Company and disclosed under
appropriate account heads.
10. Stock Option Plans
1. Employee Stock Option Scheme (ESOS) - 1998 (through Employee
Welfare Trust)
The ESOS was approved by the Board of Directors of the Company on
November 23, 1998 and thereafter by the shareholders on November 30,
1998. A compensation committee comprising of independent directors of
the Company administers the ESOS Plan. Each option carries with it the
right to purchase one hundred equity share of the Company. All options
have been granted at a pre- determined rate of Rs 2.5 per share.
2. Employee Stock Option Plan - 2004
The Board of Directors and the shareholders of the Company approved the
Employees Stock Option Plan at their meeting in August 2001 and in
September 2001, respectively. Pursuant to this approval, the Company
instituted ESOP 2004, Plan in July, 2004. The compensation committee of
the Company administers this Plan. Each option carries with it the
right to purchase one equity share of the Company. The Options have
been granted to employees of the Company and its subsidiaries at an
exercise price that is not less than the fair market value. The vesting
of the options is 33%, 33% and 34% of total options granted after end
of first, second and third year respectively from the date of grant.
The maximum exercise period is 3 years from the date of vesting.
3. Employee Stock Option Plan - 2006
The Board of Directors and the shareholders of the Company approved
another Employees Stock Option Plan at their meeting in July 2006 and
in August 2006, respectively. Pursuant to this approval, the Company
instituted ESOP 2006, Plan in October, 2006. The compensation committee
of the Company administers this Plan. Each option carries with it the
right to purchase one equity share of the Company. The Options have
been granted to employees of the Company and its subsidiaries at an
exercise price that is not less than the fair market value. The vesting
of the options is 30%, 30% and 40% of total options granted after end
of first, second and third year respectively from the date of grant.
The maximum exercise period is 3 years from the date of vesting.
11. Other Disclosures and Explanatory Notes
1. The Board has approved a transfer of Rs 27,200,000/- (Previous Year
Rs 10,000,000/-) towards KPIT Cummins Infosystems Limited Community
Foundation Reserve. This Reserve would be utilized for various
community benefit schemes as may be approved by the Management.
The Board has approved a transfer of Rs 100,000,000/- (Previous Year Rs
100,000,000/-) towards KPIT Cummins Technology Fund. This fund would be
utilized to drive high end innovative technology initiatives for
promoting green growth and energy conservation, which will successively
benefit the Company.
The Board has approved a transfer of Rs 100,000,000/- (Previous Year Rs
100,000,000/-) towards KPIT Employees' Welfare Fund. This Fund would
be utilized to promote welfare of its employees in various forms such
as Medical, Education, Housing, Holiday homes, Recreation facilities,
Activities related to Sports, Music Research, Artistic Pursuits etc.
2. The Company, during the year, has acquired 57.5% stake in SYSTIME
Global Solutions Pvt. Ltd. SYSTIME Global Solutions is one of the
world's largest JDEdwards solution provider and Oracle Platinum
partner.
3. The Company, during the year, has acquired 20% stake in share
capital of GAIA Systems Solutions Inc.; Japan on 23rd March, 2012. The
acquisition is mainly for developing new customers in Japan.
4. The Company, during the year, has incorporated two new subsidiaries
namely KPIT Infosystems Netherlands B.V. on 16th March, 2012 and KPIT
Infosystem (Brasil) Servicos De Tecnologia E Participacoes Ltda.,
Brazil on 6th March 2012. The acquisition is mainly for developing new
customers in the respective countries.
5. The Company has transferred its diversified financial services
(DFS) division in entirety to Infrasoft Technologies under the business
transfer agreement. This transfer has been done in second quarter of
the current financial year. Under this agreement, the Company has
agreed to transfer its existing DFS customer contracts along with
corresponding account management and the price agreed is based on
milestones spread over up to next three to four quarters. The Company
has accounted Rs 59,985,000/- as income in the current year based on
the milestones achieved / terms of the agreement.
6. During the year the Company has entered into a business partnership
with Sankalp Semiconductor Pvt. Ltd. for the Hardware Business of
Semiconductor Solutions Group (SSG). This agreement has been entered
into in last quarter of the current financial year. Under this
agreement, the Company has agreed to transfer all its existing
Employees and customer contracts along with corresponding account
management related to the Hardware Business of SSG. The purchase
consideration for this is in the form of cash and stocks of Sankalp
Semiconductor Pvt. Ltd., based on the milestones achieved/terms of the
agreement. The Company has thus accounted Rs 40,466,233/- as income in
the current year.
Sankalp is a key player for Analog Mixed Signal services and solutions
specializing in end-to-end solutions for IOs, analog and mixed signal
chip design/layout. This association will make it one of the largest
practices in hardware design with best competence in Analog and Mixed
Signal design (AMS) area.
7. Final Dividend
The Company allotted 188,295 equity shares against exercise of options
by the employees, after 31st March, 2011 and before the Book closure
for the Annual General Meeting held for FY 2010-11.The Company paid
dividend of Rs 134,410/- on these shares and tax on dividend of Rs
21,804/- as approved by the shareholders at the Annual General Meeting
held on July 8, 2011.
8. During the FY 2009, the Company had acquired the Mechanical
Engineering Design Services (MEDS) business of Harita TVS
E-Technologies. This acquisition had helped in strengthening the
Company's portfolio of Automotive-embedded and Mechanical Engineering
services. The MEDS service has now been fully integrated with the
Company's Automotive Business and it has been carved out as a key
practice area as part of Company's Auto & Engineering (A&E) Strategic
Business Unit.
Similarly, during the FY 2011, the Company had taken over business
assets of Nilson Technology including the Intellectual Property (IP)
for Vehicle Tracking system. This offering has now been integrated with
the Company's Integrated Enterprise Solutions (IES) and Auto &
Engineering (A&E) Strategic Business Unit.
With these integrations, it is not possible to report the value for the
practices as separate businesses. Further these practices have not been
generating the expected Profit After Tax (PAT) as per the initial
business plan during their acquisitions. Hence as a prudent accounting
practice, the Company has recognized impairment on the balance goodwill
of Rs 35,836,288/-
9. KPIT Cummins Infosystems (Bangalore) Pvt. Ltd. (KPIT Bangalore) was
merged with KPIT Cummins Infosystems Limited (the Company) in the year
2007. Employees of erstwhile KPIT Bangalore who were on the rolls at
31st March, 2007 (being the date of merger) were also transferred to
the Company. The gratuity liability of these employees was funded with
Kotak Mahindra Old Mutual Life Insurance Limited. This fund balance of
Rs 12,244,464/- (Previous Year Rs 9,602,558/-) is also transferred to
the Company and is disclosed separately under "Other Non-Current
Assets".
10. The Revised Schedule VI has become effective from 1st April, 2011
for the preparation of financial statements. This has significantly
impacted the disclosure and presentation made in the financial
statements. Previous year's figures have been regrouped/reclassified
wherever necessary to correspond with current year's
classification/disclosure.
Mar 31, 2011
1.0 Contingent Liabilities
Sr. Particulars FY 2010-11 FY 2009-10
No.
1. Outstanding Bank Guarantees in routine
course of business 32,297,391 8,839,799
2. Income tax matters not acknowledged as
debt (Refer 2.8 (a) below) 14,398,014 11,698,438
3. VAT matters not acknowledged as debt
(Refer 2.8 (b) below) 27,673,199 Nil
4. Service tax matters not acknowledged
as debt Nil 49,927,768
a) Income Tax Cases
These relate to the cases of erstwhile KPIT Cummins Infosystems
(Bangalore) Private Limited (KPIT Bangalore) which has been merged with
the Company effective April 1, 2007
AY 2006-07
The Company has filed an appeal with the Commissioner of Income Tax
(Appeals) - I, Bengaluru against an Order dated December 26, 2008
passed by the Asst. Commissioner of Income Tax Circle 11(5), Bengaluru.
The total demand raised is Rs. 5,903,204/- vide this order, which is
adjusted against refund for subsequent year, i.e. A.Y. 2007-08.
AY 2007-08
The Company has filed an appeal with Commissioner of Income Tax
(Appeals) - I, Bengaluru pursuant to an Order dated December 21, 2009
passed by the Asst Commissioner of Income Tax Circle 11 (5), Bengaluru.
The demand raised on KPIT Bangalore vide this order is Rs. 5,795,234/-.
KPIT Bangalore has made a payment of Rs. 2,354,124/- towards this
demand during the year ended March 31, 2010.
This relates to the cases of erstwhile KPIT Cummins Global Business
Solutions Ltd. which has been merged with the Company effective March
1, 2011 (Refer Note No. 4.2 below). AY 2007-08
An appeal relating to income tax dues amounting to Rs. 2,699,576 has
been filed before Commissioner of Income Tax (Appeals)-1 , Pune.
The Company and its advisers believe that the above matters would be
decided in favour by higher appellate authorities.
b) VAT Matters
FY 2005-06 to FY 2008-09
During the current financial year, the Company has filed an appeal with
the Joint Commissioner of Commercial Taxes - (Appeals)-2 against the
order received from the Asst. Commissioner of Commercial Taxes dated
December 28, 2010. The demand raised vide this order is Rs.
18,261,484/-. The Company has paid Rs. 9,130,742/- towards this demand,
and has obtained stay for the balance amount against Bank Guarantee.
FY 2009-10
During the current financial year, the Company has filed a writ
petition in Karnataka High Court against the notice received u/s 39(1)
of KVAT Act, 2003 from Deputy Commissioner of Commercial Taxes dated
February 23, 2011. The demand raised vide this notice is Rs.
9,411,715/-.
The Company and its advisers believe that the above matters would be
decided in favour by higher appellate authorities.
2.11 Stock Option Plans
1. Employee Stock Option Scheme (ESOS) Ã 1998 (through Employee
Welfare Trust)
The ESOS was approved by the Board of Directors of the Company on
November 23, 1998 and thereafter by the shareholders on November 30,
1998 and is for issue of 18,000 Options representing 1,800,000 equity
shares of the Company. A compensation committee comprising of
independent directors of the Company administers the ESOS Plan. All
options have been granted at a pre-determined rate of Rs. 5 per share.
2. Employee Stock Option Plan à 2004
The Board of Directors and the shareholders of the Company approved the
Employees Stock Option Plan for grant of 5,163,800 options convertible
into 5,163,800 equity shares, at their meeting in August 2001 and in
September 2001, respectively. Pursuant to this approval, the Company
instituted ESOP 2004, Plan in July, 2004. The compensation committee of
the Company administers this Plan. The Options have been granted to
employees of the Company and its subsidiaries at an exercise price that
is not less than the fair market value.
3. Employee Stock Option Plan à 2006
The Board of Directors and the shareholders of the Company approved
another Employees Stock Option Plan for grant of 5,000,000 options
convertible into 5,000,000 equity shares, at their meeting in July 2006
and in August 2006, respectively. Pursuant to this approval, the
Company instituted ESOP 2006, Plan in October, 2006. The compensation
committee of the Company administers this Plan. The Options have been
granted to employees of the Company and its subsidiaries at an exercise
price that is not less than the fair market value.
Personnel expenditure includes Rs. 374,984/- (Previous Year: Rs.
16,684,594/-) being the amortization of intrinsic value for the year
ending March 31, 2011.
2.12 Advances recoverable in cash or in kind or for value to be
received is net of provision for doubtful advances of Rs. 4,000,000/-
(Previous year Rs. 11,800,000/-).
2.13 Debtors include on account of unbilled revenue aggregating to Rs.
34,889,441/- (Previous year Rs. 35,849,669/-).
2.14 Quantitative details: The Company is engaged in software
development and IT enabled services for various clients based in
different geographies. The production and sale of such software cannot
be expressed in any generic unit. Therefore it is not possible to give
the quantitative details of sales and certain information as required
under paragraphs 3, 4C and 4D of part II of schedule VI to the
Companies Act, 1956.
3.1 (ii) Cash Flow hedges
A) In accordance with its risk management policy and business plan the
Company has hedged its cash flows. The Company enters into Derivative
contracts to offset the foreign currency risk arising from the amounts
denominated in currencies other than the Indian rupee. The counter
party to the Companys foreign currency contracts is generally a bank.
These contracts are entered into to hedge the foreign currency risks of
firm commitments and highly probable forecast transactions. The
Management has assessed the effectiveness of its hedging contracts
outstanding as on March 31, 2011 as required by AS-30 and accordingly
the MTM loss of X 136,241,095/-(Previous year X 226,688,046) is
recognized in the Hedging Reserve. Further the assessment of
effectiveness as performed by the management of the Company is also
confirmed by an independent expert.
3.4 Segment Information:
Where a financial report contains both consolidated financial
statements and separate financial statements of the parent, segment
information needs to be presented only in case of consolidated
financial statements. Accordingly, segment information has been
provided only in the consolidated financial statements.
3.6 Lease Transactions:
Finance lease:
The Company has taken Vehicles under Finance Lease for a period ranging
from 3 to 4 years. Upon payment of all sums due towards the agreement,
the Company has the option of acquiring the Vehicles. During the lease
period, the Company can neither sell, assign, sublet, pledge, mortgage,
charge, encumber or part with possession of the assets, nor create or
allow to create any lien on the Vehicles taken on Lease.
3.9 Provisions
The details of provision and movement in each class of provision are as
follows -
1) Provision for Variable Pay
The annual salary of eligible employees comprise of a performance based
payment, for which provision is made in the books. Such amount is paid
to employees on the basis of employees performance and additional
criteria as decided by the management.
4. Other Disclosures and Explanatory Notes
4.1 The Board has approved a transfer of Rs. 10,000,000/- towards KPIT
Cummins Infosystems Limited Community Foundation Reserve. This Reserve
would be utilized for various community benefit schemes as may be
approved by the Management.
The Board has approved a transfer of Rs. 100,000,000 towards KPIT
Cummins Technology Fund. This fund would be utilized to drive high end
innovative technology initiatives for promoting green growth and energy
conservation, which will successively benefit the Company.
The Board has approved a transfer of Rs. 100,000,000 towards KPIT
Employees Welfare Fund. This Fund would be utilized to promote welfare
of its employees in various forms such as Medical, Education, Housing,
Holiday homes, Recreation facilities, Activities related to Sports,
Music Research, Artistic Pursuits etc.
4.2 The Honble High Court of Bombay approved the Scheme of
Amalgamation of KPIT Infosystems Central Europe Sp. z.o.o., Poland
(ÃKPIT Poland) and KPIT Cummins Global Business Solutions Limited
(ÃKPIT GBS) with the Company on January 28, 2011. The Scheme of
Amalgamation became effective on March 1, 2011 being the date when the
certified copies of the High Court order sanctioning the scheme was
filed with the Registrar of Companies, Maharashtra Pune.
- KPIT Cummins Global Business Solutions Limited (KPIT GBS) was
engaged in BPO activity. Consolidation of the operations of KPIT GBS
with the Company was aimed at improving operational efficiencies.
- KPIT Infosystems Central Europe Sp. Z.o.o., Poland (KPIT Poland)
was engaged as near shore centre of excellence for European Market to
facilitate the customer work. The major customer since has merged with
another company, an already existing customer of KPIT and was serviced
and supported from India. Remaining operations were not commercially
viable to run as a Company
- In line with Clause 1.8 of the Scheme, the appointed date of merger
of KPIT Poland and KPIT GBS with the Company is April 1, 2010.
- This amalgamation is considered in the books of account as per
Accounting Standard (AS) 14 "Accounting for Amalgamationà under pooling
of interest method.
- In line with Clause 4 of the Scheme, with effect from the Appointed
Date, the whole of the undertaking of KPIT Poland and KPIT GBS
comprising of all properties and assets, debts, liabilities, contingent
liabilities etc. be transferred to the Company. In line with Clause
11.1 of the Scheme, all assets and liabilities (including reserves) be
recorded by the Company at the respective book values with effect from
the Appointed Date.
- In line with Clause 11.3 of the Scheme, investments in share of KPIT
Poland shall be adjusted against share capital of KPIT Poland. In line
with Clause 11.4 of the Scheme, investments in share of KPIT GBS shall
be adjusted against share capital of KPIT GBS and difference if any
shall be adjusted against Securities Premium of the Company.
- There are no shares and consideration exchanged with either of the
Transferor companies as both the companies were wholly owned
subsidiaries of the Company.
4.3 Warhol Limited (Warhol) (an affiliate of Chrys Capital V LLC) is a
Mauritius based, Foreign Institutional Investor. Warhol was issued
77,58,621 equity shares on preferential basis for an aggregate
consideration of X 11,250 lakhs, in terms of the Special Resolution
passed by the shareholders of the Company in the Extra-Ordinary General
Meeting held on February 8, 2011. The Equity shares of face value of X
2/- each were issued at a premium of X 143/- for cash. The proceeds of
the issue will be utilized for bona fide business purposes and for
funding the growth and operations of the Company and/or its
subsidiaries, to meet the working capital and capital expenditure
requirements of the Company/subsidiaries and for investment in
subsidiaries and joint ventures. The shares were allotted to Warhol on
February 17, 2011. Warhol currently holds approximately 8.83% of the
paid up share capital of the Company.
There has been no utilization of the proceeds till March 31, 2011. The
unutilized balance of X 11,250 lakhs is lying in deposits with Banks.
4.4 The Company has been granted permission to set up SEZ in Pune on
December 2, 2010.
4.5 a) During the year, the Company had taken over substantial part of
the Supply Chain Management Business of 7 Hills Global Consulting
Private Limited and Seven Hills Business Solutions Limited vide its
business transfer agreement dated October 9, 2010 which has resulted in
Goodwill of Rs. 11,625,000/- Goodwill on acquisition is being amortized
over a period of three years.
The business transfer agreement also involves payment of contingent
consideration which is based on the achievement of the performance
targets set forth in the agreement over the performance period ending
on December 31, 2011. As per the agreement, the total consideration
including the initial consideration shall not exceed an amount of Rs.
50,000,000/-
b) During the year, the Company has taken over business assets of
Nilson Technology vide its asset transfer agreement dated February 14,
2011 which has resulted in goodwill of Rs. 25,000,000/-. Goodwill on
acquisition is being amortized over a period of three years.
The goodwill of Rs. 25,000,000 represents the fixed consideration. The
asset transfer agreement also involves payment of contingent
consideration i.e. Earn Out Payment not exceeding Rs. 46,500,000/-. The
payment of contingent consideration is based on the achievement of the
performance targets set forth in the agreement over the performance
period which commences on January 1, 2011 and ending on December 31,
2013.
4.6 Subsidiaries/Joint Venture
The Company entered into 50:50 Joint-Venture agreement with Bharat
Forge Limited during the current year. Pursuant to the joint venture
agreement, a joint venture company in the name of Impact Automotive
Solutions Private Limited has been incorporated. Capital raised by both
the partners in this Joint Venture is Rs. 60,100,000/-
4.7 Increase in Authorized Equity Share Capital:
The Company increased its Authorized Equity Share Capital from Rs. 30
crores to Rs. 75 crores vide resolution passed by Postal Ballot dated
January 14, 2011.
4.8 Final Dividend
The Company allotted 280,705 equity shares against exercise of options
by the employees, after March 31, 2010 and before the Book closure for
the Annual General Meeting held for FY 2009-10.The Company paid
dividend of Rs. 199,215/- on these shares and tax on dividend of X
33,087/- as approved by the shareholders at the Annual General Meeting
held on July 16, 2010
Figures for the current year are not comparable with that of the
previous year due to merger of KPIT Infosystems Central Europe Sp.
Z.o.o., Poland and KPIT Cummins Global Business Solutions Limited with
the Company.
The Previous years figures have been regrouped/rearranged, wherever
necessary, to conform to the current years classification.
Mar 31, 2010
Company Overview
The Company, along with its wholly-owned subsidiaries in the USA, UK,
Poland, Germany, France, India and branches at Japan, Singapore and
South Africa provides software services and IT enabled services to its
clients. The Company predominantly provides services in Manufacturing
and Financial services sectors. Most of the revenue is generated from
the exports of services.
1.0 Contingent Liabilities
a) The Company has outstanding bank guarantees in the routine course of
business worth Rs. 8,839,799/- (PY Rs. 7,275,500/-)
b) The Company had received a show cause notice from DGCEI Bangalore
during the year 2006-07 for non-payment of service tax on account of
payments made to its subsidiaries based outside India for rendering
services outside India up to the year ended March 31, 2006. The revenue
authorities have classified the services as that of a Commission
Agent falling under the category of Business Auxiliary Services and
quantified the liability at Rs. 49,927,768/- (Previous Year Rs.
49,927,768/-).The Company has received a stay order dated January 30,
2009 on this case; wherein Customs, Excise & Service Tax Appellate
Tribunal ("CESTAT") Bangalore has granted full waiver of the balance
amount payable till the disposal of appeal.
Management including its tax advisors believe that the services can not
be classified as those of a Commission Agent and more over since the
services were rendered outside India there will not be any service tax
implications. No tax expense have been accrued in the financial
statements as management believes that the ultimate outcome of this
proceeding will not have any material adverse effect on the Companys
financial position and results of operations.
c) The Company has received a show cause notice from Jt. Commissioner
of Customs, Bangalore for removal of bonded goods without payment of
Customs duty of Rs. 804,934/-.
The Company and its advisers believe that the matter would be decided
in its favor by higher appellate authorities.
d) Income Tax Cases
These relate to the cases of erstwhile KPIT Cummins Infosystems
(Bangalore) Private Limited (KPIT Bangalore) which has been merged with
the Company effective April 1, 2007.
AY 2006-07
The Company has filed an appeal with the Commissioner of Income Tax
(Appeals) - I, Bangalore against an Order dated December 26, 2008
passed by the Asst. Commissioner of Income Tax Circle 11(5), Bangalore.
The total demand raised is Rs. 5,903,204/- vide this order, which is
adjusted against refund for subsequent year, i.e. AY 2007-08.
AY 2007-08
The Company has filed an appeal with Commissioner of Income Tax
(Appeals) -I, Bangalore pursuant to an Order dated December 21, 2009
passed by the Asst. Commissioner of Income Tax Circle 11 (5),
Bangalore. The demand raised on KPIT Bangalore vide this order is Rs.
57,95,234/-. KPIT Bangalore has made a payment of Rs. 2,354,124/-
towards this demand during the year ended March 31, 2010.
The Company and its advisers believe that the matter would be decided
in favor by higher appellate authorities.
1.1 Stock Option Plans
1. Employee Stock Option Plan - 1998 (through Employee Welfare Trust)
The ESOP was approved by the Board of Directors of the Company on
November 23, 1998 and thereafter by the shareholders on November
30,1998 and is for issue of 18,000 Options representing 1,800,000
equity shares of the Company. A compensation committee comprising of
Independent Directors of the Company administers the ESOS Plan. All
options have been granted at a pre-determined rate of Rs. 5 per share.
2. Employee Stock Option Plan - 2004
The Board of Directors and the shareholders of the Company approved the
Employees Stock Option Plan for grant of 5,163,800 options convertible
into 5,163,800 equity shares, at their meeting in August 2001 and in
September 2001, respectively. Pursuant to this approval, the Company
instituted ESOP 2004 Plan in July, 2004. The compensation committee of
the Company administers this
3. Employee Stock Option Plan - 2006
The Board of Directors and the shareholders of the Company approved
another Employees Stock Option Plan for grant of 5,000,000 options
convertible into 5,000,000 equity shares, at their meeting in July 2006
and in August 2006, respectively. Pursuant to this approval, the
Company instituted ESOP 2006, Plan in October, 2006. The compensation
committee of the Company administers this Plan. The Options have been
granted to employees of the Company and its subsidiaries at an exercise
price that is not less than the fair market value.
1.2 Advances recoverable in cash or in kind or for value to be
received is net of provision for doubtful advances of Rs.11,800,000/-
(Previous year Rs. Nil).
1.3 Debtors include on account of unbilled revenue aggregating to Rs.
35,849,669/- (Previous year Rs. 42,497,138/-).
1.4 Quantitative details: The Company is engaged in software
development and Information Technology Application work for various
clients based in different geographies. The production and sale of such
software cannot be expressed in any generic unit. Therefore it is not
possible to give the quantitative details of sales and certain
information as required under paragraphs 3, 4C and 4D of Part II of
Schedule VI to the Companies Act, 1956.
2.0 (ii) Cash Flow hedges (Disclosure as required by AS-30 "Financial
Instruments: Recognition and Measurements".
A) In accordance with its risk management policy and business plan the
Company has hedged its cash flows. The Company enters into Derivative
contracts to offset the foreign currency risk arising from the amounts
denominated in currencies other than the Indian rupee. The counter
party to the Companys foreign currency contracts is generally a bank.
These contracts are entered into to hedge the foreign currency risks of
firm commitments and highly probable forecasted transactions. The
Management has assessed the effectiveness of its hedging contracts
outstanding as on March 31, 2010 as required byAS-30 and accordingly
the MTM loss of Rs. 226,688,046/-(Previous year Rs. 1,631,303,249) is
recognized in the Hedging Reserve. Further the assessment of
effectiveness as performed by the management of the Company is also
confirmed by an independent expert.
2.1 Retirement Benefits
The disclosures as per the revised Accounting Standard 15 on "Employee
Benefits", (AS 15) issued by the Institute of Chartered Accountants of
India are as follows::
2.2 Segment Information:
Accounting Standard 17 Segment Reporting issued by the Institute of
Chartered Accountants of India prescribes that where a financial report
contains both consolidated financial statements and separate financial
statements of the parent, segment information need to be presented only
in case of consolidated financial statement. Accordingly, segment
information has been provided only in consolidated financial statement.
2.3 Lease Transactions:
Finance lease:
The Company has taken Vehicles under Finance Lease for a period ranging
from 3 to 4 years. Upon payment of all sums due towards the agreement,
the Company has the option of acquiring the Vehicles. During the lease
period, the Company can neither sell, assign, sublet, pledge, mortgage,
charge, encumber or part with possession of the assets, nor create or
allow to create any lien on the Vehicles taken on Lease.
2.4 Earnings per share:
Basic earnings per share is computed by dividing the net profit after
tax by the weighted number of equity shares outstanding during the
period. Diluted earnings per share is computed by dividing the net
profit after tax by the weighted number of equity shares considered for
deriving basic earning per share and also the weighted average number
of equity shares that could have been issued upon conversion of
dilutive potential equity shares. The diluted potential equity shares
are adjusted for the proceeds receivable had the shares been actually
issued at fair value which is the average market value of the
outstanding shares.
2.5 Provisions
The details of provision and movement in each class of provision
required by Accounting Standard 29 on Provisions, Contingent
Liabilities and Contingent Assets are as follows:
1) Provision for Variable Pay
The annual salary of eligible employees comprise of a performance based
payment, for which provision is made in the books.
While providing for such amount, the Company relies on the past
experience as regards to the actual payments.
Such amount is paid to employees on the basis of employees performance
and additional criteria as decided by the management.
3. Other Disclosures and Explanatory Notes
3.1 The Board has approved a transfer of Rs. 10,000,000/- towards KPIT
Cummins Infosystems Limited Community Foundation Reserve. This Reserve
would be utilized for various community benefit schemes as may be
approved by the Management.
3.2 The Board has approved the grant for loan to Employee Welfare Trust
upto Rs. 250,000,000/- to enable the Trust to carry out welfare
activities as laid down in the Trust deed for Employees. During the
current year, Rs. 179,500,000/- was paid to the Trust in various
tranches towards this loan.
3.3 Subsidiaries
The Company, through its wholly-owned subsidiary, KPIT Infosystems
Ltd., UK, acquired the remaining 40% share in KPIT Infosystems GmbH,
Germany. Consequently the Companys interest in KPIT Infosystems GmbH,
Germany has increased to 100%.
The Company, through its wholly-owned subsidiary, KPIT Infosystems
Inc., USA, acquired the remaining 10% shares in KPIT Infosystems Inc.
(SolvCentral.Com), USA. Consequently the Companys interest in KPIT
Infosystems Inc. (SolvCentral.Com), USA has increased to 100%.
On November 13, 2009, the Company, through its wholly-owned subsidiary,
KPIT Infosystems Inc., USA, has acquired 100% shares of Sparta
Consulting Inc., USA.
On September 18, 2009, KPIT Cummins Infosystems (BA) Inc., USA, a 100%
subsidiary of the Company, added on amalgamation of KPIT Cummins
Infosystems (Bangalore) Pvt. Ltd., has been voluntarily liquidated.
3.4 The previous years figures have been regrouped/rearranged,
wherever necessary, to conform to the current years classification.
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