Notes to Accounts of Persistent Systems Ltd.

Mar 31, 2025

o. Provisions

A provision is recognised when the Company has a present obligation as a result of past event; it is probable that
an outflow of resources embodying economic benefits will be required to settle the obligation, in respect of which
a reliable estimate can be made. Provisions are determined based on the best estimate of the amount required to
settle the obligation at the reporting date. If the effect of time value of money is material, provisions are discounted
using a current pre-tax rate that reflects the risks specific to the liability. These estimates are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.

p. Contingent liabilities and commitments

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the
occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a
present obligation that is not recognised because it is not probable that an outflow of resources will be required to
settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot
be recognised because it cannot be measured reliably. Contingent assets are neither recognised nor disclosed in
financial statements.

q. Share based payments

Employees Employees of the Company receive remuneration in the form of share based payment transactions,
whereby employees render services as consideration for equity instruments granted (equity-settled transactions).

The cost of equity-settled transactions is determined by the fair value of the options at the date of the grant and
recognised as employee compensation cost over the vesting period. The cumulative expense recognised for
equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting
period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest.

At the end of each reporting period, the entity revises its estimates of the number of options that are expected
to vest best on the non-market vesting and service conditions. It recognises the impact of the revisions to the
original estimates, if any, in profit or loss with a corresponding adjustment to equity.

The expense or credit recognised in the statement of profit and loss for the period represents the movement in
cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits
expense with a corresponding increase in stock options outstanding reserve in equity. In case of the employee
stock option schemes having a graded vesting schedule, each vesting tranche having different vesting period has
been considered as a separate option grant and accounted for accordingly.

Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the
expense as if the terms had not been modified, if the original terms of the award are met. An additional expense
is recognised for any modification that increases the total fair value of the share-based payment transaction or is
otherwise beneficial to the employee as measured at the date of modification.

The employee stock option expenses in respect of the employees of the subsidiary are charged to the
respective subsidiary.

r. Equity

Ordinary shares are classified as equity share capital. Incremental costs directly attributable to the issuance of new
ordinary shares, share options and buyback are recognised as a deduction from equity, net of any tax effects.

s. Dividend

Final dividend on shares are recorded as a liability on the date of approval by the shareholders and interim
dividends are recorded as a liability on the date of declaration by the Company’s Board of Directors.

t. Business Combination

The acquisition method of accounting is used to recognised for all business combinations, when the acquired
set of activities and assets meet the definition of business and control is transferred regardless of whether equity
instruments or other assets are acquired. The acquisition cost is measured as the aggregate of the consideration
transferred and the amount of any non-controlling interest in the acquiree at fair value.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with
limited exceptions, measured initially at their fair values at the acquisition date. The Company recognises any
non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the
non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.

Acquisition-related costs are expensed as incurred.

The excess of the:

• Consideration transferred;

• Amount of any non-controlling interest in the acquired business, and

• Acquisition-date fair value of any previous equity interest in the acquired business over the fair value of the
net identifiable assets acquired is recognised as goodwill. If those amounts are less than the fair value of the
net identifiable assets of the business acquired, the difference is recognised in other comprehensive income
and accumulated in equity as capital reserve provided there is clear evidence of the underlying reasons for
classifying the business combination as a bargain purchase. In other cases, the bargain purchase is recognised
directly in equity as capital reserve.

Business combinations between entities under common control is accounted for using pooling of interest method.
The identity of the reserves is preserved as they appear in the standalone financial statements of the Company
in the same form in which they appeared in the financial statements of the acquired entity. The difference, if
any, between the consideration and the amount of share capital of the acquired entity is transferred to business
transfer reserve.

u. Goodwill / Gain on bargain purchase

Goodwill represents the cost of business acquisition in excess of the Company’s interest in the net fair value of
identifiable assets, liabilities and contingent liabilities of the acquiree. When the net fair value of the identifiable
assets, liabilities and contingent liabilities acquired exceeds the cost of business acquisition, a gain is recognised
in the other comprehensive income as gain on bargain purchase. Subsequent to initial recognition, Goodwill is
measured at cost less accumulated impairment losses.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of
the Company’s cash-generating units that are expected to benefit from the combination, irrespective of whether
other assets or liabilities of the acquiree are assigned to those units.

A cash generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is
less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset
in the unit. Any impairment loss for goodwill is recognised in profit or loss. An impairment loss recognised for
goodwill is not reversed in subsequent periods.

Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed
of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when
determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the
relative values of the disposed operation and the portion of the cash-generating unit retained.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the combination occurs, the Company reports provisional amounts for the items for which the accounting
is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period, or
additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances
that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. These
adjustments are called as measurement period adjustments. The measurement period does not exceed one year
from the acquisition date.

v. Cashflow statement

Cash flows are reported using the indirect method, whereby profit for the year is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments
and item of income or expenses associated with investing or financing cash flows. The cash flows from operating,
investing and financing activities of the Company are segregated. The Company considers all highly liquid
investments that are readily convertible to known amounts of cash to be cash equivalents..

The Company’s objective for capital management is to maximise shareholder value, safeguard business continuity and
support the growth of the Company. The Company determines the capital requirement based on annual operating plans and
longterm and other strategic investment plans. The funding requirements are met through equity, borrowings and operating
cash flows generated. The Company is not subject to any externally imposed capital requirements.

The Board of Directors of the Company at its meeting held on January 20, 2024, recommended the sub-division/ split of 1
(One) fully paid-up equity share having a face value of ?10 each into 2 (Two) fully paid-up equity shares having a face value of
? 5 each by alteration of capital clause of the Memorandum of Association (MOA) subject to the approval of Members of the
Company. The Members of the Company approved the sub-division / Split of 1 (One) fully paid up equity share of ? 10 each
into 2 (Two) fully paid up equity shares of ? 5 each through a postal ballot with a requisite majority and the voting results were
declared on March 11, 2024.

Further, the Board of Directors at its meeting held on March 13, 2024, approved the Record Date for Split / Sub-division of
Equity Shares as April 1, 2024.

Consequent to this, the authorised share capital comprises 400 Million equity shares having a face value of ? 5 each
aggregating to ? 2,000 Million, and the paid-up capital comprises 154.05 Million equity shares having a face value of ? 5
each aggregating to ? 770.25 Million. The impact of this has been considered in the financial statement.

b. Terms / rights attached to equity shares

The Company has only one class of equity shares having a par value of ?5 per share. Each holder of equity shares is
entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the
Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

The Board of Directors of Persistent Systems Limited, at its meeting held on January 22, 2025, declared an interim
dividend of ? 20 per equity share of face value of ? 5 each for the Financial Year 2024-25.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive 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. However, no such prefrential amounts exist currently.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and
other relevant factors, such as supply and demand in the employment market.

The significant actuarial assumptions for the determination of the defined benefit obligations are discount rate and increase
in compensation levels. The sensitivity analysis below have been determined based on reasonably possible changes of the
respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

Every percentage point increase / decrease in discount rate will change the gratuity benefit obligation to approximately
? 1,638.21 Million / ? 2,069.91 Million (previous year: ? 1,427.69 Million / ? 1,809.91 million) respectively.

Every percentage point increase / decrease in rate of increase in compensation levels will change the gratuity benefit obligation to
approximately ? 1,999.38 Million / ? 1,696.70 Million (previous year: ? 1,740.00 Million / ? 1,485.70 million) respectively.

Sensitivity analysis for each significant actuarial assumptions namely Discount rate and Salary assumptions have been shown
in the table above at the end of the reporting period, showing how the defined benefit obligation would have been affected
by the changes.

The Mortality and Attrition does not have a significant impact on the Liability, hence are not considered a significant actuarial
assumption for the purpose of Sensitivity analysis.

The assumptions used in preparing the sensitivity analysis is
Discount rate at 1% and -1%

Salary assumption at 1 % and -1%

The method used to calculate the liability in these scenarios is by keeping all the other parameters and the data same as in the
base liability calculation except the parameters to be stressed.

There is no change in the method from the previous period and the points /percentage by which the assumptions are
stressed are same to that in the previous year.

Risk Characteristics of the Defined Benefit Plan
Investment risk

For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair
value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount
rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount
rate during the inter-valuation period.

Market Risk (Interest Rate)

Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. The discount
rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan
benefits & vice versa. This assumption depends on the yields on the corporate / government bonds and hence the valuation
of liability is exposed to fluctuations in the yields as at the valuation date.

Longevity Risk

The impact of longevity risk will depend on whether the benefits are paid before retirement age or after. Typically for the
benefits paid on or before the retirement age, the longevity risk is not very material.

b) Defined contribution plan - Superannuation Fund

The Company contributed ? 89.39 Million and ? 89.42 Million to superannuation fund during the years ended March
31, 2025 and March 31, 2024 respectively and the same is recognised in the Statement of profit and loss under the head
employee benefit expenses.

c) Defined contribution plan - Provident Fund

Company has certain defined contribution plans. Contributions are made to provident fund for employees @ 12% of Basic
salary as per regulation. The contributions are made to registered provident fund administered by the government. The
obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive
obligation. The expense recognised during the period towards defined contribution plan (provident fund) is ? 1,418.48 Million
(Previous year ? 1,383.67 million).

* Fair value hierarchy

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either
observable or unobservable and consists of the following three levels:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Inputs are 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 are not based on observable market data (unobservable inputs). Fair values are determined in whole or in
part using a valuation model based on assumptions that are neither supported by prices from observable current market
transactions in the same instrument nor are they based on available market data. In respect of equity instruments of unlisted
companies, in limited circumstances, insufficient more recent information is available to measure fair value, or if there are
a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range. The
Company recognises such equity instruments at cost, which is considered as appropriate estimate of fair value.

i) The fair value of the quoted bonds and mutual funds are based on price quotations at reporting date.

ii) Mark to market on forward covers and embedded derivative instruments is based on forward exchange rates at the end of
reporting period and discounted using G-sec rate plus applicable spread.

iii) For equity instruments of unlisted companies, in limited circumstances, insufficient more recent information is available
to measure fair value, or if there are a wide range of possible fair value measurements and cost represents the best
estimate of fair value within that range. The Company recognises such equity instruments at cost, which is considered as
appropriate estimate of fair value.

iv) The fair value of contingent consideration related to the acquisition of subsidiaries/ business unit is estimated using

a present value technique. The ? 228.11 Million fair value is estimated by probability-weighting the estimated future cash
outflows adjusting for risk and discounting at incremental borrowing rate for unsecured liabilities at the reporting date.

The probability-weighted cash outflows before discounting are ? 292.40 Million and reflect management’s estimate of
a 90% probability that the contract’s target level will be achieved. The effects on the fair value of risk and uncertainty in
the future cash flows are dealt with by adjusting the estimated cash flows rather than adjusting the discount rate.

Financial risk factors and risk management objectives

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s
focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial
performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial
instruments to mitigate foreign exchange related risk exposures. The use of financial derivatives is governed by the
Company’s policies approved by the Board of Directors which provide written principles on foreign exchange hedging. The
Company’s exposure to credit risk is mainly for receivables that are overdue for more than 90 days. The Credit Task Force is
responsible for credit risk management. Investment of excess liquidity is governed by the Investment policy of the Company.
The Company’s Risk Management Committee monitors risks and policies implemented to mitigate risk exposures

Market risk

Foreign currency risk

The Company operates globally with its operations spread across various geographies and consequently the Company is
exposed to foreign exchange risk. Around 70% to 90% of the Company’s foreign currency exposure is in USD. The Company
holds plain vanilla forward contracts against expected receivables in USD to mitigate the risk of changes in exchange rates.

The following table analyses unhedged foreign currency risk from financial instruments as of March 31, 2025.

Foreign currency sensitivity analysis

For the year ended March 31, 2025 and March 31, 2024 every percentage point depreciation / appreciation in the exchange
rate between the Indian rupee and foreign currencies on foreign currency exposure would affect the Company’s profit before
tax margin (PBT) by approximately 0.21% and 0.31% respectively.

Sensitivity analysis is computed based on the changes in the income and expenses in foreign currency upon conversion into
functional currency, due to exchange rate fluctuations between the previous reporting period and the current reporting period.

Derivative financial instruments

The Company holds derivative foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign
currency exposures. These derivative financial instruments are valued based on quoted prices for similar assets in active markets
or inputs that are directly or indirectly observable in the marketplace. The Company has designated foreign exchange forward
contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast sales transactions.

Credit Risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure
to the credit risk at the reporting date is primarily from trade receivables amounting to ? 17,030.88 Million and ? 17,090.40
Million as at March 31, 2025 and March 31, 2024, respectively. Trade receivables are typically unsecured and are derived
from revenue earned from customers primarily located in the United States. Credit risk is managed by the Company by Credit
Task Force through credit approvals, establishing credit limits and continuously monitoring the recovery status of customers
to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the
Company uses expected credit loss model to assess the impairment loss. The Company uses a provisioning policy approved
by the Board of Directors to compute the expected credit loss allowance for trade receivables. The policy takes into account
available external and internal credit risk factors and the Company’s historical experience for customers.

Credit risk is perceived mainly in case of receivables overdue for more than 90 days. The following table gives details of risk
concentration in respect of percentage of receivables overdue for more than 90 days:

Credit risk on cash and cash equivalents is limited as the Company generally invests in deposits with banks and financial
institutions with high credit ratings. Investments primarily include investment in debts mutual funds, quoted bonds.

Liquidity risk

The Company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from
operations. The Company has no outstanding bank borrowings. The investment of surplus funds is governed by the
Company’s investment policy approved by the Board of Directors. The Company believes that the working capital is sufficient
to meet its current fund requirements. Accordingly, no liquidity risk is perceived.

As at March 31, 2025, the Company had a working capital of ? 31,733.58 Million including cash and cash equivalents and
current fixed deposits (excluding interest accrued) of ? 6,623.84 Million and current investments of ? 3,335.01 million.

As at March 31, 2024, the Company had a working capital of ? 23,752.07 Million including cash and cash equivalents and
current fixed deposits (excluding interest accrued) of ? 6,398.30 Million and current investments of ? 2,623.06 million.

The Company’s objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy
capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The
Company’s capital management aims to ensure that it maintains a stable capital structure with the focus on total equity to
uphold investor, creditor, and customer confidence and to ensure future development of its business. The Company sets the
amount of capital required on the basis of annual business and long-term operating plans which include capital and other
strategic investments. The funding requirements are met through a mixture of equity, internal fund generation and current and
non-current borrowings.

Notes:

* Amount of remuneration represents remuneration paid through Persistent Systems Limited only.

# The remuneration to the key managerial personnel does not include the provisions made for gratuity, long service awards
and leave benefits, as they are determined on an actuarial basis for the Company as a whole.

Terms and conditions of transactions with related parties:

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length
transactions. All other outstanding balances at the year-end are unsecured, interest free and settlement occurs in cash. There
have guarantees and letters of comfort provided for subsidiaries. For the year ended 31 March 2025, the Company has not
recorded any impairment of receivables relating to amounts owed by related parties (31 March 2024: Nil).

*No contractual life is defined in the scheme.

**The options under Scheme XI, which is a performance based ESOP scheme will vest after 1-4 years in proportion of credit
points earned by the employees every quarter based on performance. The maximum options which can be granted under this
scheme are 2,800,000.

***The options under Scheme XII, ESOP scheme would vest after 1 year. The maximum options which are granted under this
scheme are 100 per employee.

The vesting period and conditions of the above ESOP schemes is as follows:

All the above ESOP schemes have service condition (other than Grant Category 1 of scheme XI which Is based on
performance criteria), which require the employee to complete a specified period of service, as a vesting condition. The
vesting pattern of various schemes has been provided below:

45. The Company has deposits of ? 408.88 Million (previous year: ? 430.00 Million) with the financial institutions viz.
Infrastructure Leasing & Financial Services Ltd. (IL&FS) and IL&FS Financial Services Ltd. (referred to as “IL&FS Group”)
as on the balance sheet date. These were due for maturity from January 2019 to June 2019. In view of the uncertainty
prevailing with respect to recovery of outstanding balances from IL&FS Group, Management of the Company has
fully provided for these deposits along with interest accrued thereon till the date the deposits had become
doubtful of recovery.

During the year the Company has received ? 21.12 Million from the IL&FS Group and the Management is hopeful
of recovery of balance amount with a time lag. The Company continues to monitor developments in the matter and is
committed to take steps including legal action that may be necessary to ensure full recovery of the said deposits.

46. The Company has been sanctioned a working capital limit in excess of ? 50.00 Million by banks and/or financial
institutions based on the security of current assets. The quarterly returns/statements, in respect of the working capital
limits have been filed by the Company with such banks and/or financial institutions and such returns/statements are in
agreement with the books of account of the Company for the respective periods which were subject to audit, except for
the following:

44. Other statutory information

a. The Company has not been declared a willful defaulter by any bank or financial institution or other lender.

b. The Company does not have any transactions with the companies struck off under section 248 of the Companies Act, 2013.

c. The Company does not have any charges or satisfaction yet to be registered with Registrar of Companies beyond the
statutory period.

d. The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with
Companies (Restriction on number of Layers) Rules, 2017

e. The Company does not have any 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).

f. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

g. There are no proceeding initiated or pending against the Company for holding any benami property under the Benami
Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

*The difference is on account of exclusion of certain amounts while submitting the details of quarterly statements to the bank

basis discussions with the bank.

47. The Company has not advanced / loaned / invested funds to any entities, including foreign entities (Intermediaries), with
the understanding that the Intermediary shall directly or indirectly lend or invest in other entities by or on behalf of the
Company (Ultimate Beneficiaries). Further, the Company has not provided any guarantee, security to or on behalf of the
Ultimate Beneficiaries.

48. The Company has not received funds from any entities, including foreign entities (Funding Parties), with the
understanding that the Company shall directly or indirectly, lend or invest in other persons or entities by or on behalf of
the Funding Party (Ultimate Beneficiaries). Further, the Company has not provided any guarantee, security on behalf of
the Ultimate Beneficiaries.

49. The Hon’ble National Company Law Tribunal, Mumbai (“NCLT”) has sanctioned the merger of M/s. CAPIOT Software
Private Limited (the Wholly Owned Subsidiary - Transferor Company) into Persistent Systems Limited (the Holding
Company - Transferee Company) through absorption, as per its order dated April 9, 2025. The Company received the
order on April 11, 2025. Further, the said Order will be effective upon submission of its Certified True Copy dated April 21,
2025, to the Registrar of Companies, Pune for updating their records. The financial impact of this merger will be reflected
in the Company’s financial statements for the period following its submission to the ROC.

50. M/s. Arrka Infosec Private Limited, India (a private company incorporated under the Companies Act, 1956) has become
a wholly owned subsidiary of Persistent Systems Limited effective from October 28, 2024, upon completion of the
necessary customary closing conditions.

51. The Board of Directors of the Company at its meeting concluded on April 24, 2025 (IST), approved the proposal of
Merger of M/s. Arrka Infosec Private Limited (‘the Wholly Owned Subsidiary’) into Persistent Systems Limited (‘the
Holding Company’), subject to the receipt of necessary approvals in accordance with the provisions of the Companies
Act, 2013.

52. The Company, through a business transfer agreement dated April 13, 2024, has transferred the UK Branch’s operations to
its wholly owned subsidiary, Persistent Systems UK Limited (‘PSUK’). Under this agreement, the Company has transferred
net assets with carrying value of ? 633.97 Million in exchange for a consideration of ? 969.99 million, resulting in a gain of
? 336.02 Million from the transfer of the business undertaking.

55. During the year ended, the Company has discontinued the policy of Long-Term Service Award to employees which was
to reward employees on reaching significant milestones in terms of number of years of their service. This is in the context
of the coverage of a large number of employees under the Company’s ESOP schemes over the last few years, providing
employees an opportunity to participate in the Company’s growth and value creation. Consequently, the accumulated
provision amounting to ? 506.74 Million has been written back in the Statement of Profit and Loss, and has been reduced
from Employee Benefit Expenses.

56. During the year, the Company has internally reorganized business operations in USA. While, the overall business has
remained consistent for these customers, the reorganisation has resulted in transfer of certain customer contracts and
certain employees, from Persistent Systems, Inc.(US subsidiary) to Persistent Systems Limited (the Holding Company and
its USA branch). As result of the reorganization, the revenue and the profit for the year ended is not comparable with the
previous corresponding year.

57. The Ministry of Corporate Affairs (MCA) has issued a notification (Companies (Accounts) Amendment Rules, 2021)
which is effective from 1st April 2023, states that every company which uses accounting software for maintaining its
books of account shall use only the accounting software where there is a feature of recording audit trail of each and every
transaction, and further creating an edit log of each change made to books of account along with the date when such
changes were made and ensuring that the audit trail cannot be disabled.

The Company uses a SaaS based ERP as a primary accounting software for maintaining books of account, which has a
feature of recording audit trail edit logs facility and that has been operative throughout the financial year for the
transactions recorded in the software impacting books of account at application as well as database level.

58. The financial statements are presented in ? Million and decimal thereof except for per share information or
as otherwise stated.

59. Previous year’s figures have been regrouped where necessary to conform with the current year’s classification. The
impact of such regrouping is not material to financial statements.

For Walker Chandiok & Co LLP For and on behalf of the Board of Directors of

Chartered Accountants Persistent Systems Limited

Firm Registration No.: 001076N/N500013

Shashi Tadwalkar Dr. Anand Deshpande Sandeep Kalra Praveen Kadle

Partner Chairman and Executive Director and Independent Director

Managing Director Chief Executive Officer

Membership No.: 101797 DIN: 00005721 DIN: 02506494 DIN: 00016814

Place: USA Place: USA Place: USA Place: USA

Date: April 23, 2025 Date: April 23, 2025 Date: April 23, 2025 Date: April 23, 2025

Vinit Teredesai Amit Atre

Executive Director and Company Secretary

Chief Financial Officer

DIN: 03293917 Membership No. A20507

Place: USA Place: USA

Date: April 23, 2025 April 23, 2025

---

Mar 31, 2024

For For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the CGU or groups of CGUs, which benefit from the synergies of the acquisition. The Group internally reviews the goodwill for impairment at the operating segment level, after allocation of the goodwill to CGUs or groups of CGUs.

The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. As at March 31, 2024, the estimated recoverable amount of the CGU exceeded its carrying amount. An analysis of the sensitivity of the computation to a change in key parameters (operating margin, discount rates and long term average growth rate), based on reasonable assumptions, did not identify any probable scenario in which the recoverable amount of the CGU would decrease below its carrying amount. Operating margin and long term growth rate are in line with company’sc current opertions.

Based on testing, no impairment loss was identified during current year and previous year.

Acquired contractual rights acquired through DataGlove acquistion, having carrying amount of ? 237.13 Million and remaining amortisation period of 5 years as on March 31, 2024.

Acquired contractual rights acquired through Shree Partner acquistion, having carrying amount of ? 34.67 Million and remaining amortisation period of 4 years as on March 31, 2024.

The Company’s objective for capital management is to maximise shareholder value, safeguard business continuity and support the growth of the Company. The Company determines the capital requirement based on annual operating plans and longterm and other strategic investment plans. The funding requirements are met through equity, borrowings and operating cash flows generated. The Company is not subject to any externally imposed capital requirements.

The Board of Directors of the Company at its meeting held on January 20, 2024, recommended the sub-division / split of 1 (One) fully paid-up equity share having a face value of T10 each into 2 (Two) fully paid-up equity shares having a face value of T 5 each by alteration of capital clause of the Memorandum of Association (MOA) subject to the approval of Members of the Company. The Members of the Company approved the sub-division / Split of 1 (One) fully paid up equity share of T 10 each into 2 (Two) fully paid up equity shares of T 5 each through a postal ballot with a requisite majority and the voting results were declared on March 11, 2024.

Further, the Board of Directors at its meeting held on March 13, 2024, approved the Record Date for Split / Sub-division of Equity Shares as at April 1, 2024.

Consequent to this, the authorized share capital comprises 400 Million equity shares having a face value of T 5 each aggregating to T 2,000 Million, and the paid-up capital comprises 154.05 Million equity shares having a face value of T 5 each aggregating to T 770.25 Million. The impact of this has been considered in the financial statement.

a. Reconciliation of the shares outstanding at the beginning and at the end of the year

b. Terms / rights attached to equity shares

The Company has only one class of equity shares having a par value of T5 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

The Board of Directors of Persistent Systems Limited, at its meeting held on January 20, 2024, declared an interim dividend of T 16 per equity share of face value of T 5 each for the Financial Year 2023-24.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive 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. However, no such prefrential amounts exist currently.

Proposed dividends on equity shares are subject to approval at the annual general meeting and are not recognised as a liability as at 31 March.

Dividend per equity share disclosed in above note represents dividends declared previously, retrospectively adjusted for the April 2024 share split.

c. Aggregate number shares bought back during the period of five years immediately preceding the reporting date

In the period of five years immediately preceding March 31, 2024, the Company had purchased and extinguished a total of 7,150,000 fully paid-up equity shares of face value ? 5 each from the stock exchange by way of buyback of shares which was completed in June 27, 2019.

Disclosure of payable to vendors as defined under the “Micro, Small and Medium Enterprise Development Act, 2006” is based on the information available with the Company regarding the status of registration of such vendors under the said Act, as per the intimation received from them on requests made by the Company. There are no overdue principal amounts / interest payable amounts for delayed payments to such vendors at the Balance Sheet date. There are no delays in payment made to such suppliers during the period or for any earlier years and accordingly there is no interest paid or outstanding interest in this regard in respect of payment made during the period or on balance brought forward from previous year.

The information as required to be disclosed pursuant under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006) has been determined to the extent such parties have been identified based on the information information available with the Company.

The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognised as at the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation-related disclosures for contracts where the revenue recognised corresponds directly with the value to the customer of the entity’s performance completed to date, typically those contracts where invoicing is on time and material and unit of work-based contracts. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency. The normal credit term is 30 to 90 days.

29\ Defined benefits and contribution obligation:

a) Defined Benefits Plan - Gratuity

The Company has a defined benefit gratuity plan. Each employee is eligible for gratuity on completion of minimum five years of service at 15 days basic salary (last drawn basic salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the Balance Sheet for the respective plans.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The significant actuarial assumptions for the determination of the defined benefit obligations are discount rate and increase in compensation levels. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

Every percentage point increase / decrease in discount rate will change the gratuity benefit obligation to approximately ? 1,427.69 million / ? 1,809.91 million (previous year: ? 1,143.07 million / ? 1,439.42 million) respectively.

Every percentage point increase / decrease in rate of increase in compensation levels will change the gratuity benefit obligation to approximately ? 1,740.00 million / ? 1,485.70 million (previous year: ? 1,372.27 million / ? 1,198.85 million) respectively.

Sensitivity analysis for each significant actuarial assumptions namely Discount rate and Salary assumptions have been shown in the table above at the end of the reporting period, showing how the defined benefit obligation would have been affected by the changes.

The Mortality and Attrition does not have a significant impact on the Liability , hence are not considered a significant actuarial assumption for the purpose of Sensitivity analysis.

The assumptions used in preparing the sensitivity analysis is Discount rate at 1% and - 1%

Salary assumption at 1 % and -1%

The method used to calculate the liability in these scenarios is by keeping all the other parameters and the data same as in the base liability calculation except the parameters to be stressed.

There is no change in the method from the previous period and the points /percentage by which the assumptions are stressed are same to that in the previous year.

Expected contributions to the gratuity plan for the next annual reporting period are ? 71.41 million.

Risk Characteristics of the Defined Benefit Plan

Investment risk

For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.

Market risk (Interest rate)

Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate / government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.

Longevity risk

The impact of longevity risk will depend on whether the benefits are paid before retirement age or after. Typically for the benefits paid on or before the retirement age, the longevity risk is not very material.

b) Defined contribution plan - Superannuation Fund

The Company contributed ? 89.42 million and ? 75.66 million to superannuation fund during the years ended March 31, 2024 and March 31, 2023 respectively and the same is recognised in the Statement of profit and loss under the head employee benefit expenses.

c) Defined contribution plan - Provident Fund

The Company has certain defined contribution plans. Contributions are made to provident fund for employees @ 12% of Basic salary as per regulation. The contributions are made to registered provident fund administered by the government.

The obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards defined contribution plan (provident fund) is ? 1,383.67 million (Previous year ? 1,159.43 million).

* Fair value hierarchy

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Inputs are 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 are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. In respect of equity instruments of unlisted companies, in limited circumstances, insufficient more recent information is available to measure fair value, or if there are a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.

The Company recognises such equity instruments at cost, which is considered as appropriate estimate of fair value.

Financial risk management

Financial risk factors and risk management objectives

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors which provide written principles on foreign exchange hedging. The Company’s exposure to credit risk is mainly for receivables that are overdue for more than 90 days. The Credit Task Force is responsible for credit risk management. Investment of excess liquidity is governed by the Investment policy of the Company. The Company’s Risk Management Committee monitors risks and policies implemented to mitigate risk exposures.

Market risk

The Company operates globally with its operations spread across various geographies and consequently the Company is exposed to foreign exchange risk. Around 70% to 90% of the Company’s foreign currency exposure is in USD. The Company holds plain vanilla forward contracts against expected receivables in USD to mitigate the risk of changes in exchange rates.

Foreign currency sensitivity analysis

For the year ended March 31, 2024 and March 31, 2023 every percentage point depreciation / appreciation in the exchange rate between the Indian rupee and foreign currencies on foreign currency exposure would affect the Company’s profit before tax margin (PBT) by approximately 0.31 % and 0.32% respectively.

Sensitivity analysis is computed based on the changes in the income and expenses in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting period and the current reporting period.

Derivative financial instruments

The Company holds derivative foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. These derivative financial instruments are valued based on quoted prices for similar assets in active markets or inputs that are directly or indirectly observable in the marketplace. The Company has designated foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast sales transactions.

Credit risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to ? 17,090.40 million and ? 10,605.98

million as at March 31, 2024 and March 31, 2023, respectively. Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in the United States. Credit risk is managed by the Company by Credit Task Force through credit approvals, establishing credit limits and continuously monitoring the recovery status of customers to which the Company grants credit terms in the normal course of business. On account of the adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss. The Company uses a provisioning policy approved by the Board of Directors to compute the expected credit loss allowance for trade receivables. The policy takes into account available external and internal credit risk factors and the Company’s historical experience for customers.

Credit risk on cash and cash equivalents is limited as the Company generally invests in deposits with banks and financial institutions with high credit ratings. Investments primarily include investment in debts mutual funds, quoted bonds.

Liquidity risk

The Company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding bank borrowings. The investment of surplus funds is governed by the Company’s investment policy approved by the Board of Directors. The Company believes that the working capital is sufficient to meet its current fund requirements. Accordingly, no liquidity risk is perceived.

As at March 31, 2024, the Company had a working capital of ? 23,752.07 million including cash and cash equivalents and current fixed deposits of ? 6,398.30 million and current investments of ? 2,623.06 million.

As at March 31, 2023, the Company had a working capital of ? 16,770.29 million including cash and cash equivalents and current fixed deposits of ? 5,277.15 million and current investments of ? 1,879.66 million.

Capital management risk

The Company’s objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Company’s capital management aims to ensure that it maintains a stable capital structure with the focus on total equity to uphold investor, creditor, and customer confidence and to ensure future development of its business. The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments. The funding requirements are met through a mixture of equity, internal fund generation and current and non-current borrowings.

The company has adopted Ind AS 116, Leases; and has recognized notional interest on lease liability of ? 147.50 million under finance costs for year ended March 31, 2024 (Previous year ? 119.73 Million).

The aggregate depreciation on ROU assets has been included under depreciation and amortisation expense in the Statement of Profit and Loss. (Refer note 4.6).

* Amount of remuneration represents remuneration paid through Persistent Systems Limited only.

^A Dr. Deepak Phatak retired wef April 2, 2023. Dr Ajit Ranade has been appointed wef June 6, 2023.

$ Mr. Arvind Goel and Dr. Ambuj Goyal have been appointed wef June 7, 2022 and Mr. Dan’l Lewin has been appointed wef June 10,2022. Ms. Avani Davda has joined with effect from December 21, 2021.

** Amount of remuneration represents remuneration paid through Persistent Systems Limited only.

‘***Dr Anant Jhingran retired wef November 20, 2022 and Mr. Thomas Kendra and Mr. Guy Eiferman retired wef July 19, 2022 and Mr. Pradeep Bhargava retired wef July 19, 2022.

# The remuneration to the key managerial personnel does not include the provisions made for gratuity, long service awards and leave benefits, as they are determined on an actuarial basis for the Company as a whole.

Terms and conditions of transactions with related parties:

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. All other outstanding balances at the year-end are unsecured, interest free and settlement occurs in cash. There have guarantees and letters of comfort provided for subsidiaries. For the year ended 31 March 2024, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (31 March 2023: Nil).

Letters of comfort of USD 24.69 Million: Rs. 2,059.15 Million (March 31, 2023: 4,247.37) to bank for loans availed by subsidiary of the Company.

34\ Employees stock option plans (ESOP)

Certain information in this note relating to number of shares, options and per share/option price has been disclosed in full and is not rounded off.

The vesting period and conditions of the above ESOP schemes is as follows:

All the above ESOP schemes have service condition (other than Grant Category 1 of scheme XI which Is based on performance criteria), which require the employee to complete a specified period of service, as a vesting condition. The vesting pattern of various schemes has been provided below:

d. Effect of the employee share-based payment plans on the statement of profit and loss and on its financial position

Compensation expense arising from equity-settled employee share-based payment plans for the year ended March 31, 2024 amounted to ? 1091.75 million (Previous year ? 1360.28 million). The liability for employee stock options outstanding as at March 31, 2024 is ? 2,227.72 million (Previous year ? 2,222,02 million).

2. The fair value of the awards are estimated using the Black-Scholes Model for time and non-market performance based options.

Note: The company has done a share split of 1:2, the impact of this has been given to options granted to the employees of the company ((refer note 16(a)).

The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk-free rate of interest. Expected volatility during the expected term of the options is based on historical volatility of the observed market prices of the Company’s publicly traded equity shares and has been modelled based on historical movements in the market prices of the publicly traded equity shares during a larger period after excluding outliers to smoothen the fluctuations.

35\ Contingent liabilities a. Claims against the company not acknowledged as debt1		(In T million)
Sr. No.	As at March 31, 2024	As at March 31, 2023
1 Indirect tax matters
i. In respect to the order passed by the Learned Principal Commissioner of Service Tax, Pune, for Service tax under import of services on reverse charge basis for the Financial Year 2014-15, the Company has filed an appeal against the order passed by Learned Principal Commissioner of Service Tax, Pune with the Hon’ble Central Excise and Service Tax Appellate Tribunal (CESTAT) on September 23, 2017. The Hon’ble CESTAT decided and passed the order on January 28,2023 with the direction that the entire show cause notice passed by the Principal Commissioner of Service Tax will now be taken up for fresh adjudication and the judgments noted in the Order of the Hon’ble CESTAT and other submissions, if any, be considered while adjudicating the show cause notice. The Company has filed Appeal against the CESTAT Order with Hon’ble High Court on March 13,2023. The Company has paid T 165.58 million under protest towards the demand and the same forms part of the GST receivable balance. If the appeal filed as mentioned above results in a demand, there will be no impact on the profitability as the Company will be eligible to claim credit/refund for the amount paid.	173.78	173.78

ii. Other Pending litigations in respect of Indirect taxes.	7.77		| 8.20
2 Income tax demands disputed in appellate proceedings. b. Letter of Comfort on behalf of Subsidiaries Sr. No.	1,102.72		1,023.34 (In ? million)
	As at March 31, 2024		As at March 31, 2023
1 Letters of comfort on behalf of subsidiary ( USD 24.69 Million (Previous year : USD 51.69 Million) ) **The Company, based on independent legal opinions and judgments in favour o that the liabilities with respect to the above matters is not likely to arise and there the financial statements. 36\ Capital and other commitments		2,059.15 4,247.37 f the Company in the earlier years, believes fore, no provision is considered necessary in (In ? million) As at
		March 31, 2024	March 31, 2023
Capital commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for		359.76	158.71
Other commitments
Forward contracts		21,881.33	19,051.50

45\The Company has deposits of ? 430 million with the financial institutions viz. Infrastructure Leasing & Financial Services Ltd. (IL&FS) and IL&FS Financial Services Ltd. (referred to as “IL&FS Group”) as on the balance sheet date. These were due for maturity from January 2019 to June 2019. In view of the uncertainty prevailing with respect to recovery of outstanding balances from IL&FS Group, Management of the Company has fully provided for these deposits along with interest accrued thereon till the date the deposits had become doubtful of recovery. The Management is hopeful of recovery though with a time lag. The Company continues to monitor developments in the matter and is committed to take steps including legal action that may be necessary to ensure full recovery of the said deposits.

46\ The Company has working capital facilities from banks on the basis of security of trade receivables. The quarterly

statements of trade receivables filed by the Company with banks are in complete agreement with the books of accounts.

47\EThe Company has not advanced / loaned / invested funds to any entities, including foreign entities (Intermediaries), with the understanding that the Intermediary shall directly or indirectly lend or invest in other entities by or on behalf of the Company (Ultimate Beneficiaries). Further, the Company has not provided any guarantee, security to or on behalf of the Ultimate Beneficiaries.

48\ The Company has not received funds from any entities, including foreign entities (Funding Parties), with the

understanding that the Company shall directly or indirectly, lend or invest in other persons or entities by or on behalf of the Funding Party (Ultimate Beneficiaries). Further, the Company has not provided any guarantee, security on behalf of the Ultimate Beneficiaries.

49\ During the period Persistent Systems Limited, Australia branch has entered into business transfer agreement and

accordingly business of the Australia branch has been transfered to Persistent Systems Australia Pty Ltd with effect from October 01, 2023. Since both the entities are under common control of PSL, it falls under purview of appendix C of Ind-AS 103 accordingly accounting is done under pooling of interest method.

50\ The Board of Directors of the Company at its meeting held on January 20, 2024, approved the Scheme of Merger of Capiot Software Private Limited (Wholly Owned Subsidiary) into Persistent Systems Limited, and accordingly, an application of Merger has been filed with the National Company Law Tribunal, Mumbai (NCLT) on March 22, 2024.

51\ The Share Purchase Agreement (‘SPA’) for the transfer of the 100% shareholding of Persistent Systems UK Limited (subsidiary) from Aepona Group Limited, Ireland (subsidiary) to Persistent Systems Limited was executed on Tuesday, March 19, 2024.

52\ The Business Transfer Agreement has been executed for the transfer of the business of the UK Branch of the Company to Persistent Systems UK Limited effective from April 1, 2024.

53\ The Ministry of Corporate Affairs (MCA) has issued a notification (Companies (Accounts) Amendment Rules, 2021) which is effective from 1st April 2023, states that every company which uses accounting software for maintaining its books of account shall use only the accounting software where there is a feature of recording audit trail of each and every transaction, and further creating an edit log of each change made to books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.

The Company uses a SaaS based ERP as a primary accounting software for maintaining books of account, which has a feature of recording audit trail edit logs facility and that has been operative throughout the financial year for the transactions recorded in the software impacting books of account at application level.

The database of the accounting software is operated by a third-party software service provider. The ‘Independent Service Auditor’s Assurance Report on the Description of Controls, their Design and Operating Effectiveness’ (‘Type 2 report’ issued in accordance with ISAE 3402, Assurance Reports on Controls at a Service Organisation) includes suitability of the design and operating effectiveness of controls. However, the availability of audit trail (edit logs) are not covered in the said report.

In our view, the company’s ERP being a SaaS based software, the audit trail at the database level is not applicable.

54\ In respect of export incentives pertaining to previous periods amounting to ? 255.52 million, which have been refunded under protest with interest of ? 41.03 million, aggregating to ? 296.55 million, the Holding Company had filed an application with Directorate General of Foreign Trade (DGFT). The Company believes that its services were eligible for the export incentives and the dispute is purely an interpretation issue given the highly technical nature. With the intention of avoiding litigation and settling the dispute, the Company had applied before the Settlement Commission for settlement of the case and had offered to forego ? 296.55 million. The Company had recognized a provision of ? 296.55 million for the quarter ended 31 December 2022, which was presented as an “exceptional item” in the statement of profit and loss for that period. During the quarter, the Settlement Commission has approved the Company’s application and has settled the liability of ? 296.55 million including interest. As the amount has already been provided for in full by the Company, no further adjustment is necessary in these financial statements.

55\ The financial statements are presented in ? Million and decimal thereof except for per share information or as otherwise stated.

56\ Previous year’s figures have been regrouped where necessary to conform with the current year’s classification. The impact of such regrouping is not material to financial statements.

1

Set-off availed: The Company spent an excessive amount of INR 55.50 Million in FY 2020-21. In FY 2022-23, the Management has claimed partial set-off against this excessive CSR spend amounting to INR 23.39 Million.

The Company continues to have an amount of INR 32.11 Million available in its book for set off till the end of FY 2023-24 as it is the third (last) year from the year of excessive spend.

38\ Business Combinations

Pursuant to a share purchase agreement, the Company acquired 100% equity interest in MediaAgility India Private Limited on April 29, 2022 for a consideration of ? 971.45 Million. During the year ended March 31, 2023 the acquisition of the said business was accounted by applying the acquisition method on provisional basis in the consolidated financial statements of the Company.

During the period, the purchase price allocation was completed and the purchase price is allocated to identifiable assets

---

Mar 31, 2023

The Company’s objective for capital management is to maximise shareholder value, safeguard business continuity and support the growth of the Company. The Company determines the capital requirement based on annual operating plans and longterm and other strategic investment plans. The funding requirements are met through equity, borrowings and operating cash flows generated. The Company is not subject to any externally imposed capital requirements.

The Board of Directors of the Company at its meeting held on Wednesday, March 22, 2023, approved the issuance of 500,000 (Five Hundred Thousand only) Equity Shares of ?10 each to the PSPL ESOP Management Trust (‘ESOP Trust’) at the allotment price of ? 2,789 per Equity Share, aggregating to the total consideration of ? 1,394.50 Million and the Board has authorized the Stakeholders Relationship and ESG Committee to allot the said Equity Shares to the ESOP Trust. The ESOP Trust made the payment of the consideration on April 5, 2023, and accordingly, 500,000 (Five Hundred Thousand only) Equity Shares of ? 10 each were allotted to the ESOP Trust on April 6, 2023. Consequent to this, the paid-up share capital of the Company is increased from 76.43 Million Equity Shares to 76.93 Million Equity Shares. Listing of the 500,000 shares on the Stock Exchanges is completed.

b. Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of ?10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

The Board of Directors of Persistent Systems Limited, at its meeting held on January 18, 2023, declared an interim dividend of ? 28 per equity share of face value of ? 10 each for the Financial Year 2022-23.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive 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. However, no such prefrential amounts exist currently.

Disclosure of payable to vendors as defined under the “Micro, Small and Medium Enterprise Development Act, 2006” is based on the information available with the Company regarding the status of registration of such vendors under the said Act, as per the intimation received from them on requests made by the Company. There are no overdue principal amounts / interest payable amounts for delayed payments to such vendors at the Balance Sheet date. There are no delays in payment made to such suppliers during the period or for any earlier years and accordingly there is no interest paid or outstanding interest in this regard in respect of payment made during the period or on balance brought forward from previous year.

The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation-related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity’s performance completed to date, typically those contracts where invoicing is on time and material and unit of work-based contracts. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.

During the year, ? 3,533.05 million (Previous year ? 1,726.07 million ) of opening unbilled revenue (contract asset) has been reclassified to trade receivables upon billing to customers on completion of milestones.

During the year, the Company recognised revenue of ? 240.27 million (Previous year ? 242.33 million ) arising from opening unearned revenue (contract liability). In addition to that ? 18.04 million (Previous year: NIL) arising from opening unearned revenue has not been recognised in revenue.

In respect of the contracts wherein the transaction price is in the form of revenue share, the estimated revenue for the customer is considered based on the historical trends and management judgement with respect to customer business. The estimated revenue from these contracts included in the total revenue for the year is ? 406.35 million (Previous year ? 211.87 million ).

29\ Gratuity plan:

The Company has a defined benefit gratuity plan. Each employee is eligible for gratuity on completion of minimum five years of service at 15 days basic salary (last drawn basic salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the Balance Sheet for the respective plans.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The significant actuarial assumptions for the determination of the defined benefit obligations are discount rate and increase in compensation levels. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

Every percentage point increase / decrease in discount rate will change the gratuity benefit obligation to approximately ? 1,143.07 million / ? 1,439.42 million (previous year: ? 1,076.57 million / ? 1,309.28 million) respectively.

Every percentage point increase / decrease in rate of increase in compensation levels will change the gratuity benefit obligation to approximately ? 1,372.27 million / ? 1,198.85 million (previous year: ? 1,240.68 million / ? 1,103.98 million) respectively.

Sensitivity analysis for each significant actuarial assumptions namely Discount rate and Salary assumptions have been shown in the table above at the end of the reporting period, showing how the defined benefit obligation would have been affected by the changes.

The Mortality and Attrition does not have a significant impact on the Liability , hence are not considered a significant actuarial assumption for the purpose of Sensitivity analysis.

The assumptions used in preparing the sensitivity analysis is Discount rate at 1% and - 1%

Salary assumption at 1 % and -1%

The method used to calculate the liability in these scenarios is by keeping all the other parameters and the data same as in the base liability calculation except the parameters to be stressed.

There is no change in the method from the previous period and the points /percentage by which the assumptions are stressed are same to that in the previous year.

Superannuation Fund

The Company contributed ? 75.66 million and ? 57.63 million to superannuation fund during the years ended March 31, 2023 and March 31, 2022 respectively and the same is recognised in the Statement of profit and loss under the head employee benefit expenses.

Defined contribution plan — Provident Fund

The Company has certain defined contribution plans. Contributions are made to provident fund for employees @ 12% of Basic salary as per regulation. The contributions are made to registered provident fund administered by the government.

The obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards defined contribution plan (provident fund) is ? 1,159.43 million (Previous year ? 827.57 million).

* Fair value hierarchy

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Inputs are 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 are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. In respect of equity instruments of unlisted companies, in limited circumstances, insufficient more recent information is available to measure fair value, or if there are a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range. The Company recognises such equity instruments at cost, which is considered as appropriate estimate of fair value.

Financial risk managementFinancial risk factors and risk management objectives

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The use of financial derivatives is governed by the

Company’s policies approved by the Board of Directors which provide written principles on foreign exchange hedging. The Company’s exposure to credit risk is mainly for receivables that are overdue for more than 90 days. The Credit Task Force is responsible for credit risk management. Investment of excess liquidity is governed by the Investment policy of the Company. The Company’s Risk Management Committee monitors risks and policies implemented to mitigate risk exposures.

Market risk

The Company operates globally with its operations spread across various geographies and consequently the Company is exposed to foreign exchange risk. Around 70% to 90% of the Company’s foreign currency exposure is in USD. The Company holds plain vanilla forward contracts against expected receivables in USD to mitigate the risk of changes in exchange rates.

Foreign currency sensitivity analysis

For the year ended March 31, 2023 and March 31, 2022 every percentage point depreciation / appreciation in the exchange rate between the Indian rupee and foreign currencies on foreign currency exposure would affect the Company’s profit before tax margin (PBT) by approximately 0.32 % and 0.16% respectively.

Sensitivity analysis is computed based on the changes in the income and expenses in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting period and the current reporting period.

Derivative financial instruments

The Company holds derivative foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. These derivative financial instruments are valued based on quoted prices for similar assets in active markets or inputs that are directly or indirectly observable in the marketplace. The Company has designated foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast sales transactions.

Credit risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to ? 10,559.23 million and ? 4,511.05 million as at March 31, 2023 and March 31, 2022, respectively. Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in the United States. Credit risk is managed by the Company by Credit Task Force through credit approvals, establishing credit limits and continuously monitoring the recovery status of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss. The Company uses a provisioning policy approved by the Board of Directors to compute the expected credit loss allowance for trade receivables. The policy takes into account available external and internal credit risk factors and the Company’s historical experience for customers.

Credit risk is perceived mainly in case of receivables overdue for more than 90 days. The following table gives details of risk concentration in respect of percentage of receivables overdue for more than 90 days:

Credit risk on cash and cash equivalents is limited as the Company generally invests in deposits with banks and financial institutions with high credit ratings. Investments primarily include investment in debts mutual funds, quoted bonds.

Liquidity risk

The Company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding bank borrowings. The investment of surplus funds is governed by the Company’s investment policy approved by the Board of Directors. The Company believes that the working capital is sufficient to meet its current fund requirements. Accordingly, no liquidity risk is perceived.

As at March 31, 2023, the Company had a working capital of ? 16,765.49 million including cash and cash equivalents and current fixed deposits of ? 5,277.15 million and current investments of ? 1,879.66 million.

As at March 31, 2022, the Company had a working capital of ? 15,085.17 million including cash and cash equivalents and current fixed deposits of ? 6,419.14 million and current investments of ? 4,346.91 million.

Capital management risk

The Company’s objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Company’s capital management aims to ensure that it maintains a stable capital structure with the focus on total equity to uphold investor, creditor, and customer confidence and to ensure future development of its business. The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments. The funding requirements are met through a mixture of equity, internal fund generation and current and non-current borrowings.

The company does not face a 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.

Rental expense recorded for short-term leases was ? 103.10 million for the year ended March 31, 2023 (Previous year R73.22 million).

The company has adopted Ind AS 116, Leases; and has recognized notional interest on lease liability of ? 119.73 million under finance costs for year ended March 31, 2023 (Previous year ? 68.59 Million).

The aggregate depreciation on ROU assets has been included under depreciation and amortisation expense in the Statement of Profit and Loss. (Refer note 4.6).

i. Guarantees outstanding as at March 31, 2023: ? 835.67 Million (March 31, 2022: ? 770.78 Million).

ii. Letters of comfort of USD 51.69 Million: ? 4,247.37 Million (March 31, 2022: 4,547.40) to bank for loans availed by subsidiary of the Company.

34\ Employees stock option plans (ESOP)

Certain information in this note relating to number of shares, options and per share/option price has been disclosed in full and is not rounded off.

The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk-free rate of interest. Expected volatility during the expected term of the options is based on historical volatility of the observed market prices of the Company’s publicly traded equity shares and has been modelled based on historical movements in the market prices of the publicly traded equity shares during a larger period after excluding outliers to smoothen the fluctuations.

35\ Contingent liabilities a. Claims against the company not acknowledged as debt*		(In T million)
Sr. No.	As at March 31, 2023	As at March 31, 2022
1 Indirect tax matters
i. In respect to the order passed by the Learned Principal Commissioner of Service Tax, Pune, for Service tax under import of services on reverse charge basis for the Financial Year 2014-15, the Company has filed an appeal against the order passed by Learned Principal Commissioner of Service Tax, Pune with the Hon’ble Central Excise and Service Tax Appellate Tribunal (CESTAT) on September 23, 2017. The Hon’ble CESTAT decided and passed the order on January 28,2023 with the direction that the entire show cause notice passed by the Principal Commissioner of Service Tax will now be taken up for fresh adjudication and the judgments noted in the Order of the Hon’ble CESTAT and other submissions, if any, be considered while adjudicating the show cause notice. The Company has filed Appeal against the CESTAT Order with Hon’ble High Court on March 13,2023. The Company has paid T 165.58 million under protest towards the demand and the same forms part of the GST receivable balance. If the appeal filed as mentioned above results in a demand, there will be no impact on the profitability as the Company will be eligible to claim credit/refund for the amount paid.	173.78	173.78

Sr. No.	As at March 31, 2023	As at March 31, 2022
ii. # In respect of export incentives pertaining to previous periods amounting to f 255.52 million, which have been refunded under protest with interest of f 41.03 million, aggregating to f 296.55 million, the Company had filed an application with Directorate General of Foreign Trade (DGFT). The Company believes that its services are eligible for the export incentives and the dispute is purely an interpretation issue given the highly technical nature. However, based on consultation with subject matter specialists, this matter is likely to involve a prolonged litigation. With the intention of avoiding prolonged litigation and settling the dispute, the Company has requested the relevant authorities for settlement of the case and has submitted an application before the Settlement Commission on 29 December 2022. As part of this settlement, the Company has offered to forego f 296.55 million. While the hearing against the settlement application is awaited, the Company has accordingly recognized a provision of f 296.55 million for the quarter ended 31 December 2022. The Company''s management reasonably expects that this matter, when ultimately concluded and determined, will not have a material and adverse effect on the Company''s results of operations or financial condition. The amount recognised during the year, is presented as an “exceptional item” in the statement of profit and loss for the current period.		296.55
2 Income tax demands disputed in appellate proceedings	1,023.34	855.02

* Set-off availed: The Company spent an excessive amount of ? 55.50 Million in FY 2020-21. In FY 2022-23, the Management has claimed partial set-off against this excessive CSR spend amounting to ? 23.39 Million.

The Company continues to have an amount of ? 32.11 Million available in its book for set off till the end of FY 2023-24 as it is the third (last) year from the year of excessive spend.

38\ Business Combinations

a. During the previous year ended March 31, 2022, the Company had entered into an agreement effecting business

acquisition of Shree Infosoft Private Limited, India on November 18, 2021. The acquisition was accounted for using the acquisition method of accounting on provisional basis availing the exemption under Ind AS 103.

b. During the previous year ended March 31, 2022, the Company had entered into an agreement effecting business

acquisition of Data Glove IT Solutions Pvt. Ltd on March 1, 2022. The acquisition was accounted for using the acquisition method of accounting on provisional basis availing the exemption under Ind AS 103.

c. Pursuant to a share purchase agreement, the Company acquired 100% stake in MediaAgility India Private Limited on April 29, 2022 for a consideration of ? 971.45 Million. The acquisition of the said businesses is accounted for using the acquisition method of accounting under Ind AS 103. The Company is in the process of performing the complete exercise of purchase price allocation of assets and liabilities assumed as at the reporting date. The Company has exercised the option available under Ind AS 103, which provides the Company a period of twelve months from the acquisition date for completing the accounting of purchase price allocation on provisional basis.

45\The Company has deposits of ? 430 million with the financial institutions viz. Infrastructure Leasing & Financial Services Ltd. (IL&FS) and IL&FS Financial Services Ltd. (referred to as “IL&FS Group”) as on the balance sheet date. These were due for maturity from January 2019 to June 2019. In view of the uncertainty prevailing with respect to recovery of outstanding balances from IL&FS Group, Management of the Company has fully provided for these deposits along with interest accrued thereon till the date the deposits had become doubtful of recovery. The Management is hopeful of recovery though with a time lag. The Company continues to monitor developments in the matter and is committed to take steps including legal action that may be necessary to ensure full recovery of the said deposits.

46\ The Company has working capital facilities from banks on the basis of security of trade receivables. The quarterly

statements of trade receivables filed by the Company with banks are in complete agreement with the books of accounts.

47\ Except as stated below the Company has not advanced / loaned / invested funds to any entities, including foreign entities (Intermediaries), with the understanding that the Intermediary shall directly or indirectly lend or invest in other entities by or on behalf of the Company (Ultimate Beneficiaries). Further, the Company has not provided any guarantee, security to or on behalf of the Ultimate Beneficiaries.

b. The Company has complied with the relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and Companies Act, 2013 and the above transactions are not violative of the Prevention of Money-Laundering Act, 2002.

48\ The Company has not received funds from any entities, including foreign entities (Funding Parties), with the

understanding that the Company shall directly or indirectly, lend or invest in other persons or entities by or on behalf of the Funding Party (Ultimate Beneficiaries). Further, the Company has not provided any guarantee, security on behalf of the Ultimate Beneficiaries.

49\ The financial statements are presented in ? Million and decimal thereof except for per share information or as otherwise stated.

50\ Previous year’s figures have been regrouped where necessary to conform with the current year’s classification. The impact of such regrouping is not material to financial statements.

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Mar 31, 2022

Disclosure of payable to vendors as defined under the “Micro, Small and Medium Enterprise Development Act, 2006” is based on the information available with the Company regarding the status of registration of such vendors under the said Act, as per the intimation received from them on requests made by the Company. There are no overdue principal amounts/interest payable amounts for delayed payments to such vendors at the Balance Sheet date. There are no delays in payment made to such suppliers during the period or for any earlier years and accordingly there is no interest paid or outstanding interest in this regard in respect of payment made during the period or on balance brought forward from previous year.

The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation-related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity’s performance completed to date, typically those contracts where invoicing is on time and material and unit of work-based contracts. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.

During the year, ? 1,726.07 million (Previous year ? 1,856.43 million) of opening unbilled revenue (contract asset) has been reclassified to trade receivables upon billing to customers on completion of milestones. In addition to that, Nil (Previous year ? 113.49 million) has been reversed in to revenue from operations in current year.

During the year, the Company recognised revenue of ? 242.33 million (Previous year ? 105.56 million) arising from opening unearned revenue (contract liability).

In respect of the contracts wherein the transaction price is in the form of revenue share, the estimated revenue for the customer is considered based on the historical trends and management judgement with respect to customer business.

The estimated revenue from these contracts included in the total revenue for the year is ? 211.87 million (Previous year ? 209.30 million).

30\ Gratuity plan:

The Company has a defined benefit gratuity plan. Each employee is eligible for gratuity on completion of minimum five years of service at 15 days basic salary (last drawn basic salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the Balance Sheet for the respective plans.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The significant actuarial assumptions for the determination of the defined benefit obligations are discount rate and increase in compensation levels. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

Every percentage point increase decrease in discount rate will change the gratuity benefit obligation to approximately ? 1,076.57 million/? 1,309.28 million (previous year: ? 820.0 million/? 1,080.10 million) respectively.

Every percentage point increase / decrease in rate of increase in compensation levels will change the gratuity benefit obligation to approximately ? 1,240.68 million/? 1,103.98 million (previous year: ? 996.40 million/? 887.40 million) respectively.

Superannuation Fund

The Company contributed ? 57.63 million and ? 43.55 million to superannuation fund during the years ended March 31, 2022 and March 31, 2021 respectively and the same is recognised in the Statement of profit and loss under the head employee benefit expenses.

Defined contribution plan — Provident Fund

The Company has certain defined contribution plans. Contributions are made to provident fund for employees @ 12% of Basic salary as per regulation. The contributions are made to registered provident fund administered by the government.

The obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards defined contribution plan (provident fund) is ? 827.57 million (Previous year - ? 484.36 million).

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Inputs are 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 are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. In respect of equity instruments of unlisted companies, in limited circumstances, insufficient more recent information is available to measure fair value, or if there are a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range. The Company recognises such equity instruments at cost, which is considered as appropriate estimate of fair value.

Financial risk managementFinancial risk factors and risk management objectives

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors which provide written principles on foreign exchange hedging. The Company’s exposure to credit risk is mainly for receivables that are overdue for more than 90 days. The Credit Task Force is responsible for credit risk management. Investment of excess liquidity is governed by the Investment policy of the Company. The Company’s Risk Management Committee monitors risks and policies implemented to mitigate risk exposures.

Market risk

The Company operates globally with its operations spread across various geographies and consequently the Company is exposed to foreign exchange risk. Around 70% to 90% of the Company’s foreign currency exposure is in USD. The Company holds plain vanilla forward contracts against expected receivables in USD to mitigate the risk of changes in exchange rates.

Foreign currency sensitivity analysis

For the year ended March 31, 2022 and March 31, 2021 every percentage point depreciation/appreciation in the exchange rate between the Indian rupee and foreign currencies on foreign currency exposure would affect the Company’s profit before tax margin (PBT) by approximately 0.16 % and 0.20% respectively.

Derivative financial instruments

The Company holds derivative foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. These derivative financial instruments are valued based on quoted prices for similar assets in active markets or inputs that are directly or indirectly observable in the marketplace. The Company has designated foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast sales transactions.

Credit risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to ? 4,511.05 million and ? 3,084.55 million as at March 31, 2022 and March 31, 2021, respectively. Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in the United States. Credit risk is managed by the Company by Credit

Task Force through credit approvals, establishing credit limits and continuously monitoring the recovery status of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss. The Company uses a provisioning policy approved by the Board of Directors to compute the expected credit loss allowance for trade receivables. The policy takes into account available external and internal credit risk factors and the Company’s historical experience for customers.

Liquidity risk

The Company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding bank borrowings. The investment of surplus funds is governed by the Company’s investment policy approved by the Board of Directors. The Company believes that the working capital is sufficient to meet its current fund requirements. Accordingly, no liquidity risk is perceived.

As at March 31, 2022, the Company had a working capital of ? 15,085.17 million including cash and cash equivalents and current fixed deposits of ? 6,419.14 million and current investments of ? 4,346.91 million.

As at March 31, 2021, the Company had a working capital of ? 16,814.60 million including cash and cash equivalents and current fixed deposits of ? 7,946.77million and current investments of ? 6,374.95 million.

The company does not face a 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.

Rental expense recorded for short-term leases was T 73.22 million for the year ended March 31,2022 (Previous year T77.50 million).

The company has adopted Ind AS 116, Leases; and has recognized notional interest on lease liability of ? 68.59 million under finance costs for year ended March 31, 2022 (Previous year ? 38.09 Million).

The aggregate depreciation on ROU assets has been included under depreciation and amortisation expense in the Statement of Profit and Loss. (Refer note 5.6)

Notes

* Mr. Sandeep Kalra, Executive Director and Unit President was appointed as the Chief Executive Officer (‘CEO’) of the Company with effect from October 23, 2020. Amount of remuneration represents remuneration paid through Persistent Systems Limited only.

@ Amount of remuneration for Mr. Christopher O’ Connor represents remuneration paid through Persistent Systems Limited only. He has resigned wef August 9, 2020.

$ Dr. Mukund Deshpande and Mrs. Chitra Buzruk and have resigned w.e.f. Apr 28, 2020 and May 29, 2020 respectively.

** Mr. Arul Deshpande has joined with effect from March 8, 2021. Amount of remuneration represents remuneration paid through Persistent Systems Limited only.

*** Ms. Avani Davda has joined with effect from December 21, 2021.

# The remuneration to the key managerial personnel does not include the provisions made for gratuity, long service awards and leave benefits, as they are determined on an actuarial basis for the Company as a whole.

@ Klisma e-Services Private Limited (‘Klisma’), an Associate of the Company has been dissolved w.e.f. August 10, 2021 vide dissolution order passed by the Hon’ble National Company Law Tribunal, Mumbai Bench. These balances were fully provided.

iv. Gurantee given on behalf of subsidiary

i. Guarantees outstanding as at March 31, 2022: ? 770.78 Million (March 31, 2021: ? 1,109.08 Million).

ii. Letters of comfort of USD 60 Million: ? 4,547.40 Million (March 31, 2021: Nil) to bank for loans availed by subsidiary of the Company.

35\ Employees stock option plans (ESOP)

Certain information in this note relating to number of shares, options and per share/option price has been disclosed in full and is not rounded off.

The vesting period and conditions of the above ESOP schemes is as follows:

All the above ESOP schemes have service condition (other than scheme XI which Is based on performance criteria), which require the employee to complete a specified period of service, as a vesting condition. The vesting pattern of various schemes has been provided below:

The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk-free rate of interest. Expected volatility during the expected term of the options is based on historical volatility of the observed market prices of the Company’s publicly traded equity shares and has been modelled based on historical movements in the market prices of the publicly traded equity shares during a larger period to smoothen the fluctuations.

39\ Business Combinationa. Shree Infosoft Pvt. Ltd

1\ On November 18, 2021 the Company acquired business of implementing and maintaining innovative cloud, infrastructure, data, and AI/ML solutions from Shree Infosft Pvt. Ltd, India (‘Shree Infosoft’). After the acquisition of business, the Company does not hold any equity interest in Shree Infosoft. The acquisition will strengthen the Company’s presence in innovative cloud, infrastructure and solutions in artificial intelligence and machine learning.

Its acquisiton will help the Company meet the growing needs of its clients and it also add a new point of presence in NCR, India, additional industry capabilities.

2\ The acquisition of the said businesses is accounted for using the acquisition method of accounting under Ind AS 103. The Company is in the process of performing the complete exercise of purchase price allocation of assets and liabilities assumed as at the reporting date. The Company has exercised the option available under Ind AS 103, which provides The Company a period of twelve months from the acquisition date for completing the accounting of purchase price allocation on provisional basis.

The fair value of amount of consideration paid/payable recognised on provisional basis is ? 108.71 million.

3\ Based on provisional purchase price allocation, the Company has recognised Property, Plant and Equipment amounting to ? 1.97 Million and provisional intangible assets represented by contractual rights amounting to ? 85 Million and goodwill amounting to ? 21.74 Million.

b. Data Glove IT Solutions Private Limited

1\ On March 1, 2022 the Company acquired business from Data Glove IT Solutions Private Ltd. which comprise of Microsoft Cloud Modernization Services Partnership with Gold level competencies in Azure Cloud Platform, Data Center, Application Development and Data Analytics, Application Integration. After the acquisition of business, the Company does not hold any equity interest in Data Glove IT Solutions Private Ltd. This acquisition will help Persistent enhance its partnership and expand expertise in Azure-based digital transformation, enabling us to capture a larger share of this high growth market. This acquisition also broadens the company’s delivery capabilities with highly skilled talent, establishing a new nearshore delivery center in Costa Rica and expanding its presence in the US and India.

2\ The acquisition of the said businesses is accounted for using the acquisition method of accounting under Ind AS 103. The Company is in the process of performing the complete exercise of purchase price allocation of assets and liabilities assumed as at the reporting date. The Company has exercised the option available under Ind AS 103, which provides The Company a period of twelve months from the acquisition date for completing the accounting of purchase price allocation on provisional basis.

The fair value of amount of consideration paid/payable recognised on provisional basis is ? 520.16 Million.

3\ Based on provisional purchase price allocation, the Company has recognised provisional intangible assets represented by contractual rights amounting to ? 420.31 Million and goodwill amounting to ? 99.85 Million.

46\ The Company has deposits of ? 430 million with the financial institutions viz. Infrastructure Leasing & Financial Services Ltd. (IL&FS) and IL&FS Financial Services Ltd. (referred to as “IL&FS Group”) as on the balance sheet date. These were due for maturity from January 2019 to June 2019. In view of the uncertainty prevailing with respect to recovery of outstanding balances from IL&FS Group, Management of the Company has fully provided for these deposits along with interest accrued thereon till the date the deposits had become doubtful of recovery. The Management is hopeful of recovery though with a time lag. The Company continues to monitor developments in the matter and is committed to take steps including legal action that may be necessary to ensure full recovery of the said deposits.

47\ The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the company towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on November 13, 2020, and has invited suggestions from stakeholders which are under active consideration by the Ministry. The Company will assess the impact and its evaluation once the subject rules are notified and will give appropriate impact in its financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.

48\ The financial statements are presented in ? Million and decimal thereof except for per share information or as otherwise stated.

49\ Previous year’s figures have been regrouped where necessary to conform with the current year’s classification.

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Mar 31, 2019

1. Nature of operations

Persistent Systems Limited (the “Company”) is a public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956 (the “Act”). The shares of the Company are listed on Bombay Stock Exchange and National Stock Exchange. The Company is a global company specializing in software products, services and technology innovation. The Company offers complete product life cycle services.

2. Basis of preparation

The financial statements of the Company have been prepared on an accrual basis and under the historical cost convention except for certain financial instruments and equity settled employee stock options which have been measured at fair value. Historical cost is generally based on the fair value of consideration given in exchange of goods and services. The accounting policies are consistently applied by the Company during the period and are consistent with those used in previous year except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

3. Statement of compliance

In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (referred to as “Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015.

a) Terms / rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

The Company declared an interim dividend of Rs. 8 per share on the face value of Rs. 10 each for the Financial Year 2018-19.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive 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.

b) Buyback of Equity Shares of the Company

The Board of Directors, at its meeting in January 2019, approved the buyback of the Company’s fully paid-up equity shares of the face value of Rs. 10 each from its shareholders/beneficial owners excluding promoters, promoter group and persons who are in control of the Company, via the “open market” route through the stock exchanges, for a total amount not exceeding Rs. 2,250 million (“Maximum Buyback Size”), and at a price not exceeding Rs. 750 per Equity Share (“Maximum Buyback Price”).

The indicative maximum number of Equity Shares bought back at the above maximum price would be 3,000,000. If the Equity Shares are bought back at a price below the Maximum Buyback Price of Rs. 750, the actual number of equity shares bought back could exceed the above indicative Maximum Buyback quantity but will always be subject to the Maximum Buyback Size.

The Buyback shall be from the open market purchases through the stock exchanges, by the order matching mechanism except ‘all or none’ order matching system, as provided under the Buyback Regulations.

The Company will fund the buyback from its securities premium account, free reserves and/or such other source as may be permitted.

The buyback of equity shares through the stock exchanges commenced on February 8, 2019 and is expected to be completed by August 7, 2019 or reaching the Maximum Buyback Size, whichever is earlier.

During the period from February 8, 2019 to March 31, 2019, 881,098 equity shares were purchased from the stock exchanges as follows: (a) 368,851 Equity Shares which have been purchased and extinguished as of March 31, 2019; (b) 447,981 Equity hares which have been purchased but not extinguished as of March 31, 2019; and (c) 64,266 shares which have been purchased but have not been settled and therefore not extinguished as of March 31, 2019. The Company has completed the extinguishment of remaining Equity Shares of 512,247 on April 9, 2019.

Consequently, the paid-up capital of the Company has been reduced from Rs. 800.00 million to Rs. 791.19 million comprising of 79,118,902 Equity Shares of Rs. 10 each.

* Note: Building includes those constructed on leasehold land:

a) Gross block as on March 31, 2019 Rs. 1,454.06 million (Previous year Rs. 1,454.10 million)

b) Depreciation charge for the year Rs. 58.95 million (Previous year Rs. 58.45 million)

c) Accumulated depreciation as on March 31, 2019 Rs. 439.96 million (Previous year Rs. 381.05 million)

d) Net book value as on March 31, 2019 Rs. 1,014.10 million (Previous year Rs. 1,073.05 million)

* Out of the cash and cash equivalent balance as at March 31, 2019, the Company can utilise Rs. 2.15 million only towards research and development activities specified in the agreement. There were no such restrictions for utilisation of the cash and cash equivalent balance as at March 31, 2018.

** The Company can utilize these balances only towards buy back of equity shares.

The term loans from Government departments have the following terms and conditions:

Loan I - amounting to Rs. 5.46 million (Previous year: Rs. 8.19 million) with interest payable @ 2% per annum guaranteed by a bank guarantee by the Company and repayable in ten equal semi annual installments over a period of five years commencing from March 2016.

Loan II - amounting to Rs. 11.09 million (Previous year: Rs. 12.94 million) with Interest payable @ 3% per annum repayable in ten equal annual installments over a period of ten years commencing from September 2015.

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.

In respect of the contracts wherein the transaction price is in the form of revenue share, the estimated revenue for the customer is considered based on the historical trends and management judgement with respect to customer business. The amount of this category of revenue included in the total revenue for the year is Rs. 192.14 million

4. Gratuity plan:

The Company has a defined benefit gratuity plan. Each employee is eligible for gratuity on completion of minimum five years of service at 15 days basic salary (last drawn basic salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the Balance Sheet for the respective plans.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

As at March 31, 2019, every percentage point increase / decrease in discount rate will affect the gratuity benefit obligation by approximately Rs. 102.92 million / Rs. 122.89 million respectively.

As at March 31, 2019, every percentage point increase / decrease in rate of increase in compensation levels will affect the gratuity benefit obligation by approximately Rs. 121.39 million / Rs. 103.23 million respectively.

Note:

The Company benefits from the tax holidays available for units set up under the Special Economic Zone Act, 2005. These tax holidays are available for a period of fifteen years from the date of commencement of operation. Under the SEZ Scheme, the Unit which begins providing services on or after April 1, 2005 will be eligible for deduction of 100% of profits or gains derived from export of services for the first five years from the financial year in which the unit commenced the provision of services, 50% of such profits or gains for a further period of five years. Upto 50% of such profits and gains is also available for the further period of five years subject to creation of a Special Economic Zone re-investment Reserve out of the profit for the eligible SEZ units and utilization of such reserve by the Company for acquiring new plant and machinery for the purpose of its business as per the provisions of the Income Tax Act, 1961.

Fair value hierarchy:

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:

Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs are 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 are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

Financial risk management

Financial risk factors and risk management objectives

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors which provide written principles on foreign exchange hedging. The Company’s exposure to credit risk is mainly for receivables that are overdue for more than 90 days. The Credit Task Force is responsible for credit risk management. Investment of excess liquidity is governed by the Investment policy of the Company. The Company’s Risk Management Committee monitors risks and policies implemented to mitigate risk exposures.

Market risk

The Company operates globally with its operations spread across various geographies and consequently the Company is exposed to foreign exchange risk. Around 80% to 90% of the Company’s foreign currency exposure is in USD. The Company holds plain vanilla forward contracts against expected future sales in USD to mitigate the risk of changes in exchange rates.

The following table analyses unhedged foreign currency risk from financial instruments as of March 31, 2019

Foreign currency sensitivity analysis

For the year ended March 31, 2019 and March 31, 2018 every percentage point depreciation / appreciation in the exchange rate between the Indian rupee and foreign currencies would affect the Company’s profit before tax margin (PBT) by approximately 0.46 % and 0.45% respectively.

Derivative financial instruments

The Company holds derivative foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. These derivative financial instruments are valued based on quoted prices for similar assets in active markets or inputs that are directly or indirectly observable in the marketplace. The Company has designated foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast sales transactions.

Credit risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs. 2,429.85 million and Rs. 3,425.07 million as at March 31, 2019 and March 31, 2018, respectively. Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in the United States. Credit risk is managed by the Company by Credit Task Force through credit approvals, establishing credit limits and continuously monitoring the recovery status of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss. The Company uses a provisioning policy approved by the Board of Directors to compute the expected credit loss allowance for trade receivables. The policy takes into account available external and internal credit risk factors and the Company’s historical experience for customers.

Credit risk is perceived mainly in case of receivables overdue for more than 90 days. The following table gives details of risk concentration in respect of percentage of receivables overdue for more than 90 days:

Credit risk on cash and cash equivalents is limited as the Company generally invests in deposits with banks and financial institutions with high credit ratings. Investments primarily include investment in debts mutual funds, quoted bonds.

Liquidity risk

The Company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding bank borrowings. The investment of surplus cash is governed by the Company’s investment policy approved by the Board of Directors. The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

As at March 31, 2019, the Company had a working capital of Rs. 11,884.14 million including cash and cash equivalents and current fixed deposits of Rs. 5,408.63 million and current investments of Rs. 3,295.53 million. As at March 31, 2018, the Company had a working capital of Rs. 11,652.07 million including cash and cash equivalents and current fixed deposits of Rs. 2,046.12 million and current investments of Rs. 5,916.31 million.

5. Operating leases

The Company has taken equipment and office premises on lease under cancellable operating lease arrangements. Further, the Company has also taken certain land and office premises under non-cancellable operating lease agreement for a period of 3 - 15 years. There are no restrictions imposed by the lease agreements. There are no subleases. The Company has an option to renew the lease agreements at the end of the lease period.

* Mr. Mritunjay Singh resigned as executive director w.e.f. November 24, 2017.

** Dr. Anant Jhingran resigned on November 3, 2016 and re-appointed as an Independent director on November 21, 2017.

Dr. Deepak Phatak and Mr. Guy Eiferman have been appointed as additional directors (independent member ) on the board of Persistent Systems Limited w.e.f. April 24, 2018.

# The remuneration to the key managerial personnel does not include the provisions made for gratuity, long service awards and leave benefits, as they are determined on an actuarial basis for the Company as a whole.

## These transactions are disclosed at the exchange rates prevailing on the date of transaction.

@ These balances are fully provided for

(iv) Guarantee given on behalf of subsidiary

Persistent Systems Ltd has given a guarantee of $ 15.17 million (Previous year: $ 15.17 million) on behalf of Persistent Systems Inc.

6. Employees stock option plans (ESOP)

Certain information in this note relating to number of shares, options and per share/option price has been disclosed in full and is not rounded off.

# Adjusted for bonus issue of shares.

*No contractual life is defined in the scheme.

**The options under Scheme XI, which is a performance based ESOP scheme will vest after 3 years in proportion of credit points earned by the employees every quarter based on performance. The maximum options which can be granted under this scheme are 2,000,000.

***The options under Scheme XII, ESOP scheme would vest after 1 year. The maximum options which granted under this scheme are 50.

The vesting period and conditions of the above ESOP schemes is as follows:

All the above ESOP schemes have service condition, which require the employee to complete a specified period of service, as a vesting condition. The vesting pattern of various schemes has been provided below:

d) Effect of the employee share-based payment plans on the statement of profit and loss and on its financial position

Compensation expense arising from equity-settled employee share-based payment plans for the year ended March 31, 2019 amounted to Nil (Previous year Rs. 2.23 million). The liability for employee stock options outstanding as at March 31, 2019 is Rs. 76.29 million (Previous year Rs. 90.52 million).

7. Contingent liabilities

Persistent Systems Limited (“the Company”) had received a show cause notice from the Commissioner of Service Tax on December 19, 2016 for non-payment of service tax of Rs. 452.15 million under import of services on reverse charge basis, excluding interest and penalty, if applicable. The issue relates to the professional and technical services rendered by overseas subsidiaries on behalf of the Company to its overseas customers for the period 2011-12 to 2014-15.

Post representations made by the Company, the Learned Principal Commissioner of Service Tax, Pune, adjudicated the aforesaid show-cause notice and issued an order on May 29, 2017, reducing the demand to Rs. 165.51 million based on the period of limitation and as a result of that, the said demand now covers financial year 2014-15. The Company has filed an appeal against the order passed by Learned Principal Commissioner of Service Tax, Pune with the Hon’ble Central Excise and Service Tax Appellate Tribunal (CESTAT) on September 23, 2017.

The Company, based on independent legal opinion obtained in respect of issues related to this matter, believes that the liability is not likely to arise and therefore, no provision is considered necessary in the financial statements. If the appeal filed as mentioned above results in a demand, there will be no impact on the profitability as the Company will be eligible to claim credit/refund for the amount paid.

The GST department has filed an appeal on October 11, 2017 with appellate authorities against the Order passed by Learned Principal Commissioner of Service Tax, Pune. Though the GST department has acknowledged the ground of revenue neutrality, the said appeal mainly questions non-application of extended period of limitation. The Company has filed reply to this appeal on December 18, 2017.

Considering the view of the Service Tax Authorities, based on legal advice, and due prudence, the Company has deposited, an amount of Rs. 647.36 million towards service tax in respect of the above matter, for the period from April 01, 2014 to June 30, 2017, under protest.

As on March 31, 2019, the pending litigations in respect of direct taxes amount to Rs. 268.74 million and in respect of indirect taxes amount to Rs. 30.40 million (excluding the show cause received from Commissioner of Service Tax on May 29, 2017 of Rs. 173.78 million under import of services on reverse charge basis as mentioned above). Based on the advice obtained and judgments in favour of the Company at the first appellate authority in the earlier years, management does not expect any outflow in respect of these litigations.

Persistent Systems Ltd has given a guarantee of $ 15.17 million on behalf of Persistent Systems Inc. (Previous year: $ 15.17 million).

8. The Company was required to spend an amount of Rs. 79.08 million during the financial year 2018-19 (Previous year Rs. 73.80 million) on Corporate Social Responsibility in accordance with section 135(5) of the Companies Act, 2013. The Company has spent Rs. 80.36 million (Rs. 1.40 million in kind) during the financial year 2018-19 (Previous year Rs. 74.46 million) on purposes other than construction / acquisition of any asset.

9. Details of dues to micro and small enterprises as defined under MSMED Act, 2006

There are no defaults and overdue amounts payable to suppliers, who have intimated about their status as Micro and Small Enterprises as per the provisions of Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006).

10. Net dividend remitted in foreign exchange

11. Loans and advances in the nature of loans given to subsidiaries and associates and firms / companies in which directors are interested

a) Loan to Persistent Systems, Inc.

- Balance as at March 31, 2019: Nil (Previous year: Rs. 130.34 million)

- Maximum amount outstanding during the year Rs. 139.97 million (Previous year: Rs. 329.23 million)

- Loan is granted for a period of 3 years @ US Prime Rate 125 Bps. This amount has been utilized for meeting working capital requirements.

b) Loan to Persistent Systems Germany GmbH

- Balance as at March 31, 2019: Nil (Previous year: Rs. 686.84 million)

- Maximum amount outstanding during the year Rs. 728.64 million (Previous year: Rs. 686.84 million)

- Loan is granted for a period of 3 years @ EURIBOR 300 Bps. This amount has been utilized for meeting working capital requirements and to fund its acquisition opportunities.

c) Advance to Persistent Systems, Inc.

- Balance as at March 31, 2019 Rs. 63.19 million (Previous year: Rs. 67.27 million).

- Maximum amount outstanding during the year Rs. 67.27 million (Previous year: Rs. 67.27million).

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

d) Advance to Persistent Systems Pte. Ltd.

- Balance as at March 31, 2019 Rs. 0.11 million (Previous year: 0.15 million)

- Maximum amount outstanding during the year Rs. 0.25 million (Previous year: Rs. 0.15 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements

e) Advance to Persistent Systems Malaysia Sdn. Bhd.

- Balance as at March 31, 2019 Rs. 0.08 million (Previous year: Rs. 0.29 million)

- Maximum amount outstanding during the year Rs. 0.38 million (Previous year: 0.30 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

f) Advance to Persistent Systems France SAS

- Balance as at March 31, 2019 Rs. 4.14 million (Previous year: Rs. 3.34 million)

- Maximum amount outstanding during the year Rs. 4.15 million (Previous year: Rs. 3.34 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

g) Loan to Klisma e-Services Private Limited

- Balance as at March 31, 2019 Rs. 27.43 million (Previous year: Rs. 27.43 million)

- Maximum amount outstanding during the year Rs. 27.43 million (Previous year: Rs. 27.43 million)

- Principal is receivable at the end of twelve months and interest is receivable quarterly @ 12 % p.a. This amount is utilized for meeting business requirements. The outstanding balance has been fully provided for.

h) Advance to Klisma e-Services Private Limited

- Balance as at March 31, 2019 Rs. 0.81 million (Previous year: Rs. 0.81 million)

- Maximum amount outstanding during the year Rs. 0.81 million (Previous year: Rs. 0.81 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements. The outstanding balance has been fully provided for.

i) Advance to Aepona Limited

- Balance as at March 31, 2019: Nil (Previous year: Nil)

- Maximum amount outstanding during the year: Nil (Previous year: Rs. 11.49 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

j) Persistent Systems (Lanka) Private Limited

- Balance as at March 31, 2019 Rs. 2.41 million (Previous year: Rs. 1.95 million)

- Maximum amount outstanding during the year Rs. 2.41 million (Previous year: Rs. 1.95 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

k) Advance to Persistent Systems Mexico, S.A. de C.V

- Balance as at March 31, 2019 Rs. 0.59 million (Previous year: Rs. 0.40 million)

- Maximum amount outstanding during the year Rs. 0.59 million (Previous year: Rs. 1.92 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

l) Advance to Akshat Corporation (d.b.a. RGen Solutions)

- Balance as at March 31, 2019: Nil (Previous year: Rs. 0.05 million)

- Maximum amount outstanding during the year Rs. 0.10 million (Previous year: Rs. 0.13 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

m) Advance to Persistent Systems Germany GmbH

- Balance as at March 31, 2019: Rs. 0.57 million (Previous year: Nil)

- Maximum amount outstanding during the year Rs. 0.74 million (Previous year: Rs. 1.54 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

n) Advance to Persistent Systems Israel Limited

- Balance as at March 31, 2019 Rs. 0.38 million (Previous year: Rs. 0.03 million)

- Maximum amount outstanding during the year Rs. 0.40 million (Previous year: Rs. 0.11 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

o) Advance to Persistent Telecom Solutions Inc

- Balance as at March 31, 2019 Rs. 4.56 million (Previous year: Nil)

- Maximum amount outstanding during the year Rs. 4.56 million (Previous year: Nil)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

p) Advance to Valista Limited Ireland

- Balance as at March 31, 2019: Nil (Previous year: Nil)

- Maximum amount outstanding during the year Rs. 0.03 million (Previous year: Nil)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

12. As reported in the previous quarters, the Company has deposits of Rs. 430 million with the financial institutions viz. Infrastructure Leasing & Financial Services Ltd. (IL&FS) and IL&FS Financial Services Ltd. (referred to as “IL&FS Group”) as on the balance sheet date. These are due for maturity from January 2019 to June 2019, of which Rs. 345 million are overdue as on March 31, 2019.The Company has not accrued any interest on these deposits since April 1, 2018. The amount due till March 31, 2019 and interest due have not been received as on date. In view of the uncertainty prevailing with respect to recovery of outstanding balances from IL&FS Group, Management of the Company has provided an amount of Rs. 182.50 million for impairment in value of deposits as of March 31, 2019. The provision currently reflects the exposure that may arise given the uncertainty. With the resolution plan in progress, the Management is hopeful of recovery though with a time lag. The Company continues to monitor developments in the matter and is committed to take steps including legal action that may be necessary to ensure full recovery of the said deposits.

13. The financial statements are presented in Rs. million and decimal thereof except for per share information or as otherwise stated.

---

Mar 31, 2018

1. Nature of operations

Persistent Systems Limited (the “Company”) is a public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956 (the “Act”). The shares of the Company are listed on Bombay Stock Exchange and National Stock Exchange. The Company is a global company specializing in software products, services and technology innovation. The Company offers complete product life cycle services.

2. Basis of preparation

The financial statements of the Company have been prepared on an accrual basis and under the historical cost convention except for certain financial instruments and equity settled employee stock options which have been measured at fair value. Historical cost is generally based on the fair value of consideration given in exchange of goods and services. The accounting policies are consistently applied by the Company during the period and are consistent with those used in previous year.

Statement of compliance

In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (referred to as “Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015.

a) Terms / rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

The Company declared an interim dividend of Rs.7 per share on the face value of Rs.10 each for the Financial Year 2017-18.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive 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.

The term loans from Government departments have the following terms and conditions:

Loan I - amounting to Rs.8.19 million (Previous year Rs.10.92 million) with interest payable @ 2% per annum guaranteed by a bank guarantee by the Company and repayable in ten equal semi annual installments over a period of five years commencing from March 2016.

Loan II - amounting to Rs.12.94 million (Previous year Rs.14.79 million) with Interest payable @ 3% per annum repayable in ten equal annual installments over a period of ten years commencing from September 2015.

3. Gratuity plan:

The Company has a defined benefit gratuity plan. Each employee is eligible for gratuity on completion of minimum five years of service at 15 days basic salary (last drawn basic salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the Balance Sheet for the respective plans.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

As at March 31, 2018, every percentage point increase / decrease in discount rate will affect the gratuity benefit obligation by approximately Rs.77.45 million / Rs.92.39 million respectively.

As at March 31, 2018, every percentage point increase / decrease in rate of increase in compensation levels will affect the gratuity benefit obligation by approximately Rs.91.75 million / Rs.78.00 million respectively.

Amounts for the current and previous year are as follows:

4. Income taxes

A reconciliation of the income tax provision to the amount computed by applying the statutory income tax rate to the profit before tax is summarized below:

Note:

The Company benefits from the tax holidays available for units set up under the Special Economic Zone Act, 2005. These tax holidays are available for a period of fifteen years from the date of commencement of operation. Under the SEZ Scheme, the Unit which begins providing services on or after April 1, 2005 will be eligible for deduction of 100% of profits or gains derived from export of services for the first five years, 50% of such profits or gains for a further period of five years and 50% of such profits and gains for the balance period of five years subject to fulfillment of certain conditions.

Financial risk management

Financial risk factors and risk management objectives

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors which provide written principles on foreign exchange hedging. The Company’s exposure to credit risk is mainly for receivables that are overdue for more than 90 days. The Credit Task Force is responsible for credit risk management. Investment of excess liquidity is governed by the Investment policy of the Company. The Company’s Risk Management Committee monitors risks and policies implemented to mitigate risk exposures.

Market risk

The Company operates globally with its operations spread across various geographies and consequently the Company is exposed to foreign exchange risk. Around 80% to 90% of the Company’s foreign currency exposure is in USD. The Company holds plain vanilla forward contracts against expected future sales in USD to mitigate the risk of changes in exchange rates.

The following table analyses unhedged foreign currency risk from financial instruments as of March 31, 2018:

Foreign currency sensitivity analysis

For the year ended March 31, 2018 and March 31, 2017, every percentage point depreciation / appreciation in the exchange rate between the Indian rupee and foreign currencies would affect the Company’s profit before tax margin (PBT) by approximately 0.45 % and 0.44% respectively.

Derivative financial instruments

The Company holds derivative foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. These derivative financial instruments are valued based on quoted prices for similar assets in active markets or inputs that are directly or indirectly observable in the marketplace. The Company has designated foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast sales transactions.

Credit risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs.3,425.07 million and Rs.4,781.35 million as at March 31, 2018 and March 31, 2017, respectively. Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in the United States. Credit risk is managed by the Company by Credit Task Force through credit approvals, establishing credit limits and continuously monitoring the recovery status of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss. The Company uses a provisioning policy approved by the Board of Directors to compute the expected credit loss allowance for trade receivables. The policy takes into account available external and internal credit risk factors and the Company’s historical experience for customers.

Credit risk is perceived mainly in case of receivables overdue for more than 90 days. The following table gives details of risk concentration in respect of percentage of receivables overdue for more than 90 days:

Credit risk on cash and cash equivalents is limited as the Company generally invests in deposits with banks and financial institutions with high credit ratings. Investments primarily include investment in debts mutual funds, quoted bonds.

Liquidity risk

The Company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding bank borrowings. The investment of surplus cash is governed by the Company’s investment policy approved by the Board of Directors. The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived. As at March 31, 2018, the Company had a working capital of Rs.11,652.07 million including cash and cash equivalents and current fixed deposits of Rs.2,046.12 million and current investments of Rs.5,916.31 million. As at March 31, 2017, the Company had a working capital of Rs.9,312.18 million including cash and cash equivalents and current fixed deposits of Rs.627.11 million and current investments of Rs.4,499.66 million.

5. Operating leases

The Company has taken equipment and office premises on lease under cancellable operating lease arrangements. Further, the Company has also taken certain land and office premises under non-cancellable operating lease agreement for a period of 3 - 15 years. There are no restrictions imposed by the lease agreements. There are no subleases. The Company has an option to renew the lease agreements at the end of the lease period.

Maximum obligation on long-term non-cancellable operating lease payable as per the rentals stated in respective agreement and the lease rentals recognized on cancellable and non-cancellable leases is as follows:

* Mr. Mritunjay Singh resigned as executive director w.e.f. November 24, 2017.

** Dr. Anant Jhingran resigned on November 3, 2016 and re-appointed as an Independent director on November 21, 2017.

# The remuneration to the key managerial personnel does not include the provisions made for gratuity, long service awards and leave benefits, as they are determined on an actuarial basis for the Company as a whole.

## These transactions are disclosed at the exchange rates prevailing on the date of transaction.

@ These balances are fully provided for.

(iv) Guarantee given on behalf of subsidiary

Persistent Systems Limited has given a guarantee of $ 15,170,000 on behalf of Persistent Systems Inc.

6. Employees stock option plans (ESOP)

Certain information in this note relating to number of shares, options and per share/option price has been disclosed in full and is not rounded off as stated in note 44.

a) Details of Employee stock option plans

The Company has framed various share-based payment schemes for its employees. The details of various equity-settled employee stock option plan (‘ESOP’) schemes adopted by the Board of Directors are as follows:

# Adjusted for bonus issue of shares.

*No contractual life is defined in the scheme.

**The options under Scheme XI, which is a performance based ESOP scheme will vest after 3 years in proportion of credit points earned by the employees every quarter based on performance. The maximum options which can be granted under this scheme are 2,000,000.

***The options under Scheme XII, ESOP scheme will vest after 1 year. The maximum options which granted under this scheme are 50.

The vesting period and conditions of the above ESOP schemes is as follows:

All the above ESOP schemes have service condition, which require the employee to complete a specified period of service, as a vesting condition. The vesting pattern of various schemes has been provided below:

d) Effect of the employee share-based payment plans on the statement of profit and loss and on its financial position

Compensation expense arising from equity-settled employee share based payment plans for the year ended March 31, 2018 amounted to Rs.2.23 million (Previous year Rs.46.79 million). The liability for employee stock options outstanding as at March 31, 2018 is Rs.90.52 million (Previous year Rs.187.12 million).

e) Details of stock options granted during the year

The weighted average fair value of the stock options granted during the current year is Rs. Nil (Previous year Rs.700.50). The Binomial tree valuation model has been used for computing the weighted average fair value for stock options granted considering the following inputs:

7. Contingent liabilities

Persistent Systems Limited (“the Company”) had received a show cause notice from the Commissioner of Service Tax on December 19, 2016 for non-payment of service tax of Rs.452.15 million under import of services on reverse charge basis, excluding interest and penalty, if applicable. The issue relates to the professional and technical services rendered by overseas subsidiaries on behalf of the Company to its overseas customers for the period 2011-12 to 2014-15. Post representations made by the Company, the Learned Principal Commissioner of Service Tax, Pune, adjudicated the aforesaid show-cause notice and issued an order on May 29, 2017, reducing the demand to Rs.165.51 million based on the period of limitation and as a result of that, the said demand now covers financial year 2014-15. The Company believes that since the said services rendered by the overseas subsidiaries have been performed outside India, the same do not fall under import of services and accordingly, the Company has filed an appeal before the appellate authorities. The Company has obtained an independent legal opinion in respect of the above matter, and believes that the liability is not likely to arise and therefore, no provision is considered necessary in the financial statements.

The GST department has filed an appeal on October 11, 2017 with appellate authorities against the Order passed by Learned Principal Commissioner of Service Tax, Pune. Though the GST department has acknowledged the ground of revenue neutrality, the said appeal mainly questions non-application of extended period of limitation. The Company has filed reply to this appeal on December 18, 2017.

Considering the view of the Service Tax Authorities, based on legal advice, and due prudence, the Company has deposited, an amount of Rs.647.36 million towards service tax in respect of the above matter, for the period from April 01, 2014 to June 30, 2017, under protest. The Company has utilized the credit amounting to Rs.532.42 million against the tax liability.

As on March 31, 2018, the pending litigations in respect of direct taxes amount to Rs.227.12 million and in respect of indirect taxes amount to Rs.37.38 million (excluding the order received from Learned Principal Commissioner of Service Tax on May 29, 2017 of Rs.165.51 million under import of services on reverse charge basis as mentioned above). Based on the advice obtained and judgments in favour of the Company at the first appellate authority in the earlier years, the management does not expect any outflow in respect of these litigations.

8. The Company has incurred an expenditure of Rs.74.46 million during the financial year 2017-18 (Previous year Rs.70.03 million) on Corporate Social Responsibility in accordance with section 135(5) of the Companies Act, 2013.

9. Details of dues to micro and small enterprises as defined under MSMED Act, 2006

There are no defaults and overdue amounts payable to suppliers, who have intimated about their status as Micro and Small Enterprises as per the provisions of Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006).

10. Net dividend remitted in foreign exchange

11. Loans and advances in the nature of loans given to subsidiaries and associates and firms / companies in which directors are interested

a) Loan to Persistent Systems, Inc.

- Balance as at March 31, 2018 Rs.130.34 million (Previous year: Rs.317.76 million)

- Maximum amount outstanding during the year Rs.329.23 million (Previous year: Rs.329.23 million)

- Principal and interest is receivable at the end of 3 years @ LIBOR 3.5% p.a. This amount is utilized for meeting business requirements.

b) Loan to Persistent Systems Germany GmbH

- Balance as at March 31, 2018 Rs.686.84 million (Previous year: Rs. Nil)

- Maximum amount outstanding during the year Rs.686.84 million (Previous year: Rs. Nil)

- Principal is receivable at the end of 3 years @ EURIBOR 3% p.a. This amount is utilized for meeting business requirements.

c) Advance to Persistent Systems, Inc.

- Balance as at March 31, 2018 Rs.67.27 million (Previous year: Rs.43.85 million).

- Maximum amount outstanding during the year Rs.67.27 million (Previous year: Rs.163.07 million).

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

d) Advance to Persistent Systems Pte. Ltd.

- Balance as at March 31, 2018 Rs.0.15 million (Previous year: Nil)

- Maximum amount outstanding during the year Rs.0.15 million (Previous year: Rs.0.29 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

e) Advance to Persistent Systems Malaysia Sdn. Bhd.

- Balance as at March 31, 2018 Rs.0.29 million (Previous year: Rs.0.17 million)

- Maximum amount outstanding during the year Rs.0.30 million (Previous year: Rs.1.46 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

f) Advance to Persistent Systems France SAS

- Balance as at March 31, 2018 Rs.3.34 million (Previous year: Rs.1.70 million)

- Maximum amount outstanding during the year Rs.3.34 million (Previous year: Rs.1.83 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

g) Loan to Klisma e-Services Private Limited

- Balance as at March 31, 2018 Rs.27.43 million (Previous year: Rs.27.43 million)

- Maximum amount outstanding during the year Rs.27.43 million (Previous year: Rs.27.43 million)

- Principal is receivable at the end of twelve months and interest is receivable quarterly @ 12 % p.a. This amount is utilized for meeting business requirements. The outstanding balance has been fully provided for.

h) Advance to Klisma e-Services Private Limited

- Balance as at March 31, 2018 Rs.0.81 million (Previous year: Rs.0.81 million)

- Maximum amount outstanding during the year Rs.0.81 million (Previous year: Rs.0.81 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements. The outstanding balance has been fully provided for.

i) Advance to Aepona Limited

- Balance as at March 31, 2018 Rs. Nil (Previous year: Rs.0.98 million)

- Maximum amount outstanding during the year Rs.11.49 million (Previous year: Rs.1.01 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

j) Persistent Systems (Lanka) Private Limited

- Balance as at March 31, 2018 Rs.1.95 million (Previous year: Rs.0.64 million)

- Maximum amount outstanding during the year Rs.1.95 million (Previous year: Rs.0.64 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

k) Advance to Persistent Systems Mexico, S.A. de C.V

- Balance as at March 31, 2018 Rs.0.40 million (Previous year: Rs.1.92 million)

- Maximum amount outstanding during the year Rs.1.92 million (Previous year: Rs.6.05 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

l) Advance to Akshat Corporation (d.b.a. R-Gen Solutions)

- Balance as at March 31, 2018 Rs.0.05 million (Previous year: Rs.0.10 million)

- Maximum amount outstanding during the year Rs.0.13 million (Previous year: Rs.0.11 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

m) Advance to Persistent Systems Germany GmbH

- Balance as at March 31, 2018 Rs. Nil (Previous year: Rs.0.51 million)

- Maximum amount outstanding during the year Rs.1.54 million (Previous year: Rs.0.51 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

n) Advance to Persistent Systems Israel Limited

- Balance as at March 31, 2018 Rs.0.03 million (Previous year: Rs. Nil)

- Maximum amount outstanding during the year Rs.0.11 million (Previous year: Rs. Nil)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

12. The financial statements are presented in Rs. million and decimal thereof except for per share information or as otherwise stated.

13. Previous year’s figures have been regrouped where necessary to conform to current year’s classification.

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Mar 31, 2017

1. Terms / rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. 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 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.

Financial risk factors and risk management objectives

The Company''s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company''s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The use of financial derivatives is governed by the Company''s policies approved by the Board of Directors which provide written principles on foreign exchange hedging. The Company''s exposure to credit risk is mainly for receivables that are overdue for more than 90 days. The Credit Task Force is responsible for credit risk management. Investment of excess liquidity is governed by the Investment policy of the Company. The Company''s Risk Management Committee monitors risks and policies implemented to mitigate risk exposures.

Market risk

The Company operates globally with its operations spread across various geographies and consequently the Company is exposed to foreign exchange risk. Around 80% to 90% of the Company''s foreign currency exposure is in USD. The Company holds plain vanilla forward contracts against expected future sales in USD to mitigate the risk of changes in exchange rates.

Foreign currency sensitivity analysis

For the year ended March 31, 2017 and March 31, 2016, every percentage point depreciation / appreciation in the exchange rate between the Indian rupee and foreign currencies would affect the Company''s profit before tax margin (PBT) by approximately 0.45% and 0.50% respectively.

Derivative financial instruments

The Company holds derivative foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. These derivative financial instruments are valued based on quoted prices for similar assets in active markets or inputs that are directly or indirectly observable in the marketplace. The Company has designated foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast sales transactions.

Credit risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs. 4,781.35 million and Rs. 3,815.07 million as at March 31, 2017 and March 31, 2016, respectively. Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in the United States. Credit risk is managed by the Company by Credit Task Force through credit approvals, establishing credit limits and continuously monitoring the recovery status of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss. The Company uses a provisioning policy approved by the Board of Directors to compute the expected credit loss allowance for trade receivables. The policy takes into account available external and internal credit risk factors and the Company’s historical experience for customers.

Credit risk is perceived mainly in case of receivables overdue for more than 90 days. The following table gives details of risk concentration in respect of percentage of receivables overdue for more than 90 days:

Liquidity risk

The Company''s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding bank borrowings. The investment of surplus cash is governed by the Company''s investment policy approved by the Board of Directors. The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived. As at March 31, 2017, the Company had a working capital of Rs. 9,312.18 million including cash and cash equivalents and current fixed deposits of Rs. 627.11 million and current investments of Rs. 4,499.66 million. As at March 31, 2016, the Company had a working capital of Rs. 9,101.18 million including cash and cash equivalents of Rs. 528.76 million and current investments of Rs. 4,914.36 million.

2. Operating leases

The Company has taken equipment and office premises on lease under cancellable operating lease arrangements. Further, the Company has also taken certain land and office premises under non-cancellable operating lease agreement for a period of 3 - 15 years. There are no restrictions imposed by the lease agreements. There are no subleases. The Company has an option to renew the lease agreements at the end of the lease period.

Maximum obligation on long-term non-cancellable operating lease payable as per the rentals stated in respective agreement and the lease rentals recognized on cancellable and non-cancellable leases is as follows:

3. Guarantee given on behalf of subsidiary

Persistent Systems Ltd has given a guarantee of $170,000 to a creditor (Sunlife Assurance Company of Canada) on behalf of Persistent Systems Inc.

4. Employees stock option plans (ESOP)

Certain information in this note relating to number of shares, options and per share/option price has been disclosed in full and is not rounded off as stated in note 46.

5. Contingent liabilities

The contingent liabilities as on March 31, 2017 were Rs. 452.15 million (previous year Rs. Nil).

The Company has received a show cause notice from Commissioner of Service Tax on December 19, 2016 for nonpayment of service tax of Rs. 452.15 million under import of services on reverse charge basis, excluding interest and penalty if applicable. The issue relates to the professional and technical services rendered by overseas subsidiaries on behalf of the Holding Company to its overseas customers for the period 2011-12 to 2014-15.

The Company, based on independent legal opinion obtained in respect of issues related to this matter, believes that the liability is not likely to arise and therefore, no provision is considered necessary in the financial statements. The Holding Company has filed a reply to this show cause notice. If this show cause notice results in a demand, there will be no impact on the profitability as the Holding Company will be eligible to claim credit for the amount paid.

As on March 31, 2017, the pending litigations in respect of direct taxes amount to Rs. 156.72 million and in respect of indirect taxes amount to Rs. 33.68 million (excluding the show cause received from Commissioner of Service Tax on December 19, 2016 for non-payment of service tax of Rs. 452.15 million under import of services on reverse charge basis as mentioned above). Based on the advice obtained and judgments in favour of the Company at the first appellate authority in the earlier years, the Group''s management does not expect any outflow in respect of these litigations.

6. The Company has incurred an expenditure of Rs. 70.03 million during the financial year 2016-17 (Previous year Rs. 62.02 million) on Corporate Social Responsibility in accordance with section 135(5) of the Companies Act, 2013

7. Details of dues to micro and small enterprises as defined under MSMED Act, 2006

There are no defaults and overdue amounts payable to suppliers, who have intimated about their status as Micro and Small Enterprises as per the provisions of Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006).

8. Net dividend remitted in foreign exchange

9. Loans and advances in the nature of loans given to subsidiaries and associates and firms / companies in which directors are interested

10. Loan to Persistent Systems, Inc.

11- Balance as at March 31, 2017 Rs. 317.76 million (Previous year: Rs. Nil million)

12- Maximum amount outstanding during the year Rs. 329.23 million (Previous year: Rs. 330.65million)

13- Principle and interest is receivable at the end of 3 years @ LIBOR 3.5% p.a. This amount is utilized for meeting business requirements.

14. Advance to Persistent Systems, Inc.

15- Balance as at March 31, 2017 Rs. 43.85 million (Previous year: Rs. 33.20 million).

16- Maximum amount outstanding during the year Rs. 163.07 million (Previous year: Rs. 33.20 million).

17- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

18. Advance to Persistent Systems Pte. Ltd

19- Balance as at March 31, 2017 Rs. Nil million (Previous year: Rs. 0.21 million)

20- Maximum amount outstanding during the year Rs. 0.29 million (Previous year: Rs. 0.27 million)

21- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

22. Advance to Persistent Telecom Solutions Inc.

23- Balance as at March 31, 2017 Rs. Nil (Previous year: Rs. 4.90 million )

24- Maximum amount outstanding during the year Rs. Nil million (Previous year: Rs. 4.90 million )

25- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

26. Advance to Persistent Systems Malaysia Sdn. Bhd.

27- Balance as at March 31, 2017 Rs. 0.17 million (Previous year: Rs. 1.23 million)

28- Maximum amount outstanding during the year Rs. 1.46 million (Previous year: Rs. 1.23 million)

29- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

30. Advance to Persistent Systems France SAS

31- Balance as at March 31, 2017 Rs. 1.70 million (Previous year: Rs. 0.82 million)

32- Maximum amount outstanding during the year Rs. 1.83 million (Previous year: Rs. 0.82 million)

33- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

34 Advance to CloudSquads Inc.

35- Balance as at March 31, 2017 Rs. Nil (Previous year Rs. Nil)

36- Maximum amount outstanding during the year Rs. Nil million (Previous year: Rs. 0.01 million)

37- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

38. Loan to Klisma eServices Private Limited

39- Balance as at March 31, 2017 Rs. 27.43 million (Previous year: Rs. 27.43 million)

40- Maximum amount outstanding during the year Rs. 27.43 million (Previous year: Rs. 27.43 million)

41- Principle is receivable at the end of twelve months and interest is receivable quarterly @ 12 % p.a. This amount is utilized for meeting business requirements. The outstanding balance has been fully provided for.

42. Advance to Klisma eServices Private Limited

43- Balance as at March 31, 2017 Rs. 0.81 million (Previous year: Rs. 0.81 million)

44- Maximum amount outstanding during the year Rs. 0.81 million (Previous year: Rs. 0.81 million)

45- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements. The outstanding balance has been fully provided for.

46. Advance to Aepona Limited

47- Balance as at March 31, 2017 Rs. 0.98 million (Previous year: Rs. 0.38 million)

48- Maximum amount outstanding during the year Rs. 1.01 million (Previous year: Rs. 0.38 million)

49- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

50. Advance to Aepona Software (Private) Limited

- Balance as at March 31, 2017 Rs. 0.64 million (Previous year: Rs. 0.10 million)

51- Maximum amount outstanding during the year Rs. 0.64 million (Previous year: Rs. 0.10 million)

52- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

53. Advance to Persistent Systems Mexico, S.A. de C.V

54- Balance as at March 31, 2017 Rs. 1.92 million (Previous year: Rs. Nil million)

55- Maximum amount outstanding during the year Rs. 6.05 million (Previous year: Rs. Nil million)

56- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

57. Advance to Akshat Corporation (d.b.a. RGen Solutions)

58- Balance as at March 31, 2017 Rs. 0.10 million (Previous year: Rs. Nil million)

59- Maximum amount outstanding during the year Rs. 0.11 million (Previous year: Rs. Nil million)

60- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

61. Advance to Persistent Systems Germany GmbH

62- Balance as at March 31, 2017 Rs. 0.51 million (Previous year: Rs. Nil million)

63- Maximum amount outstanding during the year Rs. 0.51 million (Previous year: Rs. Nil million)

64- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

65. First-time adoption of Ind-AS

These financial statements for the year ended March 31, 2017 have been prepared in accordance with Ind-AS. For periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with statutory reporting requirements in India immediately before adopting Ind AS (‘previous GAAP'').

Accordingly, the Company has prepared financial statements which comply with Ind-AS applicable for year ending on March 31, 2017, together with the comparative period data as at and for the year ended March 31, 2016. In preparing these financial statements, the Company''s opening balance sheet was prepared as at April 1, 2015, the Company''s date of transition to Ind-AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 1, 2015 and the financial statements as at and for the year ended March 31, 2016.

Ind AS 101 allows first-time adopters certain optional exemptions from the retrospective application of certain requirements under Ind AS.

The Company has applied the following optional exemptions:

66. Share based payment transactions

The Company has not applied Ind AS 102, “Share based payment" to equity instruments that vested before the date of transition to Ind AS i.e. April 1, 2015. Accordingly, equity instruments that have vested prior to April 1, 2015 have not been fair valued.

Explanation of transition to Ind AS

The below mentioned reconciliations provide a quantification of the effect of significant differences arising from the transition from Indian GAAP to Ind AS in accordance with Ind AS 101 for the following:

67- equity as at April 1, 2015

68- equity as at March 31, 2016

69- Profit for the year ended March 31, 2016

There are no material adjustments to the cash flow statements.

In the reconciliations mentioned above, certain reclassifications are made to Indian GAAP financial information to align with the Ind AS presentation.

Under Indian GAAP, the expenditure and corresponding liability for escalation of lease rent during non-cancellable lease period is required to be considered and total lease rent payable during non-cancellable lease period is recognized on straight line basis over the non-cancellable lease period. Under Ind AS, this additional expenses and corresponding liability on lease escalation is not required to be recognized if such escalation represents normal inflation in the economy. Accordingly, the excess expenses and corresponding lease escalation liability is reversed. The impact arising on this change is summarized as follows:

70. Under Indian GAAP, a liability is recognized in respect of proposed dividend on Company''s equity shares, even though the dividend is expected to be approved by the shareholders subsequent to reporting date. Under Ind AS, the liability for dividend is recognized only when it is approved by the shareholders. The impact arising on this change is summarized as follows:

Financial liabilities of Rs. 156.52 million as at April 1, 2015 and Rs. 113.39 million as at March 31, 2016 have been reclassified from other current liabilities to other current financial liabilities in accordance with Ind AS compliant Schedule III.

71. Under Indian GAAP, the long-term investments (investments in equity shares and mutual funds) are stated at cost as reduced by the permanent diminution in value of investment, if any. The short-term investments (current portion of mutual funds) are stated at lower of cost and market value. Under Ind As, the investments in mutual funds and equity shares are stated at their fair values. The impact arising on this change is summarized as follows:

72. Under Indian GAAP, the long-term security deposits are recognized at the transaction value. Under Ind AS, the long-term security deposits (financial assets) are recognized at the fair value under amortized cost method. The difference between the fair value and the transaction value is considered as prepaid rent and amortized over the period of lease. The finance income is recognized on the amortized cost of security deposits for the reported period. The impact arising on this change is summarized as follows:

73. Under Indian GAAP, the actuarial gain / loss on defined benefit obligations and plan assets is recognized as employee benefit expenses in the statement of profit and loss. Under Ind AS, such actuarial gain / loss is recognized under other comprehensive income and classified as equity. The impact arising on this change is summarized as follows:

Under Indian GAAP, the Employee stock compensation expenses are recognized at the intrinsic value as on the date of grant. Further, the Employee stock compensation expenses related to employees of subsidiaries are recognized in the books of holding company only. Under Ind AS, the Employee stock compensation expenses are recognized at the fair value as on the date of grant and the Employee stock compensation expenses related to employees of subsidiaries are recognized in the books of respective subsidiary companies. The fair valuation is made for the shares not vested as on March 31, 2015. The net impact arising on these adjustments is summarized below:

74. Under Indian GAAP, the long-term investments (investments in equity shares and mutual funds) are stated at cost as reduced by the permanent diminution in value of investment, if any. The short-term investments (current portion of mutual funds) are stated at lower of cost and market value. Under Ind As, the investments in mutual funds and equity shares are stated at their fair values. Further, deferred tax in respect of cash flow hedges is recognized under other comprehensive income. The impact arising on this change on deferred tax is summarized as follows:

Under Indian GAAP, the amount of upfront premium paid for the leasehold land is classified under tangible assets if the lease is for the significantly longer period. However, such upfront premium on leasehold land is classified as prepaid expenses under Ind AS. Further, amortization of upfront lease premium is reclassified from depreciation and amortization expenses to rent. The net impact arising on these adjustments is summarized below:

75. The financial statements are presented in Rs. million and decimal thereof except for per share information or as otherwise stated.

76. Previous year''s figures have been regrouped where necessary to conform to current year''s classification.

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Mar 31, 2015

1. Nature of operations

Persistent Systems Limited (the "Company") is a public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956 (the "Act"). The shares of the Company are listed on Bombay Stock Exchange and National Stock Exchange. The Company is a global company specializing in software products, services and technology innovation. The Company offers complete product life cycle services.

2. Basis of preparation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP) to comply in all material respects with the Accounting Standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013. These financial statements are prepared on an accrual basis and under the historical cost convention except financial instruments which have been measured at fair value. The accounting policies are consistently applied by the Company during the year and are consistent with those used in previous year.

3. Gratuity plan:

The Company has a defined benefit gratuity plan. Each employee is eligible for gratuity on completion of minimum five years of service at 15 days basic salary (last drawn basic salary) for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the Balance Sheet for the respective plans.

4. Operating leases

The Company has taken equipment and office premises on lease under cancellable operating lease arrangements. Further, the Company has also taken certain office premises under non-cancellable operating lease agreement for a period of 3 - 15 years. The escalations during non-cancellable lease period have been accounted for on a straight line basis. There are no restrictions imposed by the lease agreements. There are no subleases. The Company has an option to renew the lease agreements at the end of the lease period.

(iv) Gurantee given on behalf of subsidiary

Persistent Systems Ltd has given a guarantee of USD170,000 to a creditor (Sunlife Assurance Company of Canada) on behalf of Persistent Systems Inc.

* Includes current portion Rs. 312.40 million and non-current portion Rs. Nil (Previous year - current portion Rs. 89.91 million and non-current portion Rs. 299.70 million)

** Includes current portion Rs. 3.62 and non-current portion Rs. Nil (Previous year - current portion Rs. 1.94 million and non- current portion Rs. 6.47 million)

5. Employees stock option plans (ESOP)

Certain information in this note relating to number of shares, options and per share/option price has been disclosed in full and is not rounded off as stated in note 43.

d) Effect of the employee share-based payment plans on the statement of profit and loss and on its financial position Compensation expense arising from equity-settled employee share based payment plans for the year ended March 31, 2015 amounted to Rs. 31.71 million (Previous year Rs. Nil). The liability for employee stock options outstanding as at March 31,2015 is Rs. 55.65 million (Previous year Rs. 26.96 million).

6. Contingent liabilities

The Company does not have any contingent liability as on March 31, 2015 (Previous year Rs. Nil)

i. As on March 31,2015, the pending litigations in respect of direct taxes amount to Rs. 115.06 million and in respect of indirect taxes amount to Rs. 26.07 million. Based on the advice obtained and judgments in favour of the Company at the first appellate authority in the earlier years, the company''s management does not expect any outflow in respect of these litigations.

7. The Company has incurred an expenditure of Rs. 51.96 million during the financial year 2014-15 on Corporate Social Responsibility in accordance with section 135(5) of the Companies Act, 2013.

8. Details of dues to micro and small enterprises as defined under MSMED Act, 2006

There are no defaults and overdue amounts payable to suppliers, who have intimated about their status as Micro and Small Enterprises as per the provisions of Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006).

9. Loans and advances in the nature of loans given to subsidiaries and associates and firms / companies in which directors are interested

a) Advance to Persistent Systems, Inc.

- Balance as at March 31, 2015Rs.7.77 million (Previous year: Rs. 7.62 million).

- Maximum amount outstanding during the yearRs. 16.50 million (Previous year: Rs. 14.39 million).

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

b) Advance to Persistent Systems Pte. Ltd.

- Balance as at March 31, 2015 Rs. Nil (Previous year: Rs. 0.18 million)

- Maximum amount outstanding during the yearRs. 0.57 million (Previous year: Rs. 0.76 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

c) Advance to Persistent Telecom Solutions Inc.

- Balance as at March 31, 2015Rs.0.43 million (Previous year: Rs. 0.02 million)

- Maximum amount outstanding during the yearRs. 0.43 million (Previous year: Rs. 2.06 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

d) Advance to Persistent Systems Malaysia Sdn. Bhd.

- Balance as at March 31, 2015 Rs. Nil (Previous year: Rs. 19.28 million)

- Maximum amount outstanding during the yearRs. 20.14 million (Previous year: Rs. 44.66 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

e) Loan to Persistent Systems, Inc.

- Balance as at March 31, 2015Rs.312.40 million (Previous year: Rs. 389.61 million)

- MaximumamountoutstandingduringtheyearRs. 389.61 million (Previous year: Rs. 389.61 million)

- Principle and interest is payable at the end of 3 years @ LIBOR 3.5% p.a. This amount is utilized for meeting business requirements.

f) Advance to Persistent Systems France SAS

- Balance as at March 31, 2015Rs.0.04 million (Previous year: Rs. Nil)

- Maximum amount outstanding during the yearRs. 0.67 million (Previous year: Rs. Nil)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

g) Advance to CloudSquads Inc.

- BalanceasatMarch31,2015Rs.0.01 million (Previous year: Rs. Nil)

- Maximum amount outstanding during the yearRs. 0.03 million (Previous year: Rs. Nil)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

h) Loan to Klisma e-Services Private Limited

- Balance as at March 31, 2015Rs.27.43 million (Previous year: Rs. 27.43 million)

- Maximum amount outstanding during the year Rs. 27.43 million (Previous year: Rs. 27.43 million)

- Principle is payable at the end of twelve months and interest is payable quarterly @ 12 % p.a. This amount is utilized for meeting business requirements.

i) Advance to Klisma e-Services Private Limited

- Balance as at March 31, 2015Rs.0.75 million (Previous year: Rs. 0.75 million)

- Maximum amount outstanding during the yearRs. 0.75 million (Previous year: Rs. 0.75 million)

- There is no repayment schedule in respect of this advance. It is repayable on demand. This amount is utilized for meeting business requirements.

10. The Company had adjusted the difference between the cost incurred by the Trust for the purpose of purchase of shares and the exercise price of those shares which have been exercised by the employees during the earlier periods/years to General Reserve, in accordance with Guidance Note on accounting for Employee share based payment, issued by the Institute of Chartered Accountants of India. As per the provisions of the Trust Deed, the Trust is constituted as an irrevocable trust and in no event the funds of the Trust shall revert to the Company. The Company has obtained a legal opinion which states that the Company has no right to the assets of the Trust. Hence in view of the legal opinion the Company had reversed the amount of Rs. 92.85 million in the previous year which was initially transferred to General Reserve.

11. The financial statements are presented in Rs. million and decimal thereof except for per share information or as otherwise stated.

12. Previous year''s figures have been regrouped where necessary to conform to current year''s classification.

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Mar 31, 2014

1. Nature of operations

Persistent Systems Limited (the "Company") is a public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956 (the "Act"). The shares of the Company are listed on Bombay Stock Exchange and National Stock Exchange. The Company is a global company specializing in software products, services and technology innovation. The Company offers complete product life cycle services.

2. Basis of preparation

The financial statements of the Company for the year ended March 31, 2014 have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP) to comply in all material respects with the Accounting Standard notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956 read with general circular 15/2013 dated September 13, 2013, issued by the Ministry of Corporate Affairs, in respect of Section 133 of the Companies Act, 2013. These financial statements are prepared on an accrual basis and under the historical cost convention except derivative financial instruments which have been measured at fair value. The accounting policies are consistently applied by the Company during the year and are consistent with those used in previous year.

3. Segment Information

The Company''s operations predominantly relate to providing software products, services and technology innovation covering full life cycle of product to its customers. The primary reporting segments are identified based on review of market and business dynamics based on risk and returns affected by the type or class of customers for the services provided which are as follows:

a. Telecom and Wireless

b. Life Science and Healthcare

c. Infrastructure and Systems

Geographical Segments

The following table shows the distribution of the Company''s sales by geographical market regardless of from where the services were rendered.

4. Gratuity plan:

The Company has a defined benefit gratuity plan. Each employee is eligible for gratuity on completion of minimum five years of service at 15 days basic salary (last drawn basic salary) for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the Balance Sheet for the respective plans.

5. Operating leases

The Company has taken equipment and office premises on lease under cancellable operating lease arrangements. Further, the Company has also taken certain office premises under non-cancellable operating lease agreements for a period of 3 – 15 years. The escalations during non-cancellable lease period have been accounted for on a straight line basis. There are no restrictions imposed by the lease agreements. There are no subleases. The Company has an option to renew the lease agreements at the end of the lease period.

6. Related party disclosures

(i) Names of related parties and related party relationship

Related parties where control exists Subsidiaries

i. Persistent Systems, Inc.

ii. Persistent Systems Pte Ltd.

iii. Persistent Systems France SAS

i v. Persistent Systems Malaysia Sdn. Bhd.

v. Persistent Telecom Solutions Inc.

(wholly owned subsidiary of Persistent Systems, Inc.) vi. CloudSquads Inc.

(wholly owned subsidiary of Persistent Systems, Inc.)

Related parties with whom transactions have taken place during the year

Key management personnel

i. Dr. Anand Deshpande, Chairman and Managing Director ii. Mr. Nitin Kulkarni, Executive Director

Relatives of Key management personnel

i. Mr. Suresh Deshpande

(Father of the Chairman and Managing Director) ii. Mrs. Sulabha Deshpande

(Mother of the Chairman and Managing Director) iii. Mrs. Sonali Anand Deshpande

(Wife of the Chairman and Managing Director) i v. Dr. Mukund Deshpande

(Brother of the Chairman and Managing Director) v. Mrs. Chitra Buzruk

(Sister of the Chairman and Managing Director)

(iv) Gurantee given on behalf of subsidiary

Persistent Systems Limited has given a guarantee of USD 170,000 to Sunlife Assurance Company of Canada on behalf of Persistent Systems, Inc.

7. Employees stock option plans (ESOP)

Certain information in this note relating to number of shares, options and per share/option price has been disclosed in full and is not rounded off as stated in Note 43.

d) Effect of the employee share-based payment plans on the statement of profit and loss and on its financial position

Compensation expense arising from equity-settled employee share based payment plans for the year ended March 31, 2014 amounted to Rs. NIL (Previous year Rs. 0.94 Million). The liability for employee stock options outstanding as at March 31, 2014 is Rs. 26.96 Million (Previous year Rs. 30.48 Million).

e) Details of stock options granted during the year

The weighted average fair value of the stock options granted during the current year is Rs. NIL (Previous year Rs. 159.92). The Binomial tree valuation model has been used for computing the weighted average fair value considering the following inputs:

The expected volatility was determined based on historical volatility data. The historical volatility is calculated as the standard deviation of daily lognormal returns from the stock of the Company/ comparable Companies. To allow the effect of early exercise of the options the exercise period has been considered as one year after the vesting date where the share price is expected to be 2.50 times the exercise price.

f) Impact on the reported net profit and earnings per share by applying the fair value based method

Since the Company uses intrinsic value method as required by the Guidance Note on Accounting for Employee Share- based Payments issued by the Institute of Chartered Accountants of India, the impact on reported net profit and Earnings Per Share by applying the fair value method is set out as follows:

8. Contingent liabilities

The Company does not have any contingent liability as on March 31, 2014 (Previous year Rs. Nil)

9. Details of dues to micro and small enterprises as defined under MSMED Act, 2006

There are no defaults and overdue amounts payable to suppliers, who have intimated about their status as Micro and Small Enterprises as per the provisions of Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006).

10. Loans and advances in the nature of loans given to subsidiaries and associates and firms / companies in which directors are interested

a) Advance to Persistent Systems Inc.

- Balance as at March 31, 2014 Rs. 7.62 Million (Previous year: Rs. 3.71 Million).

- Maximum amount outstanding during the year Rs. 14.39 Million (Previous year: Rs. 52.47 Million).

- There is no repayment schedule in respect of this loan. It is repayable on demand.

b) Advance to Persistent Systems Pte. Ltd

- Balance as at March 31, 2014 Rs. 0.18 Million (Previous year: Rs. 0.18 Million)

- Maximum amount outstanding during the year Rs. 0.76 Million (Previous year: Rs. 1.98 Million)

- There is no repayment schedule in respect of this loan. It is repayable on demand.

c) Advance to Persistent Telecom Solutions Inc.

- Balance as at March 31, 2014 Rs. 0.02 Million (Previous year: Rs. 0.11 Million )

- Maximum amount outstanding during the year Rs. 2.06 Million (Previous year: Rs. 1.77 Million )

- There is no repayment schedule in respect of this loan. It is repayable on demand.

d) Advance to Persistent Systems Malaysia Sdn. Bhd.

- Balance as at March 31, 2014 Rs. 19.28 Million (Previous year: Rs. Nil)

- Maximum amount outstanding during the year Rs. 44.66 Million (Previous year: Rs. Nil)

- There is no repayment schedule in respect of this loan. It is repayable on demand.

e) Loan to Persistent Systems Inc.

- Balance as at March 31, 2014 Rs. 389.61 Million (Previous year: Rs. 352.79 Million)

- Maximum amount outstanding during the year Rs. 389.61 Million (Previous year: Rs. 352.79 Million)

- Principle and interest is payable at the end of 3 years @ LIBOR 3.5% p.a.

f) Loan to Persistent Systems France SAS

- Balance as at March 31, 2014 Rs. Nil (Previous year: Rs. 29.91 Million)

- Maximum amount outstanding during the year Rs. 29.91 Million (Previous year: Rs. 31.20 Million)

- Principal and interest is payable at the end of 3 years @ 3.43% p.a.

11. a) The ESOP schemes of Persistent Systems Limited ("the Company") are administered through the ESOP Trust. As per the provisions of the Trust Deed, the Trust is constituted as an irrevocable trust and in no event the funds of the Trust shall revert to the Company. The Company has obtained a legal opinion which states that the Company has no right to the assets of the Trust. In view of this position, the Company has not consolidated the financial statements of the ESOP Trust in the standalone financial statements of the Company.

b) The Company had adjusted the difference between the cost incurred by the Trust for the purpose of purchase of shares and the exercise price of those shares which have been exercised by the employees during the earlier periods/years to General Reserve, in accordance with Guidance Note on accounting for Employee share based payments, issued by the Institute of Chartered Accountants of India. However in view of the legal opinion referred to in a) above, the Company has reversed the amount of Rs. 92.85 Million, initially transferred to General Reserve.

12. The financial statements are presented in Rs. Million and decimal thereof except for per share information or as otherwise stated.

13. Previous year''s figures have been regrouped where necessary to conform to current year''s classification.

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Mar 31, 2012

1. Nature of operations

Persistent Systems Limited (the "Company") is predominantly engaged in Outsourced Software Product Development services. The Company offers complete product life cycle services.

2. Basis of preparation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The financial statements have been prepared to comply in all material respects with the Accounting Standards ('AS') notified by the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. These financial statements have been prepared under the historical cost convention on an accrual basis.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year except further change in accounting policy as explained below:

a) Reconciliation of the shares outstanding at the beginning and at the end of the reporting period There is no movement in the shares outstanding at the beginning and at the end of the reporting period.

b) Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

During the year ended March 31,2012, the amount of per share dividend recognized as distributions to equity shareholders is Rs 6 (March 31, 2011: Rs 5.50).

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive 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.

3. Segment information

The primary reporting segments are identified based on risk and returns affected by the type or class of customers for the services provided as follows:

a. Infrastructure and Systems

b. Life science and Healthcare

c. Telecom and Wireless

4. Gratuity plan

The Company has a defined benefit gratuity plan. Under the gratuity plan, each employee is eligible for gratuity on completion of minimum five years of service at 15 days basic salary (last drawn basic salary) for each completed year of service. The scheme is funded with an Insurance Company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognised in the Statement of Profit and Loss and the funded status and amounts recognised in the Balance Sheet for the gratuity plan.

5. Operating leases

The Company has taken equipment and office premises on lease under cancellable operating lease arrangements. Further, the Company has also taken certain office premises under non-cancellable operating lease agreement for a period of 3 -15 years. There are no escalations during non-cancellable lease period. There are no restrictions imposed by the lease agreements. There are no subleases. The Company has an option to renew the lease agreements at the end of the lease period.

6. Employees stock options(ESOP)

Certain information in this note relating to number of shares, options and per share/option price has been disclosed in full and is not rounded off as stated in note 45.

d) Effect of the employee share-based payment plans on the Profit and Loss Account and on its financial position Compensation expense arising from equity-settled employee share based payment plans for the year ended March 31, 2012 amounted to Rs 8.36 Million (Previous year Rs 7.11 Million). The liability for employee stock options outstanding as at year end is Rs 33.51 Million (Previous year Rs 34.76 Million).

The expected volatility was determined based on historical volatility data. The historical volatility is calculated as the standard deviation of daily lognormal returns from the stock of the Company/comparable Companies. To allow the effect of early exercise of the options the exercise period has been considered as one year after the vesting date where the share price is expected to be 2.50 times the exercise price.

f) Adjustment to general reserve on account of ESOP issued through trust

The Company has adjusted Rs 32.36 Million (Previous year: Rs 20.36 Million) to General Reserve as the difference between the cost incurred by the Trust for the purpose of shares and the exercise price of those shares which have been exercised by the employee during the year, in accordance with Guidance Note on accounting for Employee Share based Payment, issued by the Institute of Chartered Accountants of India and SEBI Guidelines.

7. Contingent liabilities

(In Rs Million) As at As at

March 31, 2012 March31,2011

Claims against the Company not acknowledged as debts

-Legalclaims[Note(i)] - 0.18

-lncometax[Note(ii)] 114.56 81.70

114.56 81.88

(i) This represents disputed legal claim filed by an ex-employee, which has been since decided in the favour of the Company.

(ii) This represents disputed income tax demands against which the Company has filed appeals for the respective years with relevant authorities. The management is confident that the matter would be decided in favour of the Company. Consequently no provision has been made in the books of account in respect of such disputed income tax demands.

8. Details of dues to micro and small enterprises as defined under MSMED Act, 2006 There are no amounts that need to be disclosed pertaining to micro and small enterprises under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006).

As at March 31, 2012, no supplier has intimated the Company about its status as Micro or Small enterprises or its registration with the appropriate authority under 'The Micro, Small and Medium Enterprises Development Act, 2006'.

9. Amalgamation of Persistent Systems Limited (PSL), Persistent eBusiness Solutions Limited (PeBS) and Persistent Systems and Solutions Limited (PSSL)

a) Pursuant to the scheme of amalgamation ("the Scheme") sanctioned by the Honourable High Court of Bombay vide Order dated February 3, 2012, PeBS and PSSL, subsidiaries of the Company, have been merged with the Company with effect from April 1, 2011, an Appointed Date. The Company completed the process of Amalgamation on March 16, 2012 by filing of above Court Order with the Registrar of Companies.

PeBS was engaged in software development, consultancy and system integration services.

PSSL was set up to inter alia, mainly provide software development services from Special Economic Zone.

b) Pursuant to the Scheme:

(i) The authorised share capital of the Company has been enhanced without any liability for payment of any additional fee or stamp duty. Accordingly, authorised share capital of the Company of Rs 1,000 Million (100 Million equity shares ofRs 10 each) has been enhanced to Rs 1,120 Million (112 Million equity shares of Rs 10 each).

(ii) The assets and liabilities, rights and obligation of erstwhile PeBS and PSSL have been vested with the Company effective April 1, 2011. The Scheme has, accordingly, been given effect to in these accounts. The amalgamation has been accounted for under the "Pooling of Interests" as prescribed under notified "Accounting Standard 14 - Accounting for Amalgamations" (AS-14) as per Scheme of Amalgamation. Accordingly, the assets and liabilities of erstwhile PeBS and PSSL as at April 1, 2011 have been taken over at book value.

(iii) Further pursuant to the scheme, the balance appearing as "Investments in PeBS" and "Investments in PSSL" in the books of the Company, as on the appointed date, has been cancelled against the "Equity Share Capital" appearing in the books of the subsidiary companies. The excess of net assets taken from PeBS and PSSL over the "Investments in PeBS" and "Investments in PSSL" ofRs 10.50 Million has been adjusted against the general reserve.

(vi) The Company has reported the transactions of PSSL and PeBS from April 1,2011 as if the transactions were undertaken by the Company. The Company has included profit of Rs 89.08 Million of PSSL and of Rs 4.46 Million of PeBS for year ended March 31, 2012, in its Statement of Profit and Loss.

10. Loans and advances in the nature of loans given to subsidiaries and associates and firms/companies in which directors are interested

a) Advance to Persistent Systems, Inc.

- Balance as at March 31, 2012: Rs 10.52 Million (Previous year: Rs 4.93 Million).

- Maximum amount outstanding during the year: Rs 62.92 Million (Previous year: Rs 30.96 Million).

- There is no repayment schedule in respect of this loan. It is repayable on demand.

b) Advance to Persistent Systems Pte. Ltd.

- Balance as at March 31, 2012: Rs 1.91 Million (Previous year: Rs 1.04 Million)

- Maximum amount outstanding during the year: Rs 1.93 Million (Previous year: Rs 1.04 Million)

- There is no repayment schedule in respect of this loan. It is repayable on demand.

c) Advance to Persistent Systems France S.A.S.

- Balance as at March 31, 2012: Rs 1.48 Million (Previous year: NIL)

- Maximum amount outstanding during the year: Rs 1.51 Million (Previous year: NIL)

- There is no repayment schedule in respect of this loan. It is repayable on demand.

d) Loan to Persistent Systems, Inc.

- Balance as at March 31, 2012: Rs 78.60 Million (Previous year: Rs 54.93 Million)

- Maximum amount outstanding during the year: Rs 82.19 Million (Previous year: Rs 55.82 Million)

- Principle and interest is payable at the end of 3 years @ LIBOR 3.5% p.a.

e) Loan to Persistent Systems France S.A.S.

- Balance as at March 31, 2012: Rs 8.83 Million (Previous year: Nil)

- Maximum amount outstanding during the year: Rs 9.09 Million (Previous year: NIL)

- Principal and interest is payable at the end of 3 years @ 3.43% p.a.

11. Comparatives

Till the previous reporting period, the Company was using pre-revised Schedule VI to the Companies Act 1956, for preparation and presentation of its financial statements. During the year the revised Schedule VI notified under the Companies Act 1956, has become applicable to the Company.

The Company has reclassified previous year figures to conform to this year's classification. Except accounting for dividend on investments in subsidiaries, the adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it significantly impacts presentation and disclosures made in the financial statements, particularly presentation of Balance Sheet.

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Mar 31, 2010

1. Nature of operations

Persistent Systems Limited (the "Company") is predominantly engaged in Outsourced Software Product Development services. The Company offers complete product life cycle services.

2. Securities for loans

The export packing credit is secured by hypothecation of present and future receivables of the Company on pari passu basis with Bank of India and Citibank N.A. There is no balance payable as at March 31, 2010 (previous year Rs. NIL).

3. Contingent liabilities not provided for (In Rs. Million)

Particulars As at As at

March 31, March 31,

2010 2009

Claims against the Company not acknowledged as debts

Legal Claims filed by the ex employee for salary and other benefits 0.18 0.29

ESIC - 4.92

Income Tax (Note 1) 24.03 -

24.21 5.21

Note 1

Contingent liability of Rs. 24.03 Million (previous year Rs. NIL) represents disputed income tax demands pertaining to AY 2002-2003 and AY 2006-2007 arising from disallowances of the Companys claim of tax holiday under section 10A of the Income Tax Act, 1961.

The Company believes that such claims are allowable and is in the process of filing the necessary appeals with relevant authorities. Consequently, no provision has been made in the books of accounts in respect of such disputed income tax demands.

4. Gratuity and other post-employment benefit plans:

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days basic salary (last drawn basic salary) subject to a maximum of 30 days basic salary (last drawn basic salary) as per the rules of the Company for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognised in the Profit and Loss Account and the funded status and amounts recognised in the Balance Sheet for the respective plans.

Profit and Loss account

5. Deferred Tax

The Company enjoys a tax holiday under section 10A of the Income Tax Act, 1961, upto March 31, 2011. The timing differences arising at March 31, 2010 and not reversing during the tax holiday period have been recognised in the books of accounts as summarized below

6. Related party transactions

I. Names of related parties

Subsidiaries:

i. Persistent eBusiness Solutions Limited

ii. Persistent Systems, Inc.

iii. Persistent Systems Pte. Ltd.

iv. Persistent Systems and Solutions Limited

Key Management Personnel

i. Dr. Anand Deshpande, Chairman and Managing Director

ii. Mr. S. P. Deshpande, Non Executive Director (Executive Director upto October 31, 2009)

Relatives of Key Management Personnel:

i. Mrs. Chitra Buzruk (Relative of the Chairman and Managing Director and a Director)

ii. Mrs. Sulabha Suresh Deshpande (Relative of the Chairman and Managing Director and a Director)

iii. Mrs. Sonali Anand Deshpande (Relative of the Chairman and Managing Director)

iv. Dr. Mukund Suresh Deshpande (Relative of the Chairman and Managing Director and a Director)

Notes:

1. No contractual life is defined in the schemes.

2. Compensation expense arising from employee share based payment plans amounted to Rs. 19.45 Million (previous year Rs. 14.83 Million).

3. Advance to the Trust, as on the balance sheet date in respect of shares allotted by the Company to the Trust, amounted to Rs. NIL (previous year Rs. 50.60 Million). As illustrated in the example in the appendix to the Guidance Note on accounting for Employee share based payment, issued by the ICAI, had the advance been presented as a reduction from equity, the Equity Share Capital would have been reduced by Rs. NIL (previous year Rs. 6.06 Million) and Share Premium would have been reduced by Rs. NIL (previous year Rs. 44.54 Million)

4. The Company has adjusted Rs. 47.22 Million to General Reserve as the difference between the cost incurred by the Trust for the purpose of shares and the exercise price of those shares which have been exercised by the employee during the current year, in accordance with Guidance Note on accounting for Employee share based payment, issued by the ICAI.

5. All method of settlement for all the schemes is equity based.

Stock Options granted

The weighted average fair value of stock options granted during the year was Rs. 48.93. The Binomial tree valuation model has been used for computing the weighted average fair value considering the following inputs:

No grants were issued during the previous year. Accordingly, no disclosure has been made for the previous year ended March 31, 2009.

The expected volatility was determined based on historical volatility data. The volatility is calculated as the standard deviation of daily lognormal returns from the stock of the Company for a time period of one year. To allow the effect of early exercise of the options the exercise period has been considered as one year after the vesting date where the share price is expected to be 2.50 times the exercise price.

Since the enterprise used the intrinsic value method the impact on the reported net profit and earnings per share by applying the fair value based method.

In March 2005 the ICAI has issued a guidance note on "Accounting for Employees Share Based Payments" applicable to employee based share plan the grant date in respect of which falls on or after April1, 2005. The said guidance note requires the Proforma disclosures of the impact of the fair value method of accounting of employee stock compensation accounting in the financial statements. Applying the fair value based method defined in the said guidance note, the impact on the reported net profit and earnings per share would be as follows

* The Company depreciates fixed assets based on estimated useful lives that are lower than those implicit in Schedule XIV of the Companies Act, 1956. Accordingly, the rates of depreciation used by the Company are higher than the minimum prescribed by Schedule XIV.

7. Requirement of clause 3, 4C and 4D of Part II to schedule VI of the Companies Act, 1956

The Company is engaged in the development of software and related services. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give quantitative details of sales and certain information as required under paragraphs 3, 4C and 4D of Part II to schedule VI of the Companies Act, 1956. The information required under clause 4D is given hereunder to the extent considered applicable.

8. Dues to Micro and Small enterprises

There were no Micro and Small enterprises to whom amounts are outstanding for more than 45 days, as at March 31, 2010 (previous year Rs. NIL).

As at March 31, 2010, no supplier has intimated the Company about its status as Micro or Small enterprises or its registration with the appropriate authority under ‘The Micro, Small and Medium Enterprises Development Act, 2006’.

9. Share issue expenses

The Company had deferred its Initial Public Offer (IPO) during the financial year 2008-09 and therefore, had written off share issue expenses relating to that IPO amounting to Rs. 14.73 Million in 2008-09 as an exceptional item.

* The allotment of shares was completed on March 30, 2010 and the Company was yet to be listed on the stock exchanges at March 31, 2010, the proceeds from IPO were pending utilisation as at March 31, 2010.

10. Previous year comparatives

Previous year figures have been regrouped where necessary to confirm to current period’s classification.

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Mar 31, 2009

1. Nature of operations

Persistent Systems Limited (the "Company") is predominantly engaged in Outsourced Product Development services for Independent Software Vendors ("ISVs") and Enterprises. The Company offers complete product life cycle services from end to end,

2. Securities for loans

The export packing credit is secured by hypothecation of present and future receivables of the Company on pari passu basis with Bank of India and Citibank N.A. There is no balance payable as at March 31, 2009 and March 31, 2008.

The Company has received a demand notice dated December 31, 2008, u/s 156 of the Income Tax Act, for the assessment year 2005-06 for Rs. 2.57 Million. The Commissioner of Income Tax (Appeals - II), as per the order dated November 11, 2008, has passed an order granting relief of Rs. 2.61 Million for the assessment year 2003-04.

3. Gratuity and other employment benefit plans:

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days basic salary (last drawn basic salary) subject to a maximum of 30 days basic salary (last drawn basic salary) as per the rules of the Company for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summarise the components of net benefit expense recognised in the Profit and Loss Account and the funded status and amounts recognised in the Balance Sheet for the respective plans.

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled,

4, Investment in subsidiary

During the year ended March 31, 2009 the Company has invested Rs. 14.50 Million in Persistent Systems and Solutions Limited, a wholly owned subsidiary set up in India.

The Company has, also made an additional investment of SGD 0.40 Million during the year in Persistent Systems Pte. Limited, a wholly owned subsidiary in Singapore.

Note

i. Pursuant to resolution passed at an Extra Ordinary General Meeting held on September 17, 2007 equity shares were issued as bonus shares in the ratio of 5 Equity Shares for every 2 Equity Shares held by capitalisation of reserves,

ii. Pursuant to resolution passed at an Extra Ordinary General Meeting held on September 17, 2007, 209,045 Series A Participatory Cumulative Optionally Convertible Preference Shares of Rs 100 each were converted into Equity Shares of Rs. 10 each. For computation of diluted EPS, weighted average number of equity shares includes 209,045 Series A Participatory Cumulative Optionally Convertible Preference Shares of Rs. 100 each up to the date of such conversion into equity shares.

5. Share issue expenses

The Company deferred its Initial Public Offer (IPO), which was planned during the year, due to adverse market sentiment. The Company has, therefore, written off share issue expenses amounting to Rs. 14.73 Million (Previous year Rs. 35.18 Million) as an exceptional item.

6, Related party transactions

A. Names of related parties

Subsidiaries

i. Persistent eBusiness Solutions Limited

ii. Persistent Systems, Inc.

iii. Persistent Systems Pte. Limited

iv. Persistent Systems and Solutions Limited

Key management personnel

i. Dr. Anand Deshpande, Chairman and Managing Director ii. Mr. S. P. Deshpande, Director

Relatives of key management personnel

i. Mrs. Chitra Buzruk (Relative of the Chairman and Managing Director and a Director)

ii. Mrs. Sulabha Suresh Deshpande (Relative of the Chairman and Managing Director and a Director)

iii. Mrs. Sonali Anand Deshpande (Relative of the Chairman and Managing Director)

iv. Dr. Mukund Suresh Deshpande (Relative of the Chairman and Managing Director and a Director)

Note 1: No contractual life is defined in the schemes.

All the numbers provided in this above table are after ignoring fractions Compensation expense arising from employee share based payment plans amounted to Rs. 14.83 million (Previous year Rs. 5.89). No fresh grants have been granted during the year.

Had compensation cost been determined in a manner consistent with fair value approach there will be no significant impact on the companys net income and earning per share.

Advance to the Trust, as on the bajance sheet date in respect of shares allotted by the Company to the Trust, amounted to Rs. 50.60 million (Previous year Rs. 55.10 million). As illustrated in the example in the appendix to the Guidance Note, had the advance been presented as a reduction from equity, the Equity Share Capital would have been reduced by Rs. 6.06 million (Previous year Rs. 6.60 million) and Share Premium would have been reduced by Rs. 44.54 million (Previous year Rs.48.50 million).

7. Requirement of clause 3, 4C and 4D of Part II to schedule VI of the Companies Act, 1956

The Company is engaged in the development of software and related services. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give quantitative details of sales and certain information as required under paragraphs 3, 4C and 4D of Part II to schedule VI of the Companies Act, 1956. The information required under clause 4D is given hereunder to the extent considered applicable.

8. Dues to Micro, Small and Medium

There were no amounts due to Micro, Small and Medium undertaking outstanding for more than 30 days, as at March 31, 2009.

During the year, the Company had sent requests to vendors for confirming their status as Micro, Small and Medium enterprises as per their registration with the appropriate authority under the Micro, Small and Medium Enterprises Development Act, 2006. Based on the confirmations received from such vendors, the management has confirmed that there are no dues outstanding as on March 31, 2009 and there were no payments made during the period beyond 30 days, hence no provision for interest is required.

9. Previous year comparatives

Previous years figures have been regrouped where necessary to confirm to current years classification.

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Mar 31, 2007

1. Nature of Operations

Persistent Systems Private Limited is predominantly engaged in Outsourced Product Development services for Independent Software Vendors (ISVs) and Enterprises. The Company offers complete product life cycle services from end to end.

2. Issue of Series A Participatory Cumulative Optionally Convertible Preference Shares During the financial year 2005-06, the Company had issued 2,09,045 Series A Participatory Cumulative Optionally Convertible Preference Shares of Rs. 100 each at a total premium of Rs. 4,000 per share. The terms of redemption and conversion of preference shares are as follows On or after November 17, 2009 the preference shareholders have a right to require the Company to undertake a Qualified Initial Public Offer (QIPO).

If the Company is not able to commence the process of QIPO within 90 days from the notice from the preference shareholders, then they have a right to exercise the exit transaction or buy back option to provide liquidity to their investments so that they receive the higher of:

a. Two times the Series A Adjusted Price for each share to be bought back together with all unpaid dividends which have been declared but remaining unpaid; and

b. Fair market value per share as determined by an independent accounting firm, together with all dividends, which have been declared but remaining unpaid

The Series A Adjusted Price as mentioned in point 3(a) above is required to be proportionally or appropriately adjusted for

i. any distribution of securities by way of return of capital;

ii. any bonus issue by the Company;

iii. any stock split, consolidation or other similar action in respect of the share capital of the Company; or

iv. any other reorganisation, recapitalisation, reclassification, or similar event in respect of the share capital of the Company.

For the purpose of the above terms, "QIPO" shall mean an initial public offering of shares by the Company resulting in gross proceeds to it of not less than the Indian Rupee equivalent of USD 35 Million (USD Thirty Five Million) resulting in the Companys Shares being listed on in the Relevant Market.

During the financial year 2005-06, the Company bought back 9,79,450 Equity Shares in pursuance of Section 77A of the Companies Act, 1956 by utilising the equity share capital and share premium account. Consequent to buy back, the Company has created capital redemption reserve of Rs. 97.95 Lakhs in the financial year 2005-06.

3.1 Securities for loans

The Companys immovable properties and moveable fixed assets located at Bhageerath and Aryabhata - Pingala in Pune are secured by first mortgage and charge in respect of term loan sanctioned by the Export Import Bank of India (EXIM) Bank. The Company has prepaid the loan and is in the process of clearing the charge.

The export packing credit is secured by hypothecation of entire current assets of the Company on pari passu basis with Bank of India and Citibank NA. The export packing credit is also secured by hypothecation of entire receivables of the Company on pari passu basis with State Bank of India. There is no balance payable as at the end of the financial year 2006-07.

4. Employees stock options

Based on the guidance note on share based payments issued by the Institute of Chartered Accountants of India, the Company had made a provision of Rs. 373.41 Lakhs in respect of stock appreciation rights under Employees Stock Option Plan (ESOP - I), Employees Stock Option Plan - II! (ESOP - III) and an amount of Rs. 2.93 Lakhs in respect of options to purchase shares under ESOA - ii scheme.

During the year, the Company converted the stock appreciation rights under the ESOP-I, ESOP - II! and ESOP - V schemes into option to purchase shares. As a result of this conversion, the Company is no more liable to pay compensation for stock appreciation rights to the employees. Therefore the Company has reversed the provision in respect of stock appreciation rights amounting to Rs. 376.34 Lakhs as no longer required.

Based on the assessment of fair value of equity shares of the Company by the independent valuer, no compensation expense is required to be recognised in the books for the shares granted under the ESOP schemes,

4.1 Adoption of Accounting Standard 15 (AS -15) (Revised 2005) employee benefits The Company has gone for early adoption of the Accounting Standard 15 (AS-1 5) (Revised 2005) issued by the Institute of Chartered Accountants of India, which is mandatory from accounting periods starting from December 7, 2006. Accordingly, the Company has provided for leave encashment on short term leaves on actual cost as against actuarial valuation in the previous year. Further in accordance with the transitional provision in the revised accounting standard, Rs. 107.98 Lakhs has been adjusted to the General Reserve for leave encashment.

4.2 Gratuity and other post-employment benefit plans

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 1 5 days basic salary (last drawn basic salary) subject to a maximum of 30 days basic salary (last drawn basic salary) as per the rules of the Company for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarise the components of net benefit expense recognised in the Profit and Loss Account and the funded status and amounts recognised in the balance sheet for the respective plans.

The Company maintains gratuity fund, which is being administered by Life Insurance Corporation of India (the insurer). The amount of investment as at March 31, 2007 is Rs. 290.93 Lakhs.

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

4.3 Sale of software services and products

Sale of software services and products include foreign currency fluctuation loss of Rs. 331,02 Lakhs (Previous year gain Rs. 144,29 Lakhs)

Note

a. Weighted average number of equity shares for diluted EPS includes 2,09,045 Series A participatory Redeemable Cumulative Optionally Convertible Preference Shares of Rs 100 each. The preference shareholders have a right to convert one share of Rs. 100 each into 10 Equity shares of Rs. 10 each prior to the Initial public offer (IPO).

5. Supplementary statutory information

5.1 Remuneration paid to executive and non-executive Directors

As the future liability for gratuity and leave encashment is provided on an actuarial basis for the Company as a whole, the amount pertaining to the directors is not ascertainable and, therefore, not included above.

Previous years remuneration include annual remuneration paid to Mr. Ashutosh Joshi and Mr. Ajit Tamhankar although they resigned as Directors on November 18, 2005.

Previous years sitting fees include fees paid to Dr. Shridhar Shukla who resigned as Director on November 18, 2005.

6.1 Merger of a subsidiary

The Company received sanction from the Bombay High Court, Mumbai and Bombay High Court, Goa bench for amalgamation of ControlNet (India) Pvt. Ltd. (ControlNet) effective from April 1, 2006. Pursuant to this, all assets, liabilities and losses of ControlNet are merged with the assets, liabilities and reserves of the Company with effect from April 1, 2006, by following "pooling of interest method" as prescribed in Accounting Standard 14 (AS-14) as issued by the Institute of Chartered Accountants of India.

The difference between the amounts recorded as investment and the amount of share capital plus reserves of ControlNet has been adjusted in the general reserve amounting to Rs. 630.91 Lakhs.

7. Related party disclosures

I. Names of related parties

Subsidiaries

ControlNet (India) Pvt. Ltd. (Subsidiary till March 31, 2006) Persistent eBusiness Solutions Pvt, Ltd. Persistent Systems, Inc.

Key Management Personnel

Dr. Anand S. Deshpande, Chairman and Managing Director Mr. Suresh P.Deshpande, Director Mr. Ashutosh Joshi (Resigned as Director on November 18, 2005) Mr. Ajit Tamhankar (Resigned as Director on November 18,2005)

Company in which a Non Executive Director was a Director

Great Software Laboratory Private Limited. (Resigned as Director on November 18, 2005)

Relatives of Key Management Personnel

Mrs. Chitra Buzruk (Relative of the Chairman and Managing Director and Executive Director)

Mrs. Sulabha Suresh Deshpande (Relative of the Chairman and Managing Director and Executive Director)

Mrs. Sonali Anand Deshpande (Relative of the Chairman and Managing Director and Executive Director)

Mr. Bhalchandra N. Shukla (Relative of ex-Non Executive Director, Dr. Shridhar Shukla who resigned as Director on November 18,2005)

Mr. Shreekanth Joshi (Relative of ex-Director, Mr. Ashutosh Joshi who resigned as Director on November 18,2005)

8. Requirement of clause 3, 4C and 4D of Part II to schedule VI of the Companies Act, 1956

The Company is engaged in the development of software and related services. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give quantitative details of sales and certain information as required under paragraphs 3, 4C and 4D of Part II to schedule VI of the Companies Act, 1956. The information required under clause 4D is given hereunder to the extent considered applicable

9. Dues to smal lscale industrial undertakings

On the basis of information available with the Company, there were no small scale undertakings to whom the Company owed a sum which was outstanding for more than 30 days as at March 31, 2007 (previous year ended March 31, 2006 Rs. Nil).

10. Previous year comparatives

The current years figures of the Company include twelve months operating results of erstwhile ControlNet (India) Pvt. Ltd., which merged with the Company effective from April 1, 2006. Therefore, the current year figures are strictly not comparable with previous year figures.

Previous years accounts were audited by M/s Joshi Apte & Co., Chartered Accountants and have been reclassified wherever necessary to confirm with the current years presentation.