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A Oneindia Venture

Nifty 25,966.40 +0.58%

22k Gold ₹ 12,300 /gm

Sensex 84,929.36 +0.53%

Nifty 25,966.40 +0.58%

22k Gold ₹ 12,300 /gm

Sensex 84,929.36 +0.53%

Nifty 25,966.40 +0.58%

22k Gold ₹ 12,300 /gm

Notes to Accounts of Sonata Software Ltd.

Mar 31, 2025

i. Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of economic benefits will be required to settle
the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to
settle the present obligation at the end of the reporting period, taking into account the risks and
uncertainties surrounding the obligation.

When some or all of the economic benefits required to settle a provision are expected to be
recovered from a third party, the receivable is recognized as an asset, if it is virtually certain that
reimbursement will be received and the amount of the receivable can be measured reliably.

Provisions for onerous contracts are recognized when the expected benefits to be derived by the
Company from a contract are lower than the unavoidable costs of meeting the future obligations
under the contract. Provisions for onerous contracts are measured at the present value of lower
of the expected cost of terminating the contract and the expected net cost of continuing with the
contract, which is determined based on the incremental costs of fulfilling the obligation under
the contract and an allocation of other costs directly related to fulfilling the contract. Before a
provision is established, the Company''s recognises any impairment loss on the assets associated
with that contract.

j. Income taxes

Income tax comprises current and deferred tax. Income tax expense is recognized in the statement
of profit and loss except to the extent it relates to items directly recognized in equity or in other
comprehensive income.

a) Current income tax - Current income tax liability/ (asset) for the current and prior periods are
measured at the amount expected to be recovered from or paid to the taxation authorities based
on the taxable income for the year. The tax rates and tax laws used to compute the current tax
amount are those that are enacted or substantively enacted by the reporting date and applicable
for the year. The Company off sets current tax assets and current tax liabilities, where it has a
legally enforceable right to set off the recognized amounts and where it intends either to settle
on a net basis or to realize the asset and liability simultaneously.

b) Deferred tax - Deferred income tax is recognized using the balance sheet approach. Deferred
income tax assets and liabilities are recognized for deductible and taxable temporary differences
arising between the tax base of assets and liabilities and their carrying amount in financial
statements, except when the deferred income tax arises from the initial recognition of goodwill
or an asset or liability in a transaction that is not a business combination and affects neither
accounting nor taxable profits or loss at the time of the transaction.

Deferred income tax asset is recognized to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences and the carry forward of unused tax
credits and unused tax losses can be utilized. Deferred income tax liabilities are recognized for all
taxable temporary differences.

The carrying amount of deferred income tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax asset to be utilized.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply
in the period when the asset is realized or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset when it relates to income taxes levied by the same
taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a
net basis.

k. Cash flow 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
receipt or payments and item of income or expense associated with investing or financing cash-flows.
The cash flow from operating, investing and financing activities of the Company are segregated.

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes
cash on hand, deposits held at call with financial institutions, other short-term highly liquid
investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.

l. Revenue recognition

The Company derives revenue primarily from Information Technology Services and Solutions. The
Company recognizes revenue when it transfers control over a product or a service to a customer. The
method for recognizing revenues and costs depends on the nature of the services rendered.

a) Time and materials contracts

Revenues from contracts priced on a time and material basis are recognised as the related
services are performed and related costs are incurred. Revenues in excess of billings is recorded
as unbilled revenue and is classified as a financial asset for these cases as right to consideration is
unconditional upon passage of time.

b) Fixed-price contracts

The Company applies the percentage of completion method in accounting for fixed price
contracts. Use of the percentage of completion method requires the Company to estimate the
efforts or costs expended to date (input method) as a proportion of the total efforts or costs to
be expended. Efforts or costs expended have been used to measure progress towards completion
as there is a direct relationship between input and productivity. Provisions for estimated losses, if
any, on uncompleted contracts are recorded in the period in which such losses become probable
based on the expected contract estimates at the reporting date.

If the Company does not have a sufficient basis to measure the progress of completion or to
estimate the total contract revenues and costs, revenue is recognized only to the extent of
contract cost incurred for which recoverability is probable.

When total cost estimates exceed revenues in an arrangement, the estimated losses are
recognized in the statement of profit and loss in the period in which such losses become probable
based on the current contract estimates.

Judgement is also required to determine the transaction price for the contract and to ascribe
the transaction price to each distinct performance obligation. The transaction price could be
either a fixed amount of customer consideration or variable consideration with elements such as
volume discounts, service level credits, performance bonuses, price concessions and incentives.
Any consideration payable to the customer is adjusted to the transaction price, unless it is a
payment for a distinct product or service from the customer. The estimated amount of variable
consideration is adjusted in the transaction price only to the extent that it is highly probable
that a significant reversal in the amount of cumulative revenue recognised will not occur and is
reassessed at the end of each reporting period.

For allocating the transaction price, the Company has measured the revenue in respect of each
performance obligation of a contract at its relative standalone selling price. The price that is
regularly charged for an item when sold separately is the best evidence of its standalone selling
price. In cases where the Company is unable to determine the standalone selling price, the
Company uses the expected cost plus margin approach in estimating the standalone selling price.
Fixed Price Development contracts and related services, the performance obligation are satisfied
as and when the services are rendered since the customer generally obtains control of the work as
it progresses.

Contract modifications are accounted for when additions, deletions or changes are approved
either to the contract scope or contract price. The accounting for modifications of contracts
involves assessing whether the services added to an existing contract are distinct and whether
the pricing is at the standalone selling price. Services added that are not distinct are accounted
for on a cumulative catch up basis, while those are distinct are accounted for prospectively, either
as a separate contract, if the additional services are priced at the standalone selling price, or as a
termination of the existing contract and creation of a new contract if not priced at the standalone
selling price.

Revenues from fixed-price contracts are recognized using the "percentage-of-completion"
method. Invoicing to the clients is based on milestones as defined in the contract. This would
result in the timing of revenue recognition being different from the timing of billing the
customers. Unbilled revenue for fixed price contracts is classified as non financial asset as the
contractual right to consideration is dependent on completion of contractual milestones.

Revenue recognition for delivered elements is limited to the amount that is not contingent on the
future delivery of services and future performance obligations.

c) Hardware/software products and licenses

Revenues from sale of product and licenses are recognised at the point in time when the license is
delivered to the customer, simultaneously with the transfer of control. In case of customization the
same is recognised over the life of the contract using the proportionate completion method, with
contract costs determining the degree of completion. Foreseeable losses on such contracts are
recognised when probable.

When another party is involved in providing goods or services to the customer, the entity
determines whether the nature of its promise is a performance obligation to provide the specified
goods or services itself (i.e. the entity is a principal) or to arrange for those goods or services to
be provided by the other party (i.e. the entity is an agent). The entity determines whether it is a
principal or an agent for each specified good or service promised to the customer. A specified
good or service is a distinct good or service (or a distinct bundle of goods or services) to be
provided to the customer. Company recognises revenue in the gross amount of consideration to
which it expects to be entitled in exchange for the specified good or service transferred. Company
recognises revenue in the amount of any fee or commission to which it expects to be entitled in
exchange for arranging for the specified goods or services to be provided by the other party.

d) Maintenance contracts

Revenue from fixed price maintenance contracts is recognised based on the right to invoice
for services performed for contracts in which the invoicing is representative of the value being
delivered. If invoicing is not consistent with value delivered, revenue is recognized as the services
are performed. When services are performed through an indefinite number of repetitive acts over
a specified period, revenue is recognised on a straight-line basis over the specified period unless
some other method better represents the manner in which services are performed.

Revenue is measured based on the transaction price, which is the consideration, adjusted for
rebates, credits, price concessions, discounts, pricing incentives and other similar items if any,
as specified in the contract with the customer. Sales tax / Value Added Tax (VAT) / Goods and
Services Tax (''GST'') is not received by the Company on its own account. Rather, it is tax collected
on value added to the commodity / service rendered by the seller on behalf of the Government.
Accordingly, it is excluded from revenues.

Contract assets and contract liabilities

Contract assets represent cost and earnings in excess of billings as at the end of the reporting
period. Contract assets are classified as unbilled receivables (only act of invoicing is pending)
when there is unconditional right to receive cash, and only passage of time is required, as per
contractual terms.

Contract liabilities(Unearned revenues) represent billing in excess of revenue recognized.

Revenues are reported net of GST and applicable discounts and allowances.

m. Government grants:

Grants from the Government are recognised by the Company when there is reasonable assurance that
the conditions attached to the grant will be complied and it will be received.

Government grants related to revenue are recognised on a systematic basis in the statement of profit
and loss over the periods necessary to match them with the related costs which they are intended to
compensate. Such grants are deducted in reporting the related expense. The grant pertaining to an
asset is recognized as income over the expected useful life of the asset.

n. Dividend

Final dividends 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. The Company declares and pays dividends in Indian rupees to the share holders after
deducting the taxes at applicable rates.

o. Foreign currency transactions and translations

Transactions in foreign currency are translated into the respective functional currencies using the
exchange rates prevailing at the dates of the respective transactions.

For the purposes of presenting the financial statements assets and liabilities of Company''s foreign
operations with functional currency different from the Company are translated into Company''s
functional currency i.e. INR using exchange rates prevailing at the end of each reporting period.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated
into the functional currency at the exchange rate prevalent at the date when the fair value was
determined. Non-monetary assets and liabilities denominated in a foreign currency and measured at
historical cost are translated at the exchange rate prevalent at the date of transaction.

When a foreign operation is disposed off, the relevant amount recognized in FCTR is transferred to the
statement of profit or loss as part of the statement of profit and loss on disposal.

Foreign currency gains and losses are reported on a net basis. This includes changes in the fair value of
foreign exchange derivative instruments, which are accounted at fair value through profit or loss.

p. Finance income and expense

Finance income consists of interest income on funds invested, dividend income and fair value gains
on the FVTPL financial assets. Interest income is recognized as it accrues in the statement of profit and
loss, using the effective interest rate method.

Dividend income is recognized in the statement of profit and loss on the date that the Company''s right
to receive payment is established.

Finance expenses consist of interest expense on loans and borrowings. Borrowing costs are recognized
in the statement of profit and loss using the effective interest method.

The ''effective interest rate'' is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument to the gross carrying amount of the financial
asset; or the amortised cost of the financial liability.

In calculating interest income and expense, the effective interest rate is applied to the gross carrying
amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability.
However, for financial assets that have become credit-impaired subsequent to initial recognition,
interest income is calculated by applying the effective interest rate to the amortised cost of the
financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts
to the gross basis.

q. Share based payments

Equity-settled share-based payments to employees are measured at the fair value of the equity
instruments at the grant date.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based on the Company''s estimate of equity instruments
that will eventually vest, with a corresponding increase in equity. At the end of each reporting year,
the Company revises its estimate of the number of equity instruments expected to vest. The impact
of the revision of the original estimates, if any, is recognised in statement of profit and loss such that
the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-
settled employee benefits reserve. Own equity instruments that are reacquired (treasury shares) are
recognised at cost and deducted from equity. No gain or loss is recognised in the statement of profit
and loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments.

Employees of the Company receive remuneration in the form of cash settled share based transaction,
for rendering services over a defined vesting period.

r. Impairment

a) Financial assets :

In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for
measurement and recognition of impairment loss.

The Company assesses at each balance sheet date whether a financial asset or a Company
of financial assets is impaired. The Company follows ''simplified approach'' for recognition of
impairment loss allowance on trade receivable and unbilled revenue. The application of simplified
approach does not require the Company to track changes in credit risk. Rather, it recognizes
impairment loss allowance based on lifetime ECL''s at each reporting date, right from its initial
recognition. The Company recognizes lifetime expected credit losses for all trade receivables
and/or other contract assets that do not constitute a financing transaction. For all other financial
assets, expected credit losses are measured at an amount equal to the 12 month expected
credit losses or at an amount equal to the life time expected credit losses if the credit risk on the
financial asset has increased significantly since initial recognition.

ECL allowance (or reversal) is recognised as income / expense in the statement of profit and loss.

For financial guarantee contracts held by the Company that is not an integral element of
another financial instrument, the Company accounts for such a financial guarantee contract as
a prepayment of the guarantee premium and a compensation right asset. Further, the Company
recognizes a compensation right when it recognizes the related allowance for expected credit
losses, where it is certain that the compensation will be received if the credit loss is actually
suffered. The Company has presented the compensation right asset in the statement of profit and
loss in the same line item as allowance for expected credit loss.

Credit impaired financial assets:

At each reporting date, the Company assesses whether financial assets carried at amortised cost
are credit-impaired. A financial asset is ''credit-impaired'' when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

â¢ significant financial difficulty of the debtor;

â¢ it is probable that the debtor will enter bankruptcy or other financial reorganisation;

Write off - The gross carrying amount of a financial asset is written off when the Company has
no reasonable expectations of recovering a financial asset in its entirety or a portion thereof.

The financial assets that are written off could still be subject to enforcement activities in order to
comply with the Company''s procedures for recovery of amounts due.

b) Non-financial assets

The Company assesses at each reporting date whether there is any objective evidence that a non
financial asset including goodwill or a Company of non financial assets is impaired. If any such
indication exists, the Company estimates the amount of impairment loss.

An impairment loss is calculated as the difference between an asset''s carrying amount and
recoverable amount. Losses are recognised in statement of profit and loss and reflected in an
allowance account. If the amount of impairment loss subsequently decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised, then the
previously recognised impairment loss is reversed through statement of profit and loss.

The carrying amount of the asset is increased to its revised recoverable amount, provided that
this amount does not exceed the carrying amount that would have been determined (net off any
accumulated depreciation/amortisation) had no impairment loss been recognised for the asset in
prior years.

The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of
its value in use and its fair value less costs to sell. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For the purpose
of impairment testing, assets are Companied together into the smallest Company of assets that
generates cash inflows from continuing use that are largely independent of the cash inflows of
other assets or Company of assets (the "cash-generating unit").

s. Earnings per share

Basic earnings per equity share is computed by dividing the net profit attributable to the equity
shareholders of the Company by the weighted average number of equity shares outstanding during
the period.

Diluted earnings per equity share is computed by dividing the net profit attributable to the equity
shareholders of the Company by the weighted average number of equity shares considered for
deriving basic earnings per equity share and also the weighted average number of equity shares that
could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential
equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at
fair value (i.e. the average market value of the outstanding equity shares). Dilutive potential equity
shares are deemed converted as at the beginning of the period, unless issued at a later date. Dilutive
potential equity shares are determined independently for each period presented.

t. Contingent liabilities

Contingent liabilities exist when there is a possible obligation arising from past events, the existence
of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the Company, or a present obligation that arises from past
events where it is either not probable that an outflow of resources will be required or the amount
cannot be reliably estimated. Contingent liabilities are appropriately disclosed unless the possibility of
an outflow of resources embodying economic benefits is remote.

u. Contingent assets

A contingent asset is a possible asset that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the entity. The Company does not recognize a contingent asset.

v. Goodwill

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration
transferred and any previous interest held, over the net identifiable assets acquired and liabilities
assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration
transferred, the excess is recognized as capital reserve after reassessing the fair values of the net assets.

Goodwill is tested for impairment annually for current events or circumstances indicate that unused fair
value of goodwill is than its carrying amount (based on facts such as business plan, future cash flow
and economic condition).

w. Events after the reporting period

Adjusting events are events that provide further evidence of conditions that existed at the end
of the reporting period. The standalone financial statements are adjusted for such events before
authorisation for issue.

Non-adjusting events are events that are indicative of conditions that arose after the end of the
reporting period. Non-adjusting events after the reporting date are not accounted, but disclosed.

2.3 Recent pronouncements

Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards
under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended
March 31, 2025, MCA has not notified any new standards or amendments to the existing standards
applicable to the Company.

(vi) Equity shares movement during the 5 years preceding March 31, 2025

Equity shares issued as bonus: The Company allotted 138,769,238 equity shares as fully paid up bonus
shares in the ratio of 1:1, by capitalisation of securities premium amounting to 1,387 lakhs for the quarter
ended December 31, 2023 (Financial year 2023 - 24), pursuant to an ordinary resolution passed after taking
the consent of shareholders through postal ballot.

(Equity shares issued as bonus: The Company allotted 34,642,061 equity shares as fully paid up bonus
shares in the ratio of 1:3, by capitalisation of securities premium amounting to 346 lakhs for the quarter
ended September 30, 2022 (Financial year 2022 - 23), pursuant to an ordinary resolution passed after taking
the consent of shareholders through postal ballot.)

The Company has not issued any shares for consideration other than cash or bought back during the
period of five years immediately preceding the reporting date. Further, there are no bonus shares issued
during the period of 5 years immediately preceding the reporting date, except as disclosed above. There
are no shares reserved for issue under contracts or commitment for sale of shares or disinvestment.

(vii) Distributions of dividend

During the year ended March 31, 2025, the Company has incurred a net cash outflow ^ 12,227 lakhs
towards final dividend for fiscal 2024. (During the year ended March 31, 2024, the Company has incurred
a net cash outflow ^ 12,139 lakhs towards final dividend for fiscal 2023 and ^ 9,713 lakhs towards interim
dividend for fiscal 2024.)

The applicable Indian corporate statutory tax rate for the year ended March 31, 2025 and March 31, 2024 is
25.17% and 25.17% respectively.

On September 20, 2019, the Government of India, vide the Taxation Laws (Amendment) Ordinance 2019,
inserted Section 115BAA in the Income Tax Act, 1961, which provides domestic companies an option to
pay Corporate Tax at reduced rate effective April 01, 2019, subject to certain conditions. The Company had
opted to pay tax at the reduced rate.

Dividend income from certain category of investments is exempt from tax. The difference between the
reported income tax expense and income tax computed at statutory tax rate is primarily attributable to
income exempt from tax.

The Company is also subject to tax on income attributable to its permanent establishments in foreign
jurisdictions due to operation of its foreign branches.

iii) Market risk

Foreign currency exchange rate risk

The Company''s exchange risk arises from its foreign operations, foreign currency revenues and expenses,
(primarily in U.S. Dollar, British pound sterling and Euro). A significant portion of the Company''s revenues
are in these foreign currencies, while a significant portion of its costs are in Indian rupees. As a result, if
the value of the Indian rupee appreciates relative to these foreign currencies, the Company''s revenues
measured in rupees may decrease. The exchange rate between the Indian rupee and these foreign
currencies has changed substantially in recent periods and may continue to fluctuate substantially in
the future. The Company reviews on a periodic basis to formulate the strategy for foreign currency risk
management.

Consequently, the Company uses derivative financial instruments, such as foreign exchange forward
contracts, to mitigate the risk of changes in foreign currency exchange rates in respect of its forecasted cash
flows and trade receivables.

30. Capital management

The Company''s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. The Company monitors the return on capital
as well as the level of dividends on its equity shares. The Company''s objective when managing capital is to
maintain an optimal structure so as to maximize shareholder value.

31. Employee benefit plans

i) Defined contribution plans

In accordance with the law, all employees of the Company are entitled to receive benefits under the
provident and pension fund. The Company has no obligation other than the contribution to the
provident and pension fund.

a) Provident fund

Employees receive benefits from government administered provident fund. The employer and
employees each make periodic contributions to the government administered provident fund.

A portion of the contribution is made to the government administered provident fund while the
remainder of the contribution is made to the pension fund.

Provident fund contributions amounting to ? 1,367 lakhs (for the year ended March 31, 2024
? 1,368 lakhs ) has been charged to the standalone statement of profit and loss (as part of
contribution to provident fund and other funds in Note 19 Employee benefits expense).

b) During the year the Company has recognised the following amounts in the statement of profit
and loss towards Employers contribution to:

Terms and conditions of transactions with related parties:

1. The sales to, purchases, commission income and rent income from related parties are made on terms
equivalent to those that prevail in arm''s length transactions.

2. Inter corporate deposits are unsecured, repayable on demand in cash and interest rate ranges between
8.5%-9.9%. Inter corporate loans represent amounts lent to the subsidiary for meeting working capital
requirements.

3. Commission on corporate guarantee is charged at 1%. Corporate guarantee has been issued to a
supplier of Sonata Information Technology Limited (SITL) to comply with the contractual obligations in
the ordinary course of business. The guarantee would come into effect only upon failure of SITL to pay
the amounts outstanding to such supplier.

4. The balance outstanding above are unsecured and would be settled in cash.

- for the quarter ended December, 2024, variance of ^ 515 Lakhs in book debts.

The quarterly statements filed by the Company in the previous year with such banks are in agreement with
the books of account of the Company except:

- for the quarter ended June, 2023, variance of ^320 Lakhs in book debts.

- for the quarter ended September, 2023, variance of ^1,212 Lakhs in book debts.

- for the quarter ended December, 2023, variance of ^ 1,194 Lakhs in sundry creditors.

The variances are primarily attributable to re-classifications. The Company has subsequently filed rectified
statements.

43. Additional disclosures required by Schedule III (amendments dated 24
March 2021) to the Companies Act, 2013:

(i) The Company does not have any benami property, where any proceeding has been initiated or
pending against the Company for holding any benami property.

(ii) The Company does not have any charges or satisfaction which is yet to be registered with Registrar of
Companies beyond the statutory period.

(iii) The Company has not traded or invested in crypto currency or virtual currency during the financial
year.

(iv) No funds have been advanced or loaned or invested (either from borrowed funds or share premium
or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies),
including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or
otherwise, that the Intermediary shall directly or indirectly lend or invest in other persons or entities
identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or
provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(v) No funds have been received by the Company from any person or entity, including foreign entity
(Funding Parties), with the understanding, whether recorded in writing or otherwise, that the Company
shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner
whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or provide any guarantee,
security or the like on behalf of the Ultimate Beneficiaries.

(vi) 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.

(vii) The Company is not declared as willful defaulter by any bank or financial institution (as defined under
the Companies Act, 2013) or consortium thereof or other lender in accordance with the guidelines on
willful defaulters issued by the Reserve Bank of India.

(viii) The Company has complied with the number of layers for its holding in downstream companies
prescribed under clause (87) of Section 2 of the Companies Act, 2013 read with the Companies
(Restriction on number of Layers) Rules, 2017.

(ix) The Company has not entered into any transactions with struck off Companies under Section 248 of
the Companies Act, 2013 or Section 560 of the Companies Act, 1956 for the year ended 31 March
2025.

(x) The Company has not revalued any of its property, plant and equipment (including right-of-use assets)
during the year.

As per our report of even date attached

For B S R & Co. LLP For and on behalf of the Board of Directors of Sonata Software Limited

Chartered Accountants CIN: L72200MH1994PLC082110

Firm''s Registration No: 101248W/W-100022 Sanjay K Asher Samir Dhir

Chairman Managing Director & CEO

DIN:00008221 DIN: 03021413

Amrit Bhansali Jagannathan C N R Sathyanarayana

Partner Chief Financial Officer VP - Finance & Accounts

Membership No. 065155

Mangal Krishnarao Kulkarni

Company Secretary

Place: Mumbai Place: Mumbai Place: Mumbai

Date : May 07, 2025 Date : May 07, 2025 Date : May 07, 2025

Mar 31, 2024

ii) Details of rights, preferences and restrictions attached to each class of shares

The Company has equity shares having a par value of f 1/-. Each shareholder, other than shares held by ESOP Trust, is entitled to one vote per share. The shareholders have the right to receive interim dividends declared by the Board of directors and final dividends proposed by the Board and approved by the shareholders.

In the event of liquidation by the Company, the holders of the equity shares will be entitled to receive in proportion to the number of equity shares held by them, the remaining assets of the Company.

The shareholders have all other rights as available to equity shareholders as per the provisions of the Companies Act 2013, read together with the Memorandum of Association and Articles of Association of the Company, as applicable.

(vi) Equity shares movement during the 5 years preceding March 31, 2024

Equity shares issued as bonus: The Company allotted 138,769,238 equity shares as fully paid up bonus shares in the ratio of 1:1, by capitalisation of securities premium amounting to 1,387 lakhs for the quarter ended December 31, 2023, pursuant to an ordinary resolution passed after taking the consent of shareholders through postal ballot.

(Equity shares issued as bonus: The Company allotted 34,642,061 equity shares as fully paid up bonus shares in the ratio of 1:3, by capitalisation of securities premium amounting to 346 lakhs for the quarter ended September 30, 2022, pursuant to an ordinary resolution passed after taking the consent of shareholders through postal ballot.)

The Company has not issued any shares for consideration other than cash or bought back during the period of five years immediately preceding the reporting date. Further, there are no bonus shares issued during the period of 5 years immediately preceeding the reporting date, except as disclosed above. There are no shares reserved for issue under contracts or commitment for sale of shares or disinvestment.

(vii) Distributions of dividend

During the year ended March 31, 2024, the Company has incurred a net cash outflow ^ 12,139 lakhs towards final dividend for fiscal 2023 and ^ 9,713 lakhs towards interim dividend for fiscal 2024. (During the year ended March 31, 2023, the Company has incurred a net cash outflow ^ 13,510 lakhs towards final dividend for fiscal 2022 and ^ 9,702 lakhs towards interim dividend for fiscal 2023.)

The applicable Indian corporate statutory tax rate for the year ended March 31,2024 and March 31,2023 is 25.17% and 25.17% respectively.

Dividend income from certain category of investments is exempt from tax. The difference between the reported income tax expense and income tax computed at statutory tax rate is primarily attributable to income exempt from tax.

The Company is also subject to tax on income attributable to its permanent establishments in foreign jurisdictions due to operation of its foreign branches.

22 Revenue from operations

Disaggregate revenue information

The table below presents disaggregated revenues from contracts with customers for the year ended March 31, 2024 by contract type. The Company believes that this disaggregation best depicts how the nature, amount, timing and uncertainly of our revenues and cashflows are affected by industry, market and other economic factors.

Performance obligations and remaining performance obligations

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 basis. 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 aggregate value of performance obligations that are completely or partially unsatisfied as at March 31, 2024, other than those meeting the exclusion criteria mentioned above, is ^131 lakhs. The Company expects to recognize the revenue within the next one year. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessment, the occurrence of the same is expected to be remote.

23 Contingent Liabilities

^ in Lakhs
Particulars	As at March 31, 2024	As at March 31, 2023
a) Guarantees
The Company has given corporate guarantees to certain suppliers of Sonata Information Technology Limited (SITL) and Sonata Software North America Inc., (SSNA), its wholly owned subsidiaries.	33,860	39,531
b) Claims against the Company not acknowledged as debt i) Disputed demand of Service tax
The demand for payment of service tax for the period from FY 2006-07 to FY 2012-13 on services received and consumed by UK branch of the company and a subsidiary company at USA, treating it as import of service, wrong availment of cenvat credit and usage of software services provided to subsidiary. The company had filed appeal before the Commissioner of Appeals and is confident of getting favourable outcome based on legal precedents which support its stand.	1,028	1,028
ii) Others	2,341	3,071
iii) Disputed demands of Income-tax	7,142	7,142

Details of disputed demands of Income-tax primarily relate to:

Disallowance of claims made under Section 10A of the Income-tax Act, 1961

The Company does its business of software exports through multiple operating units or undertakings registered under the Software Technology Park Scheme of India. In computing taxable profit from the export of software, the Company claims exemptions provided to registered software technology parks, undertakings and units as provided under Section 10A of the Income-tax Act, 1961 ("Act").

For the financial years 2005-06 and 2006-07 ^4,570 lakhs (As at March 31,2023 - ? 4,570 lakhs), the Company has received favourable order from Income-tax Appellate Tribunal (ITAT) and the Department has preferred an appeal before the Honourable High Court of Mumbai.

For financial years 2010-11 & 2019-20 ? 2,572 lakhs (As at March 31, 2023 ? 2,572 lakhs), assessing officer has re-opened the Assessment under section 148 of the Act and disallowed 10A benefit. The Company has preferred an appeal before Commissioner of Income-tax (Appeals).

c) In addition, the Company in the ordinary course of business receives various claims from its customers and other business partners. Based on review of such matters and the information available at this time, the Company does not anticipate that any of these will result in a settlement that will have a material impact on its financial statements.

It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above pending resolution of the respective proceedings. Future cash flow in respect of the above, if any, is determinable only on receipt of judgement/ decisions pending with relevant authorities. The Company does not expect the outcome of the matters stated above to have a material adverse impact on the Company''s financial condition, results of operations or cash flows.

24 Commitments

^ in Lakhs

Particulars

As at

March 31, 2024

As at

March 31, 2023

Estimated amount of contracts remaining to be executed on capital account and not provided for

494

25 Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006

The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated August 26, 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at March 31, 2024 has been made in the financial statements based on information received and available with the Company. The Company has not received any claim for interest from any supplier under the said Act. This information as required under Micro, small and medium enterprises development Act 2006 [MSMED] has been determined to the extent such parties have been identified on the basis of information available with the Company are as below:

The management assessed that fair value of cash and short-term deposits, trade receivables, trade payables, inter corporate deposits, borrowings and other current assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

1. The fair value of the quoted mutual funds are based on price quotations at reporting date. The fair value of other financial liabilities and other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates.

2. The fair values of the unquoted equity and preference shares have been estimated using a discounted cash flow model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility, the probabilities of the various estimates whose range can be reasonably assessed and are used in management''s estimate of fair value for these unquoted equity investments.

3. The Company enters into derivative financial instruments with banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing model, using present value calculations. The models incorporate various inputs including the credit quality of banks, foreign

exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves etc. As at March 31, 2024, the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative bank default risk. The changes in bank credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationship and other financial instruments recognised at fair value.

27 Fair value hierarchy

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

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The following table presents the fair value measurement hierarchy of financial assets and liabilities measured at fair value on recurring basis as at March 31,2024 and March 31,2023.

Derivative financial instruments

The Company is exposed to foreign currency fluctuations on foreign currency assets/ liabilities and forecasted cash flows denominated in foreign currency. The Company uses derivatives to hedge foreign currency assets/ liabilities and foreign currency forecasted cash flows. The counter party in these derivative instruments is a bank and the Company considers the risks of non-performance by the counterparty as non-material.

28 Financial risk management

The Company''s activities expose it to a variety of financial risks: credit risk, liquidity risk, foreign currency risk and interest rate risk. The Company''s primary 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. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company''s policy that no trading in derivative for speculative purposes may be undertaken.

The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below:

i) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company''s receivables from customers and investment securities. Credit risk arises from cash held with banks and financial institutions, as well as credit exposure to clients, including outstanding accounts receivable. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.

Trade and other receivables

Management considers that the demographics of the company''s customer base, including the default risk of the industry in which customers operate, has less of an influence on credit risk. Exposures to customers outstanding at the end of each reporting year are reviewed by the company to determine incurred and expected credit losses. Historical trend of impairment of trade receivables do not reflect any significant credit losses. Basis this assessment, the allowance for doubtful trade receivables as at March 31,2024 is considered adequate.

Expected credit loss

The Group uses a provision matrix to determine impairment loss on portfolio of its trade receivable. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At regular intervals, the historically observed default rates are updated and changes in forward-looking estimates are analysed.

Investments

The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. The Company does not expect any losses from nonperformance by these counterparties, and does not have any significant concentration of exposures to specific industry sectors.

ii) Liquidity risk

Liquidity risk is the risk that the company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The company generates sufficient cash flow for operations, which together with the available cash and cash equivalents and short term investments provide liquidity in the short-term and long-term. In addition, the company has concluded arrangements with well reputed banks and also plans to negotiate additional facilities for funding as and when required. The company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities.

The Company''s corporate treasury department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management.

The liquidity position of the Group is given below:

iii) Market risk

Foreign currency exchange rate risk

The Company''s exchange risk arises from its foreign operations, foreign currency revenues and expenses, (primarily in U.S. Dollar, British pound sterling and Euro). A significant portion of the Company''s revenues are in these foreign currencies, while a significant portion of its costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these foreign currencies, the Company''s revenues measured in rupees may decrease. The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. The Company reviews on a periodic basis to formulate the strategy for foreign currency risk management.

Consequently, the Company uses derivative financial instruments, such as foreign exchange forward contracts, to mitigate the risk of changes in foreign currency exchange rates in respect of its forecasted cash flows and trade receivables.

The details in respect of the outstanding foreign exchange forward contracts are given under the derivative financial instruments section.

In respect of the Company''s forward contracts, a 1% decrease/ increase in the respective exchange rates of each of the currencies underlying such contracts would have resulted in:

a) an approximately ? 680 lakhs increase and decrease in the Company''s net profit as at March 31,2024

b) an approximately ? 119 lakhs increase and decrease in the Company''s net profit as at March 31,2023

The following table presents foreign currency risk from non-derivative financial instruments as of March 31, 2024 and March 31, 2023.

For the year ended March 31, 2024, every 1% increase/decrease of the respective foreign currencies compared to functional currency of the Company would impact operating margins by 0.32%/ (0.32%). For the year ended March 31, 2023, the impact on operating margins would be 0.09%/ (0.09)%.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rates relates primarily to the Company''s investments. The Company''s investments are primarily short-term, which do not expose it to significant interest rate risk.

29 Capital management

The Company''s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Company monitors the return on capital as well as the level of dividends on its equity shares. The Company''s objective when managing capital is to maintain an optimal structure so as to maximize shareholder value.

The Company is predominantly equity financed which is evident from the capital structure table. Further, the Company has generally been a net cash Company with cash and bank balances along with investment which is predominantly investment in liquid and short term mutual funds.

30 Employee benefit plans

i) Defined contribution plans

In accordance with the law, all employees of the company are entitled to receive benefits under the provident and pension fund. The company has no obligation other than the contribution to the provident and pension fund.

a) Provident fund

Employees receive benefits from government adminstered provident fund. The employer and employees each make periodic contributions to the government adminstered provident fund.

A portion of the contribution is made to the government adminstered provident fund while the remainder of the contribution is made to the pension fund.

Provident fund contributions amounting to ^ 1,368 lakhs (for the year ended March 31,2023 ^ 1,255 lakhs) has been charged to the Statement of Profit and Loss (as part of Contribution to Provident Fund and other Funds in Note 19 Employee benefits expense).

b) During the year the Company has recognised the following amounts in the Statement of Profit and Loss towards Employers contribution to:

ii) Defined benefit plans - Gratuity

The entity has a defined benefit gratuity plan in India (funded). The entity''s defined benefit gratuity plan is a final salary plan for employees, which requires contributions to be made to a separately administered fund. The fund is managed by a trust which is governed by the Board of Trustees. The Board of Trustees are responsible for the administration of the plan assets and for the definition of the investment strategy.

Gratuity is a defined benefit plan and Group is exposed to the following Risks:

Interest rate risk: A fall in the discount rate which is linked to the government securities rate will increase the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.

Salary risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the plan''s liability.

Investment risk: The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.

Asset liability matching (ALM) risk: The plan faces the ALM risk as to the matching cash flow.

Since the plan is invested in lines of Rule 101 of Income Tax Rules, 1962, this generally reduces ALM risk.

Mortality risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.

Concentration Risk: Plan is having a concentration risk as all the assets are invested with the insurance company and a default will wipe out all the assets. Although probability of this is very low as insurance companies have to follow stringent.

The Company expects to contribute ? 914 lakhs to its defined benefit plans during the next fiscal year.

The expected rate of return on plan assets is determined after considering several applicable factors such as the composition of the plan assets, investment strategy, market scenario, etc. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are well diversified.

The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors.

The Company has established an income tax approved irrevocable trust fund to which it regularly contributes to finance liabilities of the plan. The fund''s investments are managed by insurance company as per the mandate provided to them by the trustees and the asset allocation is within the permissible limits prescribed in the insurance regulations.

31 Share-based payments

a) Employee share option plan of the Company

i) Details of the employee share option plan of the Company

The Company has a stock option plan for employees of the Company and its subsidiaries, authorized by the nomination and remuneration committee . In accordance with the terms of the plan, as approved by shareholders at its annual general meeting dated August 19, 2014. Eligible employees are granted to get stock option with graded vesting period of four years. The quantum of stock option is decided by the Nomination and Remuneration Committee. The shares are transferred to employees from the Sonata Software Ltd Employee Welfare Trust based on approval.

Each vested stock option shall convert into one equity share of the Company upon exercise. The exercise price of the stock option shall be the closing market price of the share on National Stock Exchange of India Ltd on the trading day immediately preceding the date of the grant. The stock options carry neither rights to dividends nor voting rights unless the transfer of shares from the Sonata Software Ltd Employee Welfare Trust to the employee is duly registered by the company. Options may be exercised at any time from the date of vesting to the date of their expiry.

(ii) Fair value of share options outstanding at the year end

Options are priced using Black - Scholes pricing model.

Expected volatility has been based on an evaluation of the historical volatility of the Company''s share price, particularly over the historical period commensurate with the expected term. The expected term of the instruments has been based on historical experience and general option holder behaviour

(v) Share options outstanding at the end of the year

The share options outstanding at the end of the year had a weighted average exercise price of * 295.83 (as at March 31, 2023 * 543.88)

During the year, the amount recognised as expense for employee stock options is * 455 Lakhs (for the year ended March 31, 2023 is * 746 Lakhs). Reversal of ESOP expenditure is * 72 lakhs(for the year ended March 31,2023 is * 67 lakhs)

32 Segment reporting

The Company publishes this financial statement along with the consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the consolidated financial statements.

33 Consolidation of Employee Welfare Trust

Ind AS 110 - Consolidated financial statements defines control and establishes control as the main basis for consolidating the entities. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee, in view of which the company has consolidated Sonata employee welfare trust accounts

During the year ended March 31, 2024, no advance has been given to Sonata Software Employees Welfare Trust. The assets and liabilities of the aforesaid trust have been accounted for as the assets and liabilities of the Company on the basis that such trust is merely acting as the agent of the Company. Cash and cash equivalents and bank balances of * 2,652 lakhs, investments * 22 lakhs, other assets * 49 lakhs and other liabilities * 3 lakhs, equity * 2,720 lakhs.

(During the year ended March 31,2023, no advance has been given to Sonata Software Employees Welfare Trust. The assets and liabilities of the aforesaid trust have been accounted for as the assets and liabilities of the Company on the basis that such trust is merely acting as the agent of the Company. Cash and cash equivalents and bank balances of * 2,153 lakhs, investments * 23 lakhs, other assets * 11 lakhs and other liabilities * 32 lakhs, equity * 2,155 lakhs.)

34 Corporate social responsibility

As per Section 135 of Companies Act, 2013 a company meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. A CSR committee has been formed by the Group as per the Companies Act, 2013. The CSR initiatives are focused towards the areas of education, healthcare, livelihood support, conserving art and economic empowerment of Artisans through technological support.

(i) Gross amount required to be spent by the Company during the year is * 369 lakhs (Previous year is * 41 6 lakhs).

(ii) Amount spent during the year is * 323 lakhs (Previous year is * 463 lakhs).

36 There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund.

37 Distributions made and proposed (Refer note 9):

The Board of Directors at their meeting held on October 25, 2023 had declared an interim dividend of 700% (? 7 per equity share of par value of ? 1 each). Further, the Board of Directors at its meeting held on May 7, 2024 have recommended a final dividend of 440 % (? 4.4 per equity share of par valued 1 each), which is subject to approval of shareholders.

The Board of Directors at their meeting held on October 18, 2022 had declared an interim dividend of 700% (?7 per equity share of par value of ? 1 each). Further, the Board of Directors at its meeting held on May 13, 2023 have recommended a final dividend of 875 % (? 8.75 per equity share of par value ? 1 each), which was approved by shareholders.

40. The Company has been sanctioned working capital limits in excess of five crore rupees, in aggregate, from banks on the basis of security of current assets. The quarterly statements filed by the Company with such banks are in agreement with the books of account of the Company except:

- for the quarter ended June, 2023, variance of ? 320 Lakhs in book debts.

- for the quarter ended September, 2023, variance of ^1,212 Lakhs in book debts.

- for the quarter ended December, 2023, variance of ? 1,194 Lakhs in sundry creditors.

The variance are primarily attributable to re-classifictions. The Company has subsequently filed rectified statements.

EBITDA - Earnings before interest, taxes, depreciation and amortisation

PAT - Profit after taxes

EBIT - Earnings before interest and taxes.

Debt includes current and non-current lease liabilities.

Adjusted expenses derived from total expenses excluding depreciation and finance cost.

working capital derived from current assets in excess of current liabilities excluding borrowings & lease liabilities.

Explanation for variances exceeding 25%:

¹ Debt-equity ratio has improved on account of higher profits in current financial year leading to higher net worth.

² Debt service coverage ratio increased on account of increase in EBIT during the year ended March 31, 2024

³ Return on equity ratio increased on account of increase in PAT during the year ended March 31, 2024

⁴ Trade receivable turnover ratio has decereased on account of increase in receivables for the year ended March 31, 2024

⁵ Trade payable turnover ratio has increased on account of increase in expenses for the year ended March 31, 2024

⁶ Net profit ratio has improved on account of increase in profit for the year ended March 31, 2024

⁷ Return on investment has improved on account of increase in dividend received during the financial year 2023-24

⁸ Net capital turnover has improved on account of increase in revenue during the financial year 2023-24

42. No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries

No funds have been received by the Company from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Parties ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries".

Mar 31, 2023

ii) Details of rights, preferences and restrictions attached to each class of shares

The Company has equity shares having a par value of ^ 1/-. Each shareholder, other than shares held by ESOP Trust, is entitled to one vote per share. The shareholders have the right to receive interim dividends declared by the Board of directors and final dividends proposed by the Board and approved by the shareholders.

(vi) Equity shares movement during the 5 years preceding March 31, 2023

Equity shares issued as bonus: The Company allotted 34,642,061 equity shares as fully paid up bonus shares in the ratio of 1:3, by capitalisation of securities premium amounting to 346 lakhs for the quarter ended September 30, 2022, pursuant to an ordinary resolution passed after taking the consent of shareholders through postal ballot.

(vii) During the year ended March 31, 2023, on account of final dividend for fiscal 2022 the Company has incurred a net cash outflow of ^ 13,510 lakhs and interim dividend of ^ 9,702 lakhs for fiscal 2023. (During the year ended March 31, 2022, on account of final dividend for fiscal 2021 the Company has incurred a net cash outflow of ^ 10,391 lakhs and interim dividend of ^ 8,312 lakhs for fiscal 2022.)

The applicable Indian corporate statutory tax rate for the year ended March 31, 2023 and March 31, 2022 is 25.17% and 25.17% respectively.

Dividend income from certain category of investments is exempt from tax. The difference between the reported income tax expense and income tax computed at statutory tax rate is primarily attributable to income exempt from tax.

The Company is also subject to tax on income attributable to its permanent establishments in foreign jurisdictions due to operation of its foreign branches.

22. Revenue from software services

Disaggregate revenue information

The table below presents disaggregated revenues from contracts with customers for the year ended March 31, 2023 by contract type. The Company believes that this disaggregation best depicts how the nature, amount, timing and uncertainity of our revenues and cashflows are affected by industry, market and other economic factors.

Trade receivables and Contract Balances

The Company classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue.

A receivable is a right to consideration that is unconditional upon passage of time. Revenue from time and material contracts are recognized as related services are performed. Revenue from fixed price maintenance contracts are recognized on a straightline basis over the period of the contract. Revenues in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration is unconditional upon passage of time.

Revenues from fixed-price contracts are recognized using the "percentage-of-completion" method. Invoicing to the clients is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from the timing of billing the customers. Unbilled revenue for fixed price contracts is classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones.

Invoicing in excess of earnings are classified as unearned revenue.

Trade receivable and unbilled revenues are presented net of impairment in the Balance Sheet.

During the year ended March 31, 2023, T 1,874 Lakhs of unbilled revenue as of April 1, 2022 has been reclassified to Trade receivables upon billing to customers on completion of milestones.

During the year ended March 31, 2023, the company recognized revenue of T 1 Lakhs arising from opening unearned revenue as of April 1, 2022

Performance obligations and remaining performance obligations

The aggregate value of performance obligations that are completely or partially unsatisfied as at March 31,

2023, other than those meeting the exclusion criteria mentioned above, is T Nil. The Company expects to recognize the revenue within the next one year. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessment, the occurrence of the same is expected to be remote.

23. Contingent Liabilities		^ in Lakhs
Particulars	As at March 31, 2023	As at March 31, 2022
a) Guarantees
The Company has given corporate guarantees to certain suppliers of Sonata Information Technology Limited (SITL) and Sonata Software North America Inc., (SSNA), its wholly owned subsidiaries.	39,531	36,500
b) Disputed demand of Service tax
The demand for payment of service tax for the period from FY 2006-07 to FY 2012-13 on services received and consumed by UK branch of the company and a subsidiary company at USA, treating it as import of service, wrong availment of cenvat credit and usage of software services provided to subsidiary. The company had filed appeal before the Commissioner of Appeals and is confident of getting favourable outcome based on legal precedents which support its stand.	1,028	1,028
c) Other claims against the Company not acknowledged as debt	3,071	3,071
d) Disputed demands of Income-tax	7,142	6,845

Details of disputed demands of Income-tax primarily relate to:

Disallowance of claims made under Section 10A of the Income-tax Act, 1961

For the financial year 2005-06 and 2006-07 ^ 4,570 lakhs (As at March 31, 2022 - ^ 4,570) lakhs the Company has received favourable order from Income-tax Appellate Tribunal (ITAT) and the Department has preferred an appeal before the Honourable High Court of Mumbai.

For financial year 2010-11 & 2019-20 ^ 2,572 lakhs (As at March 31, 2022 ^ 2,275 lakhs), assessing officer has re-opened the Assessment under section 148 of the Act and disallowed 10A benefit. The Company has preferred an appeal before Commissioner of Income-tax (Appeals).

e) In addition, the Company in the ordinary course of business receives various claims from its customers and other

business partners. Based on review of such matters and the information available at this time, the Company does not anticipate that any of these will result in a settlement that will have a material impact on its financial statements.

24. Commitments

^ in Lakhs
Particulars	As at	As at
	March 31, 2023	March 31, 2022
Estimated amount of contracts remaining to be executed on capital account and	494	19
not provided for

The management assessed that fair value of cash and short-term deposits, trade receivables, trade payables, inter corporate deposits and other current assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

The following methods and assumptions were used to estimate the fair values:

3. The Company enters into derivative financial instruments with Banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing model, using present value calculations. The models incorporate various inputs including the credit quality of banks, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves etc. As at March 31, 2022, the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative bank default risk. The changes in bank credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationship and other financial instruments recognised at fair value.

27. Fair value hierarchy

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

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The following table presents the fair value measurement hierarchy of financial assets and liabilities measured at fair value on recurring basis as at March 31, 2023 and March 31, 2022.

Derivative financial instruments

For movement in cash flow hedge reserve gain or loss - Refer note 10

The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below:

Credit risk

Trade and other receivables

The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment.

The following table gives details in respect of revenues generated from top customer and top 5 customers (excluding Inter-company):

Two customer accounted for more than 10% of the revenue for the year ended March 31, 2023 and two of the customer accounted for more than 10% of the receivables for the year ended March 31, 2023. One customer accounted for more than 10% of the revenue for the year ended March 31, 2022 and two of the customer accounted for more than 10% of the receivables for the year ended March 31, 2022.

Investments

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. Also, the Company has unutilized credit limits with banks.

Foreign currency risk

The Company''s exchange risk arises from its foreign operations, foreign currency revenues and expenses, (primarily in U.S. Dollar, British pound sterling and Euro). A significant portion of the Company''s revenues are in these foreign currencies, while a significant portion of its costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these foreign currencies, the Company''s revenues measured in rupees may decrease. The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. The Company reviews on a periodic basis to formulate the strategy for foreign currency risk management.

Consequently, the Company uses derivative financial instruments, such as foreign exchange forward contracts, to mitigate the risk of changes in foreign currency exchange rates in respect of its forecasted cash flows and trade receivables.

The details in respect of the outstanding foreign exchange forward contracts are given under the derivative financial instruments section.

In respect of the Company''s forward contracts, a 1% decrease/ increase in the respective exchange rates of each of the currencies underlying such contracts would have resulted in:

a) an approximately ? 119 lakhs increase and decrease in the Company''s net profit as at March 31, 2023

b) an approximately ? 160 lakhs increase and decrease in the Company''s net profit as at March 31, 2022

The following table presents foreign currency risk from non-derivative financial instruments as of March 31, 2023 and March 31, 2022.

The Company''s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Company monitors the return on capital as well as the level of dividends on its equity shares. The Company''s objective when managing capital is to maintain an optimal structure so as to maximize shareholder value.

30. Employee benefit plans

i) Defined contribution plans a) Provident fund

Until the end of April 2021 the eligible employees of Sonata Software Limited are receiving benefits from a provident fund, which is a defined benefit plan. Both the eligible employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee''s salary. The Company contributes a portion to the Sonata Software Provident Fund. The trust invests in specific designated instruments as permitted by Indian law. The remaining portion is contributed to the government administered pension fund. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the Government.

The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.

During the last year the Sonata Provident Fund Trust has surrendered the exemption granted and transferred the provident fund accumulation of employees to the Employees'' Provident Fund Organisation (EPFO), Mumbai. Accordingly from the month of May 2021 onwards the company has been remitting their monthly contribution of provident fund to EPFO.

Provident fund contributions amounting to T 1,255 lakhs (for the year ended March 31, 2022 T 1,249 lakhs ) has been charged to the Statement of Profit and Loss (as part of Contribution to Provident Fund and other Funds in Note 19 Employee benefits expense).

The Company expects to contribute T 1,305 lakhs to its defined benefit plans during the next fiscal year.

The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors.

31. Share-based payments

a) Employee share option plan of the Company

i) Details of the employee share option plan of the Company

Each vested stock option shall convert into one equity share of the Company upon exercise. The exercise price of the stock option shall be the closing market price of the share on National Stock Exchange of India Ltd on the trading day immediately preceding the date of the grant . The stock options carry neither rights to dividends nor voting rights unless the transfer of shares from the Sonata Software Ltd Employee Welfare Trust to the employee is duly registered by the company . Options may be exercised at any time from the date of vesting to the date of their expiry.

v) Share options outstanding at the end of the year

The share options outstanding at the end of the year had a weighted average exercise price of ? 543.88 (as at March 31, 2022 ? 198.48)

During the year, the amount recognised as expense for employee Stock Options is ? 746 Lakhs (for the year ended March 31, 2022 is ? 34 Lakhs). Reversal of ESOP expenditure is ? 67 lakhs(for the year ended March 31, 2022 is Nil)

b) Other stock Based compensation arrangements

Stock appreciation rights plan provides the certain employee with the right to receive cash that is equal to the increase in the value of the company''s shares from the date the right was granted and the right was exercised. They are not entitled to any shares or dividend. Plan 1 and 2 of 2018 has been approved by the Board vide Board meeting dated May 29, 2017 subsequently amended dated August 13, 2018. Plan of 2019 and 2020 has been approved by the Board vide Board meeting dated August 13, 2018 and August 4, 2021 respectively.

The Company had cancelled the existing Stock appreciation rights Plan (SAR) during the previous year and introduced the bonus plan in lieu of SAR effective from June 30, 2021.

32. Segment reporting

33. Consolidation of Employee Welfare Trust

34. Corporate social responsibility

As per Section 135 of Companies Act, 2013 a company meeting the applicability threshold, needs to spend atleast 2% of its average net profit of the immediately preceding three financial years on corporate social responsibility (CSR) activities. A CSR committee has been formed by the Company as per the Companies Act, 2013. The CSR initiatives are focused towards those programme directly or indirectly, benefit the community and society at large.

(i) Gross amount required to be spent by the Company during the year is ? 416 lakhs (Previous year is ? 393 lakhs).

(ii) Amount spent during the year is ? 463 lakhs (Previous year is ? 396 lakhs)

36. There is no amount due and outstanding as at Balance Sheet date to be credited to the Investor Education and Protection Fund.

37. Distributions made and proposed :

The Board of Directors at their meeting held on October 18, 2022 had declared an interim dividend of 700% (T 7 per equity share of par value of T 1 each). Further, the Board of Directors at its meeting held on May 13, 2023 have recommended a final dividend of 875 % (T 8.75 per equity share of par value T 1 each), which is subject to approval of shareholders.

The Board of Directors at their meeting held on October 19, 2021 had declared an interim dividend of 800% (T 8 per equity share of par value of T 1 each). Further, the Board of Directors at its meeting held on April 29, 2022 had recommended a final dividend of 1,300 % (T 13 per equity share of par value T 1 each), which was approved by shareholders.

EBITDA - Earnings before interest, taxes, depreciation and amortisation

PAT - Profit after taxes

EBIT - Earnings before interest and taxes.

Debt includes current and non-current lease liabilities.

Adjusted expenses derived from total expenses excluding depreciation and finance cost.

Working capital derived from current assets in excess of current liabilities excluding borrowings & lease liabilities.

Explanation for variances exceeding 25%:

¹ Debt-equity ratio decreased on account of termination of lease during the financial year 2022-23

² Debt service coverage ratio increased on account of increase in EBIT during the year ended March 31, 2023

³ Trade receivable turnover ratio has improved on account of increase in revenue for the year ended March 31, 2023 ⁴Net capital turnover ratio has improved on account of increase in revenue for the year ended March 31, 2023 ⁵Return on investment has improved on account of increase in dividend received during the financial year 2022-23

41. No funds have been advanced or loaned orinvested (either from borrowed funds or share premium or any other sources or kind of funds)by the Company to orinany other person(s) or entity(ies), including foreign entities.

No funds have been received by the Companyfrom any person or entity, including foreign entity (Funding Parties), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner what so ever by or on behalf of the funding party (Ultimate beneficiaries) or provide any guarantee, security or the like on behalf of the Ultimate beneficiaries.

Mar 31, 2022

The applicable Indian corporate statutory tax rate for the year ended March 31, 2022 and March 31, 2021 is 25.17% and 25.17% respectively.

Dividend income from certain category of investments is exempt from tax. The difference between the reported income tax expense and income tax computed at statutory tax rate is primarily attributable to income exempt from tax.

The Company is also subject to tax on income attributable to its permanent establishments in foreign jurisdictions due to operation of its foreign branches.

The Company has evaluated the impact of COVID-19 resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts; (ii) onerous obligations; (iii) penalties relating to breaches of service level agreements ,and (iv) termination or deferment of contracts by customers. The Company has concluded that the impact of COVID-19 is not material based on these estimates. Due to the nature of the pandemic, the Company will continue to monitor developments to identify significant uncertainties relating to revenue in future periods.

Trade receivables and Contract Balances

The company classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue.

A receivable is a right to consideration that is unconditional upon passage of time. Revenue for time and material contracts are recognized as related service are performed. Revenue for fixed price maintenance contracts is recognized on a straightline basis over the period of the contract. Revenues in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration is unconditional upon passage of time.

Revenues from fixed-price contracts are recognized using the "percentage-of-completion" method. Invoicing to the clients is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from the timing of billing the customers. Unbilled revenue for fixed price contracts is classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones.

Invoicing in excess of earnings are classified as unearned revenue.

Trade receivable and unbilled revenues are presented net of impairment in the Balance Sheet.

During the year ended March 31, 2022, R 1,568 Lakhs of unbilled revenue as of April 1, 2021 has been reclassified to Trade receivables upon billing to customers on completion of milestones.

During the year ended March 31, 2022, the company recognized revenue of R 10 Lakhs arising from opening unearned revenue as of April 1, 2021

Performance obligations and remaining performance obligations

The aggregate value of performance obligations that are completely or partially unsatisfied as at March 31, 2022, other than those meeting the exclusion criteria mentioned above, is R Nil.

23. Contingent Liabilities

		R in Lakhs
	As at March 31, 2022	As at March 31, 2021
a) Guarantees The Company has given corporate guarantees to certain suppliers of Sonata Information Technology Limited (SITL) and Sonata Software North America (SSNA), its wholly owned subsidiaries.	36,500	35,227
b) Disputed demand of Service tax The demand for payment of service tax for the period from FY 2006-07 to FY 2012-13 on services received and consumed by UK branch of the company and a subsidiary company at USA, treating it as import of service, wrong availment of cenvat credit and usage of software services provided to subsidiary. The company had filed appeal before the Commissioner of Appeals and is confident of getting favorable outcome based on legal precedents which support its stand.	1,028	1,028
c) Other claims against the Company not acknowledged as debt	3,071	3,071
d) Disputed demands of Income-tax	6,845	6,845

Details of disputed demands of Income-tax primarily relate to:

Disallowance of claims made under Section 10A of the Income-tax Act, 1961

For the financial year 2005-06 and 2006-07 R 4,570 (As at March 31, 2021 - R 4,570), the Company has received favorable order from Income-tax Appellate Tribunal (ITAT) and the Department has preferred an appeal before the Honorable High Court of Mumbai.

For financial year 2010-11 R 2,275 (As at March 31, 2021 R 2,275 ), Assessing Officer has re-opened the Assessment under section 148 of the Act and disallowed 10A benefit. The company has preferred an appeal before Commissioner of Income-tax (Appeals).

e) In addition, the Company in the ordinary course of business receives various claims from its customers and other business partners. Based on review of such matters and the information available at this time, the Company does not anticipate that any of these will result in a settlement that will have a material impact on its financial statements.

The following methods and assumptions were used to estimate the fair values:

27. Fair value hierarchy

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

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as

prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The following table presents the fair value measurement hierarchy of financial assets and liabilities measured at fair value on recurring

basis as at March 31, 2022 and March 31, 2021.

Derivative financial instruments

For movement in cash flow hedge reserve gain or loss - Refer note 9

28. Financial risk management

The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below:

Credit risk

Trade and other receivables

The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment.

One customer accounted for more than 10% of the revenue for the year ended March 31, 2022 and two of the customer accounted for more than 10% of the receivables for the year ended March 31, 2022. One customer accounted for more than 10% of the revenue for the year ended March 31, 2021 and two of the customer accounted for more than 10% of the receivables for the year ended March 31, 2021.

Investments

The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counterparties, and does not have any significant concentration of exposures to specific industry sectors.

Liquidity risk

Foreign currency risk

The Company''s exchange risk arises from its foreign operations, foreign currency revenues and expenses, (primarily in U.S. Dollar, British pound sterling and Euro). A significant portion of the Company''s revenues are in these foreign currencies, while a significant portion of its costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these foreign currencies, the Company''s revenues measured in rupees may decrease. The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. The Company reviews on a periodic basis to formulate the strategy for foreign currency risk management.

Consequently, the Company uses derivative financial instruments, such as foreign exchange forward contracts, to mitigate the risk of changes in foreign currency exchange rates in respect of its forecasted cash flows and trade receivables.

The details in respect of the outstanding foreign exchange forward contracts are given under the derivative financial instruments section.

In respect of the Company''s forward contracts, a 1% decrease/ increase in the respective exchange rates of each of the currencies underlying such contracts would have resulted in:

a) an approximately ^ 160 lakhs increase and decrease in the Company''s net profit as at March 31, 2022;

b) an approximately ^ 592 lakhs increase and decrease in the Company''s net profit as at March 31, 2021.

For the year ended March 31, 2022, every 1% increase/decrease of the respective foreign currencies compared to functional currency of the Company would impact operating margins by 0.01%/ (0.01)%. For the year ended March 31, 2021, the impact on operating margins would be 0.11%/ (0.11)%.

29. Capital management

The Company''s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Company monitors the return on capital as well as the level of dividends on its equity shares. The Company''s objective when managing capital is to maintain an optimal structure so as to maximize shareholder value.

30. Employee benefit plans

i) Defined contribution plans

a) Provident fund

Until the end of April 2021 the eligible employees of Sonata Software Limited received benefits from a provident fund, which is a defined benefit plan. Both the eligible employee and the Company made monthly contributions to the provident fund plan equal to a specified percentage of the covered employee''s salary. The Company has contributed a portion to the Sonata Software Provident Fund Trust (Trust). Trust invests in specific designated instruments as permitted by Indian law. The remaining portion is contributed to the government administered pension fund. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.

During the year the Sonata Provident Fund Trust has surrendered the exemption granted and transferred the provident fund accumulation of employees to the Employees'' Provident Fund Organisation (EPFO), Mumbai. Accordingly from May 2021 onwards the company remits the monthly contribution of provident fund to EPFO.

Provident fund contributions amounting to T 1,249 lakhs (for the year ended March 31, 2021 T 1,447 lakhs) has been charged to the Statement of Profit and Loss (as part of Contribution to Provident Fund and other Funds in Note 19 Employee benefits expense).

The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors.

31. Share-based payments

a) Employee share option plan of the Company

i) Details of the employee share option plan of the Company

Each vested stock option shall convert into one equity share of the Company upon exercise. The exercise price of the stock option shall be the closing market price of the share on National Stock Exchange of India Ltd on the trading day immediately preceding the date of the grant . The stock options carry neither rights to dividends nor voting rights unless the transfer of shares from the Sonata Software Ltd Employee Welfare Trust to the employee is duly registered by the company . Options may be exercised at any time from the date of vesting to the date of their expiry.

v) Share options outstanding at the end of the year

The share options outstanding at the end of the year had a weighted average exercise price of T 264.64 (as at March 31, 2021 T 269.98)

During the year, the amount recognised as expense for employee Stock Options is T 34 Lakhs (for the year ended March 31, 2021 is -T 53 Lakhs)

b Other Stock Based Compensation Arrangements

Stock Appreciation Rights Plan provides the certain employee with the right to receive cash that is equal to the increase in the value of the company''s shares from the date the right was granted and the right was exercised. They are not entitled to any shares or dividend. Plan 1 and 2 of 2018 has been approved by the Board vide Board Meeting dated May 29, 2017 subsequently amended dated August 13, 2018. Plan of 2019 and 2020 has been approved by the Board vide Board meeting dated August 13, 2018 and August 4, 2021 respectively.

The company has cancelled the existing Stock Appreciation Rights Plan (SAR) during the year and introduced the Bonus plan in lieu of SAR effective from June 30, 2021.

32. Segment reporting

33. Consolidation of Employee Welfare Trust

34. Corporate Social Responsibility

As per Section 135 of Companies Act, 2013 a company meeting the applicability threshold, needs to spend atleast 2% of its average net profit of the immediately preceding three financial years on Corporate Social Responsibility (CSR) activities. A CSR committee has been formed by the Company as per the Companies Act, 2013. The CSR initiatives are focused towards those programme directly or indirectly, benefit the community and society at large. The Company''s CSR activities primarily focuses on programs that promote education, gender equality empowering women and traditional Arts & Handicrafts..

(i) Gross amount required to be spent by the Company during the year is ^ 393 lakhs (Previous year is ^ 374 lakhs).

(ii) Amount spent during the year is ^ 396 lakhs (Previous year is ^ 376 lakhs).

36. There is no amount due and outstanding as at Balance Sheet date to be credited to the Investor Education and Protection Fund

37. Distributions made and proposed :

The Board of Directors at their meeting held on October 19, 2021 had declared an interim dividend of 800% (^ 8 per equity share of par value of ^ 1 each). Further, the Board of Directors at its meeting held on April 29, 2022 have recommended a final dividend of 1,300 % (^ 13 per equity share of par value ^ 1 each), which is subject to approval of shareholders.

The Board of Directors at their meeting held on November 06, 2020 had declared an interim dividend of 400% (^ 4 per equity share of par value of ^ 1 each). Further, the Board of Directors at its meeting held on May 12, 2021 have recommended a final dividend of 1,000% (^ 10 per equity share of par value ^ 1 each), was approved by shareholders on 16th August 2021.

39. Leases

The Company has adopted Ind AS 116 ''Leases'' with the date of initial application being April 1, 2020. Ind AS 116 replaces Ind AS 17 - Leases and related interpretation and guidance. The Company has applied Ind AS 116 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at April 1, 2019.

The aggregate amortization expense of ^ 1,315 lakhs (March 31, 2021 ^ 1,338 lakhs) on ROU assets is included under depreciation and amortization expense in the statement of Profit and Loss.

40. Acquisition of Encore

Sonata Software Limited has acquired 100% stake in Encore India Private Limited on Aug 1, 2021 for an investment of USD 1.2 million (INR 893 lakhs). Encore India Private Limited provides customized software development and testing, and related IT consulting services. It offers services in the areas of application management, quality assurance, analytics, information security, cloud enablement, cloud migration, and mobility. The entire consideration has been paid in cash.

Explanation for variances exceeding 25%:

¹ Debt service coverage ratio improved on account of increase in EBIT during the year ended March 31, 2022

² Net profit ratio improved on account of increase in Dividends received from subsidiary during the financial year 2021-22

³ Return on investment improved on account of increase in Dividends received from subsidiary during the financial year 2021-22

42. During the year the Company has received ^ Nil (for the year ended March 31, 2021 is ^ 937 Lakhs) from governments of various countries on compliance of certain conditions consequent to the outbreak of COVID-19 pandemic and accordingly, accounted as a credit to employee benefits expense (refer note 19).

43. No funds have been advanced or loaned or invested from borrowed funds by the Company to or in any other persons or entities, including foreign entities (Intermediaries), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or provide any guarantee, security or the like on behalf of the ultimate beneficiaries.

No funds have been received by the Company from any persons or entities including foreign entities. Since SSL has not received any funding either in current year or in prior years.

Mar 31, 2018

1. CORPORATE INFORMATION

Sonata Software Limited (âSSLâor theâCompanyâ) is a Company primarily engaged in the business of providing Information Technology Services and Solutions to its customers in the United States of America, Europe, Middle East and India.

The Company is a public limited company incorporated in India with its registered office at Mumbai and operationally headquartered at Bengaluru. The Company is listed on The National Stock Exchange Limited and The BSE Limited. The financial statements were authorised for issuance by the Companyâs Board of Directors on May 22, 2018.

The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 BASIS OF PREPARATION & PRESENTATION OF FINANCIAL STATEMENTS

a. Statement of compliance

The financial statements have been prepared in accordance with Indian Accounting Standards (âInd ASâ) notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (India Accounting Standards) Amendment Rules, 2016 as applicable.

Upto the year ended March 31, 2017, the Company prepared and presented its financial statements in accordance with the accounting standards notified under section 133 of the Companies Act, 2013 (Indian GAAP), which includes Standards notified under the Companies (Accounting Standards) Rules, 2006.

These are the Companyâs first Ind AS financial statements. The Company has adopted all applicable standards and the adoption was carried out in accordance with Ind AS 101 - âFirst Time Adoption of Indian Accounting Standardsâ. An explanation of how the transition to Ind AS has affected the reported financial position, financial performance and cash flows of the Company are provided in Note no 38 - First Time Adoption. The date of transition to Ind AS is April 1, 2016.

b. Basis of measurement

The financial statements have been prepared on a historical cost convention and on an accrual basis, except for certain financial instruments which are measured at fair value at end of the each reporting period, as explained in the accounting policies below.

c. Use of judgement, estimates and assumptions

The preparation of the financial statements in conformity with Ind AS requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities and disclosure relating to contingent liabilities as at the date of financial statement and the reported amounts of income and expenditure during the reported year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialize.

The areas involving critical estimates or judgements are:

i. Depreciation and amortisation: Depreciation and amortisation is based on management estimates of the future useful lives of certain class of property, plant and equipment and intangible assets. Estimates may change due to technological developments, competition, changes in market conditions and other factors and may result in changes in the estimated useful life and in the depreciation and amortisation charges.

ii. Impairment testing: Investments in subsidiaries, goodwill and intangible assets are tested for impairment annually and when events occur or changes in circumstances indicate that the recoverable amount of the asset or cash generating units to which these pertain is less than its carrying value. The recoverable amount of cash generating units is higher of value-in-use and fair value less cost to dispose. The calculation of value in use of a cash generating unit involves use of significant estimates and assumptions which includes turnover and earnings multiples, growth rates and net margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions.

iii. Employee Benefits : The present value of the employee benefits obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) includes the discount rate, wage escalation and employee attrition. Any changes in these assumptions will impact the carrying amount of obligations. The discount rate is based on the prevailing market yields of Indian Government securities as at the Balance Sheet date for the estimated term of the obligations.

iv. Provision and contingencies : Provisions and contingencies are based on the Managementâs best estimate of the liabilities based on the facts known at the Balance Sheet date.

v. Expected credit losses on financial assets: The impairment provisions of financial assets are based on assumptions about risk of default and expected timing of collection. The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on the Companyâs past history, customerâs creditworthiness, existing market conditions as well as forward looking estimates at the end of each reporting period.

vi. Other estimates: The preparation of financial statements involves estimates and assumptions that affect the reported amount of assets, liabilities, disclosure of contingent liabilities at the date of financial statements and the reported amount of revenues and expenses for the reporting period.

The stock compensation expense is determined based on the Companyâs estimate of equity instruments that will eventually vest.

Fair valuation of derivative hedging instruments designated as cash flow hedges involves significant estimates relating to the occurrence of forecast transaction.

2.2 Functional and presentation currency : The functional and presentation currency of the Company is Indian Rupee (Rs.). The functional currency of its Branches is as per its respective domicile currency.

(i) Disallowance of claims made under Section 10A of the Income-tax Act, 1961

The Income-tax department in its assessments has been denying or limiting the benefits of Section 10A of the Act to the multiple undertakings of the Company on the ground that they were in fact one single unit and thus the benefits claimed were in excess of permissible limits, and had raised a demand of Rs.5,001, (As at March 31, 2017 - Rs.5,001) for financial years 2007-08 to 2009-10. The company received favourable order from CIT(A) and the Department has preferred an appeal before Income-tax Appellate Tribunal (ITAT).

For the financial year 2006-07 Rs.2,368 (As at March 31, 2017- â Nil), the Company has received favorable order from Income-tax Appellate Tribunal (ITAT) and the Department has preferred an appeal before the Honorable High Court of Mumbai.

For the financial year 2001-02, ITAT had given a favorable order on the ground of income accrued under Section 10A of the Act against which the department had filed an appeal before the Honorable High Court of Mumbai Rs.149 (As at March 31, 2017 - Rs.149).

For the financial year 2013-14 Rs.43 (As at March 31, 2017 - Nil), the Company has preferred an appeal before CIT(A) .

(ii) Disallowance of Inter-Company Service Charges

The Company charges Sonata Information Technology Limited, its wholly owned subsidiary, for certain support services rendered. During assessments, the Income-tax department denied benefits under Section 10A of the Income Tax Act on such support services and assessed the same as normal business income and raised demand of Rs.2,337 (As at March 31, 2017 - Rs.2,337) for financial years 2001-02 to 2004-05. The Company had received favorable orders from ITAT. However, the department preferred an appeal on the said orders before the Honorable High Court of Mumbai.

Rs.116 (As at March 31, 2017- Rs.116) for the financial year 2010-11. The Company had filed an appeal before the CIT(A) The Company has received favorable orders and the Department has preferred an appeal before ITAT.

(iii) Transfer Pricing Adjustment

Rs.1,072 (As at March 31, 2017 - Rs.1,162) for the financial year 2011-12 and 2013-14. The Income-tax department has recommended the upward adjustment in the value of Investment in subsidiary and sale of services to associated enterprises as Transfer Pricing Adjustment in the International transactions in order to consider them to be at armâs length price. The Company had preferred an appeal before CIT(A) heard and partly allowed. For the financial year 2011-12, the Company has preferred an appeal before ITAT. For the financial year 2013-14, the company has preferred an appeal before CIT(A).

(iv) Withholding tax demand

The Income-tax department has been contending that amounts paid by the Company for buying the software products is in the nature of âRoyaltyâ and hence had to withhold Income-tax on the same as per the Income Tax Act and had raised demand of Rs.2,842 (As at March 31, 2017- Rs.2,842) from the financial year 1999-00 to 2001-02. The Companyâs contention has been that the payments were made for purchase of âGoodsâ and hence was under no obligation to withhold Income-tax on the same. The Company had received favorable orders from the ITAT which were reversed by the Honorable High Court of Karnataka. The Company had preferred a Special Leave Petition Appeal on the said order to the Honorable Supreme Court of India, which had been admitted. However, for these years one of the principal suppliers of software to the Company had paid taxes of Rs.879 out of the above demand. The amount included as disputed demand is excluding the amount paid by the supplier.

(v) Deductions claimed under Section 80 O

Prior to the enactment of Section 10A of the Act, the Company claimed deduction for exports made, under Section 80 O of the Act. The department had re-opened the assessments and disallowed certain aspects of the claims made on the contention that cost allocation principles followed for the claim are erroneous and raised a demand of Rs.83 (As at March 31, 2017 - Rs.83) for the financial year 1994-95. The Company had received favorable orders from ITAT. The department had preferred an appeal on the said order before the Honorable High Court of Mumbai.

3 Financial instruments

The carrying value and fair value of financial instruments by categories as at March 31, 2018, March 31, 2017 and April 1, 2016 is as follows:

The management assessed that fair value of cash and short-term deposits, trade receivables, trade payables, inter corporate deposits and other current financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

The following methods and assumptions were used to estimate the fair values:

1. The fair value of the quoted mutual funds are based on price quotations at reporting date. The fair value of loans from banks and other financial liabilities, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. The valuation requires management to use unobservable inputs in the model, of which the significant unobservable inputs are disclosed in the tables below. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.

2. The fair values of the unquoted equity and preference shares have been estimated using a discounted cash flow model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility, the probabilities of the various estimates whose range can be reasonably assessed and are used in managementâs estimate of fair value for these unquoted equity investments.

3. The Company enters into derivative financial instruments with Banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing model, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves etc. As at March 31, 2018, the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationship and other financial instruments recognised at fair value.

4. Fair value hierarchy

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

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The following table presents the fair value measurement hierarchy of financial assets and liabilities measured at fair value on recurring basis as at March 31, 2018, March 31, 2017 and April 1, 2016.

(i) Quantitative disclosures of fair value measurement hierarchy for financial assets is as under:

There have been no transfers among Level 1, Level 2 and Level 3 during the year.

(ii) Reconciliation of fair value measurement of investment in unquoted preference shares classified as FVTPL (Level 3):

Derivative financial instruments

For movement in cash flow hedge reserve gain or loss - Refer note 10

The following table presents the aggregate contracted principal amounts of the Companyâs derivative contracts outstanding:

5. Financial risk management

The Companyâs activities expose it to a variety of financial risks: credit risk, liquidity risk, foreign currency risk and interest rate risk. The Companyâs primary 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. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Companyâs policy that no trading in derivative for speculative purposes may be undertaken.

The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below:

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Companyâs receivables from customers and investment securities. Credit risk arises from cash held with banks and financial institutions, as well as credit exposure to clients, including outstanding accounts receivable. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.

Trade and other receivables

The Companyâs exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment.

The following table gives details in respect of revenues generated from top customer and top 5 customers (excluding Inter-company):

One customer accounted for more than 10% of the revenue for the year ended March 31, 2018, however none of the customers accounted for more than 10% of the receivables for the year ended March 31, 2018. One customer accounted for more than 10% of the revenue for the year ended March 31, 2017, however none of the customers accounted for more than 10% of the receivables for the year ended March 31, 2017.

Investments

The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counterparties, and does not have any significant concentration of exposures to specific industry sectors.

Liquidity risk

The Companyâs corporate treasury department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management.

Foreign Currency risk

The Companyâs exchange risk arises from its foreign operations, foreign currency revenues and expenses, (primarily in U.S. dollars, British pound sterling and euros). A significant portion of the Companyâs revenues are in these foreign currencies, while a significant portion of its costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these foreign currencies, the Companyâs revenues measured in rupees may decrease. The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. The Company reviews on a periodic basis to formulate the strategy for foreign currency risk management.

Consequently, the Company uses derivative financial instruments, such as foreign exchange forward contracts, to mitigate the risk of changes in foreign currency exchange rates in respect of its forecasted cash flows and trade receivables.

The details in respect of the outstanding foreign exchange forward contracts are given under the derivative financial instruments section.

In respect of the Companyâs forward contracts, a 1% decrease / increase in the respective exchange rates of each of the currencies underlying such contracts would have resulted in:

a) an approximately Rs.77 lakhs increase and decrease in the Companyâs net profit as at March 31, 2018;

b) an approximately Rs.67 lakhs increase and decrease in the Companyâs net profit as at March 31, 2017.

*Others include currencies such as Singapore $, Australian $, Swiss Franc, etc

For the year ended March 31, 2018, every 1% increase / (decrease) of the respective foreign currencies compared to functional currency of the Company would impact operating margins by 0.19% / (0.19)%. For the year ended March 31, 2017, the impact on operating margins would be 0.16%/ (0.16)%.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Companyâs exposure to the risk of changes in market interest rates relates primarily to the Companyâs debt obligations with floating interest rates and investments. The Companyâs borrowings and investments are primarily short-term, which do not expose it to significant interest rate risk.

6. Capital management

The Companyâs policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Company monitors the return on capital as well as the level of dividends on its equity shares. The Companyâs objective when managing capital is to maintain an optimal structure so as to maximize shareholder value.

The capital structure of the Company consists of net debt (borrowings offset by cash and bank balances) and total equity.

The capital structure is as follows:

7 Employee benefit plans

i) Defined contribution plans

a) Provident fund

The Company makes contributions towards Provident Fund under a defined contribution plan for qualifying employees. The Provident Fund is administered by the Trustees of Sonata Software Limited Provident Fund and by the Regional Provident Fund Commissioner. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits.

The Rules of the Companyâs Provident Fund administered by the Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employeesâ Provident Fund by the Government under para 60 of the Employeesâ Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund.

Provident fund contributions amounting to Rs.1,132 lakhs (for the year ended March 31, 2017 Rs.976 lakhs) has been charged to the Statement of Profit and Loss (as part of Contribution to Provident Fund and other Funds in Note 18 Employee benefits expense).

b) During the year the Company has recognised the following amounts in the Statement of Profit and Loss towards Employers contribution to:

ii) Defined benefit plans - Gratuity

As per valuation

The principal assumptions used for the purposes of the actuarial valuations were as follows.

Amounts recognised in statement of profit and loss in respect of these defined benefit plans are as follows:

The current service cost and the net interest expense for the year are included in the âEmployee benefits expenseâ line item in the statement of profit and loss.

The remeasurement of the net defined benefit liability is included in other comprehensive income.

The amount included in the balance sheet arising from the entityâs obligation in respect of its defined benefit plans is as follows:

The Company expects to contribute Rs.460 lakhs to its defined benefit plans during the next fiscal year.

The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors.

The Company has established an income tax approved irrevocable trust fund to which it regularly contributes to finance liabilities of the plan. The fundâs investments are managed by insurance company as per the mandate provided to them by the trustees and the asset allocation is within the permissible limits prescribed in the insurance regulations.

8. Share-based payments

a) Employee share option plan of the Company

i) Details of the employee share option plan of the Company

The Company has a stock option plan for employees of the Company and its subsidiaries, authorized by the nomination and remuneration committee. In accordance with the terms of the plan, as approved by shareholders at its annual general meeting dated August 19, 2014. Eligible employees are granted to get stock option with graded vesting period of four years. The quantum of stock option is decided by the Nomination and Remuneration Committee. The shares are transferred to employees from the Sonata Software Ltd Employee Welfare Trust based on approval.

Each vested stock option shall convert into one equity share of the Company upon exercise. The exercise price of the stock option shall be the closing market price of the share on National Stock Exchange of India Ltd on the trading day immediately preceding the date of the grant . The stock options carry neither rights to dividends nor voting rights unless the transfer of shares from the Sonata Software Ltd Employee Welfare Trust to the employee is duly registered by the company . Options may be exercised at any time from the date of vesting to the date of their expiry.

The following share-based payment arrangements were in existence during the current and prior years:

v) Share options outstanding at the end of the year

The share options outstanding at the end of the year had a weighted average exercise price of Rs.62.06 (as at March 31, 2017 Rs.49.80)

b) Other Stock Based Compensation Arrangements

Stock Appreciation Rights Plan provides the certain employee with the right to receive cash that is equal to the increase in the value of the companyâs shares from the date the right was granted and the right was exercised. They are not entitled to any shares or dividend. This plan has been approved by the Board vide Board Meeting dated May 29, 2017.

The Company has also granted stock appreciation rights plan to certain employees during the year which is subject to certain vesting conditions. Details of the grant/issue as at March 31, 2018 are given below:

9 Segment reporting

The Company prepares consolidated financial statements, hence as per Ind AS 108 on Segment Reporting, segment information has not been provided in the standalone financial statements.

10 Consolidation of Employee Welfare Trust

11 Details of leasing arrangements

i. The Company has entered into various operating lease agreements for office premises, residential premises, guest houses and certain assets. These leases are cancellable as well as non-cancellable and are for a period of 3 to 99 months and may be renewed based on mutual agreement of the parties.

12. Corporate Social Responsibility

As per Section 135 of 2013 Act, a company meeting the applicability threshold, needs to spend atleast 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. A CSR committee has been formed by the Company as per the 2013 Act. The CSR initiatives are focused towards those programme directly or indirectly, benefit the community and society at large.

(i) Gross amount required to be spent by the Company during the year is Rs.258 lakhs (Previous year is Rs.190 lakhs)

(ii) Amount spent during the year is Rs.210 lakhs (Previous year is Rs.176 lakhs)

(iii) Amount unspent is Rs.48 lakhs (Previous year is Rs.14 lakhs)

13. Earnings Per Share

Reconciliation of number of equity shares used in the computation of basic and diluted earnings per share is set out below:

14. There is no amount due and outstanding as at Balance Sheet date to be credited to the Investor Education and Protection Fund.

15. Distributions made and proposed

The amount of per share dividend recognized as distributions to equity shareholders for the year ended March 31, 2018 and year ended March 31, 2017 was Rs.10.50 and Rs.9 respectively.

The Board of Directors at their meeting held on November 13, 2017 had declared an interim dividend of 375% (Rs.3.75 per equity share of par value of Rs.1 each). Further, the Board of Directors at its meeting held on May 22, 2018 have recommended a final dividend of 675% (Rs.6.75 per equity share of par value Rs.1 each) which is subject to approval of shareholders. If approved, this would result in a cash outflow of approximately Rs.8,557 lakhs inclusive of dividend distribution tax.

The Board of Directors at their meeting held on November 2, 2016 had declared an interim dividend of 350% (Rs.3.5 per equity share of par value of Rs.1 each). The Board of Directors at its meeting held on May 29, 2017 had recommended a final dividend of 550% ( Rs.5.5 per equity share of par value Rs.1 each). The proposal was approved by shareholders at the Annual General Meeting held on August 16, 2017, this has resulted in a cash outflow of Rs.6,961 lakhs, inclusive of dividend distribution tax .

* The above post employment benefits excludes gratuity and compensated absences which cannot be separately identified from the composite amount advised by the actuary.

Transactions with WOS and Subsidiaries

(i) Maximum balance outstanding during the year is Rs.12,105 lakhs (for the year ended March 31, 2017 Rs.8880 lakhs)

(ii) These inter corporate deposits were given for working capital purposes.

Transactions with key management personnel

(i) Dividends paid to key managment personnel during the year ended March 31, 2018 amounts to Rs.52 lakhs (year ended March 31, 2017 - Rs.122 lakhs);

(ii) During the year ended March 31, 2018, 60,000 shares (year ended March 31, 2017 - Nil) were granted to the key management personnel under the Employees Stock options Plan;

(iii) During the year ended March 31, 2018, 165,000 units (year ended March 31, 2017 - Nil) were granted to the key management personnel under the Stock Appreciation Rights Plan.

16. Transition to Ind AS

The Companyâs financial statements for the year ended March 31, 2018 are prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015. The adoption of Ind AS was carried out in accordance with Ind AS 101, using April 1, 2016 as the transition date. Ind AS 101 requires that all Ind AS standards and interpretations that are effective for the Ind AS financial statements for the year ended March 31, 2018, be applied consistently and retrospectively for all fiscal years presented. All applicable Ind AS have been applied consistently and retrospectively wherever required. The resulting difference between the carrying amounts of the assets and liabilities in the financial statements under both Ind AS and Indian GAAP as at the transition date have been recognized directly in equity at the transition date.

In preparing these financial statements, the Company has availed itself of certain exemptions and exceptions in accordance with Ind AS 101 as explained below:

(i) Exceptions from full retrospective application

Estimates exception: Upon an assessment of the estimates made under Indian GAAP, the Company has concluded that there was no necessity to revise such estimates under Ind AS, except where estimates were required by Ind AS and not required by Indian GAAP.

ii) Exemptions from retrospective application:

Share-based payment exemption: The Company has availed exemption available under Ind AS 101 on application of Ind AS 102, âShare Based Paymentâ; to equity instruments that vested before the date of transition to Ind AS.

Notes

i. Business combination:

Under Ind AS, the acquireeâs identifiable assets, liabilities and contingent consideration payable on business combination that meet the condition for recognition are considered at their fair value. This has resulted in the recognition of intangible assets and consequently their amortisation in the Statement of Profit and Loss. while under previous GAAP, the assets & liabilities of the acquiree are recognised at cost.

ii. Fair valuation of investments:

Under Ind AS, financial assets and financial liabilities are required to be measured at fair value. The resulting fair value change of these investments has been recognised in the retained earnings as at the date of transition and subsequently in the profit or loss for the year ended March 31, 2017. Mutual fund investments have been classified as FVTPL. Consequently, increase in fair value of such investments in quoted mutual funds has resulted in a gain. Under previous GAAP, investments in equity instruments and Mutual funds were classified as long-term investments or current investments based on the intended holding period and its realisability. Long term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value.

iii. Security deposits:

Under previous GAAP, Lease security deposits (that are refundable in cash on completion of the lease term) are recorded at their transaction value. Under Ind AS, the difference between the Fair value and transaction value of the security deposits has been recognised as prepaid rent. The lease rentals paid in advance are charged to the statement of profit and loss over the lease term.

iv. Deferred Tax:

Under Ind AS, deferred taxes has been recognised on the adjustments made on transition to Ind AS and the items considered under other comprehensive income.

v. Consolidation of Employee Welfare Trust:

Under Ind AS, the company is required to consolidate Sonata Employee Welfare Trust Accounts, which is under common control. Under previous GAAP, the same was not consolidated.

vi. Hedge Accounting/Forward contracts:

Under Ind AS the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in Other Comprehensive Income. The ineffective portion of changes in the fair value of the derivative is recognised in the Statement of Profit and Loss. Under previous GAAP, the gain or loss on the hedging instrument that is determined to be an effective hedge was recognized directly in the appropriate equity account.

vii. Employee stock option plan:

Under the previous GAAP, the cost of equity-settled employee share-based plan were recognised using the intrinsic value method. Under Ind AS, the cost of equity-settled share based plan is recognised based on the fair value of the options as at the grant date.

viii. Remeasurement of Defined benefit obligations:

Under previous GAAP, actuarial gains and losses were recognised in the statement of Profit and Loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability/ asset which is recognised in Other Comprehensive Income. Consequently, the tax effect of the same has also been recognised in Other Comprehensive Income under Ind AS instead of the Statement of Profit and Loss.

Mar 31, 2017

1. Details of rights, preferences and restrictions attached to each class of shares

The Company has equity shares having a par value ofRs.1/-. Each shareholder is entitled for one vote per share. The shareholders have the right to receive interim dividends declared by the Board of directors and final dividends proposed by the Board and approved by the shareholders.

The shareholders have all other rights as available to equity shareholders as per the provisions of the 2013 Act, read together with the Memorandum of Association and Articles of Association of the Company, as applicable.

Details of disputed demands of Income-tax by issue and by year are as below:

2. Disallowance of claims made under Section 10A of the Income-tax Act, 1961

The Income-tax department in its assessments has been denying or limiting the benefits of Section 10A of the Act to the multiple undertakings of the Company on the ground that they were in fact one single unit and thus the benefits claimed were in excess of permissible limits, and had raised a demand ofRs.336,003,062, (As at 31.03.2016 -Rs.336,003,062) for financial years 2007-08 and 2009

3. During the year, the Company received favorable orders from Commissioner of Income-tax (Appeals) and the Department has preferred an appeal before Income-tax Appellate Tribunal (ITAT).

For the Financial Year 2006-07,Rs.Nil (As at 31.03.2016-Rs.Nil), the Company has received favorable order from Commissioner of Income-tax (Appeals) and the Department has preferred an appeal before the Honorable High Court of Mumbai which is yet to be admitted.

For the Financial Year 2008-09, ''164,128,231 (As at 31.03.2016-Rs.Nil), the Department has preferred an appeal before Income-tax Appellate Tribunal (ITAT).

For the Financial Year 2001-02, ITAT had given a favorable order on the ground of income accrued under Section 10A of the Act against which the department had filed an appeal before the Honorable High Court of MumbaiRs.14,863,703 (As at 31.03.2016 -Rs.14,863,703).

4. Inter-unit set-off of losses

As discussed in point (i) above, the Company operates multiple operating units and undertakings under the Software Technology Park Scheme of India. While computing its taxable profits, losses from one undertaking were set off against profits of another or carried forward to the subsequent years. The Income-tax department had disallowed such carry forward of losses. The Company received favorable orders from ITAT and the department had preferred an appeal before the Honorable High Court of Mumbai which is yet to be admitted for financial years 2002-03, 2003-04 and 2004-05 and hence there is no contingent liability.

5. Disallowance of Inter-Company Service Charges

The Company charges Sonata Information Technology Limited, its wholly owned subsidiary, for certain support services rendered. During assessments, the Income-tax department denied benefits under Section 10A of the Income Tax Act on such support services and assessed the same as normal business income and raised demand ofRs.233,708,329 (As at 31.03.2016 -Rs.233,708,329) for financial years 2001-02, 2002-03, 2003-04 and 2004-05. The Company had received favorable orders from ITAT. However, the department preferred an appeal on the said orders before the Honorable High Court of Mumbai.

Rs. 11,635,577 (As at 31.03.2016-Rs.11,635,577) for the Financial Year 2010-11. The Company had filed an appeal before the Commissioner of Income-tax (Appeals) The Company has received favorable orders and the Department has preferred an appeal before ITAT.

6. Transfer Pricing Adjustment

Rs. 116,162,422 (As at 31.03.2016 -Rs.116,162,422) for the Financial Year 2011-12. The Income-tax department has recommended the upward adjustment in the value of Investment in subsidiary and sale of services to associated enterprises as Transfer Pricing Adjustment in the International transactions in order to consider them to be at arm''s length price. The Company has preferred an appeal before Commissioner of Income-tax (Appeals).

7. Withholding tax demand

The Income-tax department has been contending that amounts paid by the Company for buying the software products is in the nature of ''Royalty'' and hence had to withhold Income-tax on the same as per the Income Tax Act and had raised demand ofRs.284,187,956 (As at 31.03.2016 -Rs.284,187,956) for the financial years 1999-00, 2000-01 and 2001-02. The Company''s contention has been that the payments were made for purchase of ''Goods'' and hence was under no obligation to withhold Income-tax on the same. The Company had received favorable orders from the ITAT which were reversed by the Honorable High Court of Karnataka. The Company had preferred a Special Leave Petition Appeal on the said order to the Honorable Supreme Court of India, which had been admitted. However, for these years one of the principal suppliers of software to the Company had paid taxes ofRs.87,904,913 out of the above demand. The amount included as disputed demand is excluding the amount paid by the supplier.

8. Deductions claimed under Section 80 O

Prior to the enactment of Section 10A of the Act, the Company claimed deduction for exports made, under Section 80 O of the Act. The department had re-opened the assessments and disallowed certain aspects of the claims made on the contention that cost allocation principles followed for the claim are erroneous and raised a demand ofRs.8,283,288 (As at 31.03.2016 -Rs.8,283,288) for the Financial Year 1994-95. The Company had received favorable orders from Income-tax Appellate Tribunal. The department had preferred an appeal on the said order before the Honorable High Court of Mumbai.

9. In addition, the Company in the ordinary course of business receives various claims from its customers and other business partners. Based on review of such matters and the information available at this time, the Company does not anticipate that any of these will result in a settlement that will have a material impact on its financial statements.

10 : Details on derivative instruments and unhedged foreign currency exposures

11. Objective of Company''s hedges is to minimize the impact of Foreign exchange rate variations on INR value of the committed receipts and payments in foreign currencies .The company hedges majority of cash flows expected to arise from its future one-year firm commitments/ highly probable forecasted transactions on rolling month basis through simple forward exchange contracts. On every reporting date, Company obtains the Mark to Market valuation report of all the outstanding derivative contracts from the Foreign Exchange Authorized Dealers. Extent of fair value gains/(losses) recognized in the statement of profit and loss in the current year isRs.75,344,968 (for the year ended 31.03.2016Rs.19,740,900) and recognized as Hedge Reserve as at 31.03.2017 isRs.93,654,686 (as at 31.03.2016 isRs.71,823,122).

12. Forward exchange contracts (being derivative instruments), which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain receivables / investments.

13 : Employee benefit plans

14. Defined contribution plans

15. Provident fund

The Rules of the Company''s Provident Fund administered by the Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees'' Provident Fund by the Government under para 60 of the Employees'' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future.

Provident fund contributions amounting toRs.97,558,911 (for the year ended 31.03.2016Rs.86,742,578) has been charged to the Statement of Profit and Loss (as part of Contribution to Provident Fund and other Funds in Note 21 Employee benefits expense).

16: Segment reporting

The Company prepares consolidated financial statements, hence as per Accounting Standard 17 on Segment Reporting, segment information has not been provided in the standalone financial statements.

17 : Details of leasing arrangements

18. The Company has entered into various operating lease agreements for office premises, residential premises, guest houses and certain assets. These leases are cancellable as well as non-cancellable and are for a period of 3 to 99 months and may be renewed based on mutual agreement of the parties.

19 : Corporate Social Responsibility

As per Section 135 of 2013 Act, a company meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. A CSR committee has been formed by the Company as per the 2013 Act. The CSR initiatives are focused towards those programmes directly or indirectly, benefit the community and society at large.

20. Gross amount required to be spent by the Company during the year isRs.19,016,013 (Previous year isRs.12,956,987)

21. Amount spent during the year isRs.17,595,701 (Previous year isRs.12,753,723)

22. Amount unspent isRs.1,420,312 (Previous year isRs.203,264)

23 : The Company did not have any holdings or dealings in Specified Bank Notes as defined in the Notification S.O. 3407(E) dated the 8^th November, 2016 of the Ministry of Finance, during the period from 8^th November, 2016 to 30^th December, 2016

24 : There is no amount due and outstanding as at Balance Sheet date to be credited to the Investor Education and Protection Fund.

25: The Board of Directors recommended a final dividend ofRs.5.50 (550%) on per value ofRs.1) per equity share to the Financial Year ended March 31, 2017. The payment is subject to the approval of the shareholders in the ensuring Annual General Meeting of the Company.

26 : Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.

1. Disallowance of Inter-Company service charges and costs for deputation of personnel.

Sonata Software Limited, the holding company charges the Company for certain support services rendered and for the cost of project personnel deputed. These support services and costs for deputation are being disallowed by the Income-tax department while computing taxable profits of the Company. The Company has challenged these disallowances and consequent demands at appellate levels and is confident of a favorable outcome.

Details of demands and forums where they are pending are:

2. Rs.402,964,082 (As at 31.03.2016 -Rs.402,964,082) for the financial years 2001-02, 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08. The Company has received favorable orders from the Income-tax Appellate Tribunal (ITAT). The Income-tax department has preferred an appeal to the Honorable High Court of Mumbai.

3. Rs.44,659,336 (As at 31.03.2016 -Rs.44,659,336) for the Financial Year 2002-03. The Income-tax department''s appeal to the Honorable High Court of Mumbai was time barred and hence dismissed. The Income-tax department had preferred a Special Leave Petition on the said dismissal to the Honorable Supreme Court of India which had referred the petition back to the Honorable High Court of Mumbai to reconsider its decision. The Honorable High Court of Mumbai admitted the appeal.

4. Rs.111,904,892 (As at 31.03.2016 -Rs.111,904,892) for the Financial Year 2010-11. The Company has received favorable order from the Commissioner of Income-tax (Appeals) (CIT(A)). The Income-tax Department has preferred an appeal to the ITAT.

5. Rs. Nil (As at 31.03.2016 -Rs.101,094,655) for the Financial Year 2011-12. The Company has preferred an appeal with the CIT(A) and during the year, the Company has received favorable orders from CIT(A).

6. Rs.294,414,600 (As at 31.03.2016 - ''159,262,831) for the financial years 2012-13 and 2013-14. The Company has preferred an appeal to the CIT(A).

7. Withholding tax demand

The Company is engaged in the business of buying and selling packaged software in India. The Income-tax department has been contending that amounts paid by the Company for buying the software products is in the nature of ''Royalty'' and hence had to withhold Income-tax on the same as per the Income-tax Act, 1961, and had raised demands ofRs.218,239,587 (As at 31.03.2016

-Rs.218,239,587) for the financial years 2000-01 and 2001-02. The Company''s contention has been that the payments were made for purchase of ''Goods'' and hence was under no obligation to withhold Income-tax on the same. The Company had received favorable orders from the Income-tax Appellate Tribunal which were reversed by the Honorable High Court of Karnataka. The Company had preferred a Special Leave Petition on the said order to the Honorable Supreme Court of India, which had been admitted. However, for these years one of the principal suppliers of software to the Company had paid taxes ofRs.128,598,266 out of the above demand. The amount included as disputed demand is excluding the amount paid by the supplier.

8. Disallowance of payments made for purchase of software on which Income-tax was not withheld.

Payment in the nature of Royalty on which Income-tax have not been deducted at source are subject to disallowance as an ''expense'' as per Sections 40(a)(i) and 40(a)(ia) while computing taxable profits of the Company. Consequent to issue described in (ii) above, the Income-tax department, holding payments for purchase of software as "Royalty" disallowed the same while computing taxable profits of the Company.

The Honorable High Court of Karnataka had given an unfavorable decision on the issue covered in (ii) above. However, the said demands which are consequential and penal in nature do not arise automatically and there are multiple legal precedents in favor of the Company. Based on legal opinions and feedback from its legal counsels, the Company is confident of a favorable outcome on these consequential demands.

Details of demands raised and the forum where these are pending are:

9. Rs.2,364,309,742 (As at 31.03.2016 -Rs.2,364,309,742) of tax demand for the financial years 2001-02, 2002-2003, 2006-07 and 2007-08. The Company had received a favorable order from ITAT. The Income-tax department had preferred an appeal to the Honorable High Court of Mumbai.

10. Rs.12,665,134 (As at 31.03.2016 -Rs.9,751,543) for the financial years 2012-13 and 2013-14 the Company has preferred an appeal to the CIT (A).

11. In addition, the Company in the ordinary course of business receives various claims from its customers and other business partners. Based on review of such matters and the information available at this time, the Company does not anticipate that any of these will result in a settlement that will have a material impact on its financial statements.

12: Details on derivative instruments and unhedged foreign currency

13. Objective of Company''s hedges is to minimize the impact of Foreign exchange rate variations on INR value of the committed receipts and payments in foreign currencies. The company hedges majority of cash flows expected to arise from its future one-year firm commitments/ highly probable forecasted transactions on rolling month basis through simple forward exchange contracts. On every reporting date, Company obtains the Mark to Market valuation report of all the outstanding derivative contracts from the Foreign Exchange Authorized Dealers. Extent of fair value gains/(losses) recognized in the statement of profit and loss in the current year isRs.1,747,934 (for the year ended 31.03.2016 is Rs. 6,797,308) and recognized as Hedge Reserve as at 31.03.2017 isRs.26,249,035 (as at 31.03.2016 isRs.6,362,500).

14. Forward exchange contracts (being derivative instruments), which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain receivables.

15 : Employee benefit plans

16. Defined contribution plans

17. Provident fund

The Company makes contributions towards a Provident Fund under a defined contribution plan for qualifying employees. The Provident Fund is administered by the Trustees of Sonata Software Limited Provident Fund and by the Regional Provident Fund Commissioner. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits.

Provident Fund contributions amounting toRs.5,125,411 (for the year ended 31.03.2016 Rs.4,501,362) has been charged to the Statement of Profit and Loss (as part of Contribution to Provident Fund and other Funds in Note 22 Employee benefits expense).

Mar 31, 2016

1: Employee benefit plans i) Defined contribution plans

a) Provident fund

The Company makes contributions towards a Provident Fund under a defined contribution plan for qualifying employees. The
Provident Fund is administered by the Trustees of Sonata Software Limited Provident Fund and by the Regional Provident Fund
Commissioner. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the
benefits.

The Rules of the Company''s Provident Fund administered by the Trust require that if the Board of Trustees are unable to pay
interest at the rate declared for Employees'' Provident Fund by the Government under para 60 of the Employees'' Provident Fund
Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good
by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any
deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund.

Provident fund contributions amounting to final 86,742,578 (for the year ended 31.03.2015 final 71,245,461) has been charged to
the Statement of Profit and Loss (as part of Contribution to Provident Fund and other Funds in Note 21 Employee benefits
expense).

Mar 31, 2015

1 (i) During the year, the Company has acquired software service business of Xyka Software Private Limited, pursuant to a business transfer agreement dated 21.08.2014. The Company has acquired the business by way of slump sale for a consideration in cash. Excess of consideration paid over net assets taken over is treated as goodwill, in accordance with Para 16 of Accounting Standard 10, Accounting of Fixed Assets.

2 (ii) During the year, pursuant to the notification of Schedule II to the 2013 Act with effect from 01.04.2014, the Company revised the estimated useful life of its assets to align the useful life with those specified in Schedule II. Further, assets individually costing Rs. 5,000/- or less that were depreciated fully in the year of purchase are now depreciated based on the useful life considered by the Company for the respective category of assets.

Pursuant to the transition provisions prescribed in Schedule II to the 2013 Act, the Company has fully depreciated the carrying value of assets, net of residual value, where the remaining useful life of the asset was determined to be nil as on 01.04.2014, and has adjusted an amount of Rs. 11,352,885/- (net of tax) against the opening balance in Surplus in Statement of Profit & Loss under Reserves and surplus.

The depreciation expense in the Statement of Profit and Loss for the year is higher by Rs. 12,211,563/- consequent to the change in the useful life of the assets.

3 : Contingent liabilities

For the Year For the Year ended ended 31.03.2015 31.03.2014

a) Guarantees 675,000,000 50,000,000

The Company has given corporate guarantees to certain suppliers of Sonata Information Technology Limited (SITU its wholly owned subsidiary on behalf of SITL,amount drawn down as at year end against this facility is Rs.Nil (as at 31.03.2014 is Rs.Nil)

b) Claims against the Company 22,863,099 22,863,099 not acknowledged as debt The Company had received a legal notice from its ex-employee towardscompensation arising on account of terms of appointment. Based on legal opinion received by the Company, the maximum amount payable in the event the proceeding goes against the Company is Rs 22,863,099.

c) Disputed demand of Service tax 67,653,029 67,653,029 The Company renders Information Technology related services to some of its clients in India. The Service Tax department had classified these services as Manpower Recruitment or Supply Agency Services''. The Company had contested this re-classification and had preferred an appeal before the Central Excise and Service Tax Appellate Tribunal (CESTAT). One of the clients of the Company had indemnified the Company for any demands that may arise on account of service tax liability up to an amount of Rs.23,700,000. The amount included as disputed demand is excluding the amount indemnified by the client.

d) Disputed demands of Income-tax 1,285,298,864 1,410,577,388

Details of disputed demands of Income-tax by issue and by year are as below:

(i) Disallowance of claims made under Section 10A of the Income-tax Act, 1961

The Company does its business of software exports through multiple operating units or undertakings registered under the Software Technology Park Scheme of India. In computing taxable profit from the export of software, the Company claims exemptions provided to registered software technology parks undertakings and units as provided under Section 10A of the Income-tax Act, 1961 ("Act").

The Income-tax department in its assessments has been denying or limiting the benefits of Section 10A of the Act to the multiple undertakings of the Company on the ground that they were in fact one single unit and thus the benefits claimed were in excess of permissible limits, and had raised a demand of Rs.720,298,198 (As at 31.03.14 - Rs.720,298,198) for financial year 2006-07, 2007-08, 2008-09 and 2009-10.

Rs.Nil (As at 31.03.2014-Rs.236,805,408) for the financial year 2005-06. The Commissioner of Income Tax (Appeals) had given a favorable order against which the department had filed an appeal before Income Tax Appellate Tribunal (ITAT). Income Tax Appellate Tribunal has dismissed the appeal during the current year.

For the financial year 2006-07, the Commissioner of Income Tax (Appeals) had given a favorable order against which the department had filed an appeal before Income Tax Appellate Tribunal. For the financial year 2007-08, 2008-09 and 2009- 10, the Company has challenged the decision of Assessing Officer and has preferred appeals to the Commissioner of Income-Tax (Appeals).

For the financial year 2001-02, Income Tax Appellate Tribunal had given a favorable order on the ground of income accrued under Section 10A of the Act against which the department had filed an appeal before the High Court of Mumbai Rs. 14,863,703 (As at 31.04.14 -Rs.14,863,703).

(ii) Inter-unit set-off of losses

As discussed in point (i) above, the Company operates multiple operating units and undertakings under the Software Technology Park Scheme of India. While computing its taxable profits, losses from one undertaking were set off against profits of another or carried forward to the subsequent years. The Income-tax department had disallowed such carry forward of losses. The Company received favorable orders from ITAT and the department had preferred an appeal before the Mumbai High Court which is yet to be admitted for financial years 2004-05 and hence there is no contingent liability.

Rs. 12,321,813 (As at 31.03.14 Rs. 7,770,960) for the financial year 2002-03 and 2003-04. The Company has preferred appeals before ITAT.

(iii) Disallowance of Inter-Company Service Charges

The Company charges Sonata Information Technology Limited, its wholly owned subsidiary, for certain support services rendered. During assessments, the Income-tax department denied Section 10A of the Act benefits on such support services and assessed the same as normal business income and raised demand of Rs.233,708,329 (As at 31.03.14 -Rs.138,367,875) for financial years 2001-02, 2002-03, 2003-04 and 2004-05. The Company had received favorable orders from Income Tax Appellate Tribunal. However, the department preferred an appeal on the said orders before the Honorable High Court of Mumbai.

Rs.11,635,577 (As at 31.03.14- Rs.Nil) for the financial year 2010- 11. The Company has filed an appeal before the Commissioner of Income Tax (Appeals) during the current year.

(iv) Withholding tax demand

The Income-Tax department has been contending that amounts paid by the Company for buying the software products is in the nature of''Royalty''and hence had to withhold Income-tax on the same as per the Act and had raised demand of Rs.284,187,956 (As at 31.03.14 - Rs. 284,187,956) for the financial years 1999-00, 2000-01 and 2001-02. The Company''s contention has been that the payments were made for purchase of ''Goods'' and hence was under no obligation to withhold Income tax on the same. The Company had received favorable orders from the Income Tax Appellate Tribunal which were reversed by the Honorable High Court of Karnataka. The Company had preferred a Special Leave Petition Appeal on the said order to the Honorable Supreme Court of India, which had been admitted. However, for these years one of the principal suppliers of software to the Company had paid taxes of Rs. 87,904,913 out of the above demand. The amount included as disputed demand is excluding the amount paid by the supplier.

(v) Deductions claimed under section 80

Prior to the enactment of Section 10A of the Act, the Company claimed deduction for exports made, under Section 80 of the Act. The department had re-opened the assessments and disallowed certain aspects of the claims made on the contention that cost allocation principles followed for the claim are erroneous and raised a demand of Rs.8,283,288 (As at 31.03.14 - Rs. 8,283,288) for the financial year 1994-95. The Company had received favorable orders from Income-Tax Appellate Tribunal. The department had preferred an appeal on the said order before the Honorable High Court of Mumbai.

e) In addition, the Company in the ordinary course of business receives various claims from its customers and other business partners. Based on review of such matters and the information available at this time, the Company does not anticipate that any of these will result in a settlement that will have a material impact on its financial statements.

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

4. Details on derivative instruments and unhedged foreign currency exposures

i) Forward exchange contracts (being derivative instruments), which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain receivables / investments. The following are the outstanding forward exchange contracts entered into by the Company and outstanding as at 31.03.2015 (Previous year figures are in brackets).

5: Employee benefit plans i) Defined contribution plans

a) Provident fund

The Company makes contributions towards a Provident Fund under a defined contribution plan for qualifying employees. The Provident Fund is administered by the Trustees of Sonata Software Limited Provident Fund and by the Regional Provident Fund Commissioner. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits.

The Rules of the Company''s Provident Fund administered by the Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees'' Provident Fund by the Government under para 60 of the Employees'' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund.

Provident fund contributions amounting to Rs. 71,245,461 (for the year ended 31.03.2014Rs.56,312,685), National Pension Scheme contribution amounting to Rs. 2,518,182 (for the year ended 31.03.2014 Rs.2,413,390) have been charged to the Statement of Profit and Loss (as part of Contribution to Provident Fund and other Funds in Note 20 Employee benefits expense).

b) During the year the Company has recognised the following amounts in the Statement of Profit and Loss Employers contribution to The expected rate of return on plan assets is determined after considering several applicable factors such as the composition of the plan assets, investment strategy, market scenario, etc. In order to protect the capital and optimise returns within acceptable risk parameters, the plan assets are well diversified.

The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors.

6: Segment reporting

The Company prepares consolidated financial statements, hence as per Accounting Standard 17 on Segment Reporting, segment information has not been provided in the standalone financial statements.

7: Related party disclosure i) Details of related parties :

Description of relationship Names of related parties

a) Wholly owned Subsidiaries Sonata Information Technology (WoS) Limited, India Sonata North America Inc., USA Sonata Software GmbH, Germany Sonata Europe Limited, UK Sonata Software FZ LLC, Dubai Sonata Software Qatar LLC, Qatar Sonata Technology Solutions Limited, India ( Dissolved on 18.06.2014)

(b) Subsidiary Rezopia Inc, USA (subsidiary of Sonata Software North America Inc. w.e.f 22.08.2014)

(c) Key Management personnel P Srikar Reddy, Managing Director & (KMp) Chief Executive Officer

Notes :

(i) Maximum balance outstanding during the year is Rs.973,500,000 (for the year ended 31.03.2014 Rs.860,000,000)

(ii) These inter corporate deposits were given for business purposes.

8 : Details of leasing arrangements

i. The Company has entered into various operating lease agreements for office premises, residential premises, guest houses and certain assets. These leases are cancellable as well as non-cancellable and are for a period of 11 months to 180 months and may be renewed based on mutual agreement of the parties.

iii. The Company has subleased a portion of its leased premises cancellable at the option of either parties.

iv. The lease payments recognised in the statement of Profit and Loss are as under :

9: There is no amount due and outstanding as at Balance Sheet date to be credited to the Investor Education and Protection Fund.

10: Expenditure on corporate social responsibility activities

i. Gross amount required to be spent by the company during the year Rs. 6,762,318/-.

ii. Amount spent during the year on:

11: Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.

Mar 31, 2013

Note 1 : Corporate Information

Sonata Software Limited (SSL or the Company) is a Company registered in India with its registered office at Mumbai and operationally headquartered at Bangalore. The Company is listed on the National Stock Exchange Limited and the Bombay Stock Exchange Limited. The Company is primarily engaged in the business of providing IT Services and Solutions to its customers in the US, Europe, Middle East and India.

Note 2 : Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006

There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days during the year and also as at 31.03.2013 (Previous year - Rs. Nil). The information has been identified to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

Note 3 : Details on derivative instruments and unhedged foreign currency

i) Forward exchange contracts (being derivative instruments), which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables / receivables.

Note 4 : Employee benefit plans

i) Defined contribution plans

a) Provident fund

The Company makes contributions towards a provident fund under a defined contribution retirement benefit plan for qualifying employees. The provident fund is administered by the Trustees of Sonata Software Limited Provident Fund and by the Regional Provident Fund Commissioner. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits. The Rules of the Company''s Provident Fund administered by the Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees'' Provident Fund by the Government under para 60 of the Employees'' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund.

Provident fund contributions amounting to Rs. 36,253,463 (Previous year Rs. 40,429,178) have been charged to the Statement of Profit and Loss.

b) During the year the company has recognised the following amounts in the statement of profit and loss Employers contribution to

Note 5 : Related party disclosure

i) Details of related parties :

Description of relationship Names of related parties

a) Wholly Owned Subsidiaries (WOS) Sonata Information Technology Limited, India

Sonata North America Inc., USA Sonata Software GmbH, Germany Sonata Europe Limited, UK Sonata Software FZ LLC, Dubai Sonata Software Qatar LLC, Qatar Sonata Technology Solutions Limited, India

b) Other Subsidiaries (OS) TUI InfoTec GmbH, Germany (ceased to be a subsidiary w.e.f 1st October, 2011)

c) Key Management Personnel (KMP) P Srikar Reddy, MD & CEO

Sanjay Viswanathan (Resigned w.e.f. 14th February, 2012)

B Ramaswamy (Resigned w.e.f. 16th August, 2011)

Note 6 : Details of leasing arrangements

The Company has various operating leases for office facilities and residential premises for employees that are renewable on a year basis, and cancelable at its option. Rental expenses for operating leases included in the Statement of Profit and Loss is Rs. 104,981,823 (Previous year Rs. 110,190,019).

The sublease payment received during the year included in the Statement of Profit and Loss is Rs. 535,368 ( Previous year Rs. 109,376).

There are no rents which are contingent in nature.

Note 7: There is no amount due and outstanding as at Balance Sheet date to be credited to the Investor Education and Protection Fund

Note 8: Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.

Mar 31, 2012

A) Rights and preferences attached to equity shares

The Company has equity shares having a par value of Rs 1, Each Shareholder is entitled for one vote per share. The shareholders have the right to receive interim dividends declared by the Board of Directors and final dividend proposed by the Board of Directors and approved by the shareholders.

In the event of liquidation by the company, the shareholders will be entitled in proportion to the number of equity shares held by them to receive remaining assets of the company, after distribution to those it was secured.

The shareholders have all other rights as available to equity shareholders as per the provisions of the Companies Act, 1956, read together with the Memorandum of Association and Articles of Association of the Company, as applicable.

The company has created deferred tax asset on carried forward loss of its branch of Rs 46,734,916 as at 31.03.2012 (Rs 40,836,058) as the company estimates that the branch would make taxable profits in the foreseeable future. Deferred tax asset on carried forward loss of its branch increased by Rs 5,898,859 (Rs 2,037,757) on account of foreign exchange fluctuation which is recognized in the statement of profit and loss.

1. Short-term borrowings

The working capital facilities of the company are secured by hypothecation of inventories, book debts, moveable assets and receivables both present and future,

2. Tax expense

Current tax of Rs 60,993,394 (Rs 99,674,446) shown under statement of profit and loss for the year ended 31st March, 2012 is net of Rs 9,942,473 (Rs 4,284,338), being excess tax provided for earlier years reversed,

3. Contingent liabilities

(as certified by the Management) (Rs)

31.03.2012 31.03.2011

a) Claims against the Company not acknowledged as debts - 6,970,461

b) Guarantees

i) The Company has given corporate guarantee to IBM Ltd on behalf of Sonata Information Technology Limited for a value of Rs 50,000,000 (Rs 50,000,000).

ii) The Company has provided an indemnity of US$ 500,000 (US$ 500,000) to Standard Chartered Bank, India to cover working capital limits provided by Standard Chartered Bank, Dubai to Sonata Software FZ LLC, Dubai.

c) Contingent Liabilities not provided for:

(Rs)

31.03.2012 31.03.2011

A. Disputed Income- Tax demands 975,629,465 456,972,314

(a) Disallowance of claims made under Section 10A of the Income-Tax Act, 1961:

The Company does its business of software export through its multiple operating units or undertakings registered under the Software Technology Parks Scheme of India. In computing taxable profits from the export of software, the Company claims exemptions provided to registered Software Technology Parks undertakings and units as provided under Section 10A of the Income-Tax Act, 1961 ("Act").

The Income-Tax department has been disallowing Company's claims under Section 10A on the ground that the Company and its units were formed by restructuring of the operations of Futura Polyesters Limited. The Company's contention was that it was formed by a process of de-merger as per the provisions of the Companies Act, 1956 and not through a process of restructuring as contemplated under Section 10A. The Company's contention has been upheld by the Honorable High Court of Mumbai.

The other ground adopted by the Income-Tax department in later years to deny Section 10A benefits was that the 'multiple undertakings of the Company operating under the Software Technology Parks Scheme of India were in fact one single undertaking' and so benefit as claimed by the Company for each of the unit or undertaking is not correct.

The Company has challenged all of the above disallowances and consequent demands at appellate levels.

Details of Demands and Forums where they are pending are:

I. Rs 113,100,918 for the financial year 2004-2005. The Company has received favorable orders from Commissioner of Income-Tax (Appeals). The Department has preferred an appeal on the said order to the Income- Tax Appellate Tribunal. However, based on the favorable orders on 10A issue received from the Honorable High Court of Mumbai, the Company is confident of a positive outcome at the Income-Tax Appellate Tribunal.

(Previous Year - Rs Nil).

II. Rs 220,166,905 for the financial year 2006-2007. For <8 this year, the Income-Tax department has disallowed the Company's 10A claim on the ground that the multiple undertakings of the Company operating were in fact one single undertaking. Further, certain additional disallowances have been made on Income accrued but not billed, depreciation claims, etc. The Company has preferred an appeal to the Commissioner of Income-Tax (Appeals) on above order. (Previous Year - Rs 220,166,905).

III. Rs 229,570,226 for financial year 2007-2008. This demand was received during the year. As discussed above for the earlier year the Income-Tax department has disallowed the Company's claim under Section 10A of the Act on the ground that the multiple undertakings of the Company operating were in fact one single undertaking. Further, certain additional disallowances have been made on Income accrued but not billed, depreciation claims, etc. The Company has preferred an appeal to the Commissioner of Income-Tax. (Appeals) on above order. (Previous Year - Rs Nil)

(b) Inter-unit set-off of losses :

As discussed in point (a) above, the Company operates multiple operating units and undertakings under the Software Technology Parks Scheme of India. While computing its taxable profits, losses from one undertaking were set off against profits or carried forward to the subsequent financial years by the Company. The Income- Tax department has disallowed such carry forward of losses. This position was adopted by the Assessing Officer from the financial year 2005-2006.

Details of Demands and Forums where they are pending are:

I. Rs 12,321,813 for financial years of 2002-2003 and 2003-2004. The assessments were re-opened by the me-Tax Officer to make the above demand. The Company has preferred an appeal to the Commissioner of me-Tax (Appeals). (Previous Year - Rs Nil).

II. Rs 1 1,900,233 for financial years 2004-2005. The assessments were re-opened during the year by the Income-Tax Officer to make the above demand. The Company received unfavorable orders on this issue from the Commissioner of Income Tax (Appeals) and has preferred an appeal on the said unfavorable order before Income-Tax Appellate Tribunal. (Previous Year - Rs Nil).

(c) Disallowance of Inter-Company Service Charges :

Sonata Software Limited, the holding company, charges Sonata Information Technology Limited its wholly owned subsidiary for certain support services rendered. During assessments, the Income-Tax department denied Section 10A benefits on such support services and assessed the same as normal business income. The Income-Tax department's contention is that such service charges are not eligible for benefits as contemplated under Section 10A.

Details of Demands and Forums where they are pending are:

Rs 96,098,126 for financial years 2000-2001 and 2002-2003. The Company has received favorable orders from Income-Tax Appellate Tribunal. The Department has preferred an appeal on the said order before the Honorable High Court of Mumbai, which has been admitted. (Previous year - Rs Nil)

(d) Withholding tax demand:

The Company, prior to the formation of its wholly owned subsidiary Sonata Information Technology Limited, was engaged in the business of buying and selling packaged software in India. The Income-Tax department has been contending that amounts paid by the Company for buying the software products is in the nature of 'royalty' and hence had to withhold Income-Tax on the same as per the Act. The Company's contention among others has been that the payments were made for purchase of 'goods' and hence was under no obligation to withhold Income-Tax on the same. On this dispute the Company had received favorable orders from the Income-Tax Appellate Tribunal which were during the year reversed by the Honorable High Court of Karnataka. The Company has preferred a Special Leave Petition Appeal on the said order to the Honorable Supreme Court of India, which has been admitted.

Details of Demands and the Forums where they are pending are:

Rs 284,187,956 for the financial years 1999-2000, 2000-2001 and 2001-2002. However, for these years one of the principal suppliers of software to the Company has paid Rs 87,904,913 out of the above demand.

(e) Deductions claimed under Section 80 O:

Prior to the enactment of Section 10A, the Company claimed deduction for exports made, under Section 80 of the Act. The department has re-opened the assessments and disallowed certain aspects of the claims made on the contention that cost allocation principles followed for the claim are erroneous.

Details of Demands and the Forums where they are pending are:

Rs 8,283,288 for the financial year 1994-1995. The Company has received favorable orders from Income-Tax Appellate Tribunal. The Department has preferred an appeal on the said order before the Honorable High Court of Mumbai, which has been admitted. (Previous year - Rs Nil).

4. NOTE ON AS 30 ADOPTION

Accounting Standard 30, (AS 30) Financial Instruments: Recognition and Measurement was issued by the Institute of Chartered Accountants of India (ICAI) in December, 2007. AS 30 becomes recommendatory in respect of accounting periods commencing on or after 1st April, 2009 and mandatory in respect of accounting periods commencing on or after 1st April, 2011. ICAI has announced that the earlier adoption of AS 30 is encouraged. From the accounting year 2008-09, the Company has early adopted Accounting Standard 30 (AS 30) "Financial Instruments: Recognition and Measurement".

From the year 2008-09 the Company applied the recognition and measurement principles as set out in AS 30 in accounting derivatives. Changes in fair values of derivative financial instruments designated as effective cash flow hedges were recognized directly into Hedging Reserve in the Balance Sheet under Reserves and Surplus and later reclassified into Statement of Profit and Loss upon the occurrence of the forecasted hedged transaction. Changes in the fair value of ineffective cash flow hedges are recognized in the Statement of Profit and Loss as they arise, As at 31st March, 2012, the Company recognized Rs 178,722,709 (Previous year Rs 30,712,825) into "Hedging Reserve" due to changes in fair value of the effective cash flow hedges.

a) The Company has given corporate guarantee to IBM Ltd on behalf of Sonata Information Technology Limited for a value of Rs 50,000,000 (Rs 50,000,000).

b) The Company had given corporate guarantee to Axis Bank on behalf Sonata Information Technology Limited for a value of Rs 900,000,000 (Rs 900,000,000) which was valid upto 29.02.2012.

The Company has provided an indemnity of US$ 500,000 to Standard Chartered Bank, India to cover working capital limits provided by Standard Chartered Bank, Dubai to Sonata Software FZ LLC, Dubai.

Sonata Software Qatar LLC, a company incorporated on 7th June, 2011 under the Qatar Chamber of Commerce and Industry in Doha, Qatar which is engaged in software development

(b) Provident Fund : The Guidance issued by the Accounting Standard Board (ASB) on implementing AS-1 5, Employee benefits (revised 2005) states that provident funds set up by < employers which requires interest short fall to be met by the employer, needs to be treated as defined benefit plan.

The Actuarial Society of India has issued Guidance Note for the measurement of Provident Fund (PF) liabilities during the year. The Company's actuary has accordingly provided valuation confirming that there is no liability for shortfall in the PF interest earning for the year.

(c) Basis used to determine expected rate of return on assets :

The expected return on planned assets is based on market expectation at the beginning of the period for returns over the entire life of the related obligation. The Gratuity Scheme is invested in Group Gratuity Scheme with HDFC Standard Life Insurance Company Limited. The expected return on assets assumption is taken based on current market yield.

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

(f) Estimated Contribution for the next year on account of gratuity is Rs 15,644,802 (11,145,118).

(g) Contribution/Provisions to superannuation, Pension and other funds stated under defined contribution plan is Rs 37,333,090 (Rs 35,230,035).

5. There are no Micro, Small and Medium Enterprises, as defined in the Micro, Small, Medium Enterprises Development Act, 2006 to whom the company owes dues on account of principal amount together with interest and accordingly no additional disclosures have been made.

The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company. This has been relied upon by the auditors.

6. Operating leases

The Company has various operating leases for office facilities and residential premises for employees that are renewable on a yearly basis, and cancelable at its option. Rental expenses for operating leases included in the statement of profit and loss for the year is Rs 110,190,019 (Rs 88,731,842).

7. Previous year's figures are shown in brackets and have been regrouped, whenever necessary to confirm to current year's classification.

Mar 31, 2011

(Rs.) 31.3.2011 31.3.2010

1. Contingent Liabilities not provided for

(I) Disputed Income Tax demands as explained below : (Inclusive of Interest Charged) 456,972,314 1,294,841,611

(a) The above amount represents demands raised by the Income Tax Officer at the initial assessment level for the Financial Years 2005-2006 and 2006-2007 with respect deductions sought under section 10A of the Income-Tax Act for new undertakings established by the Company. The Company has filed appeals to the Commissioner of Income Tax (Appeals) against the aforementioned demands.

(b) The above does not include demands for earlier years relating to section 10A of the Income Tax, Act where the Company has received favorable orders from

Income Tax Appellate Tribunal Mumbai. The Department has made an appeal for these years to the High Court of Mumbai which is yet to be admitted.

The Supreme Court by its order of September 9, 2010 over ruled the order of the High Court of Karnataka which had held that irrespective of the nature of payment, in the absence of a lower withholding order, income-tax had to be withheld on all payments made to overseas parties. Further the Supreme Court remanded the cases back to the High Court of Karnataka for a fresh review and to examine whether payments made to overseas parties for purchase of software was in the nature of Royalty and if so whether tax had to be withheld on the same.

Based on the above Supreme Court order the following demands are not considered as contingent liability:

i. Rs.15.79 crores as tax which had not been deducted by the Company on payments made to overseas parties for purchase of software for the Financial Years 1999- 2000,2000-2001 and 2001-2002. However, for these years one of the principal suppliers of software to the Company has paid Rs.8.79 crores out of the above demand.

i. Rs.77.38 crores of tax demand for the Financial Years 1996-97, 1997-98, 1998-1999 and 1999-2000 on account of disallowances of payments made for purchase of software on which tax had not been deducted at source. This demand is directly linked to outcome of the issue discussed in point (i) above

The Service Tax Department has raised a demand by classifying Information Technology Consulting Services rendered by the Company to its domestic clients as Manpower Recruitment or Supply Agency Services. The latter service classification brings service rendered by the Company to its domestic clients within the ambit of Service Tax. The Company has contested this re- classification of services and has filed an appeal before the Appellate Authorities. One of the clients has indemnified the Company for any demands that may arise on account of service tax liability up to an amount of Rs.2.37 Crores.

(V) (a) The Company has given corporate guarantee to IBM Ltd on behalf of Sonata Information Technology Limited fora value of Rs.5 Crores.

(b) The Company has provided an indemnity of US$ 0.5 million to Standard Chartered Bank, India to cover working capital limits provided by Standard Chartered Bank, Dubai to Sonata Software FZ LLC, Dubai.

2. Income from Services includes gain on account of exchange fluctuation of Rs.1,350,965 for the current year ended 31st March, 2011 (Previous year loss Rs. 40,692,853)

3. The working capital facility of the company are secured by hypothecation of inventories, book debts, moveable assets and receivables both present and future.

4. NOTE ON AS 30 ADOPTION :

Accounting Standard 30, (AS 30) Financial Instruments: Recognition and Measurement was issued by the Institute of Chartered Accountants of India (ICAI) in December 2007. AS 30 becomes recommendatory in respect of accounting periods commencing on or after April 1 2009 and mandatory in respect of accounting periods commencing on or after April 1 2011. ICAI has announced that the earlier adoption of AS 30 is encouraged. From the accounting year 2008-09, the Company has early adopted Accounting Standard 30 (AS 30) "Financial Instruments: Recognition and Measurement".

From the year 2008-09 the Company applied the recognition and measurement principles as set out in AS 30 in accounting derivatives. Changes in fair values of derivative financial instruments designated as effective cash flow hedges were recognized directly into Hedging Reserve in the Balance Sheet under Reserves and Surplus and reclassified into Profit and Loss account upon the occurrence of the forecasted hedged transaction.

As at 31st March 2011, the Company recognized Rs. 307.13 Lacs (Previous year Rs.1871.21 Lacs) into "Hedging Reserve" due to changes in fair value of the effective cash flow hedges.

5. Related Party Transactions :

a) The list of related parties and nature of their relationship is disclosed in the annexure

Other Related Parties :

Sonata Information Technology limited (SITL) is a company incorporated in India. SITL is a wholly owned subsidiary of SSL and both the Companies have three common directors. Amounts included in the financial statements of the Company are in relation to administrative services, normal business transactions with SITL, as given below :

6. Employee Benefits :

(b) Providend Fund : The Guidance issued by the Accounting standard Board (ASB) on implementing AS-15, Employee benefits (revised 2005) states that provident funds set up by employers which requires interest short fall to be met by the employer, needs to be treated as defined benefit plan. Pending the issuance of the Guidance Note from the Actuarial Society of India, the Companys actuary has expressed his inability to reliably measure the future obligation arising due to interest shortfall (i.e. government interest to be paid on provident fund scheme exceeds rate of interest earned on investment) hence information not furnished.

(c) Basis used to determine expected rate of return on assets

The expected return on planned assets is based on market expectation at the beginning of the period for returns over the entire life of the related obligation. The Gratuity Scheme is invested in Group Gratuity Scheme with HDFC Standard Life Insurance Company Limited. The expected return on assets assumption is taken based on current market yield.

(d) 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.

(f) Estimated Contribution for the next year on account of gratuity is Rs.11,145,118(Nil).

(g) Contribution/Provisions to superannuation, Pension and other funds stated under defined contribution plan is Rs.35,230,035(Rs.31,196,203)

7. There are no Micro, Small and Medium Enterprises, as defined in the Micro, Small, Medium Enterprises Development Act, 2006 to whom the company owes dues on account of principal amount together with interest and accordingly no additional disclosures have been made.

The above information regarding Micro, Small and Medium Enterprises has been determined to the extent; such parties have been identified on the basis of information available with the company. This has been relied upon by the auditors.

8. Operating Leases

The Company has various operating leases for office facilities and residential premises for employees that are renewable on a yearly basis, and cancellable at its option. Rental expenses for operating leases included in the Income statements for the year is Rs. 88,731,842 (Rs. 70,428,748).

9. Previous years figures are shown in brackets and have been regrouped, wherever necessary to conform to current years classification.

LIST OF RELATED PARTIES AND NATURE OF RELATIONSHIP

I. KEY MANAGERIAL PERSONS AND OTHER DIRECTORS AS ON 31.03.2011

1. B Ramaswamy, Managing Director & President

2. P Srikar Reddy, Executive Vice President & Chief Operation Officer

3. M D Dalai, Executive Vice Chairmar

4. Pradip P Shah, Chairmar

5. S B Ghia, Director

6. Viren Raheja, Director

7. S N Talwar, Director

8. B K Syngal, Director

II. OTHERS AS ON 31.03.2011

List of related parties Nature of Relationship

S B Ghia Bhupati Investments & Finance Pvt. Ltd. Significant Influence (through VIPL), Director Spouse Mrs.R S Ghia as Chairperson and brothers wife Mrs.V D Ghia as Director

Chika Pvt. Ltd. Son Mr.N S Ghia as Chairman

Viraj Investments Pvt. Ltd. (VIPL) Son as Chairman and Spouse, Brothers wife are Directors

M D Dalai Daltreya Investment & Finance Pvt. Ltd. Spouse & sister are Directors Executive Vice Chairman

Viren Raheja Rajan B Raheja Father

Director Suman R Raheja Mother

Akshay R Raheja Brother

Excelsior Construction Pvt. Ltd. 100% shareholding by Mr.Rajan B Raheja & his family

Gstaad Investments & Finance Pvt. Ltd. 100% shareholding by Mr.Rajan B Raheja & his family

Trophy Investments & Finance Pvt. Ltd. 100% shareholding by Mr.Rajan B Raheja & his family

B Ramaswamy Sonata Information Technology Ltd. Director

Managing Director & President TUI InfoTec GmbH, Germany Member of Supervisory Board

Sonata Software FZ LLC, Dubai Director

P Srikar Reddy Sonata Information Technology Ltd. Director

Executive Vice President & CEO

TUI InfoTec GmbH, Germany Managing Director

Sonata Software FZ LLC, Dubai Director

Subsidiaries Sonata Information Technology Ltd. Wholly owned subsidiary of Sonata

Sonata Software FZ LLC, Dubai Wholly owned subsidiary of Sonata

Sonata Software North America Inc., USA Wholly owned subsidiary of Sonata

Sonata Software GmbH, Germany Wholly owned subsidiary of Sonata

Sonata Europe Ltd, UK Wholly owned subsidiary of Sonata

TUI InfoTec GmbH, Germany Subsidiary of Sonata

Note : Above disclosures have been made by the Directors pursuant to the legal opinion from M/s Kanga & Co, Solicitors.

Mar 31, 2010

31.3.2010 31.3.2009 1. Contingent Liabilities not provided for

(I) Disputed Income Tax demands as explained below :

(Inclusive of Interest Charged) 1,294,841,611 26,837,461

(a) An amount of Rs. 28.42 crores has arisen on account of an adverse decision given by the High Court of Karnataka holding that the Company failed to deduct tax at source on amounts paid to overseas suppliers on purchase of software. Based on legal opinion of a Senior Counsel, the Company has preferred an appeal before the Supreme Court and the same has been admitted and stay granted on the demand. Subsequently, the Delhi High Court and the Authority on Advance Ruling have on similar set of facts has taken a view which is favourable to the Company.

Further, one of the principal suppliers of software to the Company has paid Rs 8.79 crores out of above mentioned demand thus reducing the Companys liability.

(b) An amount of Rs 77.38 crores represents demands relating to the financial years 1996-1997, 1997-1998, 1998-1999 and 1999-2000 on which the Income Tax Department has gone on appeal to the Income Tax Appellate Tribunal against favourable orders received by the Company. These demands have arisen on account of disallowance of expenditure on which tax has not been deducted at source. This issue is in principle connected to (a) above.

(c) An amount of Rs. 23.68 crores represents demands raised by the Income-tax officer at the initial assessment level for the financial year 2005-06. The Company has preferred an appeal to the Commissioner of Income Tax (Appeals) against the aforementioned demand. Further, the substantial issues giving rise to the demand have been adjudicated in earlier years, and the Company has received favourable orders from the Income Tax Appellate Tribunal on the same.

(IV) (a) The Company has given corporate guarantee to IBM Ltd on behalf of Sonata Information Technology Limited for a value of Rs.5 Crores.

(b) The Company has provided an indemnity of US$ 0.5 million to Standard Chartered Bank, India to cover working capital limits provided by Standard Chartered Bank, Dubai to Sonata Software FZ LLC, Dubai.

2. Income from Services includes loss on account of exchange fluctuation of Rs. 40,692,853 for the current year ended 31st March, 2010 (Previous year gain Rs. 27,714,181 )

3. The working capital facility of the company are secured by hypothecation of inventories and book debts both present and future and second charge on the fixed assets of the company.

4. NOTE ON AS 30 ADOPTION:

Accounting Standard 30, (AS 30) Financial Instruments: Recognition and Measurement was issued by the Institute of Chartered Accountants of India (ICAI) in December 2007. AS 30 becomes recommendatory in respect of accounting periods commencing on or after April 1 2009 and mandatory in respect of accounting periods commencing on or after April 1 2011. ICAI has announced that the earlier adoption of AS 30 is encouraged. From the accounting year 2008-09, the Company has early adopted Accounting Standard 30 (AS 30) ÃFinancial Instruments: Recognition and MeasurementÃ.

From the year 2008-09 the Company applied the recognition and measurement principles as set out in AS 30 in accounting derivatives. Changes in fair values of derivative financial instruments designated as effective cash flow hedges were recognized directly into Hedging Reserve in the Balance Sheet under Reserves and Surplus and reclassified into Profit and Loss account upon the occurrence of the forecasted hedged transaction.

As at 31st March 2010, the Company recognized Rs. 1871.21 lacs (Previous year Rs.1031.06 lacs ) into ÃHedging ReserveÃ due to changes in fair value of the effective cash flow hedges.

Other Related Parties:

Sonata Information Technology limited (SITL) is a company incorporated in India. SITL is a wholly owned subsidiary of SSL and both the Companies have three common directors. Amounts included in the financial statements of the Company are in relation to administrative services, normal business transactions with SITL, as given below:

5. Employee Benefits :

(a) Providend Fund : The Guidance issued by the Accounting standard Board (ASB) on implementing AS-15, Employee benefits (revised 2005) states that provident funds set up by employers which requires interest short fall to be met by the employer, needs to be treated as defined benefit plan. Pending the issuance of the Guidance Note from the Actuarial Society of India, the Companys actuary has expressed his inability to reliably measure the future obligation arising due to interest shortfall (i.e. government interest to be paid on provident fund scheme exceeds rate of interest earned on investment) hence information not furnished.

(b) Basis used to determine expected rate of return on assets

The expected return on planned assets is based on market expectation at the beginning of the period for returns over the entire life of the related obligation. The Gratuity Scheme is invested in Group Gratuity Scheme with HDFC Standard Life Insurance Company Limited. The expected return on assets assumption is taken based on current market yield.

(c) 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.

(d) Estimated Contribution for the next year on account of gratuity is Nil (Rs. 12,132,766)

(e) Contribution/Provisions to superannuation and other funds stated under defined contribution plan is Rs.18,582,192 (Rs 15,376,579)

6. There are no Micro, Small and Medium Enterprises, as defined in the Micro, Small, Medium Enterprises Development Act, 2006 to whom the company owes dues on account of principal amount together with interest and accordingly no additional disclosures have been made.

The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company. This has been relied upon by the auditors.

7. Operating Leases:

The Company has various operating leases for office facilities and residential premises for employees that are renewable on a year basis, and cancelable at its option. Rental expenses for operating leases included in the Income statements for the year is Rs 70,428,748 (Rs. 64,402,105).

8. Previous years figures are shown in brackets and have been regrouped, wherever necessary to conform to current years classification.

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