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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 500408ISIN: INE670A01012INDUSTRY: IT Consulting & Software

BSE   ` 7842.00   Open: 7750.10   Today's Range 7704.85
7869.75
+172.15 (+ 2.20 %) Prev Close: 7669.85 52 Week Range 5883.05
9191.10
Year End :2023-03 

The tax rate used for 2022-23 reconciliation above is the corporate tax rate of 34.944% (PY 34.944%) payable by corporate entities in India on taxable profits under Indian tax law.

The Company benefits from the tax holiday available for units set up under the Special Economic Zone Act, 2005. These tax holidays are available for a period of fifteen years from the date of commencement of operations. Under the SEZ scheme, the units which begins providing services on or after April 1, 2005 will be eligible for deductions of 100% of profits or gains derived from export of services for the first five years, 50% of such profit or gains for a further period of five years and 50% of such profits or gains for the balance period of five years subject to fulfilment of certain conditions. Pune unit 1, Thiruvananthapuram, Chennai unit and Pune Unit 2, will be eligible for deductions of 100% of profits or gains derived from export of services for the first five years, 50% of such profit or gains for a further period of five years and 50% of such profits or gains for the balance period of five years subject to fulfilment of certain conditions.

28. Employee benefit plansa. Defined contribution plans

The Company makes contribution to Provident Fund, Superannuation Fund and Employee State Insurance fund for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits.

The Company recognised i) ' 3,763.57 lakhs and ' 2,795.51 lakhs for Provident Fund contributions for the year ended March 31, 2023 and March 31, 2022, respectively. ii) ' 1,468.64 lakhs and ' 1,193.05 lakhs for Superannuation Fund contributions for the year ended March 31, 2023 and March 31, 2022, respectively. The contributions payable to these plans by the Company are at the rates specified in the rules of the schemes.

b. Defined benefit plans

The Company offers gratuity (included as part of Contribution to Provident and other funds in Note 25 Employee benefit expenses) to its eligible employees under defined benefit plans.

The gratuity plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each completed year of service. Vesting occurs upon completion of five continuous years of service. The gratuity fund is managed by third party fund (Life Insurance Corporation of India).

The expected benefits are based on the same assumptions as are used to measure the Company’s defined benefit plan obligations as at March 31, 2023. The Company is expected to contribute ' 1,808.77 lakhs to defined benefit obligations funds for the year ended March 31, 2024.

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

If the discount rate increases (decreases) by 1%, the defined benefit obligations would decrease by ' 406.72 lakhs (increase by ' 464.28 lakhs) as at March 31, 2023. If the expected salary growth increases (decreases) by 1%, the defined benefit obligations would increase by ' 466.41 lakhs (decrease by ' 415.64 lakhs) as at March 31, 2023. If the employee attrition rate increases (decreases) by 1%, the defined benefit obligation would increase by ' 20.68 lakhs (decrease by ' 26.26 lakhs).

The sensitivity analysis has been performed based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligations as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumption may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligations has been calculated using the Projected Unit Credit Method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet. There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

Each year an Asset - Liability matching study is performed in which the consequences of the strategic investment policies are analysed in terms of risk and return profiles. Investment and contribution policies are integrated within this study.

30. Financial instruments - Fair values and Risk management

The significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2.11 to the financial statements.

(b) Fair value hierarchy:

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

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

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

• Level 3 —Inputs are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. The investments included in Level 2 of fair value hierarchy have been valued using quotes available for similar assets and liabilities in the active market. The investments included in Level 3 of fair value hierarchy have been valued using the cost approach to arrive at their fair value. The cost of unquoted investments approximate the fair value because there is a range of possible fair value measurements and the cost represents estimate of fair value within that range.

The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosures are required):

(c) Financial risk management

The Company is exposed primarily to fluctuations in Interest rate, credit, liquidity and market risks, which may adversely impact the fair value of its financial instruments. The Company has a risk management policy which covers risks associated with the financial assets and financial liabilities. The risk management policy is approved by the Board of Directors. The focus of risk management committee is to assess the unpredictability of the financial environment and to mitigate potential adverse effects on the financial performance of the Company.

Interest rate risk

The Company’s investments are primarily in fixed rate interest bearing fixed deposits with banks. Hence the Company is not significantly exposed to interest rate risk.

Credit risk

Credit risk is the risk of financial loss arising from counter party failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after necessary approvals for credit.

Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, unbilled revenue, derivative financial instruments, cash and cash equivalents, other bank balances and other financial assets. Other bank balances include bank deposits for an amount of ' 1,10,950.00 lakhs (Previous year ' 92,000.00 lakhs) held with five schedule banks having high creditrating which are individually in excess of 10% or more of the Company bank deposits for the year ended March 31, 2023. Trade receivables- billed and Trade receivables-unbilled include an amount of ' 21,661.10 lakhs (Previous year ' 16,611.84 lakhs) held with two customers having high credit-rating which are individually in excess of 10% or more of Company Trade receivables- billed and Trade receivablesunbilled for the year ended March 31, 2023.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to the credit risk was ' 2,28,384.83 lakhs and ' 1,79,169.74 lakhs as at March 31, 2023 and March 31, 2022, respectively, being the total of the carrying amount of balances principally with banks, other bank balances, Trade receivables- billed and Trade receivables- unbilled and other financial assets.

The Company’s exposure to customers is diversified and except two customers, no single customer contributes to more than 10% and 10% of Trade receivables- billed and Trade receivables- unbilled as at March 31, 2023 and March 31, 2022, respectively.

Geographic concentration of credit risk

The Company also has a geographic concentration of Trade receivables- billed and Trade receivablesunbilled (gross and net of allowances) as given below:

Geographic concentration of credit risk is allocated based on the location of the customers.

Liquidity risk refers to the risk that Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and to ensure that sufficient funds are available for use as per requirements.

The Company consistently generates sufficient cash flows from operations to meet its financial obligations as and when they fall due.

The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2023

(g) Foreign currency exchange rate risk:

The fluctuation in foreign currency rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company.

Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar, Great Britain Pound and Euro against the functional currency of the Company.

The Company, as per its risk management policy, uses derivative instruments primarily to cover the exchange rate risks. Further, any movement in the foreign currency of the various operations of the Company against major foreign currencies may impact Company’s revenue in international business.

The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange risk. It covers a part of these risks by using derivative financial instruments in line with its risk management policies.

The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 10% against the functional currency of the Company.

The following analysis has been worked out based on the net exposures of the Company as of the date of balance sheet which could affect the statement of profit and loss and other comprehensive income and equity. Further the exposure indicated below is mitigated by some of the derivative contracts entered into by the Company.

10% appreciation/depreciation of the respective foreign currencies with respect to functional currency of the Company would result in decrease/ increase in the Company’s profit before tax by approximately ' 7,409.42 lakhs for the year ended March 31, 2023 and ' 11,194.20 lakhs for the year ended March 31, 2022 respectively.

-Others include AED, AUD, CAD, JPY, KRW, MYR, SGD, ZAR etc.

The Company uses various derivative financial instruments governed by policies approved by the board of directors such as foreign exchange forward and option contracts to manage and mitigate its exposure to foreign exchange rates. The counter party is generally a bank. The Company can enter into contracts for period up to one year.

33. Contingent liabilities and Commitments:

' lakhs

Contingent liabilities and commitments (to the extent not provided for)

As at March 31, 2023

As at March 31, 2022

(i) Contingent liabilities:

Claims against the Company not acknowledged as debt

Disputed demands for Income Tax aggregates.

67.29

2,997.42

(ii) Capital Commitments:

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

Property, plant and equipment

1,169.05

826.72

Intangible assets

-

372.02

34. Corporate Social Responsibility

a) Gross amount required to be spent by the Company during the year ' 894.00 lakhs (Previous year ' 699.93 lakhs)

b) Amount spent during the year:

' lakhs

Particulars

For the year ended March 31, 2023

For the year ended March 31, 2022

(i) Amount required to be spent by the Company during the year

894.00 *

699.93*

(ii) Amount of expenditure incurred on:

a) Construction/acquisition of any asset

-

-

b) On purposes other than (a) above

776.65

655.06

(iii) Shortfall at the end of the year

117.35

44.87

(iv) Total of previous years shortfall

117.35

-

(v) Reason for shortfall

Project in progress

Project in progress

(vi) Nature of CSR activities

Promoting Health care and Education

Promoting Health care and Education

(vii) Details of related party transactions in relation to CSR expenditure as per relevant Accounting Standard

-

10.00

* Includes overhead expense of ' 38.60 lakhs (Previous year ' 32.37 lakhs)

b. Remaining performance obligations

The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognised as at the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. 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 materialised and adjustments for currency.

Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognised corresponds directly with the value to the customer of the Company’s performance completed to date, typically those contracts where invoicing is on time and material, unit price basis and no information is provided about remaining performance obligations at March 31, 2023 that have an original expected duration of one year or less, as allowed by Ind AS 115.

The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2023 is ' 45,970.87 lakhs (March 31, 2022: ' 31,783.81 lakhs). Out of this, the Company expects to recognise revenue of around 47.11% (March 31, 2022: 56.14%) within the next one year and the remaining thereafter. 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.

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.

37. Segment information

The Chief Executive Officer and Managing Director of the Company has been identified as the Chief Operating Decision Maker (CODM) as defined by Ind AS 108 - operating segments. The CODM evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by industry classes. Accordingly, the segment information has been presented for industry classes.

The Company has identified business segments as its primary segment. Business segments are primarily system integration & support and software development & services.

Each segment item reported is measured at the measure used to report to the CODM for the purposes of making decisions about allocating resources to the segment and assessing its performance.

Revenues and expenses directly attributable to segments are reported under each reportable segment. All other expenses which are not attributable or allocable to segments have been disclosed as unallocable expenses.

Assets and liabilities of the Company are used interchangeably amongst segments. Allocation of such assets and liabilities is not practicable and any forced allocation would not result in any meaningful segregation. Hence, assets and liabilities have not been identified to any of the reportable segments.

Information about major customers:

The revenues of ' 3,06,594.75 lakhs (Previous year ' 2,42,131.14 lakhs) arising from the software development and services segment includes ' 84,968.17 lakhs (Previous year ' 62,141.51 lakhs) representing revenue of more than 10% of the total revenue of the Company is from two customers.

38. The Company had in the earlier year entered into incubation agreement for providing services pertaining to promotion of business of the entrepreneurs and also providing infrastructure facilities and resources. In consideration for the services rendered shares has been allocated /transferred as under. These investments are valued at fair value through profit and loss.

Considering probability of successful outcome of such development and the ability of these entities to commercialise the product being developed, as a matter of prudence the Company has recorded these investments at ' 1/-.

39. The sitting fee and commission for non-executive directors is ' 625.30 lakhs and ' 539.30 lakhs for the financial year 2022-23 and 2021-22 respectively.

41. Dividends

During the year ended March 31, 2023, the Company paid total dividends at ' 42.5 and dividend of ' 48 per equity share for the year ended March 31, 2022.

Dividends declared by the Company are based on the profit available for distribution. Distribution of dividend out of General Reserve and Retained earnings.

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

43. No funds have been advanced / loaned / invested (from borrowed funds or from share premium or from any other sources / kind of funds) by the Company to any other person(s) or entity(ies), including foreign entities (Intermediaries), with the understanding (whether recorded in writing or otherwise) that the Intermediary shall (i) 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 (ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

No funds have been received by the Company from any person(s) or entity(ies), including foreign entities (Funding Parties), with the understanding (whether recorded in writing or otherwise) that the Company shall (i) 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 (ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

44. Subsequent event note

On May 18, 2023, the Board of Directors of the Company have proposed a dividend of ' 60.60 per share in respect of the year ended March 31, 2023 subject to the approval of shareholders at the Annual General Meeting.