1 COMPANY OVERVIEW
63 moons technologies limited (the ‘Company’) is domiciled in India. The Company’s registered office is at Shakti Tower - 1, 7 th floor, Premises - E, 766, Anna Salai, Thousand Lights, Chennai - 600002, Tamilnadu, India. The Company has received fresh Certificate of Incorporation Number (CIN) L29142TN1988PLC015586 dated May 27, 2016, from the Registrar of Companies (ROC), Chennai, pursuant to change of name of the Company from Financial Technologies (India) Limited to “63 moons technologies limited” and also received approval for alteration / amendment of Main Object clause of the Memorandum of Association of the Company by way of addition of appropriate para in existing sub clause 5 of clause IIIA.
The principal activity of the company is that of Computer Programming, Consultancy and related services. The Company, is among the global leaders in offering technology IP (Intellectual Property) and domain expertise to create and trade on next-generation financial markets, that are transparent, efficient and liquid, across all asset classes including equities, commodities, currencies and bonds among others. The Company is pioneer in end to end Straight Through Processing (STP) solution that support high density transactions. It has developed proprietary technology platform benchmarked against global standard which give it a decisive edge in driving mass disruptive innovation at the speed and cost of execution unmatched in the financial market industry.
2 BASIS OF PREPARATION
2.1 Statement of Compliance and Basis of Preparation
These financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (“the 2013 Act”) read with the Companies (Indian Accounting Standards) Rules, 2015, subsequent amendments thereto and the relevant provisions of the 2013 Act.
The financial statements have been prepared on accrual basis using the historical cost measurement except for the following material items that have been measured at fair value as required by relevant Ind AS:
- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments)
- Share based payment transactions
- Defined benefit and other long-term employee benefits
The accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
These Ind-AS compliant financial statements were approved by the Board of Directors on dated May 21, 2018.
2.2 Functional and Presentation Currency
These separate financial statements are presented in Indian Rupees, which is the Company’s functional currency. All amounts have been rounded off to the nearest lakhs, unless otherwise indicated.
2.3 Use of Judgements and Estimates
The preparation of the financial statements in conformity with Ind AS requires management to make certain estimates, judgements and assumptions. These affect the application of accounting policies, the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the reporting date of the financial statements and reported amounts of income and expenses during the period. Accounting estimates could change from period to period and the actual results could differ from those estimates. These are reviewed by the management on an on-going basis and appropriate changes in estimates are made prospectively as management becomes aware of changes in circumstances surrounding the estimates. The management believes that the estimates used in preparation of these financial statements are just, prudent and reasonable.
The areas involving critical estimates & judgements are:
- Note 3.18 - Leases: whether an arrangement contains a lease and lease classification;
- Note 39 - Measurement of defined benefit obligations: key actuarial assumptions;
- Note 19 - Recognition of deferred tax assets: availability of future taxable profit against which tax losses carried forward can be used;
- Note 29 - Impairment test: key assumptions underlying recoverable amounts.
- Notes 3.8 and 29 - Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources;
- Refer Note 3.14 - Estimation of income taxes
- Refer Note 29 - Estimation of fair value of unlisted securities
- Refer Note 3.6 - Estimation of useful life of an intangible assets
- Refer Note 3.8 and 29 - Estimation of realisable value of assets
- Refer Note 29 - Estimation of contingent liabilities
- Refer Note 29 - Impairment of trade receivable
- Refer Note 38 - Share based payments
3 IND AS STANDARDS ISSUED BUT NOT YET EFFECTIVE
Ministry of Corporate Affairs (“MCA”) through Companies (Indian Accounting Standards) Amendment Rules, 2018 has notified the following new and amendments to Ind ASs which the Company has not applied as they are effective subsequent years as mentioned below:
Ind AS 115 - Revenue from Contracts with Customers (applicable for annual periods beginning on or after April 1, 2018)
Ind AS 21 - The effect of changes in Foreign Exchange rates (applicable for annual periods beginning on or after April 1, 2018)
Ind AS 116 - Leases (applicable for annual periods beginning on or after April 1, 2019)
Ind AS 115 Revenue from Contracts with Customers
Ind AS 115 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Ind AS 115 will supersede the current revenue recognition standard Ind AS 18 - Revenue, Ind AS 11 - Construction Contracts when it becomes effective. The core principle of Ind AS 115 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:
- Step 1: Identify the contract(s) with a customer
- Step 2: Identify the performance obligation in contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contract
- Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under Ind AS 115, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. The Company is evaluating the requirements of the Ind AS 115 and the effect on the financial statements is being evaluated.
Ind AS 21 - The Effect of Changes in Foreign Exchange Rates
The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The Company is evaluating the impact of this amendment on its financial statements.
Ind AS 116 - Leases
In January 2016, the IASB issued Ind AS 116 - Leases which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract and replaces the previous standard on leasing, Ind AS 17 - Leases. Ind AS 116, which is not applicable to service contracts, but only applicable to leases or lease components of a contract, defines a lease as a contract that conveys to the customer (lessee) the right to use an asset for a period of time in exchange for consideration. Ind AS 16 eliminates the classification of leases for the lessee as either operating leases or finance leases as required by Ind AS 17 and instead, introduces a single lessee accounting model whereby a lessee is required to recognise assets and liabilities for all leases with a term that is greater than 12 months, unless the underlying asset is of low value, and to recognise depreciation of leased assets separately from interest on lease liabilities in the income statement. As Ind AS 116 substantially carries forward the lessor accounting requirements in Ind AS 17, a lessor will continue to classify its leases as operating leases or finance leases and to account for those two types of leases differently. Ind AS 116 is effective from April 1, 2019, with early adoption allowed only if Ind AS 115 - Revenue from Contracts with Customers is also adopted.
ii. Contractual obligations
There is no contractual obligations towards investment property.
iii. Leasing arrangements
Certain investment properties are leased to tenants under long-term operating leases with rentals payable monthly. Minimum lease payments receivable under non-cancellable operating leases of investment properties are as follows:
b. Rights, preferences and restrictions attached to equity shares:
The Company has only one class of shares referred to as equity shares having a par value of Rs. 2/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend recommended by the Board of Directors is subject to the approval of the shareholders at the ensuing annual general meeting, except in the case of interim dividend and appropriate judicial orders. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts in the proportion of equity shares held.
d. As at March 31, 2018, 43,381 Options (Previous Year 518,090) are outstanding towards Employee Stock Options granted. For particulars of options on unissued capital under employee stock option schemes, Refer Note 38.
During the year ended March 31, 2012, the Company had availed three foreign currency term loans viz. external commercial borrowings aggregating USD 110 million comprising of:
i) Loans of USD 35 million and USD 50 million which were repayable in three annual installments (first two installments of 33.33% each and last installment of 33.34%) starting from April 2015 and June 2015 respectively. During the financial year 2013-14, the Company partly prepaid USD 9.8 million out of loan of USD 35 million and balance USD 25.2 million is repaid in during the year. Similarly, during the financial year 2013-14, the Company partly prepaid USD 14 million out of loan of USD 50 million and balance USD 36 million is repaid during the year. These loans was carried interest at the rate of applicable quarterly LIBOR plus margin of 3.0% p.a.; and
ii) Loan of USD 25 million was repayable in nine semi-annual installments (first eight installments of 11% each and last installment of 12%) starting from December 2014. During the financial year 2013-14, the loan was refinanced with the same lender at reduced borrowing rate. Also the Company prepaid USD 9.45 million during the financial year 2013-14 and balance USD 15.55 million is repayable in December 2018. This loan carried interest at the rate of applicable quarterly LIBOR plus margin of 4.3% p.a. During the year margin reduce from 4.30% p.a. to 2.3% p.a.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole. The fair value hierarchy is described as under:
- Level 1 hierarchy includes methods and input that use active quoted prices depending upon type of instrument. Management has used closing prices and values of closing NAV’s as applicable in case of financial instruments covered under this level.
- Under level 2 the fair value of the financial instruments that are not traded in any active market are determined using appropriate valuation techniques with the use of observable market data without relying much on the estimates that are entity specific. The inputs under this level are always observable.
- In case of level 3 if one or more of the significant inputs are not derived on the basis of observable market data then fair value estimations derived with such inputs are included in level 3.
- The Company follows a policy to recognise transfers between the levels only at the end of reporting period and accordingly there are no transfers between levels during the year.
The information based on the above levels is tabulated here below:
Calculation of fair values:
The fair values of Investments in mutual funds are based on Net Asset Values (NAV) published by fund houses and uploaded on Association of Mutual Funds of India (AMFI)’s website. The unlisted equity shares are fair valued on the basis of latest available financial statements of the companies. The securities which are listed but not frequently traded are fair valued based on the estimated rate as per prevailing market condition as on reporting date as received from market intermediary. Trust securities are fair valued based on latest available Net Asset Value report from the trustee company.
4 RISK MANAGEMENT
Credit Risk Management
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.
Trade Receivables
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Credit risk is managed through credit approvals of customers to which the Company grants credit terms in the normal course of business and their past transactions. Impairment losses in respect of trade receivables is assessed at party level on each reporting date. The Company establishes an expected credit loss allowance for trade receivables based on historical trends. The ageing analysis of trade receivable (gross of provision) has been considered from the date invoice falls due. Following table depicts expected credit loss on agewise trade receivables.
Financial Instruments & Bank Balances
The Company limits its exposure to credit risk by generally investing in securities with a good credit rating. The credit rating is being reviewed by the Company periodically. Balances with banks are subject to low credit risks due to good credit ratings assigned to these banks.
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’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. Typically the Company ensures that it has sufficient cash on demand to meet expected operational expenses, servicing of financial obligations.
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2018 and March 31, 2017.
Foreign Currency risk
The Company’s exchange risk arises primarily from its foreign currency borrowings, advances to overseas subsidiaries and balances in overseas bank accounts (in U.S. dollars). The exchange rate between the Indian rupee and US dollars has changed substantially in recent periods and may continue to fluctuate in the future. The Company has entered into forward contract for partial amount of its borrowings as on 31.03.2018 to mitigate the foreign exchange exposure of borrowings due in short term.
The details in respect of the outstanding foreign exchange forward contracts in respect of borrowings are as hereunder:
For the year ended March 31, 2018 every 1% increase / decrease of the respective foreign currencies compared to functional currency of the Company would result in loss / gain of Rs. 98.08 lakhs.
For the year ended March 31, 2017 every 1% increase / decrease of the respective foreign currencies compared to functional currency of the Company would result in loss / gain of Rs. 237.63 lakhs
Interest rate risk
Interest rate risk is the risk that the fair value or 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 debt obligations with floating interest rates. To mitigate the interest rate risk, the Company has entered into interest rate swap contracts for covering partial borrowing to fixed rate of interest from floating rate.
The Company’s investment are primarily in long term fixed interest rate securities and hence do not carry substantial interest rate risk.
Capital Management
The primary objective of Company’s capital management is to maximize shareholders value and safeguard its ability to continue as a going concern.
The Company monitors capital using gearing ratio, which is debt divided by total capital plus debt. Debt comprises of Long term and short term borrowings. Equity includes equity share capital and reserves that are managed as capital. The gearing at the end of the reporting period was as follows:
Price Risk:
The Company is mainly exposed to the price risk due to its investment in debt mutual funds. The price risk arises due to uncertainties about the future market values of these investments.
The Company has laid policies and guidelines which it adheres to in order to minimise price risk arising from investments in debt mutual funds.
5 OPERATING LEASE
a. The Company has entered into various cancellable and non-cancellable operating lease agreements as a lessee for various premises ranging from 6 months to 60 months and may be renewed for further period based on mutual agreement of the parties. The lease rentals recognised as an expense in the statement of profit and loss during the year are included in Note 27 under the head ‘Rent including lease rental’.
b. The Company has entered into various cancellable and non-cancellable operating lease agreements as a lessor for various premises ranging from 2 months to 60 months and may be renewed for further period based on mutual agreement of the parties. The lease rentals recognised as income in the statement of profit and loss during the year are included in Note 23 under the head ‘Rental income from properties sublease’.
6 DISCLOSURES REQUIRED UNDER SECTION 22 OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006:
a. An amount of Rs. 20.41 lakhs (Previous Year Rs. 10.68 lakhs) and ‘ Nil (Previous Year ‘ Nil) was due and outstanding to suppliers as at the end of the accounting year on account of Principal and Interest respectively. (Refer Note 21)
b. No interest paid during the year.
c. No interest is due and payable at the end of the year.
d. No amount of interest accrued and unpaid at the end of the accounting year.
The above information regarding Micro and Small Enterprises has been determined to the extent replies to the Company’s communication have been received from vendors/suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006. This has been relied upon by the auditors.
7 REVENUE EXPENDITURE INCURRED DURING THE YEAR ON RESEARCH AND DEVELOPMENT
The aggregate amount of revenue expenditure incurred during the year on Research and Development as per allocation made by the management and shown in the respective heads of the account is Rs. 1,122.99 lakhs (Previous Year Rs. 1,162.37 lakhs). This has been relied upon by the auditors.
8 STOCK BASED COMPENSATION
a. During the financial year 2011-12, Remuneration and Compensation Committee of the Company had granted 900,000 Stock Options each under the Employee Stock Option Scheme - 2009 & 2010 totaling to 1,800,000 options at a price of Rs. 770/- to the eligible employees / Directors of the Company in terms of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time and as approved by the Shareholders at the Annual General Meetings of the Company held on 25th September 2009 & 29th September 2010 respectively.
During the financial year 2012-13, Remuneration and Compensation Committee of the Company at their meeting held on March 05, 2013 has considered and approved the grant from reissue of lapsed / cancelled options of 1,86,630 Stock Options under the Employee Stock Option Schemes of which 74,350 options are granted under scheme-2009 and 1,12,280 options under scheme-2010 at a price of Rs. 807.70 to the eligible employees / Directors of the Company in terms of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time.
Each option entitles the holder to exercise the right to apply for and seek allotment of one equity share of Rs. 2/- each. The Intrinsic value of each option was nil, since the options were granted at the market price of the equity shares on the date of grant. The options shall vest in three installments of 20%, 30% and 50% at the end of 1st year, 2nd year and 3rd year respectively from the date of the grant and were to be exercised within three months from vesting of options or as may be determined by the Remuneration and Compensation Committee. During the financial year 14-15, Remuneration and Compensation Committee of the Company has approved the modification of exercise period of 3 months from date of vest to three years from the date of vest (hereinafter referred as Modification 1). As approved by the Shareholders at the Annual General Meetings of the Company held on September 23, 2014, the Remuneration and Compensation Committee of the Company at their meeting held on October 01, 2014 has approved the modification of exercise price from Rs. 770.00 to Rs. 167.00 for grant dated 14th March 2012 and from Rs. 807.70 to Rs. 167.00 for grant dated March 05, 2013 (hereinafter referred as Modification 2). The tenure of the Schemes is for maximum period of five years from the date of grant of options.
d. To allow for the effects of early exercise, it is assumed that the employees would exercise the options after vesting date.
e. Expected volatility is based on the historical volatility of the share prices over the period that is commensurate with the expected term of the option.
9 EMPLOYEE BENEFIT PLANS:
Defined contribution plans: The Company makes Provident Fund and Employee State Insurance Scheme contributions which are defined contributions plans, 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 has recognised following amounts as contributions in the statement of profit and loss as part of contribution to provident fund and other funds in Note 26 Employee benefits expenses.
Contribution to PF : Rs. 297.00 lakhs (Previous Year Rs. 307.45 lakhs)
Contribution to ESIC : Rs. 4.74 lakhs (Previous Year Rs. 1.58 lakhs)
Post employment defined benefit plans:
Gratuity Plan (Included as part of contribution to provident fund and other funds in Note xx Employee benefits expense): The Company makes annual contributions to the Employee’s Group Gratuity Assurance Scheme administered by the Life Insurance Corporation of India (‘LIC’), a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to fifteen days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs on completion of five years of service.
The expected rate of return on plan assets is based on expectation of the average long term rate of return expected to prevail over the estimated term of the obligation on the type of the investments assumed to be held by LIC, since the fund is managed by LIC.
The estimate of future salary increases, considered in actuarial valuation, takes into account the inflation, seniority, promotion, increments and other relevant factors, such as supply and demand in the employment market.
The Company expects to contribute Rs. 349.48 lakhs (Previous Year Rs. 340.44 lakhs) to the plan assets in the immediate next year.
10 RELATED PARTY DISCLOSURE:
I Names of related parties and nature of relationship: (As per Ind-AS)
i Entities where control exists (Subsidiaries, including step down subsidiaries)
1 TickerPlant Ltd. (TickerPlant)
2 IBS Forex Ltd. (IBS)
3 atom Technologies Ltd. (atom)
4 Riskraft Consulting Ltd. (Riskraft)
5 National Spot Exchange Ltd. (NSEL)
6 Western Ghats Agro Growers Company Limited (WGAGL) (Subsidiary of NSEL)
7 Farmer Agricultural Integrated Development Alliance Ltd. (FAIDA) (Subsidiary of NSEL)
8 FT Group Investments Pvt. Ltd. (FTGIPL)
9 Financial Technologies Middle East- DMCC (FTME) (Subsidiary of FTGIPL)
10 Bourse Africa Limited (BAL) (subsidiary of FTGIPL)
11 Bourse Africa Clear Limited (BACL) (Subsidiary of BAL)
12 Knowledge Assets Pvt. Ltd. (KAPL)
13 Financial Technologies Communications Ltd. (FTCL)
14 Global Payment Networks Ltd. (GPNL)
15 FT Knowledge Management Company Ltd. (FTKMCL)
16 Indian Bullion Market Association Ltd. (IBMA) (Subsidiary of NSEL)
17 Bourse Africa (Bostwana) Limited (BABL) (Subsidiary of FTGIPL) (under liquidation)
18 ICX Platform (Pty) Ltd. (ICX)
19 Credit Market Services Ltd. (CMSL)
20 Apian Finance and Investments Ltd. (APIAN)
21 Bahrain Financial Exchange BSC (c) (BFX) (Subsidiary of FTGIPL) (under liquidation)
22 BFX Clearing & Depository Corporation BSC(c) (Subsidiary of BFX) (under liquidation)
23 Financial Technologies Singapore Pte Ltd. (FTSPL)
24 FT Projects Ltd. (FTPL)
25 Adyna Solutions Pvt.Ltd. (Subsidiary of atom) (w.e.f. May 9, 2016)
ii Key Management Personnel (KMP)
Executive directors:
1 Mr. S. Rajendran : Managing Director & CEO (w.e.f. 10 Feb, 2017)
2 Mr. Rajendra Mehta : Whole-time Director
3 Mr. Devendra Agrawal : Chief Financial Officer (upto 26 May, 2017) and Whole -time Director & CFO (w.e.f. 27 May, 2017)
4 Mr. Hariraj Chouhan : Company Secretary
5 Mr. Prashant Desai : Managing Director & CEO (upto 09 Feb, 2017)
6 Mr. Jigish Sonagra : Whole-time Director (upto 20 Dec, 2016)
Non-executive directors :
1 Mr. Venkat Chary (Retd. IAS)
2 Mr. A. Nagarajan (Retd. IAS)
3 Justice Rajan Kochar (Retd.)
4 Mr. Sunil Shah
5 Justice Deepak Verma (Retd.) (w.e.f. 21.12.2016)
6 Mrs. Chitkala Zutshi (Retd. IAS) (w.e.f. 21.12.2016)
7 Mr. Suresh Salvi (Retd. IAS) (w.e.f. 14.10.2016)
8 Mr. Kanekal Chandrasekhar (w.e.f. 27.09.2017)
9 Mr. Berjis Desai (Ceased w.e.f. 26.05.2017)
10 Mr. Jigish Sonagara (Ceased w.e.f. 10.08.2017)
iii Individuals / Entity owning, directly or indirectly, an interest in the voting power that gives control or significant influence.
1 La-fin Financial Services Pvt. Ltd. (La-fin)
2 Mr. Jignesh Shah
Notes:
i. Loans to employees as per the Company’s policy are not considered.
ii. None of the loanees have made investments in the shares of the Company.
iii. Figures disclosed above are without reducing amount of provision made for doubtful loans.
11 During the year, transaction relating to granting license of the application software PowerARMSTM DAM, Power ARMSTM TAM & REC, Back Office and SLDC software along with source code to Indian Energy Exchange (IEX) has been completed and the Company has recognized revenue of Rs. 9,720.00 lakhs (excluding Rs. 1,080.00 lakhs kept in escrow account which is released in subsequent year as per the terms of the agreement). The said license is perpetual, irrevocable, non-transferable and non-assignable.
12 During the year, Bahrain Financial Exchange BSC (c) (BFX), which is a stepdown subsidiary through FT Group Investments Pvt. Ltd., a Mauritius based entity, has requested the Central Bank of Bahrain (“CBB”) to permit surrender of the CBB license to the Regulator and dissolve the company. Consequently, management has appointed a liquidator to wind up the Company.
13 During the quarter, the Securities Exchange License of step down subsidiaries Bourse Africa Limited (BAL), a wholly owned subsidiary of FT Group Investments Pvt. Ltd. (FTGIPL), Mauritius was terminated together with Clearing & Settlement Facility License of BAL’s wholly owned subsidiary Bourse Africa Clear Limited (BACL).
14 During the year, In order to meet the working capital requirements of NSEL, Company has subscribed to the right issues made by NSEL to the extent of Rs. 3,081.66 lakhs (Previous Year Rs. 3,075.00 lakhs). On conservative basis, the Company has made allowance for expected credit loss in value of long term investments in its subsidiaries including NSEL to the extent of Rs. 6,311.66 lakhs (Previous Year Rs. 3,075.00 lakhs). (Refer Note 40).
15 The Company has a total MAT credit entitlement of Rs. 9,115.62 lakhs as at March 31, 2018. During the year the Company has utilized MAT credit of Rs. 3,287.11 lakhs. The management of the Company is confident that the Company will be able to utilize balance MAT entitlement in future unexpired years.
16 As per Section 135 of the Companies Act 2013, during the year the Company was required to spend Rs. 56.72 lakhs (Previous year Rs. 145.02 lakhs) towards a Corporate Social Responsibility (CSR). During the year, an amount Rs. 387.95 lakhs were utilized on the activity specified in Schedule VII of the Companies Act, 2013. to a separate Balance earmarked funds were transferred bank account and the same shall be utilized on activities which are specified in Schedule VII of the Companies Act, 2013.
17 Out of the sale proceeds receivable on sale of share in National Bulk Handling Corporation Limited (NBHC), Rs. 2,298.43 lakhs was kept in escrow account for which the Company had received claim from the buyer for indemnification of third party claims. The Company had disputed the claims. As per agreement with the buyer during the year, the Company has received Rs. 1,300.00 lakhs out of the escrow account and Rs. 272.02 lakhs were released to the buyer. Balance Rs. 726.41 lakhs which are in dispute, are still in escrow account.
18 Certain perpetual bonds of various reputed banks in which the Company had invested were prematurely redeemed on their own by the respective banks on account of RBI placing the banks under Prompt Corrective Action (PCA) as regulatory event and without any instructions/action of the Company. The original call dates of each of the aforesaid Bonds were much later in time, with the earliest being January 12, 2020, however these banks opted for premature redemptions. Consequently, the Company has recognized impairment loss to the extent of Rs. 3,145.92 lakhs in respect of these bonds which has been shown under exceptional items.
19 The writ petition filed by the Company challenging the legality and propriety of the Forward Markets Commission’s (FMC) order on the Company inter alia declaring “not a fit & proper person” is pending for hearing before the Hon’ble Bombay High Court. The Company has filed civil appeals before Hon’ble Supreme Court challenging the Security Exchange Board of India (SEBI) Order and Central Electricity Regulatory Commission (CERC) order inter alia declaring the “Company not a fit and proper person to hold shares in recognized stock exchanges and power exchanges respectively’; which are pending for hearing. The same will come up for hearing in due course before the respective courts.
20 The Company has challenged EOW letter dated February 28, 2015 before Hon’ble Bombay High Court wherein Hon’ble Bombay High Court by its order dated June 12, 2015 granted a stay to EOW letter dated February 28, 2015 on the condition that the Company shall deposit Rs. 84 crs from the sale proceeds of IEX within four weeks from completion of sale of IEX. Accordingly, the Company has deposited Rs. 84 crs with the Registrar, Criminal Appellate Side, High Court, Bombay. The matter is pending for hearing before Hon’ble Bombay High Court.
21 The Hon’ble Bombay High Court passed an ad interim order dated September 30, 2015 inter alia restraining the Company from distributing any dividend or depositing the same in the dividend distribution account in accordance with the provisions of the Companies Act, 1956 (to be read as Companies Act, 2013) pending the final hearing and disposal of the Notice of Motion. This Notice of Motion was filed in one of the suits. The matter is pending before the Hon’ble Bombay High Court. In compliance to the order, the Company has not distributed the final dividend for the financial year 2014-15 to the shareholders pursuant to the directions of the Hon’ble Bombay High Court and hence is not in default in compliance with the statutory provisions under the Companies Act, 2013. The Notice of Motions is pending for hearing. Further, at annual general meeting held on September 27, 2017, the shareholders of the Company have approved final dividend for year 2016-17 @ Rs. 2/- per share, aggregating to Rs. 921.57 lakhs, subject to appropriate judicial order which is also pending for distribution to the shareholders due to aforesaid restrictions.
22 On February 12, 2016, Ministry of Corporate Affairs (“MCA”) passed a final order of amalgamation (Final Order) of National Spot Exchange Limited (NSEL) with the Company under Section 396 (1) of the Companies Act. The Company had challenged the Final Order by way of a Writ Petition before the Hon’ble Bombay High Court, which was dismissed by the Hon’ble Bombay High Court by its order dated December 4, 2017. The Company has filed a Special Leave Petition against the said order dated December 4, 2017 before the Hon’ble Supreme Court of India. The Hon’ble Supreme Court of India has stayed the order dated December 4, 2017, the matter will come up for hearing in due course.
23 The Union of India, through the Ministry of Corporate Affairs (“MCA”), has filed the Company Petition inter alia under Sections 397 and 398 read with Section 388B of the Companies Act, 1956 (the “Act”) before the Principal Bench of the Company Law Board at New Delhi (the “CLB”), inter-alia seeking removal and supersession of the Board of Directors of the Company. Applications for dismissal of the Company Petition for want of cause of action have been filed. Due to the formation of the National Company Law Tribunal (“NCLT”) the CLB has been dissolved. Subsequently, the matter has been transferred to NCLT, Chennai bench for disposal. In the interim as per the order of the CLB dated 30th June, 2015 the company is restrained from selling/alienating or creating third party rights in its assets and investments. This order has been upheld by the Hon’ble Supreme Court of India vide its order dated 18th April, 2016. The NCLT has also by consent formed a committee to consider sale of the assets of the Company pursuant to regulatory directions / requirements, treasury management and funding requirements of the subsidiaries. The final argument in the matter are completed and matter is kept for orders.
24 a) During the previous years, civil suits have been filed against the Company in relation to the event that occurred on the exchange platform of NSEL, wherein the Company has been made a party. In these proceedings certain reliefs have been claimed against the Company, inter-alia, on the ground that the Company is the holding company of NSEL. These matters are pending before the Hon’ble Bombay High Court for adjudication. The Company has denied all the claims and contentions in its reply. There is no privity of contract between the Company and the Plaintiffs therein. The management is of the view that the parties who have filed the Civil Suits would not be able to sustain any claim against the Company. The matters are pending for hearing before the Hon’ble Bombay High Court.
b) First Information Reports (FIRs) have been registered against various parties, including the Company, with the Economic Offences Wing of the Mumbai Police (EOW) and Central Bureau of Investigation (CBI) in connection with the events occurred on NSEL’s trading platform. After investigation, EOW, Mumbai has presently filed 3 charge-sheets. It is pertinent to note that till date, no charge sheet has been filed against the Company by EOW. All investigations are presently pending. CBI has filed charge-sheets against the Company for alleged loss caused to PSUs - PEC Ltd. & MMTC Ltd. on NSEL platform and the case is pending for trial before the CBI court.
c) The CBI - EOW, has also registered an FIR which pertains to alleged conspiracy between the accused private persons and the named officials of Securities & Exchange Board of India (SEBI) in granting renewal of stock exchange license to Metropolitan Stock Exchange of India Limited (MSEI) by SEBI in August 2010, by suppression of facts. There is no direct allegation against the Company in the FIR. Therefore, the Company has filed a petition before the Hon’ble Court for quashing of the said FIR against itself.
d) The CBI - EOW, has registered complaint against the Company along with certain officials of FMC, SEBI and other for giving illegal benefits to MCX and allowing MCX trading as private commodity exchange. The investigation in the matter is still in progress.
25 a) On 18th July, 2016, the Company received a notice from the EOW Mumbai inter alia directing the Company not to dispose of, alienate, encumber, part with possession of or create any third party right, title and/ or interest, in, to, upon or in respect of any of the assets of the Company without permission of Hon’ble Designated Court under MPID Act, Mumbai. This letter has been challenged by the Company in a Writ Petition before the Bombay High Court and the same is pending for hearing. By virtue of an Affidavit filed by the EOW in the matter the Company is not prohibited from incurring day to day expenses. The Government of Maharashtra vide its Notification dated 21st September, 2016, notified the attachments of certain assets of the Company.
The Company has filed on 16th January, 2017 a Writ Petition before the Bombay High Court challenging inter alia, the notification attaching the assets of the Company under the provisions of the Maharashtra Protection of Interest of Depositors Act. The matter is pending for hearing.
b) EOW issued a letter dated 31st January, 2017 to NSDL directing it not to dispose of, alienate, encumber, part with possession of or create any third party right, title and / or interest in, to, upon, or in respect of any assets mentioned in the letter dated 31st January, 2017 of the Company without the permission of the Hon’ble Designated Court under the MPID Act, Mumbai. The Company challenged the letter dated 31st January, 2017 before the Hon’ble Bombay High Court, inter alia, on the ground that the EOW did not have the power to do so. The Hon’ble Court has been pleased to stay the same. The matter is pending for hearing.
c) The State Government under the MPID Act has attached several Bonds, bank accounts, investments, Fixed Deposits and ODIN software and its receivables of the Company vide gazette notifications dated April 4, 2018, April 7, 2018, April 11, 2018, April 19, 2018 and May 15, 2018. The Competent Authority has filed Misc. Applications before the MPID Court to make absolute the attached properties mentioned in aforesaid gazette notifications. The said Misc. Applications are pending for hearing before Hon’ble MPID Court, Mumbai. The Company has filed a writ petition before the Bombay High Court challenging the aforesaid notifications attaching the various assets of the Company under the provisions of the MPID Act. The Hon’ble High Court has granted partial relief to the Company. The said Writ Petition will come up for hearing in June, 2018.
26 Certain assets of the Company have been attached by the Enforcement Directorate under the provisions of the Prevention of Money Laundering Act, 2002. The three Provisional Attachments Orders have been confirmed by the Adjudicating Authority. The Company has filed Appeals challenging the confirmation orders passed by the Adjudicating Authority, before the Hon’ble Appellate Tribunal. The Hon’ble Appellate Tribunal has granted status quo on orders passed by the Adjudicating Authority confirming three attachments. The matter is pending for hearing before Hon’ble Appellate Tribunal.
27 The Serious Frauds Investigation Office (SFIO) published a Public Notice during December, 2016 in a newspaper wherein it has been mentioned that the Central Government had directed the SFIO to investigate into the affairs of the Company and also inviting the members of the public to lodge their alleged grievances against the Company with them. The Company is exploring its options in relation to the SFIO orders in consultation with its attorneys and Counsel.
28 Modulus Financial Engineering filed a copyright infringement suit against the Company claiming that the Company had breached the license granted by Modulus to the Company in the use of its ODIN software. The Company has denied all these claims in its reply and written statement. The Notice of Motion seeking interim relief against the Company has been disposed of by a consent order. The suit is pending for final hearing and disposal.
29 Previous year’s figures have been regrouped / reclassified wherever necessary to correspond with the current year’s classification/disclosure.
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