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

BSE: 532175ISIN: INE136B01020INDUSTRY: IT Consulting & Software

BSE   ` 2002.00   Open: 1965.30   Today's Range 1964.80
2003.80
+61.20 (+ 3.06 %) Prev Close: 1940.80 52 Week Range 959.80
2457.00
Year End :2023-03 

The Company does not face a significant liquidity risk with regard to its lease liabilities, as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.

The aggregate depreciation on ROU assets has been included under depreciation and amortisation expense in the statement of profit and loss.

Rental expense for low value assets and short-term leases was ? 35 (March 31, 2022 - ? 35) included under other expenses in the statement of profit and loss (refer note 22).

Note:

During the year 2021-22, the Company entered into an agreement with a third party, wherein it was granted technology license to develop (namely Software Design Radio), test and commercially utilise the benefits from such testing and development activity. Accordingly, the initial amount and subsequent development costs aggregating to ? 791 had been classified under 'intangible assets under development’.

On December 22, 2021, the Board of Directors authorized the Company to hive off the Software Design Radio (SDR) division to Innovation Communications Systems Limited (ICS), a company in the business of wireless communication systems. The transfer was undertaken through a Business Transfer Agreement between the Company and ICS dated December 31, 2021 for ? 791.

In exchange for the SDR division and an additional cash investment of ? 100 by the Company in ICS aggregating to ? 891, the Company received a 15% stake in the paid up share capital of ICS (on a fully diluted basis). The said transfer was recorded in the books at fair value and did not result in any material profit / loss on disposal.

On May 6, 2022, the Company entered into a Business Transfer Agreement (BTA) to acquire Specified Business of Klaus IT Solutions Private Limited ('Klaus IT’) relating to provision of professional services being engineering, software and IT for an upfront cash consideration of ? 850 Mn. Klaus IT’s business has been acquired by the Company effective April 30, 2022 on completion of the closing conditions under the BTA and has been consolidated with effect from that date.

The fair value of the purchase consideration of ? 850 has been paid upfront. The fair value of net assets acquired on the acquisition date amounted to ? 740. The excess of purchase consideration over the fair value of the net assets acquired has been attributed towards goodwill of ? 110 and it also entails the movement of manpower to the Company. Goodwill arising on the acquisition is not deductible for tax purposes. 'Klaus IT’ has contributed revenues amounting to ? 612 and profit amounting to ? 105 to the Company’s performance for the year ended March 31, 2023. If the acquisition had taken place at the beginning of the year, revenues would have been ? 667 and the profit would have been ? 115.

Expected credit loss (ECL):

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The average credit period is between 60- 90 days. Before accepting any new customer, the Company uses an internal credit scoring system to assess the potential customer’s credit quality and defines credit limits for each customer. Limits and scoring attributed to customers are reviewed once a year.

As a practical expedient (Ind AS 109 B5.5.35), the Company uses a provision matrix to determine impairment loss of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. Accordingly, the Company creates provision for past due receivables less than 270 days ranging between 1%-30% and 100% for the receivables due beyond 270 days. The ECL allowance (or reversal) during the year is recognised in the statement of profit and loss.

(D) Rights, preferences and restrictions attached to equity shares:

The Company has only one class of equity shares having a par value of ? 5 per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company in proportion to their shareholding.

(E) Buyback of Equity shares:

Aggregate number of equity shares bought back during the period of previous five years : 3,123,963 (March 31, 2022: 3,123,963).

(F) Purchase of Treasury shares:

The Company has constituted a 'Cyient Associate Stock Option Plan 2021 Trust ('Trust’), to grant, offer and issue options to the employees of the Company and its subsidiaries. During the year 2021-22, the Trust has acquired 1,079,000 equity shares from the secondary market amounting to ? 950 based on the loan received from the Company. The Company has treated the Trust as its direct extension, such that the assets and liabilities of the Trust are included in the standalone financial statements and the shares acquired/held by the Trust are classified as "Treasury Shares".

(G) Details of shares allotted under Associate Stock Option Plans:

(i) 1,162,068 (March 31, 2022: 1,151,208) equity shares of ? 5 each fully paid-up was allotted to associates of the Company pursuant to the Associate Stock Option Plan - 2008 (ASOP - 2008)

(ii) 333,442 (March 31, 2022: 184,265) equity shares of ? 5 each fully paid-up was allotted to associates of the Company pursuant to the Associate Stock Option Plan - 2015 (ASOP - 2015)

(iii) 149,093 (March 31, 2022: 51,540) equity shares of ? 5 each fully paid-up was allotted to associates of the Company pursuant to the Associate Stock Option Plan - 2020 (ASOP - 2020)

(H) Details of shares reserved for issue:

(i) Shares aggregating 25,000 and 35,860 as at March 31, 2023 and March 31, 2022 respectively, reserved for issue under ASOP 2008 scheme.

(ii) Shares aggregating 491,481 and 679,898 as at March 31, 2023 and March 31, 2022 respectively, reserved for issue under ASOP 2015 scheme.

(iii) Shares aggregating 97,143 and 164,646 as at March 31, 2023 and March 31, 2022 reserved for issue under RSU scheme 2020.

(iv) Shares aggregating 1,009,100 and 1,026,500 as at March 31, 2023 and March 31, 2022 reserved for issue under ASOP scheme 2021.

(I) i. Associate Stock Option Plans

Associate Stock Option Plan - 2008 (ASOP 2008):

The Company instituted ASOP 2008 in July 2008 and earmarked 1,000,000 equity shares of ? 5 each for issue to the employees under ASOP. The Company modified ASOP 2008 and adjusted the number of options and exercise price on account of bonus issue 1:1 during financial year 2010-11. Under ASOP 2008, options will be issued to employees at an exercise price, which shall not be less than the market price on the date of grant. These options vest over a period ranging from one to three years from the date of grant, starting with 10% at the end of first year, 15% at the end of one and half years, 20% after two years, 25% at the end of two and half years and 30% at the end of third year.

Out of the total outstanding options 20,000 (March 31, 2022: 20,000) options pertain to options granted to the associates of subsidiary companies.

As at March 31, 2023, 1,162,068 (March 31, 2022: 1,151,208) equity shares of ? 5 each have been allotted to the associates under ASOP 2008 plan. Accordingly, options (net of cancellations) for a total number of 25,000 (March 31, 2022: 35,860) are outstanding as at March 31, 2023.

Associate Stock Option Plan - 2015 (ASOP 2015):

The Company instituted ASOP 2015 in July 2015 and earmarked 1,200,000 equity shares of ? 5 each for issue to the employees under ASOP. Under ASOP 2015, options will be issued to employees at an exercise price, which shall not be less than the market price on the date of grant. These options vest over a period ranging from one to three years from the date of grant, starting with 10% at the end of first year, 15% at the end of one and half years, 20% after two years, 25% at the end of two and half years and 30% at the end of third year.

Associate Restricted Stock Units Scheme 2020 (ARSU 2020):

The Company has instituted the ARSU’s 2020 plan earmarking 1,050,000 shares of ? 5 each which provided for grant of RSUs to eligible associates of the Company and its subsidiaries. The Board of Directors recommended the establishment of the plan on January 16, 2020 and the shareholders approved the recommendation of Board of Directors on March 5, 2020 through a postal ballot. The RSUs will vest over a period of three years from the date of grant.

Out of the total outstanding options 15,980 (March 31, 2022: 14,840) options pertain to options granted to the associates of subsidiary companies.

As at March 31, 2023, 149,093 (March 31,2022: 51,540) equity shares of ? 5 each have been allotted to the associates under ASRSU 2020 plan. Accordingly, options (net of cancellations) for a total number of 97,143 (March 31, 2022: 164,646) are outstanding as at March 31, 2023.

ASOP 2021

The Company has instituted the ASOP 2021 scheme and also incorporated 'Cyient Associate Stock Option Scheme 2021 Trust’ (Trust), whereunder shares were purchased from the stock exchanges through the Trust. KP Corporate Solutions Limited, Corporate Trustee, has been appointed as trustee for this Trust. Shareholders of the Company have approved the Scheme and the formation of Trust through postal ballot on February 23, 2021. During the year ended March 31, 2022, Trust purchased 1,079,000 shares.

*During the previous year, Company has intimated the grant of performance based stock incentive in the form of Stock options (SO’s) to certain eligible employees, which could eventually result in the issue of 1,026,500 shares against such options, subject to the fulfilment of vesting conditions. During the year Company has granted 422,600 (March 31, 2022: Nil) options to the employees.

Out of the total outstanding options 403,640 (March 31, 2022: 394,000) options pertain to options granted to the associates of subsidiary companies.

ii. Fair value of stock options granted during the year:

The weighted average fair value of the share options during the year is ? 61.69 - ?791.85 (2021-22: ? 61.69 - ?713.88). Options and RSUs were priced using Black Scholes pricing model. Where relevant, the expected life used in the model has been adjusted based on management's best estimate for the effects of non-transferability, exercise restrictions, and behavioural considerations. Expected volatility is based on the historical share price volatility over the past years.

Nature of reserves:(a) Capital redemption reserve

Represents the nominal value of equity shares bought back pursuant to Buyback in accordance with Section 69 of the Companies Act, 2013.

(b) Securities premium

Amounts received on issue of shares in excess of the par value has been classified as securities premium. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

(c) General reserve

This represents appropriation of profit by the Company. General reserve is appropriated for the creation of capital redemption reserve up on Buyback of equity shares pursuant to section 69 of the Companies Act, 2013.

(d) Share based payments reserve

The Share based payments reserve is used to record the value of equity-settled share based payment transactions with employees. The amounts recorded in this account are transferred to securities premium upon exercise of stock options by employees.

(e) Cash flow hedge reserve

Represents effective portion of gains and loss on designated portion of hedging instruments in a cash flow hedge, net of tax.

(f) Special Economic Zone ('SEZ') re-investment reserve

Represents amount transferred to the SEZ reinvestment reserve The reserve has been created out of the profits of eligible SEZ units in terms of the provisions of Section 10AA(1)(ii) of the Income-tax Act, 1961 and shall be utilized by the Company for acquiring new plant and machinery for the purpose of its business in the terms of Section 10AA(2) of the Income-tax Act, 1961.

(g) Retained earnings

(i) Retained earnings comprises of prior years’ undistributed earnings after taxes along with current year profit, net of dividends declared and dividend distribution tax thereon.

(ii) Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the year in which they occur, directly in other comprehensive income. These are presented within retained earnings.

(h) Treasury shares

The Company has constituted a 'Cyient Associate Stock Option Plan 2021 Trust ('Trust’), to grant, offer and issue options to the employees of the Company and its subsidiaries. During the year 2021-22, the Trust has acquired 1,079,000 equity shares from the secondary market amounting to ? 950 based on the loan received from the Company. The Company has treated the Trust as its direct extension, such that the assets and liabilities of the Trust are included in the standalone financial statements and the shares acquired/held by the Trust are classified as "Treasury Shares".

(i) Equity instruments through OCI

Represents the cumulative gains and loss arising from fair valuation of the equity instruments measured at the fair value through OCI, net of amounts reclassified to retained earnings when the investments have been disposed off.

(j) Share application money pending for allotment

Represents amount received from associates on exercise of stock options, pending allotment.

i. Defined Benefit Plans - Gratuity

In accordance with the 'Payment of Gratuity Act, 1972’ of India, the Company provides for gratuity, a defined retirement benefit plan (the 'Gratuity Plan’) covering eligible employees. Liabilities with regard to such gratuity plan are determined by an independent actuarial valuation and are charged to the Statement of Profit and Loss in the year determined. The gratuity plan is administered by the Company’s own trust which has subscribed to the "Group Gratuity Scheme" of Life Insurance Corporation of India.

The present value of the defined benefit obligation (DBO), and the related current service cost and past service cost, were measured using the projected unit credit method.

The average rate of increase in compensation levels is determined by the Company, considering factors such as, the Company’s past compensation revision trends and management’s estimate of future salary increases. 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 obligation.

Sensitivity analysis:

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

Composition of plan assets:

Plan assets comprise of100% insurer managed funds. Fund is managed by Life Insurance Corporation as per Insurance Regulatory and Development Authority of India (IRDA) guidelines, category wise composition of the plan assets is not available.

The accrual for unutilised leave is determined for the entire available leave balance standing to the credit of the employees at year-end as per Company’s policy. The value of such leave balance eligible for carry forward, is determined by an independent actuarial valuation and charged to statement of profit and loss in the year determined.

The average rate of increase in compensation levels is determined by the Company, considering factors such as, the Company’s past compensation revision trends and management’s estimate of future salary increases. 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 obligation.

c) Long Service Leave - Australia:

The regulations of long service leave are applicable to the associates of the Company employed at its Australia Branch. The accrual of long service leave is in addition to the compensated absences to which the associates are entitled to. These long service leaves are dependent on the tenure of the employee with the same employer and are regulated by respective state laws.

The difference between the tax rate enacted in India and the effective tax rate of the Company is primarily on account of the benefit availed on the profits of the undertakings situated in Special Economic Zones (SEZ). The SEZ units of the Company which began to provide the services on or after April 1, 2005 are eligible for 100% deduction of profits and gains derived from export of services for a period of first five years from the year of commencement of provision of services. For the next five years, they are eligible for deduction of 50% of profits and gains derived from export of services.

Fixed price:

Fixed price arrangements with customers have defined delivery milestones with agreed scope of work and pricing for each milestone. Revenue from fixed-price contracts, where the performance obligations are satisfied over time and when there is no uncertainty as to measurement or collectability of consideration, is recognised as per the 'percentage-of-completion' method. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Percentage of completion is determined based on the project costs incurred to date as a percentage of total estimated project costs required to complete the project. The input method has been used to measure the progress towards completion

as there is direct relationship between input and productivity. In certain projects, a fixed quantum of service or output units is agreed at a fixed price for a fixed term. In such contracts, revenue is recognised with respect to the actual output achieved till date as a percentage of total contractual output. Any residual service unutilised by the customer is recognised as revenue on completion of the term.

Time and material:

Revenue from time and material contracts are recognised as and when services are rendered to the customer. These are based on the efforts spent and rates agreed with the customer. Revenue from the end of the last invoicing to the reporting date is recognised as unbilled revenue.

Product sale:

Revenue from sale of products is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the products.

Sales volume discounts are reduced from the contract price to recognise the revenue and does not have material impact on revenue recognised.

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 in excess of invoicing are classified as contract assets (unbilled revenue) while invoicing in excess of revenue are classified as contract liabilities (unearned revenues).

Contract assets:

During the year ended March 31, 2023, ? 1,112 of contract assets as at March 31, 2022 has been reclassified to receivables on completion of performance obligation. During the year ended March 31, 2022, ? 776 of contract assets as at March 31, 2021 has been reclassified to receivables on completion of performance obligation.

Contract liabilities:

a) . Unearned revenue: During the year ended March 31, 2023 the Company has recognized revenue of ? 148 arising from

contract liabilities as at March 31, 2022. During the year ended March 31, 2022, the Company recognized revenue of? 185 arising from opening unearned revenue as at March 31, 2021.

b) . Advance from customers: During the year ended March 31, 2023 the Company recognised revenue of ? 56 arising from

advance from customers as at March 31, 2022. During the year ended March 31, 2022 the Company recognised revenue of ? 843 arising from advance from customers as at March 31, 2021.

The Company has applied practical expedient and has not disclosed information about remaining performance obligations in contracts, where the original contract duration is one year or less or where the entity has the right to consideration that corresponds directly with the value of entity’s performance completed to date. Consequently, disclosure related to transaction price allocated to remaining performance obligation is not material.

i. Contribution to provident fund and other funds Provident fund:

The Company makes provident fund contributions which are defined contribution plans for qualifying employees. Under the scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. These contributions are made to the Fund administered and managed by the Government of India. The Company’s monthly contributions are charged to the statement of profit and loss in the year they are incurred. Total expense recognised during the year aggregated ? 520 (2021-22: ? 392).

Gratuity (funded):

Amount recognised in statement of profit and loss in respect of gratuity: ? 171 (2021-22: ? 160). [refer note 12 (i)].

National Pension Scheme:

Amount recognised in statement of profit and loss in respect of national pension scheme ? 19 (2021-22: ? 14) Superannuation fund - India:

The employees receive benefit under a Superannuation scheme which is a defined contribution scheme wherein the employee has an option to choose the percentage of contribution between 5% to 15% of the basic salary of the covered employee. These contributions are made to a fund administrated by Life Insurance Corporation of India. The Company’s monthly contributions are charged to the statement of profit and loss in the year they are incurred. Total expense recognised during the year aggregated ? 24 (2021-22: ? 21).

Employees' State Insurance Scheme:

Amount recognised in the statement of profit and loss in respect of Company’s contribution to employees’ state insurance scheme ? 22 (2021-22: ? 28).

ii. Superannuation fund - Australia

The employees at the Australia branch of the Company are also covered under a superannuation scheme. The Company contributes 9.5% of the basic salary of the employee. The Company’s monthly contributions are charged to the statement of profit and loss in the year they are incurred. Total expense recognised during the year aggregated ? 4 (2021-22: ? 4).

(i) Expenditure for Corporate Social Responsibility:

The Company contributes towards Corporate Social Responsibility (CSR) activities through Cyient Foundation and Cyient Urban Micro Skill Centre Foundation (refer note 24). The Company has formed CSR committee as per Section 135 of the Companies Act, 2013 to formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified by law. The areas for CSR activities are promoting education, adoption of schools, facilitating skill development, medical and other social projects. Expenses incurred on CSR activities through Cyient Foundation and contributions towards other charitable institutions are charged to the statement of profit and loss under 'Other Expenses’: ? 81 (2021-22 - ? 94).

Nature of CSR activities:

Quality Education, IT / Digital Literacy, Skill Development and Employment, Women Empowerment and Sustainable Livelihood, Community Development and Environmental Protection, Preventive Healthcare and Innovation and Entrepreneurship.

ii. Expected credit loss:

Provision for expected credit loss allowance includes allowance on other financial assets ? 112 ( 2021-22: ? Nil) .

23. Contingent liabilities and commitments

Particulars

As at

March 31, 2023

As at

March 31, 2022

(A) Contingent liabilities:

(a). Claims against the Company not acknowledged as debt

519

553

(refer note (i) to (v) below)

(b). Guarantees (refer note (vi) below)

17,241

10,573

17,760

11,126

(B) Commitments:

Contracts remaining to be executed on capital account and not provided for (net of capital advances)

105

159

105

159

Total

17,865

11,285

Notes:

(i) The Company disputed various demands raised by income tax authorities for the assessment years 2017-18 and 201819 (March 31, 2022: 2002-03, 2003-04, 2013-14, 2014-15, 2016-17, 2017-18 & 2018-19) which are pending at various stages of appeals. The aggregate amount of disputed tax not provided for is ? 6 (March 31, 2022 - ? 40). The Company is confident that these appeals will be decided in its favour.

(ii) The Company disputed various demands raised by the sales tax authorities for the financial years 2004-05 to 2009-10 and 2015-16 to 2017-18 (till June 2017) (March 31, 2022 - 2004-05 to 2009-10 and 2015-16 to 2017-18 (till June 2017)). The Company filed appeals, which are pending with the appropriate authorities. The aggregate amount of disputed tax not provided for is ? 21 (March 31, 2022 - ? 21). The Company is confident that these appeals will be decided in its favour. The above does not include show cause notices received by the Company.

(iii) The Company disputed various demands raised by the service tax authorities for the financial years 2006-07 to 2009-10 and 2013-14 to 2017-18 (till June 2017) (March 31, 2022: 2006-07 to 2009-10 and 2013-14 to 2017-18 (till June 2017)). The Company filed appeals, which are pending with the appropriate authorities. The aggregate amount of disputed tax not provided for is ? 371 (March 31, 2022 - ? 371). The Company is confident that these appeals will be decided in its favour. The above does not include show cause notices received by the Company.

(iv) The Company is contesting certain pending service tax refunds amounting to ? 29 (March 31, 2022 : ? 29) at various appellate authorities. The Company is confident that these appeals will be decided in its favour.

(v) During the financial year 2015-16, the Government of India notified an amendment to the Payment of Bonus Act, 1961 whereby the applicable slabs as well as coverage limit was enhanced. The said amendment was made effective April 1, 2014. The Company is contesting the retrospective applicability of the amendment for the financial year 2014-15 in the High Court of Judicature at Hyderabad for the states of Telangana and Andhra Pradesh. The aggregate amount of liability pertaining to the financial year 2014-15, not provided for, is ? 92 (March 31, 2022 - ? 92).

(vi) Corporate guarantee has been extended to subsidiaries / step down subsidiaries for availing loans from respective banks / fellow subsidiaries and the Company charges commission from subsidiaries, wherever applicable. (refer note 24 (B))

(C) The Company has certain outstanding export obligations/commitments as at March 31, 2022 and March 31, 2023. Further, the Company has certain commitments to bankers relating to receivable factoring arrangements entered with them in respect of receivables from few customers. These factoring arrangements are without recourse to the Company and in the normal course of business. The Company is confident of meeting these commitments arising from such arrangements.

(i) The Board of Directors of the Company at their meeting held on October 14, 2021 approved the closure of its wholly owned subsidiary, Cyient Israel India Limited (CIIL) in line with its strategy and simplification of legal entity structure. CIIL did not have any operations and the financial results of CIIL are not material to the Group. This has no impact on business as the same is serviced by the existing legal entities.

(ii) Acquired 100% of equity shares of Citec Engineering India Limited on September 01, 2022.

(i) Cyient Europe Limited, acquired 100% of equity shares of Celfinet - Consultoria em Telecomunicacoes, S.A.(and its wholly owned subsidiaries Metemesonip, Unipessoal Lda; Celfinet UK Telecommunications Consulting Services Ltd; Celfinet Espana

- Consultoria en Telecomunicaciones, SL; Celfinet (Brasil) - Consultoria em Telecomunicacoes, Ltda.; Celfinet Mozambique

- Consultoria em Telecomunicacoes, Limitada and Celfinet Mexico - Consultoria de Telecomunicaciones AS) on June 30, 2022.

(ii) Cyient Europe Limited, acquired 100% of equity shares of Sentiec Oyj (and its wholly owned subsidiaries Citec Group Oy Ab; Citec Oy Ab; Citec Engineering France Sarl; Citec AB; Citec Information & Engineering GmbH; Citec Group France SAS; Akilea Overseas Ltd and Citec Norway AS) on September 1, 2022.

1. During the year 2020-21, the Company has impaired the carrying value of its investment in joint venture company, Infotech HAL Limited, India of ? 20, based on the long term outlook of the business.

2. During the FY 2019-20, Company’s subsidiary, Cyient Solutions and Systems Private Limited ('CSS’) has recognised one-time charge of ? 222 relating to costs incurred on development of UAV systems in view of the potential delays in materialization of orders. Accordingly, a corresponding provision for impairment of the loan given to CSS of ? 311 has been recognised in the Statement of Profit and Loss for FY 20.

During the previous year, CSS has recovered ? 35 against aforesaid impairment of non-current assets.

3. Foreign exchange restatements have not been disclosed as transactions during the year.

27. Financial Instruments 27.1 Capital management

The Company manages its capital to ensure that it maximises the return to stakeholders through the optimisation of the capital structure. The Company monitors the return on capital as well as the level of dividends on its equity shares. The Company is predominantly equity financed which is evident from the capital structure. Further the Company has always been positive on its net cash position with cash and bank balances along with other treasury investments.

The management assessed that fair value of cash & cash equivalents and other bank balances, trade receivables, other financial assets, loans , trade payables , lease liabilities and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments, and hence these are carried at amortised cost.

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.

Investment in unquoted equity shares are measured at fair value through initial designation in accordance with Ind-AS 109. Investments in mutual funds and derivative assets/ (liabilities) are mandatorily measured at fair value.

27.3 Fair value hierarchy Valuation technique and key inputs

Level 1 - Quoted prices (unadjusted) in an 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 methods and assumptions were used to estimate the fair values:

* The fair values of the unquoted equity shares and CCPS have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, earnings growth, discount rate, and probabilities of the various estimates within the range used in management's estimate of fair value for these unquoted equity investments.

** The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. 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 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, etc. As at March 31, 2023 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 insignificant impact on the hedge effectiveness assessment for derivatives designated in hedge relationships.

27.4 Financial risk management Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk, credit risk, liquidity risk and other price 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. The Company’s exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers. The liquidity risk is measured by the Company’s inability to meet its financial obligations as they become due.

Foreign exchange risk

The Company operates internationally and a major portion of the business is dominated in foreign currency predominantly US Dollar, Pound Sterling, Australian Dollar and Euro currencies. Consequently the Company is exposed to foreign exchange risk through its services and purchases / import of services from overseas suppliers in various foreign currencies. The Company holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company’s operations are affected as the rupee appreciates/ depreciates against these currencies.

The Company monitors and manages its financial risks by analysing its foreign exchange exposures.

The Company, in accordance with its Board approved risk management policies and procedures, enters into foreign exchange forward contracts to manage its exposure in foreign exchange rates.

The Company has applied the hedge accounting principles set out in Indian Accounting Standard - 109 "Financial Instruments" (Ind AS - 109) in respect of such derivative contracts, designated in a hedging relationship, used to hedge its risks associated with foreign currency fluctuations relating to certain highly probable forecast transactions. Accordingly, in respect of all such outstanding contracts as at March 31, 2023 that were designated as effective hedges of highly probable forecast transactions, (loss)/ gain, net of tax aggregating ? (81) (March 31, 2022: ? 128) have been recognised under the cash flow hedge reserve.

Sensitivity analysis:

In respect of the Company’s forward exchange contracts, a 5% increase/decrease in the respective exchange rates of each of the currencies underlying such contracts would have resulted in:

* an approximately ? (669)/ 669 (decrease)/increase in the Company’s other comprehensive income as at March 31, 2023.

* an approximately ? (577)/ 577 (decrease)/increase in the Company’s other comprehensive income as at March 31, 2022.

Foreign currency exposure unhedged

The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the volatility of the Company’s net financial assets (viz. which includes cash and cash equivalents, trade receivables, other financial assets, trade payables, other financial liabilities), which are denominated in various foreign currencies (USD, Euro, UK pound sterling, Aus $, SGD, CAD, Yen etc.)

Sensitivity analysis:

For the year ended March 31,2023 and March 31,2022 , every 5% increase / decrease ofthe respective foreign currencies compared to functional currency of the Company would impact profit before tax by ? 258 / (? 258) and ? 110 / (? 110) respectively.

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. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk, except for trade receivables Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of expected losses in respect of trade and other receivables and investments.

In addition, the Company is exposed, to credit risk in relation to financial guarantees given to subsidiary’s banks. The Company’s exposure in this respect is limited to the maximum amount the Company could have to pay if the guarantee is called on (refer note 23 (A))

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 counter-parties, and does not have any significant concentration of exposures to specific industry sectors or specific country risks.

Liquidity risk

The Company’s principal sources of liquidity are cash & bank balances, investments in mutual funds and cash generated from operations. The Company believes that working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

As of March 31, 2023 and March 31, 2022, the Company had unutilized credit limits from banks of ? 2,874 and ? 2,669, respectively.

The table below provides details regarding the contractual maturities of significant financial liabilities (excluding lease liabilities) as at March 31, 2023:

Other price risks:

The Company is exposed to equity price risks arising from equity investments. Certain of the Company’s equity investments are held for strategic rather than trading purposes.

The disclosures in respect of the amounts payable to such enterprises as at March 31, 2023 and March 31, 2022 has been made in the financial statements based on information received and available with the Company. Further in view of the Management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier as at the balance sheet date.

(vii) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries

(viii) The Company has not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.

34. The code of Social Security, 2020 ('Code') relating to employee benefits during employment and post-employment received Presidential assent in September 2020 and its effective date is yet to be notified. The Company will assess and record the impact of the Code, once it is effective.

35. Previous year figures have been regrouped / reclassified, where necessary, to conform to the current years' classification.