1 Corporate information
TeamLease Services Limited (the “Company”) is a HR Services Company incorporated on 2 February 2000 and the registered office is located at Office No. 6, 3rd Floor, C wing Laxmi Towers, Bandra Kurla Complex, Mumbai, Maharashtra - 400 051. The Company provides to its clients, solution for their staffing and HR requirements offering a gamut of services that include Temporary Staffing, Permanent Recruitment, Payroll Process Outsourcing, Regulatory Compliance Services, Vocational Training / Education and Assessments.
The Company has been converted into a Public Limited company, changed its name from TeamLease Services Private Limited to TeamLease Services Limited and obtained a fresh certificate of incorporation dated 15 May 2015. The equity shares of the Company got listed on National Stock Exchange of India Limited (“NSE”) and BSE Limited (“BSE’) w.e.f. 12 February 2016.
The standalone financial statements are approved by the board of directors and authorized for issue in accordance with a resolution of the directors on 16 May 2018.
2 Basis of preparation
(i) Compliance with Ind AS
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) specified under section 133 of Companies Act, (the act) read with the Companies (Indian Accounting Standards) Rules, 2015, (as amended).
The standalone financial statements of the Company for all the periods upto and including the year ended 31 March 2017 were prepared in accordance with the accounting standards notified under section 133 of the Companies Act 2013 (‘the Act’), read together with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended) and other relevant provisions of the Act. These standalone financial statements for the year ended March 31 2018 are the first the Company has prepared in accordance with Ind AS. Refer note 45 for information on how the Company has adopted IND AS.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
a) Certain financial assets and liabilities measured at fair value as explained in the accounting policies;
b) Defined benefit plan assets measured at fair value; and
c) Share-based payments are measured at fair value.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services as at the date of respective transactions.
The standalone financial statements are presented in Indian Rupee and all values are rounded to nearest lakhs except when otherwise stated.
1) Provision for diminution in the value of investments includes RS.2,198.38 lakhs (31 March 2017 RS.2,198.38 lakhs and 1 April 2016: RS.2,198.38 lakhs) towards investment in IIJT and Rs. Nil (Previous Year Rs. Nil and 01 April 2016: RS.1 lakh) towards investment in ITHS.
2) The Company entered into a definitive agreement on 29 May 2017 to acquire 30% stake in Cassius Technologies Private Limited (‘CTPL’). CTPL is engaged in rendering end to end online services for software product engineering.
3) The Company entered into a definitive agreement on 8 November 2017, with School Guru Eduserve Private Limited (‘School Guru’) to acquire 16.31% equity stake in School Guru (on fully diluted basis) and further subscribed to CCCPS. School Guru is engaged in rendering technology-led specialized academic services.
4) On 31 March 2018, the Company subscribed to 1,325,000 equity shares 0 RS.50 per share (Face Value of RS.10 per share) and CCDs of RS.10 lakhs each in TDPL. The CCD’s are convertible into equity shares on or before 10 years from the date of allotment, at the fair value as at the conversion date.
5) On 27 December 2016, the Company has disposed off 100% of its investments in the equity shares of ITHS and NEAS at RS.1 lakh each. Accordingly ITHS and NEAS ceases to be subsidiaries of the Company.
a) No receivable is due from directors or other officers of the Company either severally or jointly with any other person. For trade or other receivable due from firms or private companies respectively in which any director is a partner, a director or a member, refer note 37.
b) Trade receivables are non-interest bearing and with credit period upto 90 days.
(iv) Terms/ rights attached to equity shares
The Company has one class of equity shares having a par value of RS.10 per share. Each shareholder is eligible for one vote per share held. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
(vi) There are no shares reserved for issue under options, except held by TeamLease Employee Stock Option Plan Trust. Also refer note 32.
(vii) Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date:
(a) On 25 June 2015, the shareholders of the Company approved the issue and allotment of 29 Bonus equity shares of Re. 1 each for every equity share of Re. 1 each held by the members as on that date. Post such bonus issue, every 10 equity shares of Re 1 of the Company are consolidated into 1 equity share of RS.10 each thereby, 153,320,640 shares of Re.1 each had been consolidated into 15,332,064 shares of RS.10 each w.e.f. 10 July 2015.
(b) There are no shares allotted as fully paid up pursuant to contract without payment being received in cash during the period of five years immediately preceding the year ended 31 March 2018.
(c) There are no shares bought back by the Company during the period of five years immediately preceding the year ended 31 March 2018.
(viii) Pursuant to Initial Public Offering (IPO) during the year ended 31 March 2016, 1,764,705 equity shares of the Company of RS.10 each were allotted at RS.850 per equity share on 10 February 2016.
Nature and purpose of other reserves (i) Securities premium reserve
Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
(ii) Stock option outstanding reserve
This reserve relates to stock options granted by the Company to employees under TeamLease Employee Stock Option Plan.
Based on the information available with the Company, there are no suppliers who are registered as micro or small enterprises under The Micro, Small and Medium Enterprises Development Act, 2006.
The following reflects the income and share data used in the basic and diluted EPS computation:
Note 3: Employee benefit obligation Provident fund
Provident Fund for eligible employees is managed by the Company through TeamLease Employees Provident Fund Trust (‘Trust’), in line with the Provident Fund and Miscellaneous Provisions Act, 1952. The plan guarantees interest at the rate notified by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to the employees at the time of their separation from the Company or retirement, whichever is earlier. The benefits vests immediately on rendering of the services by the employee.
The expense recognised during the year towards provident fund is RS.16,080.43 lakhs (31 March 2017 RS.14,492.29 lakhs).
Gratuity (Associate)
The Company has recognised gratuity liability and reimbursement right in respect of associate employees in accordance with Ind AS 19.
The following table summarise the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the gratuity plan:
1) The estimates of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors such as supply and demand factors in employment market.
2) The employee benefits expense towards gratuity and related reimbursement right for associate employees for year ended 31 March 2018 RS.2,436.24 lakhs (31 March 2017: RS.1,883.61 lakhs) have been netted off in the Statement of Profit and Loss.
Sensitivity analysis
A quantitative sensitivity analysis for significant assumptions on defined benefit obligation as at 31 March 2018 and 31 March 2017 are as shown below:
The Company expects to contribute RS.3,407.39 lakhs (31 March 2017: RS.3,725.53 lakhs) in 2018-19.
The weighted average duration of defined benefit obligation at the end of the reporting period is 2 years (31 March 2017: 2 years)
Gratuity (Core employees)
The Company has defined benefit gratuity plan for its employees. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, every employee who has completed 4 years and 240 days of service are eligible for gratuity on departure at 15 days salary (last drawn) for each completed year of service. The level of benefits provided depends on the member’s length of service and salary at retirement.
The following table summarise the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the gratuity plan:
1) The estimates of future salary increase, considered in actuarial valuation, takes into account inflation, seniority, parameter and other relevant factors such as supply and demand factors in employment matter.
Sensitivity analysis
A quantitative sensitivity analysis for significant assumptions on defined benefit obligation as at 31 March 2018 and 31 March 2017 are as shown below:
The Company expects to contribute RS.194.90 lakhs (31 March 2017: RS.165.37 lakhs) in 2018-19.
The weighted average duration of defined benefit obligation at the end of the reporting period is 4 years (31 March 2017: 4 years).
Note 4: Share based payments Employee Share Option Scheme (ESOP)
TeamLease Services Limited has granted stock options to employees of the Company. The purpose of the ‘TeamLease Services Limited ESOP Plan’ 2015 is to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees and to promote the success of the business. The options issued under the plan has a term of 4 years as provided in the stock grant agreement and vest based on the terms of individual grants. When exercisable, each option is convertible into one equity share. The exercise price of option is RS.10.
The stock options are restricted for sale, pledge or transfer. The Company has carried out an independent valuation of its ESOP grants for accounting and reporting purposes as on the grant dates.
The weighted average remaining contractual life for the share options outstanding as at 31 March 2018 was 0.82 years (31 March 2017: 1.82 years).
The weighted average exercise price of the outstanding option is RS.10 (31 March 2017: RS.10).
The weighted average fair value of options granted during the year was Rs. Nil (31 March 2017: RS.1,083).
The impact of the fair value of the options granted as an expense is RS.154.25 lakhs (31 March 2017: RS.294.06 lakhs) for the Company.
Note 5: Fair value measurements
Financial assets measured at fair value through profit/ loss:
There are no transfers between levels during the year.
Management has assessed that the fair value of cash and cash equivalents, bank balances other than cash and cash equivalents, investments, loans, trade receivables, trade payables, other financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments and these are measured at amortised cost.
The fair value of the financial assets and liabilities is included in the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
Note 6: Financial risk management objectives and policies
The Company has exposure to the following risks arising from financial instruments:
- Market risk;
- Credit risk; and
- Liquidity risk.
Risk management framework
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Company’s audit committee oversees how management monitors compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The audit committee is assisted in its oversight role by internal auditors. Internal Audit function includes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
(a) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and foreign currency risk.
Financial instruments affected by market risks include trade receivable and trade payable.
(i) Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign currency rates. The Company does not have significant foreign currency exposure and hence is not exposed to any significant foreign currency risks.
(ii) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Company’s financial instruments will fluctuate because of changes in market interest rates. The Company does not have significant debt obligation with floating interest rates, hence is not exposed to any significant interest rate risks.
(b) Credit risk
Credit risk is the risk that counterparty will not meet its contractual obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and loans receivables, investments and other financial instruments.
Trade receivables
With respect to trade receivables/unbilled revenue, the Company has framed the policies to review the receivables on periodic basis and to take necessary mitigations, wherever required. The Company follows simplified approach’ for recognition of provision for ECL on trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes provision for ECL based on lifetime ECLs at each reporting date, right from its initial recognition.
Management does not expect any significant loss from non-performance by counterparties on credit granted during the financial year that has not been provided for.
The following table summarises the changes in the loss allowance measured using ECL:
Financial instruments
Credit risk from balances with the banks and financial institutions and current investment are managed by the Company’s treasury team based on the Company’s policy. Investment of surplus fund is made only with approved counterparties.
Counterparty credit limits are reviewed by the company periodically and the limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.
(c) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The Company monitors its risk of a shortage of funds on a regular basis. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts.
All financial liabilities are due within 1 year from the balance sheet date.
Note 7: Capital management
The key objective of the Company’s capital management is to ensure that it maintains a stable capital structure with the focus on total equity to uphold investor, creditor and customer confidence and to ensure future development of its business. The Company focused on keeping strong capital base to ensure independence, to ensure sustained growth in business.
The Company is predominantly equity financed. To maintain and adjust capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
The Company has very minimal amount of borrowings. The existing surplus funds along with the cash generated by the Company are sufficient to meet its current/non-current obligation and working capital requirements.
Note 8: Segment information Segment information
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The Board of Directors of the Company is identified as the Chief Operating Decision Maker (‘CODM’) as defined by Ind AS 108, Operating Segment. The CODM evaluates the Company’s performance and allocate resources based on analysis of various performance indicators of the Company. Accordingly, segment information has been presented for the nature of services rendered by the Company.
Segment Policies:
a) The reportable business segments are in line with the segment wise information which is being presented to the CODM and for which discrete financial information is available.
b) The accounting policies consistently used in the preparation of the financial statements are also applied to record revenue and expenditure in individual segments. Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while other items, wherever allocable, are apportioned to the segments on an appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably and accordingly such items are separately disclosed as unallocated’.
(i) Reportable segments:
An operating segment is classified as reportable segment if reported revenue (including inter-segment revenue) or absolute amount of result or assets exceed 10% or more of the combined total of all the operating segments.
(ii) Segment results:
Performance of a segment is measured based on segment profit (before interest and tax), as included in the internal management reports that are reviewed by the CODM.
The Operative segment comprises of the following:
a) General Staffing and Allied Services - Comprises of Staffing Operations, Temporary Recruitment and Payroll & NETAPP.
b) Other HR Services - Comprises of Permanent Recruitment, Regulatory Compliance and Training Operations.
1. As the liability for gratuity and leave encashment is provided on actuarial valuation basis for the company as a whole, the amount pertaining to directors are not included.
2. The above includes RS.36.03 lakhs (31 March 2017: RS.55.45 lakhs) for share based compensation.
Note 9: Commitments
(a) Capital commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for as at:
(b) Other commitments
Bank guarantees to customers as at 31 March 2018 RS.2,033.13 lakhs (31 March 2017 : RS.828.67 lakhs 1 April 2016 : RS.759.97 lakhs)
(c) Non-cancellable operating leases
The Company has entered into various cancellable and non-cancellable operating lease agreements for office premises at various locations. The lease period ranges between 1 year to 9 years. The lease rental charged during the year and obligation on the long term non-cancellable operating lease as per the lease agreement are as follows :
Note 10: Deduction under section 80JJAA
As per the amendment in the Finance Act, 2016, deduction under Section 80JJAA of the Income tax Act, 1961, was extended across to all the sectors. As per the provisions of Section 80JJAA, an assessee will be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in the previous year for three assessment years including the assessment year relevant to the previous year in which such employment is provided subject to fulfilment of the other conditions mentioned in the Section 80JJAA. The Company has started availing such deduction from financial year 2016-17 onwards.
Note 11: Corporate Social Responsibility expenditure
Consequent to the requirements of Section 135 and Schedule VII of the Companies Act, 2013, the Company is required to contribute 2% of its average net profits during the immediately three preceding financial years in pursuance of its Corporate Social Responsibility Policy.
Gross amount required to be spent by the Company towards corporate social responsibility expense (CSR) during the year is RS.80.15 lakhs (31 March 2017 RS.61.12 lakhs). The Company has not spent any amount towards CSR expenditure.
Amount utilised for share issue expenses of RS.1,219.70 lakhs includes payments made to merchant bankers, attorneys, consultants and registrars towards Initial Public Offering of shares.
The Board of Directors in their meeting held on 8 August 2017 approved to seek the shareholder’s approval through Postal Ballot for the variation/deviation in the utilisation of the un-utilised portion of the IPO proceeds. The resolution was passed by the shareholders with requisite majority on 18 September 2017.
Note 12: First time adoption
A. First time adoption
For periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with generally accepted accounting principle in India (Indian GAAP or IGAAP).
Accordingly, the Company has prepared standalone financial statements which comply with Ind AS applicable for year ending on 31 March 2018, together with the comparative period data as at and for the year ended 31 March 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening statement of financial position was prepared as at 1 April 2016, i.e., the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the statement of financial position as at 1 April 2016 and the financial statements as at and for the year ended 31 March 2017.
Exemptions and exceptions availed
Ind AS 101 allows first time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions :
a) Ind AS 101 permits a first-time adopter to elect to continue with the net carrying value for investments in subsidiaries as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. Accordingly, the Company has elected to measure its investments in subsidiaries in the standalone financial statements at their previous GAAP net carrying value.
b) Appendix C to Ind AS 17, Leases, requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, Leases, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101, Firsttime Adoption of Indian Accounting Standards, provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS. The Company has elected to apply this exemption for such contracts/arrangements.
c) Ind AS 101 permits a first-time adopter to elect to continue with the net carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. This exemption can also be used for intangible assets covered by Ind AS 38, Intangible Assets. Accordingly, the Company has elected to measure all of its property, plant and equipment, intangible assets at their previous GAAP net carrying value.
d) Business combinations
Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date.
The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date.
e) Share based payment
Ind AS 102 Share Based Payment has not been applied to equity settled share-based payment transactions that vested before date of transition to Ind AS.
f) Estimates
In accordance with Ind AS, as at the date of transition to Ind AS an entity’s estimates shall be consistent with the estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.
Ind AS estimates as at 1 April 2016 and as at 31 March 2017 are consistent with the estimates as at the same date made in conformity with previous GAAP apart from the impairment of financial assets based on expected credit loss model where the previous GAAP did not require estimate.
g) Classification and measurement of financial assets and liabilities
The classification and measurement of financial assets are made in accordance with Ind AS 109 Financial Instruments on the basis of facts and circumstances that exist at the date of transition to Ind AS.
h) De-recognition of financial assets and liabilities
The Company has elected to apply the de-recognition provisions of Ind AS 109, Financial Instruments, prospectively from the date of transition to Ind AS.
B. Reconciliations between previous GAAP and Ind AS
The following tables represent the reconciliations from previous GAAP to Ind AS.
A: Income tax
Under previous GAAP, deferred tax was accounted using the income statement approach, on the timing differences between the taxable profit and accounting profits for the period. Under Ind AS 12, Income Tax, requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of asset or liability in the balance sheet and its tax base.
The application of Ind AS approach has resulted in recognition of deferred tax on new temporary differences which was not required under previous GAAP.
B: Stock option compensation expense
Under the Previous GAAP, the share based compensation cost was not recognised. Under Ind AS, the share based compensation cost is determined based on the Company’s estimate of equity instruments that will eventually vest and amortized over the vesting period on an accelerated basis. However, the same does not result in difference in equity.
C: Actuarial (loss)/ gain
Under Ind AS, remeasurement i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability/asset are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were accounted for in profit or loss for the year.
D: Impact of provision for expected credit loss
The provision is made against trade receivable based on expected credit loss model as per Ind AS 109. Under I-GAAP the provision was made when the receivables turned doubtful based on the assessment on case to case basis.
E: Other comprehensive income
Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income’ comprise remeasurements of defined benefit plans. Under previous GAAP, Company has not presented other comprehensive income separately.
F: Fair valuation of security deposits
Under previous GAAP, interest free lease security deposits that are refundable in cash on completion of the lease term were recorded at their transaction value. Under Ind AS, effect of discounting/ unwinding of refundable security deposits is recognised.
G: Statement of cash flows
The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows except for bank overdrafts, which has been netted off with the cash and cash equivalents.
During the financial year ended 31 March 2018, the Employees’ Provident Fund Organisation vide circular No. Pension-I/17(10)/2016-17/Jeevan Pramaan-Aadhar/4792 dated 5 June 2017 directed employers to link Aadhar number for all new members who join Employees’ Pension Scheme, 1 995 under Employees’ Provident Funds and Miscellaneous Provisions Act, 1 952 after 1 July 2017, thereby linking the Unique Account Number (UAN) with Aadhaar so as to make their provident fund (‘PF’) account linked.
Delay in remittance of the PF contributions was on account of the non-availability / mis-match of personal information of Aadhar number of employees who joined after the said notification came into force. The Company is constantly working towards getting this matter resolved by having the linking of UAN completed with the Aadhar information.
Note 13: Previous year
The figures of previous year were audited by a firm of chartered accountants other than S.R. Batliboi & Associates LLP. Previous years figures have been reclassified wherever necessary to conform to the current year classifications.
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