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Notes to Accounts of Educomp Solutions Ltd.

Mar 31, 2015

1. During the previous year, block assessment of the Company for Assessment Year 2007-08 to 2012-13 was completed by the Income Tax authorities and additional demand of Rs. 190.91 Million was raised on account of certain disallowances. Consequently, on a prudent basis the Company, after making requisite provision for additions made under the block assessment order, had written back the excess provision for income tax amounting to Rs. 328.60 million being carried in the books of account in respect of those years. During the previous year, the Company had fled an appeal against the said block assessment order with the Income Tax Appellate Tribunal (ITAT).

During the current year, the Company has received a favourable order from the ITAT with respect to the AY 2007- 08. On the basis of such favourable order, the Company has received a refund of Rs 45.70 million (including interest) during the year and Rs. 193.31 million subsequent to the year ended 31 March 2015.

2. The Company has appointed a firm of Chartered Accountants for conducting a transfer pricing study to determine whether the transactions with associate enterprises were undertaken at "arms length basis". Adjustments, if any arising from the transfer pricing study shall be accounted for as and when the study is completed. The management confirms that all international transactions with associate enterprises are undertaken at negotiated contracted prices on usual commercial terms. Transfer pricing certificate under Section 92E for the year ending March 31, 2014 has been obtained and there are no adverse comments requiring adjustments in these Financial Statements.

3. The Company regularly undertakes Transfer Pricing Study for Specified Domestic Transactions ('SDT') with its associate parties domiciled in India as stipulated in Section 92BA of the Income Tax Act, 1961, applicable in India, to determine whether such SDT with associate parties in India are being undertaken at "arm's length basis". The management is of the opinion that all transactions with associate enterprises are undertaken at negotiated contracted prices on usual commercial terms and are at arms' length, and there will not be any impact on the Financial Statements as a consequence of the transfer prising study to be taken by the Company for the current year. Transfer pricing certificate under Section 92E for the year ending March 31, 2014 has been obtained and there are no adverse comments requiring adjustments in these Financial Statements.

4. Foreign Currency Convertible Bond (FCCB)

The Company had issued 10, Zero coupon foreign currency convertible bonds of $ 1000,000 each. These FCCB are convertible into equity shares based on the ratio calculated in accordance with the terms of offering circular dated July 13, 2012. The bonds are convertible latest by July 24, 2017. These are to be converted at initial conversion price of Rs. 188.62 for each equity shares at the applicable exchange rate at the date of conversion. As on March 31, 2015 USD 10 million (previous year USD 10 million) FCCB are outstanding for conversion into equity shares of Rs. 2 each. Due date for redemption is July 24, 2017 and redemption price at maturity is 133.15% of par value.

Futher, based on the current market scenario, the management is of the view that the FCCB holder may opt for redemption, consequently the proportionate premium on redemption amounting Rs. 111.36 million has been provided against the securities premium and classified under 'Other long term liabilities'.

5. Share warrants

The Company on July 26, 2012 had allotted 1,14,79,096 warrants to the Promoter Group entity at an issue price of Rs.193.74 per warrant, as per the provisions of Chapter VII of SEBI (ICDR) Regulations, 2009, convertible into equal number of equity shares of the face value of Rs.2/- each convertible within a period of 18 months from the date of allotment. The Company on January 22, 2013 had allotted 29,79,939 equity shares of face value of Rs. 2/- each at a premium of Rs. 191.74/- per share on conversion of warrants issued under provisions Of Chapter VII Of SEBI (ICDR) Regulations, 2009 pursuant to receipt of balance 75% of the issue price against the allotted shares. During the previous year, the Company had forfeited 84,99,157 warrants amounting to Rs. 411.66 million, due to non receipt of balance 75% of the issue price in the stipulated period of 18 months from the date of issuance of these warrants. The forfeited amount is disclosed as 'Capital Reserve' under the 'Reserve & Surplus'.

6. Employees Stock Option Schemes (ESOS)

The Company has seven stock option schemes which provides equity shares to employees and directors (excluding promoter director) of the Company and its subsidiaries. All the cost including the cost relating to the options granted to employees of subsidiary companies are borne by the Company. Employee stock options are convertible into equity shares in accordance with the respective employees stock option scheme. The option vesting period is maximum ten years from the date of grant of option to employees at an exercise price approved by the remuneration committee. The excise period is 1 year from the end of last vesting date of respective grants. There are no condition for vesting other than continued employment/ directorship with the Company or its subsidiaries. There has been no cancellation or modification of the respective schemes during the year.

Employees Stock Option Scheme 2006

Pursuant to shareholder's resolution dated August 24, 2006, the Company had introduced "Educomp Employees Stock Option Scheme 2006" which provides for the issue of 3,125,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 7 years from the date of respective grants. As at March 31, 2015 and March 31, 2014, the Company had 1,053,562 and 797,692 number of shares reserved for issue under the scheme respectively.

Employees Stock Option Scheme 2007

Pursuant to shareholder's resolution dated September 13, 2007, the Company had introduced "Educomp Employees Stock Option Scheme 2007" which provides for the issue of 1,000,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 7 years from the date of respective grants. As at March 31, 2015 and March 31, 2014, the Company had 905,550 and 664,760 number of shares reserved for issue under the scheme respectively.

Employees Stock Option Scheme 2008

Pursuant to shareholder's resolution dated November 25, 2008, the Company had introduced "Educomp Employees Stock Option Scheme 2008" which provides for the issue of 1,250,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 7 years from the date of respective grants. As at March 31, 2015 and March 31, 2014 the Company had 1,209,800 and 984,763 number of shares reserved for issue under the scheme respectively.

Employees Stock Option Scheme 2010

Pursuant to shareholder's resolution dated March 18, 2010, the Company had introduced "Educomp Employees Stock Option Scheme 2010" which provides for the issue of 1,000,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 7 years from the date of respective grants. As at March 31, 2015 and March 31, 2014 the Company had 998,125 and 860,625 number of shares reserved for issue under the scheme respectively.

Employees Stock Option Scheme 2011

Pursuant to shareholder's resolution dated July 26, 2011, the Company had introduced "Educomp Employees Stock Option Scheme 2011" which provides for the issue of 1,000,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 7 years from the date of respective grants. As at March 31, 2015 and March 31, 2014 the Company had 995,000 and 863,000 number of shares reserved for issue under the scheme respectively.

Employees Stock Option Scheme 2012

Pursuant to shareholder's resolution dated July 16, 2012, the Company had introduced "Educomp Employees Stock Option Scheme 2012" which provides for the issue of 3,500,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 10 years from the date of respective grants. As at March 31, 2015 and March 31, 2014 the Company had 3,496,625 and 3,204,625 number of shares reserved for issue under the scheme respectively.

Employees Stock Option Scheme 2014

Pursuant to shareholder's resolution dated August 11, 2014, the Company had introduced "Educomp Employees Stock Option Scheme 2014" which provides for the issue of 5,000,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 10 years from the date of respective grants. As at March 31, 2015 the Company had 4,968,650 number of shares reserved for issue under the scheme.

7. Disclosure relating to suppliers registered under Micro, Small and Medium Enterprise Development Act, 2006:

8. Foreign Currency Monetary Items Translation Difference Account (FCMITDA)

The Company has adopted Companies (Accounting Standards) Second Amendment Rules 2011 on Accounting Standard 11 as notified by the Central Government vide Notification dated December 29, 2011. Accordingly, the effect of exchange difference on foreign currency loan (including FCCB) is accounted for by addition or deduction to the cost of the assets so far it relates to depreciable capital asset and in other cases by transfer to "Foreign Currency Monetary Items Translation Difference Account"(FCMITDA) to be amortized as provided in the aforesaid notification. Further, as per the decision of the council of the Institute of Chartered Accountants of India (ICAI) in its meeting dated March 31, 2013, FCMITDA has been shown as a part of Reserves and Surplus.

9. Due to inadequacy of the profits, managerial remuneration paid, by the Company to one of its Whole Time Director during the year ended March 31, 2015, is in excess of the limits prescribed under Section 197 and 198 read with Schedule V of the Companies Act, 2013. Similarly, managerial remuneration paid in the financial year ended March 31, 2014 to one of its Whole Time Director was also in excess of limits prescribed under Section 198, 269 and 309 read with Schedule XIII of the Companies Act, 1956. The Company has submitted an application to the Central Government for waiver of managerial remuneration paid pertaining to year ended March 31, 2013. The management of the Company is in the process of making necessary applications to the Central Government to obtain its approval for the waiver/approval of the remuneration so paid in year ended March 31, 2014 and March 31, 2015 in due course.

10. The Company had received advances, from customers, which are outstanding for more than one year and still lying in the books as on 31 March 2015 . However as per the opinion taken by the Company from expert, such deposits are outside the purview of Section 2(31) and Section 73-74 of the Act read with Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014.

11. The Company has initiated proceedings for recovery of outstanding amount from certain trade receivables amounting to Rs. 2,826.55 million, in respect of which the Company has created a provision of Rs. 1,910.02 million, which in the opinion of the Company is adequate to mitigate the risk of any possible non recovery from such receivables. Further, the Company has filed a legal case against one former employee for recovery of certain damages amounting to Rs. 15 million arising from stealing of Company's intellectual property right. The Company is hopeful of favourable outcome of such proceedings/case. However, the amount likely to be realized on settlement of such proceedings/case is currently not ascertainable realistically. The Company does not expect any adverse impact on the financial position as a consequence of these proceedings/case. The Company has recorded all expenses pertaining to legal & professional charges in respect of all such proceedings/case.

12. The previous year figures have been regrouped, rearranged and reclassified wherever necessary to conform to current year's classification.


Mar 31, 2014

1. Notes to the financial statements for the year ended 31st March, 2014 Amounts in the financial statements are presented in Rs. million, except for share data and as otherwise stated.

a. Terms/ rights attached to equity shares

The Company has only one class of 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 dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting except where interim dividend is distributed.

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, if any. The distribution will be in proportion to the number of equity shares held by the shareholders.

2. (a) As part of regular process, the Company periodically evaluates the investments to identify any dimunitation other than temporary in the value of investments.

During the course of this exercise, there were certain indicators of impairment identifed in case of two of its subsidiary companies namely, Educomp Online Supplemental Services Limited and Educomp Child Care Private Limited and its associate, Greycells18 Media Limited. The Company assessed the business projections of these investments and concluded that their business is sustainable on a going concern basis. The Company evaluated the recoverability of its share of net assets held through these Companies, using business valuations performed by independent experts. The said evaluation is based on the long term business plans of its subsidiaries/associates. Accordingly, in view of the management no provision is required in respect of these investments of the Company.

(b) In earlier year, the management had identified its investment in Vidya Mandir Classes Limited to be disposed off to meet out its cash shortfall and therefore it was classified as current investment in previous financial year. However, during the year subsequent to Master Restructuring Agreement the management intents to hold it for a period of exceeding twelve months to secure of better valuation in the market. Accordingly the same has reclassified as long term investment. (refer note 8)

3.contingent laibilities

A s at As at March 31, 2014 March 31, 2013

a. Corporate guarantee given to 8,482.70 13,194.91 bank for secured loan to third party

b. Corporate guarantee given to 11,362.10 10,442.18 bank for secured loan and debenture to subsidiaries

c. Guarantee against assignment - 1,083.29 of receivables with limited recourse option*

d. Other money for which the Company is contingently liable

i. Taxes under adjudication/appeal 25.46 39.43

ii. Premium on redemption of Zero 204.76 185.30 Coupon Foreign Currency Convertible Bonds

20,075.02 24,945.12

* The amount related to credit facilities given by bank against trade receivables.

Notes:

1 The loan outstanding to banks against the corporate guarantee in point no. (a) above as on 31st March, 2014 is Rs. 5,409.70 million (previous year Rs. 8,610.47 million).

2 The loan and debenture outstanding against the corporate guarantee in point no. (b) above as on 31st March, 2014 is Rs. 10,457.79 million (previous year Rs. 9,123.78 million).

3 Future outflows in respect of (a) & (b) will arise on crystallization and demand made by bank, and in respect of (d)(ii) on redemption of the bonds on the maturity date, if not converted before the maturity date as per the terms of issue of FCCB.

4 Taxes under adjudication/appeal represents Rs. Nil (previous year Rs. 28.12 million) under appeal under Income Tax Act, 1961 and Rs. 25.46 million (Previous year Rs. 11.31 million) under appeal under service tax. The Company has paid Rs. 16.98 million (previous year Rs. 30.95 million) under protest against demands raised by tax authorities. The Company does not expect any cash outflows in respect of (a), (b), (c) & (d)(i).

4. During the year, block assessment of the Company for Assessment Year 2007-08 to 2012-13 been completed by the Income Tax authorities and additional demand of Rs. 190.91 Million has been raised on account of certain disallowances. Consequently, on a prudent basis the management, after making requisite provision for additions made under the block assessment order, has written back the excess provision for income tax amounting to Rs. 328.60 million being carried in the books of account in respect of these years. The management has filed an appeal against the said block assessment order with the Income Tax Appellate Tribunal.

5. The Company has appointed a firm of Chartered Accountants for conducting a transfer pricing study to determine whether the transactions with associate enterprises were undertaken at "arms length basis". Adjustments, if any arising from the transfer pricing study shall be accounted for as and when the study is completed. The management confirms that all international transactions with associate enterprises are undertaken at negotiated contracted prices on usual commercial terms. Transfer pricing certificate under Section 92E for the year ending March 31, 2013 has been obtained and there are no adverse comments requiring adjustments in these Financial Statements.

6. In accordance with the recent amendment in the year 2012, the Company regularly undertakes Transfer Pricing Study for Specified Domestic Transactions (''SDT'') with its associate parties domiciled in India as stipulated in newly inserted Section 92BA of the Income Tax Act, 1961, applicable in India, to determine whether such SDT with associate parties in India are being undertaken at "arm''s length basis". The management is of the opinion that all transactions with associate enterprises are undertaken at negotiated contracted prices on usual commercial terms and are at arms'' length, and there will not be any impact on the Financial Statements as a consequence of the transfer prising study to be taken by the Company for the current year.

7. Foreign Currency Convertible Bond (FCCB)

In the previous year, the Company had issued 10, Zero coupon foreign currency convertible bonds of $ 1000,000 each. These FCCB are convertible into equity shares based on the ratio calculated in accordance with the terms of offering circular dated July 13, 2012. The bonds are convertible latest by July 24, 2017. These are to be converted at initial conversion price of Rs. 188.62 for each equity shares at the applicable exchange rate at the date of conversion. As on March 31, 2014 USD 10 million (previous year USD 10 million) FCCB are outstanding for conversion into equity shares of Rs. 2 each. Due date for redemption is July 24, 2017 and redemption price at maturity is 134.07% of par value.

8. Share warrants

The Company on July 26, 2012 had allotted 1,14,79,096 warrants to Promoter Group Entity at an issue price of Rs. 193.74 per warrant, as per the provisions of Chapter VII of SEBI (ICDR) Regulations, 2009, convertible into equal number of equity shares of the face value of Rs. 2/- each convertible within a period of 18 months from the date of allotment. The Company on January 22, 2013 had allotted 29,79,939 equity shares of face value of Rs. 2/- each at a premium of Rs. 191.74/- per share on conversion of warrants issued under provisions Of Chapter VII Of SEBI (ICDR) Regulations, 2009 pursuant to receipt of balance 75% of the issue price against the allotted shares. During the year the Company had forfeited 84,99,157 warrants amounting to Rs. 411.66 million, due to non receipt of balance 75% of the issue price in the stipulated period of 18 months from the date of issuance of these warrants. The forfeited amount is disclosed as ''Capital Reserve'' under the ''Reserve & Surplus''.

9. Employees Stock Option Schemes (ESOS)

The Company has six stock option schemes which provides equity shares to employees and directors (excluding promoter director) of the Company and its subsidiaries. All the cost including the cost relating to the options granted to employees of subsidiary companies are borne by the Company. Employee stock options are convertible into equity shares in accordance with the respective employees stock option scheme. The option vesting period is maximum ten years from the date of grant of option to employees at an exercise price approved by the remuneration committee. The excise period is 1 year from the end of last vesting date of respective grants. There are no condition for vesting other than continued employment/ directorship with the Company or its subsidiaries. There has been no cancellation or modification of the respective schemes during the year.

Employees Stock Option Scheme 2006

Pursuant to shareholder''s resolution dated August 24, 2006, the Company had introduced "Educomp Employees Stock Option Scheme 2006" which provides for the issue of 3,125,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 7 years from the date of respective grants. As at March 31, 2014 and March 31, 2013, the Company had 797,692 and 902,269 number of shares reserved for issue under the scheme respectively.

Employees Stock Option Scheme 2007

Pursuant to shareholder''s resolution dated September 13, 2007, the Company had introduced "Educomp Employees Stock Option Scheme 2007" which provides for the issue of 1,000,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 7 years from the date of respective grants. As at March 31, 2014 and March 31, 2013, the Company had 664,760 and 634,260 number of shares reserved for issue under the scheme respectively.

Employees Stock Option Scheme 2008

Pursuant to shareholder''s resolution dated November 25, 2008, the Company had introduced "Educomp Employees Stock Option Scheme 2008" which provides for the issue of 1,250,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 7 years from the date of respective grants. As at March 31, 2014 and March 31, 2013 the Company had 984,763 and 748,033 number of shares reserved for issue under the scheme respectively.

Employees Stock Option Scheme 2010

Pursuant to shareholder''s resolution dated March 18, 2010, the Company had introduced "Educomp Employees Stock Option Scheme 2010" which provides for the issue of 1,000,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 7 years from the date of respective grants. As at March 31, 2014 and March 31, 2013 the Company had 860,625 and 698,750 number of shares reserved for issue under the scheme respectively.

Employees Stock Option Scheme 2011

Pursuant to shareholder''s resolution dated July 26, 2011, the Company had introduced "Educomp Employees Stock Option Scheme 2011" which provides for the issue of 1,000,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 7 years from the date of respective grants. As at March 31, 2014 and March 31, 2013 the Company had 863,000 and 525,000 number of shares reserved for issue under the scheme respectively.

Employees Stock Option Scheme 2012

Pursuant to shareholder''s resolution dated July 16, 2012, the Company had introduced "Educomp Employees Stock Option Scheme 2012" which provides for the issue of 3,500,000 equity shares to employees of the Company and its subsidiaries. All the above options granted are planned to be settled in equity at the time of exercise and have maximum vesting period of 10 years from the date of respective grants. As at March 31, 2014 and March 31, 2013 the Company had 3,204,625 and 26,00,000 number of shares reserved for issue under the scheme respectively.

10. Foreign Currency Monetary Items Translation Difference Account (FCMITDA)

The Company has adopted Companies (Accounting Standards) Second Amendment Rules 2011 on Accounting Standard 11 as notified by the Central Government vide Notification dated December 29, 2011. Accordingly, the effect of exchange difference on foreign currency loan (including FCCB) is accounted for by addition or deduction to the cost of the assets so far it relates to depreciable capital asset and in other cases by transfer to "Foreign Currency Monetary Items Translation Difference Account"(FCMITDA) to be amortized as provided in the aforesaid notification. Further, as per the decision of the council of the Institute of Chartered Accountants of India (ICAI) in its meeting dated March 31, 2013, FCMITDA has been shown as a part of Reserves and Surplus.

11. In the opinion of the management of the Company, Current Assets, Loans and Advances have a value on realisation in the normal course of business not less than the value at which they are stated unless specified otherwise. Further, provision for all known liabilities has been made.

12. Due to inadequacy of the profits during the current financial year, managerial remuneration paid, by the Company to one of its Whole Time Director during the year, is in excess of the limits provided under the Section 198, 269, 309 read with Schedule XIII of the Companies Act, 1956. The management of the Company is in the process of making necessary application to the Central Government to obtain its approval for the waiver/approval of the remuneration so paid, in due course.

13. During the year, the Company as part of its regular recoverability evaluation process, identified certain trade receivables including dues from Government Companies/ agencies amounting to Rs. 1,165.43 million as doubtful of recovery. Consequently, the management has provided the said amount as doubtful debts, out of which Rs. 700.00 million has been disclosed as exceptional item.

14. The previous year figures have been regrouped, rearranged and reclassified wherever necessary to conform to current year''s classification.


Mar 31, 2013

1.1 Segment Reporting

The Company has four segments: Higher Learning Solutions (HLS) comprising of vocational, higher education and professional development, School Learning Solutions (SLS) comprising of Smart Class & Edureach (ICT) business, K-12 Schools comprising preschools & high schools and Online, Supplemental & Global business (OSG).

In accordance with the provision of AS 17, "Segment Reporting" the Company has identified business segment as primary segment. As its Secondary Segment, the Company has only one geographical segment having 10 per cent or more of enterprise revenue from sales to external customers based on the geographical location of its customers.

Revenue and expenses directly attributable to segments are reported under each reportable segment. All other expenses, which are not attributable or allocable to segments, have been disclosed as un-allocable expenses.

Assets and liabilities that are directly attributable to segments are disclosed under each reportable segment. All other assets and liabilities are disclosed as un-allocable.

1.2 Contingent liabilities and commitments

Contingent liabilities

a. Corporate guarantee given to bank for secured loan to third party 13,194.91 12,179.13

b. Corporate guarantee given to bank for secured loan and debenture to subsidiaries 10,442.18 11,374.15

c. Guarantee against assignment of receivables with limited recourse option* 1,083.29 437.76

d. Other money for which the Company is contingently liable

i. Taxes under adjudication/appeal 39.43 41.59

ii. Premium on redemption of Zero Coupon Roreign Currency Convertible Bonds 185.30 1,649.76

24,945.11 25,682.39 Commitments

a. Estimated amount of contracts remaining to be executed on capital a ccount and not provided for(net of advances) 1,049.43

b. Uncalled liability on partly paid shares 502.62 502.62

1,552.05 502.62

* The amount related to credit facilities given by bank against trade receivables.

Notes:

1. The loan outstanding to banks against the corporate guarantee in point no. (a) above as on 31st March, 2013 is Rs.8610.47 million (previous year Rs. 10,188.71 million).

2. The loan and debenture outstanding against the corporate guarantee in point no. (b) above as on 31st March, 2013 is Rs.9,123.78 million (previous year Rs.9,767.56 million).

3. Future outflows in respect of (a) & (b) will arise on crystallization and demand made by bank, and in respect of (d)(ii) on redemption of the bonds on the maturity date, if not converted before the maturity date as per the terms of issue of FCCB.

4. Taxes under adjudication/appeal represents Rs.28.12 million (previous year Rs.28.12 million) under appeal under Income Tax Act, 1961 Rs.11.31 million (Previous year Rs.11.31 million) under appeal under service tax and Rs.. Nil (previous year Rs.2.16 million) under Value Added Taxes (VAT). The Company has paid Rs.30.95 million (previous year Rs.31.92 million ) under protest against demands raised by tax authorities.

The Company does not expect any cash outflows in respect of (a), (b), (c ) & (d)(i).

5. The Company has given comfort letter to Pearson Singapore Pte Limited, Singapore to indemnify, against any loss suffered by it due to failure to comply factually and punctually its obligations under Share Purchase Agreement. The amount pertaining to comfort letter has not been included in above

1.3. Leases

Operating lease Assets taken on lease

(i). General description of lease terms:

Assets are taken on lease over a period of 1 to 5 years. Lease rentals are charged on the basis of agreed terms. There are no restrictions imposed by the lessor. There are scheduled escalations

(ii). The Company has taken on leases office space and technology equipments under non-cancellable operating lease. The lease rental expense recognized in the Statement of Profit and Loss for the year in respect of such leases is Rs.101.13 million (previous year Rs.120.33 million). The future minimum lease payments and payment profile of non-cancellable operating leases are as follows:

1.4. The previous year figures have been regrouped, rearranged and reclassified wherever necessary to conform to current year''s classification.


Mar 31, 2012

1.1. FCMITDA

The company has adopted Companies (Accounting Standards) Second Amendment Rules 2011 on Accounting Standard 11 as notified by the Central Government vide Notification dated 29th December, 2011. Accordingly, the effect of exchange difference on foreign currency loan (including FCCB) is accounted for by addition or deduction to the cost of the assets so far it relates to depreciable capital asset and in other cases by transfer to "Foreign Currency Monetary Items Translation Difference Account" (FCMITDA) to be amortized as provided in the aforesaid notification.

1.2 Segment Reporting

The Company has four segments: Higher Learning Solutions (HLS) comprising of vocational, higher education and professional development, School Learning Solutions (SLS) comprising of smartclass & Edureach (ICT) business, K-12 Schools comprising preschools & high schools and Online, Supplemental & Globa business (OSG).

In accordance with the provision of AS 17, the Company has identified business segment as primary segment. As its Secondary Segment, the Company has only one geographical segment having 10 per cent or more of enterprise revenue from sales to external customers based on the geographical location of its customers.

Revenue and expenses directly attributable to segments are reported under each reportable segment. All other expenses, which are not attributable or allocable to segments, have been disclosed as un-allocable expenses.

Assets and liabilities that are directly attributable to segments are disclosed under each reportable segment. All other assets and liabilities are disclosed as un- allocable.

1.3 Related party Disclosures:

As per Accounting Standard 18, the disclosures of transactions with related parties as defined in Accounting Standard are given as below:

i) List of related parties & relationships:

Subsidiary Companies (Direct & Indirect Holding)

S. Name of Related Party

No.

1 Wheitstone Productions Private Limited

2 Edumatics Corporation Inc., USA

3 Educomp Learning Pvt. Ltd.

4 Educomp Infrastructure & School Management Limited

5 Educomp School Management Ltd.

6 Educomp Learning Hour Pvt. Ltd.

7 Educomp Asia Pacific Pte. Ltd., Singapore

8 Wiz Learn Pte Ltd, Singapore (formerly Asknlearn pte Ltd.)

9 Singapore Learning.com Pte Ltd, Singapore

10 Vidya Mandir Classes Ltd

11 Pave Education Pte Ltd, Singapore

12 Wiz Learn Pte Ltd., Singapore

13 Authorgen Technologies Ltd.

14 Shikhya Solutions Inc, USA

15 Educomp Software Ltd.

16 Educomp Infrastructure Services Pvt Ltd.

17 Educomp Professional Education Ltd.

18 Learning Internet Inc., U.S.A.

19 Educomp APAC Services Ltd., BVI

20 Savvica Inc.Canada

21 EuroKids International Ltd.

22 EuroKids India Ltd.

23 Educomp Child Care Pvt Ltd.

24 Educomp Online Supplemental Service Ltd.

25 Educomp Intelprop Ventures Pte. Ltd, Singapore

26 Educomp Investment Management Ltd.

27 Falcate Builders Pvt. Ltd.

28 Newzone Infrastructure Pvt. Ltd.

29 Rockstrong Infratech Pvt. Ltd.

30 Reverie Infratech Pvt. Ltd.

31 Herold Infra Pvt. Ltd

32 Growzone Infrastructure Pvt. Ltd.

33 Hidream Constructions Pvt. Ltd.

34 Leading Edge Infratech Pvt. Ltd.

35 Strotech Infrastruture Pvt. Ltd.

36 Markus Infrastructure Pvt. Ltd.

37 Orlando Builders Pvt. Ltd.

38 Crosshome Developers Pvt. Ltd.

39 Good Luck Structure Pvt. Ltd.

40 Evergreen Realtech Pvt. Ltd.

41 Zeta Buildcon Pvt. Ltd.

42 Onega Infrastructure Pvt. Ltd.

43 Grider Infratech Pvt. Ltd.

44 Boston Realtech Pvt. Ltd.

45 Modzex Infrastructure Pvt. Ltd.

46 Virtual Buildtech Pvt. Ltd.

47 Laservision Estates Pvt. Ltd.

48 Euro School International Ltd.

49 Euro School Properties & Infrastructure Ltd.

50 Knowledge Vistas Ltd.

51 Gateforum Educational Services Pvt. Ltd

52 Educomp Global Holding WLL (w.e.f. July 25, 2011)

Associates

S. Name of Related Party No.

1 Greycells18 Media Ltd.

2 Zeebo Interatctive Studios India Pvt Limited (w.e.f. 11th May, 2011 & sold out to Lakshya Digital on 17th Feb 2012)

Joint Venture of Direct Subsidiary

S. Name of Related Party No.

1 Educomp Raffles Higher Education Ltd.

2 Educomp Higher Initiatives Pte Ltd, Singapore

Key Managerial Persona

S. Name of Related Party No.

1 Mr. Shantanu Prakash

2 Mr. Jagdish Prakash

Others over which company has significant control (including subsidiary Of Joint Venture of Subsidiary)

S. Name of Related Party No.

1 Learning Links Foundation

2 Learning Leadership Foundation

3 Education Quality Foundation of India

4 Richmond Educational society

5 Indiacan Education Pvt. Ltd.

6 Millennium Infra developers Ltd.

7 A Plus Education Solution Pvt. Ltd

8 Lakshya Digital Pvt. Ltd.

1.4 Contingent Liabilities

2012 2011

Contingent Liabilities

a. Guarantees issued by banks on behalf of the Company 753.77 691.59

b. Corporate guarantee given to bank for secured loan to third party 12,179.13 9,150.00

c. Corporate guarantee given to bank for secured loan & debenture to Subsidiaries 11,374.15 8,187.65

d. Assignment of debtors with Limited Recourse Option 437.76 600.00

e. Other money for which the company is contingently liable

i. Taxes under adjudication/appeal* 41.59 64.27

ii. Premium on redemption of 'US$ 80 million Zero Coupon Foreign Currency Convertible Bonds Due 2012" 1,649.76 1,440.11

26,436.15 20,133.62 Commitments

Uncalled liability on shares and other investments partly paid up 502.62 502.62

Notes:

1. The loan outstanding to banks against the corporate guarantee in point no. (b) above as on 31st March 2012 is Rs.10,188.71 million (previous yearRs.8,062.60 million).

2. The loan & Debenture outstanding against the corporate guarantee in point no. (c) above as on 31st March 2012 is Rs.9767.56 million (previous year Rs.7,483.53 million).

3. Future outflows in respect of (b) & (c) will arise on crystallization and demand made by bank, and in respect of (e)(ii) on redemption of the bonds on the maturity date, if not converted before the maturity date as per the terms of issue of FCCB.

4. Taxes under adjudication/appeal represents Rs.28.12 million under appeal under Income Tax Act, Rs.11.31 million under uppeal under service tax and Rs.2.16 million under Value added taxes (VAT). Future outflow in respect of point (e)(i) that may arise on adjudication of the cases. The Company has paid 31.92 million (previous year Rs.16.88 million) under protest against demands raised by tax authorities.

5. The Company does not expect any cash outflows in respect of (a), (b), (c ), (d) & (e)(i).

6. The Company has given comfort letter to Pearson Singapore Pte Limited, Singapore to indemnify, against any loss suffered by it due to failure to comply factually and punctually its obligations under Share Purchase Agreement. The amount pertaining to comfort letter has not been included in above.

7. There are no other capital commitmentor other material commitment

1.5. Leases

Operating lease Assets taken on lease

(i) General description of lease terms:

- Assets are taken on lease over a period of 1 to 5 years.

- Lease rentals are charged on the basis of agreed terms.

1.6 The financial statements for the year ended March 31, 2011 had been prepared as per the applicable, prerevised Schedule VI to the Companies Act, 1956 ('the Act'). During the year, the revised Schedule VI notified under the Act has become applicable to the Company. Accordingly, the Company has reclassified previous year figures to conform to the current year's classification. The adoption of revised Schedule VI does not impact recognition and measurement principle followed for preparation of financial statements. However, it has a significant impact on presentation and disclosures made in the financial statements.

1.7 The previous year figures have been regrouped, rearranged and reclassified wherever necessary to conform to current year classification.




Mar 31, 2011

(i) Contingent Liabilities

(Rs. in million)

(a) Sl. No. Particulars As at 31st March 2011

a. Guarantees issued by banks on behalf of the Company 691.59

(743.27)

b. Corporate guarantee given to bank for secured loan to third party 9,150.00

(6,650.00)

c. Corporate guarantee given to bank for secured loan & debenture to Subsidiaries 8,187.65

(7,197.94)

d. Premium on redemption of "US$ 80 million Zero Coupon Foreign Currency Convertible Bonds Due 2012" 1,440.11

(1,455.91)

e. Taxes under adjudication/appeal 64.27

(-)

f. Assignment of debtors with Limited Recourse Option 600.00

(-)

(Previous year figures are given in parenthesis.)

Notes:

1. The loan outstanding to banks against the corporate guarantee in point no. (b) above as on 31st March, 2011 is Rs.8,062.60 million (Previous year Rs.6,640.00 million).

2. The loan & Debenture outstanding against the corporate guarantee in point no. (c) above as on 31st March, 2011 is Rs.7,483.53 million (Previous year Rs.4,485.65 million).

3. Future outflows in respect of (b) will arise on crystallization and demand made by bank, and in respect of (d) on redemption of the bonds on the maturity date, if not converted before the maturity date as per the terms of issue of FCCB.

4. Future outflow in respect of point (e) will arise on adjudication of the cases. The Company has paid Rs.16.88 million under protest against demands raised by tax authorities.

5. The Company does not expect any cash outflows in respect of (a), (b), (c) & (f).

b. The Company has given comfort letter to Pearson Singapore Pte Limited, Singapore to indemnify, against any loss suffered by it due to failure to comply factually and punctually its obligations under Share Purchase Agreement. The amount pertaining to comfort letter has not been included in above.

(ii) Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. Nil (Previous year Rs.4.39 million).

(iii) US$ 80 Million Zero Coupon Foreign Currency Convertible Bonds

In 2007, the Company had issued at par 5-year, Zero Coupon Foreign Currency Convertible Bonds (FCCB) at an exercise price of Rs.2,949.83 per share aggregating to US $ 80 million (Rs.3,237.60 million as on the date of issue) for financing overseas acquisition, capital expenditure and other expenditure as per RBI regulation. Out of the US $ 80 million Zero Coupon Foreign Currency Convertible Bonds (FCCB) aggregating to US $ 1.5 million have been converted into equity shares leading to increase in the capital base by 20,710 Equity Shares and all the proceeds out of US$ 80 million bonds have been utilized as per the terms of the offering of FCCB and as on 31st March, 2011 USD 78.5 million were outstanding.

(iv) Employees Stock Option Scheme

(a) Pursuant to shareholder resolution dated 24th August, 2006, the Company introduced "Educomp Employees Stock Option Scheme 2006" which provides for the issue of 31,25,000 equity shares to employees of the Company and its subsidiaries. The option vesting period was initially for five years from the date of award of option to employees at an exercise price approved by the remuneration committee. However the vesting period was increased to seven years as per the shareholders approval dated 13th September, 2007. Till date 29,79,420 Stock options have been granted under this scheme.

All the above options are planned to be settled in equity at the time of exercise and have maximum period of 7 years from the date of respective grants.

(b) Pursuant to shareholder resolution dated 13th September, 2007, the Company introduced "Educomp Employees Stock Option Scheme 2007" which provides for the issue of 10,00,000 equity shares to employees of the Company and its subsidiaries. The option vesting period was initially for seven years from the date of award of option to employees at an exercise price approved by the remuneration committee. However, the vesting period was increased to ten years as per the shareholders approval dated 11th February, 2008. Till date 9,67,340 Stock options have been granted.

All the above options are planned to be settled in equity at the time of exercise and have maximum period of 10 years from the date of respective grants.

(c) Pursuant to shareholder resolution dated 25th November, 2008, the Company introduced "Educomp Employees Stock Option Scheme 2008" which provides for the issue of 12,50,000 equity shares to employees of the Company and its subsidiaries. The option vesting period is Ten Years from the date of award of option to employees at an exercise price approved by the remuneration committee. Till date 12,17,600 stock options have been granted.

All the above options are planned to be settled in equity at the time of exercise and have maximum period of 10 years from the date of respective grants.

(d) Pursuant to shareholder resolution dated 18th March, 2010, the Company introduced "Educomp Employees Stock Option Scheme 2010" which provides for the issue of 10,00,000 equity shares to employees of the Company and its subsidiaries. The option vesting period is Ten Years from the date of award of option to employees at an exercise price approved by the remuneration committee. Till date 9,71,750 stock options have been granted.

All the above options are planned to be settled in equity at the time of exercise and have maximum period of 10 years from the date of respective grants.

(e) The discount rate is based upon the market yields available on government bonds at the accounting date.

(f) The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors on long term basis.

(g) Estimated amounts of benefits payable within next year are:

- For gratuity Rs.22.26 milion (Previous year Rs.10.60 million)

- For leave encashment Rs.3.81 million (Previous year Rs.1.79 million)

(vii) Operating lease

(a) General description of lease terms:

i) Assets are taken on lease over a period of 2 to 10 years.

ii) Lease rentals are charged on the basis of agreed terms.

c. Assets given on lease:

i) General description of lease terms:

a) Assets are given on lease over a period of 2 to 3 years

b) Lease rentals are charged on the basis of agreed terms.

ii) The Company has given office space on sub lease. Other Income includes income from operating lease of Rs.4.23 million (Previous year Rs.4.19 million) under lease and hire income. The future minimum Sublease payment expected to be received as on March 31, 2011 Rs.0.62 million (Previous year Rs.0.80 million).

(x) Related Party Disclosures:

As per Accounting Standard 18, the disclosures of transactions with related parties as defined in Accounting Standard are given as below:

i) List of Related Parties & Relationships:

S. No. Name of Related PartyRelationship

1 Wheitstone Productions Pvt. Ltd. Subsidiary

2 Edumatics Corporation Inc., USA Companies

3 Educomp Learning Pvt. Ltd. (Direct & Indirect

4 Educomp Infrastructure & School Management Limited Holding)

5 Educomp School Management Ltd.

6 Educomp Learning Hour Pvt. Ltd.

7 Educomp Asia Pacific Pte Ltd., Singapore

8 Ask N Learn Pte Ltd., Singapore

9 Singapore Learning.com Pte Ltd., Singapore

10 Vidya Mandir Classes Ltd.

11 Pave Education Pte Ltd., Singapore

12 Wiz Learn Pte Ltd., Singapore

13 Authorgen Technologies Ltd.

14 Shikhya Solutions Inc., USA

15 Educomp Software Ltd.

16 Educomp Infrastructure Services Pvt. Ltd.

17 Educomp Professional Education Ltd.

18 Learning Internet Inc., U.S.A.

19 Educomp APAC Services Ltd., BVI

20 Savvica Inc. Canada

21 Euro Kids International Ltd.

22 Eurokids India Ltd.

23 Educomp Child Care Pvt Ltd.

24 Educomp Online Supplemental Service Ltd.

25 Educomp Intelprop Ventures Pte. Ltd., Singapore

26 Educomp Investment Management Ltd.

27 Falcate Builders Pvt. Ltd.

28 Newzone Infrastructure Pvt. Ltd.

29 Rockstrong Infratech Pvt. Ltd.

30 Reverie Infratech Pvt. Ltd.

31 Herold Infra Pvt. Ltd.

32 Growzone Infrastructure Pvt. Ltd.

33 Hidream Constructions Pvt. Ltd.

34 Leading Edge Infratech Pvt. Ltd.

35 Strotech Infrastruture Pvt. Ltd.

36 Markus Infrastructure Pvt. Ltd.

37 Orlando Builders Pvt. Ltd.

38 Crosshome Developers Pvt. Ltd.

39 Good Luck Structure Pvt. Ltd.

40 Evergreen Realtech Pvt. Ltd.

41 Zeta Buildcon Pvt. Ltd.

42 Onega Infrastructure Pvt. Ltd.

43 Grider Infratech Pvt. Ltd.

44 Boston Realtech Pvt. Ltd.

45 Modzex Infrastructure Pvt. Ltd.

46 Virtual Buildtech Pvt. Ltd.

47 Laservision Estates Pvt. Ltd.

48 Euro School International Ltd.

49 Euro School Properties & Infrastructure Ltd.

50 Knowledge Vistas Ltd.

51 Greycells18 Media Ltd. Associate

52 Gateforum Educational Services Pvt. Ltd.

53 Educomp Raffles Higher Education Ltd. Joint Venture of Direct Subsidiary

54 Educomp Higher Initiatives Pte Ltd., Singapore

55 Mr. Shantanu Prakash

56 Mr. Jagdish Prakash

Key Managerial Personal

57 Learning Links Foundation

58 Learning Leadership Foundation

59 Education Quality Foundation of India

60 Richmond Educational society

61 Eduloans Corporations Pvt. Ltd.*

62 Indiacan Education Pvt. Ltd.

63 Millennium Infra developers Ltd.

64 A Plus Education Solutions Pvt. Ltd.

65 Lakshya Digital Pvt. Ltd.

Others having control (including subsidiary Of Joint Venture of Subsidiary)

Material Related Party Transactions

Notes:

1. Includes Sales and services to:

Learning Link Foundation Rs.83.78 million (Previous year Rs.116.23 million) Learning Leadership Foundation Rs.35.52 million (Previous year Rs.19.90 million) Educomp Raffles Higher Education Ltd Rs.32.31 million (Previous year Rs.37.28 million) Educomp Infrastructure & School Management Ltd. Rs.27.47 million (Previous year Rs.29.50 million) AsknLearn Pte Ltd. Rs.12.21 million (Previous year Rs.30.90 million)

2. Includes Other Income From:

Educomp Infrastructure & School Management Ltd. Rs.58.10 million (Previous year Rs. Nil)

Learning Leadership Foundation Rs.3.43 million (Previous year Rs.3.42 million). IndiaCan Education Pvt. Ltd. Rs.0.60 million (Previous year Rs.1.99 million) Authrogen Technologies Ltd. Rs.2.48 million (Previous year Rs.1.06 million)

3. Includes Reimbursement of Expenses:

Savvica Inc. Canada Rs. Nil (Previous year Rs.7.26 million)

IndiaCan Education Pvt. Ltd. Rs. Nil (Previous year Rs.23.27 million)

4. Includes Expenses:

IndiaCan Education Pvt. Ltd. Rs.20.03 million (Previous year Rs. Nil)

5. Loans and Advances (includes share application money) given relates to: Indiacan Education Pvt. Ltd. Rs.0.13 million (Previous year Rs.19.00 million)

Educomp Child Care Pvt. Ltd. Rs.2.71 million (Previous year Rs.12.72 million)

Educomp Infrastructure & School Management Ltd. Rs.250.00 million (Previous year Rs. Nil)

Educomp Learning Hour Pvt. Ltd. Rs.52.18 million (Previous year Rs. Nil)

Authorgen Technologies Ltd. Rs.40.31 million (Previous year Rs. Nil)

6. Includes purchase of Intangible Assets from:

Educomp Learning Pvt. Ltd Rs.30.90 million (Previous year Rs.32.14 million)

Authorgen Technologies Ltd. Rs.5.14 million (Previous year 3.32 million)

7. Represents investment made in:

Educomp Infrastructure & School Management Ltd. Rs.2,253.50 million (Previous yearRs.4,897.50 million).

Educomp Professional Education Ltd. Rs.2,371.80 million (Previous year Rs.262.97 million)

8. Includes transaction for the year mainly with:

Mr. Shantanu Prakash Rs.13.80 million (Previous year Rs.31.10 million)

Mr. Jagdish Prakash Rs.4.20 million (Previous year Rs.1.19 million)

9. Represents corporate Guarantee given to:

Educomp Asia Pacific Pte. Limited Rs.937.65 million (Previous year Rs.947.94 million). However, the loan outstanding against the guarantee of Rs.937.65 million isRs.876.03 million (Previous year Rs.885.65 million)

Educomp Infrastructure & School Management Ltd. Rs.7,250 million (Previous yearRs.6,250.00 million). However, the loan and debentures outstanding against the guarantee of Rs.7,250.00 million is Rs.6,607.50 million (Previous Year Rs.3,600.00 million)

10. Includes Rent paid to:

Educomp Learning Pvt. Ltd Rs.0.29 million (Previous year Rs.0.29 million)

Mr. Shantanu Prakash Rs.0.83 million (Previous year Rs.0.76 million)

11. Includes Sales of Business:

Educomp Child Care Pvt. Ltd. Rs. Nil (Previous year Rs.90.59)

IndiaCan Education Pvt. Ltd. Rs. Nil (Previous year Rs.215.45 million)

12. Includes Sales of Investments:

Educomp Online Supplemental Service Ltd. Rs.213.63 million (Previous year Rs. Nil)

(xi) Segment Reporting

The Company has four segments: School Learning Solutions (comprising of Smart Class & Edureach (ICT) business), K-12 Schools (comprising preschools & high schools), Higher Learning Solutions (comprising of vocational, higher education and professional development) and Online, Supplemental & Global business.

In accordance with the provision of AS 17, the Company has business segment as primary segment. As its Secondary Segment, the Company has only one geographical segment having 10 per cent or more of enterprise revenue from sales to external customers based on the geographical location of its customers.

Revenue and expenses directly attributable to segments are reported under each reportable segment. All other expenses, which are not attributable or allocable to segments, have been disclosed as un-allocable expenses.

Assets and liabilities that are directly attributable to segments are disclosed under each reportable segment. All other assets and liabilities are disclosed as un-allocable.

(xii) In accordance with Micro, Small and Medium Enterprises Development Act, 2006 which comes into force with effect from October 2, 2006, the Company is required to identify the Micro, Small and Medium suppliers and pay them interest on overdue beyond the specified period irrespective of the terms agreed with the suppliers. The Company has sent the written letters to all its vendors. However, in absence of written response from all the vendors, the liability of interest, if any cannot be reliably estimated. Management is of opinion that there will be no liability in view of supplier profile of the Company.

(xxi) The previous year figures have been regrouped, rearranged and reclassified wherever necessary to conform to current year classification.

 
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