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Notes to Accounts of KPIT Technologies Ltd.

Mar 31, 2016

Notes:

(i) The ECB loan consist of loan secured by pari passu charge over Company''s Land and Building located at Plot No. 35, 36 & 45, MIDC area of Rajiv Gandhi Infotech Park, Phase I, Hinjawadi excluding charge over R&D Centre developed in the premises. The term loan carries interest rate of 6 months LIBOR 220 basis points. The ECB loan is repayable in eight equal semi-annual installments of USD 2.5 million each upto November 2017. The principal amount of loan outstanding as at the Balance Sheet date is USD 10 million.

(ii) The ECB loan consist of loan secured by pari passu charge over Company''s Land and Building located at Plot No. 17, Rajiv Gandhi Infotech Park, Phase III, Hinjawadi. The term loan carries interest rate of 6 months LIBOR 160 basis points. The ECB loan is repayable in eight equal semi-annual installments of USD 2.5 million each, with a moratorium of 1 year, upto March 2021. The principal amount of loan outstanding as at the Balance Sheet date is USD 20 million.

(iii) Other term loans from bank are secured against fixed assets obtained under the loan arrangement. The loan carries interest upto 10.25% p.a. and is repayable in equated monthly installments of Rs. 0.17 million each upto August 2018.

(iv) Term loan from other than banks is secured by way of first and exclusive charge on fixed assets acquired under the loan arrangement. The loan is repayable in two equal installments of Rs. 8.70 million each, upto May 2017.

28. (A) Interim dividend was declared by the Board of Directors by passing a circular resolution on 31 March, 2016. The interim dividend distributed to equity shareholders for the period is Rs. 217.25 million (including amount of Rs. 10.64 million on the shares held by employee welfare trust) i.e. Rs. 1.10 per share (Previous year - Rs. NIL).

(B) The Company declares and pays dividends in Indian rupees. The dividend proposed to be distributed to equity shareholders for the period is Rs. 217.25 million i.e. Rs. 1.10 per share. (Previous year Rs. 216.33 million i.e. Rs. 1.10 per share). The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive a share in the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

1. As at 31 March, 2016 the Company has received an amount of Rs. 0.63 million (Previous year Rs. 7.65 million) towards share application money for 13,644 shares (Previous year 105,108 shares) at a premium of Rs. 0.60 million (Previous year Rs. 7.44 million). The share application money was received for proposed issue under the Employee Stock Option Plan of 2004 and 2006 at fair market value. The Company has sufficient authorized share capital to cover the allotment of these shares.

2. Disclosure as per the requirement of Section 22 of the Micro, Small and Medium Enterprise Development Act, 2006:

a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31 March, 2016 is Rs. 20.61 million (Previous year Rs. 0.13 million) including unpaid amounts of Rs. Nil (Previous year Rs. Nil) outstanding for more than 30 days. Estimated interest due thereon is Rs. Nil (Previous year Rs. Nil).

b. Amount of payments made to suppliers beyond the appointed date during the year is Rs. 44.63 million (Previous year Rs. 0.02 million). Interest paid thereon is Rs. Nil (Previous year Rs. Nil) and the estimated interest due and payable thereon is Rs. 0.64 million (Previous year Rs. 0.00 million).

c. The amount of estimated interest accrued and remaining unpaid as at 31 March, 2016 is Rs. 0.67 million (Previous year Rs. 0.03 million).

d. The amount of further estimated interest due and payable for the period from 1 April, 2016 to actual date of payment or 20 April, 2016 (whichever is earlier) is Nil.

3. 1) Details of Derivative Instruments (for hedging)

A) Cash flow hedges: In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than in Indian rupees. The counter party to the Company''s foreign currency contracts is a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments and highly probable forecast transactions. The Management has assessed the effectiveness of its hedging contracts outstanding as on 31 March, 2016 as required by AS-30 ''Financial Instruments : Recognition and Measurement'' and accordingly recognized a mark-to-market gain of Rs. 51.59 million (Previous year gain of Rs. 55.26 million) in the Hedging Reserve.

4. Details of Employee benefits as required by Accounting Standard 15 (Revised) Employee benefits are as under:

1. Defined contribution plan - Provident fund

Amount recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is Rs. 223.93 million (Previous year Rs. 190.18 million)

2. Defined benefit plan

i) Actuarial gains and losses in respect of defined benefit plans are recognized in the Statement of Profit and Loss.

ii) The defined benefit plan comprises of gratuity, which is un-funded.

5. Segment information

Where a financial report contains both consolidated financial statements and separate financial statements of the parent, segment information needs to be presented only in case of consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements.

6. Lease transactions

1) Finance leases

The Company has taken vehicles under finance lease for a period ranging from 3 to 4 years. Upon payment of all sums due towards the agreement, the Company has the option of acquiring the Vehicles. During the lease period, the Company can neither sell, assign, sublet, pledge, mortgage, charge, encumber or part with possession of the assets, nor create or allow to create any lien on the vehicles taken on lease.

7. The Company has received recognition from Department of Scientific and Industrial Research, Ministry of Science and Technology DSIR on 1 April, 2014 for its Research and Development (R&D) facility at its premise in Hinjawadi which is effective from 1 April, 2014 to 31 March, 2018. During the year, the R&D facility is approved for the purpose of Section 35(2AB) of the Income Tax Act, 1961 from 1 April, 2014 to 31 March, 2017.

R&D expenditure debited to the Statement of Profit and Loss aggregating to Rs. 92.34 million (Previous year Rs. 124.60 million) has been incurred by the Company and disclosed under appropriate account heads. Out of total R&D expenditure incurred during the year Rs. 78.00 million (Previous year Rs. 78.21 million) is towards eligible R&D expenditure under Section 35(2AB) of the Income Tax Act, 1961.

Based on this approval, a tax benefit on the weighted deduction under Section 35(2AB) of the Income Tax Act, 1961 amounting to Rs. 98.51 million (Previous year Rs. Nil) pertaining to earlier years has been considered in the current financial year.

8. Stock option plans

1. Employee Stock Option Scheme (ESOS) - 1998 (through KPIT Technologies Limited Employee Welfare Trust)

The Board of Directors and Shareholders of the Company approved Employees Stock Option Scheme -1998 at their meetings in November 1998. A compensation committee comprising of independent directors of the Company administers the ESOS Plan. Each option carries with it the right to purchase one hundred equity share of the Company. All options have been granted at a pre-determined rate of Rs. 2.5 per share.

2. Employee Stock Option Plan- 2004

The Board of Directors and the shareholders of the Company approved the Employees Stock Option Plan at their meeting in August 2001 and in September 2001, respectively. Pursuant to this approval, the Company instituted ESOP 2004, Plan in July, 2004. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 33%, 33% and 34% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.

3. Employee Stock Option Plan - 2006

The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in July 2006 and in August 2006, respectively. Pursuant to this approval, the Company instituted ESOP 2006, Plan in October, 2006. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.

4. Employee Stock Option Plan - 2014

The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in February 2014 and in April 2014, respectively. Pursuant to this approval, the Company instituted ESOP 2014 Plan in April 2014. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price of Rs. 2 per option. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.

5. Employee Stock Option Plan - 2015

The Board of Directors and the shareholders of the Company approved another Employee Stock Option Plan at their meeting in April 2015 and August, 2015, respectively. Pursuant to this approval, the Company instituted ESOP 2015 Plan in August 2015. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 5 years from the date of vesting.

9. Other disclosures and explanatory notes

1. The Company has established a system of maintenance of information and documents as required by the transfer pricing legislation under Section 92-92F of the Income Tax Act, 1961. The Company is in the process of updating the documentation for the Financial Year 2015-2016.

The management is of the opinion that is international transactions are at arm''s length and accordingly the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expenses and that of provision for taxation.

2. Final dividend

The Company allotted 493,066 equity shares against exercise of options by the employees, after 31 March, 2015 and before the Book closure for the Annual General Meeting held for financial year 2014-15. The Company paid dividend of Rs. 0.51 million on these shares as approved by the shareholders at the Annual General Meeting held on 19 August, 2015.

3. The Company has consolidated the KPIT Technologies Limited Employee Welfare Trust.

4. During the previous year ended 31 March 2015, the Company merged its wholly owned subsidiary KPIT Global Solutions Limited vide scheme of amalgamation approved by Hon''ble High Court of Bombay via order dated 28 August, 2014 with effective date from 1 April 2013.

5. The tax expense for the previous year includes credit of Rs. 72.43 million for matters pertaining to earlier years.

6. During the year, the Company has spent Rs. 18.62 million (Previous year Rs. 10.77 million) towards Corporate Social Responsibility.

7. Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with current year''s classification / disclosure.

8. As per the amended rules on Companies (Accounting Standards) Rules, 2006, notified by the Central Government, the proposed dividend will not be recorded as a liability as at the period end (amended AS-4 - Contingencies and Events occurring after Balance Sheet date). The Company believes that the Companies (Accounting Standards) Rules, 2016 will apply for the accounting periods commencing on or after 1 April 2016. Accordingly, the Company has recorded Rs. 262.66 million as liability for proposed dividend (including corporate dividend tax) as at 31 March, 2016.


Mar 31, 2015

1. The Company declares and pays dividends in Indian rupees. The dividend proposed to be distributed to equity shareholders for the period is Rs. 216,328,324 i.e Rs. 1.10 per share. (Previous year -Rs. 213,479,428 i.e Rs. 1.10 per share). The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive a share in the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

2. As at 31st March, 2015 the Company has received an amount ofRs. 7,652,081 (Previous yearRs. 14,844,492) towards share application money for 105,108 shares (Previous year 325,438 shares) at a premium ofRs. 7,441,865 (Previous yearRs. 14,193,616). The share application money was received for proposed issue under the Employee Stock Option Plan of 2004 and 2006 at fair market value. The Company has sufficient authorized share capital to cover the allotment of these shares.

3. Contingent liabilities and Commitments (i) Contingent liabilities

Particulars As at As at March, 2015 31 March, 2014

1 Outstanding Bank Guarantees in routine course of business 157,773,538 191,719,175

2 Corporate Guarantee provided by the Company for loan availed by 600,900,000 961,440,000 KPIT Infosystems Inc. USA

3 Corporate Guarantee provided by the Company for loan availed by 62,590,800 NIL

KPIT Infosystems ME FZE, UAE 4 Income tax matters 34,728,933 64,552,955

5 VAT matters 2,216,664 -

6 Service tax matters 554,858,243 343,766,261

(ii) Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for:-

a. Tangible assets - Rs. 153,656,070 (Previous yearRs. 8,274,858).

b. Intangible assets - Rs. 8,171,651 (Previous yearRs. 75,345,325).

4. Disclosure as per the requirement of section 22 of the Micro, Small and Medium Enterprise Development Act, 2006:

a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31st March 2015 is Rs. 129,095 (Previous year - Rs. Nil) including unpaid amounts ofRs. Nil (Previous year - Rs. 59,562) outstanding for more than 30 days. Estimated interest due thereon is Rs. Nil (Previous year -Rs. 15,188).

b. Amount of payments made to suppliers beyond the appointed date during the year is Rs. 17,694 (Previous year - Rs.Nil). Interest paid thereon is Rs. Nil (Previous year - Rs. Nil) and the estimated interest due and payable thereon is Rs.87 (Previous year - Rs. Nil).

c. The amount of estimated interest accrued and remaining unpaid as at 31st March 2015 is Rs. 30,590 (Previous year - Rs. 30,503).

d. The amount of estimated interest due and payable for the period from 1st April 2015 to actual date of payment or 20th April 2015 (whichever is earlier) is Nil.

5. Remittances in foreign currency to non-resident shareholders on account of dividends

The Company remits dividend byway of currency drafts equivalent to the dividend amount in Indian Rupees to registered foreign shareholders of the Company as per mandate given by them. The details of dividend remitted during the year are as follows:

6. (1) Details of Derivative Instruments (for hedging)

A) Cash flow hedges: In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than in Indian rupees. The counter party to the Company's foreign currency contracts is a bank. These contracts are entered into to hedge the foreign currency risks of Arm commitments and highly probable forecast transactions. The Management has assessed the effectiveness of its hedging contracts outstanding as on 31 March 2015 as required by AS-30 'Financial Instruments : Recognition and Measurement' and accordingly recognized a mark - to -market profit ofRs. 55,260,541(Previous year profit ofRs. 82,768,635) in the Hedging Reserve.

B) The following are the outstanding GBP/USD/EUR: INR Currency Exchange Contracts entered into by the Company which has been designated as Cash Flow Hedges as on 31 March 2015:

7. Details of Employee benefits as required by Accounting Standard 15 (Revised) Employee benefits are as under:

1 Defined contribution plan - Provident fund

Amount recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is Rs.190,175,507 (Previous year Rs. 132,153,063)

2 Defined benefit plan

i) Actuarial gains and losses in respect of defined benefit plans are recognized in the Statement of Profit and Loss.

ii) The defined benefit plan comprises of gratuity, which is un-funded.

Gratuity is a benefit to an employee in India based on 15 days last drawn salary for each completed year of service with a vesting period of five years.

8. Segment information

Where a financial report contains both consolidated financial statements and separate financial statements of the parent, segment information needs to be presented only in case of consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements.

9. Related party disclosures

A. Name of the related party and nature of relationship where control exists:

Relationship Name of related party

Subsidiary Companies KPIT Technologies (UK) Limited (erstwhile KPIT Infosystems Limited) (Direct holdin ) KPIT Infosystems Inc., USA KPIT Technologies France (erstwhile KPIT Infosystems, France)

KPIT (Shanghai) Software Technology Co. Limited, China

KPIT Technologies Netherlands B.V (erstwhile KPIT Infosystems Netherlands B.V.)

SYSTIME Computer Corporation, USA

KPIT Infosystems ME FZE, Dubai Impact Automotive Solutions Limited

Subsidiary Companies KPIT Technologies GmbH, Germany (Through KPIT Technologies (UK) Ltd) thirlRs. 1 KPIT medini Technologies AG (erstwhile IKV Technologies AG, Germany) (Through KPIT n irec o ing Technologies GmbH, Germany)

KPIT Solutions GmbH (erstwhile HD Solutions GmbH, Germany) (Through KPIT Technologies GmbH, Germany) CPG Solutions, LLC USA (Through KPIT Infosystems Inc. USA) Sparta Consulting Inc., USA (Through KPIT Infosystems Inc. USA) KPIT Technologies Soluqoes Em Informatica Ltda. (erstwhile KPIT Infosystem (Brasil) Servicos De Technologia e Participacoes Ltda.) (Through KPIT Infosystems Inc. USA) Integrated Industrial Information Inc. (Through KPIT Infosystems Inc. USA)

SYSTIME Global Solutions LTDA, Brazil (Through SYSTIME Computer Corporation, USA) KPIT Technologies Corporation (erstwhile SYSTIME Global Solutions Inc., Canada) (Through SYSTIME Computer Corporation, USA)

Associate Company GAIA System Solution Inc (till 12 March, 2014)

B. List of other related parties with whom there are transactions in the current year:

Relationship Name of related party

Key Management Personnel (KMP) Mr.S.B.(Ravi) Pandit Mr. Kishor Patil

Mr. Sachin Tikekar

Mr.Anil Patwardhan Mr.Swaminathan R

Relative of KMP Mr.Chinmay Pandit

Mrs. Jayada Pandit

Mr. Shreyas Patwardhan

Enterprise over which KMP has significant influence KP Corporate Solutions Limited

10. Lease transactions

1) Finance leases

The Company has taken vehicles under finance lease for a period ranging from 3 to 4 years. Upon payment of all sums due towards the agreement, the Company has the option of acquiring the Vehicles. During the lease period, the Company can neither sell, assign, sublet, pledge, mortgage, charge, encumber or part with possession of the assets, nor create or allow to create any lien on the vehicles taken on lease.

Reconciliation between future minimum lease payments and their present values under finance lease as at the yearend is as follows :

2) Operating leases

Obligations towards non-cancellable operating Leases:

The Company has taken facilities on lease in Bangalore and Pune. The future lease payments for these facilities are as under:

11. Research and development expenditure debited to the Statement of Profit and Loss aggregating to Rs. 78,205,605 (Previous year Rs. 61,312,373) has been incurred by the Company and disclosed under appropriate account heads.

The Company has received approval from Department of Scientific and Industrial Research, Ministry of science and technology DSIR on 2 June 2011 for its Research and Development (R&D) facility at its premise in Hinjewadi which is effective from 1 April 2014 to 31 March 2018.

The Company's spend on itsR&D activities are as follows :

12. Details of provisions and movements in each class of provisions as required by the Accounting Standard 29 - Provisions, Contingent liabilities and Contingent assets

Warranty

The Company has an obligation byway of warranty to maintain the software during the period of warranty, which may vary from contract to contract, from the date of sale of license of software to Tier I suppliers. The movement in the said provision is as under:

13. Stock option plans

1 Employee Stock Option Scheme (ESOS) - 1998 (through KPIT Technologies Limited Employee Welfare Trust)

The ESOS was approved by the Board of Directors of the Company on 23 November 1998 and thereafter by the shareholders on 30 November 1998. A compensation committee comprising of independent directors of the Company administers the ESOS Plan. Each option carries with it the right to purchase one hundred equity share of the Company. All options have been granted at a pre-determined rate of Rs.2.5 per share.

Number of options granted, exercised and cancelled/lapsed during the financial year

2 Employee Stock Option Plan- 2004 (through KPIT Technologies Limited Employee Welfare Trust)

The Board of Directors and the shareholders of the Company approved the Employees Stock Option Plan at their meeting in August 2001 and in September 2001, respectively. Pursuant to this approval, the Company instituted ESOP 2004, Plan in July, 2004. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 33%, 33% and 34% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 3 years from the date ofvesting.

3 Employee Stock Option Plan - 2006 (through KPIT Technologies Limited Employee Welfare Trust)

The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in July 2006 and in August 2006, respectively. Pursuant to this approval, the Company instituted ESOP 2006, Plan in October, 2006. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 3 years from the date ofvesting.

4 Employee Stock Option Plan - 2014 (through KPIT Technologies Limited Employee Welfare Trust)

The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in February 2014 and in April 2014, respectively. Pursuant to this approval, the Company instituted ESOP 2014 Plan in April 2014. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is linked to continued association with the Company. The options would vest not earlier than one year and not later than five years from the date of grant. The maximum exercise period is 3 years from the date of vesting.

The compensation cost of stock options granted to employees has been accounted by the Company using the intrinsicvalue method.

Had the compensation cost for the Company's stock based compensation plan been determined as per fair value approach (calculated using Black Scholes Options Pricing Model), the Company's Profit after Tax would be lower by Rs. 57,995,092 (Previous YearRs. 50,064,078) and earnings per share as reported would be lower as indicated below:

14. Disclosure of interest in joint venture

During the year, the Company has purchased the remaining stake in itsjoint venture Impact Automotive Solutions Limited with effect from 1 July, 2014. The interest of the Company as at 31 March, 2014 and its percentage of holding is given below:

15. Other disclosures and explanatory notes

1. The Company has established a system of maintenance of information and documents as required by the transfer pricing legislation under Section 92-92F of the Income Tax Act 1961. The Company is in the process of updating the documentation for the Financial Year 2014-2015.

The management is of the opinion that is international transactions are at arm's length and accordingly the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expenses and that of provision for taxation.

2. Final dividend

The Company allotted 802,768 equity shares against exercise of options by the employees, after 31 March, 2014 and before the Book closure for the Annual General Meeting held for financial year 2013-14. The Company paid dividend of Rs. 924,184 on these shares as approved by the shareholders at the Annual General Meeting held on 25 July, 2014.

3. The Company has consolidated the KPIT Technologies Limited Employee Welfare Trust.

4. During the previous year the Company had disinvested its stake in an associate forRs. 122,410,304.

5. During the previous year ended 31 March, 2014, the Company merged its wholly owned subsidiary Sparta Infotech India Private Limited vide scheme of amalgamation approved by Hon'ble High Court of Bombay via order dated 30 January, 2014 with effective date from 1 April, 2012

6. The Hon'ble High Court of Bombay has approved the Scheme of Amalgamation of KPIT Global Solutions Limited, a wholly owned subsidiary, with the Company, vide order dated 28 August, 2014 and therefore, KPIT Global Solutions Limited has ceased to exist as a separate company. KPIT Global Solutions Limited became wholly owned subsidiary upon payment of consideration for the balance equity shares of the company during the quarter ended 30 June, 2013.

a) Details of the scheme

i. With effect from the appointed date and subject to the provisions hereof and such other corrections and adjustments as may, in the opinion of the Board of Directors of the Transferee Company, be required and except to the extent required by the law, all the assets and liabilities including reserves, if any, of the Transferor Company shall be recorded in the books of the Transferee Company at the book values as recorded in the books of the Transferor Company as per Accounting Standard 14 - Accounting for Amalgamations following pooling of interest method.

ii. The balance in reserves and surplus account of the Transferor Company as on the Appointed Date shall be transferred to the corresponding reserves in the Transferee Company. In other words, identity of reserves of the Transferor Company shall be preserved.

iii. The balance of the Profit and Loss Account of the Transferor Company should be aggregated with the balance of the Profit and Loss Account of the Transferee Company.

iv. In case of any difference in the accounting policy between the Transferor Company and the Transferee Company, the impact of the same till the Appointed Date will be quantified and adjusted in the Reserves to ensure that the financial statements of the Transferee Company reflect the financial position on the basis of consistent accounting policy.

v. The difference between the value of the investment in the books of the Transferee Company for the equity and preference shares in the Transferor Company and the amount recorded as Share Capital in the books of the Transferor Company will be debited to Reserves. Accordingly, the Company has debited General reserve to the extent available i.e. Rs.1,386,966,443 and the balance ofRs. 1,362,021,042 has been debited to the Statement of Profit and Loss.

Details of assets and liabilities acquired on amalgamation and treatment of the difference between the net assets acquired and the cost of investment.

Pursuant to the said scheme of amalgamation, all assets and liabilities including intangible assets of KPIT Global Solutions Limited have got amalgamated with KPIT Technologies Limited. Resultant excess consideration paid towards acquisition of KPIT Global Solution Limited's established customers and their business in JD Edward space, customer's contracts from manufacturing vertical and market accepted and tested JD Edwards Practice knowhow along with the market reputation built by them over years and acceptance it enjoyed along with goodwill and JDE practice know howwas Rs. 1,885,780,717 arising on the appointed date.

As mentioned above, the Hon'ble High Court of Bombay has approved the Scheme of Amalgamation of KPIT Global Solutions Limited with the Company, vide Order dated 28 August 2014. Accordingly, the figures for the current year include the annual figures of KPIT Global Solutions Limited and as such are not comparable to the previous year figures.

As the effective date of amalgamation for accounting purpose is 1 April 2013, the profits aftertax of KPIT Global Solutions Limited for the year ended 31 March 2014, have been recorded in the Company's Statement of Profit and Loss.

7. The tax expense for the current period includes credit ofRs. 72,425,476 for matters pertaining to earlier years.

7A. The Company has spent Rs. 10,769,669 during FY 2014-15 towards Corporate Social Responsibility.

8. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with current year's classification / disclosure.


Mar 31, 2013

Company Overview

The Company provides software and IT enabled services to its clients. The Company predominantly provides services in Automotive, Energy & Utilities and Industrial Equipment Industry.The Company''s registered office is in Pune and it has subsidiaries across the globe.Most of the revenue is generated from the export of services.

1. The Company declares and pays dividends in Indian rupees. The dividend proposed to be distributed to equity shareholders for the period is Rs. 173,533,679 i.e. Rs. 0.90 per share. (Previous Year - Rs. 124,560,013/- i.e. Rs. 0.70 per share). The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the company, after distribution of all preferential amounts. However, no such preferential amount exists currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

2. As at 31st March, 2013 the Company has received an amount of Rs. 935,432 (Previous Year Rs. 1,053,845) towards share application money for 32,898 shares (Previous Year 34,016 shares) at a premium of Rs. 869,636 (Previous Year Rs. 985,813). The share application money was received for proposed issue under the Employee Stock Option Plan of 2004 and 2006 at fair market value. The Company has sufficient authorized share capital to cover the allotment of these shares.

3. Contingent Liabilities and Commitments:

(i) Contingent Liabilities:

S. Particulars FY 2012-13 FY 2011-12 No.

1 Outstanding Bank Guarantees in routine course of business 137,371,181 37,543,486

2 Corporate Guarantee provided by the Company for loan taken by KPIT 870,228,800 818,504,000 Infosystems Inc. USA of USD 16,000,000.

3 Income tax matters (Refer (a) below) 65,387,760 23,236,507

4 VAT matters(Refer (b) below) 4,741,566 27,673,199

5 Service Tax matters (Refer (c) below) 309,605,627 NIL

a. Income tax Matters

AY 2005-2006

This relates to erstwhile KPIT Cummins Infosystems(Bangalore) Private Ltd which has been merged with the company with effect from 1st April 2007.

The Company has filed an appeal with the Income Tax Appellate Tribunal (ITAT),Bangalore,against an order dated December 17,2007 from Assistant Commissioner of Income Tax for a demand of Rs. 3,055,945/- AY 2006-07

This relates to the case of erstwhile KPIT Cummins Infosystems (Bangalore) Pvt Ltd (KPIT Bangalore). which has been merged with the Company effective 1st April 2007.

The Company has filed an appeal on 2nd November 2011,with the Income Tax Appellate Tribunal (ITAT),Bangalore against an order dated 28th July,2011 from Commissioner of Income Tax (Appeals)-I,Bangalore.The total demand raised is Rs. 5,903,204/- vide this order,which is adjusted against refund for subsequent year i.e , A.Y.2007-08.

AY 2007-08

This relates to KPIT Cummins Infosystems Ltd.

The Company proposes to file an appeal with the Commissioner of Income Tax (Appeals) Circle 11(1),Pune,against an order from Assistant Commissioner of Income Tax,Circle11(1),Pune for a demand of Rs. 4,025,020/-.

AY 2008-09

This relates to the cases of erstwhile KPIT Cummins Global Business Solutions Ltd. which has been merged with the Company effective March 1, 2011.

The Company has filed an appeal on 24th January,2013 with the Income Tax Appellate Tribunal (ITAT) against the draft assessment order passed by Dispute Resolution Panel, Pune for proposed demand of Rs. 20,407,386/-.

AY 2009-10

- This relates to KPIT Cummins Infosystems Ltd.

The company has received the Draft Assessment Order from Assistant Commissioner Of Income Tax Circle 11(1) proposing an increase in the taxable income as per normal provisions of the Income Tax Act,1961 by Rs. 8,448,450/-.The Company has computed a reduction of Rs. 2,871,630 (tax thereon) in its MAT Credit, as a result of the said Draft Assessment Order.

The Company proposes to file an appeal with Dispute Resolution Panel.

- This relates to the cases of erstwhile KPIT Cummins Global Business Solutions Ltd. which has been merged with the company effective March 1, 2011.

The Company has received the Draft Assessment Order passed by Assistant Commissioner Of Income Tax Circle11(1) order on 1st April, 2013. The contingent liability in respect of this order is Rs. 29,124,575/- (net of provision)

The Company proposes to file an appeal with Dispute Resolution Panel.

b. VAT

FY 2011-12

The Company has received a demand notice of Rs. 4,741,566/- from the Deputy Commissioner of Commercial Taxes disallowing VAT input credit. The Company has filed an appeal with the Joint Commissioner of Commercial Taxes (Appeal) - 4 on 24th January, 2013.

c. Service Tax Case

The Company has received a show cause cum demand notice from Commissioner of Central Excise & Service Tax, Pune I for the period October 2006 to December 2011 demanding service tax relating to :

- Rs. 172,961,546/- towards Service Tax on the amount received by branches from overseas clients on behalf of the Company,under the head ''Business Auxiliary Services''

- Rs. 136,644,081/- towards the amount of expenditure made in foreign currency in respect of category II and III services.

The Company has filed an Appeal in the Mumbai Tribunal.

(ii) Commitments:

Estimated amount of contracts remaining to be executed on capital account and not provided for:-

a. Tangible Assets - Rs. 14,396,377 (Previous Year Rs. 57,543,172/-).

b. Intangible Assets - Rs. 3,536,853(Previous Year Rs. 9,122,263/-).

(iii) Other Commitments:

As per the share purchase agreement already entered into by the company the balance payout based on performance targets would be approximately Rs. 1,026,540,000/-

4. Disclosure as per the requirement of section 22 of the Micro, Small and Medium Enterprise Development Act, 2006:

a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31st March, 2013 is Rs. 508,732/- (Previous Year - Rs. 378,767/-) including unpaid amounts of Rs. 59,562/- (Previous Year - Rs. 14,442 outstanding for more than 30 days. Estimated interest due thereon is Rs. 15,188/- (Previous Year - Rs. 289/-).

b. Amount of payments made to suppliers beyond the appointed date during the year is Rs. 4,370/- (Previous year - Rs. 118,128/-). Interest paid thereon is Rs. Nil (Previous Year - Rs. Nil) and the estimated interest due and payable thereon is Rs. 127(Previous year - Rs. 2,363/-).

c. The amount of estimated interest accrued and remaining unpaid as at 31st March, 2013 is Rs. 15,315/-(Previous Year - Rs. 2,652/-)

d. The amount of estimated interest due and payable for the period from 1st April, 2013 to actual date of payment or 20th April, 2013 (whichever is earlier) is Rs. 936/-.

5. (1)Details of Derivative Instruments (for hedging):

A. Cash Flow hedges: In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into Derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian rupee. The counter party to the Company''s foreign currency contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments and highly probable forecast transactions. The Management has assessed the effectiveness of its hedging contracts outstanding as on March 31, 2013 as required by AS-30 and accordingly the MTM loss of Rs. 240,009,938 /-(Previous year Rs. 479,380,362/-) is recognized in the Hedging Reserve. Further the assessment of effectiveness as performed by the management of the Company is also confirmed by an independent expert.

B. The following are the outstanding GBP/USD/EUR: INR Currency Exchange Contracts entered into by the Company which has been designated as Cash Flow Hedges as on March 31, 2013:

6. Details of Employee benefits as required by Accounting Standard 15 (Revised) Employee benefits are as under :

1. Defined Contribution Plan - Provident Fund

Amount recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is Rs. 106,946,678(Previous Year Rs. 103,425,942/-)

2. Defined Benefit Plan

i) Actuarial gains and losses in respect of defined benefit plans are recognized in the Statement of Profit and Loss.

ii) The defined benefit plan comprises of gratuity.

7. Segment Information:

Where a financial report contains both consolidated financial statements and separate financial statements of the parent, segment information needs to be presented only in case of consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements.

8. Lease Transactions:

1. Finance lease:

The Company has taken Vehicles under Finance Lease for a period ranging from 3 to 4 years. Upon payment of all sums due towards the agreement, the Company has the option of acquiring the Vehicles. During the lease period, the Company can neither sell, assign, sublet, pledge, mortgage, charge, encumber or part with possession of the assets, nor create or allow to create any lien on the Vehicles taken on Lease.

9. Research and Development expenditure debited to the Statement of Profit and Loss aggregating to Rs. 55,225,455/-(Previous Year Rs. 73,977,401/-) has been incurred by the Company and disclosed under appropriate account heads.

10. Disclosure of interest in joint venture as per AS 27:

The Company has the following joint ventures as on 31st March, 2013 and its percentage holding is given below:

11. Stock Option Plans:

1. Employee Stock Option Scheme (ESOS) - 1998 (through Employee Welfare Trust)

The ESOS was approved by the Board of Directors of the Company on November 23, 1998 and thereafter by the shareholders on November 30, 1998. A compensation committee comprising of independent directors of the Company administers the ESOS Plan. Each option carries with it the right to purchase one hundred equity share of the Company. All options have been granted at a pre- determined rate of Rs. 2.5 per share.

2. Employee Stock Option Plan- 2004

The Board of Directors and the shareholders of the Company approved the Employees Stock Option Plan at their meeting in August 2001 and in September 2001, respectively. Pursuant to this approval, the Company instituted ESOP 2004, Plan in July, 2004. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company.The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 33%, 33% and 34% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 3 years from the date of vesting.

3. Employee Stock Option Plan - 2006

The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in July 2006 and in August 2006, respectively. Pursuant to this approval, the Company instituted ESOP 2006, Plan in October, 2006. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company.The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value.The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 3 years from the date of vesting.

12. Other Disclosures and Explanatory Notes:

1. The Board has approved a transfer of Rs. 10,000,000/- (Previous Year Rs. 27,200,000/-) towards KPIT Cummins Infosystems Limited Community Foundation Reserve. This Reserve would be utilized for various community benefit schemes as may be approved by the Management.

The Board has approved a transfer of Rs. 100,000,000/- (Previous Year Rs. 100,000,000/-) towards KPIT Cummins Technology Fund. This fund would be utilized to drive high end innovative technology initiatives for promoting green growth and energy conservation, which will successively benefit the Company.

The Board has approved a transfer of Rs. 100,000,000/- (Previous Year Rs. 100,000,000/-) towards KPIT Employees'' Welfare Fund. This Fund would be utilized to promote welfare of its employees in various forms such as Medical, Education, Housing, Holiday homes, Recreation facilities, Activities related to Sports, Music Research, and Artistic Pursuits etc.

2. a. The Company, during the year, has acquired additional 18.5% stake in SYSTIME Global Solutions Ltd., world''s largest J D Edwards solution provider and Oracle Platinum Partner under share purchase agreement. Subsequently, total shareholding in the acquired Company is 76%.

b. During the FY 2012-13, the Company has acquired 5,477,889 equity shares in Sparta Infotech India Private Limited, from its step- down subsidiary Sparta Consulting Inc, USA. Sparta Infotech India Private Limited has therefore become a 100% direct subsidiary of the Company.

c. Considering the financial position of the associate and as a prudent accounting practice,the company during the year, has recognised 100% impairment on its investment in GAIA System Solution Inc amounting to Rs. 98,151,970/-which is in line with provisions of AS 13 "Accounting for Investments".

3. The Company has received approval from Department of Scientific and Industrial Research, Ministry of Science and Technology DSIR on 2nd June 2011 for its Research and Development (R&D) facility at its premise in Hinjewadi.

(a) Revolo

Revolo is an intelligent, plug-in, parallel hybrid fuel saving solution which can be installed on wide range of four wheelers with engine capacity varying from 700cc to 3000cc (both gasoline & diesel engines). The solution brings in important benefits to end consumer in terms of fuel efficiency improvement, emission reduction and travel cost reduction. The product is made of sub-systems that include the battery pack, a motor, motor controller which are controlled by intelligent algorithms to manage engine variations and help reduce fuel cost and cut down on harmful greenhouse gas emissions from IC engine powered vehicles. The product has been extensively and successfully tested at national laboratories. Revolo is the most frugal hybrid solution available at a much lower cost point.

(b) Infotainment

In-Vehicle Infotainment (or sometimes also referred to In-Car Infotainment in case of passenger cars), is hardware and software system installed into a car (or even other forms of transportation), to provide audio / video entertainment together with convenience features such as hands-free telephony, navigation, vehicle information display and vehicle function control e.g. climate control. It includes traditional tuner or radio as well as next generation digital radio and video broadcast services. The user can bring audio / video content into car via CD, USB or smartphones. Infotainment systems also include an option of Rear Seat Entertainment for the rear seat passengers. Future infotainment systems will also provide Internet connectivity to bring in content from social network services and Internet based entertainment sources (e.g. Internet radio) into the car.

4. During the FY 2011-12, the Company had transferred its diversified financial services (DFS) division in entirety to Infrasoft Technologies under the business transfer agreement. During the FY 2012-13, Company has accounted Rs. 54,700,000/- as income based on milestone achieved per terms of agreement.

During the FY 2011 -12, the company had entered into a business partnership with Sankalp Semiconductor Pvt Ltd for the Hardware Business of Semiconductor Solutions Group (SSG). This agreement has been further amended in the FY 2012-13. The Company has accounted income of Rs. 24,970,113/- in FY 2012-13 as per the terms of amended agreement.

5. The Company has allotted 12,960,000 shares to Van Dyck, CX Partners Fund 1 Limited and AAJV Investment Trust at a price of Rs.125 per equity share on a preferential basis.The proceeds of the issue will be utilized for bona fide business purposes and for funding the growth and operations of the Company and/or its subsidiaries, to meet the working capital and capital expenditure requirements of the Company/ subsidiaries and for investment in subsidiaries and joint ventures.

There has been no utilization of the proceeds till 31st March 2013. The unutilized balance of Rs. 1,620,000,000/-is invested in Mutual Funds.

6. KPIT Cummins Infosystems (Bangalore) Pvt. Ltd. (KPIT Bangalore) was merged with KPIT Cummins Infosystems Limited (the Company) in the year 2007. Employees of erstwhile KPIT Bangalore who were on the rolls at 31st March, 2007 (being the date of merger) were also transferred to the Company. The gratuity liability of these employees was funded with Kotak Mahindra Old Mutual Life Insurance Limited. This fund balance of Rs. 13,362,848/- (Previous Year Rs. 12,244,464/-) is also transferred to the Company and is disclosed separately under "Other Non-Current Assets."

7. Final Dividend

The Company allotted 368,182 equity shares against exercise of options by the employees, after 31st March, 2012 and before the Book closure for the Annual General Meeting held for FY 2011-12. The Company paid dividend of Rs. 258,030 on these shares and tax on dividend of Rs. 42,621 as approved by the shareholders at the Annual General Meeting held on 27th July 2012.

8. Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with current year''s classification / disclosure.


Mar 31, 2012

Company Overview

The Company provides software and IT enabled services to its clients. The Company predominantly provides services in Automotive, Energy & Utilities and Industrial Equipment Industry. Most of the revenue is generated from the export of services.

(i) 11,582,682 equity shares (Previous Year 5,675,903) of Rs 2 each are reserved for issuance towards outstanding employee stock option granted (Refer Note 44)

(ii) Aggregate number of equity shares allotted as fully paid-up by way of bonus shares for the period of five years immediately preceding the Balance Sheet date - 88,971,438 (Previous Year 44,181,453)

(iii) Also refer note 26

1. The Company declares and pays dividends in Indian rupees. The dividend purpose to be distributed to equity share holders for the period is Rs 124,560,013/- i.e. Rs 0.70 per share. (Previous Year - Rs 61,504,390/- i.e. Rs 0.70 per share). The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amount exists currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

2. As at 31st March, 2012 the Company has received an amount of Rs 1,053,845 (Previous Year Rs 2,609,762) towards share application money for 34,016 shares (Previous Year 41,385 shares) at a premium of Rs 985,813 (Previous Year Rs 2,526,992). The share application money was received for proposed issue under the Employee Stock Option Plan of 2004 and 2006 at fair market value. The Company has sufficient authorized share capital to cover the allotment of these shares.

3. Contingent Liabilities and Commitments:

(i) Contingent Liabilities:

Sr. Particulars FY 2011-12 FY 2010-12 No. 1 Outstanding Bank Guarantees in routine course of business 37,543,486 32,297,391

2 Corporate Guarantee provided by the Company for loan taken by KPIT 818,504,000 - Infosystems Inc. USA of USD 16,000,000

3 Income tax matters (Refer (a) below) 23,236,507 14,398,014

4 VAT matters (Refer (b) below) 27,673,199 27,673,199

a. Income Tax Cases

1. AY 2006-07

- This relates to the cases of erstwhile KPIT Cummins Infosystems (Bangalore) Private Limited (KPIT Bangalore) which has been merged with the Company effective April 1, 2007.

The Company has filed an appeal with the Income Tax Appellate Tribunal (ITAT), Bangalore, against an Order dated 28th July, 2011 from Commissioner of Income Tax (Appeals) - I, Bangalore. The total demand raised is Rs 5,903,204/- vide this order, which is adjusted against refund for subsequent year, i.e. A.Y. 2007-08.

2. AY 2007-08

- This relates to the cases of erstwhile KPIT Cummins Global Business Solutions Ltd. which has been merged with the Company effective March 1, 2011.

An appeal relating to income tax dues amounting to Rs 2,699,576 has been filed before Commissioner of Income Tax (Appeals) - I, Pune.

The Company and its advisers believe that the above matters would be decided in favor by higher appellate authorities.

3. AY 2008-09

- This relates to the cases of erstwhile KPIT Cummins Global Business Solutions Ltd. which has been merged with the Company effective March 1, 2011.

The Company has filed an appeal with Dispute Resolution Panel on 30th January, 2012 against the draft assessment order passed by Assistant Commissioner of Income Tax, Circle 11(1), Pune for proposed demand of Rs 13,977,983.

- This relates to KPIT Cummins Infosystems Limited

The Company has filed an appeal with Dispute Resolution Panel on 30th January, 2012 against the draft assessment order passed by Assistant Commissioner of Income Tax, Circle 11(1), Pune, for proposed demand of Rs 655,744/-

a. VAT Matters

1. FY 2005-06 to FY 2008-09

During the previous year, the Company had filed an appeal with the Joint Commissioner of Commercial Taxes - (Appeals) - 2 against an order received from the Asst. Commissioner of Commercial Taxes dated December 28, 2010. The demand raised vide this order is Rs 18,261,484/-. The Company has paid the entire amount towards this demand.

2. FY 2009-10

During the previous year, the Company had filed a writ petition in Karnataka High Court against the notice received u/s 39(1) of KVAt Act, 2003 from Deputy Commissioner of Commercial Taxes (DCCT) dated February 23, 2011. The demand raised vide this notice is Rs 9,411,715/-.

During the current year, High Court has reviewed the petition and has directed DCCT to pass a revised order taking into consideration the favorable decision by the Divisional Bench of Karnataka High Court in case of Sasken Communication Technologies Ltd.

The order from DCCT is awaited.

The Company and its advisors believe that the above matters would be decided in favor of the Company considering the Karnataka High Court's decision on a similar matter.

(ii) Commitments:

Estimated amount of contracts remaining to be executed on capital account and not provided for:-

a. Tangible Assets - Rs 57,543,172/- (Previous Year Rs 19,586,026/-).

b. Intangible Assets - Rs 9,122,263/- (Previous Year Rs 4,555,716/-).

(iii) Other Commitments:

The company, during the year, has acquired 57.5% stake in Systime Global Solutions Pvt. Ltd. As per the share purchase agreement, the Company has to make a payment of Rs 405,000,000/- towards fixed consideration in the year 2012-13 and a maximum additional consideration based on performance targets of Rs 959,040,000/- in the subsequent years for acquisition of the balance stake.

4. Disclosure as per the requirement of section 22 of the Micro, Small and Medium Enterprise Development Act, 2006:

a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31st March, 2012 is Rs 378,767/- (Previous Year - Rs 321,895/-) including unpaid amounts of Rs 14,442/- (Previous Year - Rs Nil) outstanding for more than 30 days. Estimated interest due thereon is Rs 289/- (Previous Year - Rs Nil).

b. Amount of payments made to suppliers beyond 30 days during the year is Rs 118,128/- (Previous year - Rs Nil). Interest paid thereon is Rs Nil (Previous Year - Rs Nil) and the estimated interest due and payable thereon is Rs 2,363/- (Previous year - Rs Nil).

c. The amount of estimated interest accrued and remaining unpaid as at 31st March, 2012 is Rs 2,652/-. (Previous Year - Rs Nil)

d. The amount of estimated interest due and payable for the period from 1st April, 2012 to actual date of payment or 20th April, 2012 (whichever is earlier) is Rs 144/-.

5. (1) Details of Derivative Instruments (for hedging)

A) Cash Flow hedges: In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into Derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian rupee. The counter party to the Company's foreign currency contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments and highly probable forecast transactions. The Management has assessed the effectiveness of its hedging contracts outstanding as on March 31, 2012 as required by AS-30 and accordingly the MTM loss of Rs 479,380,362/- (Previous year Rs 136,241,095) is recognized in the Hedging Reserve. Further the assessment of effectiveness as performed by the management of the Company is also confirmed by an independent expert.

6. Details of Employee benefits as required by Accounting Standard 15 (Revised) Employee benefits are as under:

1. Defined Contribution Plan - Provident Fund

Amount recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is Rs 103,425,942/- (Previous year Rs 88,977,353/-)

2. Defined Benefit Plan

i) Actuarial gains and losses in respect of defined benefit plans are recognized in the statement of profit and loss.

ii) The defined benefit plans comprises of gratuity.

Gratuity is a benefit to an employee based on 15 days last drawn salary for each completed year of service.

7. Segment Information:

Where a financial report contains both consolidated financial statements and separate financial statements of the parent, segment information needs to be presented only in case of consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements.

8. Lease Transactions:

1) Finance lease:

The Company has taken Vehicles under Finance Lease for a period ranging from 3 to 4 years. Upon payment of all sums due towards the agreement, the Company has the option of acquiring the Vehicles. During the lease period, the Company can neither sell, assign, sublet, pledge, mortgage, charge, encumber or part with possession of the assets, nor create or allow to create any lien on the Vehicles taken on Lease.

b) The Company has issued 88,971,438 bonus shares in the ratio of 1:1 in its Extra Ordinary General Meeting held on 1st March, 2012. These bonus shares were allotted on 15th March, 2012. The EPS figures for the previous year have been reworked to give effect of this allotment of bonus shares, as required by the Accounting Standard (AS) 20 - "Earning per share".

9. Research and Development expenditure debited to the Statement of Profit and Loss aggregating to Rs 73,977,401/- (Previous Year Rs 132,347,834/-) has been incurred by the Company and disclosed under appropriate account heads.

10. Stock Option Plans

1. Employee Stock Option Scheme (ESOS) - 1998 (through Employee Welfare Trust)

The ESOS was approved by the Board of Directors of the Company on November 23, 1998 and thereafter by the shareholders on November 30, 1998. A compensation committee comprising of independent directors of the Company administers the ESOS Plan. Each option carries with it the right to purchase one hundred equity share of the Company. All options have been granted at a pre- determined rate of Rs 2.5 per share.

2. Employee Stock Option Plan - 2004

The Board of Directors and the shareholders of the Company approved the Employees Stock Option Plan at their meeting in August 2001 and in September 2001, respectively. Pursuant to this approval, the Company instituted ESOP 2004, Plan in July, 2004. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 33%, 33% and 34% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 3 years from the date of vesting.

3. Employee Stock Option Plan - 2006

The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan at their meeting in July 2006 and in August 2006, respectively. Pursuant to this approval, the Company instituted ESOP 2006, Plan in October, 2006. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value. The vesting of the options is 30%, 30% and 40% of total options granted after end of first, second and third year respectively from the date of grant. The maximum exercise period is 3 years from the date of vesting.

11. Other Disclosures and Explanatory Notes

1. The Board has approved a transfer of Rs 27,200,000/- (Previous Year Rs 10,000,000/-) towards KPIT Cummins Infosystems Limited Community Foundation Reserve. This Reserve would be utilized for various community benefit schemes as may be approved by the Management.

The Board has approved a transfer of Rs 100,000,000/- (Previous Year Rs 100,000,000/-) towards KPIT Cummins Technology Fund. This fund would be utilized to drive high end innovative technology initiatives for promoting green growth and energy conservation, which will successively benefit the Company.

The Board has approved a transfer of Rs 100,000,000/- (Previous Year Rs 100,000,000/-) towards KPIT Employees' Welfare Fund. This Fund would be utilized to promote welfare of its employees in various forms such as Medical, Education, Housing, Holiday homes, Recreation facilities, Activities related to Sports, Music Research, Artistic Pursuits etc.

2. The Company, during the year, has acquired 57.5% stake in SYSTIME Global Solutions Pvt. Ltd. SYSTIME Global Solutions is one of the world's largest JDEdwards solution provider and Oracle Platinum partner.

3. The Company, during the year, has acquired 20% stake in share capital of GAIA Systems Solutions Inc.; Japan on 23rd March, 2012. The acquisition is mainly for developing new customers in Japan.

4. The Company, during the year, has incorporated two new subsidiaries namely KPIT Infosystems Netherlands B.V. on 16th March, 2012 and KPIT Infosystem (Brasil) Servicos De Tecnologia E Participacoes Ltda., Brazil on 6th March 2012. The acquisition is mainly for developing new customers in the respective countries.

5. The Company has transferred its diversified financial services (DFS) division in entirety to Infrasoft Technologies under the business transfer agreement. This transfer has been done in second quarter of the current financial year. Under this agreement, the Company has agreed to transfer its existing DFS customer contracts along with corresponding account management and the price agreed is based on milestones spread over up to next three to four quarters. The Company has accounted Rs 59,985,000/- as income in the current year based on the milestones achieved / terms of the agreement.

6. During the year the Company has entered into a business partnership with Sankalp Semiconductor Pvt. Ltd. for the Hardware Business of Semiconductor Solutions Group (SSG). This agreement has been entered into in last quarter of the current financial year. Under this agreement, the Company has agreed to transfer all its existing Employees and customer contracts along with corresponding account management related to the Hardware Business of SSG. The purchase consideration for this is in the form of cash and stocks of Sankalp Semiconductor Pvt. Ltd., based on the milestones achieved/terms of the agreement. The Company has thus accounted Rs 40,466,233/- as income in the current year.

Sankalp is a key player for Analog Mixed Signal services and solutions specializing in end-to-end solutions for IOs, analog and mixed signal chip design/layout. This association will make it one of the largest practices in hardware design with best competence in Analog and Mixed Signal design (AMS) area.

7. Final Dividend

The Company allotted 188,295 equity shares against exercise of options by the employees, after 31st March, 2011 and before the Book closure for the Annual General Meeting held for FY 2010-11.The Company paid dividend of Rs 134,410/- on these shares and tax on dividend of Rs 21,804/- as approved by the shareholders at the Annual General Meeting held on July 8, 2011.

8. During the FY 2009, the Company had acquired the Mechanical Engineering Design Services (MEDS) business of Harita TVS E-Technologies. This acquisition had helped in strengthening the Company's portfolio of Automotive-embedded and Mechanical Engineering services. The MEDS service has now been fully integrated with the Company's Automotive Business and it has been carved out as a key practice area as part of Company's Auto & Engineering (A&E) Strategic Business Unit.

Similarly, during the FY 2011, the Company had taken over business assets of Nilson Technology including the Intellectual Property (IP) for Vehicle Tracking system. This offering has now been integrated with the Company's Integrated Enterprise Solutions (IES) and Auto & Engineering (A&E) Strategic Business Unit.

With these integrations, it is not possible to report the value for the practices as separate businesses. Further these practices have not been generating the expected Profit After Tax (PAT) as per the initial business plan during their acquisitions. Hence as a prudent accounting practice, the Company has recognized impairment on the balance goodwill of Rs 35,836,288/-

9. KPIT Cummins Infosystems (Bangalore) Pvt. Ltd. (KPIT Bangalore) was merged with KPIT Cummins Infosystems Limited (the Company) in the year 2007. Employees of erstwhile KPIT Bangalore who were on the rolls at 31st March, 2007 (being the date of merger) were also transferred to the Company. The gratuity liability of these employees was funded with Kotak Mahindra Old Mutual Life Insurance Limited. This fund balance of Rs 12,244,464/- (Previous Year Rs 9,602,558/-) is also transferred to the Company and is disclosed separately under "Other Non-Current Assets".

10. The Revised Schedule VI has become effective from 1st April, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped/reclassified wherever necessary to correspond with current year's classification/disclosure.


Mar 31, 2010

Company Overview

The Company, along with its wholly-owned subsidiaries in the USA, UK, Poland, Germany, France, India and branches at Japan, Singapore and South Africa provides software services and IT enabled services to its clients. The Company predominantly provides services in Manufacturing and Financial services sectors. Most of the revenue is generated from the exports of services.

1.0 Contingent Liabilities

a) The Company has outstanding bank guarantees in the routine course of business worth Rs. 8,839,799/- (PY Rs. 7,275,500/-)

b) The Company had received a show cause notice from DGCEI Bangalore during the year 2006-07 for non-payment of service tax on account of payments made to its subsidiaries based outside India for rendering services outside India up to the year ended March 31, 2006. The revenue authorities have classified the services as that of a Commission Agent falling under the category of Business Auxiliary Services and quantified the liability at Rs. 49,927,768/- (Previous Year Rs. 49,927,768/-).The Company has received a stay order dated January 30, 2009 on this case; wherein Customs, Excise & Service Tax Appellate Tribunal ("CESTAT") Bangalore has granted full waiver of the balance amount payable till the disposal of appeal.

Management including its tax advisors believe that the services can not be classified as those of a Commission Agent and more over since the services were rendered outside India there will not be any service tax implications. No tax expense have been accrued in the financial statements as management believes that the ultimate outcome of this proceeding will not have any material adverse effect on the Companys financial position and results of operations.

c) The Company has received a show cause notice from Jt. Commissioner of Customs, Bangalore for removal of bonded goods without payment of Customs duty of Rs. 804,934/-.

The Company and its advisers believe that the matter would be decided in its favor by higher appellate authorities.

d) Income Tax Cases

These relate to the cases of erstwhile KPIT Cummins Infosystems (Bangalore) Private Limited (KPIT Bangalore) which has been merged with the Company effective April 1, 2007.

AY 2006-07

The Company has filed an appeal with the Commissioner of Income Tax (Appeals) - I, Bangalore against an Order dated December 26, 2008 passed by the Asst. Commissioner of Income Tax Circle 11(5), Bangalore. The total demand raised is Rs. 5,903,204/- vide this order, which is adjusted against refund for subsequent year, i.e. AY 2007-08.

AY 2007-08

The Company has filed an appeal with Commissioner of Income Tax (Appeals) -I, Bangalore pursuant to an Order dated December 21, 2009 passed by the Asst. Commissioner of Income Tax Circle 11 (5), Bangalore. The demand raised on KPIT Bangalore vide this order is Rs. 57,95,234/-. KPIT Bangalore has made a payment of Rs. 2,354,124/- towards this demand during the year ended March 31, 2010.

The Company and its advisers believe that the matter would be decided in favor by higher appellate authorities.

1.1 Stock Option Plans

1. Employee Stock Option Plan - 1998 (through Employee Welfare Trust)

The ESOP was approved by the Board of Directors of the Company on November 23, 1998 and thereafter by the shareholders on November 30,1998 and is for issue of 18,000 Options representing 1,800,000 equity shares of the Company. A compensation committee comprising of Independent Directors of the Company administers the ESOS Plan. All options have been granted at a pre-determined rate of Rs. 5 per share.

2. Employee Stock Option Plan - 2004

The Board of Directors and the shareholders of the Company approved the Employees Stock Option Plan for grant of 5,163,800 options convertible into 5,163,800 equity shares, at their meeting in August 2001 and in September 2001, respectively. Pursuant to this approval, the Company instituted ESOP 2004 Plan in July, 2004. The compensation committee of the Company administers this

3. Employee Stock Option Plan - 2006

The Board of Directors and the shareholders of the Company approved another Employees Stock Option Plan for grant of 5,000,000 options convertible into 5,000,000 equity shares, at their meeting in July 2006 and in August 2006, respectively. Pursuant to this approval, the Company instituted ESOP 2006, Plan in October, 2006. The compensation committee of the Company administers this Plan. The Options have been granted to employees of the Company and its subsidiaries at an exercise price that is not less than the fair market value.

1.2 Advances recoverable in cash or in kind or for value to be received is net of provision for doubtful advances of Rs.11,800,000/- (Previous year Rs. Nil).

1.3 Debtors include on account of unbilled revenue aggregating to Rs. 35,849,669/- (Previous year Rs. 42,497,138/-).

1.4 Quantitative details: The Company is engaged in software development and Information Technology Application work for various clients based in different geographies. The production and sale of such software cannot be expressed in any generic unit. Therefore it is not possible to give the quantitative details of sales and certain information as required under paragraphs 3, 4C and 4D of Part II of Schedule VI to the Companies Act, 1956.

2.0 (ii) Cash Flow hedges (Disclosure as required by AS-30 "Financial Instruments: Recognition and Measurements".

A) In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into Derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian rupee. The counter party to the Companys foreign currency contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments and highly probable forecasted transactions. The Management has assessed the effectiveness of its hedging contracts outstanding as on March 31, 2010 as required byAS-30 and accordingly the MTM loss of Rs. 226,688,046/-(Previous year Rs. 1,631,303,249) is recognized in the Hedging Reserve. Further the assessment of effectiveness as performed by the management of the Company is also confirmed by an independent expert.

2.1 Retirement Benefits

The disclosures as per the revised Accounting Standard 15 on "Employee Benefits", (AS 15) issued by the Institute of Chartered Accountants of India are as follows::

2.2 Segment Information:

Accounting Standard 17 Segment Reporting issued by the Institute of Chartered Accountants of India prescribes that where a financial report contains both consolidated financial statements and separate financial statements of the parent, segment information need to be presented only in case of consolidated financial statement. Accordingly, segment information has been provided only in consolidated financial statement.

2.3 Lease Transactions:

Finance lease:

The Company has taken Vehicles under Finance Lease for a period ranging from 3 to 4 years. Upon payment of all sums due towards the agreement, the Company has the option of acquiring the Vehicles. During the lease period, the Company can neither sell, assign, sublet, pledge, mortgage, charge, encumber or part with possession of the assets, nor create or allow to create any lien on the Vehicles taken on Lease.

2.4 Earnings per share:

Basic earnings per share is computed by dividing the net profit after tax by the weighted number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the net profit after tax by the weighted number of equity shares considered for deriving basic earning per share and also the weighted average number of equity shares that could have been issued upon conversion of dilutive potential equity shares. The diluted potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value which is the average market value of the outstanding shares.

2.5 Provisions

The details of provision and movement in each class of provision required by Accounting Standard 29 on Provisions, Contingent Liabilities and Contingent Assets are as follows:

1) Provision for Variable Pay

The annual salary of eligible employees comprise of a performance based payment, for which provision is made in the books.

While providing for such amount, the Company relies on the past experience as regards to the actual payments.

Such amount is paid to employees on the basis of employees performance and additional criteria as decided by the management.

3. Other Disclosures and Explanatory Notes

3.1 The Board has approved a transfer of Rs. 10,000,000/- towards KPIT Cummins Infosystems Limited Community Foundation Reserve. This Reserve would be utilized for various community benefit schemes as may be approved by the Management.

3.2 The Board has approved the grant for loan to Employee Welfare Trust upto Rs. 250,000,000/- to enable the Trust to carry out welfare activities as laid down in the Trust deed for Employees. During the current year, Rs. 179,500,000/- was paid to the Trust in various tranches towards this loan.

3.3 Subsidiaries

The Company, through its wholly-owned subsidiary, KPIT Infosystems Ltd., UK, acquired the remaining 40% share in KPIT Infosystems GmbH, Germany. Consequently the Companys interest in KPIT Infosystems GmbH, Germany has increased to 100%.

The Company, through its wholly-owned subsidiary, KPIT Infosystems Inc., USA, acquired the remaining 10% shares in KPIT Infosystems Inc. (SolvCentral.Com), USA. Consequently the Companys interest in KPIT Infosystems Inc. (SolvCentral.Com), USA has increased to 100%.

On November 13, 2009, the Company, through its wholly-owned subsidiary, KPIT Infosystems Inc., USA, has acquired 100% shares of Sparta Consulting Inc., USA.

On September 18, 2009, KPIT Cummins Infosystems (BA) Inc., USA, a 100% subsidiary of the Company, added on amalgamation of KPIT Cummins Infosystems (Bangalore) Pvt. Ltd., has been voluntarily liquidated.

3.4 The previous years figures have been regrouped/rearranged, wherever necessary, to conform to the current years classification.

 
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