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Notes to Accounts of Megasoft Ltd.

Mar 31, 2015

1. Related party transactions

Wholly owned Subsidiary companies

Megasoft Consultants Sdn Bhd, Malaysia; Megasoft Consultants Pte Ltd, Singapore; XIUS Holding Corp (formerly, Boston Communications Group, Inc.), USA; XIUS Corp (formerly, Cellular Express, Inc.), USA; BCGI Wireless Private Limited.

Enterprise over which Director(s) / KMP have significant influence

NMR Property Development Private Limited, Sri City Private Limited, Suprani Farms Private Limited, Sricity Holdings India Private Limited, Sricity Utility Services Private Limited, Sumedha Estates Private Limited, Haripuram Developers Private Limited, Lamda Developers Private Limited, lota Developers Private Limited, Kappa Developers Private Limited, Gamaa Developers Private Limited, Sri Dhruva Builders Private Limited.

2. Employee benefit plans

(a) Provident Fund

Both the employees and the company make monthly contributions to the Provident Fund Plan equal to a specified percentage of the covered employee's salary. The entire contribution in respect of employees is contributed to the Government administered employee Provident and Pension Fund.

(b) Defined benefit plans

The company offers the following employee benefit schemes to its employees:

(i) Gratuity (unfunded) - The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment based on completed years of service or part thereof in excess of six months. Vesting occurs on completion of five years of service.

(ii) Post-employment leave encashment (unfunded) - Leave encashment is payable to the employees on separation from the company at retirement, death while in employment or on termination of employment. Employees are not entitled to encash leave while in employment.

3. Quantitative details

The Company is in the business of development and maintenance of computer software. The development and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to furnish the quantitative details and the information required under paragraphs 3, 4C and 4D of part II of Schedule VI to the Companies Act, 1956.

4. Segmental Information

The company prepares consolidated financial statements, hence as per Accounting Standard 17 on Segment Reporting, segment information has not been provided in the standalone financial statements.

5.Previous year comparatives

The financial statements have been prepared for the fifteen months period ended 31 March 2015 due to change in accounting year-end from December to March. The comparatives presented are for the year ended 31 December 2013 (12 months) and hence, not comparable to the current fifteen months period ended 31 March 2015. The previous period figures have been regrouped / reclassified, wherever necessary to conform to the current period presentation.


Dec 31, 2012

(1) Corporate Information

Megasoft Limited, a public limited company domiciled in India and incorporated under the provisions of the Companies Act, 1956, on 29 June 1999 and is having its registered office in Chennai. The company''s shares are listed on Madras Stock Exchange, The National Stock Exchange and The Bombay Stock Exchange, in India. The company is a unique Indo-American trans-national company that combines the best practices of both cultures (Indian and American), creating a high quality and cost effective entity with a focus on the global telecommunications domain.

(2) Related party transactions

Wholly owned Subsidiary companies

Megasoft Consultants Sdn Bhd, Malaysia, Megasoft Consultants Pte Ltd, Singapore, XIUS Holding Corp (f/k/a Boston Communications Group, Inc.), USA, XIUS Corp (f/k/a Cellular Express, Inc.), USA, BCGI Wireless Private Limited.

Associates - Entities controlled by Director/s

S Ravindra Babu HUF

Aries Foundations Private Limited, Innovative Water Solutions Limited, NMR Property Development Private Limited, Sannareddy Holdings Private Limited, SR Heritage Farms Private Limited, SRB Infrastructure Private Limited, Sri City Infrastructure Development Private Limited, Sri City Private Limited, Sri City Property Development Private Limited, Sricity E-World Private Limited, Sricity Holdings India Private Limited, Sricity Projects Private Limited, Sricity Utility Services Private Limited, Suprani Farms Private Limited.

Directors & Key Management Personnel

GV Kumar & D Sudhakar Reddy

(3) Quantitative details

The Company is in the business of development and maintenance of computer software. The development and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to furnish the quantitative details and the information required under paragraphs 3, 4C and 4D of part II of Schedule VI to the Companies Act, 1956.

(4) Segmental Information

In accordance with AS 17 - Segment Reporting, segment information has been given in the consolidated financial statements of Megasoft Group and therefore no separate disclosure on segment information is given in these financial statements.

(5) Corporate Guarantees

The company has given a corporate guarantee for a foreign currency loan of US$ 8.00 million (Previous year - US$ 12.00 million) from Axis Bank, Hong Kong to XIUS Holding Corp (f/k/a Boston Communications Group, Inc.), USA.

(6) Forward contracts

Foreign exchange forward contracts outstanding at the end of the year is Nil (Previous year - USD 1 million approx. Rs. 48 million )

(7)Previous year comparatives

The company has prepared these financial statements as per the format prescribed by Revised Schedule VI to the Companies Act, 1956 (''the schedule'') issued by Ministry of Corporate Affairs. Previous periods'' figures have been recast / restated to conform to the classification required under revised Schedule VI.

(8) Cash flows

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, financing and investing activities of the company are segregated. Cash flows in foreign currencies are accounted at average monthly exchange rates that approximate the actual rates of exchange prevailing at the dates of the transactions.

(9)Subsidiary companies details

The details of subsidiary companies are given in a separate statement attached to the accounts in terms of the general circular No 2/2011 dated 8 February 2011 of the Ministry of Corporate Affairs.


Dec 31, 2011

(1) Secured loans / borrowings are secured as follows:

(a) For borrowings by the company

(i) The working capital loan facilities from Axis Bank are secured by a first charge on entire current assets and fixed assets (except company's assets acquired under hire purchase scheme), present and future, of the company.

(ii) Vehicles are hypothecated to the Banks / Financial Institutions as security for the amounts borrowed by the Company. Amount repayable within one year is Rs 1,405 (Previous year - Rs 499).

(b) Collaterals for borrowings by the company's wholly owned subsidiary

The foreign currency loan of US$ 12 million from Axis Bank, Hong Kong to XIUS Holding Corp., USA, against the SBLC from Axis Bank, Hyderabad, India, is secured by a pari passu first charge on the assets of XIUS Holding Corp., USA. Amount repayable within one year is US$ 7 million (Previous year - Nil).

(2) Leases / Hire purchase

(a) Leases / Hire purchase - Capital

The Company has entered into leasing / hire purchase arrangements with banks and financial institutions for the hire / lease of motor vehicles ("the leased asset") for a period not exceeding 60 months. During the lease / hire period, the Company has agreed to hypothecate and create an exclusive charge on the vehicle in favour of the bank / financial institution and repay the principal amount of the loan along with interest thereon by way of instalments as agreed upon. The charge / security created in favour of the bank / financial institution shall remain in force until such time all the dues under the agreement are fully discharged.

(3) Loans and advances

(i) The erstwhile VisualSoft had entered into an agreement with Andhra Pradesh Industrial Infrastructure Corporation Limited ("APIIC") to acquire land admeasuring 0.751 acres at Madhapura and 15.61 acres at Nanakramguda, Hyderabad. As per the agreement the erstwhile VisualSoft had paid the required amount towards purchase of the land, stamp duty, other expenditure, etc., and the same has been included under Loans & Advances as capital advance. On satisfaction of certain terms and conditions laid down in the agreement, the deed of conveyance shall be executed in favour of the Company after payment of differential stamp duty, if any. Non-compliance of certain terms and conditions would attract withdrawal of rebate which may increase the cost of land.

(ii) Advance income-tax include MAT credit entitlement.

* The liability towards gratuity is provided on an actuarial basis for the company as a whole. The amount pertaining to directors is not individually ascertainable and is therefore not included above. Above amount does not include remuneration paid by wholly owned subsidiary company to Managing Director of the company aggregaing to Rs 3,913 (Previous year Nil) in terms of section 314 of the companies act, 1956 with due approval of the shareholders at the annual general meeting held on 17 June 2011.

(4) Quantitative details

The Company is in the business of development and maintenance of computer software. The development and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to furnish the quantitative details and the information required under paragraphs 3, 4C and 4D of part II of Schedule VI to the Companies Act, 1956.

(5) Segmental Information

In accordance with AS 17 - Segment Reporting, segment information has been given in the consolidated financial statements of Megasoft Group and therefore no separate disclosure on segment information is given in these financial statements.

(6) Taxation

Profit for taxation has been made after taking into consideration the appropriate exemptions available for operations till 31 March 2011

(7) Transfer pricing legislation

The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961. Since the law requires existence of such information and documentation to be continuous, the Company is in the process of updating the documentation for the international transactions entered into with the associated enterprises during the financial year. The management is of the opinion that its international transactions are at arm's length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

(8) Employees Stock Option Plans

The company has two stock option plans that provide for the granting of stock options to employees / directors of the company and its subsid- iaries (not being promoter directors of the company). The objectives of these plans include attracting and retaining the best personnel, providing for additional performance incentives and promoting the success of the company by providing employees the opportunity to acquire equity shares. Remuneration / Compensation Committee administers all these stock options under various plans. The stock option plans are summarised below:

(i) Associates Stock Option Plan 2004

The shareholders of the company in the AGM held on 18 June 2004 approved the Associate Stock Option Plan (ASOP-2004). The ASOP- 2004 provides for issue of 755,000 equity shares of Rs 10 each to the employees including directors at the market price of the shares on the date of grant.

At the AGM held on 22 June 2006, the exercise price of the options to be granted was amended to enable issue of options / shares at such discounts to the Market Price as on the date of the grant of the options subject to the exercise price not being less than the face value of shares.

(ii) Employees Stock Option Plan 2007

The shareholders of the company through a postal ballot process, postal ballot notice dated 26 April 2007, results declared on 8 June 2007, approved an Employees Stock Option Plan (ESOP-2007). The ESOP-2007 provides for issue of 2,700,000 options (underlying equity shares of Rs 10 each) to the employees / Directors of both the company and its subsidiaries, at such discounts to the Market Price as on the date of the grant of the options subject to the exercise price not being less than the face value of equity shares.

(9) Related party transactions

Wholly owned Subsidiary companies Megasoft Consultants Sdn Bhd, Malaysia, Megasoft Consultants Pte Ltd, Singapore, XIUS Holding Corp, (formerly Boston Communications Group, Inc.,), USA, Xius Corp (formerly Cellular Express, Inc.,) USA, BCGI Wireless Private Limited Associates - Entities controlled by Director/s S Ravindra Babu HUF Innovative Water Solutions Limited, NMR Property Develolpment Private Limited, Sannareddy Holdings Private Limited, SR heritage Farms private Limited, SRB Infrastructure Private Limited, Sri City Infrastructure Development private Limited, Sri City Private Limited, Sri City Property Development Private Limited, Sri City E-World Private Limited, Sricity Holdings India Private Limited, Sricity Projects Private Limited, Sricity Utility Services Private Limited, Suparani Farms Private Limited.

(10) Commitments & Contingencies

(Rs 000s)

Contingent liabilities including bank guarantees, letter of credits, etc. 26,813 62,749

(20) Corporate Guarantees

The company has given a corporate guarantee for the foreign currency loan of US$ 12 million from Axis Bank, Hong Kong to XIUS Holding Corp., USA.

(11) Forward contracts

Foreign exchange forward contracts outstanding at the end of the year USD 4 million approx. Rs 193,500 (Previous year - Nil).

(12) Foreign exchange rates

Foreign exchange rates adopted for balance sheet purposes is USD = Rs 53.266 as at 31 December 2011 and USD = Rs 44.7223 as at 31 December 2010. The income and expenses accounts of the overseas subsidiaries have been translated at the annual average rate of USD = Rs 47.0322 and USD = Rs 45.7195 for the financial year 2011 and 2010, respectively. The balance sheet is to be read considering the effect of the significant USD rate variations between the two periods.

(13) Dues to micro, small and medium enterprises

As at 31 December 2011, the company had no outstanding dues to small-scale industrial (SSI) undertakings and Micro and Medium enterprises (Previous year - Nil). The list of SSI undertakings, Micro and Medium enterprises was determined on the basis of information available with the company.

(14) Previous year comparatives

Previous years' figures have been regrouped, reclassified / rearranged wherever necessary to conform to current year's presentation. Current years' figures are without IT Services Division and hence are not comparable.

(15) Cash flows

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, financing and investing activities of the company are segregated. Cash flows in foreign currencies are accounted at average monthly exchange rates that approximate the actual rates of exchange prevailing at the dates of the transactions.

(16) The Ministry of Corporate Affairs ("MCA") vide its circular dated 8 February 2011 has exempted the companies from attaching the financial statements of the company's subsidiaries along with the company's accounts for the financial year ended 31 December 2011.


Dec 31, 2009

5 Divestment of IT Services (BlueAlly) Division (Note No.22 of the annual standalone financial statements)

(a) The company has completed the sale / transfer of the IT Services (BlueAlly) division to an overseas company w.e.f. 1st October 2009, as approved by the members by a postal ballot process.

(b) The Company has formulated a scheme of business restructuring to deal with the divestment of the IT Services Division. Accordingly, as per a Scheme of Arrangement under sections 391 to 394 of the Companies Act 1956 ("the Scheme") between the Company and its equity shareholders approved by the High Court of Judicature at Madras vide its Order dated 30 March 2010 duly filed with the Registrar of Companies on 30 March 2010 (effective date), a separate reserve account titled as Business Reconstruction Reserve ("BRR") has been created by transferring balance standing to the credit of Securities Premium Account and the General Reserve of the Company for adjustment of certain expenses as prescribed therein. Accordingly, Rs 1,250,000 has been transferred to BRR and Rs 1,246,237 has been set-off.

(c) Any reversal of any such set-off at any time later would be adjusted to the same Business Reconstruction Reserve.

6 FCCB (Note No.3(i) of the annual standalone financial statements)

The company issued 8,000 1.5% Foreign Currency Convertible Bonds ("FCCB") of US$ 1,000 each on preferential basis on 16 September 2005 in terms of the approval of the shareholders of the Company at the Extra-ordinary General Meeting held on 26 August 2005 aggregating to US$ 8 million. Post conversion of FCCB aggregating to US$ 6 million into equity shares during earlier year, the balance FCCB aggregating to US$ 2 million payable to the FCCB holders on redemption was negotiated and settled in full by making payment of US$ 1 million during the year.

7 Quantitative details (Note No.12 of the annual standalone financial statements)

The Company is in the business of development and maintenance of computer software. The development and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to furnish the quantitative details and the information required under paragraphs 3,4C and 4D of part II of Schedule VI to the Companies Act, 1956.

8 Dues to micro, small and medium enterprises (Note No.23 of the annual standalone financial statements)

As at 31 December 2009, the company had no outstanding dues to small-scale industrial (SSI) undertakings and Micro and Medium enterprises (Previous year - Nil). The list of SSI undertakings, Micro and Medium enterprises was determined on the basis of information available with the company.

9 Previous year comparatives (Note No.24 of the annual standalone financial statements)

Previous years figures have been regrouped, reclassified / rearranged wherever necessary to conform to current years presentation. Current years figures are without IT Services Division w.e.f. 1 October 2009 and hence are not comparable.



 
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