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Notes to Accounts of Quick Heal Technologies Ltd.

Mar 31, 2019

1. Significant accounting judgments, estimates and assumptions

The preparation of the Company''s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, including the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgments

In the process of applying the Company''s accounting policies, the management has made the following judgment’s, which have the most significant effect on the amounts recognized in the financial statements:

Significant judgment’s is required to apply lease accounting rules under Appendix C to lnd AS 17 ‘Determining whether an arrangement contains a lease''. In assessing the applicability to arrangements entered into by the Company with its various sub-contractors regarding providing of certain services, the Company has exercised judgment to evaluate the right to use the underlying assets, substance of the transaction including legally enforced arrangements, and other significant terms and conditions of the arrangement to conclude whether the arrangements meets the criteria under Appendix C to lnd AS 17. Based on the evaluation, the Company has concluded that the arrangements do not meet the definition of lease as specified under Appendix C to lnd AS 17.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm''s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow (DCF) model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset''s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

Defined benefit plans

The cost of the defined benefit gratuity plan and other postemployment benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries.

Further details about gratuity obligations are given in note 31.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer note 45 for further disclosures.

2. (a) Standards issued but not yet effective

The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Company''s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective. The Ministry of Corporate Affairs (‘MCA'') has issued the Companies (Indian Accounting Standards) Amendment Rules, 2017 and Companies (Indian Accounting Standards) Amendment Rules, 2018 amending the following standard:

(i) Ind AS 116 - Leases

Ind AS 116 Leases was notified on March 30, 2019 and it replaces Ind AS 17 Leases, including appendices there to. Ind AS 116 is effective for annual periods beginning on or after April 1, 2019. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires essees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under Ind AS 17. The standard includes two recognition exemptions for lessees - leases of ‘low-value'' assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognized the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under Ind AS 116 is substantially unchanged from today''s accounting under Ind AS 17. Lessors will continue to classify all leases using the same classification principle as in Ind AS 17 and distinguish between two types of leases: operating and finance leases.

The Company intends to adopt these standards, if applicable, when they become effective. As the Company does not have any material leases, therefore the adoption of this standard is not likely to have a material impact in its financial statements.

(ii) Appendix C to Ind AS 112 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of Ind AS 12 and does not apply to taxes or levies outside the scope of Ind AS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:

- Whether an entity considers uncertain tax treatments separately

- The assumptions an entity makes about the examination of tax treatments by taxation authorities

- How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

- How an entity considers changes in facts and circumstances

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. In determining the approach that better predicts the resolution of the uncertainty, an entity might consider, for example, (a) how it prepares its income tax filings and supports tax treatments; or

(b) how the entity expects the taxation authority to make its examination and resolve issues that might arise from that examination.

The interpretation is effective for annual reporting periods beginning on or after April 1, 2019, but certain transition reliefs are available. The Company will apply the interpretation from its effective date. The Company does not expect to have any material impact on its financial statements.

(iii) Amendment to Ind AS 19 - Employee Benefits:

The amendments to Ind AS 19, Employee Benefits relate to effects of plan amendment, curtailment and settlement. When an entity determines the past service cost at the time of plan amendment or curtailment, it shall remeasure the amount of net defined benefit liability/asset using the current value of plan assets and current actuarial assumptions which should reflect the benefits offered under the plan and plan assets before and after the plan amendment, curtailment and settlement. These amendments are not expected to have any significant impact on the Company.

Note:-

1. The value of land has been estimated based on the stamp duty valuation rate

2. Additions of building includes office building (including share in undivided portion of land) taken on long term lease i.e. 999 years.

3. The Company had elected to continue with the carrying value of property, plant and equipment as recognized in the financial statements as per previous GAAP and had regarded those values as the deemed cost on the date of transition (i.e. April 1, 2015). The Company has disclosed the gross block and accumulated depreciation above, for information purpose only. The accumulated depreciation as at April 1, 2015 was INR 228.19.

1. The Company had elected to continue with the carrying value of intangible assets as recognized in the financial statements as per previous GAAP and had regarded those values as the deemed cost on the date of transition (i.e. April 1, 2015). The Company has disclosed the gross block and accumulated amortization above, for information purpose only. The accumulated amortization as at April 1, 2015 was INR 174.39.

(b) Terms / rights attached to equity shares

The Company has only one class of equity shares having par value of INR 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in ensuing Annual General Meeting.

The Board of Directors, in their meeting on May 10, 2018, proposed a final dividend of INR 3.00 per equity share and the same was approved by the shareholders at the Annual General Meeting held on August 8, 2018. The amount was recognized as distributions to equity shareholders during the year ended March 31, 2019 and the total appropriation was INR 254.42 including dividend distribution tax. The Board of Directors, in their meeting on May 10, 2019, have proposed a final dividend of INR 2 per equity share for the financial year ended March 31, 2019. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held and if approved would result in a cash outflow of approximately INR 169.86 including dividend distribution tax.

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

(c) Shares held by holding/ ultimate holding Company and /or their subsidiaries/ associates

None.

The shareholding information has been extracted from the records of the Company including register of shareholders/ members and is based on legal ownership of shares.

(f) Shares reserved for issue under option

For details of shares reserved for issue under ESOP of the Company, please refer note 32.

(g) Buyback of shares

The Board of Directors of the Company at its meeting held on March 5, 2019 and the shareholders by way of postal ballot on April 13, 2019, approved the buyback of the Company''s fully paid equity shares of the face value of INR 10 each from its shareholder/beneficial owners of equity shares of the Company including promoters and promoter group of the Company as on the record date, on a proportionate basis through the "tender offer" route at a price of INR 275 per share for an aggregate amount not exceeding INR 1,750. The Company had filed the draft letter of offer (DLoF) with Securities and Exchange Board of India (SEBI) on April 24, 2019. Further, the Company has received final SEBI observations on the DLoF, and shall be dispatching the Letter of Offer for the Buyback to the eligible shareholders appearing on the record date of April 26, 2019, on or before May 13, 2019.

17. Other equity (Contd.)

Retained earnings

Retained Earnings represents surplus i.e. balance of the relevant column in the Statement of Changes in Equity;

Securities premium

Securities premium reserve is used to record the premium on issue of shares. The reserve can be utilized only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.

Amalgamation reserve

Pursuant to the scheme of amalgamation ("the Scheme") sanctioned by the Honourable High Court of Bombay vide Order dated April 8, 2011, Cat Labs Private Limited (CLPL), subsidiary of the Company, had been merged with the Company with effect from April 1, 2010, the Appointed Date. The Company completed the process of amalgamation on May 2, 2011 on filing of above Court Orders with the Registrar of Companies. Accordingly, an amount of INR 26.45 was recorded as amalgamation reserve.

General reserve

Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution in a given year is more than 10% of the paid-up capital of the Company for that year, then the total dividend distribution is less than the total distributable results for that year. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilized only in accordance with the specific requirements of Companies Act, 2013.

Employee stock options outstanding account

The Company has two employee stock option schemes under which options to subscribe for the Company''s shares have been granted to certain executives and senior employees. The share-based payment reserve is used to recognized the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer note 32 for further details of these plans. FVTOCI reserve

The Company has elected to recognized changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognized.

Terms and conditions of the above financial and other liabilities:

- Trade payables are non-interest bearing and have an average term of 60 days.

- Payables for purchases of fixed assets are non-interest bearing and have an average term of 90 days.

- Other liabilities (other than taxes and deferred revenue) are non-interest bearing and have an average term of 45 days.

- Taxes such as tax deducted at source and goods and service tax / vat payable, provident fund and other taxes are non-interest bearing and are generally paid within the due date.

Disaggregate revenue information

The table below presents disaggregated revenues from contracts with customers by geography and details of products and services sold. The Company believes that this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market and other economic factors.

Performance obligations and remaining performance obligations

The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue.

The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2019, is INR 21.60. Out of this, the Company expects to recognize revenue of around INR 21.60 within one to three years respectively, depending on the license period.

The impact on account of applying the erstwhile Ind AS 18 Revenue standard instead of Ind AS 115 Revenue from contract with customers on the financial statements of the Company for the year ended March 31, 2019 is insignificant.

The Company has applied Ind AS 115 for the first time for the year ended March 31, 2019 and accordingly disclosures for ''Disaggregated revenue information has been furnished only for year ended March 31, 2019.

3. Gratuity benefit plans

The Company has a defined benefit gratuity plan (funded) for its employees. The Company''s defined benefit gratuity plan is a final salary plan for its employees, which requires contributions to be made to a separately administered fund. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member''s length of service and salary at retirement age. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn) for each completed year of service as per the provisions of the Payment of Gratuity Act, 1972.

The following table summarizes the components of net benefit expense recognized in the statement of profit and loss and the funded status and the amounts recognized in the balance sheet for the gratuity plan.

4. Share based arrangements

Share based payment arrangement 2010

On June 10, 2010, the Board of Directors approved the Equity Settled Share Based Payment Arrangement (SBPA), for issue of stock options to the employees and directors of the Company. According to the SBPA 2010, the employee selected by the Board of Directors from time to time will be entitled for scheme options, subject to satisfaction of the prescribed vesting conditions, viz., continued employment and performance parameters of employee. The contractual life (comprising the vesting period and the exercise period) of options and the other relevant terms of the grant are as below:

The weighted average share price at the date of exercise of these options, as at March 31, 2019 was INR 273.86 The weighted average share price at the date of exercise of these options, as at March 31, 2018 was INR 214.61.

Share based payment arrangement 2014

On February 6, 2014, the board of directors approved the Equity Settled ESOP Scheme 2014 ("ESOP Scheme 2014") for issue of stock options to the employees and directors of the Company. According to the ESOP Scheme 2014, the employee selected by the Board of Directors from time to time will be entitled for scheme options, subject to satisfaction of the prescribed vesting conditions, viz., continued employment and performance parameters of employee. The contractual life (comprising the vesting period and the exercise period) of options and the other relevant terms of the grant are as below:

5. Commitments and contingencies a. Operating lease - Company as a lessee

The Company has obtained office premises under operating lease agreements out of which there is a lease agreement for an office premise for 6 years with a lock-in period of 3 years. These are generally cancellable and are renewable by mutual consent on mutually agreed terms. There are no restrictions imposed by lease agreements. There are no subleases. The details are as follows:

Finance lease - Company as a lessee

The Company has finance leases contracts for building purchased during the financial year ended March 31, 2015. These leases involve upfront payment to the lessor as and by way of premium for grant of lease of the building by the lessor to the lessee. No lease rent was payable by the lessee to the lessor for grant of lease from lessee. There is no escalation clause and no minimum lease payments (MLP) under finance lease.

Note A

The Company has provided letters committing continuing financial support to its subsidiaries; Quick Heal Technologies Japan K.K., Quick Heal Technologies Africa Limited, Quick Heal Technologies America Inc. and Seqrite Technologies DMCC to meet their day to day obligations / commitments; to the extent these entities may be unable to meet their obligations.

i) During the year ended March 31, 2019, the Company has received statement of demand dated March 13, 2019, in relation to service tax under the provisions of Finance Act, 1994 for INR 387.43 (excluding interest and penalties) covering the period from April 1, 2016 to June 30, 2017 on supply of anti-virus software in Compact Disk. The Company is in the process of filing the reply for the same.

During the earlier years, the Company had received statement of demands in relation to service tax under the provisions of Finance Act, 1994 for INR 1,223.07 (excluding penalty of INR 626.97 and redeposit, if any) covering the period from March 1, 2011 to March 31, 2016 on supply of anti-virus software in Compact Disk. The Company had filed an appeal with Customs, Excise and Service Tax Appellate Tribunal, New Delhi for the period March 1, 2011 to March 31, 2014 and with the Customs, Excise and Service Tax Appellate Tribunal, Mumbai for the period April 1, 2014 to March 31, 2016.

Based on technical circular issued by government authorities and an independent legal opinion, the Company is confident of getting this claim set aside and accordingly no provision including interest and penalty has been recognized in the financial statement and the demand has been disclosed as contingent liability.

ii) There are numerous interpretative issues relating to the Supreme Court (SC) judgment on PF dated February 28, 2019. As a matter of caution, the company has made a provision on a prospective basis from the date of the SC order. The company will update its provision, on receiving further clarity on the subject.

d. Other litigations

i) In the year 2016, one of the erstwhile distributor of the Company had filed a suit before the Civil Judge (Senior Division) at Sera pore Court, Hooghly District, West Bengal against the Company and others, claiming Intellectual Property Rights to one of the brand names (Quick Heal - Total Security) and alleging illegal usage of said brand name by the Company. The case was dismissed by the Court, however later on was restored. The Company believes that the suit is false, frivolous and will contest the suit on merit. The Trade Mark is registered in name of the Company and thus, the Company believes that it has sufficient grounds to counter the litigations and has strong arguments on facts as well as on point of law.

ii) In February 2016, one of the erstwhile distributor instituted a suit at High Court, Calcutta against the Company and others claiming INR 16,100 for various reasons including loss of business profits, loss of capital assets & infrastructure etc. With respect to the above matters, the Company believes that the suit is frivolous and defending to seek the leave of the court for its dismissal. The Company also believes that they have sufficient grounds based on the facts as well as on point of law. Accordingly no provision in this regard has been recognized in the financial statements.

iii) One of the erstwhile vendor had filed a First information Report (FIR) in May 2016 at Uttarpara Police Station, West Bengal, against certain directors of the Company, their wives and other associates alleging embezzlement of his investment and misappropriation of shares. The police had filed the charge sheet. The Company, its directors and others had filed quashing applications before Hon''ble Calcutta High Court and obtained stay on proceedings before trial Court. The Company also believes that police have not conducted proper investigation and have not collected nor considered relevant records, documents, statements of witnesses and thus have sufficient and strong arguments on facts as well as on point of law.

The information has been given in respect of such vendors to the extent they could be identified as "Micro and Small" enterprises on the basis of information available with the Company.

As per the objects of the offer stated in the prospectus the Total Net Proceeds received by Company by way of IPO should be deployed during the fiscal years 2016, 2017, 2018 and 2019.

However, if the funds are not utilized within prescribed period for reasons mentioned in prospectus, then such unutilized funds can be utilized in fiscal year 2020 or any subsequent period as may be determined by the company.

Based on the above, the Board of Directors of Company in the board meeting dated February 13, 2019 have decided to extend the utilization of Net Proceeds to the subsequent fiscal years up to March 31, 2021.

* includes in March 31, 2019: INR 13.85 (March 31, 2018: INR 13.85) spent by the Company from bank accounts other than the IPO account.

* The unhedged foreign currency exposure in relation to certain foreign currency balances (SGD, BDT, etc.) have not been included in the above disclosures since the figures have been disclosed in millions.

6. Related party transaction

List of related parties as per the requirements of Ind AS 24 - Related Party Disclosures Related parties where control exists

Quick Heal Technologies America Inc., USA Quick Heal Technologies Japan K.K., Japan Wholly owned subsidiaries Quick Heal Technologies Africa Limited, Kenya

Quick Heal Technologies (MENA) FZE, UAE (Deregistered on February 28, 2018) Seqrite Technologies DMCC, UAE

Related parties with whom transactions have taken place during the year

Kailash Katkar, Managing Director, Chief Executive Officer and ultimate holding shareholder

Sanjay Katkar, Joint Managing Director, Chief Technical Officer and ultimate holding shareholder

Vijay Mhaskar, Chief Operating Officer

Nitin Kulkarni, Chief Financial Officer (w.e.f. May 10, 2018)

Srinivasa Rao Anasingaraju (w.e.f. May 10, 2019)

Rajesh Ghonasgi, Chief Financial Officer (upto February 28, 2018)

Raghav Mulay, Company Secretary (upto January 16, 2019)

Key management personnel Vijay Shirode, Company Secretary (upto June 30, 2017)

Mehul Savla, Independent Director Apurva Joshi, Independent Director Pradeep Bhide, Independent Director (upto April 01, 2019)

Sunil Sethy, Independent Director (upto April 24, 2018)

Priti Rao, Independent Director (w.e.f. April 10, 2018)

Shailesh Lakhani, Non-Executive Director_

Manu Parpia, Independent Director (w.e.f May 10, 2018)

Abhijit Jorvekar, Executive Director and Vice President Sales and Marketing (upto October 12, 2017)

Anupama Katkar (wife of Kailash Katkar and ultimate holding shareholder)

Relatives of key management personnel Chhaya Katkar (wife of Sanjay Katkar and ultimate holding shareholder)

Sneha Katkar (daughter of Kailash Katkar and ultimate holding shareholder)

Kailash Sahebrao Katkar HUF

Enterprises owned by directors or major shareholders Sanjay Sahebrao Katkar HUF

Quick Heal Foundation

7. Related party transaction (contd.)

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables, except for the commitments as disclosed in note 33(b)(A) . For the year ended March 31, 2019, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (March 31, 2018: INR Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

8. (a). Segment

The Company is engaged in providing security software solutions. The Chief Operating Decision Maker (CODM) reviews the information pertaining to revenue of each of the target customer group (segments) as mentioned below. However, based on similarity of activities/ products, risk and reward structure, organization structure and internal reporting systems, the Company has structured its operations into one operating segment viz. anti-virus and as such there is no separate reportable operating segment as defined by Ind AS 108 "Operating segments".

- Retail

- Enterprise and Government

- Mobile

In accordance with paragraph 4 of Ind AS 108 ''Operating segments'', the Company has disclosed segment information only on the basis of the consolidated financial statement.

9. Fair values (Contd.)

The following methods and assumptions were used to estimate the fair values:

(i) The fair value of the quoted mutual fund are based on the price quotations at reporting date. The fair value of unquoted instruments, related parties and other financial liabilities as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

(ii) The fair values of the unquoted equity shares, compulsory convertible preference shares have been estimated using a discounted cash flow (DCF) model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management''s estimate of fair value for these unquoted equity investments.

10. Fair value hierarchy

The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 - Inputs other than quoted prices included with in Level 1 that the observable for the asset or liability, either directly (i.e. as pieces) or indirectly (i.e. derived from prices)

Level 3 - Inputs for the assets or liabilities that are not based on observable market data unobservable inputs

The following table presents the fair value measurement hierarchy of financial assets and liabilities measured at fair value on a recurring basis as at March 31, 2019 and March 31, 2018.

There have been no transfers among Level 1, Level 2 and Level 3 during the year.

11. Financial instruments risk management objectives and policies

The Company''s principal financial liabilities comprise trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations and to support its operations. The Company''s principal financial assets include investments, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company does not have borrowings and derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below:

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include deposits, investments, receivables, payables, advances and other financial instruments. From the perspective of the Company, foreign currency risk is the most significant risk and the impact of interest rate risk and other price risk is not significant. The Company is not exposed to any material price risk.

The Company has certain financial assets and financial liabilities in foreign currencies which expose the Company to foreign currency risks. The foreign currency exposure of the Company has been disclosed in Note 42 to the financial statements.

12. Financial instruments risk management objectives and policies (contd.)

Foreign currency sensitivity

The Company does not take any steps to hedge the foreign currency exposure as mentioned above as the Management believes that there is natural hedge to some extent and balance exposure not really having significant impact on the financial health of the Company.

(b) Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company follows simplified approach for recognition of impairment loss allowance on Trade receivable.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company''s treasury department in accordance with the Company''s policy. Investments of surplus funds are made with banks in terms of fixed deposits and investment in designated mutual funds. Investment decision in mutual fund is taken with the assistance from appointed agent. Credit risk on cash deposits is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Other investments primarily include investment in liquid mutual fund units of reputed companies where historically, the Company has not incurred any loss due to credit risk.

(c) Liquidity risk

The Company had no outstanding bank borrowings as of March 31, 2019 and March 31, 2018. The working capital as at March 31, 2019 was INR 5,686.87 (March 31, 2018: INR 5,080.28) including cash and cash equivalents.

As at March 31, 2019 and March 31, 2018, the outstanding employee obligations were INR 39.49 and INR 34.14 respectively which have been substantially funded. Accordingly, no significant liquidity risk is perceived.

Financial risk management Capital management

For the purpose of the Company''s capital management, capital includes issued equity share capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder''s value. The Company manages its capital and makes adjustments to it in light of the changes in economic and market conditions. The total equity as at March 31, 2019 is INR 7,948.92 (March 31, 2018: INR 7,371.32).

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2019 and March 31, 2018.

The accompanying notes form an integral part of the financial statements.


Mar 31, 2018

1. Corporate information

Quick Heal Technologies Limited (“the Company”), a public company domiciled in India, was incorporated on August 7, 1995 under the Companies Act, 1956. The CIN of the Company is L72200MH1995PLC091408. The Company’s shares are listed on the BSE Limited (‘BSE’) and National Stock Exchange of India Limited (‘NSE’) w.e.f. February 18, 2016. The registered office of the Company is located at Marvel Edge, Office No.7010 C & D, 7th Floor, Viman Nagar, Pune 411014, Maharashtra, India.

The Company is engaged in the business of providing security software products. The Company caters to both domestic and international market.

The standalone financial statements of the Company for the year ended March 31, 2018 were authorised for issue in accordance with a resolution of the Board of Directors on May 10, 2018.

2. Basis of preparation

The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (“Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015, as amended.

The standalone financial statements have been prepared on a historical cost basis, except for certain financial assets which have been measured at fair value. The standalone financial statements are presented in INR Millions; except when otherwise indicated.

3. Significant accounting judgements, estimates and assumptions

The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, including the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgements

In the process of applying the Company’s accounting policies, the management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

Significant judgements is required to apply lease accounting rules under Appendix C to lnd AS 17 ‘Determining whether an arrangement contains a lease’. In assessing the applicability to arrangements entered into by the Company with its

various sub-contractors regarding providing of certain services, the Company has exercised judgment to evaluate the right to use the underlying assets, substance of the transaction including legally enforced arrangements, and other significant terms and conditions of the arrangement to conclude whether the arrangements meets the criteria under Appendix C to lnd AS 17. Based on the evaluation, the Company has concluded that the arrangements do not meet the definition of lease as specified under Appendix C to lnd AS 17.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow (DCF) model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

Defined benefit plans

The cost of the defined benefit gratuity plan and other postemployment benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries.

Further details about gratuity obligations are given in note 31.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer note 46 for further disclosures.

3(a) Standards issued but not yet effective

The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective. The Ministry of Corporate Affairs (‘MCA’) has issued the Companies (Indian Accounting Standards) Amendment Rules, 2017 and Companies (Indian Accounting Standards) Amendment Rules, 2018 amending the following standard

a) Ind AS 115 - Revenue from Contracts with Customers

Ind AS 115 was notified on March 28, 2018 with guidance to account for revenue arising from contracts with customers. Under Ind AS 115, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The new revenue standard will supersede all current revenue recognition requirements under Ind AS. This new standard requires revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. Ind AS 115 is effective for the Company in the first quarter of fiscal 2019 using either one of two methods: (i) retrospectively to each prior reporting period presented in accordance with Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors, with the option to elect certain practical expedients as defined within Ind AS 115 (the full retrospective method); or (ii) retrospectively with the cumulative effect of initially applying Ind AS 115 recognized at the date of initial application (April 1, 2018) and providing certain additional disclosures as defined in Ind AS 115 (the modified retrospective method).

The Company continues to evaluate the available transition methods and its contractual arrangements. The ultimate impact on revenue resulting from the application of Ind AS 115 will be subject to assessments that are dependent on many variables, including, but not limited to, the terms of the contractual arrangements and the mix of business. The Company’s considerations also include, but are not limited to, the comparability of its financial statements and the comparability within its industry from application of the new standard to its contractual arrangements.

Sale of goods

For contracts with customers in which the sale of goods is generally expected to be the only performance obligation, adoption of Ind AS 115 is not expected to have any significant impact on Company’s profit or loss. The Company expects the revenue recognition to occur at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods.

In preparing to adopt Ind AS 115, the Company is considering various other aspects in the same contracts such as elements of multiple element contract, volume rebates, terms of service delivery and other considerations in service sale agreements etc. While the management continue to believe that the impact of Ind AS 115 will not be material, a reliable estimate of the quantitative impact of Ind AS 115 on the financial statements will not be possible once the implementation project has been completed.

b) Amendments to Ind AS 112 Disclosure of Interests in Other Entities: Clarification of the scope of disclosure requirements in Ind AS 112

The amendments clarify that the disclosure requirements in Ind AS 112, other than those in paragraphs B10-B16, apply to an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale.

As the Company has not included in disposal group/ classified as held for sale any of its subsidiary, joint ventures or associate. Accordingly, the amendments in Ind AS 112 will not have any impact on the Company.

c) Amendments to Ind AS 12 Recognition of Deferred Tax Assets for Unrealised Losses

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.

Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact.

These amendments are effective for annual periods beginning on or after April 1, 2018. These amendments are not expected to have any impact on the Company as the Company has no deductible temporary differences or assets that are in the scope of the amendments.

d) Transfers of Investment Property - Amendments to Ind AS 40

The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management’s intentions for the use of a property does not provide evidence of a change in use.

Entities should apply the amendments prospectively to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. An entity should reassess the classification of property held at that date and, if applicable, reclassify property to reflect the conditions that exist at that date. Retrospective application in accordance with Ind AS 8 is only permitted if it is possible without the use of hindsight.

The amendments are effective for annual periods beginning on or after April 1, 2018. The Company will apply amendments when they become effective. Since the Company does not have any such transaction, this amendment does not have any effect of the financial statements of the Company.

e) Appendix B to Ind AS 21 Foreign Currency Transactions and Advance Consideration

The Appendix clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or nonmonetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the transaction date for each payment or receipt of advance consideration.

Entities may apply the Appendix requirements on a fully retrospective basis. Alternatively, an entity may apply these requirements prospectively to all assets, expenses and income in its scope that are initially recognised on or after:

(i) The beginning of the reporting period in which the entity first applies the Appendix, or

(ii) The beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the Appendix.

The Appendix is effective for annual periods beginning on or after April 1, 2018. Since the Company does not have any such transaction, this amendment does not have any effect of the financial statements of the Company.

Note:-

1. The value of land has been estimated based on the stamp duty valuation rate

2. Additions of building includes office building (including share in undivided portion of land) taken on long term lease i.e. 999 years.

3. The Company had elected to continue with the carrying value of property, plant and equipment as recognised in the financial statements as per previous GAAP and had regarded those values as the deemed cost on the date of transition (i.e. April 01, 2015). The Company has disclosed the gross block and accumulated depreciation above, for information purpose only. The total gross cost and corresponding total accumulated depreciation as at March 31, 2018 and March 31, 2017 as disclosed above should be adjusted (at least) by an amount of INR 228.19 (representing accumulated depreciation as at April 01, 2015) to compute the cost and accumulated depreciation as per IND AS. Such adjustment will have no impact on the net block as at March 31, 2018 and March 31, 2017.

1. The Company had elected to continue with the carrying value of intangible assets as recognised in the financial statements as per previous GAAP and had regarded those values as the deemed cost on the date of transition (i.e. April 01, 2015). The Company has disclosed the gross block and accumulated amortisation above, for information purpose only. The total gross cost and corresponding total accumulated amortisation as at March 31, 2018 and March 31, 2017 as disclosed above should be adjusted (at least) by an amount of INR 174.39 (representing accumulated amortisation as at April 01, 2015) to compute the cost and accumulated amortisation as per IND AS. Such adjustment will have no impact on the net block as at March 31, 2018 and March 31, 2017.

No loans are due from directors or other officers of the Company either severally or jointly with any other person. Nor any loans are due from firms or private companies respectively in which any director is a partner, a director or a member.

Loans are non-derivative financial assets which generate a fixed or variable interest income for the Company. The carrying value may be affected by changes in the credit risk of the counterparties.

* The Company has identified an impairment of INR Nil (March 31, 2017: INR 35.00) on loan to Wegilant Net Solutions Private Limited. The impairment on FVTPL financial assets was recognised as an exceptional item in the statement of profit and loss for the year ended March 31, 2017.

Out of the total deposits, INR 2.92 (March 31, 2017: INR Nil) are pledged against bank guarantees.

* The Company has identified an impairment of INR Nil (March 31, 2017: INR 2.80) on interest accrued on loan to Wegilant Net Solutions Private Limited. The impairment on FVTPL financial assets was recognised as an exceptional item in the statement of profit and loss for the year ended March 31, 2017.

No trade or other receivable are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member. Trade receivables are non interest bearing and generally on credit terms of 30 to 60 days.

For terms and condition relating to related party receivables, refer note 44.

(b) Terms / rights attached to equity shares

The Company has only one class of equity shares having par value of INR 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in ensuing Annual General Meeting.

The Board of Directors, in their meeting on May 12, 2017, proposed a final dividend of INR 2.50 per equity share and the same was approved by the shareholders at the Annual General Meeting held on August 11, 2017. The amount was recognized as distributions to equity shareholders during the year ended March 31, 2018 and the total appropriation was INR 211.19 including dividend distribution tax.

The Board of Directors, in their meeting on May 10, 2018, have proposed a final dividend of INR 3 per equity share for the financial year ended March 31, 2018. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held and if approved would result in a cash outflow of approximately INR 254.15 including dividend distribution tax.

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

(c) Shares held by holding/ ultimate holding Company and /or their subsidiaries/ associates

None.

(f) Shares reserved for issue under option

For details of shares reserved for issue under ESOP of the Company, please refer note 32.

Employee stock options outstanding account

The Company has two employee stock option schemes under which options to subscribe for the Company’s shares have been granted to certain executives and senior employees. The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer note 32 for further details of these plans.

Amalgamation reserve

Pursuant to the scheme of amalgamation (“the Scheme”) sanctioned by the Honourable High Court of Bombay vide Order dated April 8, 2011, Cat Labs Private Limited (CLPL), subsidiary of the Company, had been merged with the Company with effect from April 1, 2010, the Appointed Date. The Company completed the process of amalgamation on May 2, 2011 on filing of above Court Orders with the Registrar of Companies. Accordingly, an amount of INR 26.45 was recorded as amalgamation reserve.

Terms and conditions of the above financial and other liabilities:

- Trade payables are non-interest bearing and have an average term of 60 days.

- Payables for purchases of fixed assets are non interest bearing and have an average term of 90 days.

- Other liabilities (other than taxes) are non interest bearing and have an average term of 45 days.

- Taxes such as tax deducted at source and goods and service tax / sales tax / Vat payable, provident fund and other taxes are non interest bearing and are generally paid within the due date.

The Company offsets the tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

4. Earnings per share (EPS)

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year.

Diluted EPS amounts are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on exercise of stock option.

The following reflects the income and share data used in the basic and diluted EPS computations:

5. Gratuity benefit plans

The Company has a defined benefit gratuity plan (funded) for its employees. The Company’s defined benefit gratuity plan is a final salary plan for its employees, which requires contributions to be made to a separately administered fund. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member’s length of service and salary at retirement age. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn) for each completed year of service as per the provisions of the Payment of Gratuity Act, 1972.

The following table summarises the components of net benefit expense recognised in the statement of profit and loss and the funded status and the amounts recognised in the balance sheet for the gratuity plan.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been no change in expected rate of return on assets

The sensitivity analysis above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

6. Share based arrangements

Share based payment arrangement 2010

On June 10, 2010, the Board of Directors approved the Equity Settled Share Based Payment Arrangement (SBPA), for issue of stock options to the employees and directors of the Company. According to the SBPA 2010, the employee selected by the Board of Directors from time to time will be entitled for scheme options, subject to satisfaction of the prescribed vesting conditions, viz., continued employment and performance parameters of employee. The contractual life (comprising the vesting period and the exercise period) of options and the other relevant terms of the grant are as below:

The weighted average share price at the date of exercise of these options, as at March 31, 2018 was INR 214.61.

The weighted average share price at the date of exercise of these options, as at March 31, 2017 was INR 263.45.

Share based payment arrangement 2014

On February 6, 2014, the board of directors approved the Equity Settled ESOP Scheme 2014 (“ESOP Scheme 2014”) for issue of stock options to the employees and directors of the Company. According to the ESOP 2014, the employee selected by the Board of Directors from time to time will be entitled for scheme options, subject to satisfaction of the prescribed vesting conditions, viz., continued employment and performance parameters of employee. The contractual life (comprising the vesting period and the exercise period) of options and the other relevant terms of the grant are as below:

The weighted average share price at the date of exercise of these options, as at March 31, 2018 was INR 222.48

The weighted average share price at the date of exercise of these options, as at March 31, 2017 was INR 250.59.

Manner in which the fair value of the stock option granted during the period was determined:

The weighted average fair value of stock options granted during the year was INR 65.26 (March 31, 2017: INR 82.59). The Black and Scholes valuation model has been used for computing the weighted average fair value considering the following inputs:

7. Commitments and contingencies

a. Operating lease - Company as a lessee

The Company has obtained office premises under operating lease agreements out of which there is a lease agreement for an office premise for 6 years with a lock-in period of 3 years. These are generally cancellable and are renewable by mutual consent on mutually agreed terms. There are no restrictions imposed by lease agreements. There are no subleases. The details are as follows:

Finance lease - Company as a lessee

The Company has finance leases contracts for building purchased during the financial year ended March 31, 2015. These leases involve upfront payment to the lessor as and by way of premium for grant of lease of the building by the lessor to the lessee. No lease rent was payable by the lessee to the lessor for grant of lease from lessee. There is no escalation clause and no minimum lease payments (MLP) under finance lease.

b. Commitments

Note A

The Company has provided letters committing continuing financial support to its subsidiaries; Quick Heal Technologies Japan K.K., Quick Heal Technologies Africa Limited, Quick Heal Technologies America Inc. and Seqrite Technologies DMCC to meet their day to day obligations / commitments; to the extent these entities may be unable to meet their obligations.

c. Contingent liabilities

i) During the previous year and earlier years, the Company has received three statement of demands of service tax under the provisions of Finance Act, 1994 for INR 1,223.07 Million (excluding penalty of INR 626.97 Million and predeposit if any) covering the period from March 01, 2011 to March 31, 2016 on supply of anti-virus software in Compact Disk. The Company had filed an appeal with Customs, Excise and Service Tax Appellate Tribunal, New Delhi for the period March 01, 2011 to March 31, 2014 and with the Customs, Excise and Service Tax Appellate Tribunal, Mumbai for the period April 01, 2014 to March 31, 2015. Based on technical circular issued by the government authorities and an independent legal opinion, the Company is confident of getting this claim set aside and accordingly no provision for liability has been recognised in the financial statements and the demand has been disclosed as contingent liability.

ii) During the year ended March 31, 2015, the Company had received a notice of demand of VAT in the state of Kerala for INR 0.15 (VAT liability INR 0.13, Interest INR 0.02 and excluding penalty) in relation to stock transfers of anti-virus products transferred to Branch. The Company had appealed the same before the first level appellate authority in previous year. During the year ended March 31, 2018, the hearing was completed and appeal filed by the Company was dismissed by the first level appelate authority, accordingly management has provided for VAT liability, interest and penalty in the books of accounts.

d. Other litigations

i) During the previous year, the suit filed before the Civil Judge (Senior Division) at Serampore Court, Hooghly District, West Bengal by one of the erstwhile distributor of the Company against the Company and others, claiming Intellectual Property Rights to one of the brand names (Quick Heal - Total Security) and alleging illegal usage of said brand name by the Company and the suit filed before the City Civil Court, Calcutta by certain individuals who are relative of the erstwhile distributor claiming ownership of certain shares of the Company have been dismissed by the respective Courts.

ii) In February 2016, one of the erstwhile distributor instituted a suit at High Court, Calcutta against the Company and others claiming INR 16,100 for various reasons including loss of business profits, loss of capital assets & infrastructure etc. With respect to the above matters, the Company believes that the suits are frivolous and is seeking dismissal of the suits. The Company also believes that they have sufficient and strong arguments on facts as well as on point of law and accordingly no provision in this regard has been recognised in the financial results.

iii) The Director of one of the erstwhile vendor had filed a First information Report (FIR) in June 2014 at Baddi Police Station, Himachal Pradesh, against certain directors and employees of the Company. The police investigated the case and came to the conclusion that there was no truth to the allegations in the FIR. The director of one of the erstwhile vendor subsequently filed a writ petition before the Himachal Pradesh High Court against the State of Himachal Pradesh and others against the said finding of the police. The said writ petition was dismissed by Hon’ble Himalchal Pradesh High Court vide order dated March 23, 2018.

8. Details of dues to micro and small enterprises as defined under Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006)

There are no amounts as at March 31, 2018 (March 31, 2017: Nil) that need to be disclosed pertaining to Micro and Small Enterprises under MSMED Act, 2006. As at March 31, 2018 and March 31, 2017, the disclosure has been made on the basis of intimation provided by the supplier to the Company.

The loan given to Wegilant Net Solutions Private Limited had been utilized for meeting their working capital requirements and for their business operations.

The amount due amounting to INR 35 (March 31, 2017 INR 35) has been provided for by the company.

9. Utilization of money raised through public issue

During the year ended March 31, 2016, the Company has raised INR 4,512.53 through public issue, specifically to meet the following objects of the Offer. The utilisation of IPO proceeds during the year ended March 31, 2018 and March 31, 2017 against the following objects of the Offer is as follows:

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel. The remuneration and perquisites on account of ESOP to key management personnel does not include employee stock compensation expense. The non-executive and independent directors do not receive gratuity entitlements from the Company.

Share options held by executive members of the Board of Directors under the Share Based Payment arrangement to purchase equity shares have the following expiry dates and exercise prices:

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables, except for the commitments as disclosed in note 33(b)(A) . For the year ended March 31, 2018, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (March 31, 2017: INR Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

10 (a). Segment

The Company is engaged in providing security software solutions. The Chief Operating Decision Maker (CODM) reviews the information pertaining to revenue of each of the target customer group (segments) as mentioned below. However, based on similarity of activities/ products, risk and reward structure, organisation structure and internal reporting systems, the Company has structured its operations into one operating segment viz. anti-virus and as such there is no separate reportable operating segment as defined by Ind AS 108 “Operating segments”.

- Retail

- Enterprise and Government

- Mobile

In accordance with paragraph 4 of Ind AS 108 ‘Operating segments’, the Company has disclosed segment information only on the basis of the consolidated financial statement.

10 (d). Exceptional items

Exceptional items includes impairment of investment in wholly owned subsidiaries amounting to INR 75.09 Million (March 31, 2017: INR 6.33 Million). It also included INR Nil (March 31, 2017: INR 37.80 Million) towards impairment of financial assets being loan to and interest receivable from Wegilant Net Solutions Private Limited.

The management assessed that the fair value of cash and cash equivalents, trade receivables, trade payables and other current financial assets and liabilities approximate their carrying amounts largely due to the short term maturities of these instruments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

(i) The fair value of the quoted mutual fund are based on the price quotations at reporting date. The fair value of unquoted instruments, related parties and other financial liabilities as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

(ii) The fair values of the unquoted equity shares, compulsory convertible preference shares have been estimated using a discounted cash flow (DCF) model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate of fair value for these unquoted equity investments.

11. Fair value hierarchy

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 - Inputs other than quoted prices included with in Level 1 that the observable for the asset or liability, either directly (i.e. as pieces) or indirectly (i.e. derived from prices)

Level 3 - Inputs for the assets or liabilities that are not based on observable market data unobservable inputs

The following table presents the fair value measurement hierarchy of financial assets and liabilities measured at fair value on a recurring basis as at March 31, 2018 and March 31, 2017.

12. Financial instruments risk management objectives and policies

The Company’s principal financial liabilities comprise trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations and to support its operations. The Company’s principal financial assets include investments, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company does not have borrowings and derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include deposits, investments, receivables, payables, advances and other financial instruments. From the perspective of the Company, foreign currency risk is the most significant risk and the impact of interest rate risk and other price risk is not significant. The Company is not exposed to any material price risk.

The Company has certain financial assets and financial liabilities in foreign currencies which expose the Company to foreign currency risks. The foreign currency exposure of the Company has been disclosed in Note 44 to the financial statements.

The Company does not take any steps to hedge the foreign currency exposure as mentioned above as the Management believes that there is natural hedge to some extent and balance exposure not really having significant impact on the financial health of the Company.

Foreign currency sensitivity

The Company does not take any steps to hedge the foreign currency exposure as mentioned above as the Management believes that there is natural hedge to some extent and balance exposure not really having significant impact on the financial health of the Company.

(b) Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company follows simplified approach for recognition of impairment loss allowance on Trade receivable.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made with banks in terms of fixed deposits and investment in designated mutual funds. Investment decision in mutual fund is taken with the assistance from appointed agent. Credit risk on cash deposits is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Other investments primarily include investment in liquid mutual fund units of reputed companies where historically, the Company has not incurred any loss due to credit risk.

(c) Liquidity risk

The Company had no outstanding bank borrowings as of March 31, 2018 and March 31, 2017. The working capital as at March 31, 2018 was INR 5,080.28 (March 31, 2017: INR 4,131.35) including cash and cash equivalents.

As at March 31, 2018 and March 31, 2017, the outstanding employee obligations were INR 34.14 and INR 37.15 respectively which have been substantially funded. Accordingly, no significant liquidity risk is perceived.

The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.

Financial risk management Capital management

For the purpose of the Company’s capital management, capital includes issued equity share capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder’s value. The Company manages its capital and makes adjustments to it in light of the changes in economic and market conditions. The total equity as at March 31, 2018 is INR 7,397.48 (March 31, 2017: INR 6,790.52).

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2018 and March 31, 2017.


Mar 31, 2017

No loans are due from directors or other officers of the Company either severally or jointly with any other person. Nor any loans are due from firms or private companies respectively in which any director is a partner, a director or a member.

Loans are non-derivative financial assets which generate a fixed or variable interest income for the Company. The carrying value may be affected by changes in the credit risk of the counterparties.

In the current year, the Company has identified an impairment of Rs. 35.00 (March 31,2016: Nil; April 1,2015: Nil) on loan to Wegilant Net Solutions Private Limited. The impairment on FVTPL financial assets has been recognized as an exceptional item in the statement of profit and loss.

1. Terms / rights attached to equity shares

The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in ensuing Annual General Meeting.

The Board of Directors, in their meeting on August 17,2015 declared an interim dividend of Rs. 6.60 per equity share for the year ended March 31,2015, which resulted in cash outflow of Rs. 485.11 inclusive of dividend distribution tax. The amount was recognized as distributions to equity shareholders during the year ended March 31,2016.

The Board of Directors, in their meeting on May 11,2016, proposed a final dividend of Rs. 2.50 per equity share and the same was approved by the shareholders at the Annual General Meeting held on August 5, 2016. The amount was recognized as distributions to equity shareholders during the year ended March 31, 2017 and the total appropriation was Rs. 210.73 including dividend distribution tax.

The Board of Directors, in their meeting on May 12,2017, have proposed a final dividend of Rs. 2.5 per equity share for the financial year ended March 31,2017. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held and if approved would result in a cash outflow of approximately Rs. 210.94 including dividend distribution tax."

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

2. Shares held by holding/ ultimate holding company and /or their subsidiaries/ associates None.

The shareholding information has been extracted from the records of the Company including register of shareholders/ members and is based on legal ownership of shares.

3. Shares reserved for issue under option

For details of shares reserved for issue under ESOP of the Company, please refer note 32.

Securities premium account

Increase during the financial year 2015-16 is due to issuance of ordinary equity shares through initial public offer (refer Note 15(a)) and issuance of ordinary equity shares exercised under employee stock option scheme. Further it has been adjusted on account of share issue expenses.

Employee stock options outstanding account

The Company has two employee stock option schemes under which options to subscribe for the Company''s shares have been granted to certain executives and senior employees. The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer note 32 for further details of these plans.

Amalgamation reserve

Pursuant to the scheme of amalgamation ("the Scheme") sanctioned by the Honourable High Court of Bombay vide Order dated April 8, 2011, Cat Labs Private Limited (CLPL), subsidiary of the Company, had been merged with the Company with effect from April 1,2010, the Appointed Date. The Company completed the process of amalgamation on May 2,2011 on filing of above Court Orders with the Registrar of Companies. Accordingly, an amount of Rs. 26.45 was recorded as amalgamation reserve.

4. Earnings per share (EPS)

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year. Diluted EPS amounts are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on exercise of stock option.

5. Gratuity benefit plans

The Company has a defined benefit gratuity plan (funded) for its employees.The Company''s defined benefit gratuity plan is a final salary plan for its employees, which requires contributions to be made to a separately administered fund. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member''s length of service and salary at retirement age. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn) for each completed year of service as per the provisions of the Payment of Gratuity Act, 1972.

6. Share based arrangements

Share based payment arrangement 2010

On June 10, 2010, the Board of Directors approved the Equity Settled Share Based Payment Arrangement (SBPA), for issue of stock options to the employees and directors of the Company. According to the SBPA 2010, the employee selected by the Board of Directors from time to time will be entitled for scheme options, subject to satisfaction of the prescribed vesting conditions, viz., continued employment and performance parameters of employee. The contractual life (comprising the vesting period and the exercise period) of options and the other relevant terms of the grant are as below:

The weighted average share price at the date of exercise of these options, as at March 31,2017 was Rs. 263.45.

The weighted average share price at the date of exercise of these options, as at March 31,2016 was Rs. 40.88.

Share based payment arrangement 2014

On February 6, 2014, the board of directors approved the Equity Settled ESOP Scheme 2014 for issue of stock options to the employees and directors of the Company. According to the ESOP 2014, the employee selected by the Board of Directors from time to time will be entitled for scheme options, subject to satisfaction of the prescribed vesting conditions, viz., continued employment and performance parameters of employee. The contractual life (comprising the vesting period and the exercise period) of options and the other relevant terms of the grant are as below:

For share options exercised during the reporting period, the weighted average share price at the date of exercise, or if options were exercised on a regular basis throughout the reporting period, the entity may instead disclose the weighted average share price during the reporting period.

The weighted average share price at the date of exercise of these options, as at March 31,2017 was Rs. 250.59.

The weighted average share price at the date of exercise of these options, as at March 31,2016 was Rs. 110.00.

7. Commitments and contingencies

8. Operating lease - Company as a lessee

The Company has obtained office premises under operating lease agreements out of which there is a lease agreement for an office premise for 6 years with a lock-in period of 3 years. These are generally cancellable and are renewable by mutual consent on mutually agreed terms. There are no restrictions imposed by lease agreements. There are no subleases. The details are as follows:

Note 9

During the year ended March 31,2016, the Company had entered into an agreement for making an investment of Rs. 60 in equity shares of Smartalyse Technologies Private Limited ("Smartalyse") by way of two tranches of Rs. 30 each. The Company had already made in investment ofRs. 30 in Smartalyse which has been disclosed under ‘on-current investment''. The second tranches of investment will be made within a period of 9 months from the date of execution of the agreement (i.e. November 3,2015) upon satisfaction of certain terms and conditions as enunciated in the agreement. Subsequently, during the year ended March 31,2017, the Company has made the second tranche of an investment of Rs. 30 in Smartalyse.

Note 10

The Company has provided letters committing continuing financial support to its subsidiaries; Quick Heal Technologies Japan K.K., Quick Heal Technologies Africa Limited, Quick Heal Technologies America Inc., Quick Heal Technologies (MENA) FZE and Seqrite Technologies DMCC to meet their day to day obligations / commitments; to the extent these entities may be unable to meet their obligations.

Finance lease - Company as a lessee

The Company has finance leases contracts for building purchased during the financial year ended March 31,2015. These leases involve upfront payment to the lessor as and by way of premium for grant of lease of the building by the lessor to the lessee. No lease rent was payable by the lessee to the lessor for grant of lease from lessee. There is no escalation clause and no minimum lease payments (MLP) under finance lease.

11. During the year ended March 31, 2016, the Company had received a statement of demand dated January 28, 2016 in relation to service tax for Rs. 560.71 (excluding penalty of Rs. 560.72) for the period from March 01, 2011 to March 31, 2014 on anti-virus software in Compact Disk issued by Additional Director General, New Delhi. The Company had filed an appeal with the Customs, Excise and Service Tax Appellate Tribunal against the said order. The management has represented, based on legal opinion obtained by the Company, that they have sufficient and strong arguments on fact as well as on point of law and outflow is not probable. Accordingly, no provision for liability has been recognized in the financial statements and the demand has been disclosed as contingent liability as at March 31, 2017, March 31, 2016 and April 1, 2015.

12. During the year ended March 31, 2016, the Company had received statement of demand dated January 25, 2016, in relation to the Service tax of Rs. 285.35 (excluding interest and penalties) for the period April 2014 to March 2015 on supply of anti-virus replicated CDs/DVDs along with license keys through dealers/ distributors to end customers in India issued by Principal Commissioner of Service tax, Pune. During the year ended March 31, 2017, the Company has received an order dated March 31, 2017 confirming the demand of Rs. 285.35 (excluding penalty of Rs. 28.55). The Company is in the process of filing a reply against the said notice with appropriate authority. The management has represented, based on legal opinion obtained by the Company, that they have sufficient and strong arguments on fact as well as on point of law and outflow is not probable. Accordingly, no provision for liability has been recognized in the financial statements and the demand has been disclosed as contingent liability as at March 31, 2017, March 31, 2016 and April 1, 2015.

Based on the grounds mentioned in point (i) and (ii) above, the Company has not recognized provision for liability in the financial statements in relation to the potential consequential liability for service tax for the period April 1, 2015 to March 31,2017."

13. During the year ended March 31,2015, the Company had received a notice of demand of VAT in the state of Kerala for Rs. 0.15 (VATRs. 0.13; Interest Rs. 0.02 and excluding penalty) on the ground of dispute in the stock transfer of antivirus products transferred to the Branch. The Company had appealed the same before the first level appellate authority and the management had represented that they have sufficient and strong arguments on facts as well as on point of law and outflow is not probable. Accordingly, no provision for liability has been recorded in the financial statements and the demand has been disclosed as contingent liability as at March 31, 2017, March 31, 2016 and April 1,2015.

14. This represented disputed income tax demand of Rs. 3.50 (including interest of Rs. 0.36 and excluding penalty) under section 156 of the Income-tax Act, 1961 related to A.Y. 2010-11 .The Company had filed appeals against assessment order with relevant authorities and have received favourable order.

15. Other litigations

16. During the current year, the suit filed before the Civil Judge (Senior Division) at Serampore Court, Hooghly District, West Bengal by one of the erstwhile distributor of the Company against the Company and others, claiming Intellectual Property Rights to one of the brand names (Quick Heal - Total Security) and alleging illegal usage of said brand name by the Company and the suit filed before the City Civil Court, Calcutta by certain individuals who are relative of the erstwhile distributor claiming ownership of certain shares of the Company have been dismissed by the respective Courts.

17. In February 2016, one of the erstwhile distributor instituted a suit at High Court, Calcutta against the Company and others claiming Rs. 16,100 for various reasons including loss of business profits, loss of capital assets & infrastructure etc. With respect to the above matters, the Company believes that the suits are frivolous and is seeking dismissal of the suits. The Company also believes that they have sufficient and strong arguments on facts as well as on point of law and accordingly no provision in this regard has been recognized in the financial results.

18 The Director of one of the erstwhile vendor had filed a First information Report (FIR) in June 2014 at Baddi Police Station, Himachal Pradesh, against certain directors and employees of the Company. The police investigated the case and came to the conclusion that there was no truth to the allegations in the FIR. The director of one of the erstwhile vendor subsequently filed a writ petition before the Himachal Pradesh High Court against the State of Himachal Pradesh and others against the said finding of the police.

19. Details of dues to micro and small enterprises as defined under Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006)

There are no amounts as at March 31, 2017 (March 31, 2016: Nil) that need to be disclosed pertaining to Micro and Small Enterprises under MSMED Act, 2006. As at March 31, 2017 and March 31, 2016, the disclosure has been made on the basis of intimation provided by the supplier to the Company.

20. Share issue expenses recoverable

During the year ended March 31, 2016, the Company had completed its Initial Public Offer (IPO) through an Offer for Sale of 6,269,558 equity shares and a fresh issue of 7,788,161 equity shares at a price of Rs. 321 per share (including share premium of Rs. 311 per equity share). Sequoia Capital India Investments III, which was holding 2,501,984 equity shares in the Company offered its entire holding in the Offer for Sale. Sequoia Capital India Investment Holdings III offered 87,574 equity shares, Mr. Kailash Katkar.and Sanjay Katkar offered 1,840,000 equity shares and 1,840,000 equity shares, respectively in the Offer for Sale in order to comply with SEBI''s requirement of maximum holding of promoter and promoter group to 75%. Since the issue was an Offer for Sale and a fresh issue, all the share issue expenses related to the IPO have been proportionately distributed between the Company and the selling shareholders.

Share issue expenses

Other financial assets comprises share issue expenses incurred in connection with proposed Initial Public offer (IPO) only by way of offer for sale by existing shareholders of the Company and a fresh issue offered to public. These receivables includes fees paid to bankers, stock exchanges, SEBI, lawyers, auditors, etc., in connection with the IPO of the Company. As per offer agreement between the Company and the selling shareholders, all expenses with respect to the IPO have been proportionately distributed between the Company and the selling shareholders. Accordingly, the Company has classified the expenses incurred in connection with the IPO as receivable from selling shareholders under other receivables, since these are not the expenses for the Company.

21. Segment

The Company is engaged in providing security software solutions. The Chief Operating Decision Maker (CODM) reviews the information pertaining to revenue of each of the target customer group (segments) as mentioned below. However, based on similarity of activities/products, risk and reward structure, organization structure and internal reporting systems, the Company has structured its operations into one operating segment viz. anti-virus and as such there is no separate reportable operating segment as defined by Ind AS 108"0perating segments".

- Retail

- Enterprise and Government

- Mobile

In accordance with paragraph 4 of Ind AS 108''Operating segments'', the Company has disclosed segment information only on the basis of the consolidated financial statement.

22. Delay in filing of Form FC-GPR

During the previous year there was an un-intentional delay in reporting of foreign inward remittances and filing of form FC-GPR in respect of the shares allotted to non- resident shareholders in the Form FC - GPR as required under the FDI Regulations of FEMA1999, which was due to delay in receipt of foreign inward remittance certificates from the authorized dealers (AD). The said Form FC-GPR had been submitted for filing by the Company to AD.

23. Exceptional items

Exceptional items includes Rs. 37.80 (March 31, 2016: Rs. Nil) towards impairment of financial assets being loan to and interest receivable from Wegilant Net Solutions Private Limited. It also includes impairment of investment in Quick Heal Technologies (MENA) FZE, UAE amounting to Rs. 6.33 (March 31,2016: Rs. Nil).

The management assessed that the fair value of cash and cash equivalents, trade receivables, trade payables and other current financial assets and liabilities approximate their carrying amounts largely due to the short term maturities of these instruments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

24. The fair value of the quoted mutual fund are based on the price quotations at reporting date. The fair value of unquoted instruments, related parties and other financial liabilities as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

25. The fair values of the unquoted equity shares, compulsory convertible preference shares have been estimated using a discounted cash flow (DCF) model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management''s estimate of fair value for these unquoted equity investments.

Level 3 - Inputs for the assets or liabilities that are not based on observable market data unobservable inputs

The following table presents the fair value measurement hierarchy of financial assets and liabilities measured at fair value on a recurring basis as at March 31,2017, March 31,2016 and April 1,2015.

26. Financial instruments risk management objectives and policies

The Company''s principal financial liabilities comprise trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations and to support its operations. The Company''s principal financial assets include investments, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company does not have borrowings and derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below:

27. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include deposits, investments, receivables, payables, advances and other financial instruments. From the perspective of the Company, foreign currency risk is the most significant risk and the impact of interest rate risk and other price risk is not significant. The Company is not exposed to any material price risk.

The Company has certain financial assets and financial liabilities in foreign currencies which expose the Company to foreign currency risks. The foreign currency exposure of the Company has been disclosed in Note 45 to the financial statements.

The Company does not take any steps to hedge the foreign currency exposure as mentioned above as the Management believes that there is natural hedge to some extent and balance exposure not really having significant impact on the financial health of the Company.

28. Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company follows simplified approach for recognition of impairment loss allowance on Trade receivable.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company''s treasury department in accordance with the Company''s policy. Investments of surplus funds are made with banks in terms of fixed deposits and investment in designated mutual funds. Investment decision in mutual fund is taken with the assistance from appointed agent. Credit risk on cash deposits is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Other investments primarily include investment in liquid mutual fund units of reputed companies where historically, the Company has not incurred any loss due to credit risk.

29. Liquidity risk

The Company had no outstanding bank borrowings as of March 31,2017, March 31,2016 and April 1,2015. The working capital as at March 31,2017 was Rs. 4,131.35 (March 31, 2016: Rs. 4,020.55; April 1,2015: Rs. 1,710.47) including cash and cash equivalents.

As at March 31,2017, March 31,2016 and April 1,2015, the outstanding employee obligations were Rs. 37.15, Rs. 33.13 and Rs. 31.50 respectively which have been substantially funded. Accordingly, no significant liquidity risk is perceived.

Financial risk management Capital management

For the purpose of the Company''s capital management, capital includes issued equity share capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder''s value. The Company manages its capital and makes adjustments to it in light of the changes in economic and market conditions. The total equity as at March 31, 2017 is Rs. 6,790.52 (March 31, 2016: Rs. 6,399.97 and April 1, 2015: Rs. 3,872.65).

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2017, March 31, 2016 and April 1,2015.

30.. First time adoption of Ind AS

As stated in note 2, these are the Company''s first financial statements prepared in accordance with Ind AS.

The accounting policies set out in note 3 have been applied in preparing the financial statements for the year ended March 31, 2017, the comparative information presented in these financial statements for the year ended March 31, 2016 and in the preparation of an opening Ind AS balance sheet as at April 1, 2015 (the Company''s date of transition).

These financial statements, for the year ended March 31,2017, are the first financial statement which Company has prepared in accordance with Ind AS. In preparing these financial statements. Company''s opening statement of financial position was prepared as at April 1,2015, the Company''s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 1,2015 and the financial statements as at and for the year ended March 31,2016.

In preparing its opening Ind AS balance sheet, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Indian GAAP. An explanation of how the transition from Indian GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flow is set out below.

In preparing its opening Ind AS balance sheet, the Company has applied the following principles for assets, liabilities and equity forming part of the combined financial statements:

Recognize all assets and liabilities whose recognition is required by Ind ASs;

Not recognize items as assets and liabilities if Ind ASs do not permit such recognition;

Reclassify items that it recognized in accordance with previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity in accordance with IndAS; and apply Ind ASs in measuring all recognized assets and liabilities.

Exemptions available under Ind AS 101

In preparing these financial statements, the Company has availed itself of certain exemptions and exceptions in accordance with Ind AS 101 as explained below:

31. Since there is no change in functional currency, the Company has elected to continue with the carrying value for all of its Property, plant and equipment and Intangible assets as recognized in its Indian GAAP financial statements as deemed cost at the date of transition.

32. Ind AS 102 Share-based Payment has not been applied to equity instruments in share-based payment transactions that vested before April 1,2015.

33. The Company has elected to continue use the Indian GAAP carrying amount for investment in subsidiaries as deemed cost as at the date of transition.

Exceptions from full retrospective application:

Estimates

The estimates at April 1,2015 and at March 31,2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:

FVTOCI - unquoted equity shares

FVTPL - debt securities

Impairment of financial assets based on expected credit loss model

The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at April 1, 2015, the date of transition to Ind AS and as of March 31,2016.

Explanation of transition to Ind AS:

The below mentioned reconciliations provide a quantification of the effect of significant differences arising from the transition from Indian GAAP to Ind AS in accordance with Ind AS 101 for the following:

- equity as at April 1,2015;

- equity as at March 31,2016; and

- profit for the year ended March 31,2016

There are no material adjustments to the cash flow statements

In the reconciliations mentioned above, certain reclassifications have been made to Indian GAAP financial information to align with the Ind AS presentation.

34. FVTOCI financial assets

Under Indian GAAP, the Company accounted for long term investments in unquoted equity shares and preference shares as investment measured at cost less provision for other than temporary diminution in the value of investments. Under Ind AS, the Company has designated such investments as FVTOCI investments. Ind AS requires FVTOCI investments to be measured at fair value. The difference between the instrument''s fair value and Indian GAAP carrying amount has been recognized as a separate component of equity, in the FVTOCI reserve.

35. FVTPL financial assets

Under Indian GAAP, the Company accounted for investment in mutual funds as investment measured at lower of cost and market value. Under Ind AS, the Company has classified such investments as FVTPL investments. Ind AS requires FVTPL investments to be measured at fair value. The difference between the instrument''s fair value and Indian GAAP carrying amount has been recognized in retained earnings, as at transition date and in statement of profit and loss for the year ended March 31,2016.

36. Employee stock option

Under Indian GAAP, the Company recognized only the intrinsic value for the long-term incentive plan as an expense. Ind AS requires the fair value of the share options to be determined using an appropriate pricing model recognized over the vesting period. An additional expense of Rs. 2.44 million has been recognized in statement of profit and loss for the year ended March 31,2016. Share options which were granted before and still vesting at April 1,2015, have been recognized as a separate component of equity in ESOP reserve against retained earnings as at April 1,2015.

37. Defined benefit obligation

Both under Indian GAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to statement of profit and loss. Under Ind-AS, re-measurements [comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability] are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI.

38. Deferred tax

Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP.

In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognized in correlation to the underlying transaction in retained earnings as at transition date and statement of profit and loss for the year ended March 31,2016.

39. Other equity

Consequential impact of the abovementioned Ind AS Adjustments have been considered in retained earnings and other comprehensive income.

40. Other comprehensive income

Under Indian GAAP, the Company has not presented other comprehensive income (OCI) separately. Hence, it has reconciled Indian GAAP profit or loss to profit or loss as per Ind AS. Further, Indian GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.

41. Other payables

Under Indian GAAP, proposed dividends including DDT are recognized as a liability in the year to which they relate, irrespective of when they are declared. Under Ind AS, a proposed dividend is recognized as a liability in the year in which it is declared by the company (usually when approved by shareholders in a general meeting) or paid. In the case of the Company, the declaration of dividend occurs after year end. Therefore, the liability of Rs. 485.11 for the year ended on March 31,2015 recorded for dividend has been derecognized against retained earnings on April 1, 2015. The proposed dividend for the year ended on March 31,2016 of Rs. 210.73 recognized under Indian GAAP was reduced from other payables and with a corresponding impact in the retained earnings.

42. Trade payables and Trade receivables

Under Indian GAAP, sales incentive payable for one customer was disclosed under Trade payables whereas trade receivable from the same customer was disclosed under Trade receivables. Under Ind AS, these balances have been netted off.

43. Revenue from operation and other expenses

Under Indian GAAP, sales incentive and promotional expenses was disclosed under other expenses. Under Ind AS, these expenses have been netted off against revenue from operation.


Mar 31, 2016

1. Gratuity

The Company has a defined benefit gratuity plan for its employees. Under the gratuity plan, every employee who has completed
five years or more of service gets a gratuity on departure at 15 days of last drawn salary for each completed year of service.
The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summarise the components of net benefit expense recognized in the statement of profit and loss and the
funded status and amounts recognized in the balance sheet for the gratuity plan.

2. Employee stock option plan

The Company provides share-based payment schemes to its employees. During the year ended March 31, 2016, an employee stock
option plan (ESOP) was in existence. The relevant details ofthe scheme and the grant are as below:

i. Details of Employee stock option plan Employee Stock Option Plan, 2010 (ESOP 2010)

On June 10, 2010, the Board of Directors approved the Equity Settled ESOP Scheme 2010 for issue of stock options to the employees
and directors of the Company. According to the ESOP 2010, the employee selected by the Board of Directors from time to time will
be entitled for scheme options, subject to satisfaction of the prescribed vesting conditions, viz., continued employment and
performance parameters of employee. The contractual life (comprising the vesting period and the exercise period) ofoptions and
the other relevant terms ofthe grant are as below:

3. Segment information

Primary segment

The Company is engaged in providing security software solutions. Based on similarity of activities/products, risk and reward
structure, organisation structure and internal reporting systems, the Company has structured its operations into one business
segment.

Geographical segment

Secondary segment reporting is performed on basis of location of customers. The Company has identified India and outside India as
two geographical segments for secondary segment reporting. All assets and liabilities of the Company except trade receivables are
situated in India.

Note A

The Company has entered into an agreement for making an investment of Rs. 60,000,000 in equity shares of Smartalyse Technologies
Private Limited ("Smartalyse") by way of two tranches of Rs. 30,000,000 each. The Company has already made an investment of Rs.
30,000,000 in Smartalyse which has been disclosed under ''Non-current investments''. The second tranche of investment will be made
within a period of 9 months from the date ofthe execution ofthe agreement (i.e. November 3, 2015) upon satisfaction of certain
terms and conditions as enunciated in the agreement.

Note B

For lease related commitments refer note 26.

Note C

The Company has provided letters committing continuing financial support to its subsidiary, Quick Heal Technologies Africa
Limited and Quick Heal Technologies America Inc. to meet their day to day obligations / commitments; to the extent these entities
may be unable to meet their obligations

Notes:

i. During the current year, the Company received a statement of demand dated January 28, 2016 in relation to the show cause
notice of service tax forRs. 550,705,595 (excluding penalty ofRs. 560,715,595) for the period from March 01, 2011 to March 31,
2014 on supply of anti-virus software in Compact Disk issued by Additional Director General, New Delhi. The Company has filed an
appeal with Customs, Excise and Service Tax Appellate Tribunal, New Delhi against the said demand. Based on recent technical
circular issued by government authorities and an independent legal opinion, the Company is confident of getting this claim set
aside and accordingly no provision have been considered necessary in this regards and also for the subsequent period till March
31, 2016.

ii. During the current year, the Company received statement of demand dated January 25, 2016, in relation to Service tax ofRs.
285,354,034 (excluding interest and penalties) forthe period April 01, 2014to March31, 2015 on supply of anti-virus replicated
CDs/DVDs along with license keys through dealers/ distributors to end customers in India issued by Principal Commissioner of
Service tax, Pune. The Company is in the process of filing a reply against the said notice with appropriate authority. Based on
recent technical circular issued by government authorities and an independent legal opinion, the Company is confident of getting
this claim set aside and accordingly no provision have been considered necessary in this regards and also for the subsequent
period till March 31, 2016.

Based on the grounds mentioned in point (i) and (ii) above, the Company has not recognised provision for liability in the
financial statements in relation to the potential consequential liability for service tax for the period April 1, 2015 to March
31, 2016.

iii. During the year ended March 31, 2015, the Company had received a notice of demand of VAT in the state of Kerala for Rs.
154,326 (VAT Rs. 130,785; Interest Rs. 23,541 and excluding penalty) on the ground of dispute in the stock transfer of
anti-virus products transferred to the Branch. The Company had appealed the same before the first level appellate authority and
the management had represented that they have sufficient and strong arguments on facts as well as on point of law and outflow is
not probable. Accordingly, no provision for liability has been recorded in the financial statements and the demand has been
disclosed as contingent liability as at March 31, 2016 and as at March 31, 2015.

iv. This represents disputed income tax demand ofRs. 3,504,300 (including interest of Rs. 361,467 and excluding penalty) under
section 156 of the Income-tax Act, 1961 related to A.Y. 2010-11. The Company has filed appeals against assessment order with
relevant authorities. The management had represented that they have sufficient and strong arguments on facts as well as on point
of law and outflow is not probable. Accordingly, no provision for liability has been recorded in the financial statements and the
demand has been disclosed as contingent liability as at March 31, 2016 and as at March 31, 2015.

(B) Other litigation

i) One of the erstwhile distributor of the Company, had filed a title suit in February 2016 before the Civil Judge (Senior
Division) at Serampore Court, Hooghly District, West Bengal against the Company and others, claiming Intellectual Property Rights
to one of the brand names (Quick Heal-Total Security) and alleging illegal usage of said brand name by the Company. The Company
is seeking dismissal of the said Title Suit.

ii) In February 2016, certain individuals who are relative of one of the erstwhile distributor instituted a suit before the City
Civil Court, Calcutta claiming ownership of certain shares of the Company.

iii) In February 2016, one of the erstwhile distributor instituted a suit at High Court, Calcutta against the Company and others
claiming Rs. 16,100 million for various reasons including loss of business profits, loss of capital assets and infrastructure
etc.

With respect to the above matters, the Company believes that the suits are frivolous and is seeking dismissal ofthe suits. The
Company also believes that they have a sufficient and strong arguments on facts as well as on point of law and accordingly no
provision in this regard has been recognised in the financial results..

iv) The Director of one of the erstwhile vendor had filed a First information Report (FIR) in June 2014 at Baddi Police Station,
Himachal Pradesh, against certain directors and employees of the Company. The police investigated the case and came to the
conclusion that there was no truth to the allegations in the FIR. The director of one of the erstwhile vendor subsequently filed
a writ petition before the Himachal Pradesh High Court against the State of Himachal Pradesh and others against the said finding
ofthe police.

4. Details of dues to micro and small enterprises as defined under Micro, Small and Medium Enterprises Development Act, 2006

There are no amounts as at March 31, 2016 (March 31, 2015: Nil) that need to be disclosed pertaining to Micro and Small
Enterprises under MSMED Act, 2006.

As at March 31, 2016 and previous year March 31, 2015, the disclosure has been made on the basis of intimation provided by the
supplier to the Company.

5. Share issue expenses recoverable

During the year, the Company has completed its Initial Public Offer (IPO) through an Offer for Sale of 6,269,558 equity shares
and a fresh issue of 7,788,161 equity shares at a price ofRs. 321 per share (including share premium of Rs.311 per equity share).
Sequoia Capital India Investments III, which was holding 2,501,984 equity shares in the Company offered its entire holding in the
Offer for Sale. Sequoia Capital India Investment Holdings III offered 87,574 equity shares, Mr. Kailash Katkar, and Sanjay
Katkar offered 1,840,000 equity shares and 1,840,000 equity shares, respectively in the Offer for Sale in order to comply with
SEBI''s requirement of maximum holding of promoter and promoter group to 75%. Since the issue was an Offer for Sale and a fresh
issue, all the share issue expenses related to the IPO have been proportionately distributed between the Company and the selling
shareholders.

Share issue expenses

Other receivables comprises share issue expenses incurred in connection with proposed Initial Public offer (IPO) only by way of
offer for sale by existing shareholders of the Company and a fresh issue offered to public. These receivables include fees paid
to bankers, stock exchanges, SEBI, lawyers, auditors, etc., in connection with the IPO ofthe Company. As per offer agreement
between the Company and the selling shareholders, all expenses with respect to the IPO have been proportionately distributed from
between the Company and the selling shareholders. Accordingly, the Company has classified the expenses incurred in connection
with the IPO as receivable from selling shareholders under other receivables, since these are not the expenses for the Company.

41. Delay in filing of Form FC-GPR

During the current year there is an un-intentional delay in reporting of foreign inward remittances and filing of form FC-GPR in
respect ofthe shares allotted to non- resident shareholders in the Form FC GPR as required underthe FDI Regulations of FEMA 1999,
which was due to delay in receipt of foreign inward remittance certificates from the authorised dealers (AD). The said Form FC
GPR has been submitted for filing by the Company to AD, as on the date of this certificate.

42. Loans and advances given to subsidiaries and associates and firms/ companies in which directors are interested

Advances given to wholly owned subsidiary

43. Previous year figures

Previous year''s figures have been regrouped, where necessary, to conform to current year''s classification.

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