Mar 31, 2023
Terms / rights attached to equity shares the balance sheet date.
The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per equity share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
Subject to the provisions of Companies Act 2013 as to preferential payments, the assets of the Company shall, on its winding-up be applied in satisfaction of its liabilities pari-passu and, subject to such application, shall, unless the articles otherwise provide, will be distributed among the members according to their rights and interests in the Company.
Aggregate number of bonus shares issued, shares issued for consideration other than cash
During the year ended March, 2023, the Company has issued 16,913,215 fully paid equity shares by way of bonus shares by capitalising retained earnings.The Company has not issued any shares by way of bonus issue by capitalising securities premium / retained earnings during the period of five years immediately preceding
Aggregate number of equity shares bought back during the period of five years immediately preceding the reporting date:
The Board of Directors vide their meeting dated November 10, 2022 approved, subject to shareholdersâ approval, buyback of equity shares of the Company. The shareholders'' approval was procured vide postal ballot, results of which were announced on December 14, 2022 and the Company concluded the said buyback of 1,714,285 equity shares of Rs. 10 each at the buyback price of Rs. 1,750 per share and the total buy back amount of Rs. 3,000 million, as approved by the Buy Back Committee at its meeting dated December 15, 2022. The settlement date for the said buyback was February 24, 2023. The shares so bought back were extinguished and the issued and paid up capital stands amended accordingly. Further, the Company has incurred buy back expenses of Rs. 29.84 million and buy back tax of Rs. 632.00 million. During the period of 5 years immediately preceding the balance sheet date, the Company bought back 1,063,157 shares in FY 2021-22 and 2,093,815 shares in FY 2020-21 and 1,746,666 shares in FY 2019-20 and 1,290,000 shares in FY 2017-18.
During the year ended March 31, 2023, the Company recognised revenue of Rs.224.35 million arising from opening unearned revenue as of April 1, 2022. During the year ended March 31, 2022, the Company recognised revenue of Rs 214.64 million arising from opening unearned revenue as on April 1,2021.
During the years ended March 31, 2023 and March 31, 2022, there is no revenue recognised from performance obligations satisfied (or partially satisfied) in previous periods.
As at March 31, 2023 and March 31, 2022, the Company does not have assets recognised from the cost incurred to obtain or fulfil a contract with a customer.
Performance obligations and remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognised as at the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts:
a) where the revenue recognised corresponds directly with the value to the customer of the entity''s performance completed to date, typically those contracts where invoicing is on time and material basis and;
b) where the performance obligation is part of a contract that has an original expected duration of one year or less.
Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialised and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as at March 31, 2023, other than those meeting the exclusion criteria mentioned above, is Rs.96.98 million (March 31, 2022 Rs. 46.94 million). Out of this, the Company expects to recognise revenue of around 78.33% (March 31, 2022 Rs. 26.19%) within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessment, the occurrence of the same is expected to be remote.
Gross amount required to be spent by the Company during the year: Rs. 65.63 (March 31, 2022: Rs. 52.81) million. Gross amount approved by the board to be spent during the year: Rs. 65.63 (March 31, 2022: Rs.52.81) million.
The Company contributes to NGOs to support initiatives that measurably improve the lives of underprivileged by one or more of the focus areas such as health, poverty eradication, hunger eradication, education, gender equality, environmental sustainability and such other causes as notified under Section 135 of the Act and Companies (Corporate Social Responsibility Policy) Rules 2014 including any statutory amendments and modifications thereto.
27. Earnings per share ("EPS")
The basic earnings per equity share are computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting period. The number of shares used in computing diluted earnings per share comprises the weighted average number of equity shares considered for deriving basic earnings per equity share, and also the weighted average number of equity shares, which would be issued on the conversion of all dilutive potential equity shares into equity shares, unless the results would be anti-dilutive.
*The weighted average number of shares takes into account the weighted average effects of changes in treasury share transaction during the year. The weighted average number of shares and the EPS for the previous year ended March 31, 2022 have been restated to give the effect of bonus equity shares issued in the current year ended March 31,2023.
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, the 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. The gratuity scheme is managed by a trust which regularly contributes to insurance service provider which manages the funds of the trust . The fundâs investments are managed by certain insurance companies as per the mandate provided to them by the trustees and the asset allocation is within the permissible limits prescribed in the insurance regulations. The Company recognises actuarial gains and losses immediately in other comprehensive income, net of taxes.
The average duration of the defined benefit plan obligation at the end of the reporting period is 12 years (March 31, 2022: 13 years).
29. Share-based payments Employee Stock Option Plan
Under the employee stock option plan, the Company, grants options to senior executive employees of the Company and its subsidiaries as approved by the Nomination and Remuneration Commitee. Vesting period is three years from the date of grant. Further, vesting of certain portion of the stock options is dependent on the Compounded Annual Growth Rate of the organic operating revenues of the Company.The fair value of the stock options is estimated at the grant date using a Black and Scholes model, taking into account the terms and conditions upon which the share options were granted. The contractual term of each option granted is six years. There are no cash settlement alternatives. The Company does not have a past practice of cash settlement of these options.
Pursuant to the applicable requirements of the erstwhile Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ("the SEBI guidelines"), the Company had framed and instituted Employee Stock Option Plan 2015 ("ESOP 2015") to attract, retain, motivate and reward its employees and to enable them to participate in the growth, development and success of the Company.
ESOP 2015 envisages an eClerx Employee Welfare Trust ("ESOP Trustâ) which is authorised for secondary acquisition. During the year ended March 2023, ESOP trust has bought 231,163 shares ( March 31, 2022: 74,440) from open market. As at March 31, 2023, ESOP Trust holds 991,380 shares (March 31, 2022 : 728,335) of the Company and it will acquire additional equity shares at prevailing market price to meet requirements of ESOP 2015 scheme.
The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
30. a. Leases Company as lessee
The Company has entered into commercial property leases for its offices. Further, the Company has also adopted Ind AS 116 âLeasesâ with effect from April 1, 2019 using the modified retrospective method.
(a) The Company has received Income tax demands amounting to Rs. 578.85 million (including interest) for financial years 2009-10 to 2020-21 against which appeals are pending with Commissioner of Income Tax (Appeals) and Income Tax Appelate Tribunal.
(b) The Company has received Service tax demands amounting to Rs. 6.19 million(excluding interest and penalties) for the period April 2007 to March 2013 against which appeals are pending with Central Excise and Service Tax Appelate Tribunal.
With respect to tax refund claims for the period July 2014 till March 2017 to the extent rejected by the Services Tax Deparment for Rs.2.08 million, the Company''s appeals are pending with Central Excise and Service Tax Appelate Tribunal.
The amounts represent best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on the outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interest and has been advised that it has strong legal positions against each of such disputes. The Management including its tax advisors expect that its position will likely be upheld on ultimate resolution and probability of any tax demand materialising against the Company is remote. Hence, no provision has been made in the financial statements for these disputes except Rs 9.81 million (March 31, 2022: 15.22 million) has been provided as per requirement of Appendix C to Ind AS 12 Income taxes.
Note: The remuneration to the key management personnel are on accrual basis and does not include the provisions made for gratuity, carry forward leave benefits and any long-term benefits payable, as they are determined on an actuarial basis for the Company as a whole.
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel except share based payment which is disclosed on the basis of shares exercised.
The Board of Directors i.e. Chief Operating Decision Maker ("CODM") evaluates the Companyâs performance and allocates resources based on an analysis of various performance indicators by reportable segments. The Company operates under a single reportable segment which is data management, analytics solutions and process outsourcing services. Further the risks and rewards under various geographies where the Company operates are similar in nature.
33. Hedging activities and derivatives Cash Flow Hedges Foreign currency risk
Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in US Dollars. These forecast transactions are highly probable, and they comprise about 62.85% of the Company''s total expected sales in US dollars. The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in the foreign exchange forward rate. The terms of foreign currency forward contracts match with the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arises requiring recognition through profit or loss.
The cash flow hedges of the expected future sales during the year ended March 31, 2023 were assessed to be highly effective and a net unrealised loss of Rs. 123.42 million, with a deferred tax asset of Rs.31.06 million relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges of the expected future sales during the year ended March 31, 2022 were assessed to be highly effective and an unrealised gain of Rs. 162.86 million, with a deferred tax liability of Rs.40.99 million was included in OCI in respect of these contracts.
The amounts reclassified from OCI to profit or loss for the year ended March 31, 2023, amounts to loss of Rs. 337.04 million (March 31, 2022: gain of Rs.339.26 million).
The management assessed that cash and cash equivalents, other bank balances, trade receivables, other financial assets, trade payables and other financial 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:
The fair values of the financial assets carried at fair value through profit and loss ("FVTPNL") classified as "Level 1" are derived from quoted market prices in active markets. The cost of unquoted investments included in "Level 3" of fair value hierarchy approximate their
fair value because there is a wide range of possible fair value measurements and the cost represents estimate of fair value within that range.
The Company enters into derivative financial instruments with various counterparties. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The
valuation techniques include forward pricing using present value calculations. The model incorporates various inputs including the foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying currency. As at March 31, 2023, the marked-to-market value of derivative asset / (liability) positions should be net of credit valuation adjustment
attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships recognised at fair value.
The fair value of security deposit that carries no interest is measured at the present value by discounting using the prevailing market rate of interest for a similar instrument with a similar credit rating.
36. Financial risk management objectives and policies
The Companyâs principal financial liabilities, other than derivatives and lease liabilities, comprises trade and other payables. The main purpose of these financial liabilities is to finance the Companyâs operations. The Companyâs principal financial assets include trade and
other receivables, cash and cash equivalents and other bank balances that derive directly from its operations. The Company also holds FVTPNL investments and enters into derivative transactions.
The Company is exposed to market risk, credit risk and liquidity risk. The Companyâs senior management
oversees the management of these risks. The Companyâs senior management provides assurance to the Board of Directors that the Companyâs financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Companyâs policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Companyâs policy that no trading in derivatives for speculative purposes may be undertaken which is consistent with the Company''s foreign risk management policy. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
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 mainly comprises of currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include deposits, FVTPNL investments and derivative financial instruments.
The sensitivity analysis in the following sections relate to the position as at March 31, 2023 and March 31, 2022.
The sensitivity analysis have been prepared on the basis that the derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2023.
The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and other post- retirement obligations; provisions, and the non-financial assets and liabilities of foreign operations.
The following assumptions have been made in calculating the sensitivity analysis:
- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2023 and March 31, 2022 including the effect of hedge accounting.
- The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges at
March 31, 2023 and March 31, 2022 for the effects of the assumed changes of the underlying risk.
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Companyâs exposure to the risk of changes in foreign exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in a foreign currency) and the Company''s net investment in foreign subsidiaries.
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 24-month period for hedges of forecasted sales.
When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure with forecasted sales.
As at March 31, 2023, the Company hedged 62.85% (March 31, 2022: 65.81%) of its expected foreign currency sales in US dollars. Those hedged sales were highly probable at the reporting date. This foreign currency risk is hedged by using foreign currency forward contracts.
The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas.
The Company evaluates exchange rate exposure arising from foreign currency transactions and the Company follows established risk management policies, including the use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk.
The following table demonstrate the sensitivity to a reasonably possible change in USD and EUR exchange rates, with all other variables held constant. The impact on the Company''s profit before tax is due to changes in the fair value of monetary assets and liabilities. The impact on Company''s pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges.
The Companyâs equity price risk is minimal due to no investment in listed securities and minimal investment in non-listed equity securities.
At the reporting date, the exposure to unlisted equity securities at was Rs. 40.50 million (March 31, 2022: Rs. 19.58 million). The value stated is based on net asset value shared by the fund and no sensitivity analysis is done since amount is not material.
Credit risk is the risk that 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) including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
Customer credit risk is managed by each business unit subject to the Companyâs established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored and followed up.
For trade receivables or contract revenue receivables, the Company follows âsimplified approachâ for recognition of impairment loss allowance.
Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
Financial instruments and bank deposits
Credit risk from balances with banks and financial institutions is managed by the Companyâs treasury department in accordance with the Companyâs policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Companyâs treasury department on a periodic basis as per the Board of Directors approved Investment policy. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterpartyâs potential failure to make payments.
The Companyâs maximum exposure relating to financial derivative instruments is noted in note 33 and note 34.
Liquidity risk refers to the risk that the Company cannot meet its financial obligations.The objective of liquidity risk management is to maintian sufficient liquidity and ensure that funds are available for use as per requirements.The Company consistently generated sufficient cash flows from operations to meet its financial obligations as and when they fall due.
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Companyâs performance to developments affecting a particular industry. In order to avoid excessive concentrations of risk, the Companyâs policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio.
For the purpose of the Companyâs capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Companyâs capital management is to maximise the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt.
No changes were made in the objectives, policies or
processes for managing capital during the years ended March 31, 2023 and March 31, 2022.
The Company has a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company appoints independent consultants for conducting a Transfer Pricing Study to determine whether the transactions with associate enterprises are undertaken, during the financial year, on an âarmâs length basisâ. Adjustments, if any, arising from the transfer pricing study in the respective jurisdictions shall be accounted for as and when the study is completed for the current financial year. However the management is of the opinion that its international transactions are at armsâ length so that the aforesaid legislation will not have any impact on the financial statements.
39. Relationship with struck off companies
The company did not had any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of the Companies Act 1956 and hence the relevant disclosures are not applicable.
There are no charges or satisfactions which are yet to be registered with the companies beyond the statutory period.
Mar 31, 2022
Terms / rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per equity share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting
Subject to the provisions of Companies Act 2013 as to preferential payments, the assets of the Company shall, on its winding-up be applied in satisfaction of its liabilities pari-passu and, subject to such application, shall, unless the articles otherwise provide, will be distributed among the members according to their rights and interests in the Company.
Aggregate number of bonus shares issued, shares issued for consideration other than cash
The Company has not issued any shares by way of bonus issue by capitalising securities premium during the period of five years immediately preceding the balance sheet date.
Aggregate number of equity shares bought back during the period of five years immediately preceding the reporting date:
The Board of Directors vide their meeting dated August 13, 2021 approved buyback of equity shares of the Company for an aggregate amount not exceeding Rs. 3,030 million at a buyback price not exceeding Rs. 3,200 per equity share from the shareholders/beneficial owners of the company. The shareholdersâ approval was procured vide postal ballot, results of which were announced on September 16, 2021 and the Company concluded the said buyback of 1,063,157 equity shares of Rs 10 each at the buyback price of Rs. 2,850 per share, as approved by the Buy Back Committee at its meeting dated September 17, 2021 and the total buy back amount of Rs. 3,030 million. The settlement date for the said buyback was November 9, 2021. The shares so bought back were extinguished and the issued and paid up capital stands amended accordingly. Further, the Company has incurred buy back expenses of Rs. 27.88 million and buy back tax of Rs. 665.54 million. During the period of 5 years immediately preceding the balance sheet date the Company bought back 2,093,815 shares in FY 2020-21 and 1,746,666 shares in FY 2019-20 and 1,290,000 shares in FY 2017-18 and 1,170,000 shares in FY 2016-17.
During the year ended March 31, 2022, the Company recognised revenue of Rs.214.64 million arising from opening unearned revenue as of April 1, 2021. During the year ended March 31, 2021, the Company recognised revenue of Rs 123.05 million arising from opening unearned revenue as on April 1, 2020.
During the years ended March 31, 2022 and March 31, 2021, there is no revenue recognised from performance obligations satisfied (or partially satisfied) in previous periods.
As at March 31, 2022 and March 31, 2021, the Company does not have assets recognised from the cost incurred to obtain or fulfil a contract with a customer.
Performance obligations and remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognised as at the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts:
a) where the revenue recognised corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis and;
b) where the performance obligation is part of a contract thathasanoriginalexpecteddurationofoneyearorless.
Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialised and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as at March 31, 2022, other than those meeting the exclusion criteria mentioned above, is Rs. 904.01 million (March 31, 2021 Rs. 666.82 million). Out of this, the Company expects to recognise revenue of around 35.18% (March 31, 2021 Rs. 44.14%) within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessment, the occurrence of the same is expected to be remote.
Gross amount required to be spent by the Company during the year: Rs. 52.81 (March 31, 2021: Rs. Rs. 55.28) million. Gross amount approved by the board to be spent during the year: Rs. 52.81 (March 31, 2021: Rs. Rs. 55.28) million.
The Company contributes to NGOs to support initiatives that measurably improve the lives of underprivileged by one or more of the focus areas such as health, poverty eradication, hunger eradication, education, gender equality, environmental sustainability and such other causes as notified under Section 135 of the Act and Companies (Corporate Social Responsibility Policy) Rules 2014 including any statutory amendments and modifications thereto.
27. Earnings per share (âEPSâ)
The basic earnings per equity share are computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting period. The number of shares used in computing diluted earnings per share comprises the weighted average number of equity shares considered for deriving basic earnings per equity share, and also the weighted average number of equity shares, which would be issued on the conversion of all dilutive potential equity shares into equity shares, unless the results would be anti-dilutive.
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, the employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the memberâs length of service and salary at retirement age. The gratuity scheme is managed by a trust which
regularly contributes to insurance service provider which manages the funds of the trust . The fundâs investments are managed by certain insurance companies as per the mandate provided to them by the trustees and the asset allocation is within the permissible limits prescribed in the insurance regulations. The Company recognises actuarial gains and losses immediately in other comprehensive income, net of taxes.
29. Share-based payments Employee Stock Option Plan
Under the employee stock option plan, the Company, grants options to senior executive employees of the Company and its subsidiaries as approved by the Nomination and Remuneration Commitee. Vesting period is three years from the date of grant. Further, vesting
of certain portion of the stock options is dependent on the Compounded Annual Growth Rate of the organic operating revenues of the Company.The fair value of the stock options is estimated at the grant date using a Black and Scholes model, taking into account the terms and conditions upon which the share options were granted. The contractual term of each option granted is six years. There are no cash settlement alternatives. The Company does not have a past practice of cash settlement of these options.
The Company instituted ESOP 2011 scheme under which 1,600,000 stock options have been allocated for grant to the employees. The scheme was approved by the shareholders at the Eleventh Annual General Meeting held on August 24, 2011. The Scheme was subsequently amended to increase the number of options to 2,600,000
stock options vide resolution passed at Thirteenth Annual General Meeting held on August 22, 2013.
The following table illustrates the number and weighted average exercise prices (âWAEPâ) of, and movements in, share options during the year:
Pursuant to the applicable requirements of the erstwhile Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (âthe SEBI guidelinesâ), the Company had framed and instituted Employee Stock Option Plan 2015 (âESOP 2015â) to attract, retain, motivate and reward its employees and to enable them to participate in the
growth, development and success of the Company. ESOP 2015 envisages an eClerx Employee Welfare Trust (âESOP Trustâ) which is authorised for secondary acquisition. During the year ended March 31, 2022, the ESOP trust has bought 74,440 shares ( March 31,2021: Nil) from open market. As at March 31, 2022, ESOP Trust holds 728,335 shares (March 31, 2021 : 8,83,605) of the Company and it will acquire additional equity shares at prevailing market price to meet requirements of ESOP 2015 scheme.
The weighted average remaining contractual life for the share options outstanding as at March 31, 2022 was 3.99 years (March 31, 2021: 3.77 years).
The range of exercise prices for options outstanding at the end of the year was Rs. 413.03 to Rs. 1,379.15 (March 31, 2021: 413.03 to Rs. 1,379.15).
The weighted average fair value of options granted during the year was Rs.304.29 (March 31, 2021: Rs.85.29)
The average vesting period is 3 years and exercise period is 3 years from the date of vesting.
The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
The Company had total cash outflows for leases of Rs. 346.44 million for the year ended March 31, 2022 (March 31, 2021: 346.48). There are no non-cash additions to right-of-use assets and lease liabilities for the year ended March 31, 2022 (March 31, 2021: Nil). There are no future cash outflows relating to leases that have not yet commenced.
(a) The Company has received Income tax demands amounting to Rs. 558.29 million (including interest) for financial years 2009-10 to 2019-20 against which appeals are pending with Deputy Commissioner of Income Tax, Commissioner of Income Tax (Appeals) and Income Tax Appelate Tribunal.
(b) The Company has received Service tax demands amounting to Rs. 125.10 million(excluding interest and penalties) for the period April 2007 to March 2013 against which appeals are pending with Central Excise and Service Tax Appelate Tribunal.
With respect to tax refund claims for the period July 2014 till March 2017 to the extent rejected by the Services Tax Deparment for Rs.2.08 million, the Companyâs appeals are pending with Central Excise and Service Tax Appelate Tribunal.
The amounts represent best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on the outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interest and has been advised that it has strong legal positions against each of such disputes. The Management including its tax advisors expect that its position will likely be upheld on ultimate resolution and probability of any tax demand materialising against the Company is remote. Hence, no provision has been made in the financial statements for these disputes except Rs 15.22 million has been provided as per requirement of Appendix C to Ind AS 12 Income Taxes.
Note: The remuneration to the key management personnel are on accrual basis and does not include the provisions made for gratuity, carry forward leave benefits and any long-term benefits payable, as they are determined on an actuarial basis for the Company as a whole.
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel except share based payment which is disclosed on the basis of shares exercised.
The Board of Directors i.e. Chief Operating Decision Maker (âCODMâ) evaluates the Companyâs performance and allocates resources based on an analysis of various performance indicators by reportable segments. The Company operates under a single reportable segment which is data management, analytics solutions and process outsourcing services. Further the risks and rewards under various geographies where the Company operates are similar in nature.
33. Hedging activities and derivatives Cash Flow Hedges Foreign currency risk
Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in US Dollars. These forecast transactions are highly probable, and they comprise about 65.81% of the Companyâs total expected sales in US dollars. The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in the foreign exchange forward rate. The terms of foreign currency forward contracts match with the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arises requiring recognition through profit or loss.
The cash flow hedges of the expected future sales during the year ended March 31, 2022 were assessed to be highly effective and a net unrealised gain of Rs. 162.86 million, with a deferred tax liability of Rs. 40.99 million relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges of the expected future sales during the year ended March 31, 2021 were
assessed to be highly effective and an unrealised gain of Rs. 264.56 million, with a deferred tax liability of Rs.66.58 million was included in OCI in respect of these contracts.
The amounts reclassified from OCI to profit or loss for the year ended March 31, 2022, amounts to gain of Rs. 339.26 million (March 31, 2021: gain of Rs.58.53 million).
The management assessed that cash and cash equivalents, other bank balances, trade receivables, other financial assets, trade payables and other financial 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:
The fair values of the financial assets carried at fair value through profit and loss (âFVTPNLâ) classified as âLevel 1â are derived from quoted market prices in active markets. The cost of unquoted investments included in âLevel 3â of fair value hierarchy approximate their fair value because there is a wide range of possible fair value measurements and the cost represents estimate of fair value within that range.
The Company enters into derivative financial instruments with various counterparties. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The valuation techniques include forward pricing using present value calculations.
The model incorporates various inputs including the foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying currency. As at March 31, 2022, the marked-to-market value of derivative asset / (liability) positions should be net of credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships recognised at fair value.
The fair value of security deposit that carries no interest is measured at the present value by discounting using the prevailing market rate of interest for a similar instrument with a similar credit rating.
36. Financial risk management objectives and policies
The Companyâs principal financial liabilities, other than derivatives and lease liabilities, comprises trade and other payables. The main purpose of these financial liabilities is to finance the Companyâs operations. The Companyâs principal financial assets include trade and other receivables, cash and cash equivalents and other bank balances that derive directly from its operations. The Company also holds FVTPNL investments and enters into derivative transactions.
The Company is exposed to market risk, credit risk and liquidity risk. The Companyâs senior management oversees the management of these risks. The Companyâs senior management provides assurance to the Board of Directors that the Companyâs financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Companyâs policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills,
experience and supervision. It is the Companyâs policy that no trading in derivatives for speculative purposes may be undertaken which is consistent with the Companyâs foreign risk management policy. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
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 mainly comprises of currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include deposits, FVTPNL investments and derivative financial instruments.
The sensitivity analysis in the following sections relate to the position as at March 31, 2022 and March 31, 2021.
The sensitivity analysis have been prepared on the basis that the derivatives and the proportion of financial instruments in foreign currencies are all
constant and on the basis of hedge designations in place at March 31, 2022.
The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and other post- retirement obligations; provisions, and the non-financial assets and liabilities of foreign operations.
The following assumptions have been made in calculating the sensitivity analysis:
- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2022 and March 31, 2021 including the effect of hedge accounting.
- The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges at March 31, 2022 and March 31, 2021 for the effects of the assumed changes of the underlying risk.
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Companyâs exposure to the risk of changes in foreign exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in a foreign currency)
and the Companyâs net investment in foreign subsidiaries.
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 24-month period for hedges of forecasted sales.
When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure with forecasted sales.
As at March 31, 2022, the Company hedged 65.81% (March 31, 2021: 65.51%) of its expected foreign currency sales in US dollars. Those hedged sales were highly probable at the reporting date. This foreign currency risk is hedged by using foreign currency forward contracts.
The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas.
The Company evaluates exchange rate exposure arising from foreign currency transactions and the Company follows established risk management policies, including the use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk.
The Companyâs equity price risk is minimal due to no investment in listed securities and minimal investment in non-listed equity securities.
At the reporting date, the exposure to unlisted equity securities at was Rs. 19.58 million (March 31, 2021: Rs. 2.4 million). The value stated is based on net asset value shared by the fund and no sensitivity analysis is done since amount is not material.
Credit risk is the risk that 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) including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
Customer credit risk is managed by each business unit subject to the Companyâs established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored and followed up.
For trade receivables or contract revenue receivables, the Company follows âsimplified approachâ for recognition of impairment loss allowance.
Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
Financial instruments and bank deposits
Credit risk from balances with banks and financial institutions is managed by the Companyâs treasury department in accordance with the Companyâs policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Companyâs treasury department on a periodic basis as per the Board of Directors approved Investment policy. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterpartyâs potential failure to make payments.
The Companyâs maximum exposure relating to financial derivative instruments is noted in note 33 and note 34.
Liquidity risk refers to the risk that the Company cannot meet its financial obligations.The objective of liquidity risk management is to maintian sufficient liquidity and ensure that funds are available for use as per requirements.The Company consistently generated sufficient cash flows from operations to meet its financial obligations as and when they fall due.
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Companyâs performance to developments affecting a particular industry. In order to avoid excessive concentrations of risk, the Companyâs policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio.
For the purpose of the Companyâs capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Companyâs capital management is to maximise the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2022 and March 31, 2021.
The Company has a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company appoints independent consultants for conducting a Transfer Pricing Study to determine whether the transactions with associate enterprises are undertaken, during the financial year, on an âarmâs length basisâ. Adjustments, if any, arising from the transfer pricing study in the respective jurisdictions shall be accounted for as and when the study is completed for the current financial year. However the management is of the opinion that its international transactions are at armsâ length so that the aforesaid legislation will not have any impact on the financial statements.
The Company has appointed eClerx Employee
Welfare Trust (âESOP Trustâ) to administer the employee stock option scheme. For the said purpose the ESOP Trust borrowed funds from the Company and purchased the Companyâs shares from open market for allotting the same to eligible employees. In the standalone financial statements, the Company had adopted the policy of not consolidating the ESOP Trust and thereby recognized loan given to ESOP trust as financial asset and tested it on periodic basis for impairment by considering the difference between purchase price of shares and exercise price of share options/ market price of shares as at the end of the financial period. However, in the consolidated financial statements the ESOP Trust was consolidated and the related loan/ investment and related provision for impairment appearing in the standalone financial statements of the Company were eliminated and investment in own shares of the Company is shown as treasury shares in âother equityâ.
During the year ended March 31,2022, the Company changed the accounting policy to consolidate the ESOP Trust in the standalone financial statements to reflect more appropriate presentation of the activity of the ESOP Trust in the standalone financial statements as the ESOP Trust carries out activities for the benefit of the employees of the Company and its subsidiaries. Consequently, in the standalone financial statements of the Company, the loan given to ESOP Trust (including interest and provision for impairment thereof) is eliminated and investment in own equity shares that are purchased (i.e. treasury shares) are recognised at cost and disclosed as deduction from equity. This voluntary change in accounting policy of the standalone financial statements has been given effect by restating the comparative information for the preceding period. The Company also has presented a third balance sheet as at the beginning of the preceding period i.e. April 1, 2020.
This change has primarily resulted in reduction in long term loans by Rs 711.6 million (net of impairment provision) as at March 31, 2021 and April 1, 2020, reduction in equity share capital by Rs. 8.84 million as at March 31, 2021 and April 1, 2020, increase in debit balance of treasury shares of Rs. 1,069.51 million as at March 31, 2021 and April 1, 2020 and increase in retained earnings by Rs. 367.78 million and Rs. 368.03 million as at March 31, 2021 and April 1, 2020, respectively.
Consequent to accounting for treasury shares in standalone financial statements, the weighted average number of shares considered for computation of earning per share (âEPSâ) has reduced resulting into increase in basic and diluted EPS as follows:
40. Relationship with struck off companies
The company did not had any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of the Companies Act 1956 and hence the relevant disclosures are not applicable.
There are no charges or satisfactions which are yet to be registered with the companies beyond the statutory period.
Mar 31, 2021
The Company has created an eClerx Employee Welfare Trust ("ESOP Trustâ) for providing share-based payment to its employees. The Company uses ESOP Trust as a vehicle for distributing shares to employees under the employee remuneration schemes. The ESOP Trust buys shares of the Company from the market, for giving shares to employees. The Company has provided loan to ESOP Trust at the weighted average rate of 7.00% for the period of 4-6 years for purchase of treasury shares (March 31, 2020 : 7.00%). In the standalone financial statements, the Company treats the ESOP Trust as a separate investment and loan given to ESOP trust is treated as loan carried at amortised cost.
During the previous year ended March 31, 2020, due to significant difference between the purchase price of shares held by the ESOP Trust and exercise price of the share options / market price of shares, the Company estimated the inability of the ESOP Trust to service it''s loan obligations when due. Hence, the Company decided to discontinue charging interest on this loan with effect from October 1, 2019. Accordingly, the Company recalculated gross carrying amount of loan and the difference of Rs 312.71 million has been shown as investment in the ESOP Trust. The gross carrying amount of loan has been recalculated as present value of the modified contractual cashflows that are discounted at
the effective interest rate. Subsequently, interest income on discounted amount is recognised using effective interest rate.
As at March 31, 2021, the Company has receivables in form of investment and loans of Rs 1,200 million from the ESOP Trust. Considering significant difference between purchase price of shares and exercise price of share options/ market price of shares during the previous year ended March 31, 2020, the Company assessed significant increase in credit risk on these receivables and calculated cashflows that the Company expects to receive from these
receivables. Consequently, it has made an impairment provision of Rs 312.71 million towards investment and Rs 175.69 million towards loans receivables from ESOP Trust and disclosed total impairment provision of Rs 488.40 million as an exceptional item for the previous year ended March 31, 2020.
Further, loss allowance of Rs 271.03 million (March 31, 2020: Rs. 206.75 million) includes loss allowance of Rs. 64.28 million pertaining to financial year 2020-21 and Rs 31.06 million pertaining to previous financial year 2019-20 towards interest receivable for the respective years.
Terms / rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per equity share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
Subject to the provisions of Companies Act 2013 as to preferential payments, the assets of the Company shall, on its winding-up be applied in satisfaction of its liabilities pari-passu and, subject to such application, shall, unless the articles otherwise provide, will be distributed among the members according to their rights and interests in the Company.
Aggregate number of bonus shares issued, shares issued for consideration other than cash
The Company has issued 10,180,609 shares by way of bonus issue by capitalising securities premium during the period of five years immediately preceding the
habnro chc^t rl
Aggregate number of equity shares bought back during the period of five years immediately preceding the reporting date:
The Board of Directors vide their meeting dated July 06, 2020 approved buyback of equity shares of the Company for an aggregate amount not exceeding Rs. 1,095 million at a buyback price not exceeding Rs. 550 per equity share from the shareholders/beneficial owners of the company (other than those who are promoters, members of promoter Group and persons in control of the Company). The Company bought back 2,093,815 equity shares of Rs 10 each at an average price of Rs. 522.97 per share amounting to Rs. 1,095 million and concluded the said buyback on July 22, 2020. The shares so bought back were extinguished and the issued and paid up capital stands amended accordingly. Further, the Company has incurred buy back expenses of Rs. 9.47 million and buy back tax of Rs. 243 million which have been charged to retained earnings. During the period of 5 years immediately preceding the balance sheet date the Company bought back 1,746,666 shares in FY 2019-20 and 1,290,000 shares in FY 2017-18 and 1,170,000 shares in FY 2016-17.
Performance obligations and remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognised as at the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts:
a) where the revenue recognised corresponds directly with the value to the customer of the entity''s performance completed to date, typically those contracts where invoicing is on time and material basis and;
b) where the performance obligation is part of a contract that has an original expected duration of one year or less.
Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of
contracts, periodic revalidations, adjustment for revenue that has not materialised and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as at March 31, 2021, other than those meeting the exclusion criteria mentioned above, is Rs. 666.82 million (March 31,2020 Rs. 351.79 million). Out of this, the Company expects to recognise revenue of around 44.14% (March 31, 2020 Rs. 66.37%) within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessment, the occurrence of the same is expected to be remote.
20(a). As per Service Exports from India Scheme (âSEIS") w.e.f. 01.04.2015 under the Foreign Trade Policy (FTP), 201520, the Company is eligible to get the duty credit scrips against export of services under defined category .The said income is accounted as other operating revenue. Other operating revenue of Rs. 15.33 million for the previous year ended March 31, 2020 represents true-up of SEIS income based on the filing made for the financial year 2018-19.
The Company has appointed eClerx Employee Welfare Trust ("ESOP Trustâ) to administer the employee stock option scheme. For this purpose, the ESOP Trust borrowed funds from the Company and purchased the Company''s shares from the open market since financial year 2016-17 for the purpose of allotting the same to eligible employees. During previous year ended March 31, 2020, due to significant difference between the purchase price of these shares and exercise price of the share options / market price of shares, the Company estimated the inability of the ESOP Trust to service it''s loan obligations. Hence, the Company made a provision of Rs 488.40 million in the previous year ended March 31, 2020 for receivables from ESOP Trust (refer note 8).
28. Earnings per share (âEPSâ)
The basic earnings per equity share are computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting period. The number of shares used in computing diluted earnings per share comprises the weighted average number of equity shares considered for deriving basic earnings per equity share, and also the weighted average number of equity shares, which would be issued on the conversion of all dilutive potential equity shares into equity shares, unless the results would be anti-dilutive.
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, the 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. The gratuity scheme is managed by a trust which regularly contributes to insurance service provider which manages the funds of the trust . The fund''s investments are managed by certain insurance companies as per the mandate provided to them by the trustees and the asset allocation is within the permissible limits prescribed in the insurance regulations. The Company recognises actuarial gains and losses immediately in other comprehensive income, net of taxes.
30. Share-based payments Employee Stock Option Plan
Under the employee stock option plan, the Company, grants options to senior executive employees of the Company and its subsidiaries as approved by the Nomination and Remuneration Committee. Vesting period is three years from the date of grant. Further, vesting of certain portion of the stock options is
dependent on the Compounded Annual Growth Rate of the organic operating revenues of the Company. The fair value of the stock options is estimated at the grant date using a Black and Scholes model, taking into account the terms and conditions upon which the share options were granted. The contractual term of each option granted is six years. There are no cash settlement alternatives. The Company does not have a past practice of cash settlement of these options.
The Company instituted ESOP 2011 scheme under which 1,600,000 stock options have been allocated for grant to the employees. The scheme was approved by the shareholders at the Eleventh Annual General Meeting held on August 24, 2011. The Scheme was subsequently amended to increase the number of options to 2,600,000
stock options vide resolution passed at Thirteenth Annual General Meeting held on August 22, 2013.
The following table illustrates the number and weighted average exercise prices (âWAEP") of, and movements in, share options during the year:
No options were exercised during the year. The weighted average share price at the date of exercise of these options for previous year March 31, 2020 was Rs. 1,128.06 per share.
The weighted average remaining contractual life for the share options outstanding as at March 31, 2021 is Nil (March 31, 2020: 1.15 years).
There are no options outstanding at the end of the year. Exercise prices for options outstanding at the end of the previous year March 31, 2020 was Rs. 1,196.25.
Pursuant to the applicable requirements of the erstwhile Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (â"the SEBI guidelines""), the Company had framed and instituted Employee Stock Option Plan 2015 (â"ESOP 2015"") to attract, retain, motivate and reward its employees and to enable them to participate in the growth, development and success of the Company. ESOP 2015 envisages an eClerx Employee Welfare Trust (âESOP Trust") which is authorised for secondary acquisition. However, during the year in review, ESOP trust has not bought any shares ( March 31,2020: Nil) from open market. As at March 31, 2021, ESOP Trust holds 883,605 shares of the Company.
The weighted average remaining contractual life for the share options outstanding as at March 31, 2021 was 3.77 years (March 31, 2020: 4.06 years).
The range of exercise prices for options outstanding at the end of the year was Rs. 413.03 to Rs. 1,379.15 (March 31,
2020: Rs. 595.70 to Rs. 1,379.15).
The weighted average fair value of options granted during the year was Rs. 85.29 (March 31, 2020: Rs. 50.59)
The average vesting period is 3 years and exercise period is 3 years from the date of vesting.
(a) The Company has received Income tax demands amounting to Rs. 116.41 million (including interest) for financial years 2009-10, 2010-11, 2011-12, 2012-13, 201314 and 2014-15 against which appeals are pending with Commissioner of Income Tax (Appeals) and Income tax Appelate Tribunal.
(b) The Company has received Income Tax demands amounting to Rs.88.92 million (including interest) for financial years 2016-17 and 2017-18 against which rectification letter & revised return have been filed with the deputy commissioner of Income-tax.
(c) The Company has received Service tax demands amounting to Rs. 125.10 million (excluding interest and penalties) for the period April 2007 to March 2013 against which appeals are pending with Central Excise and Service Tax Appelate Tribunal and Rs.3.18 million (excluding interest and penalties) for the period April 2013 to March 2017 against which appeals are pending with Commissioner of Central Excise (Appeals).
With respect to tax refund claims for the period July 2014 till March 2017 to the extent rejected by the Services Tax Department for Rs.2.08 million, the Company''s appeals are pending before the Commissioner of Central Excise & CGST (Appeals).
The amounts represent best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on the outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interest and has been advised that it has strong legal positions against each of such disputes. Hence, no provision has been made in the financial statements for these disputes except Rs 15.22 million has been provided as per requirement of Appendix C to Ind AS 12 Income Taxes.
Terms and conditions of transactions with related parties
The transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions. There have been no guarantees provided or received for any related party receivables or payables. Outstanding balances at the year end are unsecured and interest free and settlement occurs through banks.
The loan granted to eClerx Employee Welfare Trust ("ESOP Trustâ) is intended to finance purchase of shares from the open market for allotment to employees under the stock option schemes. The loan is unsecured. The Company has discontinued charging interest on this loan with effect from October 01, 2019 (The weighted average interest rate for the year ended March 31, 2020 was 7.00%) . The loan has been utilised for the purpose it was granted. Refer note 8 for further details.
Note: The remuneration to the key management personnel are on accrual basis and does not include the provisions made for gratuity, carry forward leave benefits and any long-term benefits payable, as they are determined on an actuarial basis for the Company as a whole.
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel except share based payment which is disclosed on the basis of shares exercised.
The Board of Directors i.e. Chief Operating Decision Maker (âCODM") evaluates the Company''s performance and allocates resources based on an analysis of various performance indicators by reportable segments. The Company operates under a single reportable segment which is data management, analytics solutions and process outsourcing services. Further the risks and rewards under various geographies where the Company operates are similar in nature.
34. Hedging activities and derivatives Cash Flow Hedges Foreign currency risk
Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in US Dollars. These forecast transactions are highly probable, and they comprise about 65.51% of the Company''s total expected sales in US dollars. The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in the foreign exchange forward rate. The terms of foreign currency forward contracts match with the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arises requiring recognition through profit or loss.
The cash flow hedges of the expected future sales during the year ended March 31, 2021 were assessed to be highly effective and a net unrealised gain of Rs. 264.56 million, with a deferred tax liability of Rs. 66.58 million relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges of the expected future sales during the year ended March 31, 2020 were assessed to be highly effective and an
unrealised loss of Rs. 341.00 million, with a deferred tax asset of Rs.85.83 million was included in OCI in respect of these contracts.
The amounts reclassified from OCI to profit or loss for the year ended March 31, 2021, amounts to gain of Rs. 58.53 million (March 31, 2020: gain of Rs. 98.63 million).
The management assessed that cash and cash equivalents, other bank balances, trade receivables, other financial assets, trade payables and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
For loan given to the ESOP Trust refer note 8. The management believes that difference between carrying value and fair value of loan given to ESOP Trust is not significant.
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:
The fair values of the financial assets carried at fair value through profit and loss (âFVTPNL") are derived from quoted market prices in active markets.
The Company enters into derivative financial instruments with various counterparties. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The valuation techniques include forward pricing using present value calculations. The model incorporates various inputs including the foreign exchange spot and forward rates, yield curves of the respective currencies,
currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying currency. As at March 31, 2021, the marked-to-market value of derivative asset / (liability) positions should be net of credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships recognised at fair value.
The fair value of security deposit that carries no interest is measured at the present value by discounting using the prevailing market rate of interest for a similar instrument with a similar credit rating.
37. Financial risk management objectives and policies
The Company''s principal financial liabilities, other than derivatives and lease liabilities, comprises trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include trade and other receivables, cash and cash equivalents and other bank balances that derive directly from its operations. The Company also holds FVTPNL investments and enters into derivative transactions.
The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. The Company''s senior management provides assurance to the Board of Directors that the Company''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company''s policy that no trading in
derivatives for speculative purposes may be undertaken which is consistent with the Company''s foreign risk management policy. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
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 mainly comprises of currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include deposits, FVTPNL investments and derivative financial instruments.
The sensitivity analysis in the following sections relate to the position as at March 31, 2021 and March 31, 2020.
The sensitivity analysis have been prepared on the basis that the derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2021.
The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and other post- retirement obligations; provisions, and the non-financial assets and liabilities of foreign operations.
The following assumptions have been made in calculating the sensitivity analysis:
- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2021 and March 31, 2020 including the effect of hedge accounting.
- The sensitivity of equity is calculated by considering the effect of any associated cash
flow hedges at March 31, 2021 and March 31, 2020 for the effects of the assumed changes of the underlying risk.
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency) and the Company''s net investment in foreign subsidiaries.
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 24-month period for hedges of forecasted sales.
When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure with forecasted sales.
As at March 31, 2021, the Company hedged 65.51% (March 31, 2020: 66%) of its expected foreign currency sales in US dollars. Those hedged sales were highly probable at the reporting date. This foreign currency risk is hedged by using foreign currency forward contracts.
The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas.
The Company evaluates exchange rate exposure arising from foreign currency transactions and the Company follows established risk management policies, including the use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk.
The Company''s equity price risk is minimal due to no investment in listed securities and immaterial investment in non-listed equity securities.
At the reporting date, the exposure to unlisted equity securities at was Rs. 2.4 million. No sensitivity analysis done since amount is immaterial.
Credit risk is the risk that 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) including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. For loan given to ESOP trust, refer note 8.
Customer credit risk is managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored and followed up.
For trade receivables or contract revenue receivables, the Company follows âsimplified approach'' for recognition of impairment loss allowance.
Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
Financial instruments and bank 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 only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company''s treasury department on a periodic basis as per the Board of Directors approved Investment policy. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.
The Company''s maximum exposure relating to financial derivative instruments is noted in note 34 and note 35.
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company consistently generated sufficient cash flows from operations to meet its financial obligations as and when they fall due.
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company''s performance to developments affecting a particular industry. In order to avoid excessive concentrations of risk, the Company''s policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio.
For the purpose of the Company''s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to maximise the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders,
return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2021 and March 31, 2020.
The Company has a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company appoints independent consultants for conducting a Transfer Pricing Study to determine whether the transactions with associate enterprises are undertaken, during the financial year, on an âarm''s length basis''. Adjustments, if any, arising from the transfer pricing study in the respective jurisdictions shall be accounted for as and when the study is completed for the current financial year. However the management is of the opinion that its international transactions are at arms'' length so that the aforesaid legislation will not have any impact on the financial statements.
Mar 31, 2018
1. Related party transactions A. Related Parties and Key Management Personnel Name of related party and related party relationship
Related party under Ind AS 24 - Related Party Disclosures and as per Companies Act, 2013
(a) Where control exists:
1. eClerx Limited (wholly owned subsidiary)
2. eClerx LLC (wholly owned subsidiary)
3. eClerx Investments Limited (wholly owned subsidiary, liquidated w.e.f. March 28, 2017)
4. eClerx Private Limited (wholly owned subsidiary)
5. eClerx Investments (UK) Limited (wholly owned subsidiary)
6. CLX Europe S.P.A. (100% subsidiary of eClerx Investments (UK) Limited)
7. Sintetik S.R.L. (100% subsidiary of CLX Europe S.P.A.)
8. CLX Europe Media Solution GmbH (100% subsidiary of CLX Europe S.P.A.)
9. CLX Europe Media Solution Limited (100% subsidiary of CLX Europe Media Solutions GmbH)
10. CLX Thai Company Limited (49% holding of CLX Europe S.P.A.)
11. eClerx Employee Welfare Trust (Entity under control of the Company)
12. eClerx Canada Limited (wholly owned subsidiary of eClerx Investments (UK) Limited)
(b) Related party under Ind AS 24 - Related Party Disclosures and as per Companies Act, 2013 with whom transactions have taken place during the year
(I) Enterprises where Key Managerial Personnel and / or relative of such personnel have significant influence:
1. Duncan Stratton & Company Limited
(II) Key Management Personnel:
1. Pradeep Kapoor (Non-Executive Director - Chairman)
2. PD Mundhra (Executive Director)
3. Anjan Malik (Non-Executive Director)
4. Rohitash Gupta (Chief Financial Officer)
5. Pratik Bhanushali (Company Secretary) appointed w.e.f January 30, 2018
6. Biren Gabhawala (Non-Executive Independent Director)
7. Anish Ghoshal (Non-Executive Independent Director)
8. Alok Goyal (Non-Executive Independent Director)
9. Deepa Kapoor (Non-Executive Independent Director)
10. Shailesh Kekre (Non-Executive Independent Director)
11. Vikram Limaye (Non-Executive Independent Director) resigned w.e.f. June 10, 2017
12. Gaurav Tongia (Company Secretary) resigned w.e.f. November 17, 2017
13. VK. Mundhra (Non-Executive Director-Chairman) resigned w.e.f. November 1, 2017
Note: The remuneration to the key management personnel are on accrual basis and does not include the provisions made for gratuity, carry forward leave benefits and any long-term benefits payable, as they are determined on an actuarial basis for the Company as a whole.
The amounts disclosed in the table are the amounts recognized as an expense during the reporting period related to key management personnel.
2. Segment Information
The Board of Directors i.e. Chief Operating Decision Maker ("CODM") evaluates the Company''s performance and allocates resources based on an analysis of various performance indicators by reportable segments. The Company operates under a single reportable segment which is data management, analytics solutions and process outsourcing services. Further the risks and rewards under various geographies where the Company operates are similar in nature.
The Company has three customers with revenue greater than 10% each of total company revenue totaling Rs, 5,466.67 million for the year ended March 31, 2018 and three customers with revenue greater than 10% each of total company revenue totaling Rs, 5,765.61 million for the year ended March 31, 2017.
Note: Non - current operating assets for this purpose consists of property plant and equipment, capital work in progress, other intangibles, other non - current assets and net tax assets.
3. Hedging activities and derivatives Cash Flow Hedges Foreign currency risk
Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in US Dollars and EUROs. These forecast transactions are highly probable, and they comprise about 86% of the Company''s total expected sales. The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in the foreign exchange forward rate. The terms of foreign currency forward contracts match with the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arises requiring recognition through profit or loss.
The cash flow hedges of the expected future sales during the year ended March 31, 2018 were assessed to be highly effective and a net unrealized gain of Rs, 249.24 million, with a deferred tax liability of Rs, 68.88 million relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges of the expected future sales during the year ended March 31, 2017 were assessed to be highly effective and an unrealized gain of Rs, 642.27 million, with a deferred tax liability of Rs, 133.42 million was included in OCI in respect of these contracts.
The amounts removed from OCI during the year and included in the carrying amount of the hedging items as a basis of adjustment for the year ended March 31, 2018, amounts to Rs, 553.77 million (March 31, 2017: Rs, 115.07 million). The amounts retained in OCI at March 31, 2018 are expected to mature and affect the statement of profit and loss during the year ended March 31, 2019.
4. Fair values
Set out below, is a comparison by class of the carrying amounts and fair value of the CompanyRs,s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:
The management assessed that cash and cash equivalents, trade receivables, other financial assets, trade payables and other financial 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:
Trade receivables are evaluated by the Company based on specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables. The fair values of the financial assets carried at fair value through profit and loss ("FVTPNL") are derived from quoted market prices in active markets.
The Company enters into derivative financial instruments with various counterparties. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The valuation techniques include forward pricing using present value calculations. The model incorporates various inputs including the foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying currency. As at March 31, 2018, the marked-to-market value of derivative asset positions should be net of credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships recognized at fair value.
The fair value of security deposit that carries no interest is measured at the present value by discounting using the prevailing market rate of interest for a similar instrument with a similar credit rating.
5. Fair value hierarchy
The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities.
6. Financial risk management objectives and policies
The Company''s principal financial liabilities, other than derivatives comprises trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds FVTPNL investments and enters into derivative transactions. The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. The Company''s senior management provides assurance to the Board of Directors that the Company''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken which is consistent with the Company''s foreign risk management policy. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below.
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 mainly comprises of currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include deposits, FVTPNL investments and derivative financial instruments.
The sensitivity analyses in the following sections relate to the position as at March 31, 2018 and March 31, 2017.
The sensitivity analyses have been prepared on the basis that the derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2018.
The analyses exclude the impact of movements in market variables on: the carrying values of gratuity and other post- retirement obligations; provisions; and the non-financial assets and liabilities of foreign operations.
The following assumptions have been made in calculating the sensitivity analyses:
- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2018 and March 31, 2017 including the effect of hedge accounting.
- The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges at March 31, 2018 and March 31, 2017 for the effects of the assumed changes of the underlying risk.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency) and the Companyâs net investment in foreign subsidiaries.
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 24-month period for hedges of forecasted sales.
When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure with forecasted sales.
As at March 31, 2018, the Company hedged 86% (March 31, 2017: 73%) of its expected foreign currency sales. Those hedged sales were highly probable at the reporting date. This foreign currency risk is hedged by using foreign currency forward contracts.
Foreign currency sensitivity
The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas.
The Company evaluates exchange rate exposure arising from foreign currency transactions and the Company follows established risk management policies, including the use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk.
The following table demonstrate the sensitivity to a reasonably possible change in USD and EUR exchange rates, with all other variables held constant. The impact on the Company''s profit before tax is due to changes in the fair value of monetary assets and liabilities. The impact on Company''s pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges.
Equity price risk
The Company''s equity price risk is minimal due to no investment in listed securities and immaterial investment in non-listed equity securities.
At the reporting date, the exposure to unlisted equity securities at was '' 2.4 million. No sensitivity analysis done since amount is immaterial.
Credit risk
Credit risk is the risk that 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) including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
Trade receivables
Customer credit risk is managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored and followed up.
Trade receivables are evaluated by the Company based on specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables. The impairment is Nil as of March 31, 2018, Nil as of March 31, 2017.
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 only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company''s treasury department on a periodic basis as per the Board of Directors approved Investment policy. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.
The Company''s maximum exposure relating to financial guarantees and financial derivative instruments is noted in note 35.
Liquidity risk
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company consistently generated sufficient cash flows from operations to meet its financial obligations as and when they fall due.
The table below summarizes the maturity profile of the Company''s financial liabilities based on contractual undiscounted payments.
Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company''s performance to developments affecting a particular industry. In order to avoid excessive concentrations of risk, the Company''s policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio.
7. Capital management
For the purpose of the Company''s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Company''s capital management is to maximize the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2018 and March 31, 2017.
8. Scheme of amalgamation
1. The Board of Directors of the Company in their meeting held on September 11, 2015 have approved the Scheme of Amalgamation between Agilyst Consulting Private Limited (the wholly owned step down subsidiary, hereinafter referred to as "ACPL") and the Company and their respective shareholders (collectively referred to as the Scheme) which provides for the amalgamation of ACPL with the Company under sections 391 to 394 and other applicable provisions, if any, of Companies Act, 1956 and the other relevant provisions of Companies Act, 2013. The Appointed date of the Scheme is April 1, 2015.
2. The Hon''ble High Court vide its order July 1, 2016 approved the Scheme.
3. The Company has accounted for the amalgamation of ACPL in its books of account with effect from the Appointed Date as per the ''Pooling of Interests Method'' prescribed under the''Ind AS 103'' Business Combination.
4. In accordance with the Scheme;
(a) All assets, liabilities and reserves in the books of ACPL has been transferred to the Company at their respective carrying values as on the Appointed Date.
(b) The excess, in the value of net assets and reserves to be vested in the Company, has been credited to the ''Capital Reserve Account''.
5. The amalgamation has resulted in transfer of assets, liabilities and reserves in accordance with the terms of the Scheme at the following summarized values:
All the shares of Agilyst Consulting Private Limited were held by Agilyst Inc., which was a step down subsidiary of eClerx Services Limited. As per the scheme, there was no payment of consideration/issue of shares by eClerx Services Limited to any person and the equity shares held by Agilyst Inc. in Agilyst Consulting Private Limited were cancelled in accordance with the scheme. Refer note 43(b) and 44 of consolidated financial statements.
Note for merger of Agilyst, Inc. with eClerx LLC -
Agilyst Inc, a wholly owned subsidiary of eClerx Investments Limited, has been merged with eClerx LLC w.e.f January 1, 2017. All assets, liabilities and reserves in the books of Agilyst Inc. have been transferred to the eClerx LLC., at their respective carrying values w.e.f. January 1, 2017. As per the agreement and plan of merger, the share capital of Agilyst Inc. has been adjusted against capital reserve. Consequently carrying value of investment in eClerx Investments Limited has been transferred to investment in eClerx LLC.
Note for winding up of eClerx Investments Limited -
eClerx Investments Limited, a wholly owned subsidiary of the Company, has been wound up on March 28, 2017 for administrative convenience and maintaining a lean corporate structure.
9. Buyback of shares
The Board of Directors vide their meeting dated December 22, 2017 approved, subject to shareholders'' approval, buyback of equity shares of the Company. The shareholders approval was procured vide postal ballot results of which were announced on January 23, 2018. The Company concluded the said buyback of 1,290,000 Equity Shares of '' 10 each, at a buyback price of '' 2,000 per share and total buyback amount of '' 2,580 million. The settlement date for the said buyback was March 13, 2018. The shares so bought back were extinguished and the issued and paid-up capital stands amended accordingly.
10. Transfer pricing
The Company has a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company appoints independent consultants for conducting a Transfer Pricing Study to determine whether the transactions with associate enterprises are undertaken, during the financial year, on an ''arm''s length basis''. Adjustments, if any, arising from the transfer pricing study in the respective jurisdictions shall be accounted for as and when the study is completed for the current financial year. However the management is of the opinion that its international transactions are at arms'' length so that the aforesaid legislation will not have any impact on the financial statements.
11. Standards issued but not yet effective Ind AS 115 : Revenue from contracts with customers
Ind AS 115 was issued on March 28, 2018 and establishes a five-step model to account for revenue arising from contracts with customers. Under Ind AS 115, revenue is recognized 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. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after April 1, 2018. The Company plans to adopt the new standard on the required effective date using the modified retrospective method.
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. Adoption of the new rules could affect the timing of revenue recognition for certain transactions of the Company. 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. The Company has established an implementation team to implement Ind AS 115 related to the recognition of revenue from contracts with customers and it continues to evaluate the changes to accounting system and processes, and additional disclosure requirements that may be necessary.
Amendments to Ind 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 Company that is classified) as held for sale.
As at March 31, 2018, the Company does not have any interest in subsidiary which classified as held for sale.
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 recognized 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 scope of the amendments.
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 non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognizes 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.
The Appendix is effective for annual periods beginning on or after April 1, 2018. However, since the Company''s current practice is in line with the interpretation, the Company does not expect any effect on its standalone financial statements.
Mar 31, 2017
1. EARNINGS PER SHARE (EPS)
The basic earnings per equity share are computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting period. The number of shares used in computing diluted earnings per share comprises the weighted average number of equity shares considered for deriving basic earnings per share, and also the weighted average number of equity shares, which would be issued on the conversion of all dilutive potential shares into equity shares, unless the results would be anti-dilutive.
2. GRATUITY BENEFIT PLANS
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, the employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the memberâs length of service and salary at retirement age. The gratuity scheme is managed by a trust which regularly contributes to insurance service provider which manages the funds of the trust. The fundâs investments are managed by certain insurance companies as per the mandate provided to them by the trustees and the asset allocation is within the permissible limits prescribed in the insurance regulations. The Company recognizes actuarial gains and losses immediately in other comprehensive income, net of taxes.
The following tables summaries the components of net benefit expense recognized in the statement of profit or loss and the funded status and amounts recognized in the balance sheet:
The sensitivity analyses 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.
The average duration of the defined benefit plan obligation at the end of the reporting period is 10 years (March 31, 2016: 10 years).
3. SHARE-BASED PAYMENTS Employee Stock Option Plan
Under the employee stock option plan, the Company, grants options to senior executive employees of the Company and its subsidiaries as approved by the Nomination and Remuneration Committee. Vesting period is three years from the date of grant. Further, vesting of certain portion of the stock options is dependent on the Compounded Annual Growth Rate of the organic operating revenues of the Company. The fair value of the stock options is estimated at the grant date using a Black and Scholes model, taking into account the terms and conditions upon which the share options were granted. The contractual term of each option granted is six years. There are no cash settlement alternatives. The Company does not have a past practice of cash settlement of these options.
ESOP 2008 scheme:
The Company instituted ESOP 2008 scheme under which 1,000,000 stock options have been allocated for grant to the employees. The scheme was approved by the shareholders by way of postal ballot, the result of which was declared on May 19, 2008. The Scheme was subsequently amended to increase the number of options to 1,600,000 stock options vide resolution passed at Ninth Annual General Meeting held on August 26, 2009. Pursuant to bonus issue by the Company on July 29, 2010, the number of options available under the scheme accordingly increased to 2,400,000 pursuant to relevant SEBI regulations. During the year ended March 31, 2016, the Nomination and Remuneration Committee approved that no further options will be granted under ESOP 2008 Scheme, however active options there under would continue to vest as per the respective terms.
Movements during the year
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year:
*During the previous year ended March 31, 2016, the Company has issued bonus shares in the ratio of 1:3 on December 18, 2015. The effect on the weighted average exercise price due to bonus issue has been consequently adjusted.
The weighted average share price at the date of exercise of these options was Rs. 1,465 per share (March 31, 2016: Rs. 1,613.31)
The weighted average remaining contractual life for the share options outstanding as at March 31, 2017 was 0.01 years (March 31, 2016: 0.96 years).
The exercise prices for options outstanding at the end of the year was Rs. 517.70 (March 31, 2016: Rs. 257.50 to Rs. 517.70). The average vesting period is 2.83 years and exercise period is 3 years.
ESOP 2011 scheme:
The Company instituted ESOP 2011 scheme under which 1,600,000 stock options have been allocated for grant to the employees. The scheme was approved by the shareholders at the Eleventh Annual General Meeting held on August 24, 2011. The Scheme was subsequently amended to increase the number of options to 2,600,000 stock options vide resolution passed at Thirteenth Annual General Meeting held on August 22, 2013.
Movements during the year
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year:
*During the previous year ended March 31, 2016, the Company has issued bonus shares in the ratio of 1:3 on December 18, 2015. The effect on the weighted average exercise price due to bonus issue has been consequently adjusted.
The weighted average share price at the date of exercise of these options was Rs. 1,444 per share. (March 31, 2016: Rs. 1,523.70) The weighted average remaining contractual life for the share options outstanding as at March 31, 2017 was 2.68 years (March 31, 2016: 3.98 years).
The range of exercise prices for options outstanding at the end of the year was Rs. 463.91 to Rs. 1,196.25 (March 31, 2016: Rs. 463.91 to Rs.1,196.25).
There were no grants given in current year under this scheme. The weighted average fair value of options granted during the previous year was Rs. 676.34.
The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
ESOP 2015 scheme:
Pursuant to the applicable requirements of the erstwhile Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (''the SEBI guidelinesâ), the Company had framed and instituted Employee Stock Option Plan 2015 (''ESOP 2015â) to attract, retain, motivate and reward its employees and to enable them to participate in the growth, development and success of the Company. ESOP 2015 envisages an ESOP trust which is authorized for secondary acquisition and accordingly during the year under review, ESOP Trust has bought 75,113 shares from open market.
Movements during the year
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year under ESOP 2015 scheme:
These options are not yet vested as of March 31, 2017.
The weighted average remaining contractual life for the share options outstanding as at March 31, 2017 was 5 years The exercise prices for options outstanding at the end of the year was Rs. 1,379.15 The weighted average fair value of options granted during the year was Rs. 462.43 The average vesting period is 2.86 years and exercise period is 3 years.
Notes:
(a) The guarantee is for usage of Amex cards by subsidiaries of the Company. Amex cards are issued to employees of foreign subsidiaries which are used by them to incur expenses on travel, business promotion and other office expenses. These have been cancelled in current year.
These guarantees have been given in the normal course of the Companyâs operations and are not expected to result in any loss to the Company on the basis of the beneficiaries fulfilling their ordinary commercial obligations.
(b) The Company has received favorable orders from ITAT against the demand raised by the Assessing Officers amounting to Rs. 13.20 Million for Financial Years 2004-05 and 2006-07. The department has preferred appeal to High Court for Financial Years 2004-05 and 2006-07 and filed Special Leave Petition with Supreme Court for Financial Years 2006-07 and 2007-08.The Company has received demand amounting to Rs. 17.17 Million for Financial Year 2010-11 against which Company has filed appeal with Income tax appellate tribunal.
The Companyâs subsidiary Agilyst Consulting Private Limited, which has been merged with effect from April 1, 2015 with the Company, has received demand amounting to Rs. 48.35 Million for Financial Years 2009-10, 2010-11, 2011-12 and 2012-13 against which the Companyâs subsidiary has filed appeals with Commissioner of Income Tax (Appeals) and Income tax appellate tribunal..
(c) Tax Refund claims for the period July 2014 till December 2015 to the extent rejected by the Services Tax Department for Rs.9.58 Million is pending in appeal before the Commissioner of Central Excise (Appeals)
The amounts represent best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on the outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interest and has been advised that it has strong legal positions against each of such disputes. Hence, no provision has been made in the financial statements for these disputes.
4. RELATED PARTY TRANSACTIONS
A. Related Parties and Key Management Personnel Name of related party and related party relationship
Related party under Ind AS 24 - Related Party Disclosures and as per Companies Act, 2013
(a) Where control exists:
1. eClerx Limited (wholly owned subsidiary)
2. eClerx LLC (wholly owned subsidiary)
3. eClerx Investments Limited (wholly owned subsidiary, liquidated w.e.f March 28, 2017)
4. eClerx Private Limited (wholly owned subsidiary)
5. Agilyst Inc (100% subsidiary of eClerx Investments Limited, merged with eClerx LLC w.e.f. January 1, 2017)
6. Agilyst Consulting Private Limited (100% subsidiary of Agilyst Inc., merged with eClerx Services Limited w.e.f. April 1, 2015)
7. eClerx Investments (UK) Limited (wholly owned subsidiary)
8. CLX Europe S.P.A. (100% subsidiary of eClerx Investments (UK) Limited)
9. Sintetik S.R.L. (100% subsidiary of CLX Europe S.P.A.)
10. CLX Europe Media Solution GmbH (100% subsidiary of CLX Europe S.P.A.)
11. CLX Europe Media Solution Limited (100% subsidiary of CLX Europe Media Solutions GmbH)
12. CLX Thai Company Limited (49% holding of CLX Europe S.P.A.)
13. eClerx Employee Welfare Trust (Entity under control of the Company)
14. eClerx Canada Limited (wholly owned subsidiary of eClerx Investments (UK) Limited w.e.f September 27, 2016)
(b) Related party under Indian Accounting Standard 24 - Related Party Disclosures and as per Companies Act, 2013 with whom transactions have taken place during the year
(I) Enterprises where Key Managerial Personnel and / or relative of such personnel have significant influence:
1. Duncan Stratton & Company Limited
(II) Key Management Personnel:
1. V.K. Mundhra ((Non-Executive Director - Chairman)
2. PD Mundhra (Executive Director)
3. Anjan Malik ((Non-Executive Director)
4. Rohitash Gupta (Chief Financial Officer)
5. Gaurav Tongia (Company Secretary)
6. Biren Gabhawala (Non-Executive Independent Director)
7. Anish Ghoshal (Non-Executive Independent Director)
8. Vikram Limaye (Non-Executive Independent Director)
9. Pradeep Kapoor (Non-Executive Independent Director)
10. Alok Goyal (Non-Executive Independent Director)
11. Deepa Kapoor (Non-Executive Independent Director)
12. Shailesh Kekre (Non-Executive Independent Director)
Terms and conditions of transactions with related parties
The transactions with related parties are made on terms equivalent to those that prevail in armâs length transactions. There have been no guarantees provided or received for any related party receivables or payables. Outstanding balances at the yearend are unsecured and interest free and settlement occurs through banks.
Loan to Related parties
The loan granted to eClerx Employee Welfare Trust is intended to finance purchase of shares for allotment to employees under the stock option schemes. The loan is unsecured and repayable in full. The interest rate charged is 16.05%. The loan has been utilized for the purpose it was granted.
Note: The remuneration to the key management personnel does not include the provisions made for gratuity and leave benefits, as they are determined on an actuarial basis for the Company as a whole.
The amounts disclosed in the table are the amounts recognized as an expense during the reporting period related to key management personnel.
5. SEGMENT INFORMATION
The Board of Directors i.e. Chief Operating Decision Maker (''CODMâ) evaluates the Companyâs performance and allocates resources based on an analysis of various performance indicators by reportable segments. The Company operates under a single reportable segment which is data management, analytics solutions and process outsourcing services. Further the risks and rewards under various geographies where the Company operates are similar in nature.
Note: Non - current operating assets for this purpose consists of property plant and equipment, capital work in progress, other intangibles and other non - current assets.
6. HEDGING ACTIVITIES AND DERIVATIVES Cash Flow Hedges Foreign currency risk
Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in US Dollars and EUROs. These forecast transactions are highly probable, and they comprise about 72.64% of the Companyâs total expected sales. The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in the foreign exchange forward rate. The terms of foreign currency forward contracts match the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arises requiring recognition through profit or loss.
The cash flow hedges of the expected future sales during the year ended March 31, 2017 were assessed to be highly effective and a net unrealized gain of Rs. 642.27 Million, with a deferred tax liability of Rs.133.42 Million relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges of the expected future sales during the year ended March 31, 2016 were assessed to be highly effective and an unrealized gain of Rs 149.03 Million was included in OCI in respect of these contracts.
The amounts removed from OCI during the year and included in the carrying amount of the hedging items as a basis of adjustment for the year ended March 31, 2017, totaling Rs. 115.07 Million (March 31, 2016: Rs. 257.71 Million). The amounts retained in OCI at March 31, 2017 are expected to mature and affect the statement of profit and loss during the year ended March 31, 2018.
7. FAIR VALUES
Set out below, is a comparison by class of the carrying amounts and fair value of the Companyâs financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:
The management assessed that cash and cash equivalents, trade receivables, other financial assets, trade payables and other financial 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:
Trade receivables are evaluated by the Company based on specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.
The fair values of the FVTPNL (Fair value through profit and loss) financial assets are derived from quoted market prices in active markets.
The Company enters into derivative financial instruments with various counterparties. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The valuation techniques include forward pricing using present value calculations. The model incorporates various inputs including the foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying currency. As at March 31, 2017, the marked-to-market value of derivative asset positions should be net of credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships recognized at fair value.
The fair value of security deposit that carries no interest is measured at the present value by discounting using the prevailing market rate of interest for a similar instrument with a similar credit rating.
378. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Companyâs principal financial liabilities, other than derivatives comprises trade and other payables. The main purpose of these financial liabilities is to finance the Companyâs operations. The Companyâs principal financial assets include trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds FVTPNL investments and enters into derivative transactions.
The Company is exposed to market risk, credit risk and liquidity risk. The Companyâs senior management oversees the management of these risks. The Companyâs senior management provides assurance to the Board of Directors that the Companyâs financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Companyâs policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Companyâs policy that no trading in derivatives for speculative purposes may be undertaken which is consistent with the Companyâs foreign risk management policy. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below.
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 mainly comprises of currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include deposits, FVTPNL investments and derivative financial instruments.
The sensitivity analysis in the following sections relate to the position as at March 31, 2017 and March 31, 2016.
The sensitivity analysis have been prepared on the basis that the derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2017.
The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and other post- retirement obligations; provisions; and the non-financial assets and liabilities of foreign operations.
The following assumptions have been made in calculating the sensitivity analysis:
- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2017 and March 31, 2016 including the effect of hedge accounting.
- The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges at March 31, 2016 and March 31, 2017 for the effects of the assumed changes of the underlying risk.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Companyâs exposure to the risk of changes in foreign exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in a foreign currency) and the Companyâs net investment in foreign subsidiaries.
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 24-month period for hedges of forecasted sales.
When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure with forecasted sales.
At March 31, 2017, the Company hedged 73% (March 31, 2016: 76%, April 1, 2015: 80%) of its expected foreign currency sales. Those hedged sales were highly probable at the reporting date. This foreign currency risk is hedged by using foreign currency forward contracts.
Foreign currency sensitivity
The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas.
The Company evaluates exchange rate exposure arising from foreign currency transactions and the Company follows established risk management policies, including the use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk.
The following table demonstrate the sensitivity to a reasonably possible change in USD and EUR exchange rates, with all other variables held constant. The impact on the Companyâs profit before tax is due to changes in the fair value of monetary assets and liabilities. The impact on Companyâs pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges.
Equity price risk
The Companyâs equity price risk is minimal due to no investment in listed securities and immaterial investment in non-listed equity securities.
At the reporting date, the exposure to unlisted equity securities was Rs. 2.4 Million. No sensitivity analysis done since amount is immaterial.
Credit risk
Credit risk is the risk that 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) including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
Trade receivables
Customer credit risk is managed by each business unit subject to the Companyâs established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored and followed up.
Trade receivables are evaluated by the Company based on specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables. The impairment is Nil as of March 31, 2017, Rs 0.04 Million as of March 31, 2016 and Nil as of April 1, 2015.
Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Companyâs treasury department in accordance with the Companyâs policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Companyâs treasury department on a periodic basis as per the Board of Directors approved Investment policy. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterpartyâs potential failure to make payments.
The Companyâs maximum exposure relating to financial guarantees and financial derivative instruments is noted in note 35. Liquidity risk
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company consistently generated sufficient cash flows from operations to meet its financial obligations as and when they fall due.
The table below summarizes the maturity profile of the Companyâs financial liabilities based on contractual undiscounted payments.
Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Companyâs performance to developments affecting a particular industry. In order to avoid excessive concentrations of risk, the Companyâs policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio.
9. CAPITAL MANAGEMENT
For the purpose of the Companyâs capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Companyâs capital management is to maximize the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2017 and March 31, 2016.
10. FIRST-TIME ADOPTION OF IND AS
The Company has prepared its financial statements to comply with Ind AS for the year ending March 31, 2017, together with comparative information for the year ended March 31, 2016. In preparing these financial statements, the Companyâs opening balance sheet was prepared as at April 1, 2015, the Companyâs 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.
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:
A. Exemptions availed : Business Combinations
Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date. The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date.
Deemed cost
Ind AS 101 allows a first time adopter to continue with the carrying value for all its Property, Plant and Equipment and Intangible Assets as recognized in its previous GAAP financials on the date of transition. The Company has opted for this exemption and decided to carry its Property, Plant and Equipment and Intangible assets at Carrying value as per Indian GAAP on the date of transition i.e. April 1, 2015.
Investment in subsidiaries and associates
Ind AS 101 allows a First time adopter to account for its Investments in Subsidiaries, Joint Ventures and Associates either at cost or in accordance with Ind AS 109. The Company has elected to account for its investments in subsidiary at cost, which is equal to the deemed cost as per the previous GAAP on the date of transition.
Share based payment
Ind AS 102 Share-based Payment has not been applied to equity instruments in share-based payment transactions that vested before April 1, 2015.
B. Mandatory Exemptions
The following mandatory exceptions have been applied in accordance with Ind AS 101 in preparing the financial statements. Hedge Accounting
Hedge accounting can only be applied prospectively from the transition date to transaction that satisfy the hedge accounting criteria in Ind AS 109, at that date. Hedging relationships cannot be designated retrospectively, and the supporting documentation cannot be created retrospectively. As a result, only hedging relationships that satisfied the hedge accounting criteria as of April 1, 2015 are reflected as hedges in the Companyâs results under Ind AS. The Company has designated various hedging relationships as cash flow hedges under the previous GAAP On date of transition to Ind AS, the Company had assessed that all the designated hedging relationship qualifies for hedge accounting as per Ind AS 109. Consequently the Company continues to apply hedge accounting on and after the date of transition to Ind AS.
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:
- 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.
Footnotes to the reconciliation of equity as at April 1, 2015 and March 31, 2016 and profit or loss for the year ended March 31, 2016 1. Proposed dividend
Under Indian GAAP, proposed dividends and dividend distribution tax are recognized as a liability in the period to which they relate, irrespective of when they are declared. Under Ind - AS, a proposed dividend is recognized as a liability in the period in which it is declared by the Company (i.e. when approved by shareholders in a general meeting) or paid.
In case of the Company, the declaration of dividend occurs after period end. Therefore, the liability of Rs. 1,284.56 Million for the year ended March 31, 2015 recorded for dividend has been derecognized against retained earnings on April 1, 2015. The proposed dividend for the year ended March 31, 2016 of Rs. 49.09 Million recognized under Indian GAAP was reduced from other payables and with a corresponding impact in retained earnings. The net impact on retained earnings as on March 31, 2016 was Rs. 49.09 Million.
2. Fair Value through Profit and Loss (FVTPNL) financial assets
Under Indian GAAP investment in mutual funds are carried at lower of cost and fair value. Under Ind-AS, the Company designated such investments as FVTPNL investments. Ind-AS required FVTPNL investments to be measured at fair value. At the date of transition to Ind-AS, deference between the instruments fair value and Indian GAAP carrying amount has been recognized in retained earnings. This has resulted in increase in retained earnings of Rs. 0.42 Million and Rs. 0.07 Million as on March 31, 2016 and April 1, 2015 respectively and a increase in net profit by Rs. 0.35 Million for year ended March 31, 2016.
3. Defined benefit obligation
Under Ind AS, re-measurements, i.e., actuarial gains and losses, the return on plan assets excluding amounts included in net interest on the net defined benefit liability are recognized in Other Comprehensive Income instead of Statements of Profit and Loss. Thus the employee benefit cost is reduced by Rs. 19.21 Million and remeasurement gains/losses on defined benefit plans has been recognized in the OCI.
4. Share - based payments
Under the Indian GAAP the cost of equity settled employee share based programs were recognized using the intrinsic value method. Under Ind AS the same needs to be recognized based on the fair value of options on the grant date. Share options expense totaling to Rs. 151.25 Million, which were granted before and still unvested as at April 1, 2015, have been recognized as a separate component of equity against retained earnings. An additional expense of Rs. 42.93 Million has been recognized in the profit or loss for the year ended March 31, 2016 and cross charge to the subsidiaries has been accounted in investment in subsidiaries.
Consequently expenses of Rs. 45.19 Million of Agilyst Consulting Private Limited had to be accounted in eClerx Services Limited books for year ended March 31, 2016.
5. Loans and Advances
Under Indian GAAP the Company recognized interest free rent deposit at transaction value, however under Ind AS the security deposits are required to be fair valued. This difference between the present value and the principal amount of the deposit paid at inception to be accounted for as prepaid lease payments, to be recognized as an expense on a straight line basis over the lease term. Correspondingly, there will be interest income accrued on the discounted value of deposits. Other deposits (utility deposit and Staff travel / accommodation deposit) are payable on demand and have no contractual period. Hence there are no GAAP differences for these demand deposits.
An additional income of Rs. 11.92 Million and expense of Rs. 13.92 Million has been recognized in the statement of profit and loss for the year ended March 31, 2016 with a net impact of Rs. 2.00 Million. The net impact on retained earnings was Rs. 8.59 Million and Rs. 6.59 Million as on March 31, 2016 and April 1, 2015 respectively.
6. Adjustment items due to merger
The Honâble High Court of Bombay vide its order dated July 1, 2016 had sanctioned the Scheme of Amalgamation of Agilyst Consulting Private Limited with the Company with an appointed date of April 1, 2015. The Scheme has been given effect to in the books of accounts of the Company with effect from April 1, 2015 resulting in addition to net worth by Rs. 263.54 Million as on March 31, 2016. The Company consequently reviewed the carrying value of investments in eClerx Investments Limited which was the holding company of the Agilyst group and made a provision for diminution in value of these investments of Rs. 266.12 Million on April 1, 2015. Consequently the expenses of Rs. 45.19 Million of Agilyst Consulting Private Limited has to be accounted in the books of eClerx Services Limited for the year ended March 31, 2016
7. Other comprehensive income
Under Indian GAAP the Company has not personated 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. SCHEME OF AMALGAMATION
1. The Board of Directors of the Company in their meeting held on September 11, 2015 have approved the Scheme of Amalgamation between Agilyst Consulting Private Limited (the wholly owned step down subsidiary, hereinafter referred to as ''ACPLâ) and the Company and their respective shareholders (collectively referred to as the Scheme) which provides for the amalgamation of ACPL with the Company under sections 391 to 394 and other applicable provisions, if any, of Companies Act, 1956 and the other relevant provisions of Companies Act, 2013. The Appointed date of the Scheme is April
1, 2015.
2. The Honâble High Court vide its order July 1, 2016 approved the Scheme.
3. The Company has accounted for the amalgamation of ACPL in its books of account with effect from the appointed date as per the ''Pooling of Interests Methodâ prescribed under the''Ind AS 103â Business Combination.
4. In accordance with the Scheme;
(a) All assets, liabilities and reserves in the books of ACPL has been transferred to the Company at their respective carrying values as on the Appointed Date.
(b) The excess, in the value of net assets and reserves to be vested in the Company, has been credited to the ''Capital Reserve Accountâ.
All the shares of Agilyst Consulting Private Limited were held by Agilyst Inc., which was a step down subsidiary of eClerx Services Limited. As per the scheme, there was no payment of consideration/issue of shares by eClerx Services Limited to any person and the equity shares held by Agilyst Inc. in Agilyst Consulting Private Limited were cancelled in accordance with the scheme. Refer note 43(b) and 44 of consolidated financial statement.
Note for merger of Agilyst, Inc. with eClerx LLC -
Agilyst Inc, a wholly owned subsidiary of eClerx Investments Limited, has been merged with eClerx LLC w.e.f January 1, 2017. All assets, liabilities and reserves in the books of Agilyst Inc. have been transferred to the eClerx LLC., at their respective carrying values w.e.f. January 1, 2017. As per the agreement and plan of merger, the share capital of Agilyst Inc. has been adjusted against capital reserve. Consequently carrying value of investment in eClerx Investments Limited has been transferred to investment in eClerx LLC.
Note for winding up of eClerx Investments Limited -
eClerx Investments Limited, a wholly owned subsidiary of the Company, has been wound up on March 28, 2017 for administrative convenience and maintaining a lean corporate structure.
12. BUYBACK OF SHARES
The Board of Directors vide their meeting dated August 29, 2016 approved, subject to shareholdersâ approval, buyback of equity shares of the Company. The shareholders approval was procured vide postal ballot results of which were announced on October 14, 2016. The Company concluded the said buyback of 1,170,000 Equity Shares of Rs. 10 each, at a buyback price of Rs. 2,000 per share and total buyback amount of Rs. 2,340 Million. The settlement date for the said buyback was December 19, 2016. The shares so bought back were extinguished and the issued and paid-up capital stands amended accordingly.
13. TRANSFER PRICING
The Company has a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company appoints independent consultants for conducting a Transfer Pricing Study to determine whether the transactions with associate enterprises are undertaken, during the financial year, on an ''armâs length basisâ. Adjustments, if any, arising from the transfer pricing study in the respective jurisdictions shall be accounted for as and when the study is completed for the current financial year. However the management is of the opinion that its international transactions are at armsâ length so that the aforesaid legislation will not have any impact on the financial statements.
14. STANDARDS ISSUED BUT NOT YET EFFECTIVE
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ''Statement of Cash Flowsâ and Ind AS 102, ''Share-based Payment.â The amendments are applicable to the Company from April 1, 2017.
Amendment to Ind AS 7:
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The Company is evaluating the requirements of the amendment and the effect on the standalone financial statements.
Amendment to Ind AS 102:
The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.
The Company does not have any cash-settled awards as at March 31, 2017. eClerx Services Limited Annual Report 2016-17
Mar 31, 2016
1. CORPORATE INFORMATION
eClerx Services Limited (''the Company'') is engaged in providing
Knowledge Process Outsourcing (KPO) services to global companies.
Established in 2000, the Company provides data management, analytics
solutions and process outsourcing services to a host of global clients
through a network of multiple locations in India, and is headquartered
in Mumbai. The Company is listed on the BSE Limited and National Stock
Exchange of India.
2. BASIS OF PREPARATION
The financial statements of the Company have been prepared in
accordance with the generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under section 133 of the Companies Act 2013, read together with
paragraph 7 of the Companies (Accounts) Rules 2014. The financial
statements have been prepared on an accrual basis and under the
historical cost convention, except derivative financial instruments
which have been measured at fair value.
The accounting policies adopted in the preparation of financial
statements are consistent with those of previous year.
3. EMPLOYEES STOCK OPTION PLAN (ESOP)
ESOP2008 scheme:
The Company instituted ESOP 2008 scheme under which 1,000,000 stock
options have been a [Located for grant to the employees The scheme was
approved by the shareholders by way of postal ballot, the result of
which was declared on May 19, 2008. The Scheme was subsequently amended
to increase the number of options to 1,600,000 stock options vide
resolution passed at Ninth Annua I Genera I Meeting held on August 26,
2009. Pursuant to bonus issue by the Company on July 29, 201 0, the
number of options available under the scheme accordingly increased to
2,4-00,000 pursuant to relevant SEBI regulations. During the year the
Nomination and Remuneration Committee approved that no further options
will be granted under ESOP 2008 plan, however active options thereunder
would continue to vest as per the respective terms
4. RELATED PARTY & KEY MANAGEMENT PERSONNEL INFORMATION
A. RELATED PARTIES & KEY MANAGEMENT PERSONNEL Name of related party
and related party relationship
(a) Where control exists:
1. eClerx Limited (wholly owned subsidiary)
2. eClerx LLC (wholly owned subsidiary)
3. eClerx Investments Limited (wholly owned subsidiary)
4. eClerx Private Limited (wholly owned subsidiary)
5. Agilyst Inc (100% subsidiary of eClerx Investments Limited)
6. Agilyst Consulting Private Limited (100% subsidiary of Agilyst
Inc.)
7. eClerx Investments (UK) Limited (wholly owned subsidiary)
8. CLX Europe S.P.A. (100% subsidiary of eClerx Investments (UK)
Limited)
9. Sintetik S.R.L. (100% subsidiary of CLX Europe S.P.A.)
10. CLX Europe Media Solution GmbH (100% subsidiary of CLX Europe
S.P.A.)
11. CLX Europe Media Solution Limited (100% subsidiary of CLX Europe
Media Solutions GmbH)
12. CLX Thai Company Limited (49% holding of CLX Europe S.P.A.)
(b) Related party under Accounting Standard 18 Â Related Party
Transactions and as per Companies Act, 2013 with whom transactions have
taken place during the year
(I) Enterprises where Key Managerial Person and / or relative of such
personnel have significant influence:
1. Duncan Stratton & Company Limited
(II) Key Management Personnel:
1. V.K. Mundhra (Chairman)
2. PD Mundhra (Executive Director)
3. Anjan Malik (Director)
4. Rohitash Gupta (Chief Financial Officer)
5. Gaurav Tongia (Company Secretary)
5. DISCLOSURE PURSUANTTO LISTING REGULATIONS
There are no Loans and advances in nature of Loans outstanding from
subsidiary for the year ended March 31, 2016
6. EARNINGS PERSHARE
The basic earnings per equity share are computed by dividing the net
profit attributabLe to the equity sharehoLders for the year by
the weighted average number of equity shares outstanding during the
reporting period. The number of shares used in computing diluted
earnings per share comprises the weighted average number of shares
considered for deriving basic earnings per share, and aLso the weighted
average number of equity shares, which may be issued on the conversion
of aLL dilutive potential shares, unless the results would be
antidilutive
7. EMPLOYEE BENEFIT PLANS
The Company makes annual contribution to the Employee''s Group Gratuity
Assurance Scheme of the Life Insurance Corporation of India (LIC). The
Scheme provides for Lump sum payment to vested employees at retirement,
death while in employment or on termination of employment based on
completed year of service or part thereof in excess of six months.
Vesting occurs on completion of five years of service
The following table sets out the status of the gratuity plan for the
year ended March 31, 2016as required under AS 15 (Revised) as notified
under the Companies Act, 2013 under section 133 of the Companies Act
2013, read together with paragraph 7 of the Companies (Accounts) Rules
2014-.
8. The Company has deferred the recognition of cumulative Minimum
Alternative Tax (MAT) credit of Rs.177.30 million as at March 31, 2016
(P.Y. Rs 326.39 million), which could be available for set off against
future tax liability under the provisions of the Income Tax Act, 1961
on account of uncertainty around the time frame within which income tax
will be payable under the normal provisions against which the MAT
credit can be utilised.
9. CSR EXPENDITURE
Gross amount required to be spent : Rs. 51.31 (P.Y. 46.34) million
Amount spent during Financial Year: Rs. 51.68 (P.Y. 46.37) million
10. DUESTO MICRO AND SMALL ENTERPRISES
Based on the information available with the Company, there are no dues
payable to micro and small enterprises as defined in The Micro Sma 11 &
Medium Enterprises Development Act, 2006
11. CONTINGENT LIABILITIES
(Rupees in million)
As at March
31, 2016 As at March
31, 2015
Guarantees given by the Company on
behalf of various subsidiaries against
credit card facilities (refer note a) 4.44 4.25
Income Tax demands (refer note b) 30.50 30.46
Indirect Tax demands 7.76 7.76
Notes:
(a) The guarantee is for usage of Amex cards by subsidiaries of the
Company. Amex cards are issued to employees of foreign subsidiaries
which are used by them to incur expenses on travel, business
promotionand other office expenses
These guarantees have been given in the normal course of the Company''s
operations and are not expected to result in any loss to the Company on
the basis of the beneficiaries fulfilling their ordinary commercial
obligations
(b) The Company has received favorable orders from ITAT against the
demand raised by the Assessing Officers amounting to Rs 13.20 million
for Financial Years 2004-05 and 2006-07. The department has preferred
appeal to High Court for Financial Years 2004-05 and 2006-07 and filed
Special Leave Petition with Supreme Court for Financial Years 2006-07
and 2007-08. The Company has received demand amounting to Rs. 0.09
million for Financial Year 2008-09 against which the Company has
received favorable order from Commissioner of Income Tax (Appeals). The
Company has received demand amounting to Rs 1 7.17 million for
Financial Year 201 0-11 against which Company has filed appeals with
Commissioner of Income Tax (Appeals)
(c) Service Tax refund claims for the period October 2009 till March
2012 to the extent rejected by Commissioner of Central Excise [Appeals)
for Rs.83.12 million is pending in appeal before CESTAT.
The amounts represent best possible estimates arrived at on the basis
of available information. The uncertainties and possible reimbursements
are dependent on the outcome of the different legal processes which
have been invoked by the Company or the claimants as the case may be
and therefore cannot be predicted accurately. The Company engages
reputed professional advisors to protect its interest and has been
advised that it has strong legal positions against each of such
disputes. Hence no provision has been made in the financial statements
for these disputes
12. EXCEPTIONAL ITEMS
The Company, through its subsidiary eClerx Investment Ltd, acquired
Agilyst Inc. in May 2012. One of the major clients of Agilyst Inc.
decided to move its service agreement from Agilyst Inc. to the Company
for better physical and IT infrastructure and stronger financial
position, with effect from October 22, 2015. The Company had hence
reviewed the carrying value of investment in Agilyst Inc. made through
its subsidiary eClerx Investments Ltd and made a provision for
diminution in value of Rs 259.14 million in the standalone financials
in the year ended March 31, 2016.
13. SCHEME OF AMALGAMATION
The Board of Directors of eClerx Services Limited at their meeting held
on September 11, 2015 have approved the Scheme of Amalgamation between
Agilyst Consulting Private Limited, step down subsidiary and eClerx
Services Limited and their respective shareholders (the "Scheme") which
provides for the amalgamation of Agilyst Consulting Private Limited a
step down subsidiary, with eClerx Services Limited (''the Company'')
under sections 391 to 394 and other applicable provisions, if any, of
Companies Act, 1956 and the other relevant provisions of Companies Act,
2013. The Appointed date of the Scheme is April 1, 2015.
The Company has received the Observation letter from BSE Ltd. and the
National Stock Exchange of India Limited conveying their no-objection
in filing the Scheme with the Hon''ble High Court of Bombay (''High
Court''). The Scheme of Amalgamation was filed by Agilyst Consulting
Private Limited with the Hon''ble High Court. The High Court vide its
order dated April 1, 2016, has dispensed with the requirement for
filing a separate Company Summons for Direction and Company Scheme
Petition under Section 391-394 of the Companies Act, 1956 for eClerx
Services Limited and therefore there was no requirement for holding
meetings of shareholders or creditors of the Company in this regard.
The Scheme is pending before the Hon''ble Court for approval and would
be effective only once the order is received from Hon''ble High Court of
Bombay and filed with the Registrar of Companies. Thereafter, the
Scheme will be given effect to in the books of accounts of the Company.
14. The Company has a comprehensive system of maintenance of
information and documents as required by the transfer pricing
legislation under sections 92-92F of the Income Tax Act, 1961. Since
the law requires existence of such information and documentation to be
contemporaneous in nature, the Company appoints independent consultants
for conducting a Transfer Pricing Study to determine whether the
transactions with associate enterprises are undertaken, during the
financial year, on an "arm''s length basis". Adjustments, if any,
arising from the transfer pricing study in the respective jurisdictions
shall be accounted for as and when the study is completed for the
current financial year. However the management is of the opinion that
its international transactions are at arms'' length so that the
aforesaid legislation will not have any impact on the financial
statements.
15. Previous year figures have been regrouped/reclassified wherever
necessary to conform with the current year''s presentation.
Mar 31, 2015
A) Terms / rights attached to equity shares
The Company has only one class of equity shares having a par value of
Rs 10 per share. Each holder of equity shares Is entitled to one vote
per equity share. The Company declares and pays dividends in Indian
rupees. The dividend proposed by the Board of Directors is subject to
the approval of the shareholders in the ensuing Annual General Meeting.
Subject to the provisions of Companies Act 2013 as to preferential
payments, the assets of the Company shall, on its winding-up be applied
in satisfaction of its liabilities pari-passu and, subject to such
application, shall, unless the articles otherwise provide, will be
distributed among the members according to their rights and interests
in the Company,
b) Aggregate number of bonus shares issued, shares issued for
consideration other than cash The Company has issued 9,538,674 (RY,
9,538,674) equity shares as fully paid up bonus shares by capitalising
free reserves during the period of five years immediately preceding the
balance sheet date. The company has bought back 37,623 shares (37623)
during the period of 5 years immediately preceding the balance sheet
date.
2. SHARE APPLICATION MONEY PENDING ALLOTMENT
Amounts received for 9,000 shares with an exercise price of Rs. 111.47
and 1,000 shares with an exercise price of Rs. 343.33 under ESOP Plan
2008 is pending for allotment.
3. SEGMENT REPORTING
The Company''s primary segment are based on the nature of services
provided which is data analytics and process outsourcing services.
The Company''s secondary segments are the geographic distribution of
activities. Revenue and receivables are specified by location of
customers while the other geographic information is specified by
location of the assets. The following tables present revenue and asset
information regarding the Company''s geographical segments:
4. EMPLOYEES STOCK OPTION PLAN (ESOP)
ESOP 2008 scheme:
The Company instituted ESOP 2008 scheme under which 1,000,000 stock
options have been allocated for grant to the employees. The scheme was
approved by the shareholders by way of postal ballot, the result of
which was declared on May 19, 2008. The Scheme was subsequently amended
to increase the number of options to 1,600,000 stock options vide
resolution passed at Ninth Annual General Meeting held on August 26,
2009. Pursuant to bonus issue by the Company on July 29, 2010, the
number of options available under the scheme accordingly increased to
2,400,000 pursuant to relevant SEBI regulations.
The weighted average remaining contractual life for the stock options
outstanding as at March 31, 2015 is 1.54 years (March 31, 2014: 2.61
years). The average vesting period is 2.83 years and exercise period is
3 years. The range of exercise prices for options outstanding at the
end of the year was Rs. 111.47 to Rs. 690.26 (March 31, 2014: Rs.
111.47 to Rs. 690.26).
ESOP 2011 scheme:
The Company instituted ESOP 2011 scheme under which 1,600,000 stock
options have been allocated for grant to the employees. The scheme was
approved by the shareholders at the Eleventh Annual General Meeting
held on August 24, 201 1. The Scheme was subsequently amended to
increase the number of options to 2,600,000 stock options vide
resolution passed at Thirteenth Annual General Meeting held on August
22, 2013.
5. RELATED PARTY & KEY MANAGEMENT PERSONNEL INFORMATION A. RELATED
PARTIES & KEY MANAGEMENT PERSONNEL
Name of related party and related party relationship
(a) Where control exists:
1. eClerx Limited (wholly owned subsidiary)
2. eClerx LLC (wholly owned subsidiary)
3. eClerx Investments Limited (wholly owned subsidiary)
4. eClerx Private Limited (wholly owned subsidiary)
5. Agilyst Inc.(100% subsidiary of eClerx Investments Limited)
6. Agilyst Consulting Private Limited (100% subsidiary of Agilyst Inc.)
7. eClerx Investments (U.K.) Limited (wholly owned subsidiary)
(b) Related party under Accounting Standard 18 - Related Party
Transactions and as per Companies Act, 2013 with whom transactions have
taken place during the year
(I) Enterprises where Key Managerial Person and / or relative of such
personnel have significant influence:
1. Duncan Stratton & Company Limited
(II) Key Management Personnel:
1. V.K, Mundhra (Chairman)
2. PD Mundhra (Executive Director)
3. Anjan Malik (Director)
4. Rohitash Gupta (Chief Financial Officer)
5. Gaurav Tongia (Company Secretary)
6. DISCLOSURE PURSUANT TO CLAUSE 32 OF LISTING AGREEMENT
There are no loans and advances in nature of loans outstanding from
subsidiary for the year ended March 31, 2015.
7. EARNINGS PER SHARE
The basic earnings per equity share are computed by dividing the net
profit attributable to the equity shareholders for the year by the
weighted average number of equity shares outstanding during the
reporting period. The number of shares used in computing diluted
earnings per share comprises the weighted average number of shares
considered for deriving basic earnings per share, and also the weighted
average number of equity shares, which may be issued on the conversion
of all dilutive potential shares, unless the results would be anti
dilutive.
8. EMPLOYEE BENEFIT PLANS
The Company makes annual contribution to the Employee''s Group Gratuity
Assurance Scheme of the Life Insurance Corporation of India (LIC). The
Scheme provides for lump sum payment to vested employees at retirement,
death while in employment or on termination of employment based on
completed year of service or part thereof in excess of six months.
Vesting occurs on completion of five years of service.
The following table sets out the status of the gratuity plan for the
year ended March 31, 2015 as required under AS 15 (Revised) as notified
under the Companies Act, 2013 under section 133 of the Companies Act
2013, read together with paragraph 7 of the Companies (Accounts) Rules
2014.
9. The Company has deferred the recognition of cumulative Minimum
Alternative Tax (MAT) credit of Rs,326,39 million as at March 31, 2015
(P.Y. Rs 266.23 million), which could be available for set off against
future tax liability under the provisions of the Income Tax Act, 1961
on account of uncertainty around the time frame within which income tax
will be payable under the normal provisions against which the MAT
credit can be utilised.
10. CSR EXPENDITURE
Gross amount required to be spent : Rs. 46.34 Million Amount spent
during Financial Year: Rs. 46.37 Million
11. CONTINGENT LIABILITIES (Rupees in million)
As at As at
March 31,2015 March 31,2014
Guarantees given by the Company on
behalf of various subsidiaries
against credit facilities (see note (a)) 4.25 2.60
Income Tax demands (see note (b)) 30.46 13.29
Indirect Tax demands 7.76 7.44
Notes:
(a) These guarantees have been given in the normal course of the
Company''s operations and are not expected to result in any loss to the
Company on the basis of the beneficiaries fulfilling their ordinary
commercial obligations.
(b) The Company has received favorable orders from ITAT against the
demand raised by the Assessing Officers amounting to Rs. 13.29 million
for Financial Year 2004-05 and 2006-07. The department has preferred
appeal to High Court for Financial Year 2004-05 and 2006-07 and filed
Special Leave Petition with Supreme Court for Financial Year 2006-07.
The Company has received demand amounting to Rs. 17.17 millions for
Financial Year 2010-11 against which Company has filed appeal with
Commissioner of Income Tax (Appeals)
(c) Service Tax refund claims filed by the Company from October 2009
till March 2012 for Rs. 241.51 million out of which Rs.83.12 million
was rejected by the Commissioner of Central Excise (Appeals). The
Company has filed an appeal with CESTAT. Also out of service tax refund
claims filed by the Company and assessed by the department from April
2012 to Sept 2013 for Rs.185.15 million, claims for Rs. 115.21 million
was rejected by the service tax department. The Company has filed an
appeal for Rs. 32 millions with Commissioner of Central Excise/Service
Tax (Appeals) and for Rs. 83.21 millions the company is in process of
filling an appeal with the designated appellate authority.
The amounts represent best possible estimates arrived at on the basis
of available information. The uncertainties and possible reimbursements
are dependent on the outcome of the different legal processes which
have been invoked by the Company or the claimants as the case may be
and therefore cannot be predicted accurately. The Company engages
reputed professional advisors to protect its interest and has been
advised that it has strong legal positions against each of such
disputes. Hence no provision has been made in the financial statements
for these disputes.
12. SUBSEQUENT EVENTS
The Company acquired the entire shareholding of CLX Europe S.PA a joint
stock Company based in Italy through its overseas subsidiary eClerx
Investments (UK) Limited effective April 21, 2015 for a consideration
not exceeding Euro 25 million. The transaction is funded from the
Company''s internal accruals.
13. The Company has a comprehensive system of maintenance of
information and documents as required by the transfer pricing
legislation under sections 92-92F of the Income Tax Act, 1961. Since
the law requires existence of such information and documentation to be
contemporaneous in nature, the Company appoints independent consultants
for conducting a Transfer Pricing Study to determine whether the
transactions with associate enterprises are undertaken, during the
financial year, on an "arms length basis". Adjustments, if any, arising
from the transfer pricing study in the respective jurisdictions shall
be accounted for as and when the study is completed for the current
financial year. However the management is of the opinion that its
international transactions are at arms'' length so that the aforesaid
legislation will not have any impact on the financial statements.
14. Previous year figures have been regrouped/reclassified wherever
necessary to conform with the current year''s presentation. The figures
of the previous year were audited by a firm of Chartered Accountants
other than S. R. Batliboi & Associates LLP
Mar 31, 2014
1. INVESTMENTS
The Company acquired the entire shareholding of Agilyst Inc
(''Agilyst''), a closely held US based Company through its overseas
subsidiary eClerx Investments Limited (EIL) effective May 4, 2012. The
consideration towards the acquisition consists of an upfront payment of
US$15.75 million and a variable earn out, based on Agilyst''s future
performance till September 30, 2013. During the year under review, the
Company paid final tranche towards acquisition amounting to US$3.8
million taking the total cost of acquisition to US$19.55 million.
2. RELATED PARTY INFORMATION
As per Accounting Standard 18-Related Party Transactions, as notified
under the Companies Act, 1956 read with the General Circular 15/2013
dated September 13, 2013 of the Ministry of Corporate Affairs in
respect of section 133 of the Companies Act, 2013, the Company''s
related parties and transactions with them are enumerated below:
A. Related Parties
(a) Where control exists:
1. eClerx Limited (wholly owned subsidiary)
2. eClerx LLC (wholly owned subsidiary)
3. eClerx Investments Limited (wholly owned subsidiary)
4. eClerx Private Limited (wholly owned subsidiary)
5. Agilyst Inc (100% subsidiary of eClerx Investments Limited)
6. Agilyst Consulting Private Limited (100% subsidiary of Agilyst
Inc.)
(b) Enterprises where Key Managerial Person and / or relative of such
personnel have significant influence:
1. Duncan Stratton & Company Limited
(c) Key Management Personnel:
1. V.K Mundhra (Chairman)
2. PD Mundhra (Executive Director)
3. Anjan Malik (Director)
3. EMPLOYEE BENEFIT PLANS
The Company makes annual contribution to the Employee''s Group Gratuity
Assurance Scheme of the Life Insurance Corporation of India (LIC). The
Scheme provides for lump sum payment to vested employees at retirement,
death while in employment or on termination of employment based on
completed year of service or part thereof in excess of six months.
Vesting occurs on completion of five years of service.
The following table sets out the status of the gratuity plan for the
year ended March 31, 2014 as required under AS 15 (Revised) as notified
under the Companies Act, 1956 read with the General Circular 15/2013
dated September 13, 2013 of the Ministry of Corporate Affairs in
respect of section 133 of the Companies Act, 2013
4. The Company has deferred the recognition of cumulative Minimum
Alternate Tax (MAT) credit of Rs.266.23 million as at March 31, 2014
(RY Rs. 245.50 million), which could be available for set off against
future tax liability under the provisions of the Income Tax Act, 1961
on account of uncertainty around the time frame within which income tax
will be payable under the normal provisions against which the MAT
credit can be utilised.
5. DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES
Based on the information available with the Company, there are no dues
payable to micro, small and medium enterprises as defined in The Micro,
Small & Medium Enterprises Development Act, 2006.
6. CONTINGENT LIABILITIES
(Rupees in million)
As at As at
March 31, 2014 March 31, 2013
Guarantees given by the Company on
behalf of various I subsidiaries
against credit facilities (refer
note (a)) 2.6 2.6
Income Tax demands (refer note (b)) 13.29 13.29
Indirect Tax demands 7.44 7.44
Notes:
a) These guarantees have been given in the normal course of the
Company''s operations and are not expected to result in any loss to the
Company on the basis of the beneficiaries fulfilling their ordinary
commercial obligations.
b) The company has received favorable orders from Commissioner of
Income Tax (Appeals) against the demand raised by the Assessing
officers amounting to Rs. 13.29 million for Financial Year 2004-05 and
Financial Year 2006-07. The department has preferred appeal to High
Court for Financial Year 2007-08 and filed Special Leave Petition with
Supreme Court for Financial Year 2006-07.
c) Service Tax refund claims filed by the company from October 2009
till March 2012 for Rs. 241.51 million was rejected by the
Jurisdictional Service Tax authorities. Company has preferred appeal to
the Commissioner of Central Excise(Appeals).
The amounts represent best possible estimates arrived at on the basis
of available information. The uncertainties and possible reimbursements
are dependent on the outcome of the different legal processes which
have been invoked by the Company or the claimants as the case may be
and therefore cannot be predicted accurately. The Company engages
reputed professional advisors to protect its interest and has been
advised that it has strong legal positions against each of such
disputes. Hence no provision has been made in the financial statements
for these disputes.
7. The Company has a comprehensive system of maintenance of
information and documents as required by the transfer pricing
legislation under sections 92-92F of the Income Tax Act, 1961. Since
the law requires existence of such information and documentation to be
contemporaneous in nature, the Company appoints independent consultants
for conducting a Transfer Pricing Study to determine whether the
transactions with associate enterprises are undertaken, during the
financial year, on an "arms length basis". Adjustments, if any,
arising from the transfer pricing study in the respective jurisdictions
shall be accounted for as and when the study is completed for the
current financial year. However the management is of the opinion that
its international transactions are at arms'' length so that the
aforesaid legislation will not have any impact on the financial
statements.
8. Previous year figures have been regrouped, wherever necessary to
conform with the current year''s presentation.
Mar 31, 2013
1. a) Basis of preparation
The financial statements have been prepared and presented under the
historical cost convention on the accrual basis of accounting and
comply with the Accounting Standards (AS) as notified under the
Companies Act, 1956 (the Act) and comply in all material aspects with
AS prescribed by the Central Government, in accordance with Company
(AS) Rules, 2006.
b) Use of estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles (''GAAP'') in India requires
management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent
liabilities on the date of the financial statements. Management
believes that the estimates made in the preparation of financial
statements are prudent and reasonable. Actual future period''s results
could differ from those estimates. Any revision to accounting estimates
is recognized prospectively in current and future periods.
2. Investments
During the year under review, the Company has acquired the entire
shareholding of Agilyst Inc (''Agilyst''), a closely held US based
Company, through its overseas subsidiary eClerx Investments Ltd
effective May 4, 2012. The consideration towards the acquisition
consist of an upfront payment of US$15.75 million and a variable earn
out, which would range between US$ 0 to US$ 13 million, based on
Agilyst''s future performance till September 30, 2013.
3. Segment Reporting
The Company operates under a single primary segment i.e. data analytics
and process outsourcing services.
4. Deferred Tax Balances
The components of deferred tax assets arising on account of timing
differences between taxable income and accounting income are as
follows:
5. Operating Leases
The Company has various operating leases for office facilities and
residential premises for employees which include leases that are
renewable on a yearly basis, cancellable at its option and other long
term leases.
6. Employees Stock Option Plan (ESOP) ESOP 2005 scheme:
The Company instituted ESOP 2005 scheme under which 750,000 stock
options have been allocated for grant to the employees. The scheme was
approved by our shareholders at the Extra Ordinary General Meeting held
on November 16, 2005.
ESOP 2008 scheme:
The Company instituted ESOP 2008 scheme under which 1,000,000 stock
options have been allocated for grant to the employees. The scheme was
approved by the shareholders by way of postal ballot, the result of
which was declared on May 19, 2008. The Scheme was subsequently amended
to increase the number of options to 1,600,000 stock options vide
resolution passed at Ninth Annual General Meeting held on August 26,
2009. Pursuant to bonus issue by the Company on July 29, 2010, the
number of options available under the scheme accordingly increased to
2,400,000 pursuant to relevant SEBI regulations.
ESOP 2011 scheme:
The Company instituted ESOP 2011 scheme under which 1,600,000 stock
options have been allocated for grant to the employees. The scheme was
approved by the shareholders at the Eleventh Annual General Meeting
held on August 24, 2011.
Proforma accounting for stock options granted
The Company applies the intrinsic value-based method of accounting for
determining compensation cost for its stock- based compensation plan.
Had the compensation cost been determined using the fair value
approach, the Company''s net income and basic and diluted earnings per
share (EPS) as reported would have been as per the proforma amounts as
indicated herein below:
7. Related Party Information
As per Accounting Standard 18 - Related Party Transactions, as notified
under the Companies Act, 1956, the Company''s related parties and
transactions with them are enumerated below:
A. Related Parties
(a) Where control exists:
1. eClerx Limited (wholly owned subsidiary)
2. eClerx LLC (wholly owned subsidiary)
3. eClerx Investments Limited (wholly owned subsidiary)
4. eClerx Private Limited (wholly owned subsidiary)
5. Agilyst Inc (100% subsidiary of eClerx Investments Limited)
6. Agilyst Consulting Private Limited (100% subsidiary of Agilyst
Inc.)
(b) Enterprises where Key Managerial Person and / or relative of such
personnel have significant influence:
1. Duncan Stratton & Company Limited
(c) Key Management Personnel:
1. V.K. Mundhra (Chairman)
2. P. D. Mundhra (Executive Director)
3. Anjan Malik (Director)
8. Earnings Per Share
The basic earnings per equity share are computed by dividing the net
profit attributable to the equity shareholders for the year by the
weighted average number of equity shares outstanding during the
reporting period. The number of shares used in computing diluted
earnings per share comprises the weighted average number of shares
considered for deriving basic earnings per share, and also the weighted
average number of equity shares, which may be issued on the conversion
of all dilutive potential shares, unless the results would be anti
dilutive.
9. Employee Benefit Plans
The Company makes annual contribution to the Employee''s Group
Gratuity Assurance Scheme of the Life Insurance Corporation of India
(LIC). The Scheme provides for lump sum payment to vested employees at
retirement, death while in employment or on termination of employment
based on completed year of service or part thereof in excess of six
months. Vesting occurs on completion of five years of service.
10. Forward contracts and options in foreign currencies
The Company is exposed to foreign currency fluctuations on assets /
liabilities denominated in foreign currency. The use of forward
contracts to hedge foreign currency risk is governed by the Company''s
strategy, which provides principles on the use of such forward
contracts and currency options consistent with the Company''s Foreign
Exchange Risk Management Policy. The counter- parties in these
instruments are banks and the Company considers the risks of non-
performance by the counterparty as non-material. The Company does not
use forward contracts and currency options for speculative purposes.
11. The Company has deferred the recognition of cumulative Minimum
Alternative Tax (MAT) credit of Rs.287.37 million as at March 31, 2013
(P.Y. Rs. 209.18 million), which could be available for set off against
future tax liability under the provisions of the Income Tax Act, 1961
on account of uncertainty around the time frame within which income tax
will be payable under the normal provisions against which the MAT
credit can be utilised.
12. Dues to Micro, Small and Medium Enterprises
Based on the information available with the Company, there are no dues
payable to micro, small and medium enterprises as defined in The Micro,
Small & Medium Enterprises Development Act, 2006.
13. Contingent Liabilities
Guarantees have been given by the Company on behalf of various
subsidiaries against credit facilities amounting to Rs. 2.6 million
(Previous Year Rs. 2.6 million).These guarantees have been given in the
normal course of the Company''s operations and are not expected to
result in any loss to the Company on the basis of the beneficiaries
fulfilling their ordinary commercial obligations.
The Company has received the following Income Tax demand notices
amounting to Rs. 13.20 million (Previous Year Rs.13.20 million).
The Company has also received demand notices from Service tax
department amounting to Rs. 7.44 million (Previous Year Nil).The
Company has filed responses against each of the notices with the
department.
The amounts represent best possible estimates arrived at on the basis
of available information. The uncertainties and possible reimbursements
are dependent on the outcome of the different legal processes which
have been invoked by the Company or the claimants as the case may be
and therefore cannot be predicted accurately. The Company engages
reputed professional advisors to protect its interest and has been
advised that it has strong legal positions against such disputes. Hence
no provision has been made in the financial statements for these
demands.
*The Company does not have information as to the extent to which
remittances, if any, in foreign currencies on account of dividends have
been made by/on behalf of non-resident shareholders. The particulars
given are for dividends declared and paid to non-resident shareholders
for the year 2010-11 and 2011-12.
14. The Company has a comprehensive system of maintenance of
information and documents as required by the transfer pricing
legislation under sections 92-92F of the Income Tax Act, 1961. Since
the law requires existence of such information and documentation to be
contemporaneous in nature, the company appoints independent consultants
for conducting a Transfer Pricing Study to determine whether the
transactions with associate enterprises are undertaken, during the
financial year, on an "arms length basis". Adjustments, if any,
arising from the transfer pricing study in the respective jurisdictions
shall be accounted for as and when the study is completed for the
current financial year. However the management is of the opinion that
its international transactions are at arms'' length so that the
aforesaid legislation will not have any impact on the financial
statements.
15. Previous year figures have been regrouped, wherever necessary to
conform with the current year''s presentation.
Mar 31, 2012
1. a) Basis of Preparation
The financial statements have been prepared and presented under the
historical cost convention on the accrual basis of accounting and
comply with the Accounting Standards (AS) as notified under the
Companies Act, 1956 (the Act) and comply in all material aspects with
AS prescribed by the Central Government, in accordance with Company
(AS) Rules, 2006.
b) Use of estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles ('GAAP') in India requires
management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent
liabilities on the date of the financial statements. Management
believes that the estimates made in the preparation of financial
statements are prudent and reasonable. Actual future period's results
could differ from those estimates. Any revision to accounting estimates
is recognized prospectively in current and future periods.
a) Terms / rights attached to equity shares
The Company has only one class of equity shares having a par value of
Rs.10 per share. Each holder of equity shares is entitled to one vote
per equity share. The Company declares and pays dividends in Indian
rupees. The dividend proposed by the Board of Directors is subject to
the approval of the shareholders in the ensuing Annual General Meeting.
c) The Company has issued 26,107,869 shares (P.Y. 26,107,869) by way of
bonus shares by capitalising free reserves during the period of five
years immediately preceeding the reporting date.
d) Details of Shareholders holding more than 5% of Shares in the
Company
The company has received the above applications from employees by
virtue of ESOP granted to these employees under the respective ESOP
schemes. The company has sufficient authorised capital to cover the
share capital amount resulting from allotment of shares out of such
share application money.
2. INVESTMENTS
a) Pursuant to a Share Purchase Agreement ('SPA') dated July 24,2007,
the Company, through its subsidiary, eClerx Investments Limited (EIL),
acquired 99.4% of Igentica Travel Solutions Limited (ITS) for GBP
1,428,441. ITS was wound up on March 29, 2011 and the provision for
diminution in value of investment in EIL has been made for Rs. 126.77
millions, based on the revised net worth of EIL as at March 31,2011.
b) Subsequent to the balance sheet date, the Company has acquired the
entire shareholding of Agilyst Inc ('Agilyst'), a closely held US based
Company, through its overseas subsidiary eClerx Investments Ltd
effective May 4, 2012. The consideration towards the acquisition will
consist of an upfront payment of US$15.75 million and a variable earn
out, which would range between US$ 0 to US$ 13 million, based on
Agilyst's future performance till September 30, 2014. The transaction
will be funded from Group's internal resources including unutilised IPO
proceeds.
3. SEGMENT REPORTING
The Company operates under a single primary segment i.e. data analytics
and process outsourcing services.
4. DEFERRED TAX BALANCES
The components of deferred tax assets arising on account of timing
differences between taxable income and accounting income
5. OPERATING LEASES
The Company has various operating leases for office facilities and
residential premises for employees which include leases that are
renewable on a yearly basis, cancellable at its option and other long
term leases.
6. EMPLOYEES STOCK OPTION PLAN (ESOP)
ESOP 2005 scheme:
The Company instituted ESOP 2005 scheme under which 750,000 stock
options have been allocated for grant to the employees. The scheme was
approved by our shareholders at the Extra Ordinary General Meeting held
on November 16,2005.
ESOP 2008 scheme:
The Company instituted ESOP 2008 scheme under which 1,000,000 stock
options have been allocated for grant to the employees. The scheme was
approved by the shareholders by way of postal ballot, the result of
which was declared on May 19, 2008. The Scheme was subsequently amended
to increase the number of options to 1,600,000 stock options vide
resolution passed at Ninth Annual General Meeting held on August 26,
2009. Pursuant to bonus issue by the Company on July 29, 2010, the
number of options available under the scheme accordingly increased to
2,400,000 pursuant to relevant SEBI regulations.
Proforma accounting for stock options granted
The Company applies the intrinsic value-based method of accounting for
determining compensation cost for its stock-based compensation plan.
Had the compensation cost been determined using the fair value
approach, the Company's net income and basic and diluted earnings per
share (EPS) as reported would have been as per the proforma amounts as
indicated herein below:
7. RELATED PARTY INFORMATION
As per Accounting Standard 18 - Related Party Transactions, as notified
under the Companies Act, 1956, the Company's related parties and
transactions with them are enumerated below:
A. Related Parties
(a) Where control exists:
1. eClerx Limited (wholly owned subsidiary)
2. eClerx LLC (wholly owned subsidiary)
3. eClerx Investments Limited (wholly owned subsidiary)
4. eClerx Private Limited (wholly owned subsidiary)
5. Igentica Travel Solutions Limited *(99.4% held by eClerx
Investments Limited) * Igentica Travel Solutions Limited has been wound
up on March 29, 2011
(b) Enterprises where Key Managerial Person and / or relative of such
personnel have significant influence: 1. Duncan Stratton & Company
Limited
(c) Key Management Personnel:
1. V.K. Mundhra (Chairman)
2. PD Mundhra (Executive Director)
3. Anjan Malik (Director)
B. Details Of Related Party Transactions
The Company has identified the following related party transactions in
accordance with the requirement under AS 18, as notified under the
Companies Act, 1956:
8. DISCLOSURE PURSUANTTO CLAUSE 32 OF LISTING AGREEMENT
Amount of loans and advances in nature of loans outstanding from
subsidiary for the year ended March 31,2012:
9. EARNINGS PER SHARE
The basic earnings per equity share are computed by dividing the net
profit attributable to the equity shareholders for the year by the
weighted average number of equity shares outstanding during the
reporting period. The number of shares used in computing diluted
earnings per share comprises the weighted average number of shares
considered for deriving basic earnings per share, and also the weighted
average number of equity shares, which may be issued on the conversion
of all dilutive potential shares, unless the results would be anti
dilutive.
10. EMPLOYEE BENEFIT PLANS
The Company makes annual contribution to the Employee's Group Gratuity
Assurance Scheme of the Life Insurance Corporation of India (LIC).The
Scheme provides for lump sum payment to vested employees at retirement,
death while in employment or on termination of employment based on
completed year of service or part thereof in excess of six months.
Vesting occurs on completion of five years of service.
The following table sets out the status of the gratuity plan for the
year ended March 31, 2012 as required under AS 15 (Revised) as notified
under the Companies Act, 1956
11. FORWARD CONTRACTS AND OPTIONS IN FOREIGN CURRENCIES
The Company is exposed to foreign currency fluctuations on assets /
liabilities denominated in foreign currency. The use of forward
contracts to hedge foreign currency risk is governed by the Company's
strategy, which provides principles on the use of such forward
contracts and currency options consistent with the Company's Foreign
Exchange Risk Management Policy. The counter- parties in these
instruments are banks and the Company considers the risks of
non-performance by the counterparty as non- material. The Company does
not use forward contracts and currency options for speculative
purposes.
As on the balance sheet date, the Company's net foreign currency
exposure that is not hedged is Rs. 625.76 million (P.Y. 615.28
million).
12. The Company has deferred the recognition of cumulative Minimum
Alternative Tax (MAT) credit of Rs. 209.18 million as at March 31, 2012
(P.Y. Rs. 168.69 million), which could be available for set off against
future tax liability under the provisions of the Income Tax Act, 1961
on account of uncertainty around the time frame within which income tax
will be payable under the normal provisions against which the MAT
credit can be utilised.
13. DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES
Based on the information available with the Company, there are no dues
payable to micro, small and medium enterprises as defined in The Micro,
Small & Medium Enterprises Development Act, 2006.
14. CONTINGENT LIABILITIES
Guarantees have been given by the Company on behalf of various
subsidiaries against credit facilities amounting to Rs. 2.6 million
(Previous Year Rs. 2.6 million).These guarantees have been given in the
normal course of the Company's operations and are not expected to
result in any loss to the Company on the basis of the beneficiaries
fulfilling their ordinary commercial obligations.
The Company has received the following Income Tax demand notices
amounting to Rs. 13.20 million (Previous Year Rs. 29.13 million).
(Rupees in million)
Financial Year Demand Amount Status
2004-05 9.67 Appeal filed with Commissioner of
Income Tax (Appeals)
2006-07 3.53 Appeal filed with Commissioner
of Income Tax (Appeals)
The amounts represent best possible estimates arrived at on the basis
of available information. The uncertainties and possible reimbursements
are dependent on the outcome of the different legal processes which
have been invoked by the Company or the claimants as the case may be
and therefore cannot be predicted accurately. The Company engages
reputed professional advisors to protect its interest and has been
advised that it has strong legal positions against such disputes. Hence
no provision has been made in the financial statements for these Income
Tax demands.
*The Company does not have information as to the extent to which
remittances, if any, in foreign currencies on account of dividends have
been made by/on behalf of non-resident shareholders. The particulars
given are for dividends declared and paid to non-resident shareholders
for the year 2009-10 and 2010-11.
15. The company has a comprehensive system of maintenance of
information and documents as required by the transfer pricing
legislation under sections 92-92F of the Income Tax Act, 1961. Since
the law requires existence of such information and documentation to be
contemporaneous in nature, the company appoints independent consultants
for conducting a Transfer Pricing Study to determine whether the
transactions with associate enterprises are undertaken, during the
financial year, on an "arms length basis". Adjustments, if any, arising
from the transfer pricing study in the respective jurisdictions shall
be accounted for as and when the study is completed for the current
financial year. However the management is of the opinion that its
international transactions are at arms' length so that the aforesaid
legislation will not have any impact on the financial statements.
16. Previous year figures have been regrouped, wherever necessary to
conform with the current year's presentation.
Mar 31, 2011
1. Investments
a. The Company entered into a share purchase transaction on January
28, 2010 with shareholders of eClerx Private Limited, Singapore to
acquire the entire share capital of that Company for a consideration of
Singapore $ 1.
b. Pursuant to a Share Purchase Agreement (ÃSPA') dated July 24, 2007,
the Company, through its subsidiary, eClerx Investments Limited (EIL),
acquired 99.4% of Igentica Travel Solutions Limited (ITS) for GBP
1,428,441. ITS was wound up on 29th March 2011 and the provision for
diminution in value of investment in EIL has hence been made for Rs.
126.77 millions, based on the revised net worth of EIL as at March 31,
2011.
2. Segment Reporting
The Company operates under a single primary segment i.e. data analytics
and process outsourcing services.
3 Operating Leases
The Company has various operating leases for office facilities and
residential premises for employees which include leases that are
renewable on a yearly basis, cancellable at its option and other long
term leases.
4. Employees Stock Option Plan (ESOP)
ESOP 2005 scheme:
The Company instituted ESOP 2005 scheme under which 750,000 stock
options have been allocated for grant to the employees. The scheme was
approved by our shareholders at the Extra Ordinary General Meeting held
on November 16, 2005.
ESOP 2008 scheme:
The Company instituted ESOP 2008 scheme under which 1,000,000 stock
options have been allocated for grant to the employees. The scheme was
approved by the shareholders by way of postal ballot, the result of
which was declared on May 19, 2008. The Scheme was subsequently amended
to increase the number of options to 1,600,000 stock options vide
resolution passed at Ninth Annual General Meeting held on August 26,
2009.
5. Related Party Information
As per Accounting Standard 18 - Related Party Transactions, as notified
under the Companies Act, 1956, the Company's related parties and
transactions with them are enumerated below:
A. Related Parties
(a) Where control exists:
1. eClerx Limited (wholly owned subsidiary)
2. eClerx LLC (wholly owned subsidiary)
3. eClerx Investments Limited (wholly owned subsidiary)
4. eClerx Private Limited (wholly owned subsidiary)
5. Igentica Travel Solutions Limited
*(99.4% held by eClerx Investments Limited
* Igentica Travel Solutions Limited has been wound up on March 29, 2011
(b) Enterprises where Key Managerial Person and/or relative of such
personnel have significant influence:
1. Duncan Stratton & Company Limited
(c) Key Management Personnel:
1. V.K. Mundhra (Chairman)
2. P. D. Mundhra (Executive Director)
3. Anjan Malik (Director)
B. Details of Related Party Transactions
The Company has identified the following related party transactions in
accordance with the requirement under AS 18, as notified under the
Companies Act, 1956:
6. Earnings Per Share
The basic earnings per equity share are computed by dividing the net
profit attributable to the equity shareholders for the year by the
weighted average number of Equity Shares outstanding during the
reporting period. The number of shares used in computing diluted
earnings per share comprises the weighted average number of shares
considered for deriving basic earnings per share, and also the weighted
average number of Equity Shares, which may be issued on the conversion
of all dilutive potential shares, unless the results would be anti
dilutive.
7. Employee Benefit Plans
The Company makes annual contribution to the Employee's Group Gratuity
Assurance Scheme of the Life Insurance Corporation of India (LIC) from
July 2008. The Scheme provides for lump sum payment to vested employees
at retirement, death while in employment or on termination of
employment based on completed year of service or part thereof in excess
of six months. Vesting occurs on completion of five years of service.
The following table sets out the status of the gratuity plan for the
year ended March 31, 2011 as required under AS 15 (Revised) as notified
under the Companies Act, 1956
8. Forward contracts and options in foreign currencies
The Company, in accordance with its risk management policies and
procedures, enters into foreign currency forward contracts and currency
option contracts to manage its exposure to foreign currency exchange
rate fluctuations. The counter party is generally a bank.
9. The Company has deferred the recognition of cumulative Minimum
Alternative Tax (MAT) credit of Rs. 168.69 million as at March 31,
2011, which could be available for set off against future tax liability
under the provisions of the Income Tax Act, 1961 on account of
uncertainty around the time frame within which income tax will be
payable under the normal provisions against which the MAT credit can be
utilised.
10. Dues to Small scale, micro and medium enterprises
Based on the information available with the Company, there are no dues
payable to micro, small and medium enterprises as defined in The Micro,
Small & Medium Enterprises Development Act, 2006.
11. Contingent Liabilities
Guarantees have been given by the Company on behalf of various
subsidiaries against credit facilities amounting to Rs. 2.6 million
(Previous Year Rs. 2.6 million).These guarantees have been given in the
normal course of the Company's operations and are not expected to
result in any loss to the Company on the basis of the beneficiaries
fulfilling their ordinary commercial obligations.
The Company has received the following Income Tax demand notices
amounting to Rs 29.13 million (Previous Year Rs. 29.13 million).
The amounts represent best possible estimates arrived at on the basis
of available information. The uncertainties and possible reimbursements
are dependent on the outcome of the different legal processes which
have been nvoked by the Company or the claimants as the case may be and
therefore cannot be predicted accurately. The Company engages reputed
professional advisors to protect its interest and has been advised that
it has strong legal positions against such disputes. Hence no provision
has been made in the financial statements for these Income Tax demands.
12. Quantitative details
The Company is in the business of providing Knowledge Process
Outsourcing services. Such services are not capable of being expressed
in generic unit and hence, it is not possible to give the quantitative
details required under paragraphs 3, 4C and 4D of Part II of Schedule
VI to the Companies Act, 1956.
13. The company has a comprehensive system of maintenance of
information and documents as required by the transfer pricing
legislation under sections 92-92F of the Income Tax Act, 1961. Since
the law requires existence of such information and documentation to be
contemporaneous in nature, the company appoints independent consultants
for conducting a Transfer Pricing Study to determine whether the
transactions with associate enterprises are undertaken, during the
financial year, on an "arms length basis". Adjustments, if any, arising
from the transfer pricing study in the respective jurisdictions shall
be accounted for as and when the study is completed for the current
financial year. However the management is of the opinion that its
international transactions are at arms' length so that the aforesaid
legislation will not have any impact on the financial statements.
14. Previous year figures have been regrouped, wherever necessary to
conform with the current year's presentation
Mar 31, 2010
1. Investments
The Company entered into a share purchase transaction on January 28,
2010 with shareholders of eClerx Private Limited, Singapore to acquire
the entire share capital of that Company for a consideration of
Singapore $ 1.
The Company instituted ESOP 2008 scheme under which 1,000,000 stock
options have been allocated for grant to the employees. The scheme was
approved by the shareholders by way of postal ballot, the result of
which was declared on May 19, 2008.
2. Related Party Information
As per Accounting Standard 18 - Related Party Transactions, as notified
under the Companies Act, 1956, the Companys related parties and
transactions with them are enumerated below:
A. Related Parties
(a) Where control exists:
1. eClerx Limited, United Kingdom (wholly owned subsidiary)
2. eClerx LLC, United States of America (wholly owned subsidiary)
3. eClerx Investments Limited, British Virgin Island (wholly owned
subsidiary)
4. eClerx Private Limited, Singapore (wholly owned subsidiary) (w. e.
f. January 28, 2010)
5. Igentica Travel Solutions Limited (99.4% held by eClerx Investments
Limited, BVI)
6. * Igentica Limited (100% held by Igentica Travel Solutions Limited)
7. * Electrobug Technologies Limited (100% held by Igentica Travel
Solutions Limited)
8. * E-Bug Pricing Intelligence Limited (100% held by Electrobug
Technologies Limited) * These companies have been wound up on March 17,
2009
(b) Enterprises where Key Managerial Person and/or relative of such
personnel have significant influence:
1. Duncan Stratton & Company Limited
2. Inner Challenges Private Limited
(c) Key Management Personnel:
1. V.K Mundhra (Chairman)
2. P. D. Mundhra (Executive Director)
3. Anjan Malik (Director)
B. Details of Related Party Transactions
The Company has identified the following related party transactions in
accordance with the requirement under AS 18, as notified under the
Companies Act, 1956:
The above does not include gratuity and leave encashment benefits as
the provisions for these are determined for the Company as a whole and
therefore separate amounts for the director are not available.
3. Forward contracts and options in foreign currencies
The Company, in accordance with its risk management policies and
procedures, enters into foreign currency forward contracts and currency
option contracts to manage its exposure in foreign exchange rates. The
counter party is generally a bank.
4. Secured Loans
The Company has been sanctioned working capital facilities and short
term loan to the tune of Rs. 250 million from Citi Bank. The amount
outstanding on account of pre-shipment export finance loan as on March
31, 2010 is Nil (P.Y. Nil). The loan is secured by way of charge on
movable assets, book debts, outstanding monies, receivables, claims,
bills, investments, rights to or in movable properties/movable assets
forming part of current assets both present and future.
5. Dues to Small scale, micro and medium enterprises
Based on the information available with the Company, there are no dues
payable to micro, small and medium enterprises as defined in The Micro,
Small and Medium Enterprises Development Act, 2006.
6. Contingent Liabilities
Guarantees have been given by the Company on behalf of various
subsidiaries against credit facilities amounting to Rs. 2.6 million
(P.Y. Rs. NIL).These guarantees have been given in the normal course of
the Companys operations and are not expected to result in any loss to
the Company on the basis of the beneficiaries fulfilling their ordinary
commercial obligations.
The Company has received the following Income Tax demand notices
amounting to Rs 29.13 million (P.Y. Rs. 11.52 million).
(Rupees in million)
Financial Year Demand Amount Status
2004-05 1.59 Appeal filed by Company with
Commissioner of Income Tax
2005-06 11.52 Appeal filed by Income Tax
Department with Income Tax
Appellate Tribunal
2006-07 16.02 Appeal filed by Company with
Commissioner of Income Tax
The amounts represent best possible estimates arrived at on the basis
of available information. The uncertainties and possible reimbursements
are dependent on the outcome of the different legal processes which
have been invoked by the Company or the claimants as the case may be
and therefore cannot be predicted accurately. The Company engages
reputed professional advisors to protect its interest and has been
advised that it has strong legal positions against such disputes. Hence
no provision has been made in the financial statements for these Income
Tax demands.
*The Company does not have information as to the extent to which
remittances, if any, in foreign currencies on account of dividends have
been made by/on behalf of non-resident shareholders. The particulars
given are for dividends declared and paid to non-resident shareholders
for the year 2007-08, 2008-09 and 2009-10.
7. Quantitative details
The Company is in the business of providing Knowledge Process
Outsourcing services. Such services are not capable of being expressed
in generic unit and hence, it is not possible to give the quantitative
details required under paragraphs 3, 4C and 4D of Part II of Schedule
VI to the Companies Act, 1956.
8. The Company has a comprehensive system of maintenance of
information and documents as required by the transfer pricing
legislation under sections 92-92F of the Income Tax Act, 1961. Since
the law requires existence of such information and documentation to be
contemporaneous in nature, the Company appoints independent consultants
for conducting a Transfer Pricing Study to determine whether the
transactions with associate enterprises are undertaken, during the
financial year, on an "arms length basis". Adjustments, if any, arising
from the transfer pricing study in the respective jurisdictions shall
be accounted for as and when the study is completed for the current
financial year. However the management is of the opinion that its
international transactions are at arms length so that the aforesaid
legislation will not have any impact on the financial statements.
9. Previous year figures have been regrouped, wherever necessary to
conform with the current years presentation.
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