Mar 31, 2023
The fair value of other financial assets and liabilities approximate the carrying value.
The fair value of Mutual and other funds is based on quoted price. Derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace. The fair value of equity instruments and preference instruments is based on inputs that are not based on observable market data.
IN. Financial risk management:Financial risk factors:
The Company''s activities are exposed to a variety of financial risks: market risk, credit risk, and liquidity risk. The Company''s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial
instruments to mitigate foreign exchange related risk exposures. The Company''s exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers.
The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its services from India for contracts in the overseas geographies, primarily in the United States of America and United Kingdom and purchases from overseas suppliers in foreign currencies. The Company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company''s operations may be affected as the Rupee fluctuates against these currencies.
5% appreciation/ depreciation of the respective foreign currencies with respect to functional currency Firstsource Solutions Limited would result in increase / decrease in the Company''s profit before tax approximately ^ 300.25 for the year ended March 31, 2023 (March 31, 2022: ^ 248.97).
Derivative financial instruments
The Company holds derivative financial instruments such as foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to ^ 6,177.26 as at March 31, 2023 (March 31, 2022 : ^ 5,172.44) and unbilled revenue amounting to ^ 197.33 as at March 31, 2023 (March 31, 2022 : ^ 196.30). Trade receivables and unbilled revenue are typically unsecured and are derived from revenue earned from customers primarily located in the United States, United Kingdom, Philippines and other locations. Credit risk has always been managed by the Company by continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business.
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to manage liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company''s reputation.
Future cash outflows in respect of certain leasehold properties to which the Company is potentially exposed as a lessee that are not reflected in the measurement of the lease liabilities include exposures from options of extension and termination. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, the Management has considered all relevant facts and circumstances that create an economic incentive for the Company as a lessee to exercise the option to extend the lease or not to exercise the option to terminate the lease as at March 31, 2023. The Company shall revise the lease term when there is a change in the facts and circumstances.
Management expects the recoveries from current financial assets as at the year end and the net cash inflows from operations during the ensuing financial year to be sufficient for the Company to be able to meet these obligations of lease and other significant financial liabilities. In addition, the Company also has unused lines of credit.
26. EMPLOYEE STOCK OPTION PLANEmployee stock option Scheme 2003 (''Scheme 2003'')
The Employee Stock Option Scheme 2003 (''the Scheme'') approved by the Board of Directors and the members of the Company and administered by the Nomination & Remuneration Committee (''the Committee'') is effective October 11, 2003. The key terms and conditions included in the scheme are in line with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ( as amended by SEBI (shared based employee benefits) Regulations, 2014).
As per the Scheme, the Committee issued stock options to the identified employees at an exercise price equal to the fair value on the date of grant and there stock options would vest in tranches over a period of four years as stated below and shall be exercised within a period of ten years from the date of the grant of the options.
Firstsource Solutions Limited Employee Stock Option Plan 2019 (''ESOP 2019 PLAN'')
The Company established ESOP 2019 Plan, pursuant to approval of the Board of Directors and the shareholders at the Annual General Meeting on August 02, 2019 and administered by the Committee. The key terms and conditions included in the ESOP 2019 Plan are in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, as amended.
As per the ESOP 2019 Plan, the Committee will issue stock options to the identified eligible employees/ director(s) of the Company and its Subsidiaries at an exercise price which will be the face value of the Shares or any higher price which may be decided by the Committee considering the prevailing market conditions and the norms as prescribed by the Securities and Exchange Board of India (''SEBI'') and other relevant regulatory authorities. Further the stock options under the said plan would vest & be exercisable in tranches as determined by the Committee.
Under both the above structures grants will be issued at face value of the shares or any higher price which may be decided by the Committee and will have an exercise period upto ten years as per the Scheme and as determined by the Committee.
The ESOP 2019 Plan shall be implemented by the Firstsource Employee Benefit Trust (''the Trust'') which will be administered by the Committee. The Company shall provide financial assistance to the Trust for secondary acquisition of equity shares of the Company for the purpose of implementation of ESOP 2019 Plan. The terms and conditions for the financial assistance provided shall be in Compliance with the Companies Act, 2013 read with Companies (Share Capital and Debenture) Rules, 2014 and SEBI regulations.
During the year ended March 31, 2023, the Trust has purchased
I, 930,000 (March 31, 2022: 3,197,000) equity shares
through secondary acquisition. As on March 31, 2023 trust holds 15,589,182 (March 31, 2022: 17,011,351) number of equity shares.
GRANTS TO THE MD & CEO UNDER ESOP 2019 PLAN
In view of the Shareholder''s approval via postal ballot on January
II, 2020 through a special resolution wherein it was approved that the MD & CEO shall be entitled to participate in the equity
based LTI of the Company. Accordingly the Committee onFebruary 28, 2020 has approved the grant of 10,066,204 options under ESOP Plan 2019 at the face value of ^ 10/- of the shares to the MD and CEO which are a mix of tenure based and performance based structures. The brief details of these grants are mentioned herein below:
The Company has a defined benefit gratuity plan in India (funded). The Company''s defined benefit gratuity plan is a final salary plan for employees, which requires contributions to be made to a separately administered fund.
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, Indian employee who has completed five years or more 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 fund has the form of a trust and it is governed by the Board of Trustees, which consists of an equal number of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.
Each year, the Board of Trustees reviews the level of funding in the India gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The Board of Trustees decides its contribution based on the results of this annual review. Generally, investments are in debt mutual funds. Annual contributions are at a level such that no plan deficits (based on valuation performed) will arise.
Income tax demands amounting to ^ 1,872.94 (March 31, 2022: ^ 1,840.26) for the various assessment years are disputed in appeal by the Company in respect of which it has favourable decisions supporting its stand based on the past assessment or otherwise and hence, the provision for taxation is considered adequate. The Company has paid ^ 10.38 (March 31, 2022: ^ 10.38) tax under protest against the demand raised for the assessment year 200405, ^ 12.50 (March 31, 2022: ^ 12.50) tax under protest against the demand raised for the assessment year 2009-10, ^ 80.00 (March
31, 2022: ^ 80.00) tax under protest against the demand raised for the assessment year 2011-12. ^ 5.00 (March 31, 2020: ^ 5.00) tax under protest against the demand raised for the assessment year 2014-15, ^ 2.50 (March 31, 2022: ^ 2.50) tax under protest against the demand raised for the assessment year 2015-16.
Service tax demands amounting to ^ 192.52 (March 31, 2022: ^ 151.76) in respect of service tax input credit and FCCB issue expenses is disputed in appeal by the Company. The Company expects favourable appellate decision in this regard.
The Company''s pending litigations comprise of claims against the Company and pertaining to proceedings pending with Income tax and service tax. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in the financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements.
*Guarantees given pertain to guarantees given to customers and the Government of India, Customs and Central Excise department towards future duty obligations.
The Company has a process whereby yearly all long-term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law /
Accounting Standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of account.
33. CORPORATE SOCIAL RESPONSIBILITY (''CSR'')
As per Section 135 of the Companies Act, 2013, funds have been contributed by the Company to the RP-Sanjiv Goenka Group CSR Trust (''RPSG CSR Trust'') and are to be utilized on the activities which are specified in Schedule VII to the Act. The areas identified by the CSR trust includes activities for promoting healthcare, art / culture, sports and education as the four priority areas to be pursued in phases and in a manner aligned with the CSR rules and regulations.The trust has informed that they are working on an ongoing project to set up school which will offer IB and IGCSE courses.
Gross amount required to be spent by the Company during the year is ^ 68.36 (March 31, 2022: ^ 55.71)
35. MICRO, SMALL AND MEDIUM ENTERPRISES
There are no outstanding dues to Micro and Small enterprises as at March 31, 2023 and March 31, 2022 respectively. Micro and Small Enterprises have been identified based on information collected by the Company.
Mar 31, 2022
During the year ended March 31, 2022, the Company granted 4,522,250 (March 31, 2021: 16,569,000) options at an exercise price of ? 10 (March 31, 2021: ? 10.00).
25,737,955 (March 31, 2021: 29,076,143) number of shares are reserved for employees for issue under the employee stock options plan (ESOP) amounting to ? 257.38 (March 31, 2021: ? 290.76).
f) Rights, preferences and restrictions attached to equity shares
The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Company''s residual assets. The equity shareholders are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder are in proportion to its share of the paid-up equity capital of the Company.
On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.
The Company received ? 37.32 (March 31, 2021: ? 82.15) as share application money under ESOP scheme during the year ended March 31, 2022 in respect of which 891,610 (March 31, 2021: 2,272,436) shares were allotted during the year.
h) Dividend
During the year ended March 31, 2022, the Company has declared interim dividend of ? 3.50 per share (March 31, 2021: ? 3 per share), the Company has incurred a net cash outflow of ? 2,383.96 (March 31, 2021: ? 2,037.69) (excluding dividend paid on treasury shares).
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The fair value of other financial assets and liabilities approximate the carrying value.
The fair value of Mutual and other funds is based on quoted price. Derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace. The fair value of equity instruments and preference instruments is based on inputs that are not based on observable market data.
Financial risk factors:
The Company''s activities are exposed to a variety of financial risks: market risk, credit risk, and liquidity risk. The Company''s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Company''s exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers.
The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its services from India for contracts in the overseas geographies, primarily in the United States of America and United Kingdom and purchases from overseas suppliers in foreign currencies. The Company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company''s operations may be affected as the Rupee fluctuates against these currencies.
5% appreciation/ depreciation of the respective foreign currencies with respect to functional currency Firstsource Solutions Limited would result in increase / decrease in the Company''s profit before tax approximately ? 248.97 for the year ended March 31, 2022 (March 31, 2021: ? 258.55).
The Company holds derivative financial instruments such as foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to ? 5,172.44 as at March 31, 2022 (March 31, 2021 : ? 5,199.86) and unbilled revenue amounting to ? 196.30 as at March 31, 2022 (March 31, 2021 : ? 151.71). Trade receivables and unbilled revenue are typically unsecured and are derived from revenue earned from customers primarily located in the United States, United Kingdom, Philippines and other locations. Credit risk has always been managed by the Company by continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business.
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to manage liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company''s reputation.
Future cash outflows in respect of certain leasehold properties to which the Company is potentially exposed as a lessee that are not reflected in the measurement of the lease liabilities include exposures from options of extension and termination. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, the Management has considered all relevant facts and circumstances that create an economic incentive for the Company as a lessee to exercise the option to extend the lease or not to exercise the option to terminate the lease as at March 31, 2022. The Company shall revise the lease term when there is a change in the facts and circumstances.
Management expects the recoveries from current financial assets as at the year end and the net cash inflows from operations during the ensuing financial year to be sufficient for the Company to be able to meet these obligations of lease and other significant financial liabilities. In addition, the Company also has unused lines of credit.
Employee stock option Scheme 2003 (''Scheme 2003'')
The Employee Stock Option Scheme 2003 (''the Scheme'') approved by the Board of Directors and the members of the Company and administered by the Nomination & Remuneration Committee (''the Committee'') is effective October 11, 2003. The key terms and conditions included in the scheme are in line with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ( as amended by SEBI (shared based employee benefits) Regulations, 2014).
As per the Scheme, the Committee issued stock options to the identified employees at an exercise price equal to the fair value on the date of grant and there stock options would vest in tranches over a period of four years as stated below and shall be exercised within a period of ten years from the date of the grant of the options.
The Company established ESOP 2019 Plan, pursuant to approval of the Board of Directors and the shareholders at the Annual General Meeting on August 02, 2019 and administered by the Committee. The key terms and conditions included in the ESOP 2019 Plan are in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, as amended. As per the ESOP 2019 Plan, the Committee will issue stock options to the identified eligible employees/ director(s) of the Company and its Subsidiaries at an exercise price which will be the face value of the Shares or any higher price which may be decided by the Committee considering the prevailing market conditions and the norms as prescribed by the Securities and Exchange Board of India (''SEBI'') and other relevant regulatory authorities. Further the stock options under the said plan would vest & be exercisable in tranches as determined by the Committee.
*Attainment of options can range between 0% and 150% of tranche eligible for vesting for the respective performance measurement period. Each tranche is separate. Performance and vesting in one period has no bearing on performance and vesting in another period;
Under both the above structures grants will be issued at face value of the shares or any higher price which may be decided by the Committee and will have an exercise period upto ten years as per the Scheme and as determined by the Committee.
The ESOP 2019 Plan shall be implemented by the Firstsource Employee Benefit Trust (''the Trust'') which will be administered by the Committee. The Company shall provide financial assistance to the Trust for secondary acquisition of equity shares of the Company for the purpose of implementation of ESOP 2019 Plan. The terms and conditions for the financial assistance provided shall be in Compliance with the Companies Act, 2013 read with Companies (Share Capital and Debenture) Rules, 2014 and SEBI regulations.
During the year ended March 31, 2022, the Trust has purchased 3,197,000 (March 31, 2021: 13,854,000) equity shares through secondary acquisition. As at March 31, 2022, the trust holds 17,011,351 (March 31, 2021: 17,010,000) number of equity shares.
In view of the Shareholder''s approval via postal ballot on January 11, 2020 through a special resolution wherein it was approved that the MD & CEO shall be entitled to participate in the equity based LTI of the Company. Accordingly the Committee on February 28, 2020 has approved the grant of 10,066,204 options under ESOP Plan 2019 at the face value of ? 10/- of the shares to the MD and CEO which are a mix of tenure based and performance based structures. The brief details of these grants are mentioned herein below:
The expense arises from equity settled share based payment transaction amounting to ? 320.00 and ? 208.88 for the year ended March 31, 2022 and March 31, 2021 respectively. The cost related to employee stock options of its subsidiary companies is recognised as addition to investment. Accordingly, the amount of ? 14.46 and ? 13.54 is recognised as investments in Firstsource Solutions UK Limited for the year March 31, 2022 and March 31, 2021 respectively ? 124.12 and ? 76.98 is recognised as investment in Firstsource Group USA Inc. for the year March 31, 2022 and March 31, 2021 respectively.
The Company has a defined benefit gratuity plan in India (funded). The Company''s defined benefit gratuity plan is a final salary plan for employees, which requires contributions to be made to a separately administered fund.
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, Indian employee who has completed five years or more 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 fund has the form of a trust and it is governed by the Board of Trustees, which consists of an equal number of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.
Each year, the Board of Trustees reviews the level of funding in the India gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The Board of Trustees decides its contribution based on the results of this annual review. Generally, investments are in debt mutual funds. Annual contributions are at a level such that no plan deficits (based on valuation performed) will arise.
The following table sets out the status of the gratuity plan:
As per Ind AS 108 - Operating Segments (''Ind AS 108''), if a financial report contains both consolidated financial statements of a parent that is within the scope of this Ind AS as well as the parent''s separate financial statements, segment information is required only in the consolidated financial statements. Accordingly, information required to be presented under Ind AS 108 has been given in the condensed interim standalone consolidated financial statements of the Company.
Income tax demands amounting to ? 1,840.26 (March 31, 2021: ? 983.03) for the various assessment years are disputed in appeal by the Company, in respect of which it has favourable decisions supporting its stand based on the past assessment or have been allowed in the past and hence, the provision for taxation is considered adequate. The Company has paid ? 10.38 (March 31, 2021: ? 10.38) tax under protest against the demand raised for the assessment year 2004-05, ? 12.50 (March 31, 2021: ? 12.50) tax under protest against the demand raised for the assessment year 2009-10, ? 80.00 (March 31, 2021: ? 80.00) tax under protest against the demand raised for the assessment year 2011-12. ? 5.00 (March 31, 2021: ? 5.00) tax under protest against the demand raised for the assessment year 2014-15, ? 2.50 (March 31, 2021: ? 2.50) tax under protest against the demand raised for the assessment year 2015-16.
Service tax demands amounting to ? 151.76 (March 31, 2021: ? 151.76) in respect of service tax input credit and FCCB issue expenses is disputed in appeal by the Company. The Company expects favourable appellate decision in this regard.
The Company''s pending litigations comprise of claims against the Company and pertaining to proceedings pending with Income tax and service tax. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in the financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements.
*Guarantees given pertain to guarantees given to customers and the Government of India, Customs and Central Excise department towards future duty obligations.
The Company has a process whereby yearly all long-term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law / Accounting Standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of account.
33 CORPORATE SOCIAL RESPONSIBILITY (CSR)
As per Section 135 of the Companies Act, 2013, funds have been contributed by the Company to the RP-Sanjiv Goenka Group CSR Trust and are to be utilized on the activities which are specified in Schedule VII to the Act. The areas identified by the CSR trust includes activities for promoting healthcare, art / culture, sports and education as the four priority areas to be pursued in phases and in a manner aligned with the CSR rules and regulations.The trust has informed that they are working on a project to set up school which will offer IB and IGCSE courses. The amount paid towards our contribution is being utlized to purchase land for setting up this school. a) Gross amount required to be spent by the Company during the year is ? 55.71 (March 31, 2021: ? 39.06)
35 MICRO, SMALL AND MEDIUM ENTERPRISES
There are no outstanding dues to Micro and Small enterprises as at March 31, 2022 and March 31, 2021 respectively. Micro and Small Enterprises have been identified based on information collected by the Company.
The Board of directors at its meeting held on May 05, 2022 has approved these financial statements as at and for the year ended March 31, 2022.
Mar 31, 2018
1. Employee stock option plan
Employee stock option scheme 2003 (''Scheme 2003'')
The Employee Stock Option Scheme 2003 (''the Scheme'') approved by the Board of Directors and the members of the Company and administered by the Nomination and Remuneration Committee (''the Committee'') is effective October 11, 2003. The key terms and conditions included in the scheme are in line with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ( as amended by SEBI (shared based employee benefits) Regulations, 2014). As per the Scheme, the Committee issued stock options to the identified employees at an exercise price equal to the fair value on the date of grant and the stock options would vest in tranches over a period of four years as stated below and shall be exercised within a period of ten years from the date of the grant of the options.
The expense arises from equity settled share based payment transaction amounting to INR 46.63 and INR 39.41 for the year ended 31 March 2018 and 31 March 2017 respectively. The cost related to employee stock options of its subsidiary companies is recognized as addition to investment. Accordingly, the amount of INR 6.18 and INR 6.68 is recognized as investments in First source Solutions UK Limited for the year 31 March 2018 and 31 March 2017 respectively. INR 14.41 and INR 10.02 is recognized as investment in First source Group USA Inc. for the year 31 March 2018 and 31 March 2017 respectively.
2. Related party transactions
Details of related parties including summary of transactions entered into during the year ended 31 March 2018 are summarized below:
Ultimate Holding Company CESC Limited
Holding Company Spen Liq Private Limited (Spen Liq)
Fellow Subsidiary Companies Spencer Retail Limited (Spencer)
Omnipresent Retail India Private Limited (Omnipresent)
New Rising Promoters Private Limited
Subsidiaries wherein control exists The related parties where control exists are subsidiaries as referred to in Note 1 to the
_financial statements._
Associate Nanobi Data and Analytics Private Limited (Nanobi)
Key Managerial Personnel Rajesh Subramaniam
Dinesh Jain
Non- executive Directors Sanjiv Goenka
Charles Miller Smith Y.H. Malegam Pradip Roy Subrata Talukdar Shashwat Goenka Donald W. Layden, Jr.
V. K. Sharma Pradip Kumar Khaitan Grace Koshie
3. Employee benefits
The Company has a defined benefit gratuity plan in India (funded). The Company''s defined benefit gratuity plan is a final salary plan for employees, which requires contributions to be made to a separately administered fund.
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, Indian employee who has completed five years or more 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 fund has the form of a trust and it is governed by the Board of Trustees, which consists of an equal number of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.
Each year, the Board of Trustees reviews the level of funding in the India gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The Board of Trustees decides its contribution based on the results of this annual review. Generally, investments are in debt mutual funds. Annual contributions are at a level such that no plan deficits (based on valuation performed) will arise.
a) Gratuity plan
The following table sets out the status of the gratuity plan:
Reconciliation of opening and closing balances of the present value of the defined benefit obligation and fair value of planned assets:
The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.
The Company continues to fund to the trust in next year by reimbursing the actual payouts.
Gratuity cost, as disclosed above, is included under ''Employee benefit expense''.
b) Contribution to Provident fund
The provident fund charge during the year amounts to INR 138.99 (31 March 2017: INR 173.32 ).
4. Segment reporting
As per Ind AS 108 - Operating Segment, if a financial report contains both consolidated financial statements of a parent that is within the scope of this Ind AS as well as the parent''s separate financial statements, segment information is required only in the consolidated financial statements. Accordingly, information required to be presented under Ind AS 108- Operating Segment has been given in the consolidated financial statements of the Company.
Direct tax matters
Income tax demands amounting to INR 920.66 (31 March 2017: INR 1,197.93) for the various assessment years are disputed in appeal by the Company in respect of which it has favorable decisions supporting its stand based on the past assessment or otherwise and hence, the provision for taxation is considered adequate. The Company has paid INR 10.38 (31 March 2017: INR 10.38) tax under protest against the demand raised for the assessment year 2004-05, INR 12.50 (31 March 2017: INR 12.50) tax under protest against the demand raised for the assessment year 2009-10, INR 80.00 (31 March 2017: INR 80.00) tax under protest against the demand raised for the assessment year 2011-12.
Indirect tax matters
Service tax demands amounting to INR 172.12 (31 March 2017: INR 172.11) in respect of service tax input credit and FCCB issue expenses is disputed in appeal by the Company. The Company expects favourable appellate decision in this regard.
The Company''s pending litigations comprise of claims against the Company and pertaining to proceedings pending with Income tax and service tax. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in the financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements.
5. Long-term contracts
The Company has a process whereby yearly all long-term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law / Accounting Standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of account.
6. Corporate social responsibility (CSR)
As per Section 135 of the Companies Act, 2013, a CSR trust has been formed by CESC Limited, Ultimate Holding Company. The areas identified by the CSR trust includes activities for promoting healthcare, art / culture, sports and education as the four priority areas to be pursued in phases and in a manner aligned with the CSR rules and regulations. Significant value of the funds have been contributed by the Company to the trust and are to be utilised on the activities which are specified in Schedule VII to the Act.
a) Gross amount required to be spent by the Company during the year is INR 34.52 (31 March 2017: INR 30.03)
b) Amount spent by First source during the year on:
7. Micro, small and medium enterprises
Under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, which came into force from 2 October 2006, and on the basis of the information and records available with the Company, the following disclosures are made for the amounts due to the Micro and Small enterprises:
8. Subsequent events Dividends
The Board of Directors at its meeting held on 7 May 2018 have recommended a maiden dividend of INR 1.50 per equity share for the Financial Year ended 31 March 2018, subject to approval of shareholders at the Annual General Meeting.
Mar 31, 2017
1. Related party transactions
Details of related parties including summary of transactions entered into during the year ended 31 March 2017 are summarized below:
Ultimate Holding Company__CESC Limited_
Holding Company__Spen Liq Private Limited (Spen Liq)_
Fellow Subsidiary Companies__Spencer Retail Limited (Spencer)_
__Omnipresent Retail India Private Limited (Omnipresent)_
__New Rising Promoters Private Limited_
Subsidiaries wherein control exists The related parties where control exists are subsidiaries as referred to in Note 1 to the
__financial statements._
Associate__Nanobi Data and Analytics Private Limited (Nanobi)_
Key Managerial Personnel__Rajesh Subramaniam_
__Dinesh Jain_
Non - executive Directors__Sanjiv Goenka_
__Charles Miller Smith_
__YH. Malegam_
__Pradip Roy_
__Subrata Talukdar_
__Shashwat Goenka_
__Donald W. Layden, Jr._
__V. K. Sharma_
__Pradip Kumar Khaitan_
Grace Koshie
The Company has a defined benefit gratuity plan in India (funded). The Company''s defined benefit gratuity plan is a final salary plan for employees, which requires contributions to be made to a separately administered fund.
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, Indian employee who has completed five years or more 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 fund has the form of a trust and it is governed by the Board of Trustees, which consists of an equal number of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.
Each year, the Board of Trustees reviews the level of funding in the India gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The Board of Trustees decides its contribution based on the results of this annual review. Generally, investments are in debt mutual funds. Annual contributions are at a level such that no plan deficits (based on valuation performed) will arise.
a) Gratuity plan
The following table sets out the status of the gratuity plan:
Reconciliation of opening and closing balances of the present value of the defined benefit obligation and fair value of planned assets:
The Company continues to fund to the trust in next year by reimbursing the actual payouts.
Gratuity cost, as disclosed above, is included under ''Employee benefit expense''.
b) Contribution to Provident fund
The provident fund charge during the year amounts to '' 173.32 (31 March 2016: '' 164.94 ).
2. Segment reporting
As per Ind AS 108 - Operating Segment, if a financial report contains both consolidated financial statements of a parent that is within the scope of this Ind AS as well as the parent''s separate financial statements, segment information is required only in the consolidated financial statements. Accordingly, information required to be presented under Ind AS 108 - Operating Segment has been given in the consolidated financial statements of the Company.
3. Other operating income
Other operating income comprises of net gain on restatement and settlement of debtor balances and related gain/loss on forward/option contracts.
Direct tax matters
Income tax demands amounting to Rs,1,197.93 (31 March 2016: Rs, 1,280.61) for the various assessment years are disputed in appeal by the Company in respect of which it has favorable decisions supporting its stand based on the past assessment or otherwise and hence, the provision for taxation is considered adequate. the Company has paid Rs, 10.38 (31 March 2016: Rs, 10.38) tax under protest against the demand raised for the assessment year 2004-05, Rs, 12.50 (31 March 2016: Rs, 12.50) tax under protest against the demand raised for the assessment year 2009-10, Rs, 80.00 (31 March 2016: Rs, 80.00) tax under protest against the demand raised for the assessment year 2011-12 and Rs, Nil (31 March 2016: Rs, 28.10) tax under protest against the demand raised for the assessment year 2012-13.
Indirect tax matters
Service tax demands amounting to Rs, 172.11 (31 March 2016: Rs, 172.11) in respect of service tax input credit and FCCB issue expenses is disputed in appeal by the Company. The Company expects favorable appellate decision in this regard.
The Company''s pending litigations comprise of claims against the Company and pertaining to proceedings pending with Income tax and service tax. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in the financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements.
4. Long-term contracts
The Company has a process whereby periodically all long-term contracts (including derivative contracts) are assessed for material foreseeable losses. At the period end, the Company has reviewed and ensured that adequate provision as required under any law / Accounting Standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of account.
As per Section 135 of the Companies Act, 2013, a CSR trust has been formed by CESC Limited, Ultimate Holding Company. The areas identified by the CSR trust includes activities for promoting healthcare, art / culture, sports and education as the four priority areas to be pursued in phases and in a manner aligned with the CSR rules and regulations. The funds have been contributed by the company to the trust and are to be utilized on the activities which are specified in Schedule VII to the Companies Act, 2013.
a) Gross amount required to be spent by the Company during the year is Rs, 30.03 (31 March 2015: Rs, 26.29)
b) Amount spent by First source during the year on:
5. Micro, small and medium enterprises
Under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, which came into force from 2 October 2006, and on the basis of the information and records available with the Company, the following disclosures are made for the amounts due to the Micro and Small enterprises:
6. Subsequent events
The Board of directors at its meeting held on 5 May 2017 approved the financial statements of the company for the year ended 31 March 2017. The company evaluated subsequent events from the balance sheet date through 5 May 2017 and determined there are no material items to report.
Mar 31, 2015
Cash and cash equivalents consist of cash on hand and balances with
bank. Cash and cash equivalents included in the cash flow statement
comprise the following balance sheet amounts:
1. Background
Firstsource Solutions Limited (''Firstsource'' or the Company) was
incorporated on 6 December 2001. Firstsource is engaged in the business
of providing contact center, transaction processing and debt collection
services including revenue cycle management in the healthcare industry.
a. Employees stock options
For stock options granted during the year to employees and
non-executive directors, refer Note 27.
b. Shares reserved for issue under options
42,308,052 (31 March 2014: 47,605,635) number of shares are reserved
for employees and non-executive directors for issue under the employee
stock options plan (ESOP) amounting to Rs. 423.08 (31 March 2014: Rs.
476.06). (refer Note 27)
c. Rights, preferences and restrictions attached to equity shares
The Company has a single class of equity shares. Accordingly, all
equity shares rank equally with regard to dividends and share in the
Company''s residual assets. The equity shareholders are entitled to
receive dividend as declared from time to time. The voting rights of an
equity shareholder are in proportion to its share of the paid-up equity
capital of the Company.
On winding up of the Company, the holders of equity shares will be
entitled to receive the residual assets of the Company, remaining after
distribution of all preferential amounts in proportion to the number of
equity shares held.
2A. Share application money received under ESOP scheme
During the year, the Company has allotted 55,000 shares from balance
lying as share application money pending allotment under ESOP scheme as
on 31 March 2014. The Company has also received Rs. 112.62 as share
application money under ESOP scheme during the year.. Out of the total
share application money received during the year, 6,556,583 shares were
issued during the year and Rs. 0.20 is outstanding pending allotment of
20,000 shares. These shares will be allotted during the financial year
2015-16.
a. External commercial borrowing carries interest at the rate of LIBOR
471 bps. The loan is repayable from December 2013 up to June 2019 in
quarterly installments. The loan is secured against pari passu charge
on all current assets, non-current assets and fixed assets of the
Company and its subsidiaries except assets of Anunta and FDS.
b. Finance lease obligation carries interest in the range of 6% - 12.5%
for the period of 3 - 5 years from January 2011 up to November 2016
repayable in quarterly installments. This is secured by way of
hypothecation of underlying fixed assets taken on lease, (refer note
11).
c. Loan from non-banking financing companies carries interest in the
range of 7.5%-12.5% for the period of 3 - 4 years from October 2011 to
October 2017, repayable in quarterly installments from the date of its
origination.
d. The above excludes current maturity of long term borrowings which
are mentioned in note 9 - Other current liabilities / Current
maturities of long-term borrowings.
a. Export finance from banks including post-shipment and pre-shipment
carries interest in the range of LIBOR 230 bps to LIBOR 300 bps. The
same is repayable on demand / receipt from customers.
3. Leases
Operating lease
The Company is obligated under non-cancellable operating leases for
office space and office equipment which are renewable on a periodic
basis at the option of both the lessor and lessee. Expenses under
non-cancellable operating leases for the year ended 31 March 2015
aggregated Rs. 588.76 (31 March 2014: Rs. 405.27).
The future minimum lease payments in respect of non-cancellable
operating leases are as follows:
The Company also leased office facilities and residential facilities
under cancellable operating leases that are renewable on a periodic
basis at the option of both the lessor and lessee. Expenses under
cancellable operating leases for the year ended 31 March 2015 is Rs.
247.57(31 March 2014: Rs.164.89)
The Company has acquired certain capital assets under finance lease.
Future minimum lease payments under finance lease as at 31 March 2015
are as follows:
The Company has given vehicles on finance lease to its employees as per
policy. As at 31 March 2015, the future minimum lease rentals
receivable are as follows:
4. Employee Stock Option Plan
Stock option scheme 2002 (''Scheme 2002'')
In September 2002, the Board of the Company approved the ICICI
OneSource Stock Option Scheme 2002 ("the Scheme"), which covers the
employees and directors of Firstsource and its subsidiaries. The Scheme
is administered and supervised by the members of the Compensation cum
Board Governance Committee (the ''Committee'').
As per the Scheme, the Committee shall issue stock options to the
employees at an exercise price equal to the fair value on the date of
grant, as determined by an independent valuer. The Scheme provides that
these options would vest in tranches over a period of four years as
follows:
Further, the participants shall exercise the options within a period of
nine years commencing on or after the expiry of twelve months from the
date of the grant of the options.
Employee stock option scheme 2003 (''Scheme 2003'')
In September 2003, the Board and the members of Firstsource approved
the ICICI OneSource Stock Option Scheme 2003 (''Scheme 2003'')
effective 11 October 2003. The terms and conditions under this Scheme
are similar to those under ''Scheme 2002'' except for the following,
which were included in line with the amended "SEBI (Employee stock
option scheme and employee stock purchase scheme) guidelines, 1999":
- The Scheme would be administered and supervised by the members of
the Compensation committee.
- Exercise price to be determined based on a fair valuation carried
out at the beginning of every six months for options granted during
those respective periods .
After Firstsource has been listed on any stock-exchange, the Exercise
Price shall be determined by the Committee on the date the Option is
granted in accordance with, and subject to, the Securities and Exchange
Board of India (Employees Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999 (as amended from time to time);
- The Compensation Cum Board Governance Committee of Firstsource, at
its meeting held on 27 April 2006, amended the vesting schedule for
stock options granted on 1 May 2006 to General Managers and above grade
employees and to non- executive directors. The vesting schedule for
15,980,000 stock options granted pursuant to the above is set forth
below:
- At the Extra-Ordinary General Meeting held on 22 November 2007, the
scheme was amended to include ''Executive
Options''. 50% of the vesting for ''Executive Options'' is time
linked and the balance 50% is performance linked. The vesting schedule
for time linked ''Executive Options'' is set forth below:
The vesting schedule for Performance Linked options is set forth below:
50% of ''Executive Options'' which are performance linked shall vest
in proportion to the achievement of 5 year performance targets to be
decided by the Committee, with the first vesting being at the end of
the second year from the date of grant of ''Executive Options''. The
number of ''Executive Options'' vesting at the end of each year would
be in proportion to the percentage achievement against the targets and
if the targets were not met, the vesting period would be extended
beyond 5 years. If performance was better than targets, the Options
would vest in less than 5 years.
- The Compensation Cum Board Governance Committee of Firstsource, at
its meeting held on 30 October 2008 prescribed the Exercise Period for
stock options (other than Executive Options) whether already granted or
to be granted to employees of the Company and its subsidiaries under
Firstsource Solutions Employee Stock Option Scheme 2003 as 10 years
from the date of grant of Options.
Outstanding options as at 31 March 2015 out of Scheme 2002 is Nil (31
March 2014: Nil) and Scheme 2003 is 42,308,052 (31 March 2014:
47,605,635) i.e. total outstanding is 42,308,052.
1 The aggregate stock option pool under Employee Stock Option Scheme
2002 and Employee Stock Option Scheme 2003 is 20% fully diluted equity
shares as of 31 March 2015.
2 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 as reported would have reduced to the proforma amounts as
indicated:
5. RELATED PARTY TRANSACTIONS
Details of related parties including summary of transactions entered
into during the period / year ended 31 March 2015 are summarized below:
Ultimate Holding Company - CESC Limited
Holding Company - Spen Liq Private limited (Spen Liq)
Fellow Subsidiary - Spencer Retail Limited (Spencer)
Subsidiaries wherein control exists :
The related parties where control exists are subsidiaries as referred
below :-
- Firstsource Solutions UK Limited (FSL-UK)
- Firstsource Group USA, Inc. (FG US)
- Firstsource Business Process Services, LLC. (FBPS)
- Firstsource Advantage LLC (FAL)
- MedAssist Holding, Inc. (MedAssist)
- Firstsource Solutions USA LLC (earlier known as MedAssist LLC)
- Anunta Tech Infrastructure Services Limited (Anunta)
- Firstsource Transaction Services LLC (FTS)
- Firstsource Dialog Solutions (Private) Limited (earlier known as
Dialog Business Services Private Limited ) (FDS)
- Firstsource BPO Ireland Limited
- Firstsource Solution S.A. (FSL Arg)
- One Advantage LLC (OAL)
- Medassist Holding LLC ( earlier known as Medassist Acquisition
Inc.)
- Twin Lakes Property LLC-1 and Twin Lakes Property LLC- II have been
dissolved during the previous year
Key Managerial Personnel ;
- Rajesh Subramaniam
- Dinesh Jain
Non Executive Directors :
- Sanjiv Goenka
- Ananda Mukerji**
- Charles Miller Smith
- Shailesh Mehta**
- K.P.Balaraj**
- Y.H.Malegam
- Pradip Roy
- Subrata Talukdar
- Shashwat Goenka
- Haigreve Khaitan**
- Donald W. Layden, Jr.
- V. K. Sharma
- Pradip Kumar Khaitan
- Grace Koshie
** Resigned during the period.
List of transactions with related parties having total value more than
10% of value of transactions with related parties
Advances to subsidiaries consist of the followings amounts advanced to
subsidiaries towards reimbursement of expenses and are repayable on
demand:
6. Employee benefits
a) Gratuity plan
The following table sets out the status of the gratuity plan as
required under AS 15: Reconciliation of opening and closing balances of
the present value of the defined benefit obligation and fair value of
planned assets:
The estimates of future salary increase, considered in actuarial
valuation, take account of inflation, seniority, promotion and other
relevant factors such as supply and demand factors in the employment
market.
The Company continues to fund to the trust in next year by reimbursing
the actual payouts.
Gratuity cost, as disclosed above, is included under ''Employee
benefit expense''.
b) Contribution to Provident Fund
The provident fund charge during the year amounts to Rs. 188.38 (31 March
2014: Rs. 209.51).
7. Other operating income
Other operating income comprises of net gain on restatement and
settlement of debtor balances and related gain / loss on forward /
option contracts.
8. Capital and other commitments and contingent liabilities
31March 2015 31 March2014
The estimated amount of contracts
remaining to be executed on 144.86 57.12
capital account and not provided for,
net of advances _ -
Claims not acknowledge as debt 1.35 1.35
Guarantees and letters of credit
given 13,940.05 16,504.10
Direct tax matters
Income tax demands amounting to Rs. 1,236.77 (31 March 2014: Rs. 1,240.27)
for the various assessment years are disputed in appeal by the Company
in respect of which the Company has favorable decisions supporting its
stand based on the past assessment or otherwise and hence, the
provision for taxation is considered adequate. The Company has paid Rs.
10.38 (31 March 2014: Rs. 10.38) tax under protest against the demand
raised for the assessment year 2004-05, Rs. 12.50 (31 March 2014: Rs.
12.50) tax under protest against the demand raised for the assessment
year 2009-10 and Rs. 80.00 (31 March 2014: Rs. 50.00) tax under protest
against the demand raised for the assessment year 2011-12.
Indirect tax matters
The Service tax demands amounting to Rs. 131.15 (31 March 2014: Rs. 125.52)
in respect of service tax input credit and FCCB issue expenses is
disputed in appeal by the Company. The Company expects favourable
appellate decision in this regard.
The Company''s pending litigations comprise of claims against the
Company and pertaining to proceedings pending with Income tax and
service tax. The Company has reviewed all its pending litigations and
proceedings and has adequately provided for where provisions are
required and disclosed as contingent liabilities where applicable, in
its financial statements. The Company does not expect the outcome of
these proceedings to have a materially adverse effect on its financial
results.
Guarantees and letters of credit given consist of the following:
9. Segmental reporting
In accordance with paragraph 4 of Accounting Standard 17 "Segment
Reporting" prescribed in the Companies (Accounts) Rules, 2014, issued
by the Central Government, the Company has presented segmental
information only on the basis of the consolidated financial statements
(refer note 31 of the consolidated financial statements).
10. Adoption of AS 30
In December 2007, the ICAI issued AS 30, Financials Instruments:
Recognition and Measurement, recommendatory in respect of accounting
periods commencing on or after 1 April 2009 and mandatory in respect of
accounting periods commencing on or after 1 April 2011.
In March 2008, ICAI announced that earlier adoption of AS 30 is
encouraged. However, AS 30, along with limited revision to other
accounting standards, has not been notified under the Companies
(Accounts) Rules, 2014.
On 1 October, 2008, the Company had early adopted AS 30 in its
entirety, read with AS 31, effective 1 April, 2008 and the limited
revisions to other Accounting Standards.
AS 30 states that particular sections of other Accounting Standards; AS
4, Contingencies and Events Occurring after Balance
sheet date, to the extent it deals with contingencies, AS 11 (revised
2003), The Effects of Changes in Foreign Exchange Rates, to the extent
it deals with the ''forward exchange contracts'' and AS 13,
Accounting for Investments, except to the extent it relates to
accounting for investment properties, would stand withdrawn only from
the date AS 30 becomes mandatory. In view of the Com- pany, on an early
adoption of AS 30, accounting treatment made on the basis of the
relevant sections of Accounting Standards referred above viz. AS 4, AS
11 and AS 13 stands withdrawn as it believes that principles of AS 30
more appropriately reflect the nature of these transactions.
Pursuant to the early adoption of AS 30, the Company has discounted
Non-interest-bearing deposits to their present value and the difference
between original amount of deposit and the discounted present value has
been disclosed as "Unamortised cost" under other current and
non-current assets. This unamortised cost is charged to the statement
of profit and loss over the period of related lease. Correspondingly,
interest income is accrued on these Non-interest bearing deposits using
the implicit rate of return over the period of lease and is recognised
under "Interest income".
In accordance with the transition provisions of AS 30, impact on first
time adoption was accounted in General Reserve.
The Company has also designated forward contracts and payable on asset
acquisition to hedge highly probable forecasted trans- actions on the
principles as set out in AS-30.
Consequent to the early adoption of AS 30 as stated above, the profit
after taxation for the year ended on 31 March 2015 and Reserves and
surplus as at the Balance sheet date is higher by Rs. 31 (31 March 2014:
higher by 208) and higher by Rs. 2,817 (31 March 2014: higher by Rs. 2,754
) respectively The increase in Reserves and surplus includes
translation gain on the investment in non-integral foreign operation
used as hedge against translation loss on ECB, which is currently
credited to Reserves and Sur- plus, would be realized upon disposal of
non-integral foreign operation.
11b. Derivatives
As at 31 March 2015, the Company has derivative financial instruments
to sell USD 41.99 million (31 March 2014: USD 30,60 million) having
fair value gain of Rs. 50.72 (31 March 2014: gain of Rs. 45.84), GBP 62.95
million (31 March 2014: GBP 51.42 million) having fair value gain of Rs.
677.15 (31 March 2014: loss of Rs. 125.53) and AUD Nil (31 March 2014:
AUD 29.02) having fair value gain of Rs. Nil (31 March 2014: gain of Rs.
10.18) relating to highly probable forecasted transactions.
Foreign currency exposures on loans and receivables that are not hedged
by derivative instruments or otherwise are Rs. 340.30 (equivalent to USD
2.41 million, AUD 0.74 million and GBP 1.66 million) (31 March 2014: Rs.
249.43 (equivalent to USD 2.41 million, EUR 0.25 million and GBP 0.85
million)).
12. Corporate social responsibility (CSR)
As per Section 135 of the Companies Act, 2013, a CSR trust has been
formed by the Ultimate Holding Company. The areas identified by the CSR
trust includes activities for promoting healthcare, art / culture,
sports and education as the four priority areas to be pursued in phases
and in a manner aligned with the CSR rules and regulations. The funds
have been contributed to the trust and will be utilized on these
activities which are specified in Schedule VII to the Companies Act,
2013.
13. Long-term contracts
The Company has a process whereby periodically all long term contracts
(including derivative contracts) are assessed for material foreseeable
losses. At the year end, the Company has reviewed and ensured that
adequate provision as required under any law / accounting standards for
material foreseeable losses on such long term contracts (including
derivative contracts) has been made in the books of accounts.
14. Under the Micro Small and Medium Enterprises Development Act, 2006,
(MSMED) which came into force from 2 October 2006 and on the basis of
the information and records available with the Management, following
are the dues:
Mar 31, 2014
1. EMPLOYEE STOCK OPTION PLAN
Stock option scheme 2002 (''Scheme 2002'')
In September 2002, the Board of the Company approved the ICICI
One Source Stock Option Scheme 2002 ("the Scheme"), which covers the
employees and directors of the Company including its holding Company
and subsidiaries. The Scheme is administered and supervised by the
members of the Compensation cum Board Governance Committee (the
''Committee'').
In September 2003, the Board and the members of the Company approved
the ICICI One Source Stock Option Scheme 2003 (''Scheme 2003'') effective
11 October 2003. The terms and conditions under this Scheme are similar
to those under ''Scheme 2002'' except for the following, which were
included in line with the amended "SEBI (Employee stock option scheme
and employee stock purchase scheme) guidelines, 1999":
- The Scheme would be administered and supervised by the members of the
Compensation committee.
- Exercise price to be determined based on a fair valuation carried out
at the beginning of every six months for options granted during those
respective periods.
After the Company has been listed on any stock-exchange, the Exercise
Price shall be determined by the Committee on the date the Option is
granted in accordance with, and subject to, the Securities and Exchange
Board of India (Employees Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999 (as amended from time to time);
- The Compensation Cum Board Governance Committee of the Company, at
its meeting held on 30 October 2008 prescribed the Exercise Period for
stock options (other than Executive Options) whether already granted or
to be granted to employees of the Company and its subsidiaries under
First source Solutions Employee Stock Option Scheme 2003 as 10 years
from the date of grant of Options.
- The aggregate stock option pool under Employee Stock Option Scheme
2002 and Employee Stock Option Scheme 2003 is 55% fully diluted equity
shares as of 31 March 2014.
The Company continues to fund to the trust in next year by reimbursing
the actual payouts. Gratuity cost, as disclosed above, is included
under ''Salaries, bonus and other allowances''. b) Contribution to
Provident Fund
The provident fund charge during the year amounts to 209.51 (31 March
2013: 183.12).
2. OTHER OPERATING INCOME
Other operating income comprises of net gain on restatement and
settlement of debtor balances and related gain / loss on forward /
option contracts.
3. CAPITAL AND OTHER COMMITMENTS AND CONTINGENT LIABILITIES
31 March 2014 31 March 2013
The estimated amount of contracts
remaining to be executed on 57.12 62.74
capital account and not provided for,
net of advances
Claims not acknowledge as debt 1.35 1.35
Guarantees and letters of credit given 16,504.10 14,155.52
Direct tax matters
Income tax demands amounting to 1,240.27 (31 March 2013: 442.39) for
the various assessment years are disputed in appeal by the Company in
respect of which the Company has favorable decisions supporting its
stand based on the past assessment or otherwise and hence, the
provision for taxation is considered adequate. The Company has paid
10.38 (31 March 2013: 10.38) tax under protest against the demand
raised for the assessment year 2004-05 , 12.50 (31 March 2013: Nil) tax
under protest against the demand raised for the assessment year 2009-10
and 50.00 (31 March 2013: Nil) tax under protest against the demand
raised for the assessment year 2011-12.
Indirect tax matters
The Service tax demands amounting to 125.52 (31 March 2013: 125.52) in
respect of Service tax input credit and FCCB issue expense is disputed
in appeal by the Company. The Company expects favourable appellate
decision in this regard.
4. SEGMENTAL REPORTING
In accordance with paragraph 4 of Accounting Standard 17 "Segment
Reporting" prescribed in the Companies (Accounting Standards) Rules,
2006, issued by the Central Government, the Company has presented
segmental information only on the basis of the consolidated financial
statements (refer note 31 of the consolidated financial statements).
5. ADOPTION OF AS 30
In December 2007, the ICAI issued AS 30, Financials Instruments:
Recognition and Measurement, recommendatory in respect of accounting
periods commencing on or after 1 April 2009 and mandatory in respect of
accounting periods commencing on or after 1 April 2011.
In March 2008, ICAI announced that earlier adoption of AS 30 is
encouraged. However, AS 30, there under limited revision to other
accounting standards, has currently not been notified under the
Companies (Accounting Standard) Rules, 2006.
On 1 October, 2008, the Company had early adopted AS 30 in its
entirety, read with AS 31, effective 1 April, 2008 and the limited
revisions to other Accounting Standards.
AS 30 states that particular sections of other Accounting Standards; AS
4, Contingencies and Events Occurring after Balance sheet date, to the
extent it deals with contingencies, AS 11 (revised 2003), The Effects
of Changes in Foreign Exchange Rates, to the extent it deals with the
''forward exchange contracts'' and AS 13, Accounting for Investments,
except to the extent it relates to accounting for investment
properties, would stand withdrawn only from the date AS 30 becomes
mandatory (1 April 2011). In view of the Company, on an early adoption
of AS 30, accounting treatment made on the basis of the relevant
sections of Accounting Standards referred above viz. AS 4, AS 11 and AS
13 stands withdrawn as it believes that principles of AS 30 more
appropriately reflect the nature of these transactions.
Pursuant to the early adoption of AS 30, the Company has discounted
Non-interest-bearing deposits to their present value and the difference
between original amount of deposit and the discounted present value has
been disclosed as "Unamortised cost" under other current and
non-current assets. This unamortised cost is charged to the statement
of profit and loss over the period of related lease. Correspondingly,
interest income is accrued on these Non-interest bearing deposits using
the implicit rate of return over the period of lease and is recognised
under "Interest income".
In accordance with the transition provisions of AS 30, impact on first
time adoption has been accounted in General Reserve.
The Company has also designated forward contracts and payable on asset
acquisition to hedge highly probable forecasted transactions on the
principles as set out in AS-30 (also refer Note 38).
Consequent to the early adoption of AS 30 as stated above, the profit
after taxation for the year and Reserves and Surplus as at the Balance
sheet date is higher by 208 (31 March 2013: higher by 1,099) and 2,754
(31 March 2013: higher by 2,134 ) respectively The increase in Reserve
and Surplus includes translation gain on the investment in non-integral
foreign operation used as hedge against translation loss on ECB, which
is currently credited to Reserve and Surplus, would be realised upon
disposal of non-integral foreign operation.
6. DERIVATIVES
As at 31 March 2014, the Company has derivative financial instruments
to sell USD 30,597,632 (31 March 2013: USD 20,673,912) having fair
value gain of 45.84 (31 March 2013: loss of 9.61), GBP 51,429,893 (31
March 2013: GBP 22,827,009) having fair value loss of 125.53 (31 March
2013: gain of 57.24) and AUD 2,902,890 (31 March 2013: AUD 7,950,000)
having fair value gain of 10.18 (31 March 2013: loss of 23.95) relating
to highly probable forecasted transactions.
Foreign currency exposures on loans and receivables that are not hedged
by derivative instruments or otherwise are 249.43 (equivalent to USD
2.41 million, EUR 0.25 million and GBP 0.85 million) (31 March 2013:
346.04 (equivalent to USD 2.73 million, EUR 0.24 million and LKR 1.40
million)).
7. Others matter specified in Revised Schedule VI to the Companies
Act, 1956 are either Nil or not applicable to the Company for the year.
8. PRIOR PERIOD COMPARATIVES
Figures for the current period are not strictly comparable to those of
previous period, which comprises effect of scheme of amalgamation.
Mar 31, 2013
1. AMALGAMATION OF REVIT
The Board of Directors of the Company at their meeting held on 28 April
2012 approved the Scheme of amalgamation and arrangement (''the
Scheme'') between the Company and Rev IT Systems Private Limited
(RevIT), a wholly owned subsidiary of the Company, engaged in the
business of providing Information Technology Enabled Services (ITES)
and Business Process Outsourcing (BPO) services. The Scheme was
approved by the Honorable High Court of Judicature at Bombay vide its
order dated 5 November 2012. The Scheme inter-alia provided for the
amalgamation of RevIT with the Company effective 1 April 2011 (the
appointed date).
The certified copy of order passed by Honorable High Court of
Judicature at Bombay was filed with the Registrar of Companies (ROC),
Maharashtra on 30 November 2012.
In line with the Scheme, the merger of RevIT has been accounted for
under the ''Pooling of interest'' method as follows:
a) All the assets and liabilities recorded in the books of the RevIT
have been transferred to and vested in the books of the Company
pursuant to the Scheme at their book values as appearing in the books
of RevIT;
b) All reserves and surplus of RevIT have been transferred to and
vested in the books of the Company in the same form in which they
appear in the books of RevIT;
c) Since RevIT is a wholly owned subsidiary of the Company, the
investment by the Company in the shares of RevIT has been cancelled and
the excess of the cost of investment in RevIT over the value of net
assets taken over (at respective carrying amounts) amounting to Rs.
665.21 has been debited to the Capital Redemption Reserve and General
Reserve by Rs. 24.98 and Rs. 640.23 respectively.
d) The financial results for the year ended 31 March 2013 include the
income and expenses of RevIT.
e) The financial results of RevIT for the year ended 31 March 2012
showing a net profit after tax of Rs. 185.76 (net of MAT credit
entitlement), is added to the balance brought forward of the profit and
loss account.
During the year, as RevIT carried on its existing business in trust for
and on behalf of the Company, all vouchers, documents etc. for the year
are in the name of RevIT The title deeds, licenses, agreements, loan
documents etc., are being transferred in the name of the Company.
Assets, Liabilities and Reserves of RevIT as at 31 March 2011 comprise:
2. LEASES
Operating lease
The Company is obligated under non-cancellable operating leases for
office space and office equipment which are renewable on a periodic
basis at the option of both the lessor and lessee. Rental expenses
under non-cancellable operating leases for the year ended 31 March 2013
aggregated Rs.428.90 (31 March 2012: Rs. 326.30). Of these expenses Rs.
Nil (31 March 2012: Rs. 0.90) and Rs. 15.23 (31 March 2012: Rs. Nil)
has been attributed to expenses prior to the related asset being ready
to use and, accordingly, has been included as part of the related fixed
assets and capital work in progress respectively.
3. EMPLOYEE STOCK OPTION PLAN
Stock option scheme 2002 (''Scheme 2002'')
In September 2002, the Board of the Company approved the ICICI
OneSource Stock Option Scheme 2002 ("the Scheme"), which covers the
employees and directors of the company including its holding Company
and subsidiaries. The Scheme is administered and supervised by the
members of the Compensation-cum-Board Governance Committee (the
''Committee'').
As per the Scheme, the Committee shall issue stock options to the
employees at an exercise price equal to the fair value on the date of
grant, as determined by an independent valuer. The Scheme provides that
these options would vest in tranches over a period of four years as
follows:
4. RELATED PARTY TRANSACTIONS
Details of related parties including summary of transactions entered
into during the year ended 31 March 2013 are summarized below:
Ultimate Holding Company - CESC Limited (w.e.f. 5th December, 2012)
- Spen Liq Private limited (w.e.f. 5th December, 2012)
Holding Company The related parties where control exists are
subsidiaries as referred below :-
Subsidiaries wherein control exists - Firstsource Solutions UK
Limited (FSL-UK)
- Rev IT Systems Private Limited (Rev IT) ( Refer Note 26)
- Firstsource Group USA, Inc. (FG US)
- Firstsource Business Process Services, LLC. (FBPS)
- Firstsource Advantage LLC (FAL)
- Twin Lake Property LLC - I (Twinlakes-I)
- Twin Lake Property LLC - II (Twinlakes-II)
- MedAssist Holding, Inc. (MedAssist)
- Firstsource Solutions USA LLC (earlier known as MedAssist LLC)
- Anunta Tech Infrastructure Services Limited (Anunta)
- Firstsource Transaction Services LLC (FTS)
- Firstsource Dialog Solutions (Private) Limited (earlier known as
Dialog Business Services Private Limited ) (FDS)
- Firstsource BPO Ireland Limited Key Managerial Personnel - Rajesh
Subramaniam
- Dinesh Jain
- Deep Babur (up to December 2012)
- Alexander Matthew Vallance-
Non-Executive Directors - Sanjiv Goenka--
- Ananda Mukerji
- Charles Miller Smith
- Shailesh Mehta
- K.P. Balaraj
- Mohit Bhandari -
- Y.H. Malegam
- Pradip Roy--
- Subrata Talukdar--
- Shashwat Goenka--
- Haigreve Khaitan--
- Donald Layden, Jr.
- Pravir Vohra -
- Ram Chary -
- Resigned during the year
-- Joined during the year
5. OTHER OPERATING INCOME
Other operating income comprises of net gain on restatement and
settlement of debtor balances and related gain / loss on forward /
option contracts.
5.1 Buyback of FCCB
During the year ended 31 March 2012, pursuant to RBI notification, the
Company bought back and cancelled 426 FCCBs of the face value of USD
100,000 each at a discount on accreted book value under the Automatic
route. Due to adverse foreign currency movement, the Company recognised
net loss of Rs. 67.62 for the year ended 31 March 2012 on the said
buyback.
5.2 Redemption of FCCB
In accordance with the terms of issue of respective FCCBs, the Company
redeemed all outstanding 1,698 FCCBs aggregating USD 169.80 million on
4 December 2012.
6. SEGMENTAL REPORTING
In accordance with paragraph 4 of Accounting Standard 17 "Segment
Reporting" prescribed in the Companies (Accounting Standards) Rules,
2006, issued by the Central Government, the Company has presented
segmental information only on the basis of the consolidated financial
statements (refer note 32 of the consolidated financial statements).
7. ADOPTION OF AS 30
In December2007, the ICAI issued AS 30, Financials Instruments:
Recognition and Measurement, recommendatory in respect of accounting
periods commencing on or after 1 April 2009 and mandatory in respect of
accounting periods commencing on or after 1 April 2011.
In March 2008, ICAI announced that earlier adoption of AS 30 is
encouraged. However, AS 30, along with limited revision to other
accounting standards, has currently not been notified under the
Companies (Accounting Standard) Rules, 2006.
On 1 October, 2008, the Company had early adopted AS 30 in its
entirety, read with AS 31, effective 1 April, 2008 and the limited
revisions to other Accounting Standards.
AS 30 states that particular sections of other Accounting Standards; AS
4, Contingencies and Events Occurring after Balance sheet Date, to the
extent it deals with contingencies, AS 11 (revised 2003), The Effects
of Changes in Foreign Exchange Rates, to the extent it deals with the
''forward exchange contracts'' and AS 13, Accounting for Investments,
except to the extent it relates to accounting for investment
properties, would stand withdrawn only from the date AS 30 becomes
mandatory (1 April 2011). In view of the Company, on an early adoption
of AS 30, accounting treatment made on the basis of the relevant
sections of Accounting Standards referred above viz. AS 4, AS 11 and AS
13 stands withdrawn as it believes that principles of AS 30 more
appropriately reflect the nature of these transactions.
Pursuant to the early adoption of AS 30, the Company has discounted
Non-interest-bearing deposits to their present value and the difference
between original amount of deposit and the discounted present value has
been disclosed as "Unamortised cost" under other current and
non-current assets. This unamortised cost is charged to the statement
of profit and loss over the period of related lease. Correspondingly,
interest income is accrued on these Non- interest bearing deposits
using the implicit rate of return over the period of lease and is
recognised under "Interest income"
In accordance with the transition provisions of AS 30, impact on first
time adoption has been accounted in General Reserve.
As permitted by AS 30, the Company designated its FCCB along with
premium payable on redemption as a hedging instrument to hedge its net
investment in the non-integral foreign operations effective 1 July
2008. On 1 August 2012, the Company redesignated its FCCB along with
premium on redemption as a hedging instrument to hedge the forward
exchange contract taken of USD 103 million and balance continued to be
designated as a hedge against its net investment in the non-integral
foreign operations till the repayment of the FCCB. Further, the Company
accounted for embedded derivative option included in FCCB. The Company
has charged Rs. 106.40 for the year ended 31 March 2013 as amortised
cost on the fair value of FCCB under "Finance cost" towards
accretion of FCCB liability using implicit rate of return method over
the repayment tenor of FCCB.
The Company has also designated forward contracts to hedge highly
probable forecasted transactions on the principles as set out in AS-30
(also refer Note 38).
Consequent to the early adoption of AS 30 as stated above, the profit
after taxation for the year and Reserves and Surplus as at the Balance
sheet date is higher by Rs. 199 (31 March 2012: higher by Rs. 1,099)
and Rs. 2,642 (31 March 2012: higher by Rs. 2,134 ) respectively The
increase in reserve and surplus includes translation gain on the
investment in non-integral foreign operation used as hedging against
translation loss on FCCB, which is currently credited to reserve and
surplus, would be realized upon disposal of non-integral foreign
operation.
8. DERIVATIVES
As at 31 March 2013, the Comp any has derivative financial instruments
to sell USD 20,673,912 (31 March 2012: USD 38,777,958) having fair
value loss of Rs. 9.61 (31 March 2012: loss of Rs. 63.64), GBP
22,827,009 (31 March 2012: GBP 43,503,845) having fair value gain of
Rs. 57.24 (31 March 2012: gain of Rs. 180.81) and AUD 8,589,187 (31
March 2012: AUD 16,586,223) having fair value loss of Rs. 27.27 (31
March 2012: Rs..50.81) relating to highly probable forecasted
transactions.
Foreign currency exposures on loans and receivables that are not hedged
by derivative instruments or otherwise are Rs. 346.04 (equivalent to
USD 2.73 million, EUR 0.24 million and LKR 1.40 million) (31 March
2012: Rs. 397.50 (equivalent to USD 7.52 million, AUD 0.13 million, EUR
0.01 million and LKR 3.90 million)).
9. Other matters specified in Revised Schedule VI to the Companies
Act, 1956 are either Nil or not applicable to the Company for the year.
10. PRIOR PERIOD COMPARATIVES
Figures for the previous period are not strictly comparable to those of
current period, which comprises effect of scheme of amalgamation (refer
note 26).
Mar 31, 2012
1. Leases
Operating lease
The Company is obligated under non-cancelable operating leases for
office space and office equipments which are renewable on a periodic
basis at the option of both the lessor and lessee. Rental expenses
under non-cancelable operating leases for the year ended 31 March 2012
aggregated to Rs 326.30 (31 March 2011: Rs 281.78). Rs 0.90 (31 March
2011: Rs 13.94 ) and Nil (31 March 2011: Nil) has been attributed to
expenses prior to the related asset being ready to use and,
accordingly, has been included as part of the related fixed assets and
capital work in progress respectively.
The Company also leases office facilities and residential facilities
under cancelable operating leases that are renewable on a periodic
basis at the option of both the lessor and lessee. Rental expenses
under cancelable operating leases for the year ended 31 March 2012
aggregated Rs 409.33 (31 March 2011: Rs 318.82).
2. Employee Stock Option Plan
Stock option scheme 2002 ('Scheme 2002')
In September 2002, the Board of the Company approved the ICICI
OneSource Stock Option Scheme 2002 ('the Scheme'), which covers the
employees and directors of the Company including its holding Company
and subsidiaries. The Scheme is administered and supervised by the
members of the Compensation cum Board Governance Committee (the
'Committee').
Employee stock option scheme 2003 ('Scheme 2003')
In September 2003, the Board and the members of the Company approved
the ICICI OneSource Stock Option Scheme 2003 ('Scheme 2003')
effective 11 October 2003. The terms and conditions under this Scheme
are similar to those under 'Scheme 2002' except for the following,
which were included in line with the amended "SEBI (Employee stock
option scheme and employee stock purchase scheme) guidelines, 1999":
- The Scheme would be administered and supervised by the members of
the Compensation committee.
- Exercise price to be determined based on a fair valuation carried
out at the beginning of every six months for options granted during
those respective periods After the Company has been listed on any
stock-exchange, the Exercise Price shall be determined by the Committee
on the date the Option is granted in accordance with, and subject to,
the Securities and Exchange Board of India (Employees Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (as amended
from time to time);
3. The Compensation Cum Board Governance Committee of the Company, at
its meeting held on 30 October 2008 prescribed the Exercise Period for
stock options (other than Executive Options) whether already granted or
to be granted to employees of the Company and its subsidiaries under
First source Solutions Employee Stock Option Scheme 2003 as 10 years
from the date of grant of Options.
Direct tax matters
Income tax demands amounting to Rs 113.70 (31 March 2011: Rs 112.52) for
the various assessment years are disputed in appeal by the Company in
respect of which the Company has favorable appellate decisions
supporting its stand based on the past assessment and hence, the
provision for taxation is considered adequate. The Company has paid Rs
10.00 (31 March 2011: Rs 10.00) tax under protest against the demand
raised for the assessment year 2004-05.
Indirect tax matters
The Service tax demands amounting to Rs 116.85 (31 March 2011: Rs 23.57)
in respect of service tax input credit and FCCB issue expenses is
disputed in appeal by the Company. The Company expects favorable
appellate decision in this regard.
The proceeds from the issue of the bonds were utilized to subscribe for
shares in a wholly owned subsidiary FG US (erstwhile FSL-USA). FG US
has then utilized the funds received by it for repayment of debt taken
by it in connection with the acquisition of Med Assist.
4. Buyback of FCCB
During the year ended 31 March 2012, pursuant to RBI notification, the
Company has bought back and cancelled 426 FCCBs of the face value of
USD 100,000 each at a discount on accreted book value under the
Automatic route. Due to adverse foreign currency movement, the Company
has recognized net loss of Rs 67.62 (31 March 2011: Nil) on the said
buyback which has been disclosed under 'Other income.
5. Segmental Reporting
In accordance with paragraph 4 of Accounting Standard 17 "Segment
Reporting" prescribed in the Companies (Accounting Standards) Rules,
2006, issued by the Central Government, the Company has presented
segmental information only on the basis of the consolidated financial
statements (refer note 32 of the consolidated financial statements).
6. Adoption of AS 30
In December 2007, the ICAI issued AS 30, Financials Instruments:
Recognition and Measurement which is recommendatory in respect of
accounting periods commencing on or after 1 April 2009 and mandatory in
respect of accounting periods commencing on or after 1 April 2011 for
the Company.
In March 2008, ICAI announced that earlier adoption of AS 30 is
encouraged. However, AS 30, along with limited revision to other
accounting standards, has currently not been notified under the
Companies (Accounting Standard) Rules, 2006.
In accordance with the announcement dated 27 March, 2008 issued by
ICAI, the Company had made an early adoption of AS 30 with effect from
March 2008 in so far as it relates to derivatives. The Company also
made an early adoption of AS 30 in so far as it relates to hedging with
effect from 1 July, 2008. On 1 October, 2008, the Company has early
adopted AS 30 in its entirety, read with AS 31, effective 1 April, 2008
and the limited revisions to other accounting standards which come into
effect upon adoption of AS 30.
AS 30 states that particular sections of other accounting standards: AS
4, Contingencies and Events Occurring after Balance sheet Date, to the
extent it deals with contingencies, AS 11(revised 2003), The Effects of
Changes in Foreign Exchange Rates, to the extent it deals with the
'forward exchange contracts' and AS 13, Accounting for Investments,
except to the extent it relates to accounting for investment
properties, would stand withdrawn only from the date AS 30 becomes
mandatory (1 April 2011). In view of the Company, on an early adoption
of AS 30, the Accounting Standards referred above viz. AS 4, AS 11 and
AS 13 are being treated as if they stand withdrawn.
Pursuant to the early adoption of AS 30, the Company has discounted
Non-interest-bearing deposits to their present value and the difference
between original amount of deposit and the discounted present value has
been disclosed as 'Unamortized cost' under Other Current and
Non-Current Assets, which is charged to the Statement of profit and
loss over the period of related lease. Correspondingly, interest income
is accrued on these interest free deposits using the implicit rate of
return over the period of lease and is recognized under 'Interest
income.
In accordance with the transition provisions of AS 30, impact on first
time adoption has been accounted in General Reserve.
Had the Company not early adopted AS 30 as stated above, and continued
to record Non-interest-bearing deposits at transaction value, profit
for the year ended 31 March 2012 would have been lower by Rs 1.07 (31
March 2011: lower by Rs 0.91).
As permitted by AS 30, the Company designated its FCCB along with
premium payable on redemption as a hedging instrument to hedge its net
investment in the non-integral foreign operations effective 1 July,
2008. Accordingly, the translation loss on FCCB of Rs 1,437.38 for the
year ended 31 March 2012 (31 March 2011: gain of Rs 98.94), has been
charged to Statement of profit and loss. Correspondingly, the gain of Rs
1,419.44 for the year ended 31 March 2012 (31 March 2011: loss of Rs
98.94) on translation of investment in non- integral foreign operations
has been credited to Statement of profit and loss (refer note 22 and
24). If the Company had continued to apply the provisions of AS 11 to
the FCCB and not designated it as a cash flow hedge as permitted under
AS 30 and the consequent limited revision to other accounting
standards, the net loss of Rs 1,437.38 (31 March 2011: gain of Rs 98.94)
on FCCB would have been recorded in the Statement of profit and loss.
Further, the Company has accounted for embedded derivative option
included in FCCB and revalued the same at the period end. The Company
has charged Rs 143.75 for the year ended 31 March 2012 (31 March 2011: Rs
129.03) as amortized cost on the fair value of FCCB under "Finance
cost" towards accretion of FCCB liability using implicit rate of return
method over the repayment tenor of FCCB.
7. Derivatives
The Company has designated forward contracts to hedge highly probable
forecasted transactions on the principles of set out in AS-30,
Financial Instruments: Recognition and Measurement.
As at 31 March 2012, the Company has derivative financial instruments
to sell USD 25,796,100 (31 March 2011: USD 14,358,483) having fair
value loss of Rs 43.26 (31 March 2011: gain of Rs 24.03), GBP 43,503,845
(31 March 2011: GBP 35,500,000) having fair value loss of Rs 180.81 (31
March 2011: gain of Rs 44.81) and AUD 16,586,223 (31 March 2011: Nil)
having a fair value loss of Rs 50.81 (31 March 2011: Nil) relating to
highly probable forecasted transactions. The Company also has
derivative financial instruments to sell EUR 3,700,000 (31 March 2011:
Nil) having a fair value loss of Rs 7.96 (31 March 2011: Nil) relating
to loans given.
During 31 March 2011, the Company also had derivative financial
instruments of GBP 10,000,000 which has been taken to hedge the foreign
currency loans. The Company had recognized mark to market gain of Rs
9.99 relating to derivative financial instruments that was designated
as effective cash flow hedges in the Hedge Reserve account under
Shareholders' funds (refer note 4).
The Company has recognized mark to market loss of 267.29 (31 March
2011: gain of Rs 54.56) relating to derivative financial instruments
that are designated as effective cash flow hedges in the Hedge Reserve
account under Shareholders' funds (refer note 4) and loss of Rs 25.31
(31 March 2011: gain of Rs 14.28) has been taken to statement of profit
and loss.
Foreign currency exposures on loans and receivables that are not hedged
by derivative instruments or otherwise are Rs 397.50 (equivalent to USD
7.52 million, AUD 0.13 million, EUR 0.01 million and LKR 3.90 million)
(31 March 2011: Rs 58.85 (equivalent to USD 1.31 million and CAD 0.01
million)).
8. Under the Micro Small and Medium Enterprises Development Act,
2006, (MSMED) which came into force from 2 October 2006 and on the
basis of the information and records available with the Management:
9. The Company is in the business of providing ITES and BPO 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 paragraph 5(iii)(c) of general instructions for preparation of
the statement of profit and loss as per revised schedule VI to the
Companies Act, 1956.
10. Prior period comparatives
Till the year ended 31 March 2011, the Company was using pre- revised
schedule VI to the Companies Act 1956, for preparation and presentation
of its financial statements. During the year ended 31 March 2012, the
revised schedule VI notified under the Companies Act 1956, has become
applicable to the Company. Previous year's figures have been
appropriately regrouped/ reclassified to conform to current year's
presentation.
Mar 31, 2011
1 Leases
Operating lease
The Company is obligated under non-cancelable operating leases for offi
ce space and Office equipment which are renewable on a periodic basis
at the option of both the lessor and lessee. Rental expenses under
non-cancelable operating leases for the year ended 31 March 2011
aggregated to Rs. 281,782 (31 March 2010: Rs. 220,452). Rs. 13,941 (31 March
2010: Rs. 3,519) and Nil (31 March 2010: Rs. 13,394) has been attributed to
expenses prior to the related asset being ready to use and,
accordingly, has been included as part of the related fi xed assets and
capital work in progress respectively.
2 Employee Stock Option Plan
Stock option scheme 2002 (Scheme 2002)
In September 2002, the Board of the Company approved the ICICI
OneSource Stock Option Scheme 2002 ("the Scheme"), which covers the
employees and directors of the Company including its holding Company
and subsidiaries. The Scheme is administered and supervised by the
members of the Compensation cum Board Governance Committee (the
Committee).
In September 2003, the Board and the members of the Company approved
the ICICI OneSource Stock Option Scheme 2003 (Scheme 2003) effective
11 October 2003. The terms and conditions under this Scheme are similar
to those under Scheme 2002 except for the following, which were
included in line with the amended "SEBI (Employee stock option scheme
and employee stock purchase scheme) guidelines, 1999":
- The Scheme would be administered and supervised by the members of the
Compensation committee.
- Exercise price to be determined based on a fair valuation carried out
at the beginning every six months for options granted during those
respective periods. After the Company has been listed on any
stock-exchange, the Exercise Price shall be determined by the Committee
on the date the Option is granted in accordance with, and subject to,
the Securities and Exchange Board of India (Employees Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (as amended
from time to time);
- Employee stock option activity under Scheme 2003 is as follows:
3 The aggregate stock option pool under Employee Stock Option Scheme
2002 and Employee Stock Option Scheme 2003 is 20% fully diluted equity
shares as of 31 March 2011.
4 The Compensation Cum Board Governance Committee of the Company, at
its meeting held on 30 October 2008 prescribed the Exercise Period for
stock options (other than Executive Options) whether already granted or
to be granted to employees of the Company and its subsidiaries under
Firstsource Solutions Employee Stock Option Scheme 2003 as 10 years
from the date of grant of Options.
5 Related party transactions
Details of related parties including summary of transactions entered
into during the year ended 31 March 2011 are summarised below:
Parties with substantial interests
- Metavante Investments (Mauritius) Limited**
- Aranda Investments (Mauritius) Pte Limited
Subsidiaries wherein control exists
- The related parties where control exists are subsidiaries as referred
to in Schedule 1 to the financial statements.
Key Managerial Personnel including relatives
- Ananda Mukerji#
- Alexander Matthew Vallance
- Carl Saldanha
Non Executive Directors
- Dr. Ashok Ganguly*
- Dr. Shailesh Mehta
- Ananda Mukerji#
- Charles Miller Smith
- K.P.Balaraj
- Mohit Bhandari
- Y.H.Malegam
- Donald Layden, Jr.
- Lalita D. Gupte*
- Pravir Vohra***
- Ram Chary
6 Other operating income
Other operating income comprises of net gain on restatement and
settlement of debtor balances and related gain / loss on forward /
option contracts.
7. Buyback of FCCB
During the year ended 31 March 2010, pursuant to RBI notifi cation, the
Company bought back and cancelled 129 FCCBs of the face value of USD
100,000 each under the Automatic route. The Company recognised a net
gain of Nil (31 March 2010: Rs. 73,909) on the said buyback which has
been disclosed under "Other Income".
8 Segmental Reporting
In accordance with paragraph 4 of Accounting Standard 17 "Segment
Reporting" prescribed in the Companies (Accounting Standards) Rules,
2006, issued by the central government, the Company has presented
segmental information only on the basis of the consolidated financial
statements (refer Note 25 of the consolidated financial statements).
9 Adoption of AS 30
In December 2007, the ICAI issued AS 30, Financials Instruments:
Recognition and Measurement which is recommendatory in respect of
accounting periods commencing on or after 1 April 2009 and mandatory in
respect of accounting periods commencing on or after 1 April 2011 for
the Company.
In March 2008, ICAI announced that earlier adoption of AS 30 is
encouraged. However, AS 30, along with limited revision to other
accounting standards, has currently not been notifi ed under the
Companies (Accounting Standard) Rules, 2006.
In accordance with the announcement dated 27 March, 2008 issued by
ICAI, the Company had made an early adoption of AS 30 with effect from
March 2008 in so far as it relates to derivatives. The Company also
made an early adoption of AS 30 in so far as it relates to hedging with
effect from 1 July, 2008. On 1 October, 2008, the Company has early
adopted AS 30 in its entirety, read with AS 31, effective 1 April, 2008
and the limited revisions to other accounting standards which come into
effect upon adoption of AS 30.
AS 30 states that particular sections of other accounting standards; AS
4, Contingencies and Events Occurring after Balance sheet Date, to the
extent it deals with contingencies, AS 11(revised 2003), The Effects of
Changes in Foreign Exchange Rates, to the extent it deals with the
forward exchange contracts and AS 13, Accounting for Investments,
except to the extent it relates to accounting for investment
properties, would stand withdrawn only from the date AS 30 becomes
mandatory (1 April 2011). In view of the Company, on an early adoption
of AS 30, the Accounting Standards referred above viz. AS 4, AS 11 and
AS 13 are being treated as if they stand withdrawn.
Pursuant to the early adoption of AS 30, the Company has discounted
Non-interest-bearing deposits to their present value and the difference
between original amount of deposit and the discounted present value has
been disclosed as "Unamortised cost" under Loans and Advances, which is
charged to the Profit and loss account over the period of related
lease. Correspondingly, interest income is accrued on these interest
free deposits using the implicit rate of return over the period of
lease and is recognised under "Interest income".
In accordance with the transition provisions of AS 30, impact on fi rst
time adoption has been accounted in General Reserves.
Had the Company not early adopted AS 30 as stated above, and continued
to record Non-interest-bearing deposits at transaction value, Profit
for the year ended 31 March 2011 would have been higher by Rs. 914 (31
March 2010: higher by Rs. 938).
As permitted by AS 30, the Company designated its FCCB along with
premium payable on redemption as a hedging instrument to hedge its net
investment in the non-integral foreign operations effective 1 July,
2008. Accordingly, the translation gain on FCCB of Rs. 98,942 for the
year ended 31 March 2011 (31 March 2010: gain of Rs. 1,440,194), which is
determined to be effective hedge of net investment in non integral
foreign operations, has been credited to Profit and loss account.
Correspondingly, the loss of Rs. 98,942 for the year ended 31 March 2011
(31 March 2010: loss of Rs. 1,440,194) on translation of investment in
non- integral foreign operations has been charged to Profit and loss
account (refer Schedule 18). If the Company had continued to apply the
provisions of AS 11 to the FCCB and not designated it as a hedge
against net investment in non integral foreign operations as permitted
under AS 30 and the consequent limited revision to other accounting
standards, the translation gain on FCCB would not have been recorded in
the Profit and loss account.
Further, the Company has accounted for embedded derivative option
included in FCCB and revalued the same at the period end. The Company
has charged Rs. 129,031 for the year ended 31 March 2011 (31 March 2010:
Rs. 115,255) as amortised cost on the fair value of FCCB under "Finance
charges, net" towards accretion of FCCB liability using implicit rate
of return method over the repayment tenor of FCCB.
Further the Company has taken hedges against ECB and translation loss
of Rs. 66,853 (31 March 2010: gain of Rs. 78,952) has been taken to Hedging
Reserve account.
10 Derivatives
The Company has designated forward contracts and options to hedge
highly probable forecasted transactions on the principles set out in AS
30, Financials Instruments: Recognition and Measurement.
As at 31 March 2011, the Company has derivative financial instruments
to sell USD 14,358,483 (31 March 2010: USD 25,702,798) having fair
value gain of Rs. 24,034 (31 March 2010: Rs. 55,246) and GBP 35,500,000 (31
March 2010: GBP 35,176,114) having fair value gain of Rs. 44,806 (31
March 2010: Rs. 336,936) relating to highly probable forecasted
transactions. The Company has derivative financial instruments of GBP
10,000,000 (31 March 2010: GBP 5,000,000) which has been taken to hedge
the foreign currency loans. The Company has recognised mark to market
gain of Rs. 9,993 (31 March 2010: Rs. 416,691) relating to these derivative
financial instruments that are designated as effective cash flow
hedges in the Hedge Reserve account under Shareholders funds (refer
Schedule 4).
The Company has recognised mark to market gain of Rs. 54,563 (31 March
2010: Rs. 322,107) relating to derivative financial instruments that are
designated as effective cash flow hedges in the Hedge Reserve account
under Shareholders funds (refer Schedule 4) and gain of Rs. 14,278 (31
March 2010: Rs. 70,075) has been taken to Profit and loss account.
Foreign currency exposures on loans and receivables that are not hedged
by derivative instruments or otherwise are Rs. 58,848 (equivalent to USD
1.31 million, CAD 0.01 million) (31 March 2010: Rs. 835,247 (equivalent
to USD 9.3 million, GBP 10 million, AUD 0.2 million, CAD 0.1 million
and EUR 0.09 million)). During the year ended 31 March 2011, the
Company has recognised gain of Nil (31 March 2010: Rs. 124,426) on
cancellation of undesignated derivative financial instruments in the
Profit and loss account (refer Schedule 15).
11 The Company is in the business of providing ITES and BPO 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.
12 Prior period comparatives
Previous years figures have been regrouped / reclassified to conform
to current year presentation.
Mar 31, 2010
1. Background
Firstsource Solutions Limited, (Firstsource or Parent or the
Company) was incorporated on 6 December 2001 and was promoted by ICICI
Bank Limited. The Company is engaged in the business of providing
contact center, transaction processing and debt collection services
including revenue cycle management in the healthcare industry.
During the year the Company has carried out restructuring exercise in
USA. The company set up Firstsource Group USA Inc. (FG-US) and
Firstsource Business Process Services LLC (FBPS) as its wholly-owned
subsidiary in USA.
On 31 December 2009 FirstRing Inc. (FR-US) has been merged with FBPS.
In consequence of merger FG-US has issued 29,088 shares to Firstsource
Solutions Limited India in exchange of shares of FR-US.
Effective 31 March 2010 Firstsource Solutions USA Inc. has been merged
with FG-US. In consequence of merger FG-US has issued 189,394 shares
and debt instrument of Rs. 6,735,000 (equivalent to USD 150 million) to
Firstsource Solutions Limited India in exchange of shares of FSL USA.
2. Business acquisitions
Acquisition of Business Process Management, Inc. (BPM)
Pursuant to Share Purchase agreement (SPA) dated 21 December 2006
entered into between the Company, FSL-USA and the erstwhile
shareholders of BPM, on 29 December 2006, the Company through its
wholly-owned subsidiary FSL-USA acquired 100% of the common stock of
BPM, a Delaware Corporation, including its 100% owned US-based
subsidiaries MedPlans 2000 Inc. ("MP2") and MedPlans Partners ("MPP")
for a purchase consideration of Rs. 1,597,680 (equivalent to USD 31.5
million). BPM, and its two subsidiary companies, MP2 and MPP are BPO
companies providing services principally to customers in the Healthcare
industry in transaction processing and claims adjudication. The
Company incurred direct expenses related to the acquisition aggregating
to Rs. 57,802 which has been considered as part of cost of investment
in BPM. The excess of cost of investment over the value of net assets
acquired has been recorded as goodwill amounting to Rs. 1,541,288.
Further, as stipulated in the SPA, based on performance criterion to be
achieved by BPM by way of Earnings before interest, tax, depreciation
and amortization (EBIDTA) targets for the year ending 31 December 2007,
the Company was liable to compensate the erstwhile members of BPM.
During the year ended 31 March 2009 the payment has been crystalised at
Rs. 196,110 (equivalent to USD 3.9 million). Goodwill has been restated
accordingly.
Total goodwill of BPM restated at exchange rate on balance sheet date
is Rs 1,538,035.
Acquisition of Firstsource Advantage LLC (ASG)
On 22 September 2004, the Company through its subsidiary, FR-US
acquired 100% voting right in ASG, a limited liability company in New
York, USA. The Company paid Rs. 1,333,214 (equivalent of USD 29.08
million) upfront on that date. Excess of cost of investment over the
value of net assets acquired was Rs. 1,260,590 including direct
expenses relating to the acquisition aggregating to Rs. 68,114.
Upto 31 March 2007 additional compensation of Rs. 272,411 was paid to
the erstwhile members of ASG based on the EBIDTA earnings of year 2004
and 2005. Further direct expenses of Rs. 17,789 were incurred relating
to acquisition.
In 2007-2008, additional amount of Rs. 53,288 was crystalised on
fnalisation of arbitration with the erstwhile members of ASG and direct
expenses amounting to Rs. 13,555 were paid.
Total goodwill of ASG as on 31 March 2010 is Rs. 1,617,633.
Acquisition of RevIT Systems Private Limited (RevIT)
Pursuant to Share Purchase and Sale agreement (SPA) dated 25 March
2005 entered into between the Company and the Promoters, promoter
affliates, employees and erstwhile shareholders of RevIT Systems
Private Limited (and its 100% owned US-based subsidiary Sherpa
Solutions Inc.), on 31 March 2005, the Company acquired 100% equity
interest in RevIT for a purchase consideration aggregating Rs. 936,524
(equivalent of USD 22,318,897) and preference shares at par for Rs.
5,160. As a result of this acquisition, RevIT became a subsidiary of
the Company effective 31 March 2005 and has been consolidated as such.
The Company incurred direct expenses related to acquisition aggregating
Rs. 5,082 which have been considered as part of the cost of investment
in RevIT.
Rs. 970,768 being the excess of cost of investment over the value of
net assets acquired, has been recorded as goodwill in these
consolidated fnancial statements.
Acquisition of Pipal Research Corporation, USA (Pipal)
On 26 July 2004, the Company subscribed to 136,093 equity shares of
Pipal aggregating to Rs. 151,798 thereby acquiring 51% voting interest
in Pipal. The Company incurred direct expenses related to the
acquisition aggregating to Rs. 5,462 which have been considered as part
of the cost of investment in Pipal.
Rs. 90,510 being the excess of cost of investment over the value of net
assets acquired, has been recorded as goodwill in these consolidated
fnancial statements.
Acquisition of Firstring Inc., USA (FR-US)
On 3 September 2003, the Company subscribed to 23,842,970 Series F
convertible preference shares of FR-US, aggregating to Rs. 596,862.
Firstsource acquired 99.8 % voting interest in FR-US on a fully diluted
basis. The Company incurred direct expenses related to the acquisition
aggregating to Rs. 20,357 which have been considered as part of the
cost of investment in FR-US.
Networth of FR-US on the date of acquisition representing the residual
interest in the assets of FR-US afiter deducting its liabilities
aggregated Rs. 111,617. Firstsources cost of investment in FR-US in
excess of FR-USs equity on the date of investment aggregating Rs.
728,896 has been recorded as goodwill in the consolidated fnancial
statements.
Acquisition of Customer Asset India Limited (CAST India)
Pursuant to Share Purchase and Sale agreement dated 22 April 2002
entered into between the Company, Customer Asset Mauritius and the
Promoters and investors of Customer Asset Mauritius, on 27 May 2002 the
Company acquired 100% equity interest in CAST India for cash purchase
consideration aggregating Rs. 947,727. As a result of this acquisition,
CAST India became a wholly-owned subsidiary of the Company. The Company
incurred direct expenses related to acquisition aggregating Rs. 11,796
which have been considered as part of the cost of investment in CAST
India.
Equity of CAST India on the date of acquisition representing the
residual interest in the assets of CAST India afiter deducting its
liabilities aggregated Rs. 225,916. Firstsources cost of investment in
CAST India in excess of CAST Indias equity on the date of investment
aggregating Rs. 733,607 has been recorded as goodwill in the
consolidated fnancial statements.
3. Leases
The Group is obligated under non-cancelable operating leases for offce
space and offce equipments which are renewable on a periodic basis at
the option of both the lesser and lessee. Rental expenses under
non-cancelable operating leases for the year ended 31 March 2010
aggregated to Rs. 610,999 (31 March 2009: Rs. 469,918). Of these
expenses, Rs. 3,518 (31 March 2009: Rs. 22,868) and Rs. 13,394 (31
March 2009: Nil) has been attributed to expenses prior to the related
asset being ready to use and, accordingly, has been included as part of
the related fxed assets and capital work in progress respectively.
4. Employee Stock Option Plan
Stock Option Scheme 2002 (Scheme 2002)
In September 2002, the Board of the Company approved the ICICI
OneSource Stock Option Scheme 2002 ("the Scheme"), which covers the
employees and directors of the Company including its holding company
and subsidiaries. The Scheme is administered and supervised by the
members of the Compensation cum Board Governance Committee (the
Committee).
5. Related party transactions
Details of related parties including summary of transactions entered
into during the year ended 31 March 2010 are summarized below:
Parties with substantial interests
- ICICI Bank Limited*
- Metavante Investments (Mauritius) Limited
- Aranda Investments (Mauritius) Pte Limited
Subsidiaries wherein control exists
- The related parties where control exists are subsidiaries as referred
to in Schedule 1 to the Consolidated Financial Statements.
Companies in which directors are interested - ICICI Prudential Life
Insurance Company Limited (I-Prudential)#
Key Managerial Personnel including relatives
- Ananda Mukerji
- A. M. Vallance
- Carl Saldanha
Non-Executive Directors
- Dr. Ashok S. Ganguly
- Charles Miller Smith
- K. P. Balaraj
- Shikha Sharma**
- Dr. Shailesh Mehta
- Mohit Bhandari***
- Y. H. Malegam
- Donald Layden, Jr.
- Lalita D. Gupte
- Ram Chary***
6. Employee Benefit (Continued)
Gratuity cost, as disclosed above, is included under Salaries, bonus
and other allowances. The Company expects to contribute approximately
Rs. 20,000 to the gratuity trust during fscal year 2011.
b) Contribution to Provident Funds
The provident fund charge during the year amounts to Rs. 106,855 (31
March 2009: Rs. 100,450)
7. Segmental reporting
The Group has determined its primary reportable segment as geography
identifed on the basis of the location of the customer which, in
managements opinion, is the predominant source of risks and rewards.
The Group has determined industries serviced i.e., Banking, Financial
Services and Insurance and Non-Banking, Financial Services and
Insurance as its secondary segment as management perceives risk and
rewards to be separate for these different industries.
Geographic segments
The Groups business is organized into four key geographic segments
comprising United States of America and Canada, United Kingdom, India
and Rest of the world.
Segment revenues and expenses
Revenues are attributable to individual geographic segments based on
location of the end customer. Direct expenses in relation to the
segments is categorized based on items that are individually
identifable to that segment while other costs, wherever allocable, are
apportioned to the segments on an appropriate basis.
Un-allocable expenses
Certain expenses are not specifcally allocable to individual segments
as the underlying services are used interchangeably. The Group
therefore believes that it is not practicable to provide segment
disclosures relating to such expenses, and accordingly such expenses
are separately disclosed as unallocated and directly charged against
total income.
Capital Employed
Capital employed comprises debtors, including unbilled receivables,
classifed by reportable segments. As the fxed assets and services are
used interchangeably between the segments by the Groups businesses and
liabilities contracted have not been identifed to any of the reportable
segments, the Group believes that it is currently not practicable to
provide segment disclosures relating to these assets and liabilities.
8. Other operating income
Other operating income represents net gain of Rs. 72,611 (31 March 09:
net loss of Rs. 77,377) on restatement and settlement of debtor
balances and related forward /option contracts and gain of Rs. 96,163
(31 March 2009: gain of Rs. 45,867) on account of Grant income earned
by FSL UK.
9. Capital and other commitments and contingent liabilities
2010 2009
The estimated amount of contracts remaining
to be executed on capital account and not 73,944 68,918
provided for, net of advances
Claims not acknowledged as debt 45,546 51,450
Guarantees and letters of credit given 1,826,369 1,039,251
Direct tax matters
Income tax demand amounting to Rs. 106,659 (31 March 2009: Rs. 106,659)
for the various assessment years are disputed in appeal by the Company
in respect of which the company has favourable appellate decisions
supporting its stand based on the past assessment and hence, the
provision for taxation is considered adequate. The Company has paid
Rs.10,381 tax under protest against the demand raised for the
assessment year 2004-2005.
Indirect tax matters
The service tax demand amounting to Rs. 23,574 (31 March 2009: Rs.
23,574) in respect of FCCB issue expenses is disputed in appeal by the
Company. The Company expects favourable appellate decision in this
regard.
Grant
The Companys subsidiary has accrued/ received revenue grants amounting
to Rs. 742,646 (GBP 10.93 million) from Northern Ireland. The Company
is required inter-alia, to maintain the number of employees at certain
levels for a period of fve years from the grant date, failing which
grant will be liable to be refunded. Based on the available
information, the Company expects to comply with this requirement.
10. Derivatives
As at 31 March 2010, the Company has derivative fnancial instruments to
sell USD 25,702,798 (31 March 2009: USD 98,834,044) having fair value
gain Rs. 55,246 (31 March 2009: loss of Rs. 497,649) and GBP 35,176,114
(31 March 2009: GBP 21,000,000) having fair gain of Rs. 336,936 (31
March 2009: gain of Rs. 224,340) relating to highly probable forecasted
transactions. The company has derivative fnancial instruments to buy
CAD 34,337,000 and GBP 5,000,000 (31 March 2009: Nil) which has been
taken to hedge the foreign currency loans. These derivative fnancial
instruments has fair value gain of Rs. 78,917 (31 March 2009: Nil) and
loss of Rs. 192 (31 March 2009: Nil) respectively.
The Company has recognized mark to market gain of Rs. 416,691 (31 March
2009: loss of Rs. 56,726) relating to derivative fnancial instruments
that are designated as effective cash flow hedges in the Hedge Reserve
account under Shareholders funds (refer Schedule 4) and gain of Rs.
78,917 (31 March 2009: Nil) has been taken to `Profit and loss account.
Foreign currency exposures on loans and receivables that are not hedged
by derivative instruments or otherwise are Rs. 349,671 (equivalent to
USD 12.2 million, GBP 10 million, AUD 0.2 million, CAD 0.1 million and
EUR 0.09 million) (31 March 2009: Rs. 1,747,333).
At 31 March 2009, the Company had undesignated certain derivative
fnancial instruments. During the year ended March 2010, it recognised
gain of Rs. 124,426 (31 March 2009 mark to market loss of Rs. 236,202)
on cancellation of such instruments in the `Profit and loss account.
(Refer Schedule 15).
11. Adoption of AS-30
In December 2007, the ICAI issued AS 30, Financials Instruments:
Recognition and Measurement which is recommendatory in respect of
accounting periods commencing on or afiter 1 April, 2009 and mandatory
in respect of accounting periods commencing on or afiter 1 April, 2011
for the Company.
In March 2008, ICAI announced that earlier adoption of AS 30 is
encouraged. However, AS 30, along with limited revision to other
accounting standards, has currently not been notifed under the
Companies (Accounting Standard) Rules, 2006. On 1 July, 2008,
effective 1 April, 2008, the Company early adopted AS 30 and the
limited revisions to other accounting standards which come into effect
upon adoption of AS 30.
In accordance with the announcement dated 27 March, 2008 issued by
ICAI, the company adopted AS-30 with effect from March 2008 in so far
as it relates to derivatives. Similarly, the Company also adopted AS 30
with respect to hedging transactions with effect from 1 July, 2008. On
1 October, 2008, the Company early adopted AS-30 in its entirety, read
with AS 31, effective 1 April, 2008 and the prescribed limited
revisions to other accounting standards.
AS 30 states that particular sections of other accounting standards; AS
4, Contingencies and Events Occurring afiter Balance sheet Date, to the
extent it deals with contingencies, AS 11(revised 2003), The Effects of
Changes in Foreign Exchange Rates, to the extent it deals with the
forward exchange contracts and AS 13, Accounting for Investments,
except to the extent it relates to accounting for investment
properties, would stand withdrawn only from the date AS 30 becomes
mandatory (1 April, 2011). In view of the Company, on an early adoption
of AS 30, accounting treatment made on the basis of the relevant
sections of Accounting Standards referred above viz., AS-4, AS-11 and
AS-13 stands withdrawn as it believes that principles of AS 30 has been
disclosed as "Unamortized cost" under Loans and Advances, which is more
appropriately refect the nature of these transactions.
Pursuant to the early adoption of AS 30, the Company has discounted
Non-interest-bearing deposits to their present value and the difference
between original amount of deposit and the discounted present value
charged to the `Profit and loss account over the period of related lease.
Correspondingly, interest income is accrued on these interest free
deposits using the implicit rate of return over the period of lease and
is recognized under "Interest income".
In accordance with the transition provisions of AS 30, impact on frst
time adoption has been accounted in General Reserves.
Had the Company not early adopted AS 30 as stated above, and continued
to record Non-interest-bearing deposits at transaction value, `Profit for
the year ended 31 March, 2010 would have been higher by Rs. 1,421 (31
March 2009: Rs. 570)
As permitted by AS 30, the Company designated its FCCB along with
premium payable on redemption as a hedging instrument to hedge its net
investment in the non-integral foreign operations effective 1 July,
2008. Accordingly, the translation gain on FCCB of Rs. 1,440,194 for
the year ended 31 March 2010 (31 March 2009: translation loss Rs.
1,778,551) which is determined to be effective hedge of net investment
in non integral foreign operations, has been adjusted in Translation
Reserve Account. The amounts recognised in Translation Reserve Account
would be transferred to `Profit and loss account upon sale or disposal of
non-integral foreign operations. If the Company had continued to apply
the provisions of AS 11 to the FCCB and not designated it as a cash flow
hedge as permitted under AS 30 and the consequent limited revision to
other accounting standards, the translation gain on FCCB would have
been recorded in the `Profit and loss account.
Further, the Company has accounted for embedded derivative option
included in FCCB and revalued the same at the period end. The Company
has charged Rs. 115,255 for the year ended 31 March 2010 (31 March
2009: Rs. 113,860) as amortised cost on the fair value of FCCB under
"Finance charges, net" towards accretion of FCCB liability using
implicit rate of return method over the repayment tenor of FCCB.
12. Prior period comparatives
Previous year figures have been appropriately regrouped/reclassified to
conform to current year presentation.
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