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Notes to Accounts of KPIT Technologies Ltd.

Mar 31, 2023

a. Debt includes current and non-current Lease Liabilities.

b. Earnings available for debt service = Net Profit after taxes Non-cash operating expenses Like depreciation and other amortisations interest other adjustments like loss on sale of fixed assets etc.

c. Debt service includes lease payments for the year. It excludes working capital repayment (if any) during the year.

d. Capital Employed = Tangible net worth Total debt

e. Trade payables include provision for expenses.

f. Income generated from investments include interest income, net gain on sale of investments and net fair value gain.

Explanation for variances exceeding 25%

i. Usage of fund towards acquisition of subsidiaries has majorly resulted into decrease in the ratio.

ii. Debt-equity ratio has improved majorly on account of repayment of borrowings and payment of lease rentals.

iii. Increase in the ratio is mainly on account of increased business operations.

iv. Revenue growth and reduction in working capital due to point i. above resulted in increase in the ratio.

v. Return on investment increased due to external market conditions and interest rate movement during the year ended 31 March 2023

44 Segment information

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

45 Business combinationScheme of Merger of Impact Automotive Solutions Limited

The Board of Directors of the Company at its meeting held on 26 July 2019 had approved the Composite Scheme of Arrangement (the ‘Scheme’) for merger of Impact Automotive Solutions Limited (‘Transferor Company’), wholly owned subsidiary of the Company with the Company. Application seeking approval of the Scheme was subsequently filed with Hon’ble National Company Law Tribunal (NCLT), Mumbai Bench on 27 September 2019.

On receipt of the certified copy of the order dated 15 June 2021 from NCLT, Mumbai Bench sanctioning the Scheme, with appointed date 1 April 2019, and upon filing the same with Registrar of Companies, Maharashtra on 22 June 2021 the Scheme became effective. Accordingly, the Company had given effect to the Scheme from the Appointed date of 1 April 2019 by revising the standalone financial statements for the year ended 31 March 2020 and 31 March 2021.

Pursuant to the Scheme, all the assets, liabilities, reserves and surplus of the transferor company had been transferred to and vested in the Company with effect from the appointed date at their carrying values.

Pursuant to the approved Scheme of Merger by Absorption, the Transferee Company has accounted for merger in its books as per the applicable accounting principles prescribed under relevant Indian Accounting Standards.

a) Accounting Treatment

i. The Transferee Company had recorded all the assets, liabilities and reserves of the Transferor Company vested in it pursuant to this Scheme, at their book values and in the same form as appearing in the books of the Transferor Company as on the Appointed Date, by applying the principles as set out in Appendix C of IND AS 103 ‘Business Combinations’ and prescribed under Companies (Indian Accounting Standards) Rules, 2015 issued by the Institute of Chartered Accountants of India.

ii. The financial statements of the Transferee Company reflect the financial position on the basis of consistent accounting policies.

iii. Any loans, advances or other obligations (including but not limited to any guarantees, letters of credit, letters of comfort or any other instrument or arrangement which may give rise to a contingent liability in whatever form) that were due between the Transferor Company and the Transferee Company, if

any, ipso facto, stand discharged and come to end and the same was eliminated by giving appropriate elimination effect in the books of account and records of the Transferee Company.

iv. Investments in shares of the Transferor Company held by the Transferee Company had been adjusted against Share Capital of the Transferor Company and the difference, between cost of investment of the Transferor Company in the books of the Transferee Company had been adjusted against balance of reserves and surplus of the Transferee Company post-merger.

v. The identity of the reserves had been preserved and appear in the financial statements of the Transferee Company in the same form in which they appeared in the financial statements of the Transferor Company.

d) As a consequence of the aforesaid merger, the Company recognized tax benefits accrued amounting to H 11.62 million directly under equity as at 1 April 2019. Tax benefits amounting to H 9.92 million and H 57.06 million are recognized under the revised statement of profit and loss for the financial year ending 31 March 2020 and 31 March 2021 respectively.

e) The authorised share capital of the Transferee Company, automatically stands increased, by clubbing the authorised share capital of the Transferor Company which was H 1,500.00 million divided into 150 million equity shares of H 10 each.

46 Investment in PathPartner Technology Private Limited

Effective 1 October 2021, the Company had acquired the controlling stake in PathPartner Technology Private Limited (“PathPartner”). PathPartner is engaged in design service and solution provider for Automotive, Camera, Internet of Things (IoT), Multimedia devices, Driver Monitoring Systems, Asset tracking platform, Camera module platform and several re-usable IP building blocks. PathPartner is an Indian company which currently employs 350 people including 290 embedded software engineers. It is headquartered in Bengaluru, with R&D centers in Kochi, India, California, USA and a office in Frankfurt, Germany.

The total cash consideration for the controlling stake in PathPartner was H 890.00 million. The purchase consideration of H 147.49 million is outstanding to be payable to the Tranche 1 shareholders as at 31 March 2023.

Further, the Share Purchase Agreement also provided for an acquisition of the balance stake under Tranche 2 and Tranche 3. Accordingly, during the previous year, the Company had recognised a contractual obligation of H 871.84 million towards the said acquisition. During the current year, the Company has acquired the stake under Tranche 2.

49 Additional regulatory information pursuant to the requirement in Division II of Schedule III to the Companies Act 2013

(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

(ii) The Company does not have any transactions with companies struck off.

(iii) The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.

(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

(v) The Company (other than as mentioned in note 48) has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries

(vi) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries

(vii) The Company does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.

(viii) The Company has borrowings from banks and financial institutions on the basis of security of current assets. The quarterly returns or statements of current assets filed by the Company with banks and financial institutions are in agreement with the books of accounts.

(ix) None of the entities in the Company have been declared wilful defaulter by any bank or financial institution or government or any government authority.

(x) The Company has complied with the number of layers prescribed under the Companies Act, 2013.

(xi) The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.

50 The Company has established a system of maintenance of information and documents as required by the transfer pricing legislation under Section 92-92F of the Income Tax Act 1961. The Company is in the process of updating the documentation for the financial year 2022-2023.

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


Mar 31, 2022

Proposed dividend:

The Board of Directors at its meeting held on 27 April 2022, has recommended a final dividend of ? 1.85 per equity share for the year ended 31 March 2022, which is subject to the approval of shareholders at the Annual General Meeting.

Capital Management

The Company’s objective is to safeguard its ability to continue as a going concern and to maintain investor, creditor and market confidence and to maximize shareholder value. In order to fulfil its objective, the management of the Company monitors the return on capital as well as the level of dividends to ordinary shareholders.

(i) Term loans from bank includes a loan secured against fixed assets obtained under the loan arrangement. The loan carries interest upto 8.60 % p.a. and is repayable in equated monthly installments of ? 0.15 million each upto July 2025.

(ii) Term loans from bank includes a loan secured against fixed assets obtained under the loan arrangement. The loan carries interest upto 8.70 % p.a. and is repayable in equated monthly installments of ? 0.22 million each upto November 2023.

(iii) Term loan from institution other than banks consist of unsecured loan, carrying interest rate of 3% p.a. The loan will be repaid upto October 2029.

(iv) Information about the Company’s exposure to market risk and liquidity risk is disclosed in note 34.

34.2 Fair value hierarchy

Financial assets and liabilities include investments (other than in subsidiary, joint venture and associate), cash and cash equivalents, other balances with banks, trade receivables (billed and unbilled), loans, other financial assets, trade payables, borrowings and other financial liabilities, whose fair values approximate their carrying amounts largely due to the short term nature of such assets and liabilities. Fair value of lease liabilities approximate its carrying amount, as lease liabilities are valued using discounted cash flow method. Except for quoted investments, which are Level 1, rest of the financial assets and financial liabilities are classified as Level 2 or Level 3.

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 assets or liabilities that are not based on observable market data (unobservable inputs).

34.3 Financial risk management

The board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The Company has exposure to the following risks arising from financial instruments:

a. Credit risk

Credit risk is the risk of financial losses to the Company if a customer or counterparty to financial instruments fails to discharge its contractual obligations and arises primarily from the Company’s billed trade receivables from customers amounting to ? 2,331.66 million and ? 1,637.06 million and unbilled trade receivables amounting to ? 328.96 million and ? 235.69 million and other current financial assets pertaining to receivable from related and other than related parties amounting to ? 91.24 million and ? 229.84 million as on 31 March 2022 and 31 March 2021 respectively. To manage this, the Company periodically assesses the key accounts receivable balances. As per Ind-AS 109 : Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain.

i. Trade receivables

The management has established accounts receivable policy under which customer accounts are regularly monitored. The Company has a dedicated sales team at each geography which is responsible for collecting dues from the customer within stipulated period. The management reviews status of critical accounts on a regular basis.

iii. Cash and bank balances

The Company held cash and bank balances of ? 4,481.39 million and ? 3,086.73 million as at 31 March 2022 and 31 March 2021 respectively. The cash and bank balances are held with banks which have high credit ratings assigned by international credit rating agencies.

iv. Guarantees

The Company’s policy is to provide financial guarantees in routine course of business and on behalf of subsidiaries/joint ventures.

b. Liquidity risk

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 managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company has a view of maintaining liquidity and to take minimum possible risk while making investments. In order to maintain liquidity, the Company invests its excess funds in short term liquid assets like liquid mutual funds. The Company monitors its cash and bank balances periodically in view of its short term obligations associated with its financial liabilities.

c. Market risk

Market risk is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

i. Foreign currency risk

Significant portion of the Company’s revenues are in foreign currencies, while a significant portion of the costs are in Indian rupee i.e. functional currency of the Company. The foreign currencies to which the Company is majorly exposed to are US Dollars, Euros and Pound Sterling.

The Company evaluates net exchange rate exposure based on current revenue projections and expected volatility in the market and covers its exposure up to 90% on net basis. For this purpose the Company uses foreign currency derivative instruments such as forward covers to mitigate the risk. The counterparty to these derivative instruments is a bank. The Company has designated certain derivative instruments as cash flow hedge to mitigate the foreign exchange exposure of highly probable forecasted cash flows.

The above figures exclude amounts in local currency of foreign subsidiaries.

For the period ended 31 March 2022, every 1% appreciation/depreciation of the exchange rate between respective foreign currencies and the Indian rupee would impact the operating margins by approximately 0.76%/0.76%.

For the period ended 31 March 2021, every 1% appreciation/depreciation of the exchange rate between respective foreign currencies and the Indian rupee would impact the operating margins by approximately 0.77%/(0.77)%.

ii. Derivative assets and liabilities designated as cash flow hedges

In accordance with its risk management policy and business plan the Company has hedged its cash flows. The Company enters into derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than in Indian rupees. The counter party to the Company’s foreign currency contracts is a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments (sales orders) and highly probable forecast transactions. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.

iii. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company''s investments and borrowings are fixed interest rate bearing instruments. Therefore, the Company is not exposed to interest rate risk.

35 Revenue from operationsDisaggregate revenue information

The Company disaggregates revenue from contract with customers by geography and contract type.

The Company believes that this disaggregation best depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by industry, market and other economic factors.

Performance obligations and remaining performance obligations

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

Applying the practical expedient as given in Ind AS 115, the company has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity’s performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligations estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.

The aggregate value of performance obligations that are completely or partially unsatisfied as of 31 March 2022, other than those meeting the exclusion criteria mentioned above, is ? 2,551.96 million. Out of this, the Company expects to recognize revenue of around 97% within the next one year. This includes contracts that can be terminated for convenience without a substantive penalty, since based on current assessment, the occurrence of the same is expected to be remote.

36 Gratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Gratuity is a benefit to an employee in India based on 15 days last drawn salary for each completed year of service with a vesting period of five years.

These defined benefit plans expose the Company to actuarial risks, such as longevity risk and interest rate risk.

The Company’s gratuity scheme is a defined benefit plan (funded). The Company manages the plan through a trust. Trustees administer contributions made to the trust.

a. The discount rate is based on prevailing yields of Indian Government Securities as at the Balance Sheet date for the estimated term of the obligation.

b. Salary Escalation Rate: The estimates of future salary increases takes into account the inflation, seniority, promotion and other relevant factors.

c. Assumptions regarding future mortality rates are the rates as given under Indian Assured Lives Mortality 201212 (Urban).

37 Share based payments37.1 Employee Stock Option Scheme - 2019

In accordance with the terms of the approved Composite Scheme, KPIT Engineering Limited (now known as KPIT Technologies limited) (“Resulting Company”) had issued the stock options to the employees holding options of the KPIT Technologies Limited (now known as BirlaSoft Limited) (“Transferee Company” or “Demerged Company”) as at the appointed date. The options issued consisted of:

i. 1,807,450 options of the Transferee Company (“Birlasoft options”), equivalent to the number of options outstanding as at the appointed date;

ii. 1,807,450 options of the Resulting Company (“KPIT options”), in the ratio of 1:1 for every outstanding stock options held by the employees in the Transferee Company.

The Board of Directors of the Company approved the Employees Stock Option Scheme at their meeting held on 15 May 2019. Pursuant to this approval, the Company instituted ESOS 2019 in May 2019. The compensation committee of the Company administers this Plan. Each type of option carries with it the right to purchase one equity share of the Demerged Company or the Resulting Company as the case may be. In terms of clause 18.5 of the Composite Scheme, the stock options had been granted at an exercise price which was the pre-demerger exercise price suitably adjusted in the manner of share exchange ratio. Further, as per the Composite Scheme, the Company had taken into account the vesting period completed, under the plan in the Demerged Company, prior to the grant of options to the employee under the ESOS 2019. The maximum exercise period is 5 years from the date of vesting.

The outstanding stock options held by employees of the Demerged Company as at 31 March 2022 are 193,950 and 257,350 of Birlasoft options and KPIT options respectively. The employee compensation cost for such employees is not eligible for recognition in the books of the Company.

The number of outstanding Birlasoft options held by employees of the Company as at 31 March 2022 are 158,050. The Company recorded an employee compensation cost of ? Nil in this respect in the Statement of Profit and Loss.

The fair value of each option is estimated on the date of grant using Black and Scholes option pricing model.

The Company recorded an employee compensation cost of ? Nil (Previous year ? Nil) in the Statement of Profit and Loss.

The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.

37.2 Employee Stock Option Scheme - 2019A

The Board of Directors and the shareholders of the Company approved another Employee Stock Option Scheme at their meetings held on 17 June 2019 and on 23 July 2019, respectively. Pursuant to this approval, the Company instituted ESOS 2019A in July 2019. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The options approved under this scheme are 3,793,923.

The options had been originally granted to employees of the Company and its subsidiaries at an exercise price equivalent to the fair market price of the Company’s share as on the date of grant of options. The Nomination and Remuneration Committee of the Board of Directors of the Company, in its meeting held on 30 July 2020 approved the modification in the exercise price of the options granted. The exercise price is modified to ? 10 per option.

The options would vest not earlier than statutory minimum vesting period of 1 year and up to the maximum period of 4 years from the date of grant of options or such period as may be decided by the Committee at the time of each grant of options. The exact proportion in which and the exact period over which the options would vest would be determined by the Committee, subject to the minimum vesting period of 1 year from the date of grant of options. The maximum exercise period is 5 years from the date of vesting.

The Company recorded an employee compensation cost of ? 51.61 million (Previous year ? 67.61 million) in the Statement of Profit and Loss.

The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.

37.3 Employee Share Purchase Scheme - 2019

The Board of Directors and the shareholders of the Company approved Employee Share Purchase Scheme at their meeting on 17 June 2019 and on 23 July 2019, respectively. Pursuant to this approval, the Company instituted ESPS 2019 in July 2019. The compensation committee of the Company administers this Plan. The shares approved under this scheme are 40,000 equity shares. The shares have been granted to employees of the Company and its subsidiaries at a price not less than the face value per share of the Company at the time of the offer.

38 Details of exceptional items

In line with the Company’s operational efficiency measures, it had consolidated its presence during the previous year, resulting into early termination of some of its existing leased office premises in Pune, India. Accordingly, as per Ind-AS 116 “Leases”, remeasured the lease liability and on prudent assessment, also written-off its property, plant and equipment at the said location. The net impact of ? 32.03 million was recognised as an exceptional item in the Statement of Profit and Loss.

The Company benefits from the tax holiday available for units set up under the Special Economic Zone Act, 2005 (SEZ). Accordingly, units designated in SEZ are eligible for a deduction of 100% of profits or gains derived from the export of services for the first five years from the financial year in which the unit commenced the provision of services and 50% of such profits or gains for a further five years. Certain tax benefits are also available for a further five years subject to the unit meeting defined conditions. The tax holiday period being currently available to the Company expires in various years through fiscal year 2027. From 1 April 2011, units set up under SEZ scheme are subject to Minimum Alternate Tax (MAT).

42.3 Contingent liabilities Guarantees

Particulars

31 March 2022

|^31 March 2021

Outstanding bank guarantees in routine course of business

12.34

| 15.57

42.4 Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances):

a. Property, plant and equipment - ? 13.34 million (Previous year ? 380.21 million).

b. Intangible assets - ? 4.46 million (Previous year ? 9.85 million).

43 Disclosure as per the requirement of section 22 of the Micro, Small and Medium Enterprise

Development Act, 2006:

a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31 March 2022 is ? 4.38 million (Previous year - ? 2.47 million). Estimated interest due thereon is ? Nil (Previous year - ? Nil).

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

c. The amount of estimated interest accrued and remaining unpaid as at 31 March 2022 is ? Nil (Previous year - ? Nil).

d. The amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise for the purpose of disallowance as a deductible expenditure under section 23 of the MSMED Act 2006 is ? Nil.

(i) The investee is a associate as defined under section 2(87) of the Companies Act, 2013. For the purpose of Ind-AS financial statements, the entity has been considered as a Joint Venture as defined under Ind-AS 28 : Investments in Associates and Joint Ventures.

(ii) All transactions with these related parties are priced on an arm''s length basis.

(iii) Remuneration excludes provision for gratuity and compensated absences as separate actuarial valuation for the directors, key management personnel and their relatives is not available.

(iv) Deputed on secondment to KPIT Technologies Inc., USA, a wholly owned subsidiary, with effect from 26 July 2021.

Notes:

a. Debt includes current and non-current lease liabilities.

b. Earnings available for debt service = Net Profit after taxes Non-cash operating expenses like depreciation and other amortisations interest other adjustments like loss on sale of fixed assets etc.

c. Debt service includes lease payments for the year. It excludes working capital repayment (if any) during the year.

d. Capital Employed = Tangible net worth Total debt

e. Trade payables include provision for expenses.

f. Income generated from investments include interest income, net gain on sale of investments and net fair value gain.

Explanation for variances exceeding 25%

i. The recognition of contractual obligation for acquisitions of non-controlling interest has majorly resulted into decrease in the ratio.

ii. Revenue growth with higher operational efficiency has resulted into improvement in the respective ratios. Current year profits also include dividend income from subsidiary companies, which further improved the ratio.

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

Scheme of Merger of Impact Automotive Solutions Limited

The Board of Directors of the Company at its meeting held on 26 July 2019 had approved the Composite Scheme of Arrangement (the ‘Scheme’) for merger of Impact Automotive Solutions Limited (‘Transferor Company’), wholly owned subsidiary of the Company with the Company. Application seeking approval of the Scheme was subsequently filed with Hon’ble National Company Law Tribunal (NCLT), Mumbai Bench on 27 September 2019.

On receipt of the certified copy of the order dated 15 June 2021 from NCLT, Mumbai Bench sanctioning the Scheme, with appointed date 1 April 2019, and upon filing the same with Registrar of Companies, Maharashtra on 22 June 2021 the Scheme has become effective. Accordingly, the Company has given effect to the Scheme from the Appointed date of 1 April 2019 by revising the standalone financial statements for the year ended 31 March 2020 and 31 March 2021.

Pursuant to the Scheme, all the assets, liabilities, reserves and surplus of the transferor company have been transferred to and vested in the Company with effect from the appointed date at their carrying values.

Name of the Transferor Company Impact Automotive Solutions Limited

General nature of business Engaged in the production of Integrated Systems, hybrid

automotive product and electric vehicle.

Appointed Date of the Scheme 1 April 2019

Description and number of shares issued Nil

% of Company''s equity shares exchanged Nil

Pursuant to the approved Scheme of Merger by Absorption, the Transferee Company has accounted for merger in its books as per the applicable accounting principles prescribed under relevant Indian Accounting Standards.

a) Accounting Treatment

i. The Transferee Company has recorded all the assets, liabilities and reserves of the Transferor Company vested in it pursuant to this Scheme, at their book values and in the same form as appearing in the books of the Transferor Company as on the Appointed Date, by applying the principles as set out in Appendix C of IND AS 103 ‘Business Combinations’ and prescribed under Companies (Indian Accounting Standards) Rules, 2015 issued by the Institute of Chartered Accountants of India.

ii. The financial statements of the Transferee Company reflect the financial position on the basis of consistent accounting policies.

iii. Any loans, advances or other obligations (including but not limited to any guarantees, letters of credit, letters of comfort or any other instrument or arrangement which may give rise to a contingent liability in whatever form) that are due between the Transferor Company and the Transferee Company, if any, ipso facto, stand discharged and come to end and the same is eliminated by giving appropriate elimination effect in the books of account and records of the Transferee Company.

iv. Investments in shares of the Transferor Company held by the Transferee Company have been adjusted against Share Capital of the Transferor Company and the difference, between cost of investment of the Transferor Company in the books of the Transferee Company has been adjusted against balance of reserves and surplus of the Transferee Company post-merger.

v. The identity of the reserves has been preserved and appear in the financial statements of the Transferee Company in the same form in which they appeared in the financial statements of the Transferor Company.

d) As a consequence of the aforesaid merger, the Company recognized tax benefits accrued amounting to ? 11.62 million directly under equity as at 1 April 2019. Tax benefits amounting to ? 9.92 million and ? 57.06 million are recognized under the revised statement of profit and loss for the financial year ending 31 March 2020 and 31 March 2021 respectively.

e) The authorised share capital of the Transferee Company, automatically stands increased, by clubbing the authorised share capital of the Transferor Company which is ? 1,500.00 million divided into 150 million equity shares of ? 10 each.

50 Investment in PathPartner Technology Private Limited

Effective 1 October 2021, the Company has acquired the controlling stake in PathPartner Technology Private Limited (“PathPartner”). PathPartner is engaged in design service and solution provider for Automotive, Camera, Internet of Things (loT), Multimedia devices, Driver Monitoring Systems, Asset tracking platform, Camera module platform and several re-usable IP building blocks. PathPartner is an Indian company which currently employs 350 people including 290 embedded software engineers. It is headquartered in Bengaluru, with R&D centers in Kochi, India, California, USA and a office in Frankfurt, Germany.

The total cash consideration for the controlling stake in PathPartner is ? 890 million. The purchase consideration of ? 263.96 million is outstanding to be payable to the Tranche 1 shareholders as at 31 March 2022.

Further, the Share Purchase Agreement also provides for an acquisition of the balance stake under Tranche 2 and Tranche 3. Accordingly, the Company has recognised a contractual obligation of ? 871.84 million towards the said acquisition.

52 The Company has established a system of maintenance of information and documents as required by the transfer pricing legislation under Section 92-92F of the Income Tax Act 1961. The Company is in the process of updating the documentation for the financial year 2021-2022.

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

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