Home  »  Company  »  MphasiS Ltd.  »  Quotes  »  Notes to Account
Enter the first few characters of Company and click 'Go'

Notes to Accounts of MphasiS Ltd.

Mar 31, 2017

1. The Company''s software development centres in India include 100% Export Oriented (‘EOU''), Special Economic Zone (‘SEZ'') under Special Economic Zone Ordinance and Software Technology Park (‘STP'') Units under the Software Technology Park guidelines issued by the Government of India. They are exempted from customs and central excise duties and levies on imported and indigenous capital goods and stores and spares. The Company has executed legal undertakings to pay customs duty, central excise duty, levies and liquidated damages payable, if any, in respect of imported and indigenous capital goods and stores and spares consumed duty free, in the event that certain terms and conditions are not fulfilled.

2. CONTINGENT LIABILITIES AND COMMITMENTS

a. The Company has received assessment orders for the financial years ended 31 March 2005, 31 March 2007, 31 March 2008, 31 March 2009, 31 March 2010, 31 March 2011, 31 March 2012 and 31 March 2013 wherein certain adjustments in respect of transfer pricing under Section 92CA of the Income Tax Act, 1961 have been made to the taxable income and demand orders forRs,2080.46 millions (31 March 2016:Rs,1,637.11 millions, 1 April 2015:Rs,1,802.44 millions) have been raised on the Company. The above demands are disputed by the management and the Company has filed appeals against the aforesaid orders with appellate authorities. The management is of the view that the prices determined by it are at arm''s length and is confident that the demands raised by the assessing officer are not tenable under law. Pending outcome of the aforesaid matters under litigation, no provision has been made in the books of account for the above mentioned tax demands.

Other claims against the Company (majorly Income tax and indirect tax) not acknowledged as debts amount toRs,7,057.33 millions (31 March 2016:Rs,5,532.55 millions, 1 April 2015:Rs,1,692.91 millions) net of bank guarantees aggregating toRs,6,661.95 millions (31 March 2016:Rs,6,661.95 millions, 1 April 2015:Rs,4,841.14 millions). The management, basis internal evaluation and legal opinion is of the view that these demands are not tenable.

b. Other outstanding bank guarantees as at 31 March 2017:Rs,688.31 millions (31 March 2016:Rs,703.84 millions, 1 April 2015:Rs,676.72 millions); including those furnished on account of jointly controlled operationsRs,99.35 millions (31 March 2016:Rs,99.35 millions, 1 April 2015:Rs,99.35 millions) and customs authorities aggregating toRs,52.57 millions (31 March 2016:Rs,47.82 millions, 1 April 2015:Rs,51.89 millions).

c. Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for as at 31 March 2017:Rs,77.14 millions (31 March 2016:Rs,68.15 millions, 1 April 2015:Rs,304.60 millions)

d. The Company has received claims from certain customers / vendors. Management is of the view that these claims are not tenable and is taking appropriate action in this regard. It is not practical for the Company to estimate the amounts.

e. The Company has issued performance guarantees on behalf of its subsidiaries for any future liabilities which may arise out of contracts and to certain clients for executed contracts. It is not practical for the Company to estimate the amounts.

3. OPERATING LEASES

The Company is obligated under non-cancellable leases for equipment, office and residential space that are renewable on a periodic basis at

the option of the lessor and lessee. The total rental expenses under non-cancellable operating leases amounted toRs,803.08 millions for the year ended 31 March 2017 (31 March 2016:Rs,831.88 millions).

The Company has also occupied office facilities and residential facilities under cancellable operating lease agreements. The Company intends to renew such leases in the normal course of its business. Total rental expense under cancellable operating leases for the year ended 31 March 2017 amounted toRs,866.95 millions (31 March 2016:Rs,1,399.46 millions). Office premises are obtained on operating lease for terms ranging from 1-7 years and are renewable at the option of the Company/lessor.

The Company has also subleased office space under cancellable operating lease agreements. The total sublease rental income under cancellable operating leases amounted to '' 50.56 millions for the year ended 31 March 2017 (31 March 2016:Rs,50.49 millions). The total sublease rental income under non-cancellable operating leases for the year ended 31 March 2017 amounted toRs,16.62 millions (31 March 2016: Nil).

4. RELATED PARTY TRANSACTIONS Entities where control exists:

Upto 31 August 2016 From 1 September 2016

Ultimate holding company Hewlett-Packard Enterprise Company Blackstone Capital Partners (Cayman II) VI L.P.

^ Blackstone Capital Partners (Singapore) VI Holding Co Pte

Intermediate holding company Hewlett Packard Barcelona BV Ltd

Immediate holding companies EDS Asia Pacific Holdings Marble II Pte Limited

EDS World Corporation (Far East) LLC EDS World Corporation (Netherlands) LLC

Immediate holding company holds 60.41% (31 March 2016: 60.47%) of the total share capital of the Company.

The related parties where control exists also include Kshema Employees Welfare Trust and Mphasis Provident Fund Trust (Refer note 42(b) for information on transactions with Mphasis Provident Fund Trust mentioned above) and the following subsidiaries:

Msource (India) Private Limited (‘Msource India'') Mphasis Australia Pty Limited (‘Mphasis Australia'')

Mphasis Software and Services (India) Private Limited Mphasis (Shanghai) Software & Services Company Limited (‘Mphasis China'') (‘Mphasis India'')

Mphasis Corporation (‘Mphasis USA'') Mphasis Europe BV (‘Mphasis Europe'')

Mphasis Infrastructure Services Inc. Mphasis Pte Limited (‘Mphasis Singapore'')

Digital Risk, LLC Mphasis Deutschland GmbH (‘Mphasis GmbH'')

Digital Risk Mortgage Services, LLC Mphasis Belgium BVBA (‘Mphasis Belgium'')

Digital Risk Compliance Services, LLC Mphasis Poland s.p.z.o.o

Digital Risk Valuation Services, LLC Mphasis Ireland Limited (‘Mphasis Ireland'')

Digital Risk Europe, OOD Wyde Solutions Canada Inc.

Digital Risk Anaytics, LLC Wyde Tunisie SARL

Investor Services, LLC Mphasis Wyde SASU

Wyde Corporation Inc. PT. Mphasis Indonesia (‘Mphasis Indonesia'')

Mphasis Wyde Inc. Msource Mauritius Inc. (‘Msource Mauritius'')

Mphasis UK Limited (‘Mphasis UK'') Mphasis Philippines Inc.

Mphasis Consulting Limited (‘Mphasis Consulting'') Mphasis Lanka Private Limited (‘Mphasis Lanka'')

Key management personnel

Nitin Rakesh Chief Executive Officer (Appointed w.e.f. 29 January 2017)

Balu Ganesh Ayyar Chief Executive Officer (Resigned w.e.f. 29 January 2017)

A. Sivaram Nair Executive Vice President, Company Secretary General Counsel & Ethics Officer

V. Suryanarayanan Executive Vice President & Chief Financial Officer

James Mark Merritt Director - Vice Chairman of the Board- Resigned w.e.f. 1 September 2016

Davinder Singh Brar Director, Chairman of the Board

Narayanan Kumar Director - Non Executive Independent Director

Lakshmikanth K Ananth Director- Resigned w.e.f. 1 September 2016

Stefan Antonio Lutz Director- Resigned w.e.f. 1 September 2016

Mary Teresa Hassett Director- Resigned w.e.f. 1 September 2016

Jan Kathleen Hier Non Executive Independent Director - Appointed w.e.f. 11 December 2015

Jeff Thomas Ricci Non-Executive Director - Resigned w.e.f. 1 September 2016

Amit Dixit Director - Appointed w.e.f. 1 September 2016

Amit Dalmia Director - Appointed w.e.f. 1 September 2016

Paul James Upchurch Director - Appointed w.e.f. 1 September 2016

Dario Zamarian Director - Appointed w.e.f. 1 September 2016

David Lawrence Johnson Director - Appointed w.e.f. 1 September 2016

Shankar Maitra Director - Resigned w.e.f. 26 October 2015

Friedrich Froeschl Director - Non Executive Independent Director, Chairman of the Board - Resigned

w.e.f. 26 October 2015

Direct or indirect subsidiaries of ultimate holding company with which transactions have taken place:

Global E:Business Operations Private Ltd Hewlett-Packard Limited

Hewlett Packard Enterprise Information Security UK Limited Hewlett-Packard Multimedia SDN BHD

Hewlett Packard Software, LLC Hewlett-Packard Nederland B.V.

Hewlett-Packard (Canada) Co. Hewlett-Packard New Zealand

Hewlett-Packard (India) Software Operation Private Limited Hewlett-Packard Norge AS

Hewlett-Packard (K) Limited Liability Partnership Hewlett-Packard OY

Hewlett-Packard (Schweiz) GmbH Hewlett-Packard Philippines Incorporation

Hewlett-Packard ApS Hewlett-Packard Singapore (Sales) Pte. Ltd

Hewlett-Packard Asia Pacific Pte Ltd Hewlett-Packard Sverige A.B.

Hewlett-Packard Australia Pty Limited. Hewlett-Packard UK Enterprise (1) Ltd.

Hewlett-Packard Belgium B.V.B.A/S.P.R.L HP Enterprise Services (Hong Kong) Limited

Hewlett-Packard CDS GmbH HP Enterprise Services Australia Pty Ltd

Hewlett-Packard Centre de Competence France SAS HP Enterprise Services BPA Pty Ltd

Hewlett-Packard de Mexico S. De R.L. De CV HP Enterprise Services Italia S.r.l

Hewlett-Packard Enterprise Services UK Limited HP Enterprise Services Energy Italia S.r.l

Hewlett-Packard Enterprises LLC * HP Enterprise Services, LLC

Hewlett-Packard Financial Services (India) Private Ltd. HP Facilities Services (Malaysia) Sdn Bhd

Hewlett-Packard France SAS HP Financial Services (Australia) Pty Limited

Hewlett-Packard Galway Ltd HP Financial Services (New Zealand)

Hewlett-Packard Globalsoft Private Limited HP India Sales Private Limited *

Hewlett-Packard GmbH HP PPS Singapore Sales Pte Ltd. *

Hewlett-Packard International Sa''rl HP Services (Singapore) Pte Ltd

Hewlett-Packard International Trade B.V. PT. Hewlett-Packard Berca Servisindo

Hewlett-Packard Ireland, Ltd. * Shanghai Hewlett-Packard Co, Ltd

Hewlett-Packard Japan, Ltd. Hewlett-Packard Enterprise Singapore Pte. Ltd.

Hewlett-Packard Enterprise India Private Limited

The above companies ceased to be related parties w.e.f. 1 September 2016 (refer note 49).

* Effective 1 November 2015, ceased to be related parties as these companies are no longer the subsidiaries of Hewlett-Packard Enterprise Company (ultimate holding company) and accordingly transactions up till 31st October 2015 have been disclosed as related party transactions.

5. SEGMENT REPORTING

Operating segments are defined as components of the Company for which discrete financial information is available that is evaluated regularly by the chief operating decision maker, in deciding how to allocate resources and assessing performance. The Company''s chief operating decision maker is the Chief Executive Officer.

The Company has identified business segments (industry practice) as reportable segments. The business segments comprise: Banking and Capital Market, Insurance, Information Technology, Communication and Entertainment and Emerging Industries.

The accounting policies consistently used in the preparation of the financial statements are also applied to record revenue and expenditure in individual segments. Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while other items, wherever allocable, are apportioned to the segments on an appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company therefore believes that it is not practical to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as ‘unallocated''.

Client relationships are driven based on client domicile. The geographical segments include United States of America (USA), India, Asia Pacific (APAC) and Europe, Middle East & Africa (EMEA).

The Company is predominantly equity financed which is evident from the capital structure table above. Further the Company has sufficient cash, cash equivalents, current investments and financial assets which are liquid to meet the debts.

6. EMPLOYEE BENEFITS a. Gratuity Plan

The Company has a defined benefit gratuity plan in India (funded). The Company''s defined benefit gratuity plan is a final salary plan for India 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, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member''s length of service and salary at retirement age. The 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, it aims to have a portfolio mix of equity instruments, property and debt instruments. The Board of Trustees aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise.

The following tables set out the status of the gratuity plan.

Trade receivables

Credit risk is managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored.

The impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogeneous groups and assessed for impairment collectively. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. The Company does not hold collateral as security.

The Company evaluates the concentration of risk with respect to trade receivables as low as they are spread across multiple geographies and multiple industries.

Financial instruments and deposits with banks

Credit risk is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investments in liquid mutual fund units and bonds issued by government. Counterparty credit limits are reviewed by the Company periodically and the limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company''s exposure to the risk of changes in interest rates relates primarily to the Company''s debt obligations with floating interest rates. The Company''s borrowings are short term / working capital in nature and hence is not exposed to significant interest rate risk.

Liquidity risk

The Company''s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company believes that the cash and cash equivalents is sufficient to meet its current requirements. Accordingly no liquidity risk is perceived.

Market Risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company''s exchange risk arises from its foreign operations, foreign currency revenues and expenses, (primarily in United States Dollars (‘USD'')). The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency).

Company uses derivative financial instruments, such as foreign exchange forward contracts, to mitigate the risk of changes in foreign currency exchange rates in respect of its forecasted cash flows and trade receivables.

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 counter party for these transactions are banks. 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 market place.

The foreign exchange exposure of the Company has been hedged by forward contracts disclosed above.

Sensitivity analysis

Every 1% increase/decrease of the respective foreign currencies compared to functional currency of the Company would impact operating margins by 0.25% for the year ending 31 March 2017 and 0.14% for the year ending 31 March 2016.

7. FAIR VALUES

Financial instruments carried at Amortized cost such as Cash and cash equivalents, Trade receivables, Loans and advances, other financial assets, Borrowings and Trade payables and other financial liabilities are considered to be same as their fair values, due to short term nature.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

- The fair values of the quoted Investments are based on price quotations at the reporting date.

- The Company holds derivative financial instruments such as foreign exchange forward to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value.

8. HEDGING ACTIVITIES AND DERIVATIVES Derivatives not designated as hedging instruments

The Company uses foreign exchange forward contracts to manage some of its transaction exposures. The foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions, generally from one to twelve months.

Cash flow hedges Foreign currency risk

Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in foreign currencies. These forecast transactions are highly probable.

The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in foreign exchange forward rates.

The terms of the foreign currency forward contracts match the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arise requiring recognition through profit or loss.

The cash flow hedges of the expected future sales during the year ended 31 March 2017 were assessed to be highly effective and a net unrealised gain ofRs,727.75 millions, with a deferred tax liability ofRs,251.86 millions relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges of the expected future sales during the year ended 31 March 2016 were assessed to be highly effective and an unrealised gain ofRs,107.07 millions with a deferred tax liability ofRs,37.06 millions was included in OCI in respect of these contracts.

9. The Company has announced a buyback of up to 17,370,078 fully paid-up equity shares of face value ofRs,10 each (“Equity Shares”), representing up to 8.26% of the total paid-up equity share capital of the Company, from all the shareholders/beneficial owners of the Equity Shares of the Company as on the record date i.e., 31 March 2017 (“Record Date”), on a proportionate basis, by way of “tender offer” method as prescribed under the Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998 (“Buyback Regulations”) through the stock exchange mechanism as specified by Securities and Exchange Board of India (“SEBI”) in its circular bearing number CIR/CFD/POLICYCELL/1/2015 dated 13 April 2015 read with SEBI circular bearing number CFD/DCR2/CIR/P/2016/131 dated 9 December 2016, at a price ofRs,635 per Equity Share for an aggregate amount of up toRs,11,029,999,530 (“Buyback”/ “Buyback Offer”). The offer letters together with the tender form have been sent to the shareholders as required under the Buyback Regulations. The buyback opened on 12 May 2017 and closes on 25 May 2017.

10. As per Section 135 of the Companies Act, 2013, a Corporate Social Responsibility (‘CSR'') committee has been formed by Mphasis Limited. The primary function of the Committee is to assist the Board of Directors in formulating a CSR Policy and review the implementation and progress of the same from time to time. The CSR Policy focuses on creating opportunities for the disadvantaged with emphasis on persons with disabilities and Technology driven community development. Gross amount required to be spent by the Company during the year wasRs,129.80 millions (31 March 2016:'' 134.20 millions). The expenses incurred towards CSR activities amounting toRs,133.56 million (31 March 2016:'' 126.70 millions) has been charged to the statement of profit and loss and is disclosed under other expenses.

11. Pursuant to the Share Purchase Agreement executed on 4 April 2016, Hewlett Packard Enterprise Company the erstwhile ultimate holding company has transferred its entire stake in the Company to Marble II Pte. Limited a company in Blackstone group effective 1 September 2016. Further, Marble II Pte. Limited, has acquired 2,178 Equity Shares, from the Public Shareholders, under the Open Offer as per the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. The shareholding of the Marble II Pte. Limited, post the acquisition and Open Offer, is 127,108,444 equity shares representing 60.47% of the paid up equity share capital of the Company. Further to the above, the Company forms part of Blackstone group of companies.

12. During the quarter ended 30 September 2016, the transfer of control from Hewlett Packard Enterprise Company to Blackstone group has resulted in accelerated vesting of unvested employee stock options and employee bonus, accordingly the Company has provided for deferred employee compensation cost on an accelerated basis over the remaining vesting period amounting toRs,39.77 millions (net of tax ofRs,21.45 millions) and has accounted the same as exceptional item.

13. ADOPTION OF Ind AS

These standalone financial statements, for the year ended 31 March 2017, have been prepared in accordance with Ind AS. For the year ended 31 March 2016, the Company prepared its annual standalone financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (‘Indian GAAP'' or ‘previous GAAP'').

Accordingly, the Company has prepared standalone financial statements which comply with Ind AS applicable for the year ended 31 March 2017, together with the comparative period data, as described in the summary of significant accounting policies. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements.

Exemptions applied

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following material exemptions:

- Ind AS 101 provides an option to restate past business combinations as per Ind AS 103 (‘Business Combination'') starting from a pre transition date (selected by the Company). Accordingly, Company has selected 01 Aug 2011 as the pre transition date (effective date) and has restated all business combinations post effective date.

- The Company has elected to avail exemption under Ind AS 101 to use India GAAP carrying value as deemed cost at the date of transition for all items of property, plant and equipment and intangible assets as per the statement of financial position prepared in accordance with previous GAAP.

Notes to reconciliations between previous GAAP and Ind AS

a) Fair valuation of investments

Under previous GAAP, current investments were measured at lower of cost or fair value and long term investments were measured at cost less diminution in value which is other than temporary. Under Ind AS, financial assets other than those valued at amortized cost are measured at fair value.

Investment in Mutual Funds have been classified as fair value through statement of profit and loss and fair value changes are recognized in the statement of profit and loss.

b) Fair valuation of forward contracts

Under previous GAAP, in relation to the forward contracts entered into, to hedge the foreign currency risk of the underlying outstanding at the balance sheet date, the exchange difference is calculated and recorded in accordance with paragraphs 36 and 37 of AS 11. Under Ind AS, the aforementioned forward contracts are fair valued through statement of profit and loss and fair value changes are recognized in statement of profit and loss.

c) Dividend and tax on dividend

Under previous GAAP, dividend payable was recorded as a liability in the period to which it relates. Under Ind AS, dividend to holders of equity instruments is recognized as a liability in the period in which the obligation to pay is established.

d) Effect of consolidation of employee welfare trusts

Under previous GAAP, employee welfare trusts were not required to be consolidated considering that these trusts were constituted as irrecoverable trusts. Under Ind AS all the employee welfare trusts have been consolidated.

e) Employee benefits

Under previous GAAP, actuarial gains and losses were recognized in the statement of profit and loss. Under Ind AS, the actuarial gains and losses form part of re-measurement of net defined benefit liability/asset which is recognized in other comprehensive income in the respective periods.

14. The comparatives given in the standalone financial statements have been compiled after making necessary Ind AS adjustments to the respective audited financial statements under previous GAAP to give a true and fair view in accordance with Ind AS.

15. STANDARDS ISSUED BUT NOT YET EFFECTIVE

In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7,‘Statement of cash flows'' and Ind AS 102, ‘Share-based payment.'' These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ‘Statement of cash flows'' and IFRS 2, ‘Share-based payment,'' respectively. The amendments are applicable to the Company from 1 April 2017.

Amendment to Ind AS 7:

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement. The Company is currently evaluating the requirements of the amendment and has not yet determined the impact on the standalone financial statements.

Amendment to Ind AS 102:

The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.

It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions are reflected in the ‘fair values'', but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.

The Company is currently evaluating the requirements of the amendment and has not yet determined the impact on the standalone financial statements.

1


Mar 31, 2016

1. DESCRIPTION OF THE COMPANY

Mphasis Limited (''The Company'' or ''Mphasis'') is a global, multicultural organisation headquartered in Bengaluru, India, specialises in providing a suite of application development and maintenance services, infrastructure outsourcing services and business process outsourcing solutions to clients around the world.

The Company has its Registered Office in Bengaluru. The Company is listed on the principal stock exchanges of India.

2. The Company''s software development centres in India include 100% Export Oriented (''EOU''), Special Economic Zone (''SEZ'') under Special Economic Zone Ordinance and Software Technology Park (''STP'') Units under the Software Technology Park guidelines issued by the Government of India. They are exempted from customs and central excise duties and levies on imported and indigenous capital goods and stores and spares.

The Company has executed legal undertakings to pay customs duty, central excise duty, levies and liquidated damages, if any, in respect of imported and indigenous capital goods and stores and spares consumed duty free, in the event that certain terms and conditions are not fulfilled.

3. Contingent liabilities and commitments

(a) The Company has received assessment orders for the financial years ended 31 March 2005, 31 March 2007, 31 March 2008, 31 March 2009, 31 March 2010, 31 March 2011 and 31 March 2012 wherein certain adjustments in respect of transfer pricing under Section 92CA of the Income Tax Act, 1961 have been made to the taxable income and demand orders for Rs.1,637.11 millions (31 March 2015: Rs.1,802.44 millions) have been raised on the Company. The above demands are disputed by the management and the Company has filed appeals against the aforesaid orders with appellate authorities. The management is of the view that the prices determined by it are at arm''s length and is confident that the demands raised by the assessing officer are not tenable under law. Pending outcome of the aforesaid matters under litigation, no provision has been made in the books of account for the above mentioned tax demands.

Other claims against the Company not acknowledged as debts amount to Rs.5,532.55 millions (31 March 2015: Rs.1,692.91 millions) net of bank guarantees aggregating to Rs.6,661.95 millions (31 March 2015: Rs.4,841.14 millions). The management, basis internal evaluation and legal opinion is of the view that these demands are not tenable.

(b) Other outstanding bank guarantees as at 31 March 2016: Rs.703.84 millions (31 March 2015: Rs.676.72 millions); including those furnished on account of jointly controlled operations Rs.99.35 millions (31 March 2015: Rs.99.35 millions) and customs authorities aggregating to Rs.47.82 millions (31 March 2015: Rs.51.89 millions).

(c) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for as at 31 March 2016: Rs.68.15 millions (31 March 2015: Rs.304.60 millions).

(d) The Company has received claims from certain customers / vendors. Management is of the view that these claims are not tenable and is taking appropriate action in this regard. It is not practical for the Company to estimate the amounts.

(e) Forward contracts outstanding against receivables / highly probable forecast transactions as at 31 March 2016 and 31 March 2015 are as below:

The foreign exchange exposure of the Company has been hedged by forward contracts disclosed above.

Unamortised premium as at 31 March 2016 on forward exchange contracts to hedge the foreign currency risk of the underlying outstanding at the balance sheet date is Rs.48.36 millions (31 March 2015: Rs.36.74 millions). Net foreign currency exposure of the Company that is not hedged by a derivative instrument or otherwise as at 31 March 2016: Rs.16,744.68 millions (31 March 2015: Rs.13,594.38 millions).

(f) The Company has issued performance guarantees on behalf of its subsidiaries for any future liabilities which may arise out of contracts and to certain clients for executed contracts. It is not practical for the Company to estimate the amounts.

(g) The Company has extended comfort letters to provide continued financial support to some of its subsidiaries to ensure that these entities operate on going concern basis and are able to meet their debts and liabilities as they fall due.

4. Operating Leases

(a) The Company is obligated under non-cancellable leases for equipment, office and residential space that are renewable on a periodic basis at the option of the lessor and lessee. The total rental expenses under non-cancellable operating leases amounted to Rs.831.88 millions for the year ended 31 March 2016 (31 March 2015: Rs.710.52 millions).

The Company has also occupied office facilities and residential facilities under cancellable operating lease agreements. The Company intends to renew such leases in the normal course of its business. Total rental expense under cancellable operating leases was Rs.1,329.02 millions for the year ended 31 March 2016 (31 March 2015: Rs.1,423.92 millions).

Office premises are obtained on operating lease for terms ranging from 1-7 years and are renewable at the option of the Company/ lessor.

(b) The Company has also subleased office space under cancellable operating lease agreements. The total sub lease rental income under cancellable operating leases amounted to Rs.50.49 millions for the year ended 31 March 2016 (31 March 2015: Rs.52.03 millions).

5. Related Party Transactions

(a) Entities where control exists:

- Hewlett-Packard Enterprise Company w.e.f. 01 November 2015 (ultimate holding company) (up to 31 October 2015: Hewlett- Packard Company, USA)

- Hewlett Packard Barcelona BV, (100% subsidiary of Hewlett Packard Enterprise Company)*

- Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA), (100% subsidiary of Hewlett Packard Eagle Corporation, USA)*

* EDS Asia Pacific Holdings (formerly TH Holding, Mauritius), EDS World Corporation (Far East) LLC and EDS World Corporation (Netherlands) LLC, the subsidiaries of Hewlett Packard Barcelona BV hold 60.47% (31 March 2015: 60.49%) of the equity capital of the Company.

(b) The related parties where control exists also includes BFL Employees Equity Reward Trust, Kshema Employees Welfare Trust, Mphasis Employee Benefit Trust, Mphasis Provident Fund Trust (Refer note 35 (b) for information on transactions with Mphasis Provident Fund Trust) and the following subsidiaries:

- Mphasis Corporation (''Mphasis USA'')

- Mphasis Australia Pty Limited (''Mphasis Australia'')

- Mphasis Consulting Limited (''Mphasis Consulting'')

- Mphasis Ireland Limited (''Mphasis Ireland'')

- Mphasis Lanka Private Limited (''Mphasis Lanka'')

- PT. Mphasis Indonesia (''Mphasis Indonesia'')

- Mphasis Pte Limited (''Mphasis Singapore'')

- Mphasis UK Limited (''Mphasis UK'')

- Mphasis Wyde Inc.

- Wyde Corporation Inc.

- Wyde Solutions Canada Inc.

- Mphasis Philippines Inc.

- Wyde Tunisie SARL

- Digital Risk, LLC

- Digital Risk Mortgage Services, LLC

- Digital Risk Complicance Services, LLC

- Mphasis Deutschland GmbH (''Mphasis GmbH'')

- Mphasis (Shanghai) Software & Services Company Limited (''Mphasis China'')

- Mphasis Finsource Limited (''Mphasis Finsource'')

- Mphasis Belgium BVBA (''Mphasis Belgium'')

- Mphasis Poland s.p.z.o.o

- Mphasis Europe BV (''Mphasis Europe'')

- Mphasis Infrastructure Services Inc.

- Msource (India) Private Limited (''Msource India'')

- Mphasis Software and Services (India) Private Limited (''Mphasis India'')

- Msource Mauritius Inc. (''Msource Mauritius'')

- Mphasis Wyde SASU

- Investor Services, LLC

- Digital Risk Valuation Services, LLC

- Digital Risk Europe, OOD

- Digital Risk Anaytics, LLC

(c) Key management personnel:

The key management personnel of the Company are as mentioned below:

- Balu Ganesh Ayyar Chief Executive Officer

- A. Sivaram Nair Executive Vice President, Company Secretary General Counsel & Ethics Officer

- V. Suryanarayanan Executive Vice President & Chief Financial (''CFO'') - Appointed w.e.f. 01 August 2014 (interim CFO w.e.f. 04 June 2014 till 31 July 2014)

- Ganesh Murthy Executive Vice President & Chief Financial Officer Resigned w.e.f. 03 June 2014

Non-executive/ independent directors on the Board of the Company

- Davinder Singh Brar Director - Non Executive Independent Director, Chairman of the Board

- James Mark Merritt Director - Vice Chairman of the Board

- Narayanan Kumar Director - Non Executive Independent Director

- Lakshmikanth K Ananth Director

- Stefan Antonio Lutz Director

- Mary Teresa Hassett Director - Appointed w.e.f. 9 September 2015

- Jan Kathleen Hier Non Executive Additional Independent Director - Appointed w.e.f. 9 September 2015

- Jeff Thomas Ricci Non Executive Additional Director - Appointed w.e.f. 11 December 2015

- Shankar Maitra Director - Resigned w.e.f. 26 October 2015

- Friedrich Froeschl Director - Non Executive Independent Director, Chairman of the Board

- Resigned w.e.f. 26 October 2015

- Chandrakant D Patel Director - Resigned w.e.f. 30 September 2014

(d) Direct or indirect subsidiaries of ultimate holding company with which transactions have taken place:

- Global E:Business Operations Private Ltd

- P.T. Hewlett-Packard Berca Servisindo

- Hewlett-Packard Sverige A.B.

- Hewlett-Packard India Sales Private Limited *

- Hewlett Packard Servicios Espania, S.L.

- Hewlett-Packard (Canada) Co.

- Hewlett-Packard (K) Limited Liability Partnership

- Hewlett-Packard (Schweiz) GmbH

- Hewlett-Packard (Thailand) Limited

- Hewlett-Packard ApS

- Hewlett-Packard Asia Pacific Pte Ltd

- Hewlett-Packard Australia Pty Limited.

- Hewlett-Packard Belgium B.V.B.A/S.P.R.L

- Hewlett-Packard Brasil Ltda.

- Hewlett-Packard CDS Limited

- Hewlett-Packard Enterprises LLC *

- Hewlett-Packard Financial Services (India) Private Ltd.

- Hewlett-Packard France SAS

- HP PPS Singapore Sales Pte Ltd. *

- Hewlett-Packard Galway Ltd

- Hewlett-Packard Gesellschaft m.b.H

- Hewlett-Packard Global Investments B.V *

- Hewlett-Packard Globalsoft Private Limited

- Hewlett-Packard GmbH

- Hewlett-Packard International Sa''rl

- Hewlett-Packard International Trade B.V.

- Hewlett-Packard Japan, Ltd.

- Hewlett-Packard de Mexico S. De R.L. De CV

- Hewlett-Packard Limited

- Hewlett-Packard (India) Software Operation Private Limited

- HP Services (Singapore) Pte Ltd

- Hewlett-Packard Europe Finance Ltd

- Hewlett-Packard Multimedia SDN BHD

- China Hewlett-Packard Ltd

- Hewlett-Packard Nederland B.V.

- Hewlett-Packard New Zealand

- Hewlett-Packard Norge AS

- Hewlett-Packard OY

- Hewlett-Packard Pakistan (Private) Limited

- Hewlett-Packard Philippines Incorporation

- Hewlett-Packard Services Kuwait Company W.L.L

- Hewlett-Packard Singapore (Sales) Pte. Ltd

- Hewlett-Packard Slovakia, s.r.o.

- Hewlett-Packard UK Enterprise (1) Ltd.

- Hewlett-Packard State & Local Enterprise Services, Inc.

- Shanghai Hewlett-Packard Co, Ltd

- Hewlett-Packard Technology (Shanghai) Co., Ltd *

- Hewlett-Packard Centre de Competence France SAS

- HP Enterprise Services (Hong Kong) Limited

- HP Enterprise Services Australia Pty Ltd

- HP Enterprise Services BPA Pty Ltd

- HP Enterprise Services Italia S.r.l

- Hewlett-Packard Enterprise Services UK Limited

- HP Enterprise Services Energy Italia S.r.l

- HP Enterprise Services, LLC

- HP Facilities Services (Malaysia) Sdn Bhd

- HP Financial Services (Australia) Pty Limited

- HP Financial Services (New Zealand)

- Hewlett-Packard CDS GmbH

- Hewlett-Packard Ireland, Ltd. *

- Hewlett-Packard Nigeria Limited

- Hewlett Packard Enterprise Information Security UK Limited

- Hewlett Packard Software, LLC

* Effective 1 November 2015, ceased to be related parties as these companies are no longer the subsidiaries of Hewlett-Packard Enterprise Company (ultimate holding company) and accordingly transactions up till 31 October 2015 have been disclosed as related party transactions.

6. Segment reporting

The Company has identified Banking and Capital Market, Insurance, Information Technology, Communication and Entertainment and Emerging Industries as primary business segments of the Company.

The accounting policies consistently used in the preparation of the financial statements are also applied to record revenue and expenditure in individual segments. Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while other items, wherever allocable, are apportioned to the segments on an appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company therefore believes that it is not practical to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as ''unallocated''.

Client relationships are driven based on client domicile. The geographical segments include United States of America (USA), India Asia Pacific (APAC) and Europe, Middle East & Africa (EMEA).

7. Stock Based Compensation

The Company uses Fair value method of accounting for its employee stock options except for the 1998 plan and the 2004 plan. The Company has therefore adopted the pro-forma disclosure provisions as required by the Guidance Note on "Accounting for Employee Share-based Payments" issued by the ICAI with effect from 01 April 2005.

The differential on Employee Stock Option expense if the fair value of the ESOPs on the date of the grant were considered instead of the intrinsic value during the year ended 31 March 2016 and 31 March 2015 is Rs. Nil. Consequently, there is no impact on earnings per share.

8. The management re-assessed the future profitability of long term revenue contract as at 31 March 2016 and accordingly provided for Rs.316.28 millions (net of tax of Rs.167.38 millions) towards expected loss as an exceptional item.

9. The Company has entered into international and specified domestic transactions with its associated enterprises within the meaning of section 92B and section 92BA respectively of the Income Tax Act, 1961. The Company is of the view that all the aforesaid transactions have been made at arms'' length terms.

10. The Boards of Directors in its meeting held on 27 September 2013 had approved the scheme of amalgamation (''the scheme'') of Mphasis Finsource Limited, a wholly owned subsidiary of the Company, carrying on the business of business process outsourcing, into the Company with effect from 1 April 2013. The Honourable High Court of Karnataka had passed orders approving the scheme on 19 June 2014. Upon filing of the orders of the Honourable High Court of Karnataka with the Registrar of Companies on 04 September 2014, the scheme became effective and accordingly, the Company has given effect to the merger in the financial statements during the year ended 31 March 2015.

Pursuant to the terms of the approved merger scheme, the amalgamation has been accounted for under the pooling of interest method as prescribed by Accounting Standard 14 for "Accounting for Amalgamation", accordingly all the assets and liabilities recorded in the books of Mphasis Finsource Limited as of 31 March 2013 has been recorded by the Company at their respective book values as follows:

Further, pursuant to the terms of the approved merger scheme:

(i) The Share Capital of Mphasis Finsource Limited and investments of the Company in Mphasis Finsource Limited have been cancelled and no difference arises on such cancellation.

(ii) Expenses incurred by the Company in connection with the amalgamation scheme have been charged to the statement of profit and loss of the Company.

The loss for the financial year 2013-2014 pertaining to Mphasis Finsource Limited operations has been adjusted with the surplus in the statement of profit and loss during the year ended 31 March 2015.

11. On 22 July 2013, the Board of Directors of Mphasis Lanka (Private) Limited, a wholly owned subsidiary of the Company, resolved to close down its operations. Accordingly, the Company has made provision of Rs.55.78 millions (31 March 2015: Rs.55.78 millions) towards investment and inter-company receivable as at 31 March 2016.

12. Current tax for the year ended 31 March 2016 includes provision for earlier years amounting to Rs.8.70 millions (31 March 2015: Rs.13.19 millions) while deferred tax charge for the year ended 31 March 2016 include a reversal of Rs.108.83 millions (31 March 2015: Rs.75.48 millions). On account of said adjustments, the net impact of prior period tax reversal is Rs.100.13 millions. (31 March 2015: Rs.62.29 millions).

13. The ESOP schemes ("RSU 2010", "RSU 2011", "RSU 2014", "RSU 2015" and "ESOP 2012") of Mphasis Limited are administrated through the Mphasis Employee Benefit Trust ("MEBT") and all other ESOP schemes are administrated by BFL Equity Reward Trust ("BERT"). As per the Trust deeds, MEBT and BERT are constituted as irrevocable trusts. In this regard, basis legal advice obtained, the management is of the view that the Company has no right to the assets of MEBT and BERT, hence, the Company has not consolidated the financial statements of MEBT and BERT in the financial statements of the Company.

14. The Board of Directors of the Company has approved sale and transfer of some contracts of the domestic BPO business, which is not a separate major line of Company''s business and accordingly the Company had entered into definitive agreements with Hinduja Global Solutions Limited and Karvy Data Management Services Limited for sale of a portion of domestic BPO business as a going concern on slump sale basis for a lump sum consideration amounting to Rs.140.00 millions and Rs.27.50 millions respectively. The Company had estimated losses of Rs.12.40 millions (net of tax of Rs.6.57 millions) arising on the proposed sale and accounted for the same as an exceptional item. The Competition Commission of India has approved the transaction and the Company has complied with all the pre- conditions on 01 September 2015. The results for the year ended 31 March 2016 include revenue from these contracts amounting to Rs.520.52 millions. (31 March 2015: Rs.918.15 millions).

15. The Company has formalized a plan to early exit / ramp down operations in respect of certain domestic BPO contracts. On account of the proposed early closure of the said contracts, the management has provided for Rs.92.04 millions (net of tax of Rs.48.67 millions) towards expected loss as an exceptional item.

16. Revenue for the year ended 31 March 2016 are net of reversal of '' Nil millions pertaining to earlier periods (31 March 2015: Rs.123.80 millions).

17. As per Section 135 of the Companies Act, 2013, a Corporate Social Responsibility (''CSR'') committee has been formed by Mphasis Limited. The primary function of the Committee is to assist the Board of Directors in formulating a CSR Policy and review the implementation and progress of the same from time to time. The CSR Policy focuses on creating opportunities for the disadvantaged with emphasis on persons with disabilities and Technology driven community development. Gross amount required to be spent by the Company during the year was Rs.134.20 millions (31 March 2015: Rs.139.30 millions). The expenses incurred towards CSR activities amounting to Rs.126.70 millions (31 March 2015: Rs.21.80 millions) has been charged to the statement of profit and loss and is disclosed under other expenses.


Mar 31, 2015

1. DESCRIPTION OF THE COMPANY

Mphasis Limited ('The Company' or 'Mphasis') is a global, multicultural organisation headquartered in Bengaluru, India, specialises in providing a suite of application development and maintenance services, infrastructure outsourcing services and business process outsourcing solutions to clients around the world.

The Company has its Registered Office in Bengaluru. The Company is listed on the principal stock exchanges of India.

2. Terms / rights attached to equity shares

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

During the year ended 31 March 2015, the amount of per share dividend recognized as distributions to equity shareholders is Rs. 16.00 (five months ended 31 March 2014: Rs. 7.00).

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

Employee Stock Option Plans ('ESOP') - Equity settled

All the ESOPs are in respect of the Company's shares where each stock option is equivalent to one share. In accordance with the Guidance Note on "Accounting for Employee Share-based Payments" issued by the ICAI with effect from 1 April 2005, the necessary disclosures have been made for the year ended 31 March 2015 and for the five months ended 31 March 2014 for grants outstanding on and made on or after that date for each of the plans described below (Also refer note 31).

Employees Stock Option Plan-1998 (the 1998 Plan): The Company instituted the 1998 Plan for all eligible employees in pursuance of the special resolution approved by the shareholders in the Annual General Meeting held on 31 July 1998. The 1998 Plan provides for the issuance of 3,720,000 options to eligible employees as recommended by the ESOP Committee constituted for this purpose.

In accordance with the 1998 Plan, the Committee has formulated 1998 Plan - (Version I) and 1998 Plan - (Version II) during the years 1998 -1999 and 1999 - 2000 respectively.

1998 Plan-(Version I): Each option granted under the 1998 Plan - (Version I), entitles the holder thereof with an option to apply for and be issued one equity share of the Company at an exercise price of Rs. 34.38 per share. The equity shares covered under these options vest at various dates over a period ranging from six to sixty-six months from the date of grant based on the length of service completed by the employee to the date of grant. The options are exercisable any time after their vesting period.

The weighted average share price as at the date of exercise for stock options was Rs. 422.21 (31 March 2014: Rs. 386.35). The options outstanding as at 31 March 2015 had an exercise price ranging from Rs. 23.21 to Rs. 130.60 (31 March 2014: Rs. 23.21 to Rs. 130.60) and weighted average remaining contractual life of 1.23 years (31 March 2014: 1.51 years).

Employees Stock Option Plan-2004 (the 2004 Plan): At the Extraordinary General Meeting on 12 May 2004, the shareholders approved a new Employee Stock Option Plan. The 2004 Plan provides for the issuance of equity shares to employees and directors of the Company and its subsidiaries and for the exchange of outstanding stock options of Msource Corporation as on 20 September 2004, pursuant to its merger with Mphasis Corporation and the assumption of the Msource stock options by the Company.

The 2004 Plan is administered through the ESOP Committee appointed by the Board and comprises two programs. Under Program A, outstanding options of Msource Corporation were exchanged for options in the Company on the agreed exchange ratio of 0.14028 stock options with underlying equity shares of the Company for each stock option in the Msource 2001 plan, the exercise price being the equivalent amount payable by the option holder under the Msource 2001 plan. The equity shares underlying these options vest over a period up to forty-eight months from the date of assumption by the Company and shall be exercisable within a period of ten years from the original date of grant under the Msource 2001 plan.

Options under Program B represent fresh grants and shall be issued to employees at an exercise price which will be equal to the fair value of the underlying shares at the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty-eight months from the date of grant. The exercise period is two years from the date of vesting.

The weighted average share price as at the date of exercise for stock options was Rs. 435.34 (31 March 2014: Rs. 380.75). The options outstanding as at 31 March 2015 had an exercise price ranging from Rs. 50.34 to Rs. 148.07 (31 March 2014: Rs. 50.34 to Rs. 148.07) and weighted average remaining contractual life of 2.02 years (31 March 2014: 2.75 years).

Employees Stock Option Plan-2012 (the 2012 Plan): Effective 14 March 2012, the Company instituted the 2012 Plan. The Board and the shareholders of the Company approved 2012 plan on 20 January 2012. The 2012 plan provides for the issue of restricted options to certain employees of the Company and its subsidiaries.

The 2012 plan is administered by the Mphasis Employees Benefit Trust which is created for this purpose. Each option, granted under this plan, entitles the holder thereof with an option to apply for and be issued one equity share of the Company at an exercise price of Rs. 410.25 per share. The equity shares covered under these options vest over a period ranging from twelve to twenty-four months from the date of grant. The exercise period is three years from the date of vesting.

The weighted average share price as at the date of exercise of stock options was Rs. Nil (31 March 2014: Rs. Nil). The options outstanding as at 31 March 2015 had an exercise price Rs. 410.25 (31 March 2014: Rs. 410.25) and weighted average remaining contractual life of 1.35 years (31 March 2014: 2.36 years).

Total Employee Compensation Cost pertaining to 2012 plan during the year is Rs. (4.05) millions (five months ended 31 March 2014: Rs. 1.48 millions), net off cross charge to subsidiaries.

Restricted Stock Units

EDS, the holding Company, had issued Restricted Stock Units ('RSU') to certain employees of the Company. These have been replaced by RSUs of HP, pursuant to the merger. Subsequent to the merger, HP had also issued RSUs to certain employees of the Company. However, the cost has been borne by HP and accordingly this has not been accounted as an expense or income by the Company.

Restricted Stock Unit Plan-2010 ("RSU Plan-2010")

Effective 1 August 2010, the Company instituted the Restricted Stock Unit Plan-2010. The Board and the shareholders of the Company approved RSU Plan-2010 on 29 June 2010 and 17 August 2010 respectively. The RSU Plan-2010 provides for the issue of restricted options to certain employees of the Company and its subsidiaries.

The RSU Plan-2010 is administered by the Mphasis Employees Benefit Trust which was created for this purpose. Each option, granted under the RSU Plan-2010, entitles the holder thereof with an option to apply for and be issued one equity share of the Company at an exercise price of Rs. 10.00 per share. The equity shares covered under these options vest over a period ranging from twelve to twenty-four months from the date of grant. The exercise period is one to three years from the date of vesting.

The weighted average share price as at the date of exercise of stock options was Rs. 408.99 (31 March 2014: Rs. 428.33).The options outstanding as at 31 March 2015 had an exercise price of Rs. 10.00 (31 March 2014: Rs. 10.00) and the weighted average remaining contractual life of 0.92 years (31 March 2014: 1.33 years).

Total Employee Compensation Cost pertaining to RSU Plan-2010 during the year ended 31 March 2015 is Rs. (0.39) millions (Five months ended 31 March 2014: Rs. Nil), net of cross charge to subsidiary companies.

Restricted Stock Unit Plan-2014 ("RSU Plan-2014")

Effective 20 October 2014, the Company instituted the Restricted Stock Unit Plan-2014. The Board and the shareholders of the Company approved RSU Plan-2014 on 14 May 2014. The RSU Plan-2014 provides for the issue of restricted options to certain employees of the Company and its subsidiaries.

The RSU Plan-2014 is administered by the Mphasis Employees Benefit Trust. Each option, granted under the RSU Plan-2014, entitles the holder thereof with an option to apply for and be issued one equity share of the Company at an exercise price of Rs. 10.00 per share. The equity shares covered under these options vest over a period ranging from twelve to thirty-six months from the date of grant. The exercise period is one to three years from the date of vesting.

3. The Company's software development centres in India include 100% Export Oriented ('EOU'), Special Economic Zone ('SEZ') under Special Economic Zone Ordinance and Software Technology Park ('STP') Units under the Software Technology Park guidelines issued by the Government of India. They are exempted from customs and central excise duties and levies on imported and indigenous capital goods and stores and spares. The Company has executed legal undertakings to pay customs duty, central excise duty, levies and liquidated damages, if any, in respect of imported and indigenous capital goods and stores and spares consumed duty free, in the event that certain terms and conditions are not fulfilled. Bank guarantees aggregating to Rs. 51.89 millions as at 31 March 2015 (31 March 2014: Rs. 44.06 millions) have been furnished to the Customs authorities in this regard.

4. Contingent liabilities and commitments

(a) The Company has received assessment orders for the financial years ended 31 March 2004, 31 March 2005, 31 March 2006, 31 March 2007, 31 March 2008, 31 March 2009, 31 March 2010 and 31 March 2011 wherein certain adjustments in respect of transfer pricing under Section 92CA of the Income Tax Act, 1961 have been made to the taxable income and demand orders for Rs. 1,802.44 millions (31 March 2014: Rs. 1,499.32 millions) have been raised on the Company. The above demands are disputed by the management and the Company has filed appeals against the aforesaid orders with appellate authorities. The management is of the view that the prices determined by it are at arm's length and is confident that the demands raised by the assessing officer are not tenable under law. Pending outcome of the aforesaid matters under litigation, no provision has been made in the books of account for the above mentioned tax demands.

Other claims against the Company not acknowledged as debts amount to Rs. 1,692.91 millions (31 March 2014: Rs. 2,243.61 millions) net of bank guarantees aggregating to Rs. 4,841.14 millions (31 March 2014: Rs. 4,841.14 millions). The management, basis internal evaluation and legal opinion is of the view that these demands are not tenable.

(b) Other outstanding bank guarantees as at 31 March 2015: Rs. 676.72 millions (31 March 2014: Rs. 693.77 millions); including those furnished on account of jointly controlled operations Rs. 99.35 millions (31 March 2014: Rs. 99.35 millions).

(c) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for as at 31 March 2015: Rs. 304.60 millions (31 March 2014: Rs. 74.63 millions).

(d) The Company has received claims from certain customers / vendors. Management is of the view that these claims are not tenable and is taking appropriate action in this regard. It is not practical for the group to estimate the amounts.

(e) Forward contracts outstanding against receivables / highly probable forecast transactions as at 31 March 2015 and 31 March 2014 are as below:

Currency 31 March 2015 31 March 2014 Amount Amount in Amount Amount in Amount (millions) Rs. (millions) Rs. (millions) (millions)

USD 199.61 12,475.63 213.78 12,808.63

GBP 13.11 1,212.28 10.39 1,036.56

CAD 1.02 50.01 1.97 106.91

AUD 5.22 248.13 4.37 241.65

EUR 16.51 1,109.31 12.23 1,011.24

Forward contracts outstanding against payables as at 31 March 2015 and 31 March 2014 are as below:



Currency 31 March 2015 31 March 2014 Amount Amount in Amount Amount in Amount (millions) Rs. (millions) Rs. (millions) (millions)

USD 20.00 1,250.00 - -

SGD 2.84 129.15 3.33 158.45

The foreign exchange exposure of the Company has been hedged by forward contracts disclosed above.

Unamortised premium as at 31 March 2015 on forward exchange contracts to hedge the foreign currency risk of the underlying outstanding at to balance sheet date is Rs. 36.74 millions (31 March 2014: Rs. 68.22 millions). Net foreign currency exposure of the Company that is not hedged by a derivative instrument or otherwise as at 31 March 2015: Rs. 13,594.38 millions (31 March 2014: Rs. 14,275.82 millions).

(f) The Company has issued performance guarantees on behalf of its subsidiaries for any future liabilities which may arise out of contracts and to certain clients for executed contracts. It is not practical for the group to estimate the amounts.

(g) The Company has extended comfort letters to provide continued financial support to some of its subsidiaries to ensure that these entities operate on going concern basis and are able to meet their debts and liabilities as they fall due.

5. Related Party Transactions

(a) Entities where control exists:

* Hewlett-Packard Company, USA (ultimate holding Company)

* Hewlett-Packard Eagle Corporation, USA (100% subsidiary of Hewlett-Packard Company, USA)

* Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA), (100% subsidiary of Hewlett-Packard Eagle Corporation, USA)*

* EDS Asia Pacific Holdings (formerly TH Holding, Mauritius), EDS World Corporation (Far East) LLC and EDS World Corporation (Netherlands) LLC, the subsidiaries of Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA) hold 60.49% (31 March 2014: 60.49%) of the equity capital of the Company.

(b) The related parties where control exists also includes BFL Employees Equity Reward Trust, Kshema Employees Welfare Trust, Mphasis Employee Benefit Trust, Mphasis Provident Fund Trust (Refer note 32 (b) for information on transactions with Mphasis Provident Fund Trust) and the following subsidiaries:

* Mphasis Corporation ('Mphasis USA')

* Mphasis Australia Pty Limited ('Mphasis Australia')

* Mphasis Consulting Limited ('Mphasis Consulting')

* Mphasis Ireland Limited ('Mphasis Ireland')

* Mphasis Lanka Private Limited ('Mphasis Lanka')

* PT. Mphasis Indonesia ('Mphasis Indonesia')

* Mphasis Pte Limited ('Mphasis Singapore')

* Mphasis UK Limited ('Mphasis UK')

* Mphasis Wyde Inc.

* Wyde Corporation Inc.

* Wyde Solutions Canada Inc.

* Mphasis Philippines Inc.

* Wyde Tunisie SARL

* Digital Risk, LLC

* Digital Risk Mortgage Services, LLC

* Digital Risk Complicance Services, LLC

* Mphasis Deutschland GmbH ('Mphasis GmbH')

* Mphasis (Shanghai) Software & Services Company Limited ('Mphasis China')

* Mphasis Finsource Limited ('Mphasis Finsource')

* Mphasis Belgium BVBA ('Mphasis Belgium')

* Mphasis Poland s.p.z.o.o

* Mphasis Europe BV ('Mphasis Europe')

* Mphasis Infrastructure Services Inc.

* Msource (India) Private Limited ('Msource India')

* Mphasis Software and Services (India) Private Limited ('Mphasis India')

* Msource Mauritius Inc. ('Msource Mauritius')

* Mphasis Wyde SASU

* Investor Services, LLC

* Digital Risk Valuation Services, LLC

* Digital Risk Europe, OOD

* Digital Risk Anaytics, LLC

(c) Key management personnel:

The key management personnel of the Company are as mentioned below:

* Balu Ganesh Ayyar Chief Executive Officer

* A. Sivaram Nair * Executive Vice President, Company Secretary General Counsel & Ethics Officer

* V. Suryanarayanan * Executive Vice President & Chief Financial ('CFO') - Appointed w.e.f. 01 August 2014 (interim CFO w.e.f. 04 June 2014 till 31 July 2014)

* Ganesh Murthy * Executive Vice President & Chief Financial Officer Resigned w.e.f. 03 June 2014

* Considered as Key Management Personnel w.e.f. 1 April 2014 as per the provisions of Companies Act, 2013

Non-executive/ independent directors on the Board of the Company

* Friedrich Froeschl Director - Non Executive Independent Director, Chairman of the Board

* James Mark Merritt Director - Vice Chairman of the Board w.e.f 13 March 2014

* Davinder Singh Brar Director - Non Executive Independent Director

* Narayanan Kumar Director - Non Executive Independent Director

* Lakshmikanth K Ananth Director

* Shankar Maitra Director w.e.f. 05 December 2013

* Stefan Antonio Lutz Director - Appointed w.e.f. 12 February 2014

* Mary Teresa Hassett Additional Director - Appointed w.e.f. 30 September 2014

* Chandrakant D Patel Director - Resigned w.e.f. 30 September 2014

* Antonio Neri Director - Resigned w.e.f. 05 December 2013

* V Ravichandran Director - Resigned w.e.f. 12 February 2014

(d) Direct or indirect subsidiaries of ultimate holding company with which transactions have taken place:

* Global E:Business Operations Private Ltd

* P.T. Hewlett-Packard Berca Servisindo

* Hewlett-Packard Sverige A.B.

* Hewlett-Packard India Sales Private Limited

* Hewlett Packard Servicios Espania, S.L.

* Hewlett-Packard (Canada) Co.

* Hewlett-Packard (K) Limited Liability Partnership

* Hewlett-Packard (Schweiz) GmbH

* Hewlett-Packard (Thailand) Ltd

* HP Services (Singapore) Pte Ltd

* Hewlett-Packard Aps

* Hewlett-Packard Asia Pacific Pte Ltd

* Hewlett-Packard Australia Pty Limited.

* Hewlett-Packard Belgium B.V.B.A/S.P.R.L

* Hewlett-Packard Brasil Ltda

* Hewlett-Packard CDS Limited

* Hewlett-Packard Enterprises LLC

* Hewlett-Packard Financial Services (India) Private Ltd.

* Hewlett-Packard France SAS

* Hewlett-Packard Multimedia SDN BHD

* HP Information Security UK Ltd

* Hewlett-Packard Nederland B.V

* Hewlett-Packard New Zealand

* Hewlett-Packard Norge A/S

* Hewlett-Packard OY

* Hewlett-Packard Pakistan (Private) Limited

* Hewlett-Packard Philippines Incorporation

* Hewlett-Packard Services Kuwait Company W.L.L

* HP Software, LLC

* Hewlett-Packard Singapore (Sales) Pte. Ltd

* Hewlett-Packard Slovakia, s.r.o.

* Hewlett Packard Europe Finance Ltd

* Hewlett-Packard Nigeria Ltd

* China Hewlett-Packard Ltd.

* Hewlett-Packard de Mexico S. De R.L. De CV

* HP Centre de Competence France SAS

* HP Enterprise Services (Hong Kong) Ltd

* HP Enterprise Services Australia Pty Ltd

* Hewlett-Packard FS France SAS

* Hewlett-Packard Galway Ltd

* Hewlett-Packard Gesellschaft m.b.H

* Hewlett-Packard Global Investments B.V

* Hewlett-Packard Globalsoft Limited

* Hewlett-Packard GmbH

* Hewlett-Packard International Sa'rl

* Hewlett-Packard International Trade B.V

* Hewlett-Packard Japan Limited

* Hewlett-Packard Ltd

* HP India Software Operation Pvt Ltd

* HP Enterprise Services BPA Pty Ltd

* HP Enterprise Services Italia S.r.l

* HP Enterprise Services UK Ltd

* HP Enterprise Services Energy Italia S.r.l

* HP Enterprise Services, LLC

* HP Facilities Services (Malaysia) Sdn Bhd

* HP Financial Services (Australia) Pty Ltd

* HP Financial Services (New Zealand)

* HP Financial Services GmbH

* Hewlett-Packard Ireland, Ltd.

* HP Financial Services SPRL

6. Segment reporting

The Company has identified Banking and Capital Market, Insurance, Information Technology, Communication and Entertainment and Emerging Industries as primary business segments of the Company.

The accounting policies consistently used in the preparation of the financial statements are also applied to record revenue and expenditure in individual segments. Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while other items, wherever allocable, are apportioned to the segments on an appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company therefore believes that it is not practical to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as 'unallocated'.

7. Stock Based Compensation

The Company uses the intrinsic value method of accounting for its employee stock options except for RSU Plan 2010, RSU Plan 2011, RSU 2014 and ESOP 2012 plan wherein compensation cost is measured based on fair value method. The Company has therefore adopted the pro-forma disclosure provisions as required by the Guidance Note on "Accounting for Employee Share-based Payments" issued by the ICAI with effect from 1 April 2005.

b. Provident Fund

Effective 03 July 2013, the Company has established a Mphasis Provident Fund Trust ('the Trust') to which contributions towards provident fund are made each month which have been invested in Government bonds with average returns more than guaranteed return. On 23 April 2014, an amount ofRs.5,052.27 millions which was held by Regional Provident Fund Commissioner has been transferred from Recognised Provident Fund to the Mphasis Provident Fund Trust effective 01 April 2014. The Company has carried out actuarial valuation as at 31 March 2015.

8. The Company has incurred losses, in respect of certain long term non-cancellable revenue contracts, as the operations are in its stabilisation phase. The management has initiated various cost optimisation and revenue enhancement initiatives and is confident of making profits over the period of the contract.

9. The Company has entered into international and specified domestic transactions with its associated enterprises within the meaning of section 92B and section 92BA respectively of the Income Tax Act, 1961. The Company is of the view that all the aforesaid transactions have been made at arms' length terms.

10. The Boards of Directors in its meeting held on 27 September 2013 had approved the scheme of amalgamation ('the scheme') of Mphasis Finsource Limited, a wholly owned subsidiary of the Company, carrying on the business of business process outsourcing, into the Company with effect from 1 April 2013. The Honourable High Court of Karnataka had passed orders approving the scheme on 19 June 2014. Upon filing of the orders of the Honourable High Court of Karnataka with the Registrar of Companies on 04 September 2014, the scheme became effective and accordingly, the Company has given effect to the merger in the financial statements during the year ended 31 March 2015.

Further, pursuant to the terms of the approved merger scheme:

(i) The Share Capital of Mphasis Finsource Limited and investments of the Company in Mphasis Finsource Limited have been cancelled and no difference arises on such cancellation.

(ii) Expenses incurred by the Company in connection with the amalgamation scheme have been charged to the statement of profit and loss of the Company.

The loss for the financial year 2013-2014 pertaining to Mphasis Finsource Limited operations has been adjusted with the surplus in the statement of profit and loss.

11. On 13 February 2014, the Company entered into a definitive agreement subject to fulfilment of certain conditions for sale of a business division on a slump sale basis. Accordingly, the expected loss of Rs. 64.41 millions (net of tax of Rs. 33.17 millions) on such sale of business has been provided for and disclosed as an exceptional item during the five months period ended 31 March 2014. The management is confident of completing the sale of business division on fulfilment of the conditions precedent as per the definitive agreement. Pending completion of the transaction, the management has reversed / provided for overdue debtors of Rs. 379.43 millions.

12. On 22 July 2013, the Board of Directors of Mphasis Lanka (Private) Limited, a wholly owned subsidiary of the Company, resolved to close down its operations. Accordingly, the Company has made provision of Rs. 55.78 millions (31 March 2014: Rs. 46.69 millions) towards investment and inter-company receivable as at 31 March 2015.

13. Current tax for the year ended 31 March 2015 includes provision for earlier years amounting to Rs. 13.19 millions (Five months ended 31 March 2014: Rs. 47.56 millions) while deferred tax charge for the year ended 31 March 2015 include a reversal of Rs. 75.48 millions (Five months ended 31 March 2014: Rs. Nil). On account of said adjustments, the net impact of prior period tax reversal is Rs. 62.29 millions. (Impact of prior period tax charge for the five months ended 31 March 2014: Rs. 47.56 millions).

14. The ESOP schemes ("RSU 2010", "RSU 2011", "RSU 2014" and "ESOP 2012") of Mphasis Limited are administrated through the Mphasis Employee Benefit Trust ("MEBT") and all other ESOP schemes are administrated by BFL Equity Reward Trust ("BERT"). As per the Trust deeds, MEBT and BERT are constituted as irrevocable trusts. In this regard, basis legal advice obtained, the management is of the view that the Company has no right to the assets of MEBT and BERT, hence, the Company has not consolidated the financial statements of MEBT and BERT in the financial statements of the Company.

15. Revenue for the year ended 31 March 2015 are net of reversal of Rs. 123.80 millions pertaining to earlier periods (five months ended 31 March 2014: Rs. Nil).

16. As per Section 135 of the Companies Act, 2013, a Corporate Social Responsibility ('CSR') committee has been formed by Mphasis Limited. The primary function of the Committee is to assist the Board of Directors in formulating a CSR Policy and review the implementation and progress of the same from time to time. The CSR Policy focuses on creating opportunities for the disadvantaged with emphasis on persons with disabilities and Technology driven community development. Gross amount required to be spent by the Company during the year was Rs. 139.30 millions. The expenses incurred towards CSR activities amounting to Rs. 21.80 millions has been charged to the statement of profit and loss and is disclosed under other expenses.

17. The Company has changed its accounting year end from October to March, effective 01 November 2013. Consequent to such change, the figures furnished by the management for comparative is five months ended 31 March 2014. Hence, the same is not comparable with the current year's figures. Previous year's figures have been reclassified to conform to current year's classification, wherever applicable


Mar 31, 2014

1. DESCRIPTION OF THE COMPANY

Mphasis Limited (''The Company'' or ''Mphasis'') is a global, multicultural organisation headquartered in Bengaluru, India, specialises in providing a suite of application development and maintenance services, infrastructure outsourcing services and business process outsourcing solutions to clients around the world.

The Company is registered under the Indian Companies Act, 1956 with it''s Registered Office in Bengaluru. The Company is listed on the principal stock exchanges of India.

2. The Company''s software development centres in India include 100% Export Oriented (''EOU''), Special Economic Zone (''SEZ'') under Special Economic Zone Ordinance and Software Technology Park (''STP'') Units under the Software Technology Park guidelines issued by the Government of India. They are exempted from customs and central excise duties and levies on imported and indigenous capital goods and stores and spares. The Company has executed legal undertakings to pay customs duty, central excise duty, levies and liquidated damages, if any, in respect of imported and indigenous capital goods and stores and spares consumed duty free, in the event that certain terms and conditions are not fulfilled. Bank guarantees aggregating to Rs. 44.06 millions as at 31 March 2014 (31 October 2013: Rs. 44.06 millions) have been furnished to the Customs authorities in this regard.

3. Contingent liabilities and commitments

(a) The Company has received assessment orders for the financial years ended 31 March 2004, 31 March 2005, 31 March 2006, 31 March 2007, 31 March 2008, 31 March 2009 and 31 March 2010, wherein certain adjustments in respect of transfer pricing under Section 92CA of the Income Tax Act, 1961 have been made to the taxable income and demand orders for X 1,499.32 millions (31 October 2013: X 1,536.95 millions) have been raised on the Company. The above demands are disputed by the management and the Company has filed appeals against the aforesaid orders with appellate authorities. The management is of the view that the prices determined by it are at arm''s length and is confident that the demands raised by the assessing officer are not tenable under law. Pending outcome of the aforesaid matters under litigation, no provision has been made in the books of account for the above mentioned tax demands.

Other claims against the Company not acknowledged as debts amount to X 2,243.61 millions (31 October 2013: X 3,701.89 millions) net of bank guarantees aggregating to X 4,841.14 millions (31 October 2013: X 4,910.28). The management, basis nternal evaluation and legal opinion is of the view that these demands are not tenable.

(b) Other outstanding bank guarantees as at 31 March 2014: X 693.77 millions (31 October 2013: X 663.63 millions); including those furnished on account of jointly controlled operations X 99.35 millions (31 October 2013: X 108.70 millions).

(c) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for as at 31 March 2014: X 74.63 millions (31 October 2013: X 92.06 millions).

(d) The Company has received claims from certain customers/ vendors. Management is of the view that these claims are not tenable and is taking appropriate action in this regard.

(e) Forward contracts outstanding against receivables/ highly probable forecast transactions as at 31 March 2014 and 31 October 2013 are as below:

Currency 31 March 2014 31 October 2013 Amount Amount in Amount Amount in (millions) Rs (millions) (millions) Rs. (millions)

USD 213.78 12,808.63 250.50 15,407.00

GBP 10.39 1,036.56 13.15 1,295.90

CAD 1.97 106.91 1.88 110.62

AUD 4.37 241.65 - -

EUR 12.23 1,011.24 11.65 978.95

Forward contracts outstanding against payables as at 31 March 2014 and 31 October 2013 are as below:

Currency 31 March 2014 31 October 2013 Amount Amount in Amount Amount in (millions) Rs (millions) (millions) Rs. (millions)

SGD 3.33 158.45 3.80 188.67

The foreign exchange exposure of the Company has been hedged by forward contracts disclosed above.

Unamortized premium as at 31 March 2014 on forward exchange contracts to hedge the foreign currency risk of the underlying outstanding at the balance sheet date is X 68.22 millions (31 October 2013: X 52.26 millions). Net foreign currency exposure of the Company that is not hedged by a derivative instrument or otherwise as at 31 March 2014 is X 14,275.82 millions (31 October 2013: X 14,393.83 millions).

(f) The Company has issued performance guarantees on behalf of its subsidiaries for any future liabilities which may arise out of contracts and to certain clients for executed contracts.

(g) The Company has extended comfort letters to provide continued financial support to some of its subsidiaries to ensure that these entities operate on going concern basis and are able to meet their debts and liabilities as they fall due.

4. Operating Leases

(a) The Company is obligated under non-cancellable leases for equipment, office and residential space that are renewable on a periodic basis at the option of the lessor and lessee. The total rental expenses under non-cancellable operating leases amounted to Rs. 318.68 millions for the five months ended 31 March 2014 (year ended 31 October 2013: Rs. 367.62 millions).

The Company has also occupied office facilities and residential facilities under cancellable operating lease agreements. The Company intends to renew such leases in the normal course of its business. Total rental expense under cancellable operating leases was X 520.07 millions for the five months ended 31 March 2014 (year ended 31 October 2013: X 1,074.60 millions). Office premises are obtained on operating lease for terms ranging from 1-7 years and are renewable at the option of the Company/ lessor.

(b) The Company has subleased office space under non-cancellable operating lease agreements that are renewable on a periodic basis at the option of both the lessor and lessee. The total sub lease rental Income under non-cancellable operating leases amounted to X Nil for the five months ended 31 March 2014 (year ended 31 October 2013: X 42.08 millions).

The Company has also subleased office space under cancellable operating lease agreements. The total sub lease rental in- come under cancellable operating leases amounted to X 23.07 millions for the five months ended 31 March 2014 (year ended 31 October 2013: X 11.06 millions).

5. Related Party Transactions

(a) Entities where control exists:

- Hewlett-Packard Company, USA (ultimate holding Company)

- Hewlett-Packard Eagle Corporation, USA (100% subsidiary of Hewlett-Packard Company, USA)

- Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA), (100% subsidiary of Hewlett-Packard Eagle Corporation, USA)*

* EDS Asia Pacific Holdings, Mauritius (formerly TH Holding, Mauritius), EDS World Corporation (Far East) and EDS World Corporation LLC (Netherlands), the subsidiaries of Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA) hold 60.49% (31 October 2013: 60.49%) of the equity capital of the Company.

(b) The related parties where control exists also includes BFL Employees Equity Reward Trust, Kshema Employees Welfare Trust, Mphasis Employee Benefit Trust and the following subsidiaries.

- Mphasis Corporation (''Mphasis USA)

- Mphasis Australia Pty Limited (''Mphasis Australia'')

- Mphasis Consulting Limited (''Mphasis Consulting'')

- Mphasis Ireland Limited (''Mphasis Ireland'')

- Mphasis Lanka Private Limited (''Mphasis Lanka'')

- PT. Mphasis Indonesia (''Mphasis Indonesia'')

- Mphasis Pte Limited (''Mphasis Singapore'')

- Mphasis UK Limited (''Mphasis UK'')

- Mphasis Wyde Inc.

- Wyde Corporation Inc.

- Mphasis Deutschland GmbH (''Mphasis GmbH'')

- Mphasis (Shanghai) Software & Services Company Limited (''Mphasis China'')

- Mphasis Finsource Limited (''Mphasis Finsource'')

- Mphasis Belgium BVBA (''Mphasis Belgium'')

- Mphasis Poland s.p.z.o.o

- Mphasis Europe BV (''Mphasis Europe'')

- Mphasis Infrastructure Services Inc.

- Msource (India) Private Limited (''Msource India'')

- Mphasis Software and Services (India) Private Limited (''Mphasis India'')

- Msource Mauritius Inc. (''Msource Mauritius'')

- Wyde Solutions Canada Inc.

- Mphasis Philippines Inc.

- Wyde Tunisie SARL

- Digital Risk, LLC

- Digital Risk Mortgage Services, LLC

- Digital Risk Compliance Services, LLC

- Digital Risk Analytics, LLC

- Mphasis Wyde SASU

- Msource India BPO Private Limited

- Investor Services, LLC

- Digital Risk Valuation Services, LLC

- Digital Risk Europe, OOD

- Digital Risk Mortgage Services, Corp

(c) Key management personnel:

The key management personnel of the Company are as mentioned below:

Executive key management personnel represented on the Board of the Company

- Balu Ganesh Ayyar Chief Executive Officer

Non-executive/ independent directors on the Board of the Company

- Friedrich Froeschl Director-Non Executive Chairman of the Board

- James Mark Merritt Director-Appointed as Vice Chairman w.e.f. 13 March 2014

- Chandrakant D Patel Director-Appointed w.e.f. 05 December 2012

- Davinder Singh Brar Director

- Narayanan Kumar Director-Appointed w.e.f. 15 February 2013

- Lakshmikanth K Ananth Director-Appointed w.e.f. 28 February 2013

- Shankar Maitra Director-Appointed w.e.f. 05 December 2013

- Stefan Antonio Lutz Additional Director-appointed w.e.f. 12 February 2014

- Nawshir H Mirza Director-Retired w.e.f. 01 February 2013

- Antonio Neri Director-Resigned w.e.f. 05 December 2013

- V Ravichandran Director-Resigned w.e.f. 12 February 2014

- Francesco Serafini Director & Vice Chairman-Resigned w.e.f. 14 February 2013

- Balu Doraisamy Director-Resigned w.e.f. 14 February 2013

- Gerard Brossard Director-Resigned w.e.f. 06 December 2012

(d) Direct or indirect subsidiaries of ultimate holding company with which transactions have taken place:

- Global E-Business Operations Private Ltd

- Hewlett-Packard Company

- Hewlett-Packard Gulf SAS

- Hewlett-Packard India Sales Private Limited

- Hewlett-Packard Servicios Espania, S.L.

- Hewlett-Packard (Canada) Co.

- Hewlett-Packard (K) Limited Liability Partnership

- Hewlett-Packard (Schweiz) GmbH

- Hewlett-Packard (Thailand) Ltd

- Hewlett-Packard AP (Hong Kong) Limited

- Hewlett-Packard Aps

- Hewlett-Packard Asia Pacific Pte Ltd

- Hewlett-Packard Australia Pty Limited.

- Hewlett-Packard Belgium B.VB.A/S.PR.L

- Hewlett-Packard Brasil Ltda

- Hewlett-Packard CDS Limited

- Hewlett-Packard de Mexico S. De R.L. De CV

- Hewlett-Packard Multimedia SDN BHD

- PT. Hewlett-Packard Berca Servisindo

- Hewlett-Packard Nederland B.V

- Hewlett-Packard New Zealand

- Hewlett-Packard Norge A/S

- Hewlett-Packard OY

- Hewlett-Packard Pakistan (Private) Limited

- Hewlett-Packard Philippines Incorporation

- Hewlett-Packard Services Kuwait Company W.L.L

- Hewlett-Packard Servizi ICT S.r.l.

- Hewlett-Packard Singapore (Sales) Pte. Ltd

- Hewlett-Packard Slovakia, s.r.o.

- Hewlett-Packard South Africa (Proprietary) Limited

- Hewlett-Packard State & Local Enterprise Services, Inc.

- Shanghai Hewlett-Packard Co, Ltd

- Hewlett-Packard Technology (Shanghai) Co., Ltd

- Hewlett-Packard UK Enterprise (I) Ltd.

- Hewlett-Packard Enterprises LLC

- Hewlett-Packard Financial Services (India) Private Ltd.

- Hewlett-Packard France SAS, France

- Hewlett-Packard FS France SAS

- Hewlett-Packard Galway Ltd

- Hewlett-Packard Gesellschaft m.b.H

- Hewlett-Packard Global Investments B.V

- Hewlett-Packard Globalsoft Limited

- Hewlett-Packard GmbH

- Hewlett-Packard International Sa''rl

- Hewlett-Packard International Trade B.V.

- Hewlett-Packard Japan Limited

- Hewlett-Packard Korea Limited

- Hewlett-Packard Ltd

- HP India Software Operation Pvt Ltd

- HP Services (Singapore) Pte Ltd

- PT. Hewlett-Packard Berca Servisindo

- HP Centre de Competence France SAS

- HP Enterprise Services (Hong Kong) Ltd

- HP Enterprise Services Australia Pty Ltd

- HP Enterprise Services BPA Pty Ltd

- HP Enterprise Services Italia S.r.l

- HP Enterprise Services UK Ltd

- HP Enterprise Services Energy Italia S.r.l

- HP Enterprise Services, LLC

- HP Facilities Services (Malaysia) Sdn Bhd

- HP Financial Services (Australia) Pty Ltd

- HP Financial Services (New Zealand)

- HP Financial Services GmbH

- Hewlett-Packard Ireland, Ltd.

- HP Financial Services SPRL

- HP Information Security UK Ltd

- HP Software, LLC

6. Segment reporting

The Company has identified Banking and Capital Market, Insurance, Information Technology, Communication and Entertainment and Emerging Industries as primary business segments of the Company.

The accounting policies consistently used in the preparation of the financial statements are also applied to record revenue and expenditure in individual segments. Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while other items, wherever allocable, are apportioned to the segments on an appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company therefore believes that it is not practical to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as ''unallocated''.

Client relationships are driven based on client domicile. The geographical segments include United States of America (USA), India Asia Pacific (APAC) and Europe, Middle East & Africa (EMEA).

7. Stock Based Compensation

The Company uses the intrinsic value method of accounting for its employee stock options except for RSU Plan 2010, RSU Plan 2011 and ESOP 2012 plan wherein compensation cost is measured based on fair value method. The Company has therefore adopted the pro-forma disclosure provisions as required by the Guidance Note on "Accounting for Employee Share-based Payments" issued by the ICAI with effect from 1 April 2005.

8. The Company acquired control of Kshema Technologies Limited ("Kshema") on 1 June 2004. Kshema has been amalgamated with Mphasis Limited with effect from 1 April 2005.

The balance consideration payable to the erstwhile shareholders amounting to Rs. 17.06 millions (31 October 2013: Rs. 17.06 millions) is carried as a liability which will be paid after necessary regulatory approvals are obtained (refer note 6).

9. The Company is eligible for tax benefit in respect of profits generated from special economic zones (''SEZ'') under section 10AA of the Income Tax Act, 1961 (''Act''). The management has relied on the explanations provided in the Act and consultant''s advice regarding formation of SEZ units and inter unit costs while considering revenue and profits arising from SEZ units for the tax financial year 2012-2013. Further, pursuant to introduction of domestic transfer pricing regulation, effective 1 April 2012, the Company had undertaken a transfer pricing study and analysis of its domestic transactions between the related parties. As a result, revenue of Rs. 733.00 millions with corresponding cost of Rs. 666.00 millions relating to the period 1 April 2012 to 31 January 2013, had been accounted during the year ended 31 October 2013, which was initially cross charged by the Company to domestic related parties by crediting the cost. On the above matters, an incremental tax liability of Rs. 121.91 millions had been provided during the year ended 31 October 2013. The management is confident that the provision made in respect of aforementioned matters is adequate.

10. The Company has entered into international and specified domestic transactions with its associated enterprises within the meaning of section 92B and section 92BA respectively of the Income Tax Act, 1961. The Company is of the view that all the aforesaid transactions have been made at arm''s length terms.

11. Mphasis Finsource Limited is being merged with its Holding Company, Mphasis Limited effective 01 April 2013. The petition for amalgamation of Mphasis Finsource Limited with the Company has been filed with The Hon''ble High Court of Karnataka upon obtaining the approval from the Bombay Stock Exchange and the National Stock Exchange of India Limited. Pending requisite approvals, merger has not been accounted in the financial statements.

12. On 13 February 2014, the Company entered into a definitive agreement subject to fulfilment of certain conditions for sale of a business division on a slump sale basis. Accordingly, the expected loss of Rs. 64.41 millions (net of tax of Rs. 33.17 millions) on such sale of business has been provided for and disclosed as an exceptional item.

13. On 22 July 2013, the Board of Directors of Mphasis Lanka (Private) Limited, a wholly owned subsidiary of the Company, resolved to close down its operations. Accordingly, the Company has made provision towards investment and intercompany receivables in the financial statements of the Company amounting to Rs. 62.33 millions during the year ended 31 October 2013. Provision outstanding as at 31 March 2014 amounts to Rs. 46.69 millions.

14. Msource India BPO Private Limited has been dissolved and the name has been struck off from the register of Registrar of Companies effective 21 November 2013.

15. Current tax for the five months ended 31 March 2014 includes provision for earlier years amounting to Rs. 47.56 millions (31 October 2013: Rs. 84.14 millions).

16. The ESOP schemes ("RSU 2010","RSU 2011" and "ESOP 2012") of Mphasis Limited are administrated through the Mphasis Employee Benefit Trust ("MEBT") and all other ESOP schemes are administrated by BFL Equity Reward Trust ("BERT"). Clause 22A.1 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme ) Guidelines, 1999 states that in case of ESOS/ ESPS administrated through a Trust, the accounts of the Company shall be prepared as if the Company itself is administrating the ESOS/ ESPS. As per the Trust deeds, MEBT and BERT are constituted as irrevocable trusts. In this regard, basis legal advice obtained, the management is of the view that the Company has no right to the assets of MEBT and BERT, hence, the Company has not consolidated the financial statements of MEBT and BERT in the financial statements of the Company.

17. The financial statements have been prepared for the five months ended 31 March 2014 due to change in accounting year-end from October to March. The comparatives presented are for the year ended 31 October 2013 and hence, not comparable to the current five month period ended 31 March 2014. Previous year''s figures have been reclassified to conform to current period''s classification, wherever applicable.


Oct 31, 2013

Restricted Stock Unit Plan-2011 ("RSU Plan-2011")

Effective 1 April 2011, the Company instituted the Restricted Stock Unit Plan-2011. The Board and the shareholders of the Company approved RSU Plan-2011 on 22 November 2010 and 24 February 2011 respectively. The RSU Plan-2011 provides for the issue of restricted options to employees and directors of the Company and its subsidiaries.

The RSU Plan-2011 is administered by the MphasiS Employees Benefit Trust which was created for this purpose. Each option, granted under the RSU Plan-2011, entitles the holder thereof with an option to apply for and be issued one equity share of the Company at an exercise price of Rs. Nil per share. The equity shares covered under these options vest over a period of twelve months from the date of grant. The exercise period is three months from the date of vesting.

1. The Company''s software development centres in India include 100% Export Oriented (''EOU''), Special Economic Zone (''SEZ'') under Special Economic Zone Ordinance and Software Technology Park (''STP'') Units under the Software Technology Park guidelines issued by the Government of India. They are exempted from customs and central excise duties and levies on imported and indigenous capital goods and stores and spares. The Company has executed legal undertakings to pay customs duty, central excise duty, levies and liquidated damages, if any, in respect of imported and indigenous capital goods and stores and spares consumed duty free, in the event that certain terms and conditions are not fulfilled. Bank guarantees aggregating to Rs. 44.06 millions as at 31 October 2013 (31 October 2012: Rs. 44.53 millions) have been furnished to the Customs authorities in this regard.

2. Contingent liabilities and commitments

(a) The Company has received assessment orders for the financial years ended 31 March 2004, 31 March 2005, 31 March 2006, 31 March 2007, 31 March 2008 and 31 March 2009, wherein certain adjustments in respect of transfer pricing under section 92CA of the Income Tax Act, 1961 have been made to the taxable income and demand orders for Rs. 1,536.95 millions (31 October 2012: Rs. 1,503.02 millions) have been raised on the Company. The above demands are disputed by the management and the Company has filed appeals against the aforesaid orders with appellate authorities. The management is of the view that the prices determined by it are at arm''s length and is confident that the demands raised by the assessing officer are not tenable under law. Pending outcome of the aforesaid matters under litigation, no provision has been made in the books of account for the above mentioned tax demands.

Other claims against the Company not acknowledged as debts amounting to Rs. 3,701.89 millions (31 October 2012: Rs. 1,110.80 millions) net of bank guarantees aggregating to Rs. 4,910.28 millions (31 October 2012: Rs. Nil). The management, basis internal evaluation and legal opinion is of the view that these demands are not tenable.

(b) Other outstanding bank guarantees as at 31 October 2013: Rs. 663.63 millions (31 October 2012: Rs. 619.30 millions) including those furnished on account of jointly controlled operations Rs. 108.70 millions (31 October 2012: Rs. 235.74 millions).

(c) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for as at 31 October 2013: Rs. 92.06 millions (31 October 2012: Rs. 90.61 millions);

Unamortized premium as at 31 October 2013 on forward exchange contracts to hedge the foreign currency risk of the underlying outstanding at the balance sheet date is Rs. 52.26 millions (31 October 2012: Rs. 53.91 millions). Net foreign currency exposure of the Company that is not hedged by a derivative instrument or otherwise as at 31 October 2013: Rs. 14,393.83 millions (31 October 2012: Rs. 9,999.80 millions).

(e) The Company has issued performance guarantees on behalf of its subsidiaries for any future liabilities which may arise out of contracts and to certain clients for executed contracts.

3. Operating Leases

(a) The Company is obligated under non-cancellable leases for equipment, office and residential space that are renewable on a periodic basis at the option of the lessor and lessee. The total rental expenses under non-cancellable operating leases amounted to Rs. 303.97 millions for the year ended 31 October 2013. (31 October 2012: Rs. 421.38 millions).

The Company has also occupied office facilities and residential facilities under cancellable operating lease agreements. The Company intends to renew such leases in the normal course of its business. Total rental expense under cancellable operating leases was Rs. 1,138.25 millions for the year ended 31 October 2013. (31 October 2012: Rs. 854.43 millions). Office premises are obtained on operating lease for terms ranging from 1-7 years and are renewable at the option of the Company/ lessor.

(b) The Company has subleased office space under non-cancellable operating lease agreements that are renewable on a periodic basis at the option of both the lessor and lessee. The total sub lease rental Income under non-cancellable operating leases amounted to Rs. 42.08 millions for the year ended 31 October 2013 (31 October 2012: Rs. 34.14 millions).

4. Related Party Transactions

(a) Entities where control exists:

- Hewlett-Packard Company, USA (ultimate holding Company)

- Hewlett-Packard Eagle Corporation, USA (100% subsidiary of Hewlett-Packard Company, USA)

- Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA), (100% subsidiary of Hewlett-Packard Eagle Corporation, USA)*

* EDS Asia Pacific Holdings, Mauritius (formerly TH Holding, Mauritius), EDS World Corporation (Far East) and EDS World Corporation LLC (Netherlands), the subsidiaries of Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA) hold 60.49% (31 October 2012: 60.50%) of the equity capital of the Company.

(b) The related parties where control exists also includes BFL Employees Equity Reward Trust, Kshema Employees Welfare Trust, MphasiS Employee Benefit Trust and the following subsidiaries.

- MphasiS Corporation (Rs.MphasiS USARs.)

- MphasiS Australia Pty Limited (MphasiS Australia)

- MphasiS Consulting Limited (MphasiS Consulting)

- MphasiS Ireland Limited (MphasiS Ireland'')

- MphasiS Lanka Private Limited (''MphasiS Lanka'')

- MphasiS Deutschland GmbH (''MphasiS GmbH'')

- MphasiS (Shanghai) Software & Services Company Limited (''MphasiS China'')

- MphasiS FinsourcE Limited (''MphasiS FinsourcE'')

- MphasiS Belgium BVBA (''MphasiS Belgium'')

- MphasiS Poland s.p.z.o.o

- PT. MphasiS Indonesia (''MphasiS Indonesia'')

- MphasiS Pte Limited (''MphasiS Singapore'')

- MphasiS UK Limited (''MphasiS UK'')

- MphasiS Wyde Inc.

- Wyde Corporation

- Wyde Solutions Canada Inc.

- MphasiS Philippines Inc.

- Wyde Tunisie SARL

- Digital Risk, LLC

- Digital Risk Mortgage Services, LLC

- Digital Risk Compliance Services, LLC

- Digital Risk Analytics, LLC

- MphasiS Europe BV (''MphasiS Europe'')

- MphasiS Infrastructure Services Inc.

- MsourcE (India) Private Limited (''MsourcE India'')

- MphasiS Software and Services (India) Private Limited (''MphasiS India'')

- MsourcE Mauritius Inc. (''MsourcE Mauritius'')

- MphasiS Wyde SAS

- MsourcE India BPO Private Limited

- Investor Services, LLC

- Digital Risk Valuation Services, LLC

- Digital Risk Europe, OOD

- Digital Risk Mortgage Services, Corp

(c) Key management personnel:

The key management personnel of the Company are as mentioned below:

Executive key management personnel represented on the Board of the Company

- Balu Ganesh Ayyar Chief Executive Officer

(d) Direct or indirect subsidiaries of ultimate holding company with which transactions have taken place:

- Hewlett-Packard UK Enterprise (I) Ltd.

- P.T. Hewlett-Packard Berca Servisindo

- Autonomy Inc

- HP India Software Operation Pvt Ltd

- Hewlett-Packard Australia Pty Limited

- HP Enterprise Services BPA Pty Ltd

- Hewlett-Packard Brasil Ltda

- Hewlett-Packard (Schweiz) GmbH

- Shanghai Hewlett-Packard Co, Ltd

- Hewlett-Packard GmbH

- Global E:Business Operations Private Ltd

- HP Centre de Competence France SAS

- Hewlett-Packard Ltd

- HP Financial Services (New Zealand)

- Hewlett-Packard Company

- HP Financial Services GmbH

- HP Financial Services SPRL

- HP Enterprise Services Australia Pty Ltd

- Hewlett-Packard Belgium B.V.B.A/S.P.R.L

- Hewlett-Packard (Canada) Co.

- Hewlett-Packard Technology (Shanghai) Co., Ltd

- Hewlett-Packard Colombia Ltda

- Hewlett-Packard Aps

- Hewlett-Packard OY

- Hewlett-Packard France SaS

- Hewlett-Packard CDS Limited

- HP Enterprise Services UK Ltd

- Hewlett-Packard India Sales Private Limited

- Hewlett-Packard Galway Ltd

- Hewlett-Packard Servicios Espania, S.L.

- Hewlett-Packard Globalsoft Limited

- HP Enterprise Services Energy Italia S.r.l

- Hewlett-Packard Korea Limited

- Hewlett-Packard de Mexico S. De R.L. De CV

- Hewlett-Packard (K) Limited Liability Partnership

- Hewlett-Packard International Trade B.V.Saudi Arabia Branch

- Hewlett-Packard New Zealand

- Hewlett-Packard Singapore (Sales) Pte. Ltd

- HP Services (Singapore) Pte Ltd

- HP Software, LLC

- Hewlett-Packard State & Local Enterprise Services, Inc.

- Hewlett-Packard SAS, France

- Hewlett-Packard Servizi ICT S.r.l.

- Hewlett-Packard Global Investments B.V

- Hewlett-Packard International Sa''rl

- Hewlett-Packard Pakistan (Private) Limited

- Hewlett-Packard Financial Services (Australia)

- HP Enterprise Services (Hong Kong) Ltd

- Hewlett-Packard Ireland, Ltd.

- Hewlett-Packard Financial Services (India) Private Ltd.

- Hewlett-Packard (M) Sdn.Bhd.

- HP Enterprise Services Italia S.r.l

- Hewlett-Packard Japan Limited

- Hewlett-Packard Services Kuwait Company W.L.L

- Hewlett-Packard Multimedia SDN BHD

- Hewlett-Packard Nederland B.V

- Hewlett-Packard Norge A/S

- Hewlett-Packard Sverige A.B.

- Hewlett-Packard Asia Pacific Pte Ltd.

- Hewlett-Packard (Thailand) Ltd

- Hewlett-Packard Enterprises LLC

- HP Enterprise Services, LLC

- Hewlett-Packard South Africa (Proprietary) Limited

- Hewlett-Packard Nigeria Ltd

- Hewlett-Packard Slovakia, s.r.o.

- Hewlett-Packard Gulf SAS

- Hewlett-Packard Philippines Incorporation

- Hewlett-Packard Enterprise Services France S.A.S

5. Segment reporting

The Company has identified Banking and Capital Market, Insurance, Information Technology, Communication and Entertainment and Emerging Industries as primary business segments of the Company.

The accounting policies consistently used in the preparation of the financial statements are also applied to record revenue and expenditure in individual segments. Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while other items, wherever allocable, are apportioned to the segments on an appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company therefore believes that it is not practical to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as ''unallocated''.

Client relationships are driven based on client domicile. The geographical segments include United States of America (USA), Asia Pacific (APAC), India and Europe, Middle East & Africa (EMEA).

6. Stock Based Compensation

The Company uses the intrinsic value method of accounting for its employee stock options except for RSU Plan 2010, RSU Plan 2011 and ESOP 2012 plan wherein compensation cost is measured based on fair value method. The Company has therefore adopted the pro-forma disclosure provisions as required by the Guidance Note on "Accounting for Employee Share-based Payments" issued by the ICAI with effect from 1 April 2005.

b. Provident Fund

The Company contributed '' 512.02 millions during the year ended 31 October 2013 (31 October 2012: '' 542.83 millions).

Effective 03 July 2013, the Company has established a Provident Fund Trust to which contributions towards provident fund are made each month. The Company has initiated steps for closure and transfer of funds from recognised provident funds to trust. The trust has invested the contribution in Government bonds with average returns more than the guaranteed return. Pending transfer of corpus from recognised provident fund the Company has not carried out actuarial valuation as at the date of Balance Sheet. Also the management does not expect any shortfall.

7. MphasiS Employee Welfare Trust, Mauritius (''MEWT''), was formed in year 2000 to administer the options granted to the employees of MphasiS Corporation when it was acquired by MphasiS Limited. At the time of acquisition, 1,288,787 shares of MphasiS Limited were issued to MEWT to be granted to the employees of MphasiS Corporation in lieu of the options on its shares held by them. The options that were not exercised lapsed on 11 April 2011. MEWT no longer had a purpose hence, the cash balance to the extent of '' 181.69 millions with MEWT and the sale proceeds of 216,783 shares amounting to '' 83.47 millions representing the lapsed options was remitted back during the year ended 31 October 2012. The remittance received has been credited to Capital Reserve. The Company has agreed to indemnify the trustees of MEWT towards any future claims.

8. The Company acquired control of Kshema Technologies Limited ("Kshema") on 1 June 2004. Kshema has been amalgamated with MphasiS Limited with effect from 1 April 2005.

The balance consideration payable to the erstwhile shareholders amounting to '' 17.06 millions (31 October 2012: '' 17.06 millions) is carried as a liability which will be paid after necessary regulatory approvals are obtained (refer note 7).

9. The Company is eligible for tax benefit in respect of profits generated from special economic zones (''SEZ'') under section 10AA of the Income Tax Act, 1961 (''Act''). The management has relied on the explanations provided in the Act and consultant''s advice regarding formation of SEZ units and inter unit costs while considering revenue and profits arising from SEZ units for the tax financial year 2012-2013. Further, pursuant to introduction of domestic transfer pricing regulation, effective 1 April 2012, the Company has undertaken a transfer pricing study and analysis of its domestic transactions between the related parties. As a result, revenue of '' 733.00 millions with corresponding cost of '' 666.00 millions relating to the period 1 April 2012 to 31 January 2013, has been accounted during the year ended 31 October 2013, which was initially cross charged by the Company to domestic related parties by crediting the cost. On the above matters, an incremental tax liability of '' 121.91 millions has been provided during the year ended 31 October 2013. The management is confident that the provision made in respect of aforementioned matters is adequate.

10. The Company has entered into international and specified domestic transactions with its associated enterprises within the meaning of section 92B and section 92BA respectively of the Income Tax Act, 1961. The Company is of the view that all the aforesaid transactions have been made at arms'' length terms.

11. The Board of directors of the Company in its meeting held on 27 September 2013 has approved the amalgamation of MphasiS FinsourcE Limited with its holding company, MphasiS Limited. 1 April 2013 being the appointed date of the merger. The Company is in the process of seeking approvals from The National Stock Exchange of India Limited, The Bombay Stock Exchange limited and The Hon''ble High Court of Karnataka.

12. On 22 July 2013, the Board of Directors of MphasiS Lanka (Private) Limited, a wholly owned subsidiary of the Company, resolved to close down its operations. Accordingly, an amount of '' 62.33 millions towards investment and inter-company receivables has been provided for in the financial statement of the Company.

13. MsourcE India BPO Private Limited has been dissolved and the name has been struck off from the register of Registrar of Companies effective 21 November 2013.

14. Current tax for the year ended 31 October 2013 include provision for earlier years amounting to '' 84.14 millions (year ended 31 October 2012 is net of reversal of provision for earlier years amounting to '' 180.00 millions).

15. Previous year''s figures have been reclassified to conform to this year''s classification, wherever applicable.


Oct 31, 2011

1. DESCRIPTION OF THE COMPANY

MphasiS Limited ('The Company' or 'MphasiS') is a global, multicultural organisation headquartered in Bangalore, India, specialising in providing a suite of application development and maintenance services, infrastructure outsourcing services and business process outsourcing solutions to clients around the world.

The Company is registered under the Indian Companies Act, 1956 with it's Registered Office in Bangalore. The Company is listed on the principal stock exchanges of India.

1.1 The Company acquired control of Kshema Technologies Limited ("Kshema") on 1 June 2004. Kshema has been amalgamated with MphasiS Limited with effect from 1 April 2005.

The balance consideration payable to the erstwhile shareholders amounting to Rs. 17,060,055 (31 October 2010: Rs. 17,060,055) is carried as a liability which will be paid after necessary regulatory approvals are obtained (refer note 16).

1.2 The Company filed a scheme of merger of MphasiS FinSolutions Private Limited, a wholly owned subsidiary acquired by MphasiS Limited effective 1 October 2009, with itself, with the Hon'ble High Court of Karnataka and the Hon'ble High Court of Madras. The Hon'ble High Courts had passed orders approving the petition of merger on 5 July 2010 and 17 September 2010 respectively, effective from 1 November 2009. Subsequently, the Company had filed the Court orders with the Roc of Karnataka and Chennai on 11 August 2010 and 8 October 2010 respectively. The appointed date of merger was 01 November 2009. Accordingly, the financial statements for the year ended 31 October 2010 had been adjusted by incorporating the merger impact of MphasiS Fin Solutions Private Limited with the Company in accordance with aforesaid High Court orders.

Pursuant to the terms of the approved merger scheme, the amalgamation had been accounted for under the pooling of interest method as prescribed by Accounting Standard 14 for "Accounting for Amalgamations", accordingly, all the assets and liabilities recorded in the books of MphasiS Finsolutions as at 31 October 2009 had been recorded by the Company at their respective book values as follows:

Further, pursuant to the terms of the approved merger scheme:

(a) The amount of investments in MphasiS Fin Solutions had been credited in full and Goodwill of Rs. 1 73,468,380 accounted at the time of acquisition of MphasiS Fin Solutions by the Company had been reduced from the securities premium account of the Company.

(b) Deficit of Rs. 4,298,663 in net assets acquired by the Company as of appointed date of 1 November 2009 had been adjusted against the securities premium account of the Company.

(c) Expenses of Rs. 622,311 incurred by the Company in connection with the amalgamation scheme had been adjusted against the General Reserves of the Company.

The above treatment is different from the requirements of Accounting Standard 14 for "Accounting for Amalgamations" ('AS-14') and Generally Accepted Accounting Principles ('GAAP'). In accordance with the requirements of AS-14 and GAAP, the carrying value of securities premium would have been higher by Rs. 177,767,044, profit and loss before tax for the year ended 31 October 2010 would have been lower by Rs. 178,389,355 and general reserves would have been higher by Rs. 622,311.

1.3 MphasiS Lanka (Private) Limited was incorporated as a subsidiary of the Company on 1 2 February 2010.

1.4 MphasiS Corporation, a subsidiary of the Company, acquired Fortify Infrastructure Services Inc. along with its subsidiaries Fortify North America Inc. and Wide Area Management Services Inc. effective 1 May 2010 for an aggregate consideration of USS 27,737,309 (Rs. 1,230,427,027) including USS 1 2,500,000 (Rs. 608,687,500) payable in trenches up to the financial year ended 31 October 2012 on the basis of the fulfillment of certain Revenue/Earnings obligations.

As per addendum to the Share Purchase Agreement the date for fulfillment of Revenue/Earnings obligations is revised to 31 January 2013.

The name of the acquired company was changed to MphasiS Infrastructure Services Inc. with effect from 7 July 2010. Further, Fortify North America Inc. was merged with MphasiS Infrastructure Services Inc. effective 14 July 2010. Wide area Management Services Inc., a subsidiary of MphasiS Infrastructure Services Inc. was closed effective 4 November 2010.

1.5 MphasiS Poland s.p.z.o.o. was incorporated as a subsidiary of the Company on 11 May 2010.

1.6 PT MphasiS Indonesia was incorporated as a subsidiary of the Company on 25 April 2011

1.7 Seine Acquisition Inc., a subsidiary of MphasiS UK Limited incorporated on 27 July 2011, acquired Wyde Corporation along with its subsidiaries Wyde Solutions Canada Inc., Wyde Inc. SA and Wyde Tunisie SARL effective 29 August 2011 for an aggregate consideration of USS 90,599,977 (Rs. 4,183,046,899) including acquisition related expenses and USS 6,100,000 (Rs. 281,149,000) held in escrow account for a stipulated period subject to deduction of any liability arising in relation to the indemnification provided by the erstwhile shareholders.

1.8 M source India BPO Private Limited had filed an application under section 560 of the Companies Act 1956, for striking its name off the register with the Registrar of Companies, Ministry of Corporate Affairs under Fast Track Exit mode which is under progress with Ministry of Corporate Affairs.

Employee Stock Option Plans ('ESOP') - Equity Settled

Effective 1 February 2011, the Company has adopted the policy of accounting employee stock-based compensations using fair-value method in place of intrinsic value method. In the opinion of the Company, fair value method is a more globally accepted method. Measurement and disclosure of the employee share based payments plan is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the guidance note on accounting for Employee Share Based Payments, issued by Institute of Chartered Accountants of India ('ICAI'). The Company accounts for stock compensation expense based on the fair value of the option granted, determined on the date of grant. Compensation expenses are amortized over the vesting period of the option on the straight line basis.

Had the Company adopted the intrinsic value method of accounting, the employee compensation cost would have been higher by Rs. 610,929 for the year ended 31 October 2011 and profit would have been lower by that extent.

All the ESOPs are in respect of the Company's shares where each stock option is equivalent to one equity share. In accordance with the Guidance Note on "Accounting for Employee Share-based Payments" issued by the ICAI with effect from 1 April 2005, the necessary disclosures have been made for the years ended 31 October 2011 and 31 October 2010 for grants outstanding on and made on or after that date for each of the plans described below (Also refer note 37).

Employees Stock Option Plan 1998 (the 1998 Plan): The Company instituted the 1998 Plan for all eligible employees in pursuance of the special resolution approved by the shareholders in the Annual General Meeting held on 31 July 1998. The 1998 Plan provides for the issuance of 3,720,000 options to eligible employees as recommended by the ESOP Committee constituted for this purpose.

In accordance with the 1998 Plan, the Committee has formulated 1998 Plan - (Version I) and 1998 Plan - (Version II) during the years 1998 - 1999 and 1999 - 2000 respectively.

1998 Plan - (Version I): Each option granted under the 1998 Plan - (Version I), entitles the holder thereof with an option to apply for and be issued one equity share of the Company at an exercise price of Rs. 34.38 per share. The equity shares covered under these options vest at various dates over a period ranging from six to sixty-six months from the date of grant based on the length of service completed by the employee to the date of grant. The options are exercisable any time after their vesting period.

The weighted average share price as at the date of exercise for stock options was Rs. 522.00 (31 October 2010:Rs. 689.1 3). The options outstanding as at 31 October 2011 had an exercise price of Rs. 34.38 (31 October 2010: Rs. 34.38).

1998 Plan - (Version II): Commencing January 2000, the Company decided to grant all future options at the market price immediately preceding the date of grant. The equity shares covered under these options vest at various dates over a period ranging from twelve to forty-eight months from the date of grant based on the grade of the employee. However, in the case of options granted to the then Managing Director or Chief Executive Officer, the vesting period of the options, subject to minimum period of one year from the date of grant, is determined by the ESOP Committee and approved by the Board. The options are to be exercised within a period of ten years from their date of vesting.

The weighted average share price as at the date of exercise for stock options was Rs. 533.21 (31 October 2010:Rs. 664.54). The options outstanding as at 31 October 2011 had an exercise price ranging from Rs. 23.21 to Rs. 258.00 (31 October 2010: Rs. 23.21 to Rs. 275) and weighted average remaining contractual life of 2.33 years (31 October 2010: 2.68 years).

Employees Stock Option Plan 2000 (the 2000 Plan): Effective 25 July 2000, the Company instituted the 2000 Plan. The shareholders and ESOP Committee approved the 2000 Plan in July 2000. The 2000 Plan provides for the issue of equity shares to employees and directors of the Company and its subsidiaries.

The 2000 Plan is administered by the ESOP Committee appointed by the Board. Under the 2000 Plan, options will be issued to employees at an exercise price, which shall not be less than the market price immediately preceding the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty-eight months from the date of grant. The exercise period is one to two years from the date of vesting.

The weighted average share price as at the date of exercise for stock options was Rs. 521.83 (31 October 2010:Rs. 649.45). The options outstanding as at 31 October 2011 had an exercise price ranging from Rs. 129.95 to Rs. 208.45 (31 October 2010: Rs. 119.03 to Rs. 208.45) and weighted average remaining contractual life of 0.27 years (31 October 2010: 0.70 years).

Employees Stock Option Plan - 2003 (the 2003 Plan): The shareholders at the Annual General Meeting on 2 June 2003 approved a new Employee Stock Option Plan. The 2003 Plan provides for the issue of equity shares to employees and directors of the Company and its subsidiaries and is administered by the ESOP Committee appointed by the Board. Options shall be issued to employees at an exercise price which shall not be less than the market price immediately preceding the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty-eight months from the date of grant. However, certain options were granted to executive directors having a target stock price condition and a one year service condition as vesting conditions. The exercise period is two years from the date of vesting.

The weighted average share price as at the date of exercise for stock options was Rs. 455.08 (31 October 2010:Rs. 629.56). No options are outstanding as at 31 October 2011 and the options outstanding as at 31 October 2010 had an exercise price of Rs. 1 30.60 and weighted average remaining contractual life of 0.59 years.

Employees Stock Option Plan - 2004 (the 2004 Plan): At the Extraordinary General Meeting on 12 May 2004, the shareholders approved a new Employee Stock Option Plan. The 2004 Plan provides for the issuance of equity shares to employees and directors of the Company and its subsidiaries and for the exchange of outstanding stock options of MsourcE Corporation as on 20 September 2004, pursuant to its merger with MphasiS Corporation and the assumption of the MsourcE stock options by the Company.

The 2004 Plan is administered through the ESOP Committee appointed by the Board and comprises two programs. Under Program A, outstanding options of MsourcE Corporation were exchanged for options in the Company on the agreed exchange ratio of 0.14028 stock options with underlying equity shares of the Company for each stock option in the MsourcE 2001 plan, the exercise price being the equivalent amount payable by the option holder under the MsourcE 2001 plan. The equity shares underlying these options vest over a period up to forty-eight months from the date of assumption by the Company and shall be exercisable within a period of ten years from the original date of grant under the MsourcE 2001 plan.

Options under Program B represent fresh grants and shall be issued to employees at an exercise price which will be equal to the fair value of the underlying shares at the date of grant. The equity shares covered under these options vest over a period ranging from twelve to forty-eight months from the date of grant. The exercise period is two years from the date of vesting.

The weighted average share price as at the date of exercise for stock options was Rs. 473.40 (31 October 2010:Rs. 647.19). The options outstanding as at 31 October 2011 had an exercise price ranging from Rs. 50.34 to Rs. 1 84.50 (31 October 2010: Rs. 50.34 to Rs. 1 84.50) and weighted average remaining contractual life of 4.25 years (31 October 201 0: 2.58 years).

Restricted Stock Units

EDS, the holding company, had issued Restricted Stock Units ('RSU') to certain employees of the Company. These have been replaced by RSUs of HP, pursuant to the merger. Subsequent to the merger, HP had also issued RSUs to certain employees of the Company. The total cost incurred towards RSUs for the year ended 31 October 2011 and 31 October 2010 amounted to Rs. 42,623,598 and Rs. 41,904,396 respectively. However, the cost has been borne by HP and accordingly this has not been accounted as an expense by the Company.

Restricted Stock Unit Plan-2010 ("RSU Plan-2010")

Effective 1 August 201 0, the Company instituted the Restricted Stock Unit Plan-2010. The Board and the shareholders of the Company approved RSU Plan-2010 on 29 June 2010 and 17 August 2010 respectively. The RSU Plan-2010 provides for the issue of restricted options to certain employees of the Company and its subsidiaries.

The RSU Plan-2010 is administered by the MphasiS Employees Benefit Trust which was created for this purpose. Each option, granted under the RSU Plan-2010, entitles the holder thereof with an option to apply for and be issued one equity share of the Company at an exercise price of Rs. 1 0.00 per share. The equity shares covered under these options vest over a period ranging from twelve to twenty-four months from the date of grant. The exercise period is one to three years from the date of vesting.

The option outstanding as on October 2011 has an exercise price of f 10.00 and the weighted average remaining contractual life of 3.78 years.

* The expected volatility was determined based on historical volatility data

Total Employee Compensation Cost pertaining to RSU Plan-2010 during the year is Rs. 43,522,056 ( 31 October 2010: Nil), net of cross charge to subsidiary companies.

Restricted Stock Unit Plan-2011 ("RSU Plan-2011")

Effective 1 April 2011, the Company instituted the Restricted Stock Unit Plan-2011. The Board and the shareholders of the Company approved RSU Plan-2011 on 22 November 2010 and 24 February 201 1 respectively. The RSU Plan-2011 provides for the issue of restricted options to employees and directors of the Company and its subsidiaries.

The RSU Plan-2011 is administered by the MphasiS Employees Benefit Trust which was created for this purpose. Each option, granted under the RSU Plan-2011, entitles the holder thereof with an option to apply for and be issued one equity share of the Company at an exercise price of Nil per share. The equity shares covered under these options vest over a period of twelve months from the date of grant. The exercise period is three months from the date of vesting.

The option outstanding as on October 2011 has an exercise price of Rs. Nil and the weighted average remaining contractual life of 0.67 years.

* The expected volatility was determined based on historical volatility data

Total Employee Compensation Cost pertaining to RSU Plan-2011 during the year is Rs. 44,240,140 (31 October 2010: Nil), net of cross charge to subsidiary companies.

The Company has advanced an amount of Rs. 214,859,768 (31 October 2010: Rs.20,871,472) to the MphasiS Employees Benefit Trust.

2. The Company's software development centres in India are 100% Export Oriented ('EOU') / Special Economic Zone ('SEZ') under Special Economic Zone Ordinance and Software Technology Park ('STP') Units under the Software Technology Park guidelines issued by the Government of India. They are exempted from customs and central excise duties and levies on imported and indigenous capital goods and stores and spares. The Company has executed legal undertakings to pay customs duty, central excise duty, levies and liquidated damages, if any, in respect of imported and indigenous capital goods and stores and spares consumed duty free, in the event that certain terms and conditions are not fulfilled. Bank guarantees aggregating to Rs. 115,025,500 as at 31 October 2011 (31 October 2010: Rs. 108,855,940) have been furnished to the Customs authorities in this regard.

3. Contingent liabilities and commitments

(a) The Company has received assessment orders for the financial years ended 31 March 2004, 31 March 2005, 31 March 2006, 31 March 2007 and 31 March 2008, wherein certain adjustments in respect of transfer pricing under Section 92CA of the Income Tax Act, 1961 and other disallowances have been made to the taxable income and demand order for Rs. 1,518,477,841 (31 October 2010: Rs. 814,876,045)has been raised on the Company.

The above demands are disputed by the management and the Company has filed appeals against the aforesaid orders with appellate authorities.

The management is of the view that the prices determined by it are at arm's length and is confident that the demands raised by the assessing officer are not tenable under law.

Pending outcome of the aforesaid matters under litigation, no provision has been made in the books of accounts in this regards.

(b) Other claims against the Company not acknowledged as debts amount to Rs. 613,042,569 (31 October 2010: Rs. 15,324,107);

(c) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for as at 31 October 2011: Rs.183,914,732 (31 October 2010: Rs. 31,902,663);

(d) Guarantees outstanding including those furnished to Customs Authorities as at 31 October 2011: Rs. 257,413,768 (31 October 2010: Rs.306,335,852);

(e) Forward contracts outstanding against receivables/highly probable forecast transactions as at 31 October 2011 and 31 October 2010 are as below:

Unamortised premium as at 31 October 2011 on forward exchange contracts to hedge the foreign currency risk of the underlying outstanding at the balance sheet date is Rs. 52,925,257 (31 October 2010: Rs. 67,916,086). Net foreign currency exposure of the Company that is not hedged by a derivative instrument or otherwise as at 31 October 2011: Rs. 8,739,083,072 (31 October 2010: Rs. 4,909,958,385).

(f) The Company has issued performance guarantees on behalf of its subsidiaries for any future liabilities which may arise out of contracts.

4. Operating Leases

a) The Company is obligated under non-cancelable leases for computer equipments, office and residential space that are renewable on a periodic basis at the option of both the lesser and lessee. The total rental expenses under non-cancelable operating leases amounted to Rs. 586,792,394 for the year ended 31 October 2011. (31 October 2010: Rs. 790,768,173).

The Company leases office facilities and residential facilities under cancelable operating lease agreements. The Company intends to renew such leases in the normal course of its business. Total rental expense under cancelable operating leases was Rs. 665,386,094 for the year ended 31 October 2011. (31 October 2010: Rs. 329,510,696).

Office premises are obtained on operating lease for terms ranging from 1-7 years and are renewable at the option of the Company/lesser.

b) The Company has subleased office space under non-cancelable operating lease agreements that are renewable on a periodic basis at the option of both the lesser and lessee. The total sub lease rental Income under non- cancelable operating leases amounted to Rs. 27,985,067 for the year ended 31 October 2011 (31 October 2010: Rs.Nil).

The Company has subleased office space under cancelable operating lease agreements. The total sub lease rental Income under cancelable operating leases amounted to Rs. 9,319,638 for the year ended 31 October 2011. (31 October 2010: Nil).

5. Related Party Transactions

(a) Entities where control exists:

Hewlett-Packard Company, USA (ultimate holding company)

Hewlett Packard Eagle Corporation, USA (100% subsidiary of Hewlett Packard Company, USA)

Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA), (100% subsidiary of Hewlett Packard Eagle Corporation, USA)*

* EDS Asia Pacific Holdings, Mauritius (formerly TH Holding, Mauritius), EDS World Corporation (Far East) and EDS World Corporation (Netherlands), the subsidiaries of Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA) hold 60.52% (31 October 2010: 60.55%) of the equity capital of the Company.

The related parties where control exists also include subsidiaries as referred in Note 2, BFL Employees Equity Reward Trust, Kshema Employees Welfare Trust and MphasiS Employee Benefit Trust.

* This does not include remuneration paid to certain non-executive directors who are paid by the ultimate parent company and its affiliates as they are employees of the said companies.

** The Company has accrued expenses for certain services received from a related party where significant influence exists for which the Master Service Agreement ("MSA") has expired and is expected to be renewed upon completion of the ongoing negotiation of terms. As at 31 October 2011, the provisioning for such services has been made on best estimate basis.

Due to changes in the business environment and changes in the manner in which business is conducted, the Company has revised its transfer pricing policy with regard to certain transactions with its subsidiaries with effect from 1 April 2011 and the effect of the same has been accounted for in the current year.

* This does not include remuneration to certain non-executive directors, as the same is paid by the ultimate parent

company and its affiliates as they are employees of the said companies. ** As the liability for gratuity and leave encashment is provided on an actuarial basis for the Company as whole, the amount pertaining to the directors are not included above.

6. Segment reporting

The Company was reporting Applications Services, Infrastructure Outsourcing Services and Business Process Outsourcing Services as its primary business segments till 31 October 2010. Effective 1 November 2010, the Company has redefined its Organisational Structure and accordingly has identified Banking and Capital Market, Insurance, Information Technology, Communication and Entertainment and Emerging Industries as primary business segments of the Company. The comparative figures have been restated to reflect information for these new segments.

The accounting policies consistently used in the preparation of the financial statements are also applied to record revenue and expenditure in individual segments. Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while other items, wherever allocable, are apportioned to the segments on an appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company therefore believes that it is not practical to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as 'unallocated'.

Client relationships are driven based on client domicile. The geographical segments include United States of America (USA), India & Asia Pacific (APAC) and Europe, Middle East & Africa (EMEA). Secondary segment information for previous year has been re grouped based on geographical segments of current year.

7. Stock Based Compensation

The Company uses the intrinsic value method of accounting for its employee stock options except for RSU Plan 2010 and RSU Plan 2011 wherein compensation cost is measured based on fair value method. The Company has therefore adopted the pro-forma disclosure provisions as required by the Guidance Note on "Accounting for Employee Share-based Payments" issued by the ICAI with effect from 1 April 2005.

Had the compensation cost been determined in a manner consistent with the fair value approach described in the aforesaid Guidance Note, the Company's net profit and EPS as reported would have been adjusted to the pro-forma amounts indicated below:

The gratuity expense is grouped under salary and allowances in the profit and loss account. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market. Expected return on plan assets is computed based on prevailing market rate.

8. Loans and Advances include service tax input credit receivable, (net) of Rs. 2,662,837,992 (31 October 2010: Rs. 2,510,057,550). Based on legal opinion obtained by the Company, service tax liability on imported services under "Import of Services Rules" have been discharged using accumulated balance available in CENVAT Credit Account for the period December 1, 2010 to March 31, 2011. Effective April 1 ,2011 such position is reversed and service tax liability on select imported services under "Import of Services Rules" have been discharged in cash. Further, the Company has obtained legal opinions in support of its position on non applicability of Sec 66A of the Finance Act 1994 read with 'Import of Services Rules' on onsite services provided by foreign vendors (including group companies).

The management, per the legal opinions, is confident that the legal positions taken by the Company are tenable and defendable under law.

9. The Company has entered into joint venture agreements with E - Governance Solutions Private Limited and Strategic Outsourcing Services Private Limited for execution of certain projects jointly. These parties do not have significant interest in such projects being executed jointly with the Company.

10. The figures of the previous year have been regrouped/ reclassified, wherever necessary, to conform with the current year classification.


Oct 31, 2010

1. The Companys software development centres in India are 100% Export Oriented (EOU) / Special Economic Zone (SEZ) under Special Economic Zone Ordinance and Software Technology Park (STP) Units under the Software Technology Park guidelines issued by the Government of India. They are exempted from customs and central excise duties and levies on imported and indigenous capital goods and stores and spares. The Company has executed legal undertakings to pay customs duty, central excise duty, levies and liquidated damages, if any, in respect of imported and indigenous capital goods and stores and spares consumed duty free, in the event that certain terms and conditions are not fulfilled. Bank guarantees aggregating to Rs. 108,855,940 as at 31 October 2010 (31 October 2009: Rs. 111,582,340) have been furnished to the Customs authorities in this regard.

2. Until 31 October 2009, the Company used the spot discounted method wherein the changes in the spot rate of derivative financial instruments designated as cash flow hedges were recognized directly in Hedging Reserve and reclassified into the profit and loss account upon the occurrence of the hedged transaction. Changes in fair value relating to the premia/ discount on the derivative financial instruments were recognized in the profit and loss account.

For the new cash flow hedges taken from 01 November 2009, the Company adopted the forward discounted method in accordance with its revised hedge accounting methodology, wherein the forward rate is used to record changes in fair value of derivative financial instruments and such changes are recognised directly in Hedging Reserve and reclassified into the profit and loss account upon the occurrence of the hedged transaction. As a result of this change, net profit for the year ended 31 October 2010 is higher by Rs. 163,422,267.

3. Contingent liabilities and commitments

(a) Claims against the Company not acknowledged as debts amount to Rs. 830,200,152 (31 October 2009: Rs. 822,338,829);

(b) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for as at 31 October 2010: Rs. 31,902,663 (31 October 2009: Rs. 240,249,348);

(c) Guarantees outstanding including those furnished to Customs Authorities as at 31 October 2010: Rs. 306,335,852 (31 October 2009: Rs. 222,022,340);

(d) Forward contracts outstanding as at 31 October 2010 are as below:

Currency Amount Amount in INR

USD 536,075,000 23,815,131,875

GBP 37,100,000 2,623,712,000

AUD 42,994,167 1,854,983,343

EUR 4,100,807 251,861,317

SGD 17,039,555 582,284,193

Forward contracts outstanding as at 31 October 2009 are as below:

Currency Amount Amount in INR

USD 637,900,000 31,377,326,500

GBP 54,654,683 4,405,112,949

SGD 6,889,857 234,842,330

The foreign exchange exposure of the Company has been hedged by forward contracts disclosed above.

Unamortised premium as at 31 October 2010 on forward exchange contracts to hedge the foreign currency risk of the underlying outstanding at the balance sheet date is Rs. 67,916,086 (31 October 2009: Rs. 32,347,958). Net foreign currency exposure of the Company that is not hedged by a derivative instrument or otherwise as at 31 October 2010: Rs. 3,745,390,029 (31 October 2009: Rs. 3,678,793,348).

(e) The Company has issued performance guarantees on behalf of its subsidiaries for any future liabilities which may arise out of contracts.

4. Operating Leases

The Company is obligated under non-cancellable leases for computer equipments, office and residential space that are renewable on a periodic basis at the option of both the lessor and lessee. The total rental expenses under non-cancellable operating leases amounted to Rs. 790,768,173 for the year ended 31 October 2010. (31 October 2009: Rs. 887,569,700).

The Company leases office facilities and residential facilities under cancellable operating lease agreements. The Company intends to renew such leases in the normal course of its business. Total rental expense under cancellable operating leases was Rs. 329,510,696 for the year ended 31 October 2010. (31 October 2009: Rs. 392,281,266).

Office premises are obtained on operating lease for terms ranging from 1-7 years and are renewable at the option of the Company/lessor. There are no sub leases.

5. Related Party Transactions

(a) Entities where control exists:

- Hewlett-Packard Company, USA (ultimate holding company)

- Hewlett Packard Eagle Corporation, USA (100% subsidiary of Hewlett Packard Company, USA)

- Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA), (100% subsidiary of Hewlett Packard Eagle Corporation, USA)*

* EDS Asia Pacific Holdings, Mauritius (formerly TH Holding, Mauritius), EDS World Corporation (Far East) and EDS World Corporation (Netherlands), the subsidiaries of Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA) hold 60.55% (31 October 2009: 60.65%) of the equity capital of the Company.

The related parties where control exists also include subsidiaries as referred in Note 2, BFL Employees Equity Reward Trust, Kshema Employees Welfare Trust and MphasiS Employee Benefit Trust.

(b) Key management personnel:

The key management personnel of the Company are as mentioned below: Executive key management personnel represented on the Board of the Company

- Balu Ganesh Ayyar Chief Executive Officer - Appointed w.e.f. 29 January 2009

- Jeya Kumar Chief Executive Officer - Resigned w.e.f. 28 January 2009 Non-executive / independent directors on the Board of the Company

- Friedrich Froeschl Director - Appointed as non executive Chairman of the Board w.e.f. 15 July 2010

- Andreas W Mattes Director - Appointed as non executive Chairman of the Board w.e.f. 06 February 2009 and Resigned w.e.f 15 July 2010

- Michael Coomer Non-executive Chairman - Resigned w.e.f. 6 February 2009

- Francesco Serafini Additional Director - Appointed w.e.f. 15 July 2010

- Balu Doraisamy Additional Director-Appointed w.e.f. 15 July 2010

- Nawshir H Mirza Director

- Davinder Singh Brar Director

- Gerard Brossard Additional Director-Appointed w.e.f. 15 July 2010

- Juergen Reiners Additional Director - Appointed w.e.f. 15 July 2010

- Prakash Jothee Director - Appointed w.e.f. 6 February 2009

- Jim Bridges Director - Vacated office in terms of Section 283(l)(g) w.e.f. 24 November 2009

- Joseph Eazor Director - Resigned w.e.f. 6 February 2009

- Anthony Glasby Director - Resigned w.e.f. 30 March 2009

- KM Suresh Director - Appointed on 24 November 2009 and Resigned w.e.f 15 July 2010

- Vinita Bali Director - Resigned w.e.f 15 July 2010

- Jose de la Torre Director - Resigned w.e.f 15 July 2010

- Craig Wilson Director - Resigned w.e.f 15 July 2010

(c) Direct or indirect subsidiaries of ultimate holding company with which transactions have taken place:

- EDS Poland Sp.Z.O.O

- EDS (Operations) Pty Limited

- EDS Itellium GmbH

- Electronic Data Systems (EDS) International B.V.

- EDS Information Services LLC

- EDS Canada Inc.

- EDS (Australia) Pty Limited

- EDS Gulf States, WLL

- EDS Sweden AB

- EDS (Thailand) Co. Limited

- Hewlett-Packard Inter-Americas United States (California)

- EDS International Limited

- Hewlett Packard Ireland Limited

- RelQ Software Private Limited

- Electronic Data Systems Limited, UK

- Electronic Data Systems Italia SPA

- Hewlett Packard Europe Finance Limited, Israel Branch

- UAB Hewlett Packard

- Hewlett Packard Financial Services (India) Private Limited

- EDS MSC (M) Sdn Bhd

- EDS Japan LLC

- Hewlett-Packard Software, LLC

- Hewlett-Packard Asia Pacific Pte Limited

- BPO Hewlett Packard Finance Operations

- Hewlett Packard (M) Sdn.Bhd.

- Hewlett Packard New Zealand

- Hewlett Packard GmbH

- EDS Omega S.L

- EDS (Queensland) Pty Limited

- HP Asia Pacific (HK) Limited

- Hewlett Packard (Schweiz) GmbH

- Hewlett Packard (Canada) Co.

- EDS Brazil Elimination

- Hewlett Packard Australia Pty Limited

- Hewlett Packard International Trade B.V. Saudi Arabia Branch

- EDS World Services Corp

- EDS Operations Services GmbH

- Hewlett Packard Norge AS

- EDS (New Zealand) Limited

- Electronic Data System Belgium N.V

- EDS Information Business GmbH

- EDS Business Services Pty Limited

- EDS (China) Co. Limited

- HP Services (Singapore) Pte Limited

- Electronic Data Systems Espana S.A.

- EDS (Schweiz) AG

- Electronic Data Systems (Hong Kong) Limited

- EDS Application Services GmbH

- EDS Malaysia (Shell EPO AP)

- Electronic Data Systems Hungary Limited

- Electronic Data Systems France SAS

- EDS Columbia

- EDS de Mexico S deRLdeCV

- EDS Denmark A/S

- Hewlett Packard Development Company, L.P.

- Hewlett Packard India Sales Private Limited

- HP India Software Operation Private Limited

- EDS Africa (Pty) Limited

- EDS Austria GmbH

- Hewlett Packard Singapore (Sales) Pte Limited

- Saber Software, Inc.

- EDS Finland Oy

- Hewlett Packard Limited (UK)

- EDS Holding GmbH

- Electronic Data Systems(lreland) Limited

- Hewlett Packard (Thailand) Limited

- ExcellerateHROJV

- HP Enterprise Services BPA Pty Limited

- Hewlett Packard Company

- Electronic Data Systems Taiwan Corp

6. Segment reporting

The Companys operations predominantly relate to providing application development and maintenance (Application) services, infrastructure outsourcing (ITO) services and business process outsourcing (BPO) services delivered to clients operating globally. Secondary segmental reporting is done on the basis of the geographical location of clients.

Application services cover consulting, application development, testing and application maintenance services. ITO covers a range of infrastructure management services and service/ technical help desks. BPO services provide voice, transaction based services and knowledge based processes.

The accounting policies consistently used in the preparation of the financial statements are also applied to record revenue and expenditure in individual segments.

Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while other items, wherever allocable, are apportioned to the segments on an appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company therefore believes that it is not practical to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as unallocated.

Client relationships are driven based on client domicile. The geographical segments include United States of America (USA), The India & Asia Pacific (APAC) and Europe, Middle East & Africa (EMEA). Secondary segment information for previous year has been re grouped based on geographical segments of current year.

7. Stock Based Compensation

The Company uses the intrinsic value method of accounting for its employee stock options. The Company has therefore adopted the pro-forma disclosure provisions as required by the Guidance Note on "Accounting for Employee Share- based Payments" issued by the ICAI with effect from 1 April 2005.

8. The Company is engaged in the business of software development services, projects and professional services. Such services are not capable of being expressed in any 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.

9. The figures of the previous year have been regrouped/ reclassified, wherever necessary, to conform with the current year classification.


Oct 31, 2009

1. DESCRIPTION OF THE COMPANY

MphasiS Limited (The Company or MphasiS) is a global, multicultural organisation headquartered in Bangalore, India, specialising in providing a suite of application development and maintenance services, infrastructure outsourcing services and business process outsourcing solutions to clients around the world.

2. a) The Company acquired control of Kshema Technologies Limited ("Kshema") on 1 June 2004. Kshema has been amalgamated with MphasiS Limited with effect from 1 April 2005.

The balance consideration payable to the erstwhile shareholders amounting to Rs 17,060,055 ( 31 October 2008: Rs 17,060,055) is carried as a liability which will be paid after necessary regulatory approvals are obtained (refer note 16).

2. b) During July 2006, the Board of the Company approved the amalgamation of EDS Electronic Data Systems (India) Private Limited (EDS India), a wholly owned subsidiary of then Electronic Data Systems Corporation USA, (EDS) into MphasiS Limited. The scheme of amalgamation was approved by the shareholders at their meeting on 13 November 2006, and by the Honble High Courts of Maharashtra and Karnataka on 2 February 2007 and 19 June 2007 respectively. The necessary formalities to give effect to the amalgamation have been completed thereafter. Under the scheme, the Company issued 44,104,064 shares to EDS World Corporation (Far East), the holding company of EDS India and a subsidiary of EDS and 1 share to EDS World Corporation, (Netherlands) on 6 August 2007. Post allotment of the shares, EDS, through EDS Asia Pacific Holdings, Mauritius (formerly TH Holdings, Mauritius), EDS World Corporation (Far East) and EDS World Corporation (Netherlands) holds 127,106,266 equity shares forming more than 50% of the paid-up share capital of the Company. In terms of a merger agreement executed between Electronic Data Systems Corporation USA, Hewlett-Packard Company (HP) and Hawk Merger Corporation, the last named company merged in to Electronic Data Systems Corporation USA on 26 August 2008. As a result of the merger, Electronic Data Corporation USA became 100% subsidiary of HP and was renamed as Electronic Data Systems LLC. Further HP became the ultimate holding company of MphasiS. Post merger, the Board of Directors of the Company on 16 October 2008 approved the change in the accounting year-end from March to October, in line with the ultimate holding companys accounting year-end.

2. c) During the year ended 31 March 2008, MbrokeR India, a subsidiary of the Company made an application under Section 560 of the Companies Act, 1956, to the Registrar of Companies, Bangalore, Karnataka to strike off its name from the Register of Companies. The name was struck off on 16 June 2008 from the Register of Companies and MbrokeR India stands dissolved.

2. d) During April 2008, MphasiS Belgium was incorporated as a subsidiary of MphasiS Limited.

2. e) The Company acquired AIG Systems Solutions Private Limited, a subsidiary of AIG Inc effective 1 October 2009. The name of the acquired company stands changed to MphasiS FinSolutions Private Limited with effect from 13 October 2009.

2. f) During the year, the Company filed an application with Reserve Bank of India for closure of its subsidiary BFL Software Asia Pte Ltd.

3. The Companys software development centres in India are 100% Export Oriented (EOU) / Software Technology Park (STP) Units under the Software Technology Park guidelines issued by the Government of India. They are exempted from customs and central excise duties and levies on imported and indigenous capital goods and stores and spares. The Company has executed legal undertakings to pay customs duty, central excise duty, levies and liquidated damages, if any, in respect of imported and indigenous capital goods and stores and spares consumed duty free, in the event that certain terms and conditions are not fulfilled. Bank guarantees aggregating to Rs 111,582,340 as at 31 October 2009 ( 31 October 2008: Rs 134,217,540) have been furnished to the Customs authorities in this regard.

4. Contingent liabilities and commitments

(a) Claims against the Company not acknowledged as debts amount to Rs 822,338,829 ( 31 October 2008: Rs 194,532,433);

(b) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for as at 31 October 2009: Rs 240,249,348 ( 31 October 2008: Rs 831,778,309);

(c) Guarantees outstanding including those furnished to Customs Authorities as at 31 October 2009: Rs 222,022,340 (31 October 2008: Rs 154,217,540);

5. Operating Leases

The Company is obligated under non-cancellable lease for office and residential space that are renewable on a periodic basis at the option of both the lessor and lessee. The total rental expenses under non-cancellable operating leases amounted to Rs 887,569,700 for the year ended 31 October 2009 and Rs 321,065,073 for the period from 1 April 2008 to 31 October 2008.

6. Related Party Transactions

(a) Entities where control exists:

Hewlett Packard Company, USA (ultimate holding company)

Hewlett Packard Eagle Corporation, USA (100% subsidiary of Hewlett Packard Company, USA)

Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA), (100% subsidiary of Hewlett Packard Eagle Corporation, USA)*

* EDS Asia Pacific Holdings, Mauritius (formerly TH Holding, Mauritius), EDS World Corporation (Far East) and EDS World Corporation (Netherlands), the subsidiaries of Electronic Data Systems LLC, USA (formerly Electronic Data Systems Corporation, USA) hold 60.65% of the equity capital of the Company.

The related parties where control exists also include subsidiaries as referred in Note 2, BFL Employees Equity Reward Trust and Kshema Employees Welfare Trust.

7. Segment reporting

The Companys operations predominantly relate to providing application development and maintenance (Application) services, business process outsourcing (BPO) services and infrastructure outsourcing (ITO) services delivered to clients operating globally. Secondary segmental reporting is done on the basis of the geographical location of clients.

Application services cover consulting, application development, testing and application maintenance services. BPO services provide voice, transaction based services and knowledge based processes. ITO covers a range of infrastructure management services and service/ technical help desks.

The accounting policies consistently used in the preparation of the financial statements are also applied to record revenue and expenditure in individual segments.

Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identifable to that segment, while other items, wherever allocable, are apportioned to the segments on an appropriate basis. Certain items are not allocable to individual segments as the underlying services are used interchangeably. The Company therefore believes that it is not practical to provide segment disclosures relating to such items, and accordingly such items are separately disclosed as unallocated.

Client relationships are driven based on client domicile. The geographical segments include United States of America (USA), the Middle East and India and Others.

8. The Company is engaged in the business of software development services, projects and professional services. Such services are not capable of being expressed in any 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.

9. The Company has made a provision of Rs 123,231,404 ( 31 October 2008: Rs Nil) towards claims during the year and the closing balance of such provisions as at the end of the year is Rs 169,101,026 ( 31 October 2008: Rs 45,869,622).

10. The Company has short term working capital facility of USD 5,000,000 or equivalent from a bank. This facility is usable interchangeably by the Company and its subsidiaries in India. The facility has not been utilised as at 31 October 2009.

11. Prior period figures are for the period 1 April 2008 to 31 October 2008 and hence not comparable with the figures of the current year ended 31 October 2009. The figures of previous period have been regrouped/ reclassified, wherever necessary, to conform with the current year classification.

Find IFSC