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Notes to Accounts of Nucleus Software Exports Ltd.

Mar 31, 2022

The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.

Rental expense recorded for short-term leases was '' 34 lacs (net of rent concession of '' 16 lacs ) for the year ended 31 March 2022 (previous year ended 31 March 2021''45 lacs, net of rent concessions '' 6 lacs )

The Company does not foresee any large-scale contraction in demand due to COVID-19 which could result in significant downsizing of its employee base rendering the physical infrastructure redundant. The leases that the Company has entered with lessors towards properties used as delivery centers / sales offices are long term in nature and no changes in terms of those leases are expected due to COVID-19.

The Company has one class of equity shares having a par value of ''10 each. Each shareholder is eligible for one vote per share held. The dividend is paid on the approval of the shareholders in the Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

The subscribed and paid capital of ''2,904 lacs includes ''15,000 in respect of 2,800 forfeited equity shares pending reissue.

Employees Stock Option Plan ("ESOP")

a. Employee Stock Option Scheme and SEBI (Share Based Employee Benefits) Regulations, 2014, is effective for regulation of all schemes by the Company for the benefits for its employees dealing in shares, directly or indirectly from 28 October 2014. In accordance with these Guidelines, the excess of the market price of the underlying equity shares as on the date of grant of options over the exercise price of the option, including up-front payments, if any, is to be recognized and amortised on graded vesting basis over the vesting period of the options.

The Company currently has one ESOP scheme- ESOP Scheme - 2015 (instituted in 2015) which was duly approved by the Board of Directors and Shareholders. The ESOP Scheme 2015 provides for 500,000 options to eligible employees. As per ESOP scheme 2015, equity shares would be transferred to eligible employees on exercise of options through Nucleus Software Employee Welfare Trust. The Scheme is administered by the Compensation Committee comprising three members, majority of whom are independent directors.

No options have been granted till date under the ESOP Scheme 2015.

(i) Dividend

The Board of Directors on 17 May 2022 have recommended a payment of Final Dividend of ''7 per share (on equity share of par value of ''10 each) for the year ended 31 March 2022. The payment is subject to approval of shareholders at the ensuing AGM.

The Board of Directors on 3 June 2021 have recommended a payment of Final Dividend of ''6 per share (on equity share of par value of ''10 each) for the year ended 31 March 2021. The payment was approved by shareholders at the annual general meeting held on 23 July 2021. This dividend was paid on 28 July 2021. Such dividend payment by the company is in accordance with section 123 of the Companies Act 2013.

On 30 July 2020 the Board of Directors declared an interim dividend of ''3 per share (on equity share of par value of ''10 each) for FY 2020-21. This interim dividend has been paid to the equity shareholders of the Company, whose names were appearing in the Register of Members of the Company or in the records of the Depositories as beneficial owners of the shares, on 12 August 2020 which was the Record Date that was fixed for this purpose. Such dividend payment by the company is in accordance with section 123 of the Companies Act 2013.

(ii) Buyback of shares

The Company in its Board meeting on 24th September 2021 has approved the buyback of 22,67,400 Equity Shares (maximum buy back shares) comprising of 7.81% of the total paid up equity capital of the Company at a price of ''700/- per Equity Share ("Maximum Buyback Price") payable in cash for an aggregate amount not exceeding ''158.72 Crore ("Maximum Buyback Offer Size"), excluding transaction costs and taxes.The Shareholders approved this Buy-back vide Postal Ballot in November 2021. The Settlement of Buyback was done on 21st January 2022 and 22,67, 400 Equity Shares bought back were extinguished on 27th January 2022.

(iii) Scheme of Amalgamation:

The Honourable National Company Law Tribunal (NCLT) of New Delhi vide its Order dated 18 March 2020 approved the Scheme of Amalgamation (referred to as "the Scheme") of Virstra -I Technology Services Limited (referred to as "Virstra") and Avon Mobility Solutions Private Limited (referred to a "Avon") with the Company, the certified copy of which was received by the Company in the quarter ended 30 June 2020. Consequent to the above Order and subsequent filing of the said certified copy with the Registrar of Companies, NCT of Delhi, the Scheme became effective.

As per directions of the Honourable NCLT and applicable provisions of the Companies Act, 2013, the Company, Avon and Virstra filed the requisite E-forms along with certified copy of the above NCLT Order and the Scheme with the Registrar of Companies, NCT of Delhi/ Ministry of Corporate Affairs (MCA) on 30 June 2020. These E-forms were approved during the quarter ended 31 December 2020.

Upon coming into effect of the Scheme, the business undertakings of Virtsra and Avon were transferred to and vested in the Company w.e.f 1 April 2019 which was the appointed date and the financial statements were prepared accordingly giving effect to the Scheme.

The Company applied the pooling of interest method under which:

(a) The assets and liabilities of the business acquired were carried at the carrying values at which these were included in the financial statements of Virstra and Avon and no adjustments were made to reflect fair values, or to recognize any new assets or liabilities except to harmonize the accounting policies.

(b) The identity of the reserves acquired under the business combination were preserved as they appeared in the financial statements of Virstra and Avon.

(c) The figures of the previous period were recast as if the amalgamation had occurred from the beginning of the preceding period i.e. 1 April 2019 to harmonize the accounting as per the requirements of Appendix C of Ind AS 103 on Business Combinations.

(iv) Nature and purpose of other reserves Capital reserve

The Company had transferred forfeited ESOP application money to Capital reserve in accordance with the provision of the Companies Act, 1956. The reserve will be utilised in accordance with the provisions of the Companies Act, 2013.

As per Companies Act, 2013, capital redemption reserve is created when company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares so purchased is transferred to capital redemption reserve. The reserve is utilised in accordance with the provisions of section 69 of the Companies Act, 2013.

Securities premium account

Securities premium is used to record the premium on issue of shares and shall be utilised in accordance with the provisions of the Companies Act, 2013.

Capital Redemption reserve

This reserve was created on account of a buy back of shares by the Company during the year ended 31 March 2017. A sum equal to the nominal value of the shares so purchased was transferred to capital redemption reserve. The reserve shall be utilised in accordance with the provisions of section 69 of the Companies Act, 2013.

Hedging reserve

This comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

General reserve

The general reserve is a free reserve which is used from time to time to transfer profits from retained earnings for appropriation purposes.

Equity instrument through other comprehensive income

The Company has designated its investments in certain equity instruments at fair value through other comprehensive income. These changes are accumulated within the FVOCI equity investments within equity. The Company transfers amounts therefrom to retained earnings when the relevant equity securities are derecognised.

Remeasurement of net defined benefit plans

Remeasurement of net defined benefit plans (asset) comprises actuarial gain and losses and return on plan assets (excluding interest income)

Impact of COVID-19

The Company primarily caters to customers in Banking and Financial Services sector. While the Company believes that it has offerings, which will have great value proposition for the customers, the impact on future revenue streams could come from -

i. the inability of our customers to continue their businesses due to financial resource constraints or their services no-longer being availed by their customers

ii. customers postponing their discretionary spend due to change in priorities

The Company has considered impact of the above reasons to the extent known and available currently. The Company has also taken steps to assess the cost budgets required to complete its performance obligations in respect of fixed price contracts and incorporated the impact of likely delays / increased cost in meeting its obligations and based on its current assessment, the Company sees no material impact on these Financial Statements. However, the impact assessment of COVID-19 is a continuing process given the uncertainties associated with its nature and duration.

Remaining performance obligation disclosure and contract balances

The remaining performance obligation disclosure provides the aggregate amount of transaction price yet to be recognised as revenue towards unsatisfied or partially satisfied performance obligations, along with the broad time band for the expected time to recognise those revenues, The Company has applied the practical expedient in Ind AS 115 and accordingly the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised meets the criteria as per the practical expedients and typically relate to time and material, outcome based and event based contracts.

Unsatisfied (or partially satisfied) performance obligations are subject to variability due to several factors such as terminations, changes in scope of contracts, periodic revalidations of the estimates, changes in currency rate etc).

The aggregate value of transaction price allocated to unsatisfied (or partially satisfied) performance obligations as at 31 March 2022 , other than those meeting the exclusion criteria is '' 6,133 Lacs out of which 25% is expected to be recognised as revenue in the next year and the balance thereafter.

The aggregate value of transaction price allocated to unsatisfied (or partially satisfied) performance obligations as at 31 March 2021, other than those meeting the exclusion criteria is '' 6,223 Lacs out of which 60% is expected to be recognised as revenue in the next year and the balance thereafter.

Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

a) the use of quoted market prices or dealer quotes for similar instruments.

b) for forward exchange contracts, the fair value is determined based on confirmations received from the bankers at the reporting date.

c) the fair value of remaining financial instruments is determined using discounted cash flows method.

The fair values of current trade receivables, short term loan, current security deposit, trade payables, current financial liabilities, other bank balances and cash and cash equivalents are considered to be the same as their carrying amount , due to their short-term nature.

The fair value of long term loan , non -current security deposit and non-current financial liabilities were calculated based on cash flows discounted using the lending rate as on the transition date since there is no material change in the lending rate.

Fair value hierarchy

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

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

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Reconciliation table in respect of Level 3 Investments

b) Financial risk management

The Company''s activities expose it to a variety of financial risks arising from financial instruments

- Market risk,

- Credit risk and

- Liquidity risk

Risk Management Committee (RMC) is responsible for identification and review of risks and mitigation plans. The Committee meets on a quarterly basis for identification and prioritization of risks. RMC conducts risk survey with the senior and middle level management of the Company to identify risks and rate them appropriately. Top risks are identified and remaining are categorized as other risks. The RMC then places updates to the Board of Directors on a quarterly basis, on key risks facing the Company, along with their mitigation plans.

i) Market riska) Currency risk

The Company''s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk.

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services and purchase of services from overseas suppliers in various foreign currencies. The Company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company''s operations are affected if the rupee appreciates/ depreciates against these currencies.

The Company''s risk management policy is to hedge 30% to 55% of its estimated foreign currency exposure in respect of forecast collection over the following 6 months at any point in time. The Company uses forward exchange contracts to hedge its currency risk, mostly with a maturity of less than one year from the reporting date. Such contracts are generally designated as cash flow hedges.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows.

Cash flow sensitivity of currency risk

As at 31 March 2022 and as at 31 March 2021 a 10% strengthening/weakening of the Indian rupee against the respective Foreign currencies, would have affected the Company''s total comprehensive income by ''520 lacs and ''436 lacs respectively.

Sensitivity analysis is computed based on the changes in the income and expenses in foreign currency upon conversion into functional currency due to exchange rate fluctuations between the previous reporting year and the current reporting period.

Impact of COVID-19

The Company basis its assessment believes that the probability of the occurrence of their forecasted transactions is not impacted by COVID-19 pandemic. The Company has also considered the effect of changes, if any, in both counterparty credit risk and their own credit risk while assessing hedge effectiveness and measuring hedge ineffectiveness. The Company continues to believe that there is no impact on effectiveness of its hedges.

b) Price risk(i) Exposure

The Company''s exposure to equity securities and mutual funds arises from investments held by the Company and classified in the balance sheet either as fair value through OCI or at fair value through profit or loss.

(ii) Sensitivity

The sensitivity of profit or loss in respect of investments in mutual funds and equity instruments (other than subsidiaries) at the end of the reporting period for /- 2% change in price and net asset value is presented below:

Derivative financial instruments

The Company holds derivative financial instruments such as foreign currency contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.

The following table gives details in respect of outstanding foreign exchange forward contracts:

Hedge effectiveness is determined at the inception of the hedge relationship and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.

The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available, reasonable and supportive forward- looking information.

In general, it is presumed that credit risk has significantly increased since initial recognition if the payments are more than 30 days past due.

A default on a financial asset is when the counter party fails to make contractual payments within 90 days of when they fall due. This definition of default is determined by considering the business environment in which entity operates and other macro-economic factors.

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to ''7,591 lacs and ''8,092 lacs as of 31 March 2022 and 31 March 2021 respectively and income accrued but not due and unbilled revenue amounting to ''1,002 lacs and ''1,119 lacs as of 31 March 2022 and 31 March 2021, respectively. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company uses a provision matrix to compute the expected credit loss allowance for trade receivables and income accrued but not due and unbilled revenue. The provision matrix takes into account available external and internal credit risk factors such as Company''s historical experience with customers. In addition to the historical pattern of

credit loss, the Company has considered the likelihood of increased credit risk and consequential default considering emerging situations due to COVID-19. This assessment is not based on any mathematical model but an assessment considering the impact immediately seen in the demand outlook and the financial strength of the customers.

The following table gives details in respect of percentage of revenues generated from its top most customer and the top five customers:

Credit risk on cash and cash equivalents 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 investment in mutual fund units, quoted bonds issued by government , preference shares and non convertible debentures.

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

As of 31 March 2022, the Company had a working capital of ''21,156 lacs including cash and cash equivalent of ''1,513 lacs and current investment of ''28,522 lacs (31 March 2021 ''39,118 lacs including cash and cash equivalent of ''1,100 lacs and current investment of ''45,729 lacs). A substantial portion of the current investments are classified as Level 1 and their fair value is marked to an active market, which factors the uncertainties arising out of COVID-19 and material volatility is not expected. Further, the cash and cash equivalents, bank deposits and earmarked balances are with banks where the Company has assessed the counterparty credit risk as low.

c) Capital Management

The Company''s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and maintain an appropriate capital structure.

The Board of Directors has the primary responsibility to maintain a strong capital base and reduce the cost of capital through prudent management in deployment of funds and sourcing by leveraging opportunities in domestic and international financial markets so as to maintain investors, creditors & markets'' confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Company defines as result from operating activities divided by total shareholders'' equity.

The Company monitors capital, using a medium term view of three to five years, on the basis of a number of financial ratios generally used by industry and by the rating agencies. The Company is not subject to externally imposed capital requirements.

(i) Risk management

For the purpose of the Company''s capital management, capital includes issued equity capital, securities premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to maximise the shareholder value.

The Company manages it capital structure and makes adjustments in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders, raise debts or issue new shares.

1. In relation with AY 14-15, a tax demand of '' 2 lacs ( previous year March 2021''2 lacs) on account of MAT credit is outstanding. Management is of the view that this demand is not tenable and is unlikely to be retained

2. In relation with AY 15-16, a tax demand of '' 2 lacs ( previous year March 2021''2 lacs) on account of MAT credit and custom duty is outstanding. Management is of the view that this demand is not tenable and is unlikely to be retained

3. In relation with AY 2018-19, a tax demand of '' 38 lacs is outstanding on account of withholding taxes. Management is of the view that this demand is not tenable.

Estimated amount of contracts remaining to be executed on capital account and not provided for in the books of account (net of advances).

2.35 Research and development expenditure

Research and development expense recognised in the statement of profit and loss account for the year ended 31 March 2022''3,556 lacs ( Previous year 31 March 2021''3970 lacs).

2.36 Segment reporting - Basis of preparationa. Segment accounting policies

The Segment reporting policy complies with the accounting policies adopted for preparation and presentation of standalone financial statements of the Company and is in conformity with Ind AS 108. The segmentation is based on the geographies of the Company''s customers and internal reporting systems. Based on the "management approach" as defined in Ind AS 108, the Chief Operating Decision Maker (CODM) evaluates the Company''s performance and allocates resources based on an analysis of various performance indicators by geographical segments.

b. Composition of reportable segments

The Company operates in seven main geographical segments: India, Far East, South East Asia, Europe, Middle East, Africa and Australia which represent the reportable segments. These segments are based on location of customers of the Company.

Income and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while the remainder of the costs are allocated to segments based on factors such as revenue, payroll cost etc. Certain expenses are not specifically allocable to specific segments as the underlying services are used interchangeably across geographies. The Company believes that it is not practicable to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly adjusted against total income.

Segment assets and liabilities represent assets and liabilities of that segment. All the fixed assets of the Company are located in India. These have not been identified to any of the reportable segments, as these are used interchangeably between geographical segments . Other items which are not directly attributable to any particular segment and which cannot be reasonably allocated to various segments are consolidated under the "Unallocated" head.

2.38 Employee Benefit Obligations Defined contribution plans

An amount of '' 1,380 lacs for the year ended 31 March 2022 (for the year ended 31 March 2021 ''1,247 lacs), has been recognized as an expense in respect of the Company''s contribution towards Provident Fund, '' 4 lac for the year ended 31 March 2022 (year ended 31 March 2021 ''1 lac ) has been recognised as an expense in respect of Employee State Insurance Fund and '' 167 lacs for the year ended 31 March 2022 (for the year ended 31 March 2021''131 lacs ) has been recognized as an expense in respect of National Pension scheme and have been shown under Employee Benefits expense in the standalone Statement of Profit and Loss.

In judgement of the Honourable Supreme Court of India (SC) on 28 February 2019 related to provident fund, there are considerable interpretative challenges including its retrospective implications due to which the impact of the retrospective period cannot be reliably estimated. Pending further clarity, the Company had, based on this judgement, paid '' 21 lacs during the year ended 31 March 2020 in respect of the year ended 31 March 2019. Further, with effect from 1 April 2019, the Company has aligned its salary structure in accordance with the (SC) judgement.

Defined benefit plans

The Gratuity scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each completed year of service or part thereof in excess of 6 months subject to a maximum limit of ''20 lacs in terms of the provisions of the Payment of Gratuity Act, 1972. Vesting occurs upon completion of 5 years of service.

Provision in respect of gratuity and compensated absence has been determined using the Projected Unit Credit method, with actuarial valuations being carried out at the balance sheet date.

The Company had made contributions to Nucleus Software Export Limited Employees Group Gratuity Assurance Scheme, which has made further contributions to Employees Group Gratuity Scheme of Life Insurance Corporation of India.

Discount rate:

The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.

Salary escalation rate:

The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors. Expected return on plan assets:

The expected rate of return on plan assets is determined after considering several applicable factors such as the composition of the plan assets, investment strategy, market scenario, etc.

2.39 FUNCTION WISE CLASSIFICATION OF STATEMENT OF STANDALONE PROFIT AND LOSS

The Company has provided following function wise results of operations on a voluntary basis. The Management believes that this information is relevant to understanding Company''s financial performance.

2.41 The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Enterpreneurs Memorandum Number as allocated after filling of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2022 and 31 March 2021 have been made in the financials statements based on information received and available with the Company.

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management.

2.42 As recommended by Nomination and Remuneration committee, the Company has paid remuneration of ''233 lacs to Mr. Parag Bhise (Chief Executive Officer & Whole-time Director) and ''143 lacs to Mr. Anurag Mantri (Chief Financial Officer & Whole-time Director) (Charge taken from Subsidiary Company Nucleus Software Solution Pte Ltd). Total remuneration paid to these two directors and consequently, the total managerial remuneration of ''620 lacs paid during the year ended 31 March 2022 exceeds the prescribed limit under section 197 read with schedule V in the Companies Act 2013 by ''207 lacs. Pursuant to the provisions of Companies Act 2013 and in view of inadequacy of profits for the financial year ended 31 March 2022, The Company shall seek approval of the shareholders by way of special resolution in its forthcoming Annual General Meeting for the above mentioned remuneration. The Company is probable that the approval will be received.

2.43 No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

2.44 In view of the pandemic relating to COVID-19, the Company has considered internal and external information and has performed an analysis based on current estimates while assessing the provision towards employee benefits and recoverability of right-of-use assets, trade receivables, investments and other current and financial assets, for any possible impact on the Standalone Financial Statements. The Company has also assessed the impact of this whole situation on its capital and financial resources, profitability, liquidity position, internal financial reporting controls etc. and is of the view that based on its present assessment this situation does not materially impact these Standalone financial Statements. However, the actual impact of COVID-19 on these Financial Statements may differ from that estimated due to unforeseen circumstances and the Company will continue to closely monitor any material changes to future economic conditions.

Mar 31, 2019

Note 1: 1.1 Company overview

The Company has wholly owned subsidiaries in India, Singapore, USA, Japan, Netherlands, South Africa and Australia. The Companyâs business consists of software product development and marketing and providing support services mainly for corporate business entities in the banking and financial services sector.

(i) The Company has one class of equity shares having a par value of Rs. 10 each. Each shareholder is eligible for one vote per share held. The dividend is paid on the approval of the shareholders in the Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(ii) Employees Stock Option Plan (âESOPâ)

a. Employee Stock Option Scheme and SEBI (Share Based Employee Benefits) Regulations, 2014, is effective for regulation of all schemes by the Company for the benefits for its employees dealing in shares, directly or indirectly from October 28, 2014. In accordance with these Guidelines, the excess of the market price of the underlying equity shares as of the date of grant of options over the exercise price of the option, including up-front payments, if any, is to be recognized and amortised on graded vesting basis over the vesting period of the options.

b. The Company currently has one ESOP scheme- ESOP Scheme - 2015 (instituted in 2015) which was duly approved by the Board of Directors and Shareholders. The ESOP Scheme 2015 provides for 500,000 options to eligible employees. As per ESOP scheme 2015, equity shares would be transferred to eligible employees on exercise of options through Nucleus Software Employee Welfare Trust. The scheme is administered by the Compensation Committee comprising three members, the majority of whom are independent directors.

c. There are no options granted, forfeited and exercised during the year under ESOP Scheme 2015.

Note :

(i) The Board of Directors on 23 April, 2019 have recommended a payment of Final Dividend of Rs. 9 per share (on equity share of par value of Rs. 10 each) for the year ended 31 March 2019. The payment is subject to approval of shareholders at the ensuing AGM. The final dividend paid in previous year was Rs. 8 per share.

Nature and purpose of other reserves

Capital reserve

The company had transferred forfeited ESOP application money to Capital reserve in accordance with the provision of the Companies Act, 1956.The reserve will be utilised in accordance with the provisions of the Companies Act, 2013.

Securities premium reserve

Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

Capital Redemption reserve

The Board of Directors of the Company, at its meeting held on April 25, 2017 had approved a proposal to buy-back not exceeding Rs 11,779 lacs at maximum price of Rs. 350 per equity share.

The Shareholders of the Company approved the scheme of Buyback of 33,43,000 (Thirty Three Lakhs Forty Three Thousand) equity shares of the face value of Rs.10/- each fully paid up at a price of Rs. 350/- (Rupees Three Hundred and Fifty Only) (the âBuyback Priceâ) payable in cash aggregating upto Rs. 11,701/-lacs (Rupees Eleven thousands Seven Hundred One lacs) through Postal Ballot on June 15, 2017 . The Company made the Public Announcement of the same which was published on June 19, 2017.

Further pursuant to Shareholdersâ approval vide Postal Ballot in June 2017, the Buy Back Committee of Board of Directors on 16th June 2017 approved the Buyback of 33,43,000 of fully paid up Equity Shares of face value of Rs. 10/ each of the Company at price of Rs. 350/- per Equity share, payable in cash for an aggregate consideration not exceeding Rs. 11,701 lacs . The settlement of the Buyback was done on 8th September, 2017 and 33,43,000 Equity shares bought back were extinguished on 14th September, 2017.

Capital Redemption Reserve was created to the extent of share capital extinguished Rs 334 lacs. An amount of Rs 3,254 lacs from Retained Earnings was used to offset the excess of buy-back cost of Rs 11,701 lacs over par value of shares after adjusting the balance lying in Security Premium of Rs 219 lacs and General Reserve of Rs 8,227 lacs.

Hedging reserve

This comprises as the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

General reserve

The general reserve is a free reserve which is used from time to time to transfer profits from retained earnings for appropriation purposes.

Equity instrument through other comprehensive income

The Company has designated its investments in certain equity instruments at fair value through other comprehensive income. These changes are accumulated within the FVOCI equity investments within the equity. The group transfers amounts therefrom to retained earnings when the relevant equity securities are derecognised.

Remeasurement of net defined benefit plans

Remeasurement of net defined benefit plans (asset) comprises actuarial gain and losses and return on plan assets (excluding interest income)

The carrying amount of current trade receivables, short term loan, current security deposit, trade payables, current financial liabilities, other bank balances and cash and cash equivalent are considered to be same as their fair values, due to their short-term nature.

The fair value of non-current trade receivables, long term loan , non -current security deposit and non-current financial liabilities were calculated based on cashflows discounted using a transition date lending rate as there is no material change in the lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusions of unobservable inputs including counterparty credit risk.

Fair value hierarchy

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

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

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

Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

a) the use of quoted market prices or dealer quotes for similar instruments.

b) for forward exchange contracts, the fair value is determined using quoted forward exchange rates at the reporting date.

c) the fair value of remaining financial instruments is determined using discounted cash flows method.

b) Financial risk management

The Companyâs activities expose it to a variety of financial risks arising from financial instruments

- Market risk,

- Credit risk and

- Liquidity risk

Risk Management Committee (RMC) is responsible for identification and review of risks and mitigation plans. The Committee meets on a quarterly basis for identification and prioritization of risks. RMC conducts risk survey with the senior and middle level management of the Company to identify risks and rate them appropriately. Top risks are identified and remaining are categorized as other risks. The RMC then places updates to the Board on a quarterly basis, on key risks facing the Company, along with their mitigation plans.

i) Market risk

a) Currency risk

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services and purchases from overseas suppliers in various foreign currencies. The Company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Companyâs operations are affected as the rupee appreciates/ depreciates against these currencies.

The Companyâs risk management policy is to hedge 40% to 55% of its estimated foreign currency exposure in respect of forecast collection over the following 6 months at any point in time. The Company uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date. Such contracts are generally designated as cash flow hedges.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows.

For the year ended 31 March 2019 and 31 March 2018 10% depreciation / appreciation in the exchange rate between the Indian rupee and Foreign currencies, would have affected the Companyâs incremental profit by Rs. 400 lacs and Rs. 299 lacs respectively.

Sensitivity analysis is computed based on the changes in the income and expenses in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting year and the current reporting year.

b) Price risk

(i) Exposure

The Companyâs exposure to equity securities and mutual funds price risk arises from investments held by the Company and classified in the balance sheet either as fair value through OCI or at fair value through profit or loss.

(ii) Sensitivity

Derivative financial instruments

The Company holds derivative financial instruments such as foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.

The following table gives details in respect of outstanding foreign exchange forward contracts:

The foreign exchange forward contracts matured within six months. The table below analyses the derivative financial instruments into relevant maturity groupings based on the remaining period as of the balance sheet date.

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.

The following table provides the reconciliation of cash flow hedge reserve for the year ended :

The Company offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the company intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

ii) Credit risk

The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information.

In general, it is presumed that credit risk has significantly increased since initial recognition if the payments are more than 30 days past due.

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs. 6,105 lacs and Rs. 7,080 lacs as of 31 March 2019 and 31 March 2018 respectively and unbilled revenue amounting to Rs. 1,406 lacs and Rs. 922 lacs as of 31 March 2019 and 31 March 2018, respectively. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company uses a provision matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. The provision matrix takes into account available external and internal credit risk factors such as Companyâs historical experience for customers.

a) Expected credit loss for loans, security deposits and Investments

iii) Liquidity risk

The Companyâs principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The company has no outstanding bank borrowings. The company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

As of 31 March 2019, the Company had a working capital of Rs. 14,722 lacs including cash and cash equivalent of Rs. 1,390 lacs and current investment of Rs. 16,384 lacs (31 March 2018 Rs. 9,712 lacs including cash and cash equivalents of Rs 1,861 lacs and current investments of Rs. 13,196 lacs).

c) Capital Management

The Companyâs objectives when managing capital are to:

- Safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and

- Maintain an appropriate capital structure

The Board of Directors has the primary responsibility to maintain a strong capital base and reduce the cost of capital through prudent management in deployment of funds and sourcing by leveraging opportunities in domestic and international financial markets so as to maintain investors, creditors & marketsâ confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Company defines as result from operating activities divided by total shareholdersâ equity.

The Company monitors capital using gearing ratio which is adjusted net debt divided by total equity. Adjusted net debt comprises of long term and short term liabilities less cash and cash equivalent. Equity includes equity share capital and reserves that are managed as capital. The gearing ratio at the end of the reporting periods was as follows:

(i) Risk management

For the purpose of the Companyâs capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Companyâs capital management is to maximise the shareholder value.

2.1 OPERATING LEASE

Obligations on long-term, non-cancellable operating leases

The Company has acquired office premises under cancellable and non-cancellable operating lease. Operating lease rentals paid during the year ended 31 March 2019 is Rs. 332 lacs (previous year Rs. 290 lacs) . The future minimum lease payments in respect of non-cancellable lease is as follows:

2.2 RELATED PARTY TRANSACTIONS LIST OF RELATED PARTIES - WHERE CONTROL EXISTS

A. SUBSIDIARY COMPANIES

- Nucleus Software Solutions Pte Ltd, Singapore

- Nucleus Software Japan Kabushiki Kaisha, Japan

- Nucleus Software Inc., USA

- Nucleus Software Netherlands B.V., Netherlands

- VirStra i-Technology Services Limited, India

- Nucleus Software Limited, India

- Nucleus Software Australia Pty. Ltd., Australia

- Nucleus Software South Africa Pty. Limited, South Africa

- Avon Mobility Solutions Private Limited

b. Other related parties:

Key managerial personnel:

- Vishnu R Dusad (Managing Director )

- Ravi Pratap Singh (Whole time Director)

- Ashish Nanda (Chief Financial officer)

- Poonam Bhasin (Company Secretary)

- Nucleus Software Foundation (see note 2.42)

- Avon Solutions & Logistics Pvt Ltd

2.3 Research and development expenditure

Expenditure on research and development as per Ind AS 38 Revenue Expenditure

The Company had been accorded initial recognition for the in-house Research and Development (R&D) unit by the Department of Scientific and Industrial Research (DSIR) for its R&D center at Noida effective 31 December, 2012 which was valid till 31 March, 2015. The Company further received renewal of recognition for its R&D center for three years starting from 1 April 2015 till 31 March 2018 and subsiquently from 1 April 2018 till 31 March 2021.

2.4 Segment reporting - Basis of preparation

a. Segment accounting policies

The Segment reporting policy complies with the accounting policies adopted for preparation and presentation of financial statements of the Company and is in conformity with Ind AS 108. The segmentation is based on the geographies of Companyâs customers and internal reporting systems. Based on the âmanagement approachâ as defined in Ind AS 108, the Chief Operating Decision Maker (CODM) evaluates the companyâs performance and allocates resources based on an analysis of various performance indicators by geographical segments.

b. Composition of reportable segments

Income and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while the remainder of the costs are categorised in relation to the associated turnover and/or man months. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably across geographies. The Company believes that it is not practicable to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as âunallocatedâ and directly charged against total income.

Segment assets and liabilities represent the net assets and liabilities of that segment. All the fixed assets of the Company are located in India. These have not been identified to any of the reportable segments, as these are used interchangeably between geographical segments . Other items which are not directly attributable to any particular segment and which cannot be reasonably allocated to various segments are consolidated under âUnallocatedâ head.

Information in respect of reportable segments being geographies

2.5 Disaggregation of revenue

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

* Revenue from product comprises of revenue generated from companyâs own developed software and from third party software supplied along with own software. It also includes services such as enhancements to the product, maintenance of the product and any other related service on the product. Revenue other than the above is categorized under revenue from other services.

2.6 Employee Benefit Obligations Defined contribution plans

An amount of Rs 1,076 lacs for the year ended 31 March 2019 (Year ended 31 March 2018 Rs 917 lacs), have been recognized as an expense in respect of Companyâs contribution for Provident Fund and Rs. 7 lacs (Year ended 31 March 2018 Rs. 6 lacs) for Employee State Insurance Fund deposited with the government authorities and has been shown under employee benefit expenses in the Statement of Profit and Loss.

In relation to the Supreme Court (SC) judgement on provident fund dated 28 February, 2019 there is considerable interpretative matters including its retrospective implications due to which the impact of the retrospective period cannot be estimated reliably. Pending further clarity on the subject, the Company has made a provision of Rs 22 lakhs which pertains to the year ending 31 March 2019.

Defined benefit plans

The Gratuity scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each completed year of service or part thereof in excess of 6 months subject to a maximum limit of Rs. 20 lacs in terms of the provisions of the Payment of Gratuity Act, 1972. Vesting occurs upon completion of 5 years of service.

Provision in respect of gratuity and compensated absence has been determined using the Projected Unit Credit method, with actuarial valuations being carried out at the balance sheet date.

2.7 Transfer Pricing

The Company has established a comprehensive system of maintenance of information and documents as required by transfer pricing legislation under section 92D for its international transactions and specified domestic transactions. The Company will further update above information and records and expects these to be in existence latest by due date of the filing of return, as required under law. The management is of the opinion that all above transactions are at armâs length so that aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

2.8 On 17 March 2016, the Company has acquired 96% stake in Avon Mobility Solutions Private Limited (âAvonâ), a Mobile Technology Solutions provider for a purchase consideration of Rs 192 lacs. The Company has also taken over Avonâs net liabilities aggregating to Rs. 125 lacs. Further, the Company had an option to acquire the remaining 4% shares of Avon as per terms and conditions of share purchase agreement executed with the shareholders of Avon. The Company has further subscribed during the year ended 31 March 2019, 1,350,000 (previous year 31 March 2018, 300,000) 11% redeemable preference shares of face value of Rs. 10 per share, for a minimum tenor of 5 years and maximum tenor of 20 years. Further, during the year ended 31 March 2019, the Company vide share purchase agreement dated 10 July 2018 exercised the call option and acquired remaining 444 shares in Avon, thereby, now it has become wholly owned subsidiary of the Company.

2.9 The disclosures regarding details of specified bank notes held and transacted during 8 November 2016 to 30 December 2016 has not been made in these financial statements since the requirement does not pertain to financial year ended 31 March 2019.

Mar 31, 2018

Note 1: 1.1 Company Overview

The Company has wholly owned subsidiaries in Singapore, USA, Japan, Netherlands, South Africa, Australia. The Company has wholly and partly owned subsidiaries in India. The Companyâs business consists of software product development and marketing and providing support services mainly for corporate business entities in the banking and financial services sector.

(i) The Company has one class of equity shares having a par value of Rs.10 each. Each shareholder is eligible for one vote per share held. The dividend is paid on the approval of the shareholders in the Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(ii) Number of shares held by shareholders holding more than 5% of the aggregate shares in the Company :-

(iii) Employees Stock Option Plan (âESOPâ)

a. Employee Stock Option Scheme and SEBI (Share Based Employee Benefits) Regulations, 2014, is effective for regulation of all schemes by the Company for the benefits for its employees dealing in shares, directly or indirectly from October 28, 2014. In accordance with these Guidelines, the excess of the market price of the underlying equity shares as of the date of grant of options over the exercise price of the option, including up-front payments, if any, is to be recognized and amortised on graded vesting basis over the vesting period of the options.

c. There are no options granted, forfeited and exercised during the period under ESOP Scheme 2015.

(vi) The Board of Directors of the Company, at its meeting held on April 25, 2017 had approved a proposal to buy-back not exceeding Rs.11,779 lacs at maximum price of Rs.350 per equity share.

The Shareholders of the Company approved the scheme of Buyback of 33,43,000 (Thirty Three Lakhs Forty Three Thousand) equity shares of the face value of Rs.10/- each fully paid up at a price of Rs.350/- (Rupees Three Hundred and Fifty Only) (the âBuyback Priceâ) payable in cash aggregating upto Rs.11,701/-lacs (Rupees Eleven thousands Seven Hundred One lacs) through Postal Ballot on June 15, 2017 . The Company made the Public Announcement of the same which was published on June 19, 2017.

Further pursuant to Shareholdersâ approval vide Postal Ballot in June 2017, the Buy Back Committee of Board of Directors on 16th June 2017 approved the Buyback of 33,43,000 of fully paid up Equity Shares of face value of Rs.10/ each of the Company at price of Rs.350/- per Equity share, payable in cash for an aggregate consideration not exceeding Rs.11,701 lacs . The settlement of the Buyback was done on 8th September, 2017 and 33,43,000 Equity shares bought back were extinguished on 14th September, 2017.

Capital Redemption Reserve was created to the extent of share capital extinguished Rs.334 lacs. An amount of Rs.3,254 lacs from Retained Earnings was used to offset the excess of buy-back cost of Rs.11,701 lacs over par value of shares after adjusting the balance lying in Security Premium of Rs.219 lacs and General Reserve of Rs.8,227 lacs.

Note :

(i) The Board of Directors recommended a Final Dividend of Rs.5 per share (on equity share of par value of Rs.10 each) for the year ended March 31, 2017. The payment was approved in the Annual General Meeting held on 8th July 2017.

(ii) The Board of Directors on May 3, 2018 have recommended a payment of Final Dividend of Rs.8 per share (on equity share of par value of Rs.10 each) for the year ended March 31, 2018. The payment is subject of approval of shareholders at the ensuing Annual General Meeting. The final dividend declared in the previous year was Rs.5/- per equity share.

Nature and purpose of other reserves

Capital reserve

Securities premium reserve

Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

Hedging reserve

This comprises as the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

General reserve

The Company transferred certain percentage of retained earnings to general reserve as per the provisions for dividend distribution under the Companies Act, 2013.

Equity instrument through other comprehensive income

The Group has designated its investments in certain equity instruments at fair value through other comprehensive income.

These changes are accumulated within the FVOCI equity investments within the equity. The group transfers amounts therefrom to retained earnings when the relevant equity securities are derecognised.

Remeasurement of net defined benefit plans

Remeasurement of net defined benefit plans (asset) comprises actuarial gain and losses and return on plan assets (excluding interest income)

The Company has no amounts payable to Micro and Small Enterprises as defined in section 7(1) of the Micro, Small and Medium Enterprises Development Act, 2006, to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

The carrying amount of current trade receivables, short term loan, current security deposit, trade payables, current financial liabilities and cash and cash equivalent are considered to be same as their fair values, due to their short-term nature.

The fair value of Non-current trade receivables, long term loan, Non -current security deposit and non-current financial liabilities were calculated based on cashflows discounted using a transition date lending rate as there is no material change in the lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusions of unobservable inputs including counterparty credit risk.

b) Fair value hierarchy

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

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

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

Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

a) the use of quoted market prices or dealer quotes for similar instruments.

b) for forward exchange contracts, the fair value is determined using quoted forward exchange rates at the reporting date.

c) the fair value of remaining financial instruments is determined using discounted cash flows method.

The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of 31 March 2018:

c) Financial risk management

The Companyâs activities expose it to a variety of financial risks arising from financial instruments

- Market risk,

- Credit risk and

- Liquidity risk

Risk Management Committee (RMC) is responsible for identification and review of risks and mitigation plans. The Committee meets on a quarterly basis for identification and prioritization of risks. RMC conducts risk survey with the senior and middle level management of the Company to identify risks and rate them appropriately. Top risks are identified and remaining are categorized as other risks. The RMC then places updates to the Board on a quarterly basis, on key risks facing the Company, along with their mitigation plans.

i) Market risk

a) Hedge accounting

The Companyâs focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. . The Companyâs exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers.

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services and purchases from overseas suppliers in various foreign currencies. The Company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Companyâs operations are adversely affected as the rupee appreciates/ depreciates against these currencies.

The Companyâs risk management policy is to hedge 40 to 55% of its estimated foreign currency exposure in respect of forecast sales over the following 12 months at any point in time. The Company uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date. Such contracts are generally designated as cash flow hedges.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows.

For the year ended 31 March 2018 and 31 March 2017 10% depreciation / appreciation in the exchange rate between the Indian rupee and Foreign currencies, would have affected the Companyâs incremental profit by Rs.299 lacs, Rs.879 lacs respectively.

b) Price risk

(a) Exposure

(b) Sensitivity

Derivative financial instruments

The Company holds derivative financial instruments such as foreign currency forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.

The following table provides the reconciliation of cash flow hedge reserve for the year ended 31 March 2017:

The company offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the company intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

The following table provides quantitative information about offsetting of derivative financial assets

ii) Credit risk

The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information.

In general, it is presumed that credit risk has significantly increased since initial recognition if the payments are more than 30 days past due.

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs.7,080 lacs Rs.5,905 lacs and Rs.8,604 lacs as of 31 March 2018, 31 March 2017 and 1 April 2016, respectively and unbilled revenue amounting to Rs.922 lacs,Rs.619 lacs and Rs.761 lacs as of 31 March 2018, 31 March 2017 and 1 April 2016, respectively. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company uses a provision matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. The provision matrix takes into account available external and internal credit risk factors such as Companyâs historical experience for customers.

The following table gives details in respect of percentage of revenues generated from top customer and top five customers:

Credit risk exposure

The reversal for lifetime expected credit loss on customer balances for the year ended 31 March 2018 is Rs.37 lacs and for the year ended 31 March 2017 was Rs.23 lacs. The reversal for lifetime expected credit loss on customer balances for the year ended 1 April 2016 was Rs.84 lacs.

Credit risk on cash and cash equivalents 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 investment in mutual fund units, quoted bonds issued by government, preference shares and non convertible debentures.

iii) Liquidity risk

The companyâs principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The company has no outstanding bank borrowings. The company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

As of 31 March 2018, the Company had a working capital of Rs.9,712 lacs including cash and cash equivalent of Rs.1,861 lacs and current investment of Rs.13,196 lacs (31 March 2017 Rs.21,324 lacs including cash and cash equivalents of Rs.1,094 lacs and current investments of Rs.22,437 lacs).

d) Capital Management

The Companyâs objectives when managing capital are to:

- safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and

- maintain an appropriate capital structure

The Board of Directors has the primary responsibility to maintain a strong capital base and reduce the cost of capital through prudent management in deployment of funds and sourcing by leveraging opportunities in domestic and international financial markets so as to maintain investors, creditors & marketsâ confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Company defines as result from operating activities divided by total shareholdersâ equity.

(i) Risk management

The Board of Directors on May 3, 2018 have recommended a payment of Final Dividend of Rs.8 per share (on equity share of par value of Rs.10 each) for the year ended 31 March 2018. The payment is subject to approval of shareholders at the ensuing Annual General Meeting. The final dividend declared in the previous year was Rs.5/- per equity share.

2.1 OPERATING LEASE OBLIGATIONS ON LONG-TERM, NON-CANCELLABLE OPERATING LEASES

The Company has acquired office premises under cancellable and non-cancellable operating lease. Operating lease rentals paid during the year ended 31 March 2018 is Rs.290 lacs (previous year ended 31 March 2017 is Rs.324 lacs)

2.2 RELATED PARTY TRANSACTIONS

List of related parties - where control exists

a. Subsidiary Companies

- Nucleus Software Solutions Pte Ltd, Singapore

- Nucleus Software Japan Kabushiki Kaisha, Japan

- Nucleus Software Inc., USA

- Nucleus Software Netherlands B.V., Netherlands

- VirStra i-Technology Services Limited, India

- Nucleus Software Limited, India

- Nucleus Software Australia Pty. Ltd., Australia

- Nucleus Software South Africa Pty. Limited, South Africa (incorporated on 10 February, 2015)

- Avon Mobility Solutions Private Limited (acquired on 17 March 2016)

b. Other related parties:

Key managerial personnel:

- Vishnu R Dusad (Managing Director and Chief Executive Officer)

- Ravi Pratap Singh (Whole time Director)

- Ashish Nanda (Chief Financial officer)

- Poonam Bhasin (Company Secretary)

- Nucleus Software Foundation (see note 2.42)

- Avon Solutions & Logistics Pvt Ltd

The Company had been accorded initial recognition for the in-house Research and Development (R&D) unit by the Department of Scientific and Industrial Research (DSIR) for its R&D center at Noida effective 31 December, 2012 which was valid till 31 March, 2015. The Company has further received renewal of recognition for its R&D center for three years starting from 1 April, 2015.

2.3 SEGMENT REPORTING - BASIS OF PREPARATION

a. Segment accounting policies

The Segment reporting policy complies with the accounting policies adopted for preparation and presentation of financial statements of the Company and is in conformity with Ind AS 108.The segmentation is based on the Geographies (reportable business segment) in which the Company operates and internal reporting systems. The geographical segmentation is based on the nature and type of services rendered. Based on the âmanagement approachâ as defined in Ind AS 108, the Chief Operating Decision Maker (CODM) evaluates the companyâs performance and allocates resources based on an analysis of various performance indicators by business segments and geographical segments.

b. Composition of reportable segments

The Company operates in seven main geographical segments: India, Far East, South East Asia, Europe, Middle East, Africa and Australia which individually contribute 10% or more of the Companyâs revenue and segment assets.

Segment assets and liabilities represent the net assets and liabilities of that segment. All the fixed assets of the Company are located in India. These have not been identified to any of the reportable segments, as these are used interchangeably between segments and across geographies. Other items which are not directly attributable to any particular segment and which cannot be reasonably allocated to various segments are consolidated under âUnallocatedâ head.

The geographical segmentation is based on the nature and type of services rendered. Accordingly, geographical Segmentation has been classified under Products and Software Projects and Services. Products revenue includes Income from sale of licenses and all other related customization, implementation, time and material contracts, fixed price contracts and annual technical service for these licenses. Software projects and services includes other time and material contracts and fixed price contracts, whereby no license sale is made by the Company.

2.4 EMPLOYEE BENEFIT OBLIGATIONS DEFINED CONTRIBUTION PLANS

An amount of Rs.917 lacs for the year ended 31 March, 2018 (Year ended 31 March, 2017 Rs.809 lacs), have been recognized as an expense in respect of Companyâs contribution for Provident Fund and Rs.6 lacs (Year ended 31 March, 2017 Rs.4 lacs) for Employee State Insurance Fund deposited with the government authorities and has been shown under employee benefit expenses in the Statement of Profit and Loss.

Defined benefit plans

The Gratuity scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each completed year of service or part thereof in excess of 6 months subject to a maximum limit of Rs.20 lacs in terms of the provisions of the Payment of Gratuity Act, 1972. Vesting occurs upon completion of 5 years of service.

Provision in respect of gratuity and compensated absence has been determined using the Projected Unit Credit method, with actuarial valuations being carried out at the balance sheet date.

Salary escalation rate:

The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors.

Expected return on plan assets:

The expected rate of return on plan assets is determined after considering several applicable factors such as the composition of the plan assets, investment strategy, market scenario, etc.

k Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding and other assumptions constant,would have affected the defined benefit obligation by the amount shown below:

2.5 Transfer Pricing

2.6 On March 17, 2016, the Company has acquired 96% stake in Avon Mobility Solutions Pvt. Ltd. (âAvonâ), a Mobile Technology Solutions provider for a purchase consideration of Rs.192 lacs . The Company has also taken over Avonâs net liabilities aggregating to Rs.125 lacs. Further, the Company has an option to acquire the remaining 4% shares of Avon as per terms and conditions of share purchase agreement executed with the shareholders of Avon. The Company has further subscribed during the year ended March 31 2018, 300,000 ( previous year 31 March 2017, 2,350,000) 11% redeemable preference shares of face value of Rs.10 per share, for a minimum tenor of 5 years and maximum tenor of 20 years.

2.7 Disclosure under schedule III of Companies Act, 2013 for transaction in Specified Bank Notes (SBNâs) and other denomination notes during the period 08 November, 2016 to 30 December,2016 :

* Imprest in hand with employees.

Note: For the purpose of this disclosure, the term âSpecified Bank Notesâ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E) dated 8 November 2016.

2.8 First-time adoption of Ind-AS

These standalone financial statements of Nucleus Software Exports Limited for the year ended 31 March 2018 have been prepared in accordance with Ind AS. For the purposes of transition to Ind AS, the Company has followed the guidance prescribed in Ind AS 101 - First Time adoption of Indian Accounting Standard , with 1 April, 2016 as the transition date and IGAAP as the previous GAAP.

The transition to Ind AS has resulted in changes in the presentation of the financial statements, disclosures in the notes thereto and accounting policies and principles. The accounting policies set out in Note 1 have been applied in preparing the standalone financial statements for the year ended 31 March 2018 and the comparative information. An explanation of how the transition from previous GAAP to Ind AS has affected the Companyâs Balance Sheet , Statement of Profit and Loss, is set out in note 2.46.

Exemptions availed and exceptions applied on first time adoption of Ind-AS 101

In preparing these financial statements, the Company has applied the below mentioned optional exemptions and mandatory exceptions:

A Optional exemptions availed

1 Property plant and equipment and intangible assets

As permitted by Ind AS 101, the Company has elected to continue with the carrying values under previous GAAP as deemed cost for all the items of property, plant and equipment and Intangible assets.

2 Designation of previously recognised financial instruments

Under Ind AS 109, at initial recognition of a financial asset, an entity may make an irrevocable election to present subsequent changes in the fair value of an investment in equity instrument in other comprehensive income. Ind AS 101 allows such designation of previously recognised financial assets, as âfair value through other comprehensive incomeâ on the basis of the facts and circumstances that existed at the date of transition to Ind AS.

Accordingly , the company has designated its investments in certain equity instruments at fair value through other comprehensive income on the basis of the facts and circumstances that existed at the date of transition to Ind AS.

3 Investment in Subsidiaries

As per Ind AS 101, when an entity prepare seperate financial statements , Ind AS 27 requires it to account for its investments in subsidiaries either:

(a) at cost or

(b) in accordance with Ind AS 109.

The Company has chosen to avail the option to measure the investment in subsidiaries at cost.

4 Share- Based payment transactions

The Company can apply Ind AS 102 Share- based payment to equity instruments that vested before date of transition to Ind ASs. However, if an entity elects to apply Ind AS 102 to such equity instruments, it may do so only if it has disclosed publicly the fair value of those equity instruments. The Company has chosen not to apply Ind AS 102 to equity instruments that vested before date of transition.

B Mandatory exceptions

1 Estimates

As per Ind AS 101, an entityâs estimates in accordance with Ind AS at the date of transition to Ind AS at the end of the comparative period presented in the entityâs first Ind AS financial statements,as the case may be, should be consistent with estimates made for the same date in accordance with the previous GAAP unless there is objective evidence that those estimates were in error. However, the estimates should be adjusted to reflect any differences in accounting policies.

As per Ind AS 101, where application of Ind AS requires an entity to make certain estimates that were not required under previous GAAP, those estimates should be made to reflect conditions that existed at the date of transition (for preparing opening Ind AS balance sheet) or at the end of the comparative period (for presenting comparative information as per Ind AS).

The Companyâs estimates under Ind AS are consistent with the above requirement. Key estimates considered in preparation of the financial statements that were not required under the previous GAAP are listed below:

- fair valuation of financial instruments carried at FVTPL and/ or FVOCI.

- Impairment of financial assets based on the expected credit loss model.

- Determination of the discounted value for financial instruments carried at amortised cost.

2 Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortised cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable.

Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at amortised cost has been done retrospectively except where the same is impracticable.

3 Hedge Accounting

Hedge accounting can only be applied prospectively from the transition date to transactions that satisfy the hedge accounting criteria in Ind AS 109, at that date. Hedging relationships cannot be designated retrospectively, and the supporting documentation cannot be created retrospectively. As a result, only hedging relationships that satisfied the hedge accounting criteria as of 1 April 2016 are reflected as hedges in the Companyâs results under Ind AS. The Company had designated various hedging relationships as cash flow hedges under the previous GAAP. On date of transition to Ind AS, the entity had assessed that all the designated hedging relationship qualifies for hedge accounting as per Ind AS 109. Consequently, the Company continues to apply hedge accounting on and after the date of transition to Ind AS.

Explanation for reconciliation of equity as at 1 April 2016 and 31 March 2017 and Profit and Loss for the year ended 31 March 2017 as previously reported under IGAAP to Ind AS

1.1 investments

a) Tax free bonds

Tax free bonds are carried at amortised cost under Ind AS . Premium paid for acquisition of tax free bonds shall be added to the Investment value and thereafter investment will be measured at amortised cost under Ind AS. However under Previous GAAP, premium on tax free bond was recorded seperatly and amortised over the life of an Investment. As a result of this change, profit for the year ended 31 March 2017 increased Rs.15 lacs and retained earning as at 1 April 2016 increased by Rs. 4 lacs .

b) Fixed Maturity Plans (FMPs)

Under Previous GAAP, Investments in FMPs were classified as long-term investments or current investments based on the intended holding period and realisability.Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at amortised cost.This change has resulted in an increase in profit for the year ended 31 March 2017 by Rs.157 lacs respectively and increase in retained earning as at 1 April 2016 by Rs.453 lacs.

c) Preference Shares

Cumulative Preference shares are carried at amortised cost under Ind AS. Under Previous GAAP, Investments in Preference shares were classified as long-term investments or current investments based on the intended holding period and realisability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. This change has resulted in an increase in profit for the year ended 31 March 2017 by Rs.13 lacs respectively and increase in retained earning as at 1 April 2016 by Rs.1 lacs.

d) Investment in Equity instruments other than subsidiaries

Under Previous GAAP, the company accounted for long term investments in equity shares of Ujjivan Financial Services Limited as investment measured at cost less provision for other than temporary diminution in the value of investments. Under Ind-AS, the company has designated this investments as FVTOCI investments. Ind-AS requires FVTOCI investments to be measured at fair value.

At the date of transition to Ind-AS, difference between the instruments fair value and Previous GAAP carrying amount has been recognised as a separate component of equity, in the FVTOCI reserve.This increased other reserves by Rs.547 lacs as at 31 March 2017 (1 April 2016 - Rs.488 lacs) and profit and other comprehensive income for the year ended 31 March 2017 increased by Rs.547 lacs.

e) Investment in Subsidiaries

The Company has the option to measure the investment in subsidiaries at either cost or in accordance with Ind AS 109.The Company has chosen to avail the option to measure the investment in subsidiaries at cost. There is no impact on the total equity or profit and loss as a result of this adjustment.

f) Investment in Mutual funds

Under Previous GAAP, Investments in Mutual funds were classified as long-term investments or current investments based on the intended holding period and realisability.Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at Fair value through profit or loss.This change has resulted in an decrease in profit for the the year ended 31 March 2017 by Rs.11 lacs and increase in retained earning as at 1 April 2016 by Rs.6 lacs.

g) Investment in Non convertible debentures

Investments in Non Convertible debentures were classified as long-term investments or current investments based on the intended holding period and realisability.Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at amortised cost.This change has resulted in an increase in profit for the year ended 31 March 2017 by Rs.14 lacs.

1.2 Long term trade receivables

Under Ind AS, Long term receivable should be reduced to the extent of the present value of money and interest income should be recognised over the period of receivable.Adjustments reflect the separation of financing component from the long term receivables. This adjustments increase the profit for the year ended 31 March 2017 by Rs.89 lacs and reduced the retained earning as at 1 April 2016 by Rs.223 lacs.

1.3 Long term Loans

Under Previous GAAP, employee loans and other long term advances to be settled in cash or another financial asset are recorded at cost.

However, under Ind AS, certain assets covered under Ind AS 32 meet the definition of financial assets which include employee loans and long term advances to subsidiaries are classified at amortized cost, further these financial assets have been given at nil interest rate , therefore, these have been discounted to present value.

a) Interest free Loans to subsidiaries

As loan given to Nucleus software Limited, 100% subsidiary at nil interest rate , the same should be accounted at amortized cost using prevalent market rate of interest by applying effective interest rate method. Further during the year ended 31 March 2017, under previous GAAP, the Company had made full provision against the loan but in accordance with Ind AS, provision reversed to the extent of excess provision over amorised cost as at 31 March 2017. An amount of Rs.194 lacs,net of taxes has been recognised as deemed investment and included in value of investment in Nucleus Software Limited.

As a result of this change, profit for the year ended 31 March 2017 increased by Rs.132 lacs and increased the retained earning as at 1 April 2016 by Rs.164 lacs.

b) Interest free Loans to employees

Loan to employees are also given at nil interest rates , the same should be accounted at amortized cost using prevalent market rate of interest by applying effective interest rate method.

As a result of this change, profit for the year ended 31 March 2017 increased by Rs.1 lacs and increased the retained earning as at 1 April 2016 by Rs.1 lacs.

1.4 other Financial assets

Under Previous GAAP, Security deposit are recorded at cost. However under Ind AS, security deposits are classified at amortised cost. Therefore, adjustment has been made for the impact of discounting of interest free security deposit given for the rented premises.

As a result of this change, profit for the year ended 31 March 2017 increased by â Nil and reduced the retained earning as at 1 April 2016 by Rs.1 lacs.

1.5 Deferred tax

Deferred Tax adjustment on transitional entries under Ind - AS has been made in accordance with Ind-AS. This has reduced profit for the year ended 31 March 2017 by Rs.84 lacs and other comprehensive income by Rs.49 lacs and and retained earning as at 1 April 2016 by Rs.94 lacs . The Previous GAAP require deferred tax accounting using the income statement approach, which focusses on differences between taxable profit and accounting profits for the period. Ind-AS 12 : Income Taxes requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind-AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Previous GAAP.

1.6 Other Equity

Adjustment to retained earnings and OCI have been made in accordance with Ind-AS, for the above mentioned line items

Under Previous GAAP, the Company has not presented other comprehensive income (OCI) separately. Items that have been reclassified from statement of profit and loss to other compreshensive income includes remeasurement of defined benefit plans and fair value gain/loss on FVOCI equity instruments. Hence, Previous GAAP profit or loss is reconciled to total comprehensive income as per Ind AS

1.7 Non -current Financial liabilities

Under Previous GAAP, annual incentive payables and creditors are recorded at cost.

However, under Ind AS, liabilities in which the Company has a contractual obligation to deliver cash are classified as financial liabilities. Thus in case of annual incentive being long term in nature, the financial liabilities have been discounted to present value and carried at amortised cost. Consequential impact of the same have been taken to employe benefit expenses.

As a result of this change, profit for the year ended 31 March 2017 increased by Rs.12 lacs.

1.8 Remeasurements of the defined benefit plans

Under Ind AS, remeaurements, i.e., actuarial gains and losses and the return on plan assets, excluding amount included in the net interest expense on the net defined liability are recognised in other comprehensive income instead of profit or loss. Under Previous GAAP, these remeasurements were forming part of the profit or loss for the year. However, this has no impact on the total comprehensive income and total equity as on 31 March 2017 and 1 April 2016.

2.9 Previous year figures have been regrouped/ reclassified wherever necessary to correspond with the current year classification/ disclosure.

Mar 31, 2017

Note 1: 1.1 Company Overview

Nucleus Software Exports Limited (âNucleusâ or âthe Companyâ) was incorporated on 9 January, 1989 in India as a private limited company. It was subsequently converted into a public limited company on 10 October, 1994. The Company made an initial public offer in August 1995. As at 31 March, 2017, the Company is listed on two stock exchanges in India namely National Stock Exchange and Bombay Stock Exchange. The Company has wholly owned subsidiaries in Singapore, USA, South Africa, Japan, Netherlands and Australia. The Company has wholly and partly owned subsidiaries in India. The Companyâs business consists of software product development and marketing and providing support services mainly for corporate business entities in the banking and financial services sector.

2.1 OPERATING LEASE

Obligations on long-term, non-cancellable operating leases

The Company has acquired office premises under cancellable and non-cancellable operating lease. Operating lease rentals paid during the year ended 31st March, 2017 is Rs.32,086,548/-. (Year ended 31st March, 2016 Rs.37,254,013/-).

2.3 RELATED PARTY TRANSACTIONS List of related parties - where control exists a. Subsidiary Companies

- Nucleus Software Solutions Pte Ltd, Singapore

- Nucleus Software Japan Kabushiki Kaisha, Japan

- Nucleus Software Inc., USA

- Nucleus Software Netherlands B.V., Netherlands

- VirStra i-Technology Services Limited, India

- Nucleus Software Limited, India

- Nucleus Software Australia Pty. Ltd., Australia

- Nucleus Software South Africa Pty. Limited, South Africa (incorporated on 10 February, 2015)

- Avon Mobility Solutions Private Limited (acquired on 17 March 2016)

b. Other related parties:

Key managerial personnel:

- Vishnu R Dusad (Managing Director and Chief Executive Officer)

- Ravi Pratap Singh (Whole time Director)

- Nucleus Software Foundation (see note 2.39)

- Avon Solutions & Logistics Pvt Ltd

2.4 Segment reporting â Basis of preparation

a. Segment accounting policies

The Segment reporting policy complies with the accounting policies adopted for preparation and presentation of financial statements of the Company and is in conformity with Accounting Standard-17 on âSegment Reportingâ specified as per Section 133 of the Companies Act, 2013 (âthe 2013 Actâ) read with Rule 7 of Companies (Accounts) Rules, 2014. The segmentation is based on the Geographies (reportable primary segment) in which the Company operates and internal reporting systems. The secondary segmentation is based on the nature and type of services rendered.

b. Composition of reportable segments

Segment assets and liabilities represent the net assets and liabilities of that segment. All the fixed assets of the Company are located in India. These have not been identified to any of the reportable segments, as these are used interchangeably between segments and across geographies. Other items which are not directly attributable to any particular segment and which cannot be reasonably allocated to various segments are consolidated under âUnallocatedâ head.

The secondary segmentation is based on the nature and type of services rendered. Accordingly, Secondary Segmentation has been classified under Products and Software Projects and Services. Products revenue includes Income from sale of licenses and all other related customization, implementation, time and material contracts, fixed price contracts and annual technical service for these licenses. Software projects and services includes other time and material contracts and fixed price contracts, whereby no license sale is made by the Company.

2.5 Employee Benefit Obligations Defined contribution plans

An amount of Rs.80,910,509 for the year ended 31 March, 2017 (Year ended 31 March, 2016 Rs.75,942,046), have been recognized as an expense in respect of Companyâs contribution for Provident Fund and Rs.427,932 (Year ended 31 March, 2016 Rs.118,035) for Employee State Insurance Fund deposited with the government authorities and has been shown under employee benefit expenses in the Statement of Profit and Loss.

Defined benefit plans

The Gratuity scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each completed year of service or part thereof in excess of 6 months subject to a maximum limit of Rs.1,000,000 in terms of the provisions of the Payment of Gratuity Act, 1972. Vesting occurs upon completion of 5 years of service.

Provision in respect of gratuity and compensated absence has been determined using the Projected Unit Credit method, with actuarial valuations being carried out at the balance sheet date.

2.6 TRANSFER PRICING

2.7 During the year ended 31 March, 2017 as per provision of Income-tax Act, 1961, the Company has taken credit of corporate dividend tax aggregating Rs. Nil (Year ended 31 March, 2016 Rs.17,304,300) on account of tax paid on dividend received from one of its subsidiaries.

2.8 On March 17, 2016, the Company has acquired 96% stake in Avon Mobility Solutions Pvt. Ltd. (âAvonâ), a Mobile Technology Solutions provider for a purchase consideration of Rs.19,200,720. The Company has also taken over Avonâs net liabilities aggregating to Rs.12,504,061. Further, the Company has an option to acquire the remaining 4% shares of Avon as per terms and conditions of share purchase agreement executed with the shareholders of Avon. During the year ended March 31 2017, the Company has further subscribed 2,350,000 11% redeemable preference shares of face value of Rs.10 per share, for a minimum tenor of 5 years and maximum tenor of 20 years.

2.9 Previous year figures were audited by another firm of chartered accountants.

2.10 Previous year figures have been regrouped/ reclassified wherever necessary to correspond with the current year classification/ disclosure.

Mar 31, 2016

(ii) Rights, preferences and restrictions attached to shares

The Company has one class of equity shares having a par value of '' 10 each. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(v) Employees Stock Option Plan ("ESOP")

a. Employee Stock Option Scheme and SEBI (Share Based Employee Benefits) Regulations, 2014, is effective for regulation of all schemes by the Company for the benefits for its employees dealing in shares, directly or indirectly from October 28, 2014. In accordance with these Guidelines, the excess of the market price of the underlying equity shares as of the date of grant of options over the exercise price of the option, including up-front payments, if any, is to be recognized and amortized on graded vesting basis over the vesting period of the options.

c. There are no options granted, forfeited and exercised during the year under ESOP Scheme 2015.

1. OPERATING LEASE

Obligations on long-term, non-cancellable operating leases

The Company has acquired office premises under cancellable and non-cancellable operating lease. Operating lease rentals paid during the year March 2016 Rs.37,254,013/- (year ended 31 March, 2015 is Rs. 36,702,024/-) . The future minimum lease payments in respect of non-cancellable leases as at 31 March, 2016 is Rs. Nil (As at 31 March, 2015, Rs. Nil).

2. Segment reporting - Basis of preparation

a. Segment accounting policies

The Segment reporting policy complies with the accounting policies adopted for preparation and presentation of financial statements of the Company and is in conformity with Accounting Standard-17 on "Segment Reporting" specified as per Section 133 of the Companies Act, 2013 ("the 2013 Act") read with Rule 7 of Companies (Accounts) Rules, 2014. The segmentation is based on the Geographies (reportable primary segment) in which the Company operates and internal reporting systems. The secondary segmentation is based on the nature and type of services rendered.

b. Composition of reportable segments

Income and direct expenses in relation to segments are categorized based on items that are individually identifiable to that segment, while the remainder of the costs are categorized in relation to the associated turnover and/or man months. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably across geographies. The Company believes that it is not practicable to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly charged against total income.

Segment assets and liabilities represent the net assets and liabilities of that segment. All the fixed assets of the Company are located in India. These have not been identified to any of the reportable segments, as these are used interchangeably between segments and across geographies. Other items which are not directly attributable to any particular segment and which cannot be reasonably allocated to various segments are consolidated under "Unallocated" head.

3. Employee Benefit Obligations Defined contribution plans

An amount of Rs. 75,942,046 for the year ended 31 March, 2016 (Year ended 31 March, 2015 Rs. 68,862,235), have been recognized as an expense in respect of Company''s contribution for Provident Fund and Rs. 118,035 (Year ended 31 March, 2015 Rs. 50,172) for Employee State Insurance Fund deposited with the government authorities and has been shown under employee benefit expenses in the Statement of Profit and Loss.

Defined benefit plans

The Gratuity scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each completed year of service or part thereof in excess of 6 months subject to a maximum limit of Rs. 1,000,000 in terms of the provisions of the Payment of Gratuity Act, 1972. Vesting occurs upon completion of 5 years of service.

Provision in respect of gratuity and compensated absence has been determined using the Projected Unit Credit method, with actuarial valuations being carried out at the balance sheet date.

4. Other current liabilities includes Rs. Nil (as at 31 March, 2015 Rs. 91,306,938) received by the Company during previous year ended 31 March, 2015 against insurance claim filed on behalf of one of its overseas subsidiary company towards claim settlement with its customer and expenses incurred in this regard by the subsidiary Company. During the current year, the Company has reimbursed the same to its overseas subsidiary company.

5. TRANSFER PRICING

The Company has established a comprehensive system of maintenance of information and documents as required by transfer pricing legislation under section 92D for its international transactions and specified domestic transactions. The Company will further update above information and records and expects these to be in existence latest by due date of the filing of return, as required under law. The management is of the opinion that all above transactions are at arm''s length so that aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

6. During the year ended 31 March, 2016 as per provision of Income-tax Act, 1961, the Company has taken credit of corporate dividend tax aggregating Rs. 17,304,300 (Year ended 31 March, 2015 Rs. Nil) on account of tax paid on dividend received from one of its subsidiaries.

7. On March 17, 2016, the Company has acquired 96% stake in Avon Mobility Solutions Pvt. Ltd. (''Avon''), a Mobile Technology Solutions provider for a purchase consideration of Rs.19,200,720. The Company has also taken over Avon''s net liabilities aggregating to Rs. 12,504,061. Further, the Company has an option to acquire the remaining 4% shares of Avon as per terms and conditions of share purchase agreement executed with the shareholders of Avon. Subsequent to year end, the Company has further subscribed 1,750,000 11% redeemable preference shares of face value of '' 10 per share, for a minimum tenor of 5 years and maximum tenor of 20 years.

8. Previous year figures have been regrouped/ reclassified wherever necessary to correspond with the current year classification/ disclosure.

Mar 31, 2015

Note 1:

1.1 Company Overview

Nucleus Sofware Exports Limited (''Nucleus'' or ''the Company'') was incorporated on 9 January, 1989 in India as a private limited company. It was subsequently converted into a public limited company on 10 October, 1994. The Company made an inital public ofer in August 1995. As at 31 March, 2015, the Company is listed on two stock exchanges in India namely Natonal Stock Exchange and Bombay Stock Exchange. The Company has wholly owned subsidiaries in Singapore, USA, Japan, Netherlands, Australia and India. The Company''s business consists of sofware product development and marketng and providing support services mainly for corporate business enttes in the banking and financial services sector.

2.1 OPERATING LEASE

Obligatons on long-term, non-cancellable operatng leases

The Company has acquired ofce premises under cancellable and non-cancellable operatng lease. Operatng lease rentals paid during the year ended 31 March, 2015 is Rs. 36,702,024/- (year ended 31 March, 2014 is Rs. 29,975,165) . The future minimum lease payments in respect of non-cancellable leases as at 31 March, 2015 is Rs. Nil (As at 31 March, 2014, Rs. Nil).

2.2 Tax Expense

The Company has been accorded inital recogniton for the in-house R&D unit by the Department of Scientfc and Industrial Research (DSIR) for its R&D center at Noida effective 31 December, 2012 which is valid tll 31 March, 2015. The Company had thereafer applied to DSIR for the approval of weighted deducton under secton 35(2AB) of the Income Tax Act, 1961, which was received by the Company in the year ended 31 March, 2014. Accordingly, the Company has during the year ended 31 March , 2015 availed and recognised tax benefit under secton 35 (2AB) aggregatng to Rs. 55,233,750. This has resulted in decrease in income tax liability of the Company for the year ended 31 March , 2015.

2.3 Advance Tax (Net of provision)

Advance Tax (Net of provision) aggregatng to Rs. 110,341,548 (As at 31 March, 2014 : Rs. 140,338,603) has been classifed as Long-Term Loans and Advances as the same represents amount recoverable from Income Tax Department afer the completon of Income Tax Assessments.

2.4 Contngent liabilites and Commitments (to the extent not provided for)

(Amount in Rs.) Particulars As at As at 31 Mar 2015 31 Mar 2014

a. Contngent liabilites

Claims against the Company not acknowledged as debts 6,922,050 -

b. Capital Commitments

Estmated amount of contracts remaining to be executed on capital account and not 3,149,016 22,725,415 provided for in the books of account (net of advances).

c. other Commitments

The Company is commited to provide financial support to its subsidiary companies, as and when required.

As at 31 March 2015, the Company has given an undertaking to repay the amounts due to Nucleus Sofware Solutons Pte Limited, Singapore (subsidiary company) by Nucleus Sofware Japan Kabushiki Kaisha, Japan (subsidiary company), in the event that the later party is unable to repay the same, as and when it falls due. (Also see note 2.31)

As on 31 March, 2015, the Company has outstanding bank guarantee and leter of credits of Rs. 23,444,551 (As at 31 March, 2014 Rs. 13,617,899). These are secured to the extent of Rs. 15 crores against all present and future receivables of the Company.

2.5 Research and development expenditure

Expenditure on research and development as per Accounting Standard 26

Revenue 190,208,441 164,556,919

The Company had been accorded inital recogniton for the in-house R&D unit by the Department of Scientfc and Industrial Research (DSIR) for its R&D center at Noida effective 31 December, 2012 which is valid tll 31 March, 2015. The Company had thereafer applied to DSIR for the approval of weighted deducton under secton 35(2AB) of the Income Tax Act, 1961, which was been received by the Company in the year ended 31 March, 2014. (Also see note 2.23)

2.6 Segment reportng Â Basis of preparaton

a. Segment Accounting policies

The Segment reportng policy complies with the Accounting policies adopted for preparaton and presentaton of financial statements of the Company and is in conformity with Accounting Standard-17 on "Segment Reportng" specified as per Secton 133 of the Companies Act, 2013 ("the 2013 Act") read with Rule 7 of Companies (Accounts) Rules, 2014. The segmentaton is based on the Geographies (reportable primary segment) in which the Company operates and internal reportng systems. The secondary segmentaton is based on the nature and type of services rendered.

b. Compositon of reportable segments

The Company operates in seven main geographical segments: India, Far East, South East Asia, Europe, Middle East, Africa and Australia which individually contribute 10% or more of the Company''s revenue and segment assets.

Income and direct expenses in relaton to segments are categorised based on items that are individually identfable to that segment, while the remainder of the costs are categorised in relaton to the associated turnover and/or man months. Certain expenses such as depreciaton, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably across geographies. The Company believes that it is not practcable to provide segment disclosures relatng to those costs and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly charged against total income.

Segment assets and liabilites represent the net assets and liabilites of that segment. All the fixed assets of the Company are located in India. These have not been identfed to any of the reportable segments, as these are used interchangeably between segments and across geographies. Other items which are not directly atributable to any partcular segment and which cannot be reasonably allocated to various segments are consolidated under "Unallocated" head.

The secondary segmentaton is based on the nature and type of services rendered. Accordingly, Secondary Segmentaton has been classifed under Products and Sofware Projects and Services. Products revenue includes Income from sale of licenses and all other related customizaton, implementaton, tme and material contracts, fixed price contracts and annual technical service for these licenses. Sofware projects and services includes other tme and material contracts and fixed price contracts, whereby no license sale is made by the Company.

2.34 Employee benefit Obligatons

Defned contributon plans

An amount of Rs. 68,862,235 for the year ended 31 March, 2015 (Year ended 31 March, 2014 Rs. 60,315,334), have been recognized as an expense in respect of Company''s contributon for Provident Fund and Rs. 50,172 (Year ended 31 March, 2014 Rs. 43,412) for Employee State Insurance Fund deposited with the government authorites and has been shown under employee benefit expenses in the Statement of Profit and Loss.

Defined benefit plans

The Gratuity scheme provides for lump sum payment to vested employees at retrement, death while in employment or on terminaton of employment of an amount equivalent to 15 days basic salary payable for each completed year of service or part thereof in excess of 6 months subject to a maximum limit of Rs. 1,000,000 in terms of the provisions of the Payment of Gratuity Act, 1972. Vestng occurs upon completon of 5 years of service.

Provision in respect of gratuity and compensated absence has been determined using the Projected Unit Credit method, with actuarial valuatons being carried out at the balance sheet date.

During the year, the Company has made contributons to Nucleus Sofware Export Limited Employees Group Gratuity Assurance Scheme, which has made further contributons to Employees Group Gratuity Scheme of Life Insurance Corporaton of India.

2.7 Other current liabilites includes Rs. 91,306,938 received by the Company during the year ended 31 March, 2015 against insurance claim fled on behalf of one of its overseas subsidiary company towards claim setlement with its customer and expenses incurred in this regard by the subsidiary Company. The above insurance claim is to be reimbursed to the subsidiary company.

2.8 The Company had during the year ended 31 March, 2014 reclassified investment in bonds of Indian Railway Finance Corporaton Limited - Trache 1 Series I as non-current investments which was originally held as current investment. Due to this change in classification and in accordance with Accounting Standard (AS) 13, the diference in the fair value of the investment as on the date of transfer and the cost at which these were recorded earlier aggregatng to Rs. 9,350,000 had been recognised as an adjustment to the carrying value of the investment.

2.9 trANSFEr PriCiNG

The Company has established a comprehensive system of maintenance of informaton and documents as required by transfer pricing legislaton under secton 92D for its internatonal transactons and specified domestc transactons. The Company will further update above informaton and records and expects these to be in existence latest by due date of the fling of return, as required under law. The management is of the opinion that all above transactons are at arm''s length so that aforesaid legislaton will not have any impact on the financial statements, partcularly on the amount of tax expense and that of provision for taxaton.

2.10 During the year ended 31 March, 2015 as per provision of Income-tax Act, 1961, the Company has taken credit of corporate dividend tax aggregatng Rs. Nil (Year ended 31 March, 2014 : Rs. 15,963,730) on account of tax paid on dividend received from one of its subsidiaries.

2.11 During the year, the Corporate Social Responsibility (CSR) commitee has been formed by the Company to monitor CSR related actvites. The Company has contributed Rs. 7,050,000 out of the total contributable amount of Rs. 11,853,562 for the year ended 31 March, 2015 in accordance with secton 135 read with schedule VII of the Companies Act, 2013 to various trusts and NGOs. The contributons have been made towards promotng educaton and sanitaton. The management has not spent the remaining amount of Rs. 4,803,562.

2.12 Previous year figures have been regrouped/ reclassified wherever necessary to correspond with the current year classification/ disclosure.

Mar 31, 2013

1.1. Company overview

Nucleus Software Exports Ltd. (''Nucleus'' or ''the Company'') was incorporated on 9 January 1989 in India as a private limited company. It was subsequently converted into a public limited company on 10 October, 1994. The Company made an initial public offer in August 1995. As at 31 March, 2013, the Company is listed on two stock exchanges in India namely National Stock Exchange and Bombay Stock Exchange. The Company has wholly owned subsidiaries in Singapore, USA, Japan, Netherlands and India. The Company''s business consists of software product development and marketing and providing support services mainly for corporate business entities in the banking and financial services sector.

The shares of the Company have been voluntarily delisted from Madras Stock Exchange w.e.f. 16 September, 2011.

2.1 EMPLOYEES STOCK OPTION PLAN ("ESOP")

a. Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999, issued by the SEBI, is effective for all stock option schemes established after 19 June 1999. In accordance with these Guidelines, the excess of the market price of the underlying equity shares as of the date of grant of options over the exercise price of the option, including up-front payments, if any, is to be recognized and amortised on graded vesting basis over the vesting period of the options.

b. The Company currently has three ESOP schemes, ESOP scheme - 2002 (instituted in 2002), ESOP scheme - 2005 (instituted in 2005) and ESOP scheme - 2006 (instituted in 2006). These schemes were duly approved by the Board of Directors and Shareholders in their respective meetings. The 2002 scheme provides for the issue of 225,000 options, 2005 scheme for 600,000 options and 2006 scheme for 1,000,000 options to eligible employees. These schemes are administered by the Compensation Committee comprising four members, the majority of whom are independent directors.

2.2 OPERATING LEASE

Obligations on long-term, non-cancelable operating leases

The Company has acquired office premises under cancellable and non-cancellable operating lease. Operating lease rentals paid during the year ended 3I March, 20I3 is Rs. 30,655,263 (Year ended 3I March, 20I2 : Rs. 29,224,530). The future minimum lease expense in respect of non-cancellable leases is as follows:

2.3 TAX EXPENSE

a. The Company had set up SEZ unit, which has commenced operations during the year ended 3I March, 20I2. Income from SEZ unit is eligible for exemption under section I0 AA. This has resulted in decrease in income tax liability of the Company as income earned from SEZ unit is not liable to tax under Income tax Act, I96I.

b. During earlier years, the Company had calculated its tax liability under Minimum Alternative Tax (MAT) as its liability under MAT was higher than normal tax liability. The excess of tax payable under MAT over normal tax payable (MAT Credit entitlement) was carried forward to be set off against the future tax liabilities. During the year ended 3I March, 20I3, the Company is liable to Normal Tax as its Normal Tax is higher than MAT Tax Liability. The Company has utilised the balance MAT Credit Entitlement of Rupees 20,937,7I5 during the year ended 3I March, 20I3, to set off its liability for payment of Income Tax.

2.4 ADVANCE TAX (NET OF PROVISION) AND MAT CREDIT ENTITLEMENT

a. Advance Tax (Net of provision) aggregating to Rs. I37,535,009 (As at 3I March, 20I2 : Rs. I04,758,287) has been classified as Long- Term Loans and Advances as the same represents amount recoverable from Income Tax Department after the completion of Income Tax Assessments.

b. MAT Credit Entitlement balance aggregating to Rs. Nil (As at 3I March, 20I2 : Rs. 20,937,7I5) which the Company expects to set off against Income Tax payable for the year ending 3I March, 20I3 has been considered to be Short-Term Loans and Advances.

2.5 RELATED PARTY TRANSACTIONS

List of related parties - where control exists

a. Wholly owned subsidiary companies

- Nucleus Software Solutions Pte Ltd, Singapore

- Nucleus Software Japan Kabushiki Kaisha, Japan

- Nucleus Software Inc., USA

- Nucleus Software Netherlands B.V, Netherlands

- VirStra i -Technology Services Limited, India

- Nucleus Software Limited, India

b. other subsidiary company (wholly owned subsidiary of VirStra i Technology Services Limited)

- VirStra i -Technology (Singapore) Pte Ltd., Singapore

c. other related parties:

Key managerial personnel:

- Vishnu R Dusad (Managing Director)

2.6 SEGMENT REPORTING - BASIS OF PREPARATION

a. Segment accounting policies

The Segment reporting policy complies with the accounting policies adopted for preparation and presentation of financial statements of the Company and is in conformity with Accounting Standard-17 on "Segment Reporting", as specified in the Companies (Accounting Standards) Rules, 2006. The segmentation is based on the Geographies (reportable primary segment) in which the Company operates and internal reporting systems. The secondary segmentation is based on the nature and type of services rendered.

b. Composition of reportable segments

The Company operates in five main geographical segments: India, Far East, South east Asia, Europe and Middle East which individually contribute I0% or more of the Company''s revenue and segment assets.

Income and direct, expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while the remainder of the costs are categorised in relation to the associated turnover and/or man months. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably across geographies. The Company believes that it is not practicable to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly charged against total income.

Segment assets and liabilities represent the net assets and liabilities of that segment. All the fixed assets of the Company are located in India. These have not been identified to any of the reportable segments, as these are used interchangeably between segments and across geographies. Other items which are not directly attributable to any particular segment and which cannot be reasonably allocated to various segments are consolidated under "Unallocated" head.

The secondary segmentation is based on the nature and type of services rendered. Accordingly, Secondary Segmentation has been classified under Products and Software Projects and Services. Products revenue includes Income from sale of licenses and all other related customization, implementation, time and material contracts, fixed price contracts and annual technical service for these licenses. Software projects and services includes other time and material contracts and fixed price contracts, whereby no license sale is made by the Company.

2.7 EMPLOYEE BENEFIT OBLIGATIONS DEFINED CONTRIBUTION PLANS

An amount of Rs. 57,69I,669 for the year ended 3I March, 20I3 (Year ended 3I March, 20I2 : Rs. 58,330,038), have been recognized as an expense in respect of Company''s contribution for Provident Fund and Employee State Insurance Fund deposited with the government authorities and has been shown under employee benefit expenses in the Statement of Profit and Loss.

Defined benefit plans

The Gratuity scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to I5 days basic salary payable for each completed year of service or part thereof in excess of 6 months subject to a maximum limit of Rs I,000,000 in terms of the provisions of the Payment of Gratuity Act, I972. Vesting occurs upon completion of 5 years of service.

2.8 TRANSFER PRICING

The Company had during the previous year ended 31 March, 2012 set up an SEZ unit at Jaipur. The Income from SEZ unit is eligible for exemption under section 10 AA. The Company has established a comprehensive system of maintenance of information and documents as required by transfer pricing legislation under section 92D for its international transactions and is in the process of establishing such system for specified domestic transactions. The Company will further update above information and records and expects these to be in existence latest by due date of the filing of return, as required under law. The management is of the opinion that all above transactions are at arm''s length so that aforesaid legislation will not have any impact on the financial statement, particularly on the amount of tax expense and that of provision for taxation.

2.9 During the year ended 31 March, 2013, as per provision of Income-tax Act, 1961, the Company has taken credit of corporate dividend tax aggregating Rs. 4,864,702 (Year ended 31 March, 2012 : Rs. 5,839,693) on account of tax paid on dividend received from one of its subsidiaries.

2.10 Revenue recognised up to the reporting date in respect of contracts in progress at the reporting date aggregates to Rs. 764,470,880 (As at 31 March, 2012 : Rs. 951,240,690).

2.11 Previous year figures have been regrouped/ reclassified wherever necessary to correspond with the current year''s classification/ disclosure.

Mar 31, 2010

1. Company Overview

Nucleus Software Exports Ltd. (Nucleus or the Company) was incorporated on 9 January 1989 in India as a private limited company. It was subsequently converted into a public limited company on 10 October 1994. The Company made an initial public offer in August 1995. As at 31 March 2010, the Company is listed on three stock exchanges in India namely National Stock Exchange, Bombay Stock Exchange and Madras Stock Exchange. The Company has wholly owned subsidiaries in Singapore, USA, Japan, Australia, Hong-Kong, Netherlands and India.The Companys business consists of software product development and marketing and providing support services mainly for corporate business entities in the banking and financial services sector.

2. Employees Stock Option Plan ("ESOP")

The Securities and Exchange Board of India (SEBI) has issued the (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, which is effective for all stock option schemes established after 19 June 1999. In accordance with these Guidelines, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the option, including up-front payments, if any, is to be recognised and amortised on graded vesting basis over the vesting period of the options.

The Company currently has three ESOP schemes, ESOP scheme- 2002 (instituted in 2002), ESOP scheme-2005 (instituted in 2005) and ESOP scheme-2006 (instituted in 2006). These schemes were duly approved by the Board of Directors and Shareholders in their respective meetings. The 2002 scheme provides for the issue of 225,000 options, 2005 scheme for 600,000 options and 2006 scheme for 1,000,000 options to eligible employees. These schemes are administered by the Compensation Committee comprising four members, the majority of whom are independent directors.

3. Most of the operations of the company are conducted through Software Technology Park (STP). Income from STP are tax exempt for the earlier of 10 years commencing from the fiscal year in which the unit commences software development or 31 March 2011, whether is earlier.

Pursuant to the change in the Indian Income-tax Act, 1961, the company has calculated its tax liability after considering Minimum Alternative Ta x (MAT). The MAT credit entitlement can be carried forward and set off against the future tax liability. Accordingly a sum of Rs.45,300,000 (Rs.57,300,000) was carried forward and shown under "Loans and advances" in the balance sheet as at 31 March 2010.

4. Employee Benefit Obligations

Defined contribution plans

An amount of Rs.51,493,973 (Rs.56,896,091) for the year ended, have been recognized as an expense in respect of Companys contribution for Provident Fund and Employee State Insurance Fund deposited with the government authorities and has been shown under personnel expenses in the Profit and Loss Account.

Defined benefit plans

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to 15 days of total basic salary last drawn for each completed year of service. Gratuity is payable to all eligible employees of the Company on retirement, separation, death or permanent disablement, in terms of the provisions of the Payment of Gratuity Act, 1972.

5. Segment reporting - Basis of preparation

(i) Segment accounting policies

The Segment reporting policy complies with the accounting policies adopted for preparation and presentation of financial statements of the Company and is in conformity with Accounting Standard-17 on "Segment Reporting", as specified in the Companies (Accounting Standard) Rules, 2006. The segmentation is based on the Geographies (reportable primary segment) in which the Company operates and internal reporting systems. The secondary segmentation is based on the nature and type of services rendered.

(ii) Composition of reportable segments

The Company operates in five main geographical segments: India, Far East, Singapore, Europe and Middle East.

Income and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while the remainder of the costs are categorised in relation to the associated turnover and/or man months. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably across geographies. The Company believes that it is not practicable to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly charged against total income.

Segment assets and liabilities represent the net assets put up and liabilities of that segment. All the fixed assets of the Company are located in India. These have not been identified to any of the reportable segments, as these are used interchangeably between segments and across geographies. Other items which are not directly attributable to any particular segment and which cannot be reasonably allocated to various segments are consolidated under "Unallocated" head.

6. Related party transactions

a) List of related parties - where control exists Wholly owned subsidiary companies Ã Nucleus Software Solutions Pte Ltd, Singapore Ã Nucleus Software Japan Kabushiki Kaiga, Japan Ã Nucleus Software Inc., USA

Ã Nucleus Software (H.K) Ltd., Hong Kong (de-registered w.e.f. 8 January 2010) Ã Nucleus Software (Australia) Pty Ltd., Australia Ã VirStra i -Technology Services Limited, India Ã Nucleus Software Netherlands B.V, Netherlands Ã Nucleus Software Limited, India (incorporated on 21 April 2008)

Other subsidiary company (wholly owned subsidiary of Virstra i Technology Services Limited) Ã Virstra i -Technology (Singapore) Pte. Ltd., Singapore Other related parties: Key managerial personnel: Ã Vishnu R Dusad (Managing Director)

7. Capital commitments and contingent liabilities

a. Estimated amount of contracts remaining to be executed on capital account and not provided for in the books of account (net of advances) Rs.1,775,062 (Rs.1,309,533).

b. Claim against the Company not acknowledged as debt Rs.324,000 (Rs.324,000).

8. The company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income Ta x Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation for the international transactions entered into with associated enterprises during the financial year and expects such records to be in existence latest by the due date of filing of the return of income, as required under law. The management is of the opinion that its international transactions are at arms length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

9. During the current year, as per provision of Income-tax Act, 1961, the Company has taken credit of corporate dividend tax aggregating Rs.11,896,274 on account of dividend received from one of its subsidiaries.

10. Revenue recognised upto the reporting date in respect of contracts in progress at the reporting date aggregates Rs.754,921,708 (Rs.1,457,086,628).

11. During the current year, Nucleus Software (HK) Ltd, one of the wholly owned subsidiaries of the Company, has been wound up with effect from 8 January 2010.

12. During the current year, Nucleus Software (Australia) Pty Ltd., one of the wholly owned subsidiaries of the Company, has filed for voluntary winding up. Subsequent to the year end, the subsidiary has been wound up with effect from 5 April 2010.

13. One of the subsidiaries of the Company has been granted a Letter of Approval (LOA) from Office of Development Commissioner, Special Economic Zone, the Government of India on 25 June 2008 with a further extension of one year granted vide letter dated 30 June 2009. According to this, the Company has to commence operations by 24 June 2010. As per the management, the subsidiary is yet to commence its operations and is in the process of filing an application for further extension of LOA. Based on the assessment of the management, extension will be granted and would undertake requisite steps to comply with the conditions stipulated in the LOA.

14. As reported in earlier quarters of the year, one of the major customers of an overseas subsidiary of the Company, had on July 25, 2009 given a notice to this subsidiary of partial cancellation of the contracts. During the current quarter, the subsidiary and the customer have fully closed a settlement without any liability on the subsidiary or on the parent Company.

15. Previous year figures have been regrouped/ reclassified wherever necessary to make them comparable with the current year figures.

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