Notes to Accounts of Oracle Financial Services Software Ltd.

Mar 31, 2023

Share application money pending allotment

Share application money pending allotment represents the amount received on exercise of stock options by the eligible employees under the prevailing ESOP schemes of the Company, on which allotment is yet to be made.

Share application money pending allotment as at March 31,2023 represents the money received from employees of the Company towards exercise of 1,518 (March 31, 2022 - 125) OFSS Stock Units (“OSUs”) at the exercise price of f 5 under Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Each OSUs will entitle one equity share of f 5 each of the Company.

Securities premium

Securities premium represents amount received in excess of face value on issue of shares by the Company. It also includes transfer of stock compensation related to options exercised from employee stock options outstanding (other equity). The securities premium will be utilized in accordance with the provisions of the Act.

General reserve

General reserve represents the amount of profits appropriated by the Company.

Employee stock options outstanding

Selected employees of the OFSS group also receive remuneration in the form of share-based payments under stock option program of the Company. Employee stock options outstanding represents the fair value of equity-settled transactions, calculated at the date when the grant is made using an appropriate valuation model and recognized over the period in which the performance and/or service conditions are fulfilled.

Contribution from ultimate holding company

Oracle Corporation, the Ultimate Holding Company of Oracle Financial Services Software Limited has extended its stock option program to selected employees of OFSS''s overseas subsidiaries and branches. Contribution from Ultimate Holding Company represents the fair value of equity-settled transactions; calculated at the date when the grant is made using an appropriate valuation model and recognized over the period in which the performance and/or service conditions are fulfilled.

Oracle Corporation has also extended its Employee Stock Purchase Plan (ESPP) to employees of OFSS group. Under the plan, the employees are eligible to purchase the shares of Oracle Corporation at discounted price. The discount amount on the shares purchased during the year by employees is treated as Contribution from Ultimate Holding Company.

Gain on treasury shares

Company''s own equity instruments (treasury shares) are recognized at cost and deducted from equity. Gain or loss on the sale of the Company''s own equity instruments is recognized in Other Equity.

Retained earnings

Retained earnings represents the undistributed earnings, net of amounts transferred to general reserve; if any.

The Board of Directors have declared an interim dividend on April 26, 2023 of f 225 per equity share for the year ended March 31, 2023. This would result in an estimated cash outflow of f 19,443.34 million.

The Board of Directors had declared an interim dividend on May 4, 2022 of f 190 per equity share for the year ended March 31, 2022. This had resulted in cash outflow of f 16,405.35 million.

Other comprehensive income

Other comprehensive income represents the exchange differences arising on translation of foreign subsidiaries and branches for consolidation and the remeasurements of the defined benefit gratuity plan; comprising of actuarial gains and losses on its net liabilities / assets.

(b) During the year ended March 31, 2023, the OFSS group recognized revenue of f 3,995.27 million from opening deferred revenue as of April 1, 2022. During the year ended March 31, 2022, the OFSS group recognized revenue of f 3,267.67 million from opening deferred revenue as of April 1, 2021.

(c) During the year ended March 31, 2023, the OFSS group has not recognized any revenue from performance obligations satisfied prior to April 1, 2022. During the year ended March 31,2022, the OFSS group has not recognized any revenue from performance obligations satisfied prior to April 1,2021.

(d) Change in contract assets and contract liabilities are on account of transactions undertaken in the normal course of business. In accordance with Ind AS 115, unbilled revenue of f 2,136.13 million as at March 31, 2023 (March 31, 2022 - f 2,004.68 million) has been classified as other current asset.

(f) Remaining Performance obligation

The OFSS group has applied the practical expedient as provided in Ind AS 115 and excluded the disclosure relating to remaining performance obligation for:

i. contracts where the original expected duration is one year or less;

ii. contracts where the revenue recognized corresponds directly with the value to the customer of the entity''s performance completed to date. Typically this involves those contracts where invoicing is on time and material basis.

Remaining performance obligation estimates are subject to change and are affected by several factors such as terminations, changes in the scope of contracts, periodic revalidations of estimates and other macro economic factors.

The aggregate amount of transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as at March 31, 2023, after considering the practical expedient mentioned above is f 18,948.38 million (March 31, 2022 - f 16,910.81 million), out of which 58% (March 31,2022 - 60%) is expected to be recognized as revenue within the next one year and the balance thereafter.

(g) Asset recognized from the costs to obtain a contract

The OFSS group recognizes incremental costs of obtaining a contract with customers as an asset and disclose them under "Other assets" as Deferred contract costs in the Consolidated financial statements. Incremental costs of obtaining contracts are those costs that the OFSS group incurs to obtain a contract with the customer that would not have been incurred if the contract had not been obtained. Such deferred contract costs assets are amortized over the benefit period.

The OFSS group has amortized deferred contract cost of f 75.14 million for the year ended March 31,2023 (March 31,2022 -f 62.22 million) and has closing balance of deferred contract cost asset of f 171.91 million as at March 31,2023 (March 31,2022 -f 150.94 million).

Note 26: Significant accounting judgements, estimates and assumptions

The preparation of the OFSS group''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

The key assumptions and estimate at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described below. These assumptions and estimates are based on available parameters as on the date of preparation of financial statements. These assumptions and estimates, however, may change due to market changes or circumstances arising that are beyond the control of the OFSS group.

i) Leases

The OFSS group has entered into commercial property leases for its offices. The OFSS group evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgement. The OFSS group uses significant judgement in assessing the lease term and the applicable discount rate. The OFSS group has lease contracts which include extension and termination option and this requires exercise of judgement by the OFSS group in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. The discount rate is generally based on the incremental borrowing rate specific to the lease period.

ii) Employee benefit trust

The Company had formed a Trust with name i-flex Employee Stock Option Trust (‘The Trust'') in the year 1998. The main object was to provide benefit to the employees through stock purchase scheme. The Trust was holding equity shares of the Company which have been sold during the previous years. The Trust funds would now be utilized for the benefit of the employees. However, as per the Trust deed, the Company may use its controlling power on certain activities of the Trust. Accordingly, the financial of the Trust are consolidated with the financials of the OFSS group.

iii) Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm''s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived

from the projections for the next five years and do not include restructuring activities that the OFSS group is not yet committed to or significant future investments that will enhance the asset''s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill recognized by the OFSS group. The key assumptions used to determine the recoverable amount for the different CGUs, are disclosed and further explained in Note 31.

iv) Share based payments

The Company measures share-based payments and transactions at fair value and recognizes over the vesting period using Black Scholes valuation model. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and model used for estimating fair value for share-based payment transactions are disclosed in note 29(b).

v) Taxes

Income tax expense comprises current tax expense and the net changes in the deferred tax asset or liability during the year. Significant judgements are involved in determining the provision for income taxes, including amount expected to be paid/ recovered for uncertain tax positions, including disclosures thereof. Also refer Note 2.3 (f), Note 16 and Note 40.

Deferred tax liability is recognized on the undistributed profits of subsidiaries where it is expected that the earnings of the subsidiary will be distributed in foreseeable future. Deferred tax asset is recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgement is required to determine the amount of deferred tax that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

vi) Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan and other post-employment retirement benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date annually. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. For plans operated outside India, the management considers the interest rates of high quality corporate bonds in currencies consistent with the currencies of the post-employment benefit obligation with at least an AA'' rating or above, as set by an internationally acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The underlying bonds are further reviewed for quality. Those having excessive credit spreads are excluded from the analysis of bonds on which the discount rate is based, on the basis that they do not represent high quality corporate bonds.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases is based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in note 30.

vii) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 37 for further disclosures.

viii) Revenue Recognition

The OFSS group assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables. The OFSS group exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time.

In determining the transaction price for the contract, judgement is required to assess if the consideration is fixed or is considered variable and whether there is any constraint on such variable consideration such as volume discounts, service level credits and price concessions. The OFSS group uses judgement to determine an appropriate standalone selling price for each performance obligation and allocates the transaction price to each performance obligation on the basis of the relative stand-alone selling price of each distinct product or service promised in the contract except for sale of software licenses, where the OFSS group uses a residual approach for estimating the standalone selling price of software license as the pricing is highly variable.

Contract fulfilment costs are generally expensed as incurred except for certain contract costs which meet the criteria for capitalization. Such costs are amortized over the benefit period. The assessment of this criteria requires the application of judgement.

Note 29: Share based compensation / payments(a) Employee Stock Purchase Scheme (ESPS)

The Company had adopted the ESPS administered through a Trust with the name i-flex Employee Stock Option Trust (“the Trust”) to provide equity-based incentives to key employees of the Company. i-flex Solutions Trustee Company Ltd. is the Trustee of this Trust.

No allocation of shares to the employees have been made through the Trust since 2005 and all selected employees under the Trust have exercised their right of purchase of shares prior to March 31, 2014. In this regard, the Trustee Company had filed a petition in the Honorable Bombay High Court to seek directions for utilization of the remaining unallocated shares along with the other assets held by the Trust for the benefit of the employees of the Company. As per the order of the Honorable Bombay High Court dated August 1, 2016, the trust funds would be utilized for the benefit of the employees. Accordingly, during the financial year, the trust has incurred an expenditure of f 61.14 million (March 31, 2022 - f 22.24 million) towards welfare of employees of the Company.

As at March 31,2023, the Trust is not holding any equity shares (March 31, 2022 - Nil equity shares) of the Company.

(b) Employee Stock Option Plan (ESOP)

The Members of the Company at their Annual General Meeting held on August 14, 2001 had approved grant of ESOPs to the employees / directors of the Company and its subsidiaries up to 7.5% of the issued and paid-up capital of the Company from time to time. This said limit was enhanced and approved up to 12.5% of the issued and paid-up capital of the Company from time to time, by the Members at their Annual General Meeting held on August 18, 2011. This extended limit is an all-inclusive limit applicable for stock options (“options”) granted in the past and in force and those that will be granted by the Company in future.

Employees Stock Option Plan 2011 Scheme (Scheme 2011)

Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Scheme 2011. Accordingly, the Company has granted 1,950,500 options under the Scheme 2011. As per the Scheme 2011, each of 20% of the total options granted vest on completion of 12, 24, 36, 48 and 60 months from the date of grant.

Oracle Financial Services Software Limited Stock Plan 2014 (OFSS Stock Plan 2014)

Nomination and Remuneration Committee in their meeting held on August 7, 2014, approved OFSS Stock Plan 2014. Accordingly, the Company has granted 178,245 Stock Options and 1,465,030 OFSS Stock Units (“OSUs”) under OFSS Stock Plan 2014. The issuance terms of OSUs are the same as for options. Till March 2019, employees could elect to receive 1 OSU in lieu of 4 awarded options at their respective exercise price. In respect of the OFSS Stock Plan 2014, each of 25% of the total options / OSUs granted will vest on completion of 12, 24, 36 and 48 months from the date of grant.

Any vesting is subject to continued employment of the employee with the Company or its subsidiaries. Options / OSUs have an exercise period of 10 years from the date of grant. The employee pays the exercise price and applicable taxes upon exercise of options / OSUs.

During the year ended March 31, 2023, the Company has granted 281,387 OSUs at an exercise price of f 5 (March 31, 2022 -156,215 OSUs at an exercise price of f 5) under OFSS Stock Plan 2014. The weighted average share price for the year over which options / OSUs were exercised was f 3,181 (March 31, 2022 - f 4,111).

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.

The OFSS group evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government bonds consistent with the currency and estimated term of the post employment benefits obligations. Plan assets are administered by LIC and HDFC Life. The expected rate of return on plan assets is based on the expected average long term rate of return on investments of the fund during the terms of the obligation.

The OFSS group''s contribution to the fund for the year ending March 31,2024 is expected to be f 110.22 million (March 31,2023 -f 139.98 million).

The OFSS group performed its annual impairment test for years ended March 31,2023 and March 31,2022 on respective balance sheet date. The recoverable amount of above CGUs exceeded their carrying amounts.

Products CGU

The recoverable amount of the Products CGU as at March 31, 2023 is determined based on a value in use calculation using projections covering a five-year period. The growth rate used to extrapolate the cash flows of the unit beyond the five-year period is 1% (March 31,2022 - 1%). This growth rate is in line with the industry average growth rate. The pre-tax discount rate applied to the cash flow projections for impairment testing during the current year is 18.40% (March 31,2022 - 17.27%).

Key assumptions used for value in use calculations

The calculation of value in use for Products CGU is most sensitive to the following assumptions:

- Operating margins

- Discount rates

- Growth rates used to extrapolate cash flows beyond the forecast period

Operating margins - Operating margins are based on average values achieved in the current financial year.

Discount rates - Discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and is derived from its weighted average cost of capital (WACC). Segment-specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available market data. Adjustments to the discount rate are made to factor in the specific amount and timing of the future tax flows in order to reflect a pre-tax discount rate.

Growth rate estimates - Rates are in line with the industry average growth rate.

Note 32: Financial risk management objectives and policies

The OFSS group activities expose it to market risks, liquidity risk and credit risks. The management oversees these risks and is aided by the Risk Management Committee whose scope is to formulate the risk management policy, which will identify elements of risk, if any which may affect the OFSS group.

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk mainly comprises of foreign currency risk.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of monetary items will fluctuate because of changes in foreign exchange rates. This may have potential impact on the statement of profit and loss and other components of equity, where monetary items are denominated in a foreign currency which are different from functional currency in which they are measured. As of balance sheet date, the OFSS group''s net foreign currency exposure expressed in INR that is not hedged is f 1,332.90 million (March 31, 2022 - f 1,883.77 million).

The OFSS group manages its foreign currency risk by hedging the receivables in the major currencies (USD, EUR, AUD, GBP and JPY) using hedging instrument as forward contracts. The period of the forward contracts is determined by the expected collection period for invoices which currently ranges between 30 to 120 days.

Foreign currency sensitivity

The table below demonstrates sensitivity impact on OFSS group''s profit after tax and total equity due to change in foreign exchange rates of currencies where it has significant exposure:

The above sensitivity impact gain (loss) is due to every percentage point appreciation or depreciation in the exchange rate of respective currencies, with all other variables held constant. Sensitivity impact is computed based on change in value of monetary assets and liabilities denominated in above respective currency, where the functional currency of the entity is a currency other than above respective currency and entities with functional currency as above respective currency where transactions are in foreign currencies. The OFSS group''s exposure to foreign currency changes for all other currencies is not material.

(b) Liquidity risk

Liquidity risk management implies maintaining sufficient availability of funds to meet obligations when due and to close out market positions. The OFSS group monitors rolling forecast of the cash and cash equivalent on the basis of expected cash flows.

The OFSS group has sufficient funds in cash and cash equivalent and other bank balances to meet obligations towards financial liabilities.

(c) Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The OFSS group is exposed to credit risk from its operating activities (primarily trade receivables, including receivables from related parties) and from its finance activities, including time deposits with banks, foreign exchange transactions and other financial instruments.

(i) Trade receivables

Customer credit risk is managed in line with the established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on regional historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 8.

(ii) Cash and Bank balances

Credit risk from balances with banks is managed by the OFSS group''s treasury department in accordance with the OFSS group''s policy. Investments of surplus funds are made only with existing Bankers and within credit limits assigned to each banker.

OFSS group follows a conservative philosophy and aims to invest surplus funds mainly in India and only in time deposits with well-known and highly rated banks. The duration of such time deposits will not exceed 364 days. The OFSS group, on quarterly basis, monitors the credit ratings and total deposit balances of each of its bankers. Further limits are set to minimize the concentration of risks and therefore mitigate financial loss of any potential failure to repay deposits.

Note 33: Capital management

For the purpose of the OFSS group''s capital management, capital includes issued equity share capital, share premium and all other equity reserves attributable to the equity shareholders of the Company. The primary objective of the OFSS group''s capital management is to maximize the equity shareholder value.

The OFSS group manages its capital structure and makes adjustments in light of changes in economic conditions and other financial requirements.

Note 34: Derivative instruments

The Company enters into forward foreign exchange contracts where the counter party is a bank. The Company purchases forward foreign exchange contracts to mitigate the risks of change in foreign exchange rate on receivables denominated in certain foreign currencies. The Company considers the risk of non-performance by the counter party as non-material.

Note 35: Code on Social Security

The Code on Social Security, 2020 (“Code”) relating to employee benefits during the employment and post-employment benefits has been published in the Gazette of India on September 29, 2020. The Ministry of Labour and Employment has released draft rules for the Code on November 13, 2020. The effective date from which these changes are applicable is yet to be notified. The Company will assess and record the impact, if any, when the rules are notified, and the code becomes effective.

Note 36: Corporate Social Responsibility expenditure

As per the requirements of Section 135 of the Companies Act, 2013 the OFSS group was required to spend an amount of f 457.64 million (March 31, 2022 - f 430.58 million) on Corporate Social Responsibility expenditure based on the average net profits of the three immediately preceding financial years. The Company has adjusted excess amount paid in the previous financial year of f 9.82 million (March 31, 2022 Nil). Net amount to be spend against CSR expenditure amounts to f 447.82 million. The OFSS group has spent an amount of f 473.62 million (March 31, 2022 - f 440.40 million) against CSR expenditure; of which f 25.80 million (March 31,2022 - f 9.82 million) has been carried forward for set off against CSR spends in the next financial year.

The following methods and assumptions are used to estimate the fair values:

The OFSS group enters into derivative financial instruments with various banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies.

There have been no transfers between Level 1 and Level 2 during the periods March 31,2023 and March 31,2022.

Note 40: Tax litigations

As at March 31, 2023, the OFSS group has certain litigations with respect to tax matters for various assessment years amounting to f 24,434.24 million (March 31, 2022 - f 21,059.00 million), which are pending before various appellate / tax authorities. The management expects that its position will be upheld on ultimate resolution and the possibility of any outflow of resources is remote. Demand of tax payable after adjusting taxes paid under protest and refunds amounts to f 16,678.50 million (March 31, 2022 -f 13,850.59 million) as at March 31, 2023. Further for certain litigations the OFSS group has aggregate provisions of f 874.15 million (March 31,2022 - f 1,209.04 million) as at March 31, 2023.

Note (i): Remuneration includes salary, bonus and perquisites. During the year, 59,988 OSUs under OFSS Stock Plan 2014 (March 31, 2022 - 41,500 OSUs under OFSS Stock Plan 2014) were granted to KMP.

Note (ii): Terms and conditions of transactions with related parties:

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at year end are unsecured and interest free and settlement occurs in cash.

Note 42: Segment information

Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.

The OFSS group is organized by business segment and geographically. For management purposes the OFSS group is primarily organized on a worldwide basis into two business segments:

a) Product licenses and related activities (''Products'') and

b) IT solutions and consulting services (''Services'')

The business segments are the basis on which the OFSS group reports its primary operational information to management.

Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.

IT solutions and consulting services segment offers services spanning the entire lifecycle of applications used by financial service institutions. The division''s portfolio includes Consulting, Application, Support and Technology Services that help institutions improve efficiency, optimize costs, meet risk and compliance mandates and implement IT solutions finely attuned to their business needs.

Segment revenue and expense:

Revenue is generated through licensing of software products, maintenance fees as well as by providing software solutions to the customers including consulting services. The income and expenses which are not directly attributable to a business segment are shown as unallocable income and expenses.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of trade receivables, net of allowances, unbilled revenue, deposits for premises, property, plant and equipment and right-of-use asset. Segment liabilities primarily includes trade payables, deferred revenues, advance from customer, employee benefit obligations, lease liability and other liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by both the segments is allocated to each of the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown as part of unallocable assets and liabilities.

Non current assets for this purpose consist of property, plant and equipment, capital work-in-progress, right-of-use assets, investment property, intangible assets, non-current income tax asset and other non-current assets.

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Mar 31, 2022

The Company''s investment property consists of a portion of land at Pune, India.

The fair value of the investment property as at March 31, 2022 and March 31, 2021 is based on valuations performed by RNC VALUECON LLP; an accredited independent valuer. RNC VALUECON LLP is one of the senior most and reputed valuer in the field of asset valuation. RNC VALUECON LLP. has been carrying out valuation as per the international norms and standards. The fair value of the above investment property as at March 31, 2022 and March 31, 2021 is ? 237.60 million and ? 205.50 million respectively.

The direct operating expenses incurred in relation to investment property are ? 2.89 million and ? 2.70 for the financial year ended March 31, 2022 and March 31, 2021 respectively. These expenses are included in repairs and maintenance under note 22 : other operating expenses.

The Company has no restrictions on the realizability of its investment properties and has no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements. Lair value hierarchy disclosures for investment properties have been provided in note 24 on fair value measurement.

The fair market value of the portion of land is computed using the market approach (Sale Comparison Method). The prevalent market rates of comparable property in the vicinity are considered to estimate the market value of the investment property. To estimate the market rate of land, a local enquiry as well as a market survey has been conducted with property dealers, brokers, owners of similar property in the surrounding areas and the rates from Joint Sub-Registrars'' Office for actual transactions and the ready reckoner rates have also been considered. Weightages to additional factors like shape, size, location, frontage, access to main road and the demand and supply of similar properties have been considered while computing the market value of the investment property.

Cash at banks earns interest at floating rates based on the daily bank deposit rates and the daily balances. Time deposits are placed for varying periods ranging from 7 days to 364 days, depending on the immediate cash requirements of the Company. The time deposits earn interest at the respective deposit rates.

Changes in liabilities arising from financing activities is primarily due to repayment of lease liabilities [Refer note 28 - Leases],

Share application money pending allotment

Share application money pending allotment represents the amount received on exercise of stock options by the eligible employees under the prevailing ESOP schemes of the Company, on which allotment is yet to be made.

Note: Share application money pending allotment as at March 31, 2022 represents the money received from employees of the Company towards exercise of 125 OFSS Stock Units (OSUs) at the exercise price of f 5 under Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Each OSUs will entitle one equity share of ? 5 each of the Company.

Share application money pending allotment as at March 31,2021 represents the money received from employees of the Company towards exercise of 572 OFSS Stock Units (OSUs) at the exercise price of f 5 under Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Each OSUs will entitle one equity share of f 5 each of the Company.

Securities premium

Securities premium represents amount received in excess of face value on issue of shares by the Company. It also includes transfer of stock compensation related to options exercised from employee stock options outstanding (other equity). The securities premium will be utilized in accordance with the provisions of the Act.

General reserve

General reserve represents the amount of profits appropriated by the Company.

Employee stock options outstanding

Selected employees of the Company also receive remuneration in the form of share-based payments under stock option program of the Company. Employee stock options outstanding represents the fair value of equity-settled transactions, calculated at the date when the grant is made using an appropriate valuation model and recognized over the period in which the performance and/or service conditions are fulfilled.

Contribution from Ultimate Holding Company

Oracle Corporation, the Ultimate Holding Company of Oracle Financial Services Software Limited has extended its stock option program to selected employees of the Company’s overseas branches. Contribution from Ultimate Holding Company represents the fair value of equity-settled transactions; calculated at the date when the grant is made using an appropriate valuation model and recognized over the period in which the performance and/or service conditions are fulfilled.

Oracle Corporation has also extended its Employee Stock Purchase Plan (ESPP) to employees of the Company. Under the plan, the employees are eligible to purchase the shares of Oracle Corporation at discounted price. The discount amount on the shares purchased during the year by employees is treated as Contribution from Ultimate Holding Company.

Retained earnings

Retained earnings represents the undistributed earnings, net of amounts transferred to general reserve; if any.

Note: The Board of Directors have declared an interim dividend on May 4, 2022 of ? 190 per equity share for the year ended March 31, 2022. This would result in estimated cash outflow of ? 16,396.37 million.

The Board of Directors had declared an interim dividend on May 5, 2021 of ? 200 per equity share for the year ended March 31, 2021. This has resulted in cash outflow of ? 17,223.39 million.

Other comprehensive income

Other comprehensive income represents the exchange differences arising on translation of foreign branches and the remeasurements of the defined benefit gratuity plan; comprising of actuarial gains and losses on its net liabilities / assets.

**(ii) The Company entered into foreign exchange forward contracts with the intention of reducing the foreign exchange risk of trade receivables; these contracts are not designated in hedge relationships and are measured at fair value through profit or loss.

***(7/7) There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund, except an amount of ? 3.10 million which is held back with the Company based on court order received.

Terms and conditions of financial liabilities:

- Trade payables are non-interest bearing and are normally settled on 30-day terms

- Other financial liabilities are normally settled as and when due

The Company enters into derivative financial instruments with various banks. Foreign exchange forward contracts are valued using valuation techniques, which employ the use market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies.

There have been no transfers between Level 1 and Level 2 during the periods March 31,2022 and March 31, 2021.

Note 26: Significant accounting judgements, estimates and assumptions

The preparation of the Company’s standalone financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

The key assumptions and estimate at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described below. These assumptions and estimates are based on available parameters as on the date of preparation of standalone financial statements. These assumptions and estimates, however, may change due to market changes or circumstances arising that are beyond the control of the Company.

(i) Leases

The Company has entered into commercial property leases for its offices.

The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term and the applicable discount rate. The Company has lease contracts which include extension and termination option and this requires exercise of judgement by the Company in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. The discount rate is generally based on the incremental borrowing rate specific to the lease period.

(ii) Fair value of investment property

As per the Ind AS, the Company is required to disclose the fair value of the investment property. Accordingly, the Company has engaged an independent valuation specialist to assess the fair values of investment property as at March 31,2022 and March 31, 2021. The investment property was valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the investment property. The key assumptions used to determine fair value of the investment property and sensitivity analysis are provided in note 5.

(iii) Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the projections for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

(iv) Share based payments

The Company measures share-based payments and transactions at fair value and recognizes over the vesting period using Black Scholes valuation model. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and model used for estimating fair value for share-based payment transactions are disclosed in note 30 (b).

(v) Taxes

Income tax expense comprises current tax expense and the net changes in the deferred tax asset or liability during the year. Significant judgements are involved in determining the provision for income taxes, including amount expected to be paid / recovered for uncertain tax positions, including disclosures thereof. Also refer note 2.2 (f), note 16 and note 39.

(vi) Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan and other post-employment retirement benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date annually. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. For plans operated outside India, the management considers the interest rates of high quality corporate bonds in currencies consistent with the currencies of the post-employment benefit obligation with at least an AA’ rating or above, as set by an internationally acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The underlying bonds are further reviewed for quality. Those having excessive credit spreads are excluded from the analysis of bonds on which the discount rate is based, on the basis that they do not represent high quality corporate bonds.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases is based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in note 30.

(vii) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 24 for further disclosures.

(viii) Revenue recognition

The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables. The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time.

In determining the transaction price for the contract, judgement is required to assess if the consideration is fixed or is considered variable and whether there is any constraint on such variable consideration such as volume discounts, service level credits and price concessions. The Company uses judgement to determine an appropriate standalone selling price for each performance obligation and allocates the transaction price to each performance obligation on the basis of the relative stand-alone selling price of each distinct product or service promised in the contract except for sale of software licenses, where the Company uses a residual approach for estimating the standalone selling price of software license as the pricing is highly variable.

Contract fulfilment costs are generally expensed as incurred except for certain contract costs which meet the criteria for capitalization. Such costs are amortized over the benefit period. The assessment of this criteria requires the application of judgement.

The Company had adopted the ESPS administered through a Trust with the name i-flex Employee Stock Option Trust (“the Trust”) to provide equity based incentives to key employees of the Company, i-flex Solutions Trustee Company Ltd. is the Trustee of this Trust.

No allocation of shares to the employees have been made through the Trust since 2005 and all selected employees under the Trust have exercised their right of purchase of shares prior to March 31, 2014. In this regard, the Trustee Company had filed a petition in the Honorable Bombay High Court to seek directions for utilization of the remaining unallocated shares along with the other assets held by the Trust for the benefit of the employees of the Company. As per the order of the Honorable Bombay High Court dated August 1,2016, the trust funds would be utilized for the benefit of the employees. Accordingly, during the financial year the trust has incurred an expenditure of ? 22.24 million (March 31,2021 - f 8.33 million) towards welfare of employees of the Company.

As at March 31, 2022, the Trust is not holding any equity shares (March 31,2021 - Nil equity shares) of the Company.

The Members at their Annual General Meeting held on August 14, 2001, approved grant of ESOPs to the employees / directors of the Company and its subsidiaries up to 7.5% of the issued and paid-up capital of the Company from time to time. This said limit was enhanced and approved up to 12.5% of the issued and paid-up capital of the Company from time to time, by the Members at their Annual General Meeting held on August 18, 2011. This limit is an all inclusive limit applicable for stock options (“options”) granted in the past and in force and those that will be granted by the Company.

Pursuant to ESOP scheme approved by the shareholders of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the 2002 Employees Stock Option Plan (“Scheme 2002”) for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier). On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme (“Scheme 2010”) for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier). As at March 31,2022 there are no options outstanding under ESOP Scheme 2002 and ESOP Scheme 2010.

Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme ("Scheme 2011”). Accordingly, the Company has granted 1,950,500 options under the Scheme 2011. Nomination and Remuneration Committee in their meeting held on August 7, 2014, approved Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Accordingly, the Company has granted 178,245 Stock Options and 1,183,643 OFSS Stock Units (OSUs) under OFSS Stock Plan 2014. The issuance terms of OSUs are the same as for options. Till March 2019, employees could elect to receive 1 OSU in lieu of 4 awarded options at their respective exercise price.

As per the Scheme 2002, Scheme 2010 and Scheme 2011, each of 20% of the total options granted vest on completion of 12, 24, 36, 48 and 60 months from the date of grant. In respect of the OFSS Stock Plan 2014, each of 25% of the total options / OSUs granted will vest on completion of 12, 24, 36 and 48 months from the date of grant. Any vesting is subject to continued employment of the employee with the Company or its subsidiaries. Options / OSUs have exercise period of 10 years from the date of grant. The employee pays the exercise price and applicable taxes upon exercise of options / OSUs.

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government bonds consistent with the currency and estimated term of the post employment benefits obligations. Plan assets are administered by LIC and HDFC Life. The expected rate of return on plan assets is based on the expected average long term rate of return on investments of the fund during the terms of the obligation.

The Company''s investment property consists of a portion of land at Pune, India.

The fair value of the investment property as at March 31, 2022 and March 31, 2021 is based on valuations performed by RNC VALUECON LLP; an accredited independent valuer. RNC VALUECON LLP is one of the senior most and reputed valuer in the field of asset valuation. RNC VALUECON LLP. has been carrying out valuation as per the international norms and standards. The fair value of the above investment property as at March 31, 2022 and March 31, 2021 is ? 237.60 million and ? 205.50 million respectively.

The direct operating expenses incurred in relation to investment property are ? 2.89 million and ? 2.70 for the financial year ended March 31, 2022 and March 31, 2021 respectively. These expenses are included in repairs and maintenance under note 22 : other operating expenses.

The Company has no restrictions on the realizability of its investment properties and has no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements. Lair value hierarchy disclosures for investment properties have been provided in note 24 on fair value measurement.

The fair market value of the portion of land is computed using the market approach (Sale Comparison Method). The prevalent market rates of comparable property in the vicinity are considered to estimate the market value of the investment property. To estimate the market rate of land, a local enquiry as well as a market survey has been conducted with property dealers, brokers, owners of similar property in the surrounding areas and the rates from Joint Sub-Registrars'' Office for actual transactions and the ready reckoner rates have also been considered. Weightages to additional factors like shape, size, location, frontage, access to main road and the demand and supply of similar properties have been considered while computing the market value of the investment property.

Cash at banks earns interest at floating rates based on the daily bank deposit rates and the daily balances. Time deposits are placed for varying periods ranging from 7 days to 364 days, depending on the immediate cash requirements of the Company. The time deposits earn interest at the respective deposit rates.

Changes in liabilities arising from financing activities is primarily due to repayment of lease liabilities [Refer note 28 - Leases],

Share application money pending allotment

Share application money pending allotment represents the amount received on exercise of stock options by the eligible employees under the prevailing ESOP schemes of the Company, on which allotment is yet to be made.

Note: Share application money pending allotment as at March 31, 2022 represents the money received from employees of the Company towards exercise of 125 OFSS Stock Units (OSUs) at the exercise price of f 5 under Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Each OSUs will entitle one equity share of ? 5 each of the Company.

Share application money pending allotment as at March 31,2021 represents the money received from employees of the Company towards exercise of 572 OFSS Stock Units (OSUs) at the exercise price of f 5 under Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Each OSUs will entitle one equity share of f 5 each of the Company.

Securities premium

Securities premium represents amount received in excess of face value on issue of shares by the Company. It also includes transfer of stock compensation related to options exercised from employee stock options outstanding (other equity). The securities premium will be utilized in accordance with the provisions of the Act.

General reserve

General reserve represents the amount of profits appropriated by the Company.

Employee stock options outstanding

Selected employees of the Company also receive remuneration in the form of share-based payments under stock option program of the Company. Employee stock options outstanding represents the fair value of equity-settled transactions, calculated at the date when the grant is made using an appropriate valuation model and recognized over the period in which the performance and/or service conditions are fulfilled.

Contribution from Ultimate Holding Company

Oracle Corporation, the Ultimate Holding Company of Oracle Financial Services Software Limited has extended its stock option program to selected employees of the Company’s overseas branches. Contribution from Ultimate Holding Company represents the fair value of equity-settled transactions; calculated at the date when the grant is made using an appropriate valuation model and recognized over the period in which the performance and/or service conditions are fulfilled.

Oracle Corporation has also extended its Employee Stock Purchase Plan (ESPP) to employees of the Company. Under the plan, the employees are eligible to purchase the shares of Oracle Corporation at discounted price. The discount amount on the shares purchased during the year by employees is treated as Contribution from Ultimate Holding Company.

Retained earnings

Retained earnings represents the undistributed earnings, net of amounts transferred to general reserve; if any.

Note: The Board of Directors have declared an interim dividend on May 4, 2022 of ? 190 per equity share for the year ended March 31, 2022. This would result in estimated cash outflow of ? 16,396.37 million.

The Board of Directors had declared an interim dividend on May 5, 2021 of ? 200 per equity share for the year ended March 31, 2021. This has resulted in cash outflow of ? 17,223.39 million.

Other comprehensive income

Other comprehensive income represents the exchange differences arising on translation of foreign branches and the remeasurements of the defined benefit gratuity plan; comprising of actuarial gains and losses on its net liabilities / assets.

**(ii) The Company entered into foreign exchange forward contracts with the intention of reducing the foreign exchange risk of trade receivables; these contracts are not designated in hedge relationships and are measured at fair value through profit or loss.

***(7/7) There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund, except an amount of ? 3.10 million which is held back with the Company based on court order received.

Terms and conditions of financial liabilities:

- Trade payables are non-interest bearing and are normally settled on 30-day terms

- Other financial liabilities are normally settled as and when due

The Company enters into derivative financial instruments with various banks. Foreign exchange forward contracts are valued using valuation techniques, which employ the use market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies.

There have been no transfers between Level 1 and Level 2 during the periods March 31,2022 and March 31, 2021.

Note 26: Significant accounting judgements, estimates and assumptions

The preparation of the Company’s standalone financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

The key assumptions and estimate at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described below. These assumptions and estimates are based on available parameters as on the date of preparation of standalone financial statements. These assumptions and estimates, however, may change due to market changes or circumstances arising that are beyond the control of the Company.

(i) Leases

The Company has entered into commercial property leases for its offices.

The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term and the applicable discount rate. The Company has lease contracts which include extension and termination option and this requires exercise of judgement by the Company in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. The discount rate is generally based on the incremental borrowing rate specific to the lease period.

(ii) Fair value of investment property

As per the Ind AS, the Company is required to disclose the fair value of the investment property. Accordingly, the Company has engaged an independent valuation specialist to assess the fair values of investment property as at March 31,2022 and March 31, 2021. The investment property was valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the investment property. The key assumptions used to determine fair value of the investment property and sensitivity analysis are provided in note 5.

(iii) Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the projections for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

(iv) Share based payments

The Company measures share-based payments and transactions at fair value and recognizes over the vesting period using Black Scholes valuation model. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and model used for estimating fair value for share-based payment transactions are disclosed in note 30 (b).

(v) Taxes

Income tax expense comprises current tax expense and the net changes in the deferred tax asset or liability during the year. Significant judgements are involved in determining the provision for income taxes, including amount expected to be paid / recovered for uncertain tax positions, including disclosures thereof. Also refer note 2.2 (f), note 16 and note 39.

(vi) Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan and other post-employment retirement benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date annually. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. For plans operated outside India, the management considers the interest rates of high quality corporate bonds in currencies consistent with the currencies of the post-employment benefit obligation with at least an AA’ rating or above, as set by an internationally acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The underlying bonds are further reviewed for quality. Those having excessive credit spreads are excluded from the analysis of bonds on which the discount rate is based, on the basis that they do not represent high quality corporate bonds.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases is based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in note 30.

(vii) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 24 for further disclosures.

(viii) Revenue recognition

The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables. The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time.

In determining the transaction price for the contract, judgement is required to assess if the consideration is fixed or is considered variable and whether there is any constraint on such variable consideration such as volume discounts, service level credits and price concessions. The Company uses judgement to determine an appropriate standalone selling price for each performance obligation and allocates the transaction price to each performance obligation on the basis of the relative stand-alone selling price of each distinct product or service promised in the contract except for sale of software licenses, where the Company uses a residual approach for estimating the standalone selling price of software license as the pricing is highly variable.

Contract fulfilment costs are generally expensed as incurred except for certain contract costs which meet the criteria for capitalization. Such costs are amortized over the benefit period. The assessment of this criteria requires the application of judgement.

Note 31: Investment in step-down subsidiary company

During the year ended March 31, 2022, the Company acquired 99.82% of equity shares of Oracle (OFSS) BPO Services Limited at ? 167.60 million towards restructuring of ownership in step-down subsidiary of the Company. Subsequent to the acquisition, Oracle (OFSS) BPO Services Limited has become a direct subsidiary of the Company.

Note 32: Financial risk management objectives and policies

The Company’s activities expose it to market risks, Liquidity risk and credit risks. The management oversees these risks and is aided by the Risk Management Committee whose scope is to formulate the risk management policy, which will identify elements of risk, if any which may affect the Company.

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk mainly comprises of foreign currency risk.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of monetary items will fluctuate because of changes in foreign exchange rates. This may have potential impact on the statement of profit and loss and other components of equity, where monetary items are denominated in a foreign currency, which are different from functional currency in which they are measured. As at the balance sheet date, the Company’s net foreign currency exposure expressed in INR that is not hedged is ? 1,044.66 million (March 31,2021 - ? 1,630.62 million).

The above sensitivity impact gain (loss) is due to every percentage point appreciation or depreciation in the exchange rate of respective currencies, with all other variables held constant. Sensitivity impact is computed based on change in value of monetary assets and liabilities denominated in above respective currency, where the functional currency of the entity is a currency other than above respective currency and entities with functional currency as above respective currency where transactions are in foreign currencies. The Company’s exposure to foreign currency changes for all other currencies is not material.

(b) Liquidity risk

Liquidity risk management implies maintaining sufficient availability of funds to meet obligations when due and to close out market positions. The Company monitors rolling forecast of the cash and cash equivalent on the basis of expected cash flows.

(c) Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities and from its finance activities, including time deposits with banks, foreign exchange transactions and other financial instruments.

(i) Trade receivables

Customer credit risk is managed in line with the established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on regional historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 7.

(ii) Cash and Bank balances

Credit risk from balances with banks is managed by the Company’s treasury department in accordance with the Company''s policy. Investments of surplus funds are made only with existing Bankers and within credit limits assigned to each banker.

Company follows a conservative philosophy and aims to invest surplus funds in India only in time deposits with well-known and highly rated banks. The duration of such time deposits will not exceed 364 days. The Company, on quarterly basis, monitors the credit ratings and total deposit balances of each of its bankers. Further limits are set to minimize the concentration of risks and therefore mitigate financial loss of any potential failure to repay deposits.

Note 33: Capital management

For the purpose of the Company’s capital management, capital includes issued equity share capital, share premium and all other equity reserves attributable to the equity shareholders of the Company. The primary objective of the Company''s capital management is to maximize the equity shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and other financial requirements.

Note 34: Derivative instruments

The Company enters into forward foreign exchange contracts where the counter party is a bank. The Company purchases forward foreign exchange contracts to mitigate the risks of change in foreign exchange rate on receivables denominated in certain foreign currencies. The Company considers the risk of non-performance by the counter party as non-material.

Note (i): Remuneration includes salary, bonus and perquisites. During the year, 41,500 OSUs under OFSS Stock Plan 2014 (March 31, 2021 -47,000 OSUs under OFSS Stock Plan 2014) were granted to KMP.

Note (ii): Terms and conditions of transactions with related parties.

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at year end are unsecured and interest free (except loan to step-down subsidiary) and settlement occurs in cash.

Note 36: Corporate Social Responsibility expenditure

As per the requirements of Section 135 of the Companies Act, 2013 the Company was required to spend an amount of ? 428.47 million (March 31,2021 - ? 384.46 million) on Corporate Social Responsibility (CSR) expenditure based on the average net profits of the three immediately preceding financial years. The Company has spent an amount of ? 438.29 million (March 31, 2021 -? 384.46 million) against CSR expenditure; of which f 9.82 million has been carried forward for set off against CSR spends in the next financial year.

Note 37: Dividend from subsidiary company

During the year ended March 31,2022, the Company has received dividend of ? 1,500.66 million from its wholly owned subsidiary company Oracle Financial Services Software B.V.

Note 39: Tax litigations

As at March 31, 2022, the Company has certain litigations with respect to tax matters for various assessment years amounting to ? 21,059.00 million (March 31,2021 - ? 12,150.43 million), which are pending before various appellate / tax authorities. The management expects that its position will be upheld on ultimate resolution and the possibility of any outflow of resources is remote. Demand of tax payable after adjusting taxes paid under protest and refunds amounts to ? 13,850.59 million (March 31, 2021 -? 5,858.05 million) as at March 31, 2022. Further for certain litigations the Company has aggregate provisions of ? 1,209.04 million (March 31,2021 - ? 896.78 million) as at March 31, 2022.

The Company had entered into a loan agreement with its step-down subsidiary company, Oracle (OFSS) BPO Services Limited (the “borrower”) on March 1,2019 (“effective date”) whereby the Company had agreed to lend to the borrower; a loan in principal sum of not greater than ? 250 million for the purpose of working capital requirements of the borrower. Simple interest at an annual fixed rate of 9.50% was calculated on the unpaid principal amount of the loan drawn by the borrower. The interest accrued was due and payable annually to the extent of loan drawn. The borrower may at its option prepay the unpaid principal balance together with interest on the portion so prepaid accrued up to and including the date of prepayment; without any premium or penalty. The unpaid principal was due and payable in full on or before two years from the effective date. The Company had extended the tenure of the loan agreement up to February 28, 2022, wherein they had also amended the interest rate to the One-year State Bank Of India Marginal Cost Lending Rate plus 175 basis points.

During the year ended March 31,2022, the borrower has repaid the entire outstanding loan amount along with interest accrued under the said loan agreement. The maximum amount of loan outstanding during the year ended March 31, 2022 was ? 30.00 million (March 31,2021 - ? 106.00 million).

Note 42: Other operating expenses for the year ended March 31,2021 includes ? 42.11 million towards reversal of provision for diminution in value of investment in ISP Internet Mauritius Company.

Note 43: Disclosure on revenue from operations

(a) Disaggregate revenue information

The table below presents disaggregated revenues from contracts with customers by geography, streams and type of contract for

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(b) During the year ended March 31, 2022, the Company recognized revenue of ? 633.89 million from opening deferred revenue as of April 1,2021.

During the year ended March 31, 2021, the Company recognized revenue of ? 810.96 million from opening deferred revenue as of April 1,2020.

(c) During the year ended March 31, 2022, the Company has not recognized any revenue from performance obligations satisfied prior to April 1, 2021.

During the year ended March 31, 2021, the Company has not recognized any revenue from performance obligations satisfied prior to April 1,2020.

(d) Change in contract assets and contract liabilities are on account of transactions undertaken in the normal course of business. In accordance with Ind AS 115, unbilled revenue of ? 1,417.61 million as at March 31, 2022 (March 31, 2021 - ? 1,407.10 million) has been classified as other current asset.

(f) Remaining performance obligation

The Company has applied the practical expedient as provided in Ind AS 115 and excluded the disclosure relating to remaining performance obligation for

i. contracts where the original expected duration is one year or less

ii. contracts where the revenue recognized corresponds directly with the value to the customer of the entity’s performance completed to date. Typically this involves those contracts where invoicing is on time and material basis.

Remaining performance obligation estimates are subject to change and are affected by several factors such as terminations, changes in the scope of contracts, periodic revalidations of estimates and other macro economic factors.

The aggregate amount of transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as at March 31, 2022, after considering the practical expedient mentioned above is f 12,517.31 million (March 31, 2021 -? 12,317.61 million), out of which 59% (March 31, 2021 - 58%) is expected to be recognized as revenue within the next one year and the balance thereafter.

(g) Asset recognized from the costs to obtain a contract

The Company recognizes incremental costs of obtaining a contract with customers as an asset and discloses them under “other assets” as deferred contract costs in the Standalone financial statements. Incremental costs of obtaining contracts are those costs that the Company incurs to obtain a contract with the customer that would not have been incurred if the contract had not been obtained. Such deferred contract costs assets are amortized over the benefit period.

The Company has amortized deferred contract cost of ? 20.20 million for the year ended March 31, 2022 ( March 31, 2021 -? 18.56 million) and has closing balance of deferred contract cost asset of ? 50.29 million as at March 31, 2022 (March 31,2021 - ? 38.88 million).

Note 44: Segment information

Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.

The Company is organized by business segment and geographically. For management purposes the Company is primarily organized on a worldwide basis into two business segments:

a) Product licenses and related activities (“Products”) and

b) IT solutions and consulting services (“Services”)

The business segments are the basis on which the Company reports its primary operational information to management. Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.

IT solutions and consulting services segment offers services spanning the entire lifecycle of applications used by financial service institutions. The division’s portfolio includes Consulting, Application, Support and Technology Services that help institutions improve efficiency, optimize costs, meet risk and compliance mandates and implement IT solutions finely attuned to their business needs.

Segment revenue and expense:

Revenue is generated through licensing of software products, maintenance fees as well as by providing software solutions to the customers including consulting services. The income and expenses which are not directly attributable to a business segment are shown as unallocable income and expenses.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of trade receivables net of allowances, unbilled revenue, deposits for premises, property, plant and equipment and right-of-use asset. Segment liabilities primarily includes trade payables, deferred revenues, advance from customer, employee benefit obligations, lease liability and other liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown as part of unallocable assets and liabilities.

Non-current assets for this purpose consist of property, plant and equipment, capital work-in-progress, right-of-use asset, investment property, income tax assets (net) and other non-current assets.

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Mar 31, 2021

Note 25: Estimation of uncertainties relating to the global health pandemic from COVID-19

The Company has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying value of trade receivables, unbilled receivables, contract assets and investment in subsidiaries. These are not significant to the standalone financial statements for the year ended March 31, 2021. In assessing the recoverability of these assets, the Company has used internal and external sources of information up to the date of approval of these standalone financial statements, and based on current estimates, expects the net carrying amount of these assets will be recovered. The impact on account of COVID-19 on the Company''s financial statements may differ from that estimated as at the date of approval of these standalone financial statements. The Company will continue to monitor any material impact due to changes in future economic conditions.

Note 26: Code on Social Security

The Code on Social Security, 2020 (''Code'') relating to employee benefits during the employment and post-employment benefits has been published in the Gazette of India on September 29, 2020. The Ministry of Labour and Employment has released draft rules for the Code on November 13, 2020. The effective date from which these changes are applicable is yet to be notified. The Company will assess and record the impact, if any, when the rules are notified, and the code becomes effective.

Note 27: Significant accounting judgements, estimates and assumptions

The preparation of the Company''s standalone financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

The key assumptions and estimate at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described below. These assumptions and estimates are based on available parameters as on the date of preparation of standalone financial statements. These assumptions and estimates, however, may change due to market changes or circumstances arising that are beyond the control of the Company.

(i) Leases

The Company has entered into commercial property leases for its offices. Further, the Company has also adopted Ind AS 116 ‘Leases'' with effect from April 1, 2019 using the modified retrospective method.

The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term and the applicable discount rate. The Company has lease contracts which include extension and termination option and this requires exercise of judgement by the Company in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. The discount rate is generally based on the incremental borrowing rate specific to the lease period.

(ii) Fair value of investment property

As per the Ind AS, the Company is required to disclose the fair value of the investment property.

Accordingly, the Company has engaged an independent valuation specialist to assess the fair values of investment property as at March 31, 2021 and March 31, 2020. The investment property was valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the investment property. The key assumptions used to determine fair value of the investment property and sensitivity analysis are provided in note 5.

(iii) Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm''s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the projections for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset''s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

(iv) Share based payments

The Company measures share-based payments and transactions at fair value and recognizes over the vesting period using Black Scholes valuation model. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and model used for estimating fair value for share-based payment transactions are disclosed in note 30 (b).

(v) Taxes

Income tax expense comprises current tax expense and the net changes in the deferred tax asset or liability during the year. Significant judgements are involved in determining the provision for income taxes, including amount expected to be paid/ recovered for uncertain tax positions, including disclosures thereof. Also refer note 2.2 (f), note 16 and note 40.

(vi) Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan and other post-employment retirement benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date annually. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. For plans operated outside India, the management considers the interest rates of high quality corporate bonds in currencies consistent with the currencies of the post-employment benefit obligation with at least an AA'' rating or above, as set by an internationally acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The underlying bonds are further reviewed for quality. Those having excessive credit spreads are excluded from the analysis of bonds on which the discount rate is based, on the basis that they do not represent high quality corporate bonds.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases are based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in note 31.

(vii) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 24 for further disclosures.

(viii) Revenue recognition

The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables. The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time.

In determining the transaction price for the contract, judgement is required to assess if the consideration is fixed or is considered variable and whether there is any constraint on such variable consideration such as volume discounts, service level credits and price concessions. The Company uses judgement to determine an appropriate standalone selling price for each performance obligation and allocates the transaction price to each performance obligation on the basis of the relative stand-alone selling price of each distinct product or service promised in the contract except for sale of software licenses, where the Company uses a residual approach for estimating the standalone selling price of software license as the pricing is highly variable.

Contract fulfilment costs are generally expensed as incurred except for certain contract costs which meet the criteria for capitalization. Such costs are amortized over the benefit period. The assessment of this criteria requires the application of judgement.

Note 30: Share based compensation / payments(a) Employee Stock Purchase Scheme (“ESPS”)

The Company had adopted the ESPS administered through a Trust with the name i-flex Employee Stock Option Trust (“the Trust”) to provide equity based incentives to key employees of the Company. i-flex Solution Trustee Company Ltd. is the Trustee of this Trust.

No allocation of shares to the employees have been made through the Trust since 2005 and all selected employees under the Trust have exercised their right of purchase of shares prior to March 31, 2014. In this regard, the Trustee Company had filed a petition in the Honorable Bombay High Court to seek directions for utilization of the remaining unallocated shares along with the other assets held by the Trust for the benefit of the employees of the Company. As per the order of the Honorable Bombay High Court dated August 1, 2016, the trust funds would be utilized for the benefit of the employees. Accordingly during the financial year the trust has incurred an expenditure of ? 8.33 million (March 31,2020 ? 48.59 million) towards welfare of employees of the Company.

As at March 31, 2021, the Trust is not holding any equity shares (March 31,2020 - Nil equity shares) of the Company.

(b) Employee Stock Option Plan (“ESOP”)

The Members at their Annual General Meeting held on August 14, 2001 approved grant of ESOPs to the employees / directors of the Company and its subsidiaries up to 7.5% of the issued and paid-up capital of the Company from time to time. This said limit was enhanced and approved up to 12.5% of the issued and paid-up capital of the Company from time to time, by the Members at their Annual General Meeting held on August 18, 2011. This limit is an all inclusive limit applicable for stock options (“options”) granted in the past and in force and those that will be granted by the Company.

Pursuant to ESOP scheme approved by the shareholders of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the 2002 Employees Stock Option Plan (“Scheme 2002”) for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier). On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme (“Scheme 2010”) for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier). As at March 31,2021 there are no options outstanding under ESOP Scheme 2002 and ESOP Scheme 2010.

Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme (“Scheme 2011”). Accordingly, the Company has granted 1,950,500 options under the Scheme 2011. Nomination and Remuneration Committee in their meeting held on August 7, 2014 approved Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Accordingly, the Company has granted 178,245 Stock Options and 1,027,428 OFSS Stock Units (“OSUs”) under OFSS Stock Plan 2014. The issuance terms of OSUs are the same as for options, till March 2019, employees elected to receive 1 OSU in lieu of 4 awarded options at their respective exercise price.

As per the Scheme 2002, Scheme 2010 and Scheme 2011, each of 20% of the total options granted vest on completion of 12, 24, 36, 48 and 60 months from the date of grant. In respect of the OFSS Stock Plan 2014, each of 25% of the total options / OSUs granted will vest on completion of 12, 24, 36 and 48 months from the date of grant. Any vesting is subject to continued employment of the employee with the Company or its subsidiaries. Options / OSUs have exercise period of 10 years from the date of grant. The employee pays the exercise price and applicable taxes upon exercise of options / OSUs.

Note 32: Investment in subsidiary company

The Board of Directors of Mantas India Private Limited at its meeting held on May 29, 2019 had approved transfer of shares held in it by Sotas Inc. to the Company. Accordingly, the Company acquired all the equity shares of Mantas India Private Limited from Sotas Inc. for a total consideration of f 20.28 million (equivalent USD 0.29 million). Subsequent to the acquisition, Mantas India Private Limited has become a direct subsidiary of the Company.

Note 33: Financial risk management objectives and policies

The Company''s activities expose it to market risks, Liquidity risk and credit risks. The management oversees these risks and is aided by the Risk Management Committee whose scope is to formulate the risk management policy, which will identify elements of risk, if any which may affect the Company.

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk mainly comprises of foreign currency risk.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of monetary items will fluctuate because of changes in foreign exchange rates. This may have potential impact on the statement of profit and loss and other components of equity, where monetary items are denominated in a foreign currency, which are different from functional currency in which they are measured. As at the balance sheet date, the Company''s net foreign currency exposure expressed in INR that is not hedged is f 1,630.62 million (March 31, 2020 f 1,674.93 million).

The above sensitivity impact gain (loss) is due to every percentage point appreciation or depreciation in the exchange rate of respective currencies, with all other variables held constant. Sensitivity impact is computed based on change in value of monetary assets and liabilities denominated in above respective currency, where the functional currency of the entity is a currency other than above respective currency and entities with functional currency as above respective currency where transactions are in foreign currencies. The Company''s exposure to foreign currency changes for all other currencies is not material.

(b) Liquidity risk

Liquidity risk management implies maintaining sufficient availability of funds to meet obligations when due and to close out market positions. The Company monitors rolling forecast of the cash and cash equivalent on the basis of expected cash flows.

(c) Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities and from its finance activities, including time deposits with banks, foreign exchange transactions and other financial instruments.

(i) Trade receivables

Customer credit risk is managed in line with the established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on regional historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 7.

(ii) Cash and Bank balances

Credit risk from balances with banks is managed by the Company''s treasury department in accordance with the Company''s policy. Investments of surplus funds are made only with existing Bankers and within credit limits assigned to each banker.

Company follows a conservative philosophy and aims to invest surplus funds in India only in time deposits with well-known and highly rated banks. The duration of such time deposits will not exceed 364 days. The Company, on quarterly basis, monitors the credit ratings and total deposit balances of each of its bankers. Further limits are set to minimize the concentration of risks and therefore mitigate financial loss of any potential failure to repay deposits.

Note 34: Capital management

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

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and other financial requirements.

Note 35: Derivative instruments

The Company enters into forward foreign exchange contracts where the counter party is a bank. The Company purchases forward foreign exchange contracts to mitigate the risks of change in foreign exchange rate on receivables denominated in certain foreign currencies. The Company considers the risk of non-performance by the counter party as non-material. As at March 31,2021 the Company has following outstanding derivative instrument:

(d) Change in contract assets and contract liabilities are on account of transactions undertaken in the normal course of business. In accordance with Ind AS 115, unbilled revenue of f 1,397.54 million as at March 31, 2021 (March 31, 2020 f 1,165.28 million) has been classified as other current asset.

(f) Remaining performance obligation

The Company has applied the practical expedient as provided in Ind AS 115 and excluded the disclosure relating to remaining performance obligation for:

i. contracts where the original expected duration is one year or less.

ii. contracts where the revenue recognized corresponds directly with the value to the customer of the entity''s performance completed to date. Typically this involves those contracts where invoicing is on time and material basis.

Remaining performance obligation estimates are subject to change and are affected by several factors such as terminations, changes in the scope of contracts, periodic revalidations of estimates and other macro economic factors.

The aggregate amount of transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as at March 31,2021, after considering the practical expedient mentioned above is f 12,317.61 million (March 31,2020 f 10,921.80 million), out of which 58% (March 31,2020 69%) is expected to be recognized as revenue within the next one year and the balance thereafter.

(g) Asset recognized from the costs to obtain a contract

The Company recognizes incremental costs of obtaining a contract with customers as an asset and discloses them under "other assets” as deferred contract costs in the standalone financial statements. Incremental costs of obtaining contracts are those costs that the Company incurs to obtain a contract with the customer that would not have been incurred if the contract had not been obtained. Such deferred contract costs assets are amortized over the benefit period.

The Company has amortized deferred contract cost of f 18.56 million for the year ended March 31, 2021 (March 31, 2020 f 17.52 million) and has closing balance of deferred contract cost asset of f 38.88 million as at March 31, 2021 (March 31, 2020 f 35.53 million).

Note 45: Segment information

Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.

The Company is organized by business segment and geographically. For management purposes the Company is primarily organized on a worldwide basis into two business segments:

a) Product licenses and related activities (''Products'') and

b) IT solutions and consulting services (''Services'')

The business segments are the basis on which the Company reports its primary operational information to management. Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.

IT solutions and consulting services segment offers services spanning the entire lifecycle of applications used by financial service institutions. The division''s portfolio includes Consulting, Application, Support and Technology Services that help institutions improve efficiency, optimize costs, meet risk and compliance mandates and implement IT solutions finely attuned to their business needs.

Segment revenue and expense:

Revenue is generated through licensing of software products, maintenance fees as well as by providing software solutions to the customers including consulting services. The income and expenses which are not directly attributable to a business segment are shown as unallocable income and expenses.

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Mar 31, 2019

Note 1: Corporate information

Oracle Financial Services Software Limited (the ‘Company’) was incorporated in India with limited liability on September 27, 1989. The Company is domiciled in India and has its registered office at Mumbai, Maharashtra, India. The Company is a subsidiary of Oracle Global (Mauritius) Limited holding 73.50% (March 31, 2018 - 73.82%) ownership interest in the Company as at March 31, 2019.

The Company is principally engaged in the business of providing information technology solutions to the financial services industry worldwide. The Company has a suite of banking products, which caters to the transaction processing and compliance needs of corporate, retail, investment banking, treasury operations and data warehousing.

The standalone financial statements for the year ended March 31, 2019 were approved by the Company’s Board of Directors and authorized for issue on May 9, 2019.

The Company''s investment property consists of a portion of land at Pune, India.

The fair value of the investment property as at March 31, 2019 and March 31, 2018 is based on valuations performed by Rakesh Narula & Co; an accredited independent valuer. Rakesh Narula & Co. is one of the senior most and reputed valuer in the field of asset valuation. Rakesh Narula & Co. has been carrying out valuation as per the international norms and standards. The fair value of the above investment property as at March 31, 2019 and March 31, 2018 is Rs.245.00 million and Rs. 237.50 million respectively.

The direct operating expenses incurred in relation to investment property are Rs.4.13 million and Rs.4.44 million for the financial year ended March 31, 2019 and March 31, 2018 respectively. These expenses are included in repairs and maintenance under note 20: other operating expenses.

The Company has no restrictions on the realisability of its investment properties and has no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements. Fair value hierarchy disclosures for investment properties have been provided in note 22 on fair value measurement.

The fair market value of the portion of land is computed using the market approach (Sale Comparison Method). The prevalent market rates of comparable property in the vicinity are considered to estimate the market value of the investment property. To estimate the market rate of land, a local enquiry as well as a market survey has been conducted with property dealers, brokers, owners of similar property in the surrounding areas and the rates from Joint Sub-Registrars'' Office for actual transactions and the ready reckoner rates have also been considered. Weightages to additional factors like shape, size, location, frontage, access to main road and the demand and supply of similar properties have been considered while computing the market value of the investment property.

* The Company had made an investment of Rs. 45 million and the same has been fair valued as at the balance sheet date.

** The Company entered into foreign exchange forward contracts with the intention of reducing the foreign exchange risk of trade receivables; these contracts are not designated in hedge relationships and are measured at fair value through profit or loss.

Cash at banks earns interest at floating rates based on the daily bank deposit rates and the daily balances. Time deposits are placed for varying periods ranging from 7 days to 364 days, depending on the immediate cash requirements of the Company. The time deposits earn interest at the respective deposit rates.

(a) The Company has only one class of equity shares having a par value of Rs. 5 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(b) Details of shareholders holding more than 5% equity shares in the Company

As per records of the Company, including its register of shareholders / members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of equity shares.

Share application money pending allotment

Share application money pending allotment represents the amount received on exercise of stock options by the eligible employees under the prevailing ESOP schemes of the Company, on which allotment is yet to be made.

Share application money pending allotment for the year ended March 31, 2019 represents the money received from employees of the Company towards exercise of 250 stock options at the exercise price of Rs. 1,930 under Employee Stock Option Plan 2011 Scheme (“Scheme 2011”) and 299 OFSS Stock Units (“OSUs”) at the exercise price of Rs. 5 under Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Each stock option and OSUs will entitle one equity share of Rs. 5 each of the Company.

Share application money pending allotment for the year ended March 31, 2018 represents the money received from employees of the Company towards exercise of 350 stock options at the exercise price of Rs. 3,077 and 200 stock options at the exercise price of Rs. 3,127 under Employee Stock Option Plan 2011 Scheme ("Scheme 2011") and 133 OFSS Stock Units ("OSUs") at the exercise price of Rs. 5 and 62 stock options at the exercise price of Rs. 3,393 under Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Each stock option and OSUs will entitle one equity share of Rs. 5 each of the Company.

Securities premium

Securities premium represents amount received in excess of face value on issue of shares by the Company. It also includes transfer of stock compensation related to options exercised from employee stock options outstanding (other equity). The securities premium will be utilized in accordance with the provisions of the Act.

General reserve

General reserve represents the amount of profits appropriated by the Company

Employee stock options outstanding

Selected employees of the Company also receive remuneration in the form of share-based payments under stock option program of the Company. Employee stock options outstanding represents the fair value of equity-settled transactions, calculated at the date when the grant is made using an appropriate valuation model and recognized over the period in which the performance and / or service conditions are fulfilled.

Contribution from Ultimate Holding Company

Oracle Corporation, the Ultimate Holding Company of Oracle Financial Services Software Limited has extended its stock option program to selected employees of the Company’s overseas subsidiaries and branches. Contribution from Ultimate Holding Company represents the fair value of equity-settled transactions; calculated at the date when the grant is made using an appropriate valuation model and recognized over the period in which the performance and / or service conditions are fulfilled.

Oracle Corporation has also extended its Employee Stock Purchase Plan (ESPP) to employees of the Company. Under the plan, the employees are eligible to purchase the shares of Oracle Corporation at discounted price. The discount amount on the shares purchased during the year by employees is treated as Contribution from Ultimate Holding Company.

Retained earnings

Retained earnings represents the undistributed earnings, net of amounts transferred to general reserve; if any.

The Board of Directors had recommended a final dividend of Rs. 130 per equity share for the year ended March 31, 2018. This final dividend was approved by the shareholders at the Annual General Meeting of the Company held on August 14, 2018.

Other comprehensive income

Other comprehensive income represents the exchange differences arising on translation of foreign branches and the remeasurements of the defined benefit gratuity plan; comprising of actuarial gains and losses on its net liabilities / assets.

** The Company entered into foreign exchange forward contracts with the intention of reducing the foreign exchange risk of trade receivables; these contracts are not designated in hedge relationships and are measured at fair value through profit or loss.

*** There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund. Terms and conditions of financial liabilities:

- Trade payables are non-interest bearing and are normally settled on 30-day terms

- Other financial liabilities are normally settled as and when due

Note: As per the requirements of Section 135 of the Companies Act, 2013 the Company was required to spend an amount of Rs. 323.23 million (March 31, 2018 - Rs. 330.36 million) on Corporate Social Responsibility expenditure based on the average net profits of the three immediately preceding financial years. The Company has spent an amount of Rs. 323.30 million (March 31, 2018 -Rs. 330.48 million) against Corporate Social Responsibility expenditure.

Note 2: Fair values

The management has assessed that fair value of financial instruments approximates their carrying amounts largely due to the short term maturities of these instruments.

Fair value hierarchy:

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities.

Fair value measurement hierarchy for assets and liabilities as at March 31, 2019:

The following methods and assumptions are used to estimate the fair values:

The Company enters into derivative financial instruments with various banks. Foreign exchange forward contracts are valued using valuation techniques, which employ the use market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies.

There have been no transfers between Level 1 and Level 2 during the periods March 31, 2019 and March 31, 2018.

Note 3: Significant accounting judgements, estimates and assumptions

The preparation of the Company’s standalone financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

The key assumptions and estimate at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described below. These assumptions and estimates are based on available parameters as on the date of preparation of standalone financial statements. These assumptions and estimates, however, may change due to market changes or circumstances arising that are beyond the control of the Company.

(i) Operating lease

The Company has entered into commercial property leases for its offices. The Company has accounted these contracts as operating leases which have been determined based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property, the fair value of the asset and that the Company does not obtain any significant risks and rewards of ownership of these properties.

(ii) Fair value of investment property

As per the Ind AS, the Company is required to disclose the fair value of the investment property

Accordingly, the Company has engaged an independent valuation specialist to assess the fair values of investment property as at March 31, 2019 and March 31, 2018. The investment property was valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the investment property. The key assumptions used to determine fair value of the investment property and sensitivity analysis are provided in note 4.

(iii) Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the projections for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

(iv) Share based payments

The Company measures share-based payments and transactions at fair value and recognizes over the vesting period using Black Scholes valuation model. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and model used for estimating fair value for share-based payment transactions are disclosed in note 26(b).

(v) Taxes

Income tax expense comprises current tax expense and the net changes in the deferred tax asset or liability during the year. Significant judgements are involved in determining the provision for income taxes, including amount expected to be paid / recovered for uncertain tax positions, including disclosures thereof.

Deferred tax liability is recognized on the undistributed profits of subsidiaries where it is expected that the earnings of the subsidiary will be distributed in foreseeable future. Significant management judgement is required to determine the amount of deferred tax that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

(vi) Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan and other post-employment retirement benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date annually. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. For plans operated outside India, the management considers the interest rates of high quality corporate bonds in currencies consistent with the currencies of the post-employment benefit obligation with at least an ‘AA’ rating or above, as set by an internationally acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The underlying bonds are further reviewed for quality. Those having excessive credit spreads are excluded from the analysis of bonds on which the discount rate is based, on the basis that they do not represent high quality corporate bonds.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases is based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in note 27.

(vii) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 22 for further disclosures.

(viii) Revenue recognition

The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables. The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time.

In determining the transaction price for the contract, judgement is required to assess if the consideration is fixed or is considered variable and whether there is any constraint on such variable consideration such as volume discounts, service level credits and price concessions. The Company uses judgement to determine an appropriate standalone selling price for each performance obligation and allocates the transaction price to each performance obligation on the basis of the relative standalone selling price of each distinct product or service promised in the contract except for sale of software licenses, where the Company uses a residual approach for estimating the standalone selling price of software license as the pricing is highly variable.

Contract fulfilment costs are generally expensed as incurred except for certain contract costs which meet the criteria for capitalization. Such costs are amortized over the benefit period. The assessment of this criteria requires the application of judgement.

Note 4: Leases

Where Company is lessee Operating lease

The Company has taken certain office premises under operating lease, which expire at various dates through year 2025. Some of the lease agreements have a price escalation clause. Gross rental expenses for the year ended March 31, 2019 aggregated to Rs. 337.99 million (March 31, 2018 - Rs. 320.35 million). The minimum rental payments to be made in future in respect of these leases are as follows:

Note 5: Share based compensation / payments

(a) Employee Stock Purchase Scheme ("ESPS")

The Company had adopted the ESPS administered through a Trust with the name i-flex Employee Stock Option Trust (“the Trust”) to provide equity based incentives to key employees of the Company. i-flex Solution Trustee Company Ltd. is the Trustee of this Trust.

No allocation of shares to the employees have been made through the Trust since 2005 and all selected employees under the Trust have exercised their right of purchase of shares prior to March 31, 2014. In this regard, the Trustee Company had filed a petition in the Honorable Bombay High Court to seek directions for utilization of the remaining unallocated shares along with the other assets held by the Trust for the benefit of the employees of the Company. As per the order of the Honorable Bombay High Court dated August 1, 2016, the trust funds would be utilized for the benefit of the employees. Accordingly during the year ended March 31, 2019, the trust has incurred an expenditure of Rs. 10.89 million (March 31, 2018 - Rs. 28.71 million) towards welfare of employees of the Company.

As at March 31, 2019, the Trust is holding 27,160 equity shares (March 31, 2018 — 70,600 equity shares) of the Company.

(b) Employee Stock Option Plan ("ESOP")

The Members at their Annual General Meeting held on August 14, 2001 approved grant of ESOPs to the employees / directors of the Company and its subsidiaries up to 7.5% of the issued and paid-up capital of the Company from time to time. This said limit was enhanced and approved up to 12.5% of the issued and paid-up capital of the Company from time to time, by the Members at their Annual General Meeting held on August 18, 2011. This extended limit is an all-inclusive limit applicable for stock options (“options”) granted in the past and in force and those that will be granted by the Company under this authorization.

Pursuant to ESOP scheme approved by the shareholders of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme (“Scheme 2002”) for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier). On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme (“Scheme 2010”) for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).

Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme (“Scheme 2011”). Accordingly, the Company has granted 1,950,500 options under the Scheme 2011. Nomination and Remuneration Committee in their meeting held on August 7, 2014 approved Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Accordingly the Company granted 178,245 Stock Options and 712,203 OFSS Stock Units (“OSUs”) under OFSS Stock Plan 2014. The issuance terms of OSUs are the same as for Stock Options, employees may elect to receive 1 OSU in lieu of 4 awarded Stock Options at their respective exercise price.

As per the Scheme 2002, Scheme 2010 and Scheme 2011, each of 20% of the total options granted will vest on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of options.

In respect of the OFSS Stock Plan 2014, each of 25% of the total options / OSUs granted will vest on completion of 12, 24, 36 and 48 months from the date of grant and is subject to continued employment of the employee with the Company or its subsidiaries. Options / OSUs have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of options / OSUs.

During the year ended March 31, 2019, the Company has granted 12,450 stock options and 125,219 OSUs under OFSS Stock Plan 2014 at an exercise price of Rs. 4,158 and Rs. 5 respectively.

The weighted average share price for the year over which stock options / OSUs were exercised was Rs. 3,960 (March 31, 2018 - Rs. 3,795).

Stock options / OSUs granted during the financial year ended March 31, 2019:

The weighted average fair value of stock options / OSUs granted during the year was Rs. 3,868 (March 31, 2018 - Rs. 3,407).

The expected volatility was determined based on historical volatility data; historical volatility includes early years of the Company’s life; the Company expects the volatility of its share price to reduce as it matures.

Note 6: Employee benefit obligation

Defined contribution plans

During year ended March 31, 2019 and 2018, the Company contributed following amounts to defined contributions plans:

Defined benefit plan — gratuity

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government bonds consistent with the currency and estimated term of the post-employment benefits obligations. Plan assets are administered by LIC. The expected rate of return on plan assets is based on the expected average long term rate of return on investments of the fund during the terms of the obligation.

The Company’s contribution to the fund for the year ending March 31, 2020 is expected to be Rs. 113.25 million (March 31, 2019 Rs. 110.46 million).

Note 7: Investment in associate

The Company had an investment of Rs. 6.59 million in Login SA with a 33% interest. During the year ended March 31, 2018, the Company had disposed off the investment for a total consideration of Rs. 16.90 million.

Note 8: Financial risk management objectives and policies

The Company’s activities expose it to market risks, liquidity risk and credit risks. The management oversees these risks and is aided by the Risk Management Committee whose scope is to formulate the risk management policy, which will identify elements of risk, if any which may affect the Company.

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk mainly comprises of foreign currency risk.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of monetary items will fluctuate because of changes in foreign exchange rates. This may have potential impact on the statement of profit and loss and other components of equity, where monetary items are denominated in a foreign currency, which are different from functional currency in which they are measured. As at the balance sheet date, the Company’s net foreign currency exposure expressed in INR that is not hedged is Rs. 2,750.14 million (March 31, 2018 - Rs. 787.80 million).

The Company manages its foreign currency risk by hedging the receivables in the major currencies (USD, EUR, JPY and AUD) using hedging instrument as forward contracts. The period of the forward contracts is determined by the expected collection period for invoices which currently ranges between 30 to 120 days.

Foreign currency sensitivity

Below table demonstrates sensitivity impact on Company’s profit after tax and total equity due to change in foreign exchange rates of currencies where it has significant exposure:

The above sensitivity impact gain (loss) is due to every percentage point appreciation or depreciation in the exchange rate of respective currencies, with all other variables held constant. Sensitivity impact is computed based on change in value of monetary assets and liabilities denominated in above respective currency, where the functional currency of the entity is a currency other than above respective currency and entities with functional currency as above respective currency where transactions are in foreign currencies. The Company’s exposure to foreign currency changes for all other currencies is not material.

(b) Liquidity risk

Liquidity risk management implies maintaining sufficient availability of funds to meet obligations when due and to close out market positions. The Company monitors rolling forecast of the cash and cash equivalent on the basis of expected cash flows.

The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.

The Company has sufficient funds in cash and cash equivalents and other bank balances to meet obligations towards financial liabilities.

(c) Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities and from its finance activities, including time deposits with banks, foreign exchange transactions and other financial instruments.

(i) Trade receivables

Customer credit risk is managed in line with the established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on regional historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 7.

(ii) Cash and Bank balances

Credit risk from balances with banks is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with existing Bankers and within credit limits assigned to each banker.

Company follows a conservative philosophy and aims to invest surplus funds in India only in time deposits with well-known and highly rated banks. The duration of such time deposits will not exceed 364 days. The Company, on quarterly basis, monitors the credit ratings and total deposit balances of each of its bankers. Further limits are set to minimize the concentration of risks and therefore mitigate financial loss of any potential failure to repay deposits.

Note 9: Capital management

For the purpose of the Company’s capital management, capital includes issued equity share capital, share premium and all other equity reserves attributable to the equity shareholders of the Company. The primary objective of the Company’s capital management is to maximize the equity shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and other financial requirements.

Note 10: Derivative instruments

The Company enters into forward foreign exchange contracts where the counter party is a bank. The Company purchases forward foreign exchange contracts to mitigate the risks of change in foreign exchange rate on receivables denominated in certain foreign currencies. The Company considers the risk of non-performance by the counter party as non-material. As at March 31, 2019 the Company has following outstanding derivative instrument:

Note (i): Remuneration includes salary, bonus and perquisites. During the year, 31,750 OSUs under OFSS Stock Plan 2014 (March 31, 2018 — 35,500 OSUs under OFSS Stock Plan 2014) were granted to KMP.

Note (ii): Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at year end are unsecured and interest free and settlement occurs in cash.

Note 11: Net equity dividend remitted in foreign exchange

Note 12: Litigations

The Company has certain litigations with respect to income tax matters for various assessment years amounting to Rs. 3,451.95 million (income tax demand outstanding on account of dispute), which are pending before various appellate authorities. The management expects that its position will be upheld on ultimate resolution and the possibility of any outflow of resources is remote. Further for certain litigations the Company has aggregate provisions of Rs. 883.78 million as at March 31, 2019 (March 31, 2018 - Rs. 883.78 million).

Note 13: Research and development expenditure

Five in-house research and development centers of the Company in India have been accorded recognition by the Department of Scientific and Industrial Research (DSIR) from February 26, 2016. The aggregate expenditure on research and development activities in these in-house R&D centers is as follows:

Note 14: Auditors remuneration (including GST / service tax)

Note 15: Other operating expenses for the year ended March 31, 2019 include Rs. 209.47 million towards provision for diminution in value of investment along with provision for loss in fair value of loan given to ISP Internet Mauritius Company and reversal of provision for diminution in value of investment in Oracle (OFSS) ASP Private Limited for Rs. 40.70 million.

Other operating expenses for the year ended March 31, 2018 include Rs. 196.75 million towards reversal of provision for diminution in value of investment in ISP Internet Mauritius Company along with reversal of provision for loss in fair value of loan given to ISP Internet Mauritius Company.

Note 16: Recent accounting pronouncements

Standards issued but not yet effective

The Ministry of Corporate Affairs (MCA) vide the Companies (Indian Accounting Standards) Amendment Rules, 2019 has notified Ind AS 116 and amendments to certain other Ind ASs:

Ind AS 116 Leases:

Ind AS 116 was notified on March 30, 2019 and is applicable to the Company from financial year beginning April 1, 2019.

Ind AS 116 has introduced a single lease accounting model which requires a lessee to recognize a right-of-use asset and a lease liability by assessing whether a contract is, or contains a lease at the inception of the contract. The standard specifies the manner in which an initial lease liability will be measured and the cost of the right-of-use asset will be recognized. The standard also provides certain exemptions from recognition; based on the term of lease contracts and the underlying asset values. Lessor accounting requirements are substantially in line with Ind AS 17.

Ind AS 116 permits two methods of transition: i) full retrospective method: retrospective application to each prior reporting period applying Ind AS 8 Accounting Polices, Changes in Accounting Estimates and Errors or, ii) modified retrospective method: retrospective application with cumulative effect of initially applying Ind AS 116 recognized at the date of initial application (i.e. April 1, 2019). Certain practical expedients are available under both the methods. The standard also contains additional disclosures requirements as defined in Ind AS 116.

The Company proposes to adopt the new standard effective April 1, 2019 using the modified retrospective method and is in the process of evaluating the requirements of the amendment and the effect on the standalone financial statements.

Appendix C to Ind AS 12 Uncertainty over Income Tax Treatments:

The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of Ind AS 12 and does not apply to taxes or levies outside the scope of Ind AS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The interpretation specifically addresses the following:

- Whether an entity considers uncertain tax treatments separately

- The assumptions an entity makes about the examination of tax treatments by taxation authorities

- How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

- How an entity considers changes in facts and circumstances

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. In determining the approach that better predicts the resolution of the uncertainty, an entity might consider, for example, (a) how it prepares its income tax filings and supports tax treatments; or (b) how the entity expects the taxation authority to make its examination and resolve issues that might arise from that examination.

This interpretation will come into force from April 1, 2019. The Company is evaluating the requirements of the amendment and the effect on the standalone financial statements.

Amendment to Ind AS 12 — Income taxes

The amendments clarify that the income tax consequence of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognizes the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.

The amendment will come into force from April 1, 2019. Since the Company’s current practice is in line with these amendments, the Company does not expect any effect on the standalone financial statements.

Amendment to Ind AS 19 - Employee benefits

The amendments to Ind AS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to:

- Determine current service cost for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event.

- Determine net interest for the remainder of the period after the plan amendment, curtailment or settlement using: the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event; and the discount rate used to remeasure that net defined benefit liability (asset).

The amendments also clarify that an entity first determines any past service cost, or a gain or loss on settlement, without considering the effect of the asset ceiling. This amount is recognized in profit or loss. An entity then determines the effect of the asset ceiling after the plan amendment, curtailment or settlement. Any change in that effect, excluding amounts included in the net interest, is recognized in other comprehensive income.

The amendments apply to plan amendments, curtailments, or settlements occurring on or after the beginning of the first annual reporting period that begins on or after April 1, 2019. These amendments will apply only to any future plan amendments, curtailments, or settlements of the Company

Note 17: Disclosure on revenue from operations

(a) Disaggregate revenue information

The table below presents disaggregated revenues from contracts with customers by geography, streams and type of contract for each of our business segments.

(b) During the year ended March 31, 2019, the Company recognized revenue of Rs. 613.54 million from opening deferred revenue as of April 1, 2018.

(c) During the year ended March 31, 2019, the Company recognized revenue of Rs. 725.31 million from performance obligations satisfied prior to April 1, 2018.

(d) Change in contract assets and contract liabilities are on account of transactions undertaken in the normal course of business. On account of adoption of Ind AS 115, unbilled revenue of Rs. 702.08 million as at March 31, 2019 has been classified as other current asset.

(e) Reconciliation of revenue recognized with contract price for the year ended March 31, 2019:

(f) Remaining performance obligation

The Company has applied the practical expedient as provided in Ind AS 115 and excluded the disclosure relating to remaining performance obligation for:

i. contracts where the original expected duration is one year or less.

ii. contracts where the revenue recognized corresponds directly with the value to the customer of the entity’s performance completed to date. Typically this involves those contracts where invoicing is on time and material basis.

Remaining performance obligation estimates are subject to change and are affected by several factors such as terminations, changes in the scope of contracts, periodic revalidations of estimates and other macro economic factors.

The aggregate amount of transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as at March 31, 2019, after considering the practical expedient mentioned above is Rs. 10,560.45 million, out of which 66% is expected to be recognized as revenue within the next one year and the balance thereafter.

(g) Asset recognized from the costs to obtain a contract

The Company recognizes incremental costs of obtaining a contract with customers as an asset and discloses them under "other assets" as deferred contract costs in the standalone financial statements. Incremental costs of obtaining contracts are those costs that the Company incurs to obtain a contract with the customer that would not have been incurred if the contract had not been obtained. Such deferred contract costs assets are amortized over the benefit period.

The Company has amortized deferred contract cost of Rs. 18.71 million for the year ended March 31, 2019 and has closing balance of deferred contract cost asset of Rs. 34.05 million as at March 31, 2019.

Note 18: With effect from April 1, 2018, the Company has amended its commercial arrangements with its subsidiary companies without modifying the substance of the arrangements and functions undertaken by the Company and its subsidiary companies. Consequently, there is a reduction in the revenue earned and the expenditure incurred by the Company in the current year and they are not comparable with the previous year.

Note 19: Segment information

Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.

The Company is organized by business segment and geographically. For management purposes the Company is primarily organized on a worldwide basis into two business segments:

a) Product licenses and related activities (Products'') and

b) IT solutions and consulting services (Services'')

The business segments are the basis on which the Company reports its primary operational information to management. Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.

IT solutions and consulting services segment offers services spanning the entire lifecycle of applications used by financial service institutions. The division’s portfolio includes Consulting, Application, Support and Technology Services that help institutions improve efficiency, optimize costs, meet risk and compliance mandates and implement IT solutions finely attuned to their business needs.

Segment revenue and expense:

Revenue is generated through licensing of software products, maintenance fees as well as by providing software solutions to the customers including consulting services. The income and expenses which are not directly attributable to a business segment are shown as unallocable income and expenses.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of trade receivables net of allowances, unbilled revenue, deposits for premises and property, plant and equipment. Segment liabilities primarily includes trade payables, deferred revenues, advance from customer, employee benefit obligations and other liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown as part of unallocable assets and liabilities.

Geographical segments

The following table shows the distribution of the Company''s sales by geographical market:

Revenue of Rs. 27,574.41 million (March 31, 2018 Rs. 31,321.29 million) is derived from a single customer in ''Products'' and ''Services'' segment.

Non-current assets for this purpose consist of property, plant and equipment, capital work-in-progress, investment property, income tax assets (net) and other non-current assets.

---

Mar 31, 2018

Note: Share application money pending allotment for the year ended March 31, 2018 represents the money received from employees of the Company towards exercise of 350 stock options at the exercise price of '' 3,077 and 200 stock options at the exercise price of Rs, 3,127 under Employee Stock Option Plan 2011 Scheme (“Scheme 2011”) and 133 OFSS Stock Units (“OSUs") at the exercise price of Rs, 5 and 62 stock options at the exercise price of Rs, 3,393 under Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Each stock option and OSUs will entitle one equity share of Rs, 5 each of the Company.

Note: As per the requirements of Section 135 of the Companies Act, 2013 the Company was required to spend an amount of Rs, 330.36 million (March 31, 2017 - Rs, 335.39 million) on Corporate Social Responsibility expenditure based on the average net profits of the three immediately preceding financial years. The Company has spent an amount of Rs, 330.48 million (March 31, 2017 -Rs, 337.18 million) against Corporate Social Responsibility expenditure.

Note 1: Fair values

The management has assessed that fair value of financial instruments approximates their carrying amounts largely due to the short term maturities of these instruments.

Fair value hierarchy:

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities.

The following methods and assumptions are used to estimate the fair values:

The Company enters into derivative financial instruments with various banks. Foreign exchange forward contracts are valued using valuation techniques, which employ the use market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies.

There have been no transfers between Level 1 and Level 2 during the periods March 31, 2018 and March 31, 2017.

Note 2: Significant accounting judgments, estimates and assumptions

The preparation of the Company’s standalone financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

The key assumptions and estimate at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described below. These assumptions and estimates are based on available parameters as on the date of preparation of standalone financial statements. These assumptions and estimates, however, may change due to market changes or circumstances arising that are beyond the control of the Company.

- Operating lease

The Company has entered into commercial property leases for its offices. The Company has accounted these contracts as operating leases which have been determined based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property, the fair value of the asset and that the Company does not obtain any significant risks and rewards of ownership of these properties.

- Fair value of investment property

As per the Ind AS, the Company is required to disclose the fair value of the investment property. Accordingly, the Company has engaged an independent valuation specialist to assess the fair values of investment property as at March 31, 2018 and March 31, 2017. The investment property was valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the investment property. The key assumptions used to determine fair value of the investment property and sensitivity analysis are provided in note 4.

- Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the projections for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

- Share based payments

The Company measures share-based payments and transactions at fair value and recognizes over the vesting period using Black Scholes valuation model. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and model used for estimating fair value for share based payment transactions are disclosed in note 26(b).

Taxes

Deferred tax liability is recognized on the undistributed profits of subsidiaries where it is expected that the earnings of the subsidiary will be distributed in foreseeable future. Significant management judgment is required to determine the amount of deferred tax that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan and other post-employment retirement benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date annually. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. For plans operated outside India, the management considers the interest rates of high quality corporate bonds in currencies consistent with the currencies of the post-employment benefit obligation with at least an ‘AA’ rating or above, as set by an internationally acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The underlying bonds are further reviewed for quality. Those having excessive credit spreads are excluded from the analysis of bonds on which the discount rate is based, on the basis that they do not represent high quality corporate bonds.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases is based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in note 27.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 22 for further disclosures.

Note 3: Share based compensation / payments

(a) Employee Stock Purchase Scheme ("ESPS")

The Company had adopted the ESPS administered through a Trust with the name i-flex Employee Stock Option Trust (“the Trust”) to provide equity based incentives to key employees of the Company. i-flex Solution Trustee Company Ltd. is the Trustee of this Trust.

No allocation of shares to the employees have been made through the Trust since 2005 and all selected employees under the Trust have exercised their right of purchase of shares prior to March 31, 2014. In this regard, the Trustee Company had filed a petition in the Honorable Bombay High Court to seek directions for utilization of the remaining unallocated shares along with the other assets held by the Trust for the benefit of the employees of the Company. As per the order of the Honorable Bombay High Court dated August 1, 2016, the trust funds would be utilized for the benefit of the employees. Accordingly during the financial year the trust has incurred an expenditure of Rs, 28.71 million (March 31, 2017 - Rs, Nil) towards welfare of employees of the Company.

As at March 31, 2018, the Trust is holding 70,600 equity shares (March 31, 2017 - 166,142 equity shares) of Oracle Financial Services Software Limited.

(b) Employee Stock Option Plan ("ESOP")

The Members at their Annual General Meeting held on August 14, 2001 approved grant of ESOPs to the employees / directors of the Company and its subsidiaries up to 7.5% of the issued and paid-up capital of the Company from time to time. This said limit was enhanced and approved up to 12.5% of the issued and paid-up capital of the Company from time to time, by the Members at their Annual General Meeting held on August 18, 2011. This extended limit is an all inclusive limit applicable for stock options (“options”) granted in the past and in force and those that will be granted by the Company under this authorization.

Pursuant to ESOP scheme approved by the shareholders of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme (“Scheme 2002”) for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier). On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme (“Scheme 2010”) for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).

Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme (“Scheme 2011”). Accordingly, the Company has granted 1,950,500 options under the Scheme 2011. Nomination and Remuneration Committee in their meeting held on August 7, 2014 approved Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Accordingly the Company granted 165,795 stock options and 586,984 OFSS Stock Units (‘OSUs’) under OFSS Stock Plan 2014. The issuance terms of OSUs are the same as for stock options, employees may elect to receive 1 OSU in lieu of 4 awarded stock options at their respective exercise price.

As per the Scheme 2002, Scheme 2010 and Scheme 2011, each of 20% of the total options granted will vest on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have an exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of options.

In respect of the OFSS Stock Plan 2014, each of 25% of the total stock options / OSUs granted will vest on completion of 12, 24, 36 and 48 months from the date of grant and is subject to continued employment of the employee with the Company or its subsidiaries. Options / OSUs have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of options / OSUs.

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government bonds consistent with the currency and estimated term of the post employment benefits obligations. Plan assets are administered by LIC. The expected rate of return on plan assets is based on the expected average long term rate of return on investments of the fund during the terms of the obligation.

The Company’s contribution to the fund for the year ending March 31, 2019 is expected to be Rs, 110.46 million (March 31, 2018 -Rs, 111.65 million).

Note 4: Investment in associate

The Company had a 33% interest in Login SA; a private company incorporated in France which specializes in trading, risk management and back-office software, dedicated to bank treasury and capital markets activities.

The Company had an investment of Rs, 6.59 million in Login SA During the year ended March 31, 2018, the Company has disposed off the investment for a total consideration of Rs, 16.91 million.

Note 5: Financial risk management objectives and policies

The Company’s activities expose it to market risks, Liquidity risk and credit risks. The management oversees these risks and is aided by the Risk Management Committee whose scope is to formulate the risk management policy, which will identify elements of risk, if any which may affect the Company.

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk mainly comprises of foreign currency risk.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of monetary items will fluctuate because of changes in foreign exchange rates. This may have potential impact on the statement of profit and loss and other components of equity, where monetary items are denominated in a foreign currency, which are different from functional currency in which they are measured. As at the balance sheet date, the Company’s net foreign currency exposure expressed in INR that is not hedged is Rs, 787.80 million (March 31, 2017 - Rs, 4,009.00 million).

The Company manages its foreign currency risk by hedging the receivables in the major currencies (USD, EUR and AUD) using hedging instrument as forward contracts. The period of the forward contracts is determined by the expected collection period for invoices which currently ranges between 30 to 120 days.

Foreign currency sensitivity

Below table demonstrates sensitivity impact on Company’s profit after tax and total equity due to change in foreign exchange rates of currencies where it has significant exposure:

The above sensitivity impact gain (loss) is due to every percentage point appreciation or depreciation in the exchange rate of respective currencies, with all other variables held constant. Sensitivity impact is computed based on change in value of monetary assets and liabilities denominated in above respective currency, where the functional currency of the entity is a currency other than above respective currency and entities with functional currency as above respective currency where transactions are in foreign currencies. The Company’s exposure to foreign currency changes for all other currencies is not material.

(b) Liquidity risk

Liquidity risk management implies maintaining sufficient availability of funds to meet obligations when due and to close out market positions. The Company monitors rolling forecast of the cash and cash equivalent on the basis of expected cash flows.

The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:

The Company has sufficient funds in cash and cash equivalents and other bank balances to meet obligations towards financial liabilities.

(c) Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including time deposits with banks, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed in line with the established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on regional historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 7.

Cash and Bank balances

Credit risk from balances with banks is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with existing Bankers and within credit limits assigned to each banker.

Company follows a conservative philosophy and aims to invest surplus funds in India only in time deposits with well-known and highly rated banks. The duration of such time deposits will not exceed 364 days. The Company, on quarterly basis, monitors the credit ratings and total deposit balances of each of its bankers. Further limits are set to minimize the concentration of risks and therefore mitigate financial loss of any potential failure to repay deposits.

Note 6: Capital management

For the purpose of the Company’s capital management, capital includes issued equity share capital, share premium and all other equity reserves attributable to the equity shareholders of the Company. The primary objective of the Company’s capital management is to maximize the equity shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and other financial requirements.

Note 7: Derivative instruments

The Company enters into forward foreign exchange contracts where the counter party is a bank. The Company purchases forward foreign exchange contracts to mitigate the risks of change in foreign exchange rate on receivables denominated in certain foreign currencies. The Company considers the risk of non-performance by the counter party as non-material. As at March 31, 2018 the Company has following outstanding derivative instrument:

Note 8: Names of related parties and description of relationship:

Relationship Names of related parties

(i) Related parties where control exists

Ultimate Holding Company Oracle Corporation

Holding Company Oracle Global (Mauritius) Limited

Direct Subsidiaries Oracle Financial Services Software B.V.

Oracle Financial Services Software Pte. Ltd.

Oracle Financial Services Software Chile Limitada Oracle Financial Services Software (Shanghai) Limited Oracle Financial Services Software America, Inc.

Relationship Names of related parties

ISP Internet Mauritius Company Oracle (OFSS) Processing Services Limited Oracle (OFSS) ASP Private Limited

Subsidiaries of Subsidiaries Subsidiary of Oracle Financial Services Software B.V.

- Oracle Financial Services Software SA

Subsidiary of Oracle Financial Services Software Pte. Ltd.

- Oracle Financial Services Consulting Pte. Ltd.

Subsidiaries of Oracle Financial Services Software America, Inc.

- Oracle Financial Services Software, Inc.

- Mantas Inc.

Subsidiaries of Mantas Inc.

- Sotas Inc.

Subsidiary of Sotas Inc.

- Mantas India Private Limited

Subsidiaries of ISP Internet Mauritius Company

- Oracle (OFSS) BPO Services Inc.

- Oracle (OFSS) BPO Services Limited

(ii) Associate Login SA (disposed off on July 4, 2017)

(iii) Related parties with whom transactions have taken place during the year

Fellow Subsidiaries Oracle Egypt Ltd.

Oracle Canada ULC Oracle Taiwan LLC Oracle Romania SRL Oracle Hungary Kft.

Oracle EMEA Limited Oracle Czech s.r.o.

Oracle America, Inc.

Oracle Nederland B.V.

Oracle Vietnam Pte. Ltd Oracle Italia S.R.L.

Oracle Polska, Sp.z.o.o.

Oracle India Private Limited Oracle East Central Europe Limited Oracle Systems Hong Kong Limited Oracle Corporation UK Limited Oracle (Philippines) Corporation Oracle do Brasil Sistemas Limitada Oracle Corporation Malaysia Sdn. Bhd.

Oracle Systems Limited

Oracle Corporation Singapore Pte. Ltd.

Oracle East Central Europe Services BV Oracle Corporation Australia Pty. Limited

Relationship Names of related parties

Oracle Corporation (Thailand) Company Limited Oracle Portugal - Sistemas de Informa^ao Lda.

Oracle Corporation (South Africa) (Pty) Limited Oracle Research & Development Center, Beijing, Ltd.

Oracle Research & Development Center, Shenzhen, Ltd.

Oracle Technology Systems (Kenya) Limited Oracle de Mexico, S.A. de C.V.

Oracle New Zealand PT Oracle Indonesia Oracle (China) Software Systems Co. Ltd.

Oracle Colombia Limitada Sistemas Oracle de Chile, S.A Oracle Belgium B.V.B.A/SPRL Oracle Luxembourg S.a.r.l.

Oracle Korea, Ltd.

(iv) Controlled Trust i-flex ESOP Stock Option Trust

(v) Key Managerial Personnel (KMP'') Chaitanya Kamat - Managing Director and Chief Executive Officer

Makarand Padalkar - Chief Financial Officer

Onkarnath Banerjee - Company Secretary & Compliance Officer

(vi) Independent Directors S Venkatachalam

Richard Jackson Sridhar Srinivasan

Note 1: Remuneration includes salary, bonus and perquisites. During the year, 35,500 OSUs under OFSS Stock Plan 2014 (March 31, 2017 - 35,500 OSUs under OFSS Stock Plan 2014) were granted to KMP.

Note 2: During the year ended March 31, 2017, all loans given to subsidiaries; including the interest accrued thereon were settled. Interest received on loans represents the interest for the year till the date of settlement of the loan.

Note 3: Terms and conditions of transactions with related parties:

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at year end are unsecured and interest free and settlement occurs in cash.

Note 9: Litigations

The Company has some litigations in respect of which the Company has aggregate provisions of '' 883.78 million as at March 31, 2018 (as at March 31, 2017 - '' 945.50 million).

Note 10:

Other operating expenses for the year ended March 31, 2018 include '' 196.75 million towards reversal of provision for diminution

in value of investment in ISP Internet Mauritius Company along with reversal of provision for loss in fair value of loan given to ISP

Internet Mauritius Company.

Note 11: Exceptional item

(a) During the year ended March 31, 2017, the Company has recorded a charge under the Products segment of '' 628.25 million on its receivables from customers in Egypt due to significant devaluation of Egyptian Pound post liberalization of exchange rates by the Egypt Government.

(b) During the year ended March 31, 2017, the Company has received dividend of '' 1,146.73 million, '' 1,270.10 million and '' 374.01 million from its wholly owned subsidiaries Oracle Financial Services Software B.V., Oracle Financial Services Software Pte. Ltd. and Oracle (OFSS) Processing Services Limited respectively. Considering the amount of dividend received, the same has been disclosed as an exceptional item. Tax expenses for the year ended March 31, 2017 includes applicable tax credits on this dividend income.

Note 12:

Other income for the year ended March 31, 2017 includes Rs, 245.04 million against liability written-back towards amount due to its wholly owned subsidiary Oracle Financial Services Software, Inc.

Note 13: Recent accounting pronouncements

Standards issued but not yet effective

The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Amendment Rules, 2017 and Companies (Indian Accounting Standards) Amendment Rules, 2018 amending the following standards:

Ind AS 115, Revenue from Contract with Customers

Ind AS 115 was notified on March 28, 2018 and is applicable to the Company from financial year 2018-19 beginning April 1, 2018.

The core principle of Ind AS 115 is to recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Ind AS 115 establishes a five-step model to identify the contract(s) with the customers, identifying performance obligations, estimating variable consideration included in the transaction price and allocating the transaction price to each separate performance obligation and recognizing revenue when (or as) each performance obligation is satisfied. The new standard also provides guidance on recognition of incremental cost of obtaining and fulfilling a contract with a customer.

Ind AS 115 will supersede all current revenue recognition requirements under Ind AS. The standard permits two methods of transition: i) full retrospective method: retrospective application to each prior reporting period with the option to elect certain practical expedients as defined within Ind AS 115; or, ii) modified retrospective method: retrospective application with cumulative effect of initially applying Ind AS 115 recognized at the date of initial application (i.e. April 1, 2018) and providing certain additional disclosures as defined in Ind AS 115.

The Company will adopt the new standard effective April 1, 2018 using the modified retrospective method and is in the process of evaluating its contractual arrangements as per the five-step model required by Ind AS 115. The ultimate impact on revenue resulting from the application of Ind AS 115 will be subject to assessments that are dependent on many variables, including, but not limited to, the terms of the contractual arrangements and the mix of business. A reliable estimate of the quantitative impact of Ind AS 115 on the financial statements will only be possible once the assessment has been completed.

Appendix B to Ind AS 21 Foreign Currency Transactions and Advance Consideration

On March 28, 2018, MCA has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.

This amendment will come into force from April 1, 2018. The Company is evaluating the requirements of the amendment and the effect on the standalone financial statements.

Note 14: Segment information

Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.

The Company is organized by business segment and geographically. For management purposes the Company is primarily organized on a worldwide basis into two business segments:

a) Product licenses and related activities (‘Products’) and

b) IT solutions and consulting services (‘Services’)

The business segments are the basis on which the Company reports its primary operational information to management. Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.

IT solutions and consulting services segment offers services spanning the entire lifecycle of applications used by financial service institutions. The division’s portfolio includes Consulting, Application, Support and Technology Services that help institutions improve efficiency, optimize costs, meet risk and compliance mandates and implement IT solutions finely attuned to their business needs.

Segment revenue and expense:

Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services. The expenses which are not directly attributable to a business segment are classified as unallocable expenses.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of trade receivables, net of allowances, unbilled revenue, deposits for premises and property, plant and equipment. Segment liabilities primarily includes trade payables, deferred revenues, advance from customer, employee benefit obligations and other current liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown as part of unallocable assets and liabilities.

Non-current assets for this purpose consist of property, plant and equipment, capital work-in-progress, investment property, income tax assets (net) and other non-current assets.

---

Mar 31, 2017

Note: Share application money pending allotment for the year ended March 31, 2017 represents the money received from employees of the Company towards exercise of 480 stock options at the exercise price of Rs, 2,050.00 under Employee Stock Option Plan 2010 Scheme ("Scheme 2010"), 3,053 stock options at the exercise price of Rs, 1,929.95, 2,612 stock options at the exercise price of Rs, 3,076.85 and 3,243 stock options at the exercise price of Rs, 3,126.85 under Employee Stock Option Plan 2011 Scheme ("Scheme 2011") and 2,658 OFSS Stock Units ("OSUs") at the exercise price of Rs, 5 and 338 stock options at the exercise price of Rs, 3,241.25 under Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Each stock option and OSUs will entitle one equity share of Rs, 5 each of the Company.

Note: The Board of Directors have declared an interim dividend on March 29, 2017 of Rs, 170 per share for the year ended March 31, 2017 which was paid subsequent to the date of balance sheet (March 31, 2016 - Rs, Nil). The Board of Directors have proposed a final dividend of Rs, Nil for the year ended March 31, 2017 (March 31, 2016 - Rs, 100 and March 31, 2015 - Rs, 180).

* The identification of Micro and Small Enterprises is based on Management''s knowledge of their status.

** The Company entered into foreign exchange forward contracts with the intention of reducing the foreign exchange risk of trade receivables; these contracts are not designated in hedge relationships and are measured at fair value through profit or loss.

*** There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund.

Terms and conditions of financial liabilities:

- Trade payables are non-interest bearing and are normally settled on 30-day terms

- Other financial liabilities are normally settled quarterly throughout the year

Current tax charge for the year ended March 31, 2016 includes provision made in relation to foreign tax receivable of Rs, 413.03 million.

Deferred tax charge for the year ended March 31, 2017 and March 31, 2016 relates to origination and reversal of temporary differences.

Note : As per the requirements of Section 135 of the Companies Act, 2013 the Company was required to spend an amount of Rs, 335.39 million (March 31, 2016 Rs, 334.48 million) on Corporate Social Responsibility expenditure based on the average net profits of the three immediately preceding financial years. The Company has spent an amount of Rs, 337.18 million (March 31, 2016 Rs, 248.47 million) against Corporate Social Responsibility expenditure.

Note 1: Fair values

The management has assessed that fair value of financial instruments approximates their carrying amounts largely due to the short term maturities of these instruments.

Fair value hierarchy :

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities.

The following methods and assumptions are used to estimate the fair values:

The Company enters into derivative financial instruments with various banks. Foreign exchange forward contracts are valued using valuation techniques, which employ the use market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies.

There have been no transfers between Level 1 and Level 2 during the periods March 31, 2017, March 31, 2016 and April 1, 2015.

Note 2 Significant accounting judgments, estimates and assumptions

The preparation of the Company’s standalone financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

The key assumptions and estimate at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described below. These assumptions and estimates are based on available parameters as on the date of preparation of standalone financial statements. These assumptions and estimates, however, may change due to market changes or circumstances arising that are beyond the control of the Company.

- Operating lease

The Company has entered into commercial property leases for its offices. The Company has accounted these contracts as operating leases which have been determined based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property, the fair value of the asset and that the Company does not obtain any significant risks and rewards of ownership of these properties.

- Fair value of investment property

As per the Ind AS, the Company is required to disclose the fair value of the investment property. Accordingly, the Company has engaged an independent valuation specialist to assess the fair values of investment property as at April 1, 2015, March 31, 2016 and March 31, 2017. The investment property was valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the investment property. The key assumptions used to determine fair value of the investment property and sensitivity analysis are provided in note 4.

- Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the projections for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

- Share based payments

The Company measures share-based payments and transactions at fair value and recognizes over the vesting period using Black Scholes valuation model. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and model used for estimating fair value for share-based payment transactions are disclosed in note 26(b).

- Taxes

Deferred tax liability is recognized on the undistributed profits of subsidiaries where it is expected that the earnings of the subsidiary will be distributed in foreseeable future. Significant management judgment is required to determine the amount of deferred tax that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

- Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan and other post-employment retirement benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date annually. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. For plans operated outside India, the management considers the interest rates of high quality corporate bonds in currencies consistent with the currencies of the post-employment benefit obligation with at least an ‘AA’ rating or above, as set by an internationally acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The underlying bonds are further reviewed for quality. Those having excessive credit spreads are excluded from the analysis of bonds on which the discount rate is based, on the basis that they do not represent high quality corporate bonds.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases is based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in note 27.

- Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 21 for further disclosures.

Note 3: Share based compensation / payments

(a) Employee Stock Purchase Scheme ("ESPS")

The Company had adopted the ESPS administered through a Trust with the name i-flex Employee Stock Option Trust (“the Trust”) to provide equity based incentives to key employees of the Company. i-flex Solution Trustee Company Ltd. is the Trustee of this Trust.

No allocation of shares to the employees have been made through the Trust since 2005 and all selected employees under the Trust have exercised their right of purchase of shares prior to March 31, 2014. In this regard, the Trustee Company had filed a petition in the Honorable Bombay High Court to seek directions for utilization of the remaining unallocated shares along with the other assets held by the Trust for the benefit of the employees of the Company. As per the order of the Honorable Bombay High Court dated August 1, 2016, the trust funds would be utilized for the benefit of the employees.

As at March 31, 2017, the Trust is holding 166,142 equity shares (March 31, 2016 - 166,142 equity shares) of Oracle Financial Services Software Limited.

(b) Employee Stock Option Plan ("ESOP")

The Members at their Annual General Meeting held on August 14, 2001 approved grant of ESOPs to the employees / directors of the Company and its subsidiaries up to 7.5% of the issued and paid-up capital of the Company from time to time. This said limit was enhanced and approved up to 12.5% of the issued and paid-up capital of the Company from time to time, by the Members at their Annual General Meeting held on August 18, 2011. This extended limit is an all inclusive limit applicable for stock options granted in the past and in force and those that will be granted by the Company under this authorization.

Pursuant to ESOP scheme approved by the shareholders of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme (“Scheme 2002”) for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier).

On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme (“Scheme 2010”) for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).

Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme (“Scheme 2011”). Accordingly, the Company has granted 1,950,500 options under the Scheme 2011. Nomination and Remuneration Committee in their meeting held on August 7, 2014 approved Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Accordingly the Company granted 156,795 stock options and 457,601 OFSS Stock Units (‘OSUs’) under OFSS Stock Plan 2014. The issuance terms of OSUs are the same as for stock options, employees may elect to receive 1 OSU in lieu of 4 awarded stock options at their respective exercise price.

As per the Scheme 2002, Scheme 2010 and Scheme 2011, each of 20% of the total options granted will vest on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have an exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of options.

In respect of the OFSS Stock Plan 2014, each of 25% of the total stock Options/OSUs granted will vest on completion of 12, 24, 36 and 48 months from the date of grant and is subject to continued employment of the employee with the Company or its subsidiaries. Options/OSUs have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of Options/OSUs.

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government bonds consistent with the currency and estimated term of the post employment benefits obligations. Plan assets are administered by the LIC and invested in lower risk assets, primarily debt securities. The expected rate of return on plan assets is based on the expected average long term rate of return on investments of the fund during the terms of the obligation.

The Company’s contribution to the fund for the year ending March 31, 2018 is expected to be Rs, 111.65 million (March 31, 2017 Rs, 99.56 million).

Note 4: Investment in associate

The Company has a 33% interest in Login S.A; a private company incorporated in France which specializes in trading, risk management and back-office software, dedicated to bank treasury and capital markets activities.

The Company has an investment of Rs, 6.59 million in Login S.A as against total investments of Rs, 7,549.57 million as at March 31, 2017 and accordingly the investment in Login S.A is considered as immaterial as per the guidelines of Ind AS 112.

Note 5: Financial risk management objectives and policies

The Company’s activities expose it to market risks, Liquidity risk and credit risks. The management oversees these risks and is aided by the Risk Management Committee whose scope is to formulate the risk management policy, which will identify elements of risk, if any which may affect the Company.

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk mainly comprises of foreign currency risk.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of monetary items will fluctuate because of changes in foreign exchange rates. This may have potential impact on the statement of profit and loss and other components of equity, where monetary items are denominated in a foreign currency, which are different from functional currency in which they are measured. As at the balance sheet date, the Company’s net foreign currency exposure expressed in INR that is not hedged is Rs, 4,009.00 million (March 31, 2016 Rs, 427.35 million and April 1, 2015 Rs, (3,521.91) million).

The Company manages its foreign currency risk by a hedging the receivables in the major currencies (USD, EUR and AUD) using hedging instrument as forward contracts. The period of the forward contracts is determined by the expected collection period for invoices which currently ranges between 30 to 120 days.

Foreign currency sensitivity

Below table demonstrates sensitivity impact on Company’s profit after tax and total equity due to change in foreign exchange rates of currencies where it has significant exposure:

The above sensitivity impact gain (loss) is due to every percentage point appreciation or depreciation in the exchange rate of respective currencies, with all other variables held constant. Sensitivity impact is computed based on change in value of monetary assets and liabilities denominated in above respective currency, where the functional currency of the entity is a currency other than above respective currency and entity’s with functional currency as above respective currency where transactions are in foreign currencies. The Company’s exposure to foreign currency changes for all other currencies is not material.

(b) Liquidity risk

Liquidity risk management implies maintaining sufficient availability of funds to meet obligations when due and to close out market positions. The Company monitors rolling forecast of the cash and cash equivalent on the basis of expected cash flows.

The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.

The Company has sufficient liquid funds in cash and cash equivalents to meet obligations towards financial liabilities.

(c) Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including time deposits with banks, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed in line with the established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on regional historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 7.

Cash and Bank balances

Credit risk from balances with banks is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with existing Bankers and within credit limits assigned to each banker.

Company follows a conservative philosophy and shall aim to invest surplus funds in India only in time deposits with well-known and highly rated banks. The duration of such time deposits will not exceed 364 days. The Company, on quarterly basis, monitors the credit ratings and total deposit balances of each of its bankers. Further limits are set to minimize the concentration of risks and therefore mitigate financial loss of any potential failure to repay deposits.

Note 30: Capital management

For the purpose of the Company’s capital management, capital includes issued equity share capital, share premium and all other equity reserves attributable to the equity shareholders of the Company. The primary objective of the Company’s capital management is to maximize the equity shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and other financial requirements.

Note 6: Derivative instruments

The Company enters into forward foreign exchange contracts where the counter party is a bank. The Company purchases forward foreign exchange contracts to mitigate the risks of change in foreign exchange rate on receivables denominated in certain foreign currencies. The Company considers the risk of non-performance by the counter party as non-material. As at March 31, 2017 the Company has following outstanding derivative instrument:

Note 7: Names of Related Parties and description of relationship:

Relationship Names of related parties

(i) Related parties where control exists

Ultimate Holding Company Oracle Corporation

Holding Company Oracle Global (Mauritius) Limited

Direct Subsidiaries Oracle Financial Services Software B.V.

Oracle Financial Services Software Pte. Ltd.

Oracle Financial Services Software Chile Limited Oracle Financial Services Software (Shanghai) Limited Oracle Financial Services Software America, Inc.

ISP Internet Mauritius Company Oracle (OFSS) Processing Services Limited Oracle (OFSS) ASP Private Limited

Subsidiaries of Subsidiaries Subsidiary of Oracle Financial Services Software B.V.

- Oracle Financial Services Software SA

Subsidiary of Oracle Financial Services Software Pte. Ltd.

- Oracle Financial Services Consulting Pte. Ltd.

Subsidiaries of Oracle Financial Services Software America, Inc.

- Oracle Financial Services Software, Inc.

- Mantas Inc.

Subsidiaries of Mantas Inc.

- Sotas Inc.

Subsidiary of Sotas Inc.

- Mantas India Private Limited

Subsidiaries of ISP Internet Mauritius Company

- Oracle (OFSS) BPO Services Inc.

- Oracle (OFSS) BPO Services Limited

(ii) Associate Login S. A.

(iii) Related parties with whom transactions have taken place during the year

Fellow Subsidiaries Oracle Norge AS

Oracle Egypt Ltd.

Oracle Canada ULC Oracle Taiwan LLC Oracle Romania SRL Oracle Hungary Kft Oracle EMEA Limited Oracle Czech s.r.o.

Oracle America, Inc.

Oracle Nederland B.V.

Oracle Vietnam Pte. Ltd Oracle Italia S.R.L.

Relationship Names of related parties

Oracle Polska, Sp.z.o.o.

Oracle India Private Limited Oracle East Central Europe Limited Oracle Systems Hong Kong Limited Oracle Corporation UK Limited Oracle (Philippines) Corporation Oracle do Brasil Sistemas Limitada Oracle Corporation Malaysia Sdn. Bhd.

Oracle Systems Limited

Oracle Corporation Singapore Pte. Ltd.

Oracle East Central Europe Services BV Oracle Corporation Australia Pty. Limited Oracle Systems Pakistan (Private) Limited Oracle Solution Services (India) Private Ltd.

Oracle Corporation (Thailand) Company Limited Oracle Portugal - Sistemas de Informa^ao Lda.

Oracle Corporation (South Africa) (Pty) Limited Oracle Research & Development Center, Beijing, Ltd.

Oracle Research & Development Center, Shenzhen, Ltd.

Oracle Technology Systems (Kenya) Limited Oracle Luxembourg S.a.r.l.

Oracle de Mexico, S.A. de C.V.

Oracle Korea, Ltd.

Oracle New Zealand PT Oracle Indonesia Oracle (China) Software Systems Co. Ltd.

Oracle Srbija & Crna Gora d.o.o. Beograd Oracle Corporation Japan Oracle Ukraine

(iv) Controlled Trust i-flex ESOP Stock Option Trust

(v) Key Managerial Personnel (KMP'') Chaitanya Kamat - Managing Director and Chief Executive Officer

Makarand Padalkar - Chief Financial Officer

Onkarnath Banerjee - Company Secretary & Compliance Officer (from June 1, 2015)

Jayant Joshi - Company Secretary & Compliance Officer (from September 29, 2014 till May 31, 2015)

(vi) Independent Directors S Venkatachalam

Richard Jackson

Sridhar Srinivasan (from July 23, 2015)

Note 1: Remuneration includes salary, bonus and perquisites. The bonus is included on payment basis. During the year, 35,500 OSUs under OFSS Stock Plan 2014 (March 31, 2016 — 35,375 OSUs under OFSS Stock Plan 2014) were granted to KMP.

Note 2: Loan given to subsidiaries represents loan to Oracle Financial Services Software America, Inc. amounting to '' 662.03 million (interest LIBOR 50 basis points), ISP Internet Mauritius Company amounting to '' 60.41 million (interest LIBOR 50 basis points) and Oracle (OFSS) BPO Services Limited amounting to '' 30 million; as at March 31, 2016. During the year ended March 31, 2016 impairment has been provided against loan given to ISP Internet Mauritius Company including interest thereon. During the year ended March 31, 2017, all loans given to subsidiaries; including the interest accrued thereon were settled. Interest received on loans represents the interest for the year till the date of settlement of the loan.

Note 3: Terms and conditions of transactions with related parties:

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at year end are unsecured and interest free and settlement occurs in cash.

Note 8: Litigations

The Company has some litigations in respect of which the Company has aggregate provisions of Rs, 945.50 million as at March 31, 2017 (as at March 31, 2016 - Rs, 945.50 million).

Note9:

Other expenses for the year ended March 31, 2016 include a provision of Rs, 157.77 million against equity investment and loan including interest thereon to a subsidiary company.

Note 10: Exceptional item

(a) During the year ended March 31, 2017, the Company has recorded a charge under the Products segment of Rs, 628.25 million on its receivables from customers in Egypt due to significant devaluation of Egyptian Pound post liberalization of exchange rates by the Egypt Government. The same has been disclosed as an exceptional item.

(b) During the year ended March 31, 2017, the Company has received dividend of Rs, 1,146.73 million, Rs, 1,270.10 million and Rs, 374.01 million from its wholly owned subsidiaries Oracle Financial Services Software B.V., Oracle Financial Services Software Pte. Ltd and Oracle Processing Services Limited respectively. Considering the amount of dividend received, the same has been disclosed as an exceptional item. Tax expenses for the year ended March 31, 2017 includes applicable tax credits on this dividend income.

Note11:

Other income for the year ended March 31, 2017 includes Rs, 245.04 million against liability written-back towards amount due to its wholly owned subsidiary Oracle Financial Services Software, Inc.

Note 12:

Previous year''s figures have been reclassified, where necessary to conform with current year''s presentation.

Note13: Recent accounting pronouncements

Standards issued but not yet effective

In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of cash flows’ and Ind AS 102, ‘Share-based payment.’ The amendments are applicable to the Company from April 1, 2017.

(i) Amendment to Ind AS 7 - Statement of Cash Flows

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.

The Company is evaluating the requirements of the amendment and the effect on the financial statements.

(ii) Amendment to Ind AS 102 - Share-based Payment

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

The Company does not have any cash-settled awards as at March 31, 2017.

Note 14: First time adoption of Ind AS

The Company’s date of transition to Ind AS is April 1, 2015. Ind AS 101 - First-time Adoption of Indian Accounting Standards allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following material exemptions:

- Cumulative currency translation differences for all foreign operations are deemed to be zero as at April 1, 2015.

- Ind AS 102 - Share-based Payment has not been applied to equity instruments in share-based payment transactions that vested before April 1, 2015.

- Appendix C to Ind AS 17 - Leases requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the Company has used Ind AS 101 exemption and assessed all arrangements based on conditions in place as at the date of transition.

- The Company has opted to continue with carrying value for all its intangible assets as recognized in its Previous GAAP, as deemed cost at the transition date.

(c) Cash flow statement

There were no significant reconciliation items between cash flows prepared under Previous GAAP and those prepared under Ind AS.

(i) Dividend (including dividend tax)

Under Ind AS, liability for dividend is recognized in the period in which the obligation to pay is established. Under Previous GAAP, dividend payable is recorded as liability in the period to which the dividend relates, even though the dividend may be approved by the shareholders subsequent to the reporting date. This has resulted in an increase in equity.

(ii) Tax adjustments

Tax adjustments include deferred tax impact on account of differences between Ind AS and Previous GAAP. This has resulted reduction in equity.

(iii) Stock compensation adjustments

(a) Under Ind AS, the Company followed ''Fair Value'' method using an appropriate valuation model to determine Fair Value of stock Options/OSU as on the date of the grant as against ''intrinsic value'' method in the Previous GAAP. This has resulted in additional stock compensation charge considered under comprehensive income to the statement of profit and loss.

(b) Equity Contribution for stock Options/OSU granted to employees of subsidiaries of the Company.

(iv) Fair Valuation

Under Ind AS, financial assets and financial liabilities designated at fair value through profit and loss (FVTPL) are fair valued at each reporting date with changes in fair value recognized in the statement of profit and loss, while financial assets and financial liabilities which are measured at amortized cost are fair valued on the date when they are recognized initially and subsequently amortized using effective interest method. Under Previous GAAP, they were measured at cost.

This has also resulted into reclass of:

- Deposit for premises which are measured at fair value on initial recognition under Ind AS. The same were recorded at cost under Previous GAAP and accordingly, the resultant impact of Rs, 503.69 million and Rs, 389.43 million has been reclosed to prepaid expenses as at April 1, 2015 and March 31, 2016 respectively.

- Loans to subsidiaries which are measured at fair value on initial recognition under Ind AS. The same were recorded at cost under Previous GAAP and accordingly, the resultant impact of Rs, 160.58 & Rs, 181.09 million has been reclassed to investment in subsidiaries as at April 1, 2015 and March 31, 2016 respectively.

(v) Deferral of Revenue

As per Ind AS 18, when the product / services are delivered but the billing is on an extended term then all the payments (including tax) shall be discounted back to their Net Present Value (NPV) with this amount recorded as a reduction to revenue. Further revenue has been adjusted to meet revenue recognition principles of Ind AS 18. This has resulted reduction in equity.

(vi) Actuarial gain / (loss) on gratuity fund

Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability / asset which is recognized in other comprehensive income. Under Previous GAAP, actuarial gains and losses were recognized in the statement of profit and loss. Consequently, impact along with tax effect of the same has been recognized in other comprehensive income under Ind AS.

(vii) Exchange differences

Primarily on account of translation of the functional currency of foreign operations in to presentation currency as per the provisions of Ind AS 21.

Note 15: Segment information

Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.

The Company is organized by business segment and geographically. For management purposes the Company is primarily organized on a worldwide basis into two business segments:

a) Product licenses and related activities (Products'') and

b) IT solutions and consulting services (Services'')

The business segments are the basis on which the Company reports its primary operational information to management. Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.

Segment revenue and expense:

Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services. The expenses which are not directly attributable to a business segment are classified as unallocable expenses.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of trade receivables, net of allowances, unbilled revenue, deposits for premises and property, plant and equipment. Segment liabilities primarily includes trade payables, deferred revenues, advance from customer, employee benefit obligations and other current liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown as part of unallocable assets and liabilities.

Non-current assets for this purpose consist of property, plant and equipment, capital work-in-progress, intangible assets, investment property, income tax assets (net) and other non-current assets.

The accompanying notes form an integral part of the financial statements.

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Mar 31, 2015

Note 1: Corporate information

Oracle Financial Services Software Limited (the ''Company'') was incorporated in India with limited liability on September 27, 1989. The Company is a subsidiary of Oracle Global (Mauritius) Limited holding 74.52% (March 31, 2014 - 74.93%) ownership interest in the Company as at March 31, 2015.

The Company is principally engaged in the business of providing information technology solutions to the financial services industry worldwide. The Company has a suite of banking products, which caters to the needs of corporate, retail, investment banking, treasury operations and data warehousing.

Note 2: Capital commitments and contingent liabilities

(Amounts in Rs. million)

Particulars March 31, 2015 March 31, 2014

(a) Capital commitments

Contracts remaining to be executed on capital account not provided for (net of 177.24 169.83 advances).

(b) Contingent liabilities Nil Nil

Note 22: Share based compensation / payments a) Employee Stock Purchase Scheme ("ESPS")

The Company has adopted the ESPS administered through a Trust (''the Trust'') to provide equity based incentives to key employees of the Company. As per the scheme, the Trust can purchase shares of the Company from market using the proceeds of loans obtained from the Company. Such shares are allocated by the Trust to nominated employees at an exercise price, which approximates the fair value on the date of the grant. The shares vest in the employees over a period of five years and the employees can purchase the shares from the Trust over a period of ten years based on continued employment, until which, the Trust holds the shares for the benefit of the employees. The employees are entitled to receive dividends, bonus, etc., that may be declared by the Company from time to time for the entire portion of shares held by the Trust on behalf of the employees.

On the acceptance of the offer, the selected employee undertakes to purchase the shares from the Trust within ten years from the date of acceptance of the offer. In case an employee resigns from employment, the rights relating to vested shares, which are eligible for exercise, may be purchased by the employee by payment of the exercise price whereas, the balance shares are forfeited in favor of the Trust. The Trustees have the right of recourse against the employees for any amounts that may remain unpaid on the shares accepted by them. As of the balance sheet date, the Trust has repaid the entire loan obtained from the Company on receipt of payments from employees against shares exercised.

In accordance with the Guidance Note on Accounting for Employee Share Based Payments issued by ICAI, the excess of market price of the underlying equity shares on the date of grant of the stock options over the exercise price of the options is to be recognized in the books of account and amortized over the vesting period. However, no compensation cost has been recorded as the scheme terms are fixed and the exercise price equals the market price of the underlying stock on the grant date.

b) Employee Stock Option Plan ("ESOP")

Pursuant to ESOP scheme approved by the shareholders of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme ("Scheme 2002") for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier). On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme ("Scheme 2010") for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).

Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme ("Scheme 2011"). Accordingly, the Company has granted 1,950,500 options under the Scheme 2011. Nomination and Remuneration Committee in their meeting held on August 7, 2014 approved Oracle Financial Services Software Limited Stock Plan 2014 ("OFSS Stock Plan 2014") and during the year 2014-15, the Company granted 58,370 Stock Options and 147,889 Restricted Stock Units (RSUs) under OFSS Stock Plan 2014. The issuance terms of RSUs are the same as for Stock Options, employees may elect to receive 1 RSU in lieu of 4 awarded Stock Options at their respective exercise price.

As per the Scheme 2002, Scheme 2010 and Scheme 2011, each of 20% of the total options granted will vest on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of option.

In respect of the Stock Options and RSUs granted in the Financial year 2014-15 under OFSS Stock Plan 2014, each of 25% of the total Stock Options / RSUs will vest on completion of 12, 24, 36 and 48 months from the date of grant and is subject to continued employment of the employee of the Company or its subsidiaries. Options have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of option.

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government bonds consistent with the currency and estimated term of the post employment benefits obligations. Plan assets are administered by the LIC and invested in lower risk assets, primarily debt securities. The expected rate of return on plan assets is based on the expected average long term rate of return on investments of the fund during the terms of the obligation.

The Company''s contribution to the fund for the year ending March 31, 2016 is expected to be Rs. 72.48 million (March 31, 2015 - Rs. 63.31 million).

Notes:

1. Remuneration includes salary, bonus and perquisites. The bonus is included on payment basis. As the liabilities for gratuity and compensated absence are provided on an actuarial basis for the Company as a whole, the amounts pertaining to individual KMP are not included above. During the year 37,000 options under the OFSS Stock Plan 2014 (March 31, 2014 - 141,000 options under the Scheme 2011) were granted to KMP.

2. Loan given to subsidiaries represents loan to Oracle Financial Services Software America, Inc. amounting to Rs. 625.06 million (interest LIBOR 50 basis points) as at March 31, 2015 (March 31, 2014 - Rs. 599.90 million) and ISP Internet Mauritius Company amounting to Rs. 59.37 million (interest LIBOR 50 basis points) as at March 31, 2015 (March 31, 2014 - Rs. 56.98 million). No additional loans have been given during the year. The amount shown above is towards the revaluation impact of the outstanding loans.

3. During the year ended March 31, 2011, the Company had signed a settlement agreement with Oracle (OFSS) BPO Services Limited whereby the outstanding amount is being repaid in 10 equal annual installments. No additional loan has been given during the year. The amount shown above is towards repayment of the existing loan.

Note 3: Segment information

Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.

The Company is organized by business segment and geographically. For management purposes the Company is primarily organized on a worldwide basis into two business segments:

a) Product licenses and related activities (''Products'') and

b) IT solutions and consulting services (''Services'').

The business segments are the basis on which the Company reports its primary operational information to management. Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.

IT solutions and consulting services segment offers services spanning the entire lifecycle of applications used by financial service institutions. The division''s portfolio includes Consulting, Application, Support and Technology Services that help institutions improve efficiency, optimize costs, meet risk and compliance mandates and implement IT solutions finely attuned to their business needs.

Segment revenue and expense:

Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services. The expenses which are not directly attributable to a business segment are classified as unallocable expenses.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of debtors, net of allowances, unbilled revenue, deposits for premises and fixed assets. Segment liabilities primarily includes deferred revenues, advance from customer, accrued employee cost and other current liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown as part of unallocable assets and liabilities.

Note 4

The expenditure on research and development activities recognized as expense in the statement of profit and loss is Rs. 3,027.49 million (previous year - Rs. 2,727.71 million).

Note 5 : Litigations

The Company has some litigations, the outcomes of which are considered probable, and in respect of which the Company has made aggregate provisions of Rs. 806.30 million.

Note 6:

Previous year''s figures have been reclassified, where necessary to conform with current year''s presentation.

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Mar 31, 2014

Note 1: Corporate information

Oracle Financial Services Software Limited (the "Company") was incorporated in India with limited liability on September 27, 1989. The Company is a subsidiary of Oracle Global (Mauritius) Limited holding 74.93% (March 31, 2013 – 80.27%) ownership interest in the Company as at March 31, 2014.

The Company is principally engaged in the business of providing information technology solutions to the financial services industry worldwide. The Company has a suite of banking products, which caters to the needs of corporate, retail, investment banking, treasury operations and data warehousing.

Note 2: Share capital

(a) The Company has only one class of equity shares having a par value of Rs. 5 per share. Each holder of equity shares is entitled to one vote per share.

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

(b) Details of shareholders holding more than 5% equity shares in the Company

(d) Refer note 23 (b) for details of shares reserved for issue under the employee stock option (ESOP) plan of the Company.

(e) Share application money pending allotment for the year ended March 31, 2014 represents the money received from employees of the Company towards exercise of 1,000 options at the exercise price of Rs. 2,050.00 under Employee Stock Option Plan 2010 Scheme ("Scheme 2010") and 800 options at the exercise price of Rs. 1,929.95 under Employee Stock Option Plan 2011 Scheme ("Scheme 2011"). Each option will entitle one equity share of Rs. 5 each of the Company at a premium of Rs. 2,045.00 under the Scheme 2010 and Rs. 1,924.95 under the Scheme 2011.

Operating lease

The Company has taken certain office premises and residential premises for employees under operating lease, which expire at various dates through year 2025. Some of the lease agreements have a price escalation clause. Gross rental expenses for the year ended March 31, 2014 aggregated to Rs. 379.24 million (March 31, 2013 - Rs. 297.86 million). The minimum rental payments to be made in future in respect of these leases are as follows:

Note 22: Derivative instruments and unhedged foreign currency exposure

The Company enters into forward foreign exchange contracts where the counter party is a bank. The Company purchases forward foreign exchange contracts to mitigate the risks of change in foreign exchange rate on receivables denominated in certain foreign currencies. The Company considers the risk of non-performance by the counter party as non-material. As at March 31, 2014 the Company has following outstanding derivative instrument:

Note 3: Share based compensation / payments a) Employee Stock Purchase Scheme ("ESPS")

The Company has adopted the ESPS administered through a Trust ("the Trust") to provide equity based incentives to key employees of the Company. As per the scheme, the Trust can purchase shares of the Company from market using the proceeds of loans obtained from the Company. Such shares are allocated by the Trust to nominated employees at an exercise price, which approximates the fair value on the date of the grant. The shares vest in the employees over a period of five years and the employees can purchase the shares from the Trust over a period of ten years based on continued employment, until which, the Trust holds the shares for the benefit of the employees. The employees are entitled to receive dividends, bonus, etc., that may be declared by the Company from time to time for the entire portion of shares held by the Trust on behalf of the employees.

On the acceptance of the offer, the selected employee undertakes to purchase the shares from the Trust within ten years from the date of acceptance of the offer. In case an employee resigns from employment, the rights relating to vested shares, which are eligible for exercise, may be purchased by the employee by payment of the exercise price whereas, the balance shares are forfeited in favor of the Trust. The Trustees have the right of recourse against the employees for any amounts that may remain unpaid on the shares accepted by them. As of the balance sheet date, the Trust has repaid the entire loan obtained from the Company on receipt of payments from employees against shares exercised.

The Securities and Exchange Board of India (''SEBI'') has issued the Employee Stock Option Scheme and Stock Purchase Guidelines, 1999 (''SEBI guidelines''), which are applicable to stock purchase schemes for employees of all Indian listed companies. In accordance with these guidelines, the excess of market price of the underlying equity shares on the date of grant of the stock options over the exercise price of the options is to be recognized in the books of account and amortized over the vesting period. However, no compensation cost has been recorded as the scheme terms are fixed and the exercise price equals the market price of the underlying stock on the grant date.

In addition to 166,142 unallocated shares of the Company as stated above, the unaudited balance sheet of the Trust as at March 31, 2014 mainly consists of bank balance of Rs. 249.29 million and surplus in income & expenditure account of Rs. 248.57 million. There are no other material assets, liabilities or contingent liabilities of the Trust as on that date as per the unaudited financial statements. According to the provisions of the Trust Deed, the Trust is constituted as an irrevocable trust and in no event shall the funds and assets (including the unallocated shares) of the Trust revert to the Company. The Company has obtained a legal opinion which states that the Company has no right to the assets and funds of the Trust. In view of this position, the Company has not consolidated the financial statements of the Trust in the standalone financial statements of the Company.

b) Employee Stock Option Plan ("ESOP")

Pursuant to ESOP scheme approved by the shareholders of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme ("Scheme 2002") for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier).

On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme ("Scheme 2010") for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).

Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme ("Scheme 2011") for issue of 5,100,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2011, the Company has granted 1,935,500 options till March 31, 2014.

As per the above schemes, each of 20% of the total options granted will vest to the eligible employees and directors on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of option.

The weighted average share price for the year over which stock options were exercised was Rs. 2,857 (March 31, 2013 - Rs. 2,859).

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government bonds consistent with the currency and estimated term of the post employment benefits obligations. Plan assets are administered by the LIC and invested in lower risk assets, primarily debt securities. The expected rate of return on plan assets is based on the expected average long term rate of return on investments of the fund during the terms of the obligation.

The Company''s contribution to the fund for the year ending March 31, 2015 is expected to be Rs. 63.31 million.

Note 4: Tax expenses

Current tax charge for the year ended March 31, 2013 includes prior year net reversal of Rs. 295.37 million.

Note 5: Segment information

Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.

The Company is organized by business segment and geographically. For management purposes the Company is primarily organized on a worldwide basis into two business segments:

a) Product licenses and related activities ("Products") and

b) IT solutions and consulting services ("Services").

The business segments are the basis on which the Company reports its primary operational information to management. Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.

IT solutions and consulting services segment offers services spanning the entire lifecycle of applications used by financial service institutions. The division''s portfolio includes Consulting, Application, Support and Technology Services that help institutions improve efficiency, optimize costs, meet risk and compliance mandates and implement IT solutions finely attuned to their business needs.

Segment revenue and expense:

Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services. The expenses which are not directly attributable to a business segment are classified as unallocable expenses.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of debtors, net of allowances, unbilled revenue, deposits for premises and fixed assets. Segment liabilities primarily includes deferred revenues, advance from customer, accrued employee cost and other current liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown as part of unallocable assets and liabilities.

Geographical segments

The following table shows the distribution of the Company''s sales by geographical market :

Note 9: Investments in wholly owned subsidiaries

As at March 31, 2014, the Company has total investment of Rs. 192.12 million in ISP Internet Mauritius Company (''ISP'') which is the holding company of Oracle (OFSS) BPO Services Inc., US and Oracle (OFSS) BPO Services Limited, India, entities operating in business of Business Process Outsourcing (BPO). Further, the Company has an outstanding loan of Rs. 56.98 million from ISP and Rs. 140.00 million from Oracle (OFSS) BPO Services Limited as at March 31, 2014. On a consolidated basis, ISP and its subsidiaries (''ISP Group'') have accumulated losses amounting to Rs. 152.65 million as at March 31, 2014. However ISP Group has posted a profit of Rs. 33.20 million for the year ended March 31, 2014. Based on the assessment of the estimated future cash flows from the operations of the Group and the results of the current year, the management of the Company believes that Rs. 120.00 million recorded as diminution in value of investment in earlier year is appropriate and no further diminution in value is considered necessary as at March 31, 2014.

Note 10:

Previous year''s figures have been reclassified, where necessary to conform with current year''s presentation.

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Mar 31, 2013

Note 1: Corporate information

Oracle Financial Services Software Limited (the "Company") was incorporated in India with limited liability on September 27, 1989. The Company is a subsidiary of Oracle Global (Mauritius) Limited holding 80.27% (March 31, 2012 - 80.36%) ownership interest in the Company as at March 31, 2013.

The Company is principally engaged in the business of providing information technology solutions to the financial services industry worldwide. The Company has a suite of banking products, which caters to the needs of corporate, retail, investment banking, treasury operations and data warehousing.

Note 2: Share based compensation/payments

a) Employee Stock Purchase Scheme (''ESPS'')

The Company has adopted the ESPS administered through a Trust ("the Trust") to provide equity based incentives to key employees of the Company. As per the scheme, the Trust can purchase shares of the Company from market using the proceeds of loans obtained from the Company. Such shares are allocated by the Trust to nominated employees at an exercise price, which approximates the fair value on the date of the grant. The shares vest in the employees over a period of five years and the employees can purchase the shares from the Trust over a period of ten years based on continued employment, until which, the Trust holds the shares for the benefit of the employees. The employees are entitled to receive dividends, bonus, etc., that may be declared by the Company from time to time for the entire portion of shares held by the Trust on behalf of the employees.

On the acceptance of the offer, the selected employee undertakes to purchase the shares from the Trust within ten years from the date of acceptance of the offer. In case an employee resigns from employment, the rights relating to vested shares, which are eligible for exercise, may be purchased by the employee by payment of the exercise price whereas, the balance shares are forfeited in favor of the Trust. The Trustees have the right of recourse against the employees for any amounts that may remain unpaid on the shares accepted by them. As of the balance sheet date, the Trust has repaid the entire loan obtained from the Company on receipt of payments from employees against shares exercised.

The Securities and Exchange Board of India (''SEBI'') has issued the Employee Stock Option Scheme and Stock Purchase Guidelines, 1999 (''SEBI guidelines''), which are applicable to stock purchase schemes for employees of all Indian listed companies. In accordance with these guidelines, the excess of market price of the underlying equity shares on the date of grant of the stock options over the exercise price of the options is to be recognized in the books of account and amortized over the vesting period. However, no compensation cost has been recorded as the scheme terms are fixed and the exercise price equals the market price of the underlying stock on the grant date.

b) Employee Stock Option Plan (''ESOP'')

Pursuant to ESOP scheme approved by the shareholders of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme ("Scheme 2002") for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier).

On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme ("Scheme 2010") for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).

Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme ("Scheme 2011") for issue of 5,100,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2011, the Company has granted 1,285,500 options till March 31, 2013.

As per the above schemes, each of 20% of the total options granted will vest to the eligible employees and directors on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of option.

Note 3: Tax expenses

Current tax charge for the year ended March 31, 2013 includes prior year net reversal of Rs. 295.37 million.

Note 4: Segment information

Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.

The Company is organized by business segment and geographically. For management purposes the Company is primarily organized on a worldwide basis into two business segments:

a) Product licenses and related activities (''Products'') and

b) IT solutions and consulting services (''Services'').

The business segments are the basis on which the Company reports its primary operational information to management. Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.

IT solutions and consulting services segment offers services spanning the entire lifecycle of applications used by financial service institutions. The division''s portfolio includes Consulting, Application, Support and Technology Services that help institutions improve efficiency, optimize costs, meet risk and compliance mandates and implement IT solutions finely attuned to their business needs.

Segment revenue and expense:

Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services. The expenses which are not directly attributable to a business segment are classified as unallocable expenses.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of trade receivables net of allowances, unbilled revenues, deposits for premises and fixed assets. Segment liabilities primarily include deferred revenues, advance from customers, accrued employee costs and other current liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by two segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown as part of unallocable assets and liabilities.

Geographical segments:

The following table shows the distribution of the Company''s sales by geographical market:

Note 5: Investments in wholly owned subsidiaries

(a) As at March 31, 2013, the Company has total investment of Rs. 6,291.74 million in Oracle Financial Services Software America, Inc. (''OAI''). Further, the Company has loan outstanding of Rs. 542.74 million to OAI. OAI is the holding company for US operations and has acquired Companies in earlier years. On a consolidated basis, OAI along with subsidiaries (''OAI Group'') has accumulated losses of Rs. 349.51 million as at March 31, 2013. The OAI Group has posted a profit of Rs. 171.15 million for the year ended March 31, 2013. Based on the assessment of the estimated future cash flows from the US operations and the results of the current year, the management of the Company believes that no provision is required towards diminution in the value of investment in OAI as at March 31, 2013.

(b) As at March 31, 2013, the Company has total investment of Rs. 192.12 million in ISP Internet Mauritius Company (''ISP'') which is the holding company of Oracle (OFSS) BPO Services Inc., US and Oracle (OFSS) BPO Services Limited, India, entities operating in business of Business Process Outsourcing (BPO). Further, the Company has an outstanding loan of Rs. 51.55 million from ISP and Rs. 170.00 million from Oracle (OFSS) BPO Services Limited as at March 31, 2013. On a consolidated basis, ISP and its subsidiaries (''ISP Group'') have accumulated losses amounting to Rs. 185.85 million as at March 31, 2013. However ISP Group has posted a profit of Rs. 40.23 million for the year ended March 31, 2013. Accordingly, the Company believes that Rs. 120.00 million recorded as diminution in value of investment in earlier year is appropriate and no further diminution in value is considered necessary as at March 31, 2013.

Note 6:

Previous year''s figures have been reclassified, where necessary to conform with current year''s presentation.

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Mar 31, 2012

Note 1: Corporate information

Oracle Financial Services Software Limited (the "Company") was incorporated in India with limited liability on September 27, 1989. The Company is a subsidiary of Oracle Global (Mauritius) Limited holding 80.36% (March 31, 2011 — 80.44%) ownership interest in the Company as at March 31, 2012.

The Company is principally engaged in the business of providing information technology solutions to the financial services industry worldwide. The Company has a suite of banking products, which caters to the needs of corporate, retail, investment banking, treasury operations and data warehousing.

(a) The Company has only one class of equity shares having a par value of Rs 5 per share. Each holder of equity shares is entitled to one vote per share.

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

(b) Details of shareholders holding more than 5% equity shares in the Company

(d) Refer note 24 (b) for details of shares reserved for issue under the employee stock option (ESOP) plan of the Company.

(e) Share application money pending allotment represents the money received from employees of the Company towards exercise of 500 options at the exercise price of Rs 1,290.85 under Employee Stock Option Scheme 2002 ("Scheme 2002") and 289 options at the exercise price of Rs 2,050.00 under Employee Stock Option Plan 2010 Scheme ("Scheme 2010") (March 31, 2011 - 600 options at the exercise price of Rs 1,290.85 under Scheme 2002). Each option will entitle one equity share of Rs 5 each of the Company at a premium of Rs 1,285.85 under Scheme 2002 and Rs 2,045.00 under Scheme 2010 (March 31, 2011 - Rs 1,285.85 per options under Scheme 2002).

(a) During the year ended March 31, 2012, the Company has received dividend of Rs 1,833.30 and Rs 1,275.00 from its wholly owned subsidiaries Oracle Financial Services Software B.V. and Oracle Financial Services Software Pte. Ltd. respectively. Considering the amount of dividend received, the same has been disclosed as an exceptional item.

(b) A customer had filed a lawsuit against the Company and one of its subsidiaries, claiming damages of upwards of Rs 5,784.19. In respect of this claim, the Company had provided Rs 122.07 in the year ended March 31, 2011. During the year ended March 31, 2012, the Company has settled the said customer dispute for full release of all alleged claims and accordingly has accounted the balance settlement amount, net of insurance claim and disclosed the same as an exceptional item.

Operating lease

The Company has taken certain office premises and residential premises for employees under operating lease, which expire at various dates through year 2025. Some of the lease agreements have a price escalation clause. Gross rental expenses for the year ended March 31, 2012 aggregated to Rs 397.92 (March 31, 2011 - Rs 589.70). The minimum rental payments to be made in future in respect of these leases are as follows:

Note 2: Derivative instruments and un-hedged foreign currency exposure

The Company enters into forward foreign exchange contracts where the counter party is a bank. The Company purchases forward foreign exchange contracts to mitigate the risks of change in foreign exchange rate on receivables denominated in certain foreign currencies. The Company considers the risk of non-performance by the counter party as non-material. As at March 31, 2012 the Company has following outstanding derivative instrument:

Note 3: Share based compensation/payments

a) Employee Stock Purchase Scheme ('ESPS')

The Company has adopted the ESPS administered through a Trust ("the Trust") to provide equity based incentives to key employees of the Company. As per the scheme, the Trust can purchase shares of the Company from market using the proceeds of loans obtained from the Company. Such shares are allocated by the Trust to nominated employees at an exercise price, which approximates the fair value on the date of the grant. The shares vest in the employees over a period of five years and the employees can purchase the shares from the Trust over a period of ten years based on continued employment, until which, the Trust holds the shares for the benefit of the employees. The employees are entitled to receive dividends, bonus, etc., that may be declared by the Company from time to time for the entire portion of shares held by the Trust on behalf of the employees.

On the acceptance of the offer, the selected employee undertakes to purchase the shares from the Trust within ten years from the date of acceptance of the offer. In case an employee resigns from employment, the rights relating to vested shares, which are eligible for exercise, may be purchased by the employee by payment of the exercise price whereas, the balance shares are forfeited in favor of the Trust. The Trustees have the right of recourse against the employees for any amounts that may remain unpaid on the shares accepted by them. As of the Balance Sheet date, the Trust has repaid the entire loan obtained from the Company on receipt of payments from employees against shares exercised.

The Securities and Exchange Board of India ('SEBI’) has issued the Employee Stock Option Scheme and Stock Purchase Guidelines, 1999 ('SEBI guidelines’), which are applicable to stock purchase schemes for employees of all Indian listed companies. In accordance with these guidelines, the excess of market price of the underlying equity shares on the date of grant of the stock options over the exercise price of the options is to be recognized in the books of account and amortized over the vesting period. However, no compensation cost has been recorded as the scheme terms are fixed and the exercise price equals the market price of the underlying stock on the grant date.

b) Employee Stock Option Plan ('ESOP')

Pursuant to ESOP scheme approved by the shareholders of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme ("Scheme 2002") for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619.000 options at various dates after IPO (including the grants of options out of options forfeited earlier).

On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme ("Scheme 2010") for issue of 618.000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).

Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme ("Scheme 2011") for issue of 5,100,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2011, the Company has granted 640,500 options till March 31, 2012.

As per the above schemes, each of 20% of the total options granted will vest to the eligible employees and directors on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of option.

The expected volatility was determined based on historical volatility data; historical volatility includes early years of the Company’s life; the Company expects the volatility of its share price to reduce as it matures.

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government bonds consistent with the currency and estimated term of the post employment benefits obligations. Plan assets are administered by the LIC and invested in lower risk assets, primarily debt securities. The Company’s contribution to the fund for the year ending March 31, 2013 is expected to be Rs 75.00.

Note 4: Segment information

Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.

The Company is organized by business segment and geographically. For management purposes the Company is primarily organized on a worldwide basis into two business segments:

a) Product licenses and related activities ("Products") and

b) IT solutions and consulting services ("Services").

The business segments are the basis on which the Company reports its primary operational information to management. Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.

Segment revenue and expense:

Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services. The expenses which are not directly attributable to a business segment are classified as unallowable expenses.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of debtors, net of allowances, unbilled revenue, deposits for premises and fixed assets. Segment liabilities primarily includes deferred revenues, advance from customer, accrued employee cost and other current liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown as part of unallowable assets and liabilities.

Note:

1. Remuneration includes salary, bonus and perquisites. The bonus is included on payment basis. As the liabilities for gratuity and compensated absence are provided on an actuarial basis for the Company as a whole, the amounts pertaining to individual KMP are not included above. During the year 30,000 options under the Scheme 2011 (March 31, 2011 - 60,000 options under the Scheme 2002 and 10,600 options under the Scheme 2010) were granted to KMP.

2. Loan given to subsidiaries represents loan to Oracle Financial Services Software America, Inc. amounting to Rs 511.22 (interest LIBOR 50 basis points) as at March 31, 2012 (March 31, 2011 - Rs 446.14) and ISP Internet Mauritius Company amounting to Rs 48.56 (interest LIBOR 50 basis points) as at March 31, 2012 (March 31, 2011 - Rs 42.38). No additional loans have been given during the year. The amount shown above is towards the revaluation impact of the outstanding loans.

3. During the year ended March 31, 2011, the Company had signed a settlement agreement with Oracle (OFSS) BPO Services Limited while repaying Rs 200.00 along with an interest waiver on the same. Further to this, the outstanding amount as on March 31, 2011 will be repaid in 10 equal annual installments.

Note 5: Investments in wholly owned subsidiaries

(a) As at March 31, 2012, the Company has total investment of Rs 6,291.74 in Oracle Financial Services Software America, Inc. ('OAI'). Further, the Company has loan outstanding of Rs 511.22 to OAI. OAI is the holding company for US operations and has acquired companies in earlier years. On a consolidated basis, OAI along with subsidiaries ("OAI Group") has accumulated losses of Rs 520.66 as at March 31, 2012. The OAI Group has posted a profit of Rs 464.16 for the year ended March 31, 2012. Based on the assessment of the estimated future cash flows from the US operations and the results of the current year, the management of the Company believes that no provision is required towards diminution in the value of investment in OAI as at March 31, 2012.

(b) As at March 31, 2012, the Company has total investment of Rs 192.12 in ISP Internet Mauritius Company ('ISP') which is the holding company of Oracle (OFSS) BPO Services Inc., US and Oracle (OFSS) BPO Services Limited, India, entities operating in business of Business Process Outsourcing (BPO). Further, the Company has an outstanding loan of Rs 48.56 from ISP and Rs 200.00 from Oracle (OFSS) BPO Services Limited as at March 31, 2012. On a consolidated basis, ISP and its subsidiaries ("ISP Group") have accumulated losses amounting to Rs 226.08 as at March 31, 2012. However ISP Group has posted a profit of Rs 47.73 for the year ended March 31, 2012. Accordingly, the Company believes that Rs 120.00 recorded as diminution in value of investment in earlier year is appropriate and no further diminution in value is considered necessary as at the balance sheet date.

Note 6:

Till the year ended March 31, 2011, the Company was using pre-revised Schedule VI to the Companies Act 1956, for preparation and presentation of its financial statements. During the year ended 31 March 2012, the revised Schedule VI notified under the Companies Act 1956, has become applicable to the Company. The Company has reclassified previous year figures to conform to this year’s classification.

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Mar 31, 2010

1. Background and nature of operations

Oracle Financial Services Software Limited ("the Company") was incorporated in India with limited liability on September 27, 1989- Oracle Financial Services Software Limited is a subsidiary of Oracle Global (Mauritius) Limited holding 80.47% ownership interest in the Company as at March 31, 2010.

The Company is principally engaged in the business of providing information technology solutions to the financial services industry worldwide. Oracle Financial Services Software Limited has a suite of banking products, which caters to the needs of corporate, retail, investment banking, treasury operations and data warehousing.

2. Commitments and contingent liabilities

a. Capital commitments

Contracts remaining to be executed on capital account and not provided for (net of advances) aggregates to Rs. 1,957,451 (includes capital commitment through issuance of letter of intents of Rs. 979,350 (March 31, 2009-Rs. 260,505) as at March 31, 2010 (March 31, 2009-Rs. 1,419,990).

b. Contingent liabilities

Disputed liability in respect of Income-tax demands as at March 31, 2010 Rs. Nil (March 31, 2009-Rs. 285,638).

3. Share-based compensation/payments

a. Employee Stock Purchase Scheme (ESPS)

The Company has adopted the ESPS administered through a Trust ("the Trust") to provide equity based incentives to key employees of the Company. The Trust purchases shares of the Company from market using the proceeds of loans obtained from the Company. Such shares are offered by the Trust to employees at an exercise price, which approximates the fair value on the date of the grant. The employees can purchase the shares in a phased manner over a period of five years based on continued employment, until which, the Trust holds the shares for the benefit of the employee. The employee will be entitled to receive dividends, bonus, etc., that may be declared by the Company from time to time for the entire portion of shares held by the Trust on behalf of the employees.

On the acceptance of the offer, the selected employee shall undertake to pay within ten years from the date of acceptance of the offer the cost of the shares incurred by the Trust including repayment of the loan relatable thereto. The repayment of the loan by the Trust to the Company would be dependent on employee repaying the amount to the Trust. In case the employee resigns from employment, the rights relating to shares, which are eligible for exercise, may be purchased by payment of the exercise price whereas, the balance shares shall be forfeited in favor of the Trust. The Trustees have the right of recourse against the employee for any amounts that may remain unpaid on the shares accepted by the employee. The shares that an employee is eligible to exercise during the initial five-year period merely go to determine the amount and scheduling of the loan to be repaid on exercise by the employee. The Trust shall repay the loan obtained from the Company on receipt of payments from employees against shares exercised or otherwise.

The Securities and Exchange Board of India (SEBI) has issued the Employee Stock Option Scheme and Stock Purchase Guidelines, 1999 (SEBI guidelines), which are applicable to stock purchase schemes for employees of all listed Companies. In accordance with these guidelines, the excess of market price of the underlying equity shares on the date of grant of the stock options over the exercise price of the options is to be recognized in the books of account and amortized over the vesting period. However, no compensation cost has been recorded as the scheme terms are fixed and the exercise price equals the market price of the underlying stock on the grant date.

b. Employee Stock Option Plan (ESOP)

Pursuant Co ESOP scheme approved by the shareholders of the Company held on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme (the Scheme) for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme, the Company has granted 4,548,920 options prior to the IPO and 559,000 options at various dates after IPO. As per the scheme, each of 20% of the total options granted will vest to the eligible employees and directors on completion of 12, 24, 36, 48 and 60 months and is subject to continued employment of the employee or director with the company or its subsidiaries. Options have exercise period of 10 years. The employee pays the exercise price upon exercise of option.

8. Segment information

Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.

The Company is organized by business segment and geographically. For management purposes the Company is primarily organized on a worldwide basis into two business segments:

a. Product licenses and related activities (Products) and

b. IT solutions and consulting services (Services).

The business segments are the basis on which the Company reports its primary operational information to management. Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.

Segment revenue and expense:

Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services. The expenses which are not directly attributable to a business segment are classified as unallocated corporate expenses and shown under corporate in the segment disclosure above.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of debtors, net of allowances, unbilled revenue, deposits for premises and fixed assets. Segment liabilities primarily includes deferred revenues, finance lease obligation, advance from customer, accrued employee cost and other current liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown as part of corporate assets and liabilities.

4. Investments in wholly owned subsidiaries

a. As at March 31, 2010, the Company has total investment of Rs. 6,291,743 in Oracle Financial Services Software America, Inc. (OAI). Further, the Company has loan outstanding of Rs. 450,910 toOAI. OAI is the holding company for US operations and has acquired Companies in earlier years. On a consolidated basis, OAI along with subsidiaries (OAI Group) has accumulated losses of Rs. 1,434,248 as at March 31, 2010. The OAI Group has posted a profit of Rs. 222,562 for the year ended March 31, 2010. Based on the assessment of the estimated future cash flows from the US operations and the results of the current year, the management of the Company believes that no provision is required towards diminution in the value of investment in OAI as at March 31,2010.

b. As at March 31, 2010, the Company has total investment of Rs. 192,115 in ISP Internet Mauritius Company (ISP) which is the holding company of i-flex Processing Services Inc, US and Oracle (OFSS) BPO Services Limited, India, entities operating in business of Business Process Outsourcing (BPO). The Company has further granted a loan of Rs. 42,832 to ISP and Rs. 500,000 to Oracle (OFSS) BPO Services Limited. On a consolidated basis, ISP and its subsidiaries (ISP Group) have accumulated losses amounting to Rs. 30,230 as at March 31, 2010. However ISP Group has posted a profit of Rs. 134,077 for the year ended March 31, 2010. Accordingly, the Company believes that Rs. 120,000 recorded as diminution in value of investment in previous year is appropriate and no further diminution in value is considered necessary as at the balance sheet date.

5. Selling and marketing expenses of product segment for the current year include reversal of referral fee provisions amounting to Rs. 184,476 based on a settlement agreement entered with a distributor.

6. The Company has settled a dispute with a party for Rs. 468,900 for full release of all alleged claims and has disclosed the same as an exceptional item in the financial results for the year ended March 31, 2009.

7. Prior year amounts have been reclassified, where necessary to conform with current years presentation.