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Notes to Accounts of Oracle Financial Services Software Ltd.

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.


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.


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.


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.


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.


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.

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