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Notes to Accounts of SIS Ltd.
Mar 31, 2025
During the year ended March 31, 2025, the Board of Directors of the Company, at its meeting held on March 25, 2025, has approved the proposal for buy-back of fully paid up equity shares up to 37,12,871 equity shares of face value of H 5/- each of the Company for an aggregate amount not exceeding H 1,500 million, being 2.57% of the total paid up equity share capital of the Company as on March 21, 2025, at H 404 per equity share in accordance with the provisions of the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018, as amended and the Companies Act, 2013, as amended. The Buyback is subject to the approval of the shareholders by means of a special resolution through a postal ballot.
During the year ended March 31, 2024, pursuant to the approval of the Board of Directors of the Company, at its meeting held on November 30, 2023, the Company offered 1,636,363 equity shares of face value of H 5 each for buyback to all eligible shareholders, through the tender offer process, for an aggregate amount not exceeding 900 million, equivalent to 1.12% of the total paid up equity share capital of the Company as on November 24, 2023, at H 550 per equity share, in accordance with the provisions of the Security and Exchange Board of India (Buy-back of Securities) Regulations 2018, as amended and the Companies Act, 2013, as amended. The said shares bought back through the tender offer process and were extinguished on January 05, 2024. The Company funded the buyback from its free reserves as required under the said regulations. Consequently, 1,636,363 equity shares of face value of H 5 each were extinguished by appropriating a sum of H 891.82 million from the securities premium and an amount of H 8.18 million, equivalent to the nominal value of the Equity Shares bought back through the buyback have been transferred to the capital redemption reserve account.
During the year ended March 31, 2023, pursuant to the approval of the Board of Directors of the Company, at its meeting held on June 29, 2022, and the shareholders, by way of a special resolution through postal ballot, on August 12, 2022, the Company offered 1,454,545 equity shares of face value of H 5 each for buyback for buyback to all eligible shareholders, through the tender offer process, for an aggregate amount not exceeding 800 million, equivalent 0.99% of the total paid up equity share capital of the Company as on March 31, 2022, at H 550 per equity share, in accordance with the provisions of the Security and Exchange Board of India (Buy-back of Securities) Regulations 2018, as amended and the Companies Act, 2013, as amended. The said share bought back through the tender offer process was completed on November 11, 2022. The Company funded the buyback from its free reserves as required under the said regulations. Consequently, 1,454,545 equity shares of face value of H 5 each were extinguished by appropriating a sum of H 792.73 million from the securities premium and an amount of H 7.27 million, equivalent to the nominal value of the Equity Shares bought back through the buyback have been transferred to the capital redemption reserve account.
During the year ended March 31, 2022, pursuant to the approval of the Board of Directors of the Company, at its meeting held on February 15, 2021, and the shareholders, by way of a special resolution through postal ballot, on March 20, 2021, the Company offered 1,818,181 equity shares of face value of H 5 each for buyback for buyback to all eligible shareholders, through the tender offer process, for an aggregate amount not exceeding 1,000 million, equivalent 1.24% of the total paid up equity share capital of the Company as on March 31,2020, at H 550 per equity share, in accordance with the provisions of the Security and Exchange Board of India (Buy-back of Securities) Regulations 2018, as amended and the Companies Act, 2013, as amended. The said share bought back through the tender offer process was completed on June 21, 2021. The Company funded the buyback from its free reserves as required under the said regulations. Consequently, 1,818,181 equity shares of face value of H 5 each were extinguished by appropriating a sum of H 990.91 million from the securities premium and an amount of H 9.09 million, equivalent to the nominal value of the Equity Shares bought back through the buyback have been transferred to the capital redemption reserve account.
Notes (pre share sub-division effect i.e. face value of E 10 per share):
a. 2,210,500 and 62,457,240 equity shares were allotted as fully paid Bonus Shares by capitalization of general reserve during the year ended March 31, 2006 and March 31, 2017 respectively.
b. Mr. Uday Singh was the holder of 79,000 unpaid shares in SIS International Holdings Ltd., a wholly owned subsidiary. In terms of a letter dated December 1,2009, Mr. Singh had the option to exchange these shares for shares of the Company in a manner reflecting the fair value of these shares, reduced by the amounts unpaid on them. Subsequently, in lieu of these shares and suitably adjusted for amounts unpaid thereon, Mr. Singh was allotted 40,565 Equity Shares during the year ended March 31,2017, at a ratio as determined in accordance with a valuation report prepared by a SEBI registered merchant banker.
c. During the year ended March 31,2018, the Company completed an Initial Public Offering (IPO) of its shares consisting of a fresh offer of 4,444,785 equity shares of H 10 each at a premium of H 805 per share and an offer for sale of 5,120,619 equity shares of H 10 each by the selling shareholders. The proceeds of the fresh offer component from the IPO amounted to H 3,410.47 (million) (net of issue expenses). The equity shares of the Company were listed on NSE and BSE effective August 10, 2017.
The Company declares and pays dividends in Indian Rupees. According to the Companies Act, 2013 any dividend should be declared only out of accumulated distributable profits. A Company may, before the declaration of any dividend, transfer a percentage of its profits for that financial year, as it may consider appropriate, to the reserves.
The Board, at its meeting dated May 01, 2025, has not proposed final dividend for the year ended March 31, 2025 (March 31, 2024: H Nil per share).
Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of H 5 per share. Each holder of equity shares is entitled to one vote per share and to participate in dividends in proportion to the number of and amounts paid on the shares held. The Company declares and pays dividends in Indian rupees.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the 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.
Nature and purpose of Reserves Securities Premium
Security premium is used to record the premium on issue of shares or other securities such as debentures or bonds. The reserve is utilised in accordance with the Companies Act, 2013.
The general reserve is the result of a company''s transferring a certain amount of profit from the account of retained earnings to the general reserve account. The purpose of setting up a general reserve account is to meet potential future unknown liabilities. In other words, the general reserve is a free reserve which can be utilized for any purpose after fulfilling certain conditions.
Retained earnings represent the amount of accumulated earnings of the Company and re-measurement differences on defined benefit plans.
Stock Options outstanding Account
The stock options outstanding account is used to recognize the grant date fair value of options issued to employees under the company''s employee stock option plans. The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to note 28 for further details.
As per the Companies Act, 2013, Capital redemption reserve is created when a company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares so purchased is transferred to capital redemption reserve. This reserve can be utilized in accordance with the provisions of section 69 of the Companies Act, 2013. Refer note 13 for further details.
Share application money pending allotment
Share application money pending allotment represents the exercise price received from employees of the Company against stock options on which allotment is not yet made.
Long Term Borrowings - Secured:
Bonds/Debentures:
a) On March 26, 2025, the Company successfully issued 25,000 Listed, Rated, Secured, Redeemable, Non-Convertible Debentures ("NCDs") having a face value of H 1,00,000/- (Indian Rupees One Lakh only) each, aggregating to H 2,500 million, The NCDs carry interest @ 8.50% per annum, payable Quarterly. The NCDs are secured by a pledge over a portion of the Company''s Shareholding in Dusters total solutions services private limited, a subsidiary of the Company. The debentures are redeemable 3 years after the date of issue. i.e. March 25, 2028.
Term loans:
From Banks:
b) Secured by way of exclusive charge on equipment/assets finance by lender to Company. The loan is repayable in 18 equal quarterly instalments commenced in the 4th quarter of FY 2023-24 and last installment repayment is scheduled in first quarter of FY 2028-29.
c) Secured by way of exclusive charge over the Monitoring equipment/assets purchased out of the term loan proceeds. The loan is repayable in 12 equal quarterly instalments commenced from the end of the fourth quarter of FY 2021-22 and has been fully repaid during the FY 2024-25.
d) Secured by way of exclusive charge on the Monitoring equipment/assets purchased out of the term loan proceeds. The loan was repayable in 18 equal quarterly instalments commenced from the end of the 4th quarter of FY 2023-24 and last installment repayment is scheduled in first quarter of FY 2028-29.
e) Vehicle Loan from banks are secured by hypothecation of vehicles purchased against the loan taken from that Bank. The loans have various repayment schedules and the last instalment repayment is scheduled in FY 2029-30.
The term loans mentioned above except vehicle loans, carry interest at quarterly/half-yearly/year MCLR/Repo/T-Bill plus spread ranging from upto to 186 bps (March 31, 2024: upto to 315 bps). The vehicle loans carry interest from 7.10% to 9.20% per annum.
From Other Parties:
f) Secured by way of first pari-passu charge on current and non-current assets of Dusters Total Solution Services Private Limited & Uniq Security Solutions Private Limited (subsidiaries of the Company) and pledge over portion of the Company Shareholding in Dusters Total Solutions Services Private Limited. The loan has been fully prepaid during first quarter of F.Y.2025-26.
g) Secured by way of first pari-passu charge on current and movable fixed assets of Dusters Total Solutions Services Private Limited & UNIQ Security Solutions Private Limited (subsidiaries of the Company) and pledge over portion of the Company Shareholding in Dusters Total Solutions Services Private Limited. The loan has been fully prepaid during first quarter of F.Y.2025-26.
h) Vehicle Loan from other financiers are secured by hypothecation of the respective vehicle(s) purchased against the loan taken from that financier(s). The loans carry interest from 7.50% to 9.50% per annum and have various repayment schedules and last instalment repayment is scheduled in FY 2025-2026.
Long term borrowings - Unsecured:
Bonds/debentures:
i) SIS Australia Group Pty Limited, a subsidiary, has subscribed to 750 Rupee Denominated Bonds (RDBs) of face value of H 1,000,000/- each. The RDBs will constitute direct, unconditional and unsecured obligations of the Company to repay the issue price plus interest @ 8% per annum. These RDB''s shall be redeemed within 9 years (redemption due by August 2025) from the date of issue with a lock-in-period of 3 years from the date of issue and interest is payable half yearly.
Short term borrowings - Secured/Unsecured loans repayable on demand:
j) Secured by first pari-passu charges over the current assets and second pari-passu charge over movable fixed assets.
k) Secured by first pari passu charge over current assets both present and future.
l) The short-term borrowing charges are excluding assets specifically charged to term loan lenders, if any.
The loans repayable on demand mentioned above, carry interest at quarterly/half yearly/yearly MCLR/Repo rate/MIBOR/ TBILL plus spread ranging from upto 151 bps (March 31, 2024: upto 200 bps) for WCDL/Cash credit facility.
Quarterly returns or statements of current assets filed by the Company with the Banks/Financial Institutions are in agreement with the books of accounts as per the approach agreed with the lenders, as applicable.
There has been no default in the payment of interest or repayment of principal in respect of the above loans/borrowing.
Investment in equity / preference instruments: The Company''s investments consist primarily of investment in equity / preference shares of unquoted companies. Management has considered cost to be approximating to the fair value of certain investments and valued other investments using fair valuation techniques as mentioned below.
All of the resulting fair value estimates are included in Level 3 as the fair values have been determined based on present values and discount rates used are adjusted for counter party or own credit risk.
The Company has assessed that the fair value of cash and cash equivalents, trade receivables, other financial assets, trade payables, bank overdrafts, lease liabilities and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of investments, loans given and fixed rate borrowings are calculated based on fixed cash flows discounted using weighted average cost of debt as on balance sheet date and accordingly classified under level 2 fair values in the fair value hierarchy due to the use of significant observable inputs.
The finance department of the Company includes the team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. The team reports directly to the chief financial officer (CFO). Discussions of valuation processes and results are held between the CFO and the team at least once every 3 months, in line with the Company''s quarterly reporting period. External valuer''s assistance is also taken for valuation purposes where required.
The main level 3 inputs used by the Company are derived and evaluated as follows:
⢠Discounts rates are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
⢠Risk adjustments specific to the counter parties (including assumptions about credit default rates) are derived from credit risk grading determined by the Company''s internal credit risk management group.
⢠Volatility used for option pricing model is based on historical volatility of comparable companies.
⢠Contingent consideration - estimated based on expected cash outflows arising from the forecasted sales and the entities; knowledge of the business and how the current economic environment is likely to impact it.
The liability for earned and sick leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of non-billing employees at the reporting date. In determining the present value of the liability, attrition rates and pay increases through promotion and inflation have been taken into account.
(c) Defined contribution plans
The Company has certain defined contribution plans. Contributions are made to provident fund for employees at the rate of 12% of the salary (subject to a limit of H 15,000 salary per month) as per regulations. The contributions are made to a statutory provident fund administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual or constructive obligations in this regard.
Further, contributions are made in respect of Employees'' State Insurance Scheme, for specified employees, at the rate of 3.25% of the gross pay as per regulations. The contributions are towards medical benefits provided by the Government to the employees. The contributions are made to employees'' state insurance authorities administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual or constructive obligations in this regard.
Contributions to provident fund and employees'' state insurance scheme are recognised as an expense as they become payable which coincides with the period during which relevant employee services are received. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
In accordance with the Payment of Gratuity Act, 1972, the Company provides for a lump sum payment to eligible employees, at retirement or termination of employment based on the last drawn salary, years of employment with the Company subject to completion of five years of service and other conditions. The gratuity plan is a partly funded plan and the Company makes contributions to a fund administered and operated by a reputed insurance company. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
The Company has invested the 100% plan assets in the funds managed by insurance companies.
The following tables summarises the components of net benefit expense recognised in the standalone statement of profit or loss and the funded status and amounts recognised in the standalone balance sheet for the respective plans:
The present value of defined benefit obligation relates to active employees only.
The Company has no legal obligation to settle the deficit in the funded plans with an immediate contribution or additional one-off contributions. The Company intends to continue to contribute to the defined benefit plans to achieve a target level of funding to he maintained over a period of time based on estimations of expected gratuitv payments
The above sensitivity analysis is based on a change in assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected credit unit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the standalone balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year. Risk Exposure
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are market volatility, changes in inflation, changes in interest rates, rising longevity, changing economic environment and regulatory changes.
The Company has selected a suitable insurer to manage the funds in such a manner as to ensure that the investment positions are managed with an asset-liability matching framework that has been developed to achieve investments which are in line with the obligations under the employee benefit plans. Within this framework, the asset-liability matching objective is to match assets to the obligations by investing in securities to match the benefit payments as they fall due.
The insurer, on behalf of the Company, actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that failure of any single investment should not have a material impact on the overall level of assets.
(e) The Code on Wages, 2019 and the Code on Social Security, 2020 have been notified through Gazette of India after assent of Hon''ble President of India which govern, and are likely to impact, the contributions by the Company towards certain employee''s benefits. Notification of the rules of these codes are pending. The effective date of implementation of these Codes has not yet been notified and the Company will assess the impact of these codes as and when they come into effect and will provide for the appropriate impact in its financial statements in the period in which, the Code becomes effective.
The Company has Employee Stock Option plan namely ESOP 2016 as on March 31, 2025 and March 31, 2024.
a) During the year ended March 31, 2022, the Company issued 1,421,973 options to eligible employees which will vest over next four financial years and be eligible for exercise, subject to certain conditions, after June 1, 2025, except as approved otherwise. Out of such options:
(i) 243,741 options have been forfeited/lapsed till March 31, 2025
(ii) 275,581 options have been exercised up till March 31, 2025
(iii) 571,365 options have been vested and exercisable but not exercised / allotted as on March 31, 2025
b) During the year ended March 31, 2023, the Company issued a further 35,700 options to eligible employees which will vest over next three financial years and be eligible for exercise, subject to certain conditions, after June 1, 2025, except as approved otherwise. Out of such options:
(i) 21,800 options have been forfeited/lapsed on account of the respective employees no longer in employment till March 31, 2025.
(ii) 10,000 options have been exercised up till March 31, 2025.
(iii) 2,600 options have been vested and exercisable but not exercised as on March 31, 2025.
c) During the year ended March 31, 2024, the Company issued a further 10,000 options to eligible employees which will vest over next two financial years and be eligible for exercise, subject to certain conditions, after June 1, 2025, except as approved otherwise. Out of such options:
(i) No options have been forfeited/lapsed till March 31,2024.
(ii) 5,000 options have been vested and exercisable but not exercised as on March 31, 2025.
d) During the year ended March 31, 2025, the Company issued a further 1,000 options to eligible employees which will vest over next financial year and be eligible for exercise, subject to certain conditions, on or after October 5, 2025, except as approved otherwise. Out of such options:
(i) No options have been forfeited/lapsed till March 31,2025.
(ii) No options have been vested and not exercised/exercisable as on March 31, 2025
e) During the year ended March 31, 2025, Nomination and Remuneration Committee has approved the option of early exercise of vested option as on date.
f) There were no cancellation to the awards during the year ended March 31, 2025 and March 31, 2024 Options granted under the aforesaid plans carry no dividend or voting rights.
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34 COMMITMENTS AND CONTINGENCIES |
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(a) Capital commitment |
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Particulars |
March 31, 2025 |
March 31, 2024 |
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Estimated amount of contracts remaining to be executed on capital account (net of capital advances) and not provided for |
39.93 |
5.27 |
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(b) Contingent liabilities |
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Particulars |
March 31, 2025 |
March 31, 2024 |
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Cams aga mt me Company -ot ack^ow edged as debt: |
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- Litigation matters with respect to direct taxes |
148.53 |
382.17 |
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- Litigation matters with respect indirect taxes |
134.09 |
103.36 |
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Other money for which the Company is contingently liable |
8.44 |
10.11 |
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Total |
291.06 |
495.64 |
The Company is subject to various income tax proceedings arising from assessments for multiple assessment years. These primarily relate to disallowances of expenses including belated remittances of employees'' share of Provident Fund (PF) and Employees'' State Insurance (ESI) under Section 36(1)(va), disallowance u/s 14A, ESOP expenses, differences between the Return of Income and Tax Audit Report, and other disallowances under Sections 37 and 43B of the Income-tax Act, 1961. Appeals have been filed before appropriate appellate authorities including the Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal (ITAT) as applicable. Rectification applications have also been submitted in relevant cases. The Company believes that it has a valid position in these matters and the likelihood of an outflow of resources is not considered probable at this stage. Accordingly, selected provision has been made in the financial statements, and the matters have been disclosed as contingent liabilities.
The Company is subject to various indirect proceedings under Service Tax, Finance Act, 1994 and Goods and Service Tax 2017 in various states. The litigation is due to assessments and audit conducted by GST Authorities, including the cases which have been filed under appeals at different Appellate Authorities i.e. Commissioner Appeals and CESTAT. The various issues involved are due to taxability of reimbursement of expenditure, excess claim of input credit as per authorities, pre-GST credit notes issued, GST payable on SEZ locations, GST liability due to incorrect computation of GSTR1 vs GSTR3B, GSTR3B vs GSTR9.
The Company records a liability when it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. The Company reviews these provisions periodically and adjusts these provisions accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. The Company believes that the amount or estimable range of reasonably possible loss, will not, either individually or in the aggregate, have a material adverse effect on its business, financial position, results of the Company, or cash flows with respect to loss contingencies for legal and other contingencies as at March 31, 2025.
Disputed claims against the Company, including claims raised by the tax authorities and which are pending in appeal /court and for which no reliable estimate can be made of the amount of the obligation, are not provided for in the accounts. However, the present obligation, if any, as a result of past events with a possibility of outflow of resources, when reliably estimable, is recognised in the accounts as an expense as and when such obligation crystallises.
The Company is required to disclose segment information based on the ''management approach'' as defined in Ind AS 108-Operating Segments, which in how the Chief Operating Decision Maker (CODM) evaluates the Company''s performance and allocates resources based on the analysis of the various performance indicators. In the case of the Company, the CODM reviews the results of the Company as a whole as the Company is primarily engaged in the business of rendering security services in India. Accordingly, the Company is a single CGU, hence single segment Company. The information as required under Ind AS 108 is available directly from the financial statements, hence no separate disclosures have been made.
Terms and conditions of transactions with related parties
Transactions relating to dividends paid, subscription for new equity shares were on the same terms and conditions that applied to other shareholders.
The sales to, and purchases from, related parties are made on normal commercial terms and conditions and at market rates. Outstanding balances at the year-end are unsecured and carry interest equivalent to the market rate, where specified, in terms of the transactions, and settlement occurs in cash. For the year ended March 31, 2025, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (March 31, 2024: Nil). This assessment
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 currency risk and interest rate risk. Financial instruments affected by market risk include loans and borrowings, loans and deposits given, FVTOCI investments and derivative financial instruments.
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates which arises from assets and liabilities denominated in currencies other than the functional currency of the respective entities and foreign currency revenue and cash flows. The Company''s exposure to the risk of changes in foreign currency exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency) and the Company''s net investments in foreign subsidiaries. The Company has limited foreign currency transactions and has limited exposure to foreign currency assets and liabilities resulting in the foreign currency risk being low.
The exchange rate between the Indian Rupee and foreign currencies has fluctuated in recent years and may continue to do so in the future. Consequently, the results of the Company''s operations may be affected as the Indian Rupee appreciates/ depreciates against these currencies.
The Company''s principal financial liabilities, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to support the financing of the operations of its subsidiaries, joint ventures and associates. The Company''s principal financial assets include trade and other receivables, cash and cash equivalents that derive directly from its operations, loans, security and other deposits.
The Company''s operations expose it to market risk, credit risk and liquidity risk. The Company''s focus is to reduce volatility in financial statements while maintaining balance between providing predictability in the Company''s business plan along with reasonable participation in market movement. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken.
Interest rate risk
Interest rate risk primarily arises from floating rate borrowing, including various revolving and other lines of credit. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The exposure of the Company''s borrowing to interest rate changes at the end of the reporting period are as follows:
Credit risk arises from the possibility that counterparties may not be able to settle their obligations as agreed resulting in a financial loss. The primary exposure to credit risk arises from Trade receivables and Unbilled revenue (refer note 11 & 7 respectively). These are unsecured and are managed by the Company through a system of periodically assessing the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivables. There is no customer accounted for more than 10% of the accounts receivable as of March 31, 2025 (March 31, 2024: single customer). There is no significant concentration of credit risk. The Company uses the expected credit loss (''ECL'') method to assess the loss allowance for Trade receivables and Unbilled revenue taking into account primarily the historical trends and analysis of bad debts. The Company does not expect any credit risk or impairment in respect of amounts lent to its subsidiaries, associates and joint ventures, if any.
The credit risk for financial assets other than bank balances and trade receivables are considered low.
Significant estimates and judgements Impairment of financial assets
The impairment provision for financial assets disclosed above are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company''s past history and existing market conditions. The Company estimates loss arising on trade receivables as a percentage of sales based on past trends and such loss is directly debited to revenue instead of creating a provision for impairment of receivables.
Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Company''s treasury department in accordance with the Company''s policy. Surplus funds are invested in bank fixed deposits or used to temporarily reduce the balance of cash credit accounts to optimize interest costs.
Liquidity risk is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities. The Company consistently generates sufficient cash flows from operations and has access to multiple sources of funding to meet its financial obligations and maintain adequate liquidity for use.
40 FINANCIAL RISK MANAGEMENT (CONTD.)
The Company''s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, debentures, shareholder equity, and finance leases.
The Company has assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and significant portion of short-term debt maturing within 12 months can be rolled over with existing lenders. The Company believes that it has sufficient working capital and cash accruals to meet its business requirements and other obligations.
The table below summarises the maturity profile of the Company''s financial liabilities based on contractual undiscounted payments.
4l| ADDITIONAL CAPITAL DISCLOSURES
For the purpose of the Company''s capital management, capital includes issued equity capital, share premium, all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to maximise shareholder value and support its strategies and operating requirements. The key objective of the Company''s capital management is to ensure that it maintains a stable capital structure with a focus on total equity to uphold investor, creditor, and customer confidence and to ensure future development of its business. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements for the Company''s operations are generally met through operating cash flows generated and supplemented by long-term and working capital borrowings from banks.
The Company''s objectives when managing capital are to:
a) safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and
b) Maintain an optimal capital structure to optimise the cost of capital.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants to which it is subject. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a ratio, which is Net Debt divided by EBITDA. The Company defines Net Debt as borrowings and lease liabilities less cash and cash equivalents including bank balances and deposits irrespective of their duration / maturity.
Mar 31, 2023
During the year ended March 31, 2023, pursuant to the approval of the Board of Directors of the Company, at its meeting held on June 29, 2022, and the shareholders, by way of a special resolution through postal ballot, on August 12, 2022, 1,454,545 equity shares of face value of H 5 each of the Company were offered for buyback by the Company to all eligible shareholders, through the tender offer process, for an aggregate amount not exceeding H 800 Million, being 0.99% of the total paid up equity share capital of the Company as on March 31, 2022, at H 550 per equity share, as per the provisions of the Security and Exchange Board of India (Buyback of Securities) Regulations 2018, as amended and the Companies Act, as amended. The said buyback through the tender offer process was completed on November 11, 2022. The Company has funded the buyback from its free reserves as required under the said regulations. As a result of the buyback, 1,454,545 equity shares of face value of H 5 each were extinguished by appropriating a sum of H 792.73 Million from the securities premium and an amount of H 7.27 Million, being a sum equal to the nominal value of the Equity Shares bought back through the buyback have been transferred to the capital redemption reserve account.
During the year ended March 31, 2022, pursuant to the approval of the Board of Directors of the Company, at its meeting held on February 15, 2021, and the shareholders, by way of a special resolution through postal ballot, on March 20, 2021, 1,818,181 equity shares of face value of H 5 each of the Company were offered for buyback by the Company to all eligible shareholders of the Company, through the tender offer process, for an aggregate amount not exceeding 1,000 Million, being 1.24% of the total paid up equity share capital of the Company as on March 31, 2020, at H 550 per equity share, per the provisions of the Security and Exchange Board of India (Buy-back of Securities) Regulations 2018, as amended and the Companies Act, as amended. The said buyback through the tender offer process was completed on
June 21, 2021. The Company has funded the buyback from its free reserves as required under the said regulations. As a result of the buyback, 1,818,181 equity shares of face value of H 5 each were extinguished by appropriating a sum of H 990.91 Million from the securities premium and an amount of H 9.09 Million, being a sum equal to the nominal value of the Equity Shares bought back through the Buyback have been transferred to the capital redemption reserve account.
Notes (pre share sub-division effect):
a) 2,210,500 and 62,457,240 equity shares were allotted as fully paid Bonus Shares by capitalization of general reserve during the year ended March 31, 2006 and March 31, 2017 respectively.
b) Mr. Uday Singh was the holder of 79,000 unpaid shares in SIS International Holdings Ltd., a wholly-owned subsidiary. In terms of a letter dated December 01, 2009, Mr. Singh had the option to exchange these shares for shares of the Company in a manner reflecting the fair value of these shares, reduced by the amounts unpaid on them. Subsequently, in lieu of these shares and suitably adjusted for amounts unpaid thereon, Mr. Singh was allotted 40,565 Equity Shares during the year ended March 31, 2017, at a ratio as determined in accordance with a valuation report prepared by a SEBI registered merchant banker.
c) During the year ended March 31, 2018, the Company completed an Initial Public Offering (IPO) of its shares consisting of a fresh offer of 4,444,785 equity shares of H 10 each at a premium of H 805 per share and an offer for sale of 5,120,619 equity shares of H 10 each by the selling shareholders. The proceeds of the fresh offer component from the IPO amounted to H 3,410.47 (Million) (net of issue expenses). The equity shares of the Company were listed on NSE and BSE effective August 10, 2017.
Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of H 5 per share. Each holder of equity shares is entitled to one vote per share and to participate in dividends in proportion to the number of and amounts paid on the shares held. The Company declares and pays dividends in Indian rupees.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the 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.
Nature and purpose of Reserves Securities Premium
Security premium is used to record the premium on issue of shares or other securities such as debentures or bonds. The reserve is utilized in accordance with the Companies Act, 2013.
The general reserve is the result of a company''s transferring a certain amount of profit from the account of retained earnings to the general reserve account. The purpose of setting up a general reserve account is to meet potential future unknown liabilities. In other words, the general reserve is a free reserve which can be utilized for any purpose after fulfilling certain conditions.
Retained earnings represents the amount of accumulated earnings of the Company and re-measurement differences on defined benefit plans.
Stock Options outstanding Account
The stock options outstanding account is used to recognize the grant date fair value of options issued to employees under the Company''s'' employee stock option plans. The share-based payment reserve is used to recognize the
value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to note 28 for further details.
Debenture redemption reserve
Pursuant to the provisions of the Act, the Company is required to create debenture redemption reserve out of the profits which is to be utilized for the purpose of redemption of debentures. On redemption of the debentures, the related amount of this reserve will be transferred to retained earnings.
Capital redemption reserve
As per the Companies Act, 2013, Capital redemption reserve is created when a company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares so purchased is transferred to capital redemption reserve. This reserve can be utilized in accordance with the provisions of Section 69 of the Companies Act, 2013.
Share application money pending allotment
Share application money pending allotment represents the exercise price received from employees of the Company against stock options on which allotment is not yet made.
Long-Term Borrowings - Secured:
Bonds/debentures:
a) i) ICICI Prudential Assets Management Company
Limited has subscribed to 1,900 non-convertible debentures (NCDs) of H 1,000,000/- each on March 30, 2021. The NCDs carried interest @ 7.90% per annum, payable annually. The NCDs were secured against 85.68% shareholding in Dusters total solutions services private limited, a subsidiary of the Company. The debentures were redeemable after 2 years from the date of issue. i.e., March 30, 2023. During the year ended March 31, 2023, NCDs has been repaid on maturity.
Term loans:
From Banks:
b) Secured by way of first charge on the movable fixed assets of the Company purchased out of the term loan proceeds and second parri passu charge on receivables/ current assets of the Company both present and future. The loan is repayable in 18 equal quarterly instalments commenced from the end of the 1st quarter of FY 201920 after the end of moratorium Period of six months and last installment repayment is scheduled in fourth quarter of FY 2023-24.
c) Secured by way of first charge on the Monitoring equipment purchased out of the term loan proceeds. The loan is repayable in 12 equal quarterly instalments commenced from the end of the fourth quarter of FY 2021-22 and last installment repayment is scheduled in third quarter of FY 2024- 25.
d) Vehicle Loan from banks are secured by hypothecation of vehicles purchased against the loan taken from that Bank. The loans have various repayment schedules and last instalment repayment is scheduled in FY 2028-29.
The terms loans mentioned above except vehicle loans,
carry interest at quarterly/ half-yearly/ year MCLR/ Mibor/
15. Borrowing''s (Contd.)
per annum. These RDB''s shall be redeemed within 9 years (redemption due by August, 2025) from the date of issue with a lock-in-period of 3 years from the date of issue and interest is payable half yearly.
Being a fixed interest instrument, Transfer pricing (TP) compliance has already been done for this transaction under fixed interest agreement and it is within allowed premises for TP compliance.
Short-term borrowings - Secured/Unsecured loans repayable on demand:
i) Secured by first pari passu charges over the current assets and immovable fixed assets and second pari passu charge over movable fixed assets.
j) Secured by first pari passu charges over the current assets and movable fixed assets (both present and
Repo plus spread margin ranging from 75 bps to 315 bps
(March 31, 2022: 75 bps to 315 bps). The vehicle loans carry
interest from 7.10% to 9.75% per annum.
e) Secured by way of first pari passu charge on current and non-current assets of Dusters Total Solution Services Private Limited & Uniq Security Solutions Private Limited (subsidiaries of the Company) and 13% pledge of shares of Dusters Total Solutions Services Private Limited. The loan is repayable on 5 semi-annual equal instalment commenced from the end of fourth quarter of FY 2024-25 after the moratorium of 1.5 years and last payment of repayment is scheduled on fourth quarter of FY 2026-27.
f) Secured by way of first pari passu charge on current and movable fixed assets of Dusters Total Solutions Services Private Limited & UNIQ Security Solutions Private Limited (subsidiaries of the Company) and 13% pledge of shares of Dusters Total Solutions Services Private Limited. The loan is repayable on 8 equal quarterly instalment commenced from the end of first quarter of FY 2024-25 after the moratorium of 1 year and last payment of repayment is scheduled on fourth quarter of FY 2025-26.
g) Vehicle Loan from other financiers are secured by hypothecation of the respective vehicle(s) purchased against the loan taken from that financier(s). The loans carry interest from 7.50% to 10.50% per annum and have various repayment schedules and last instalment repayment is scheduled in FY 2025-2026.
Long-term borrowings - Unsecured:Bonds/debentures:
h) SIS Australia Group Pty. Limited, a subsidiary, has subscribed to 750 Rupee Denominated Bonds (RDBs) of face value of H 1,000,000/- each. The RDBs will constitute direct, unconditional and unsecured obligations of the Company to repay the issue price plus interest @ 8%
future) of the Company and second pari passu charge is with other working capital lenders.
k) Secured by first pari passu charge over current assets both present and future.
l) The short-term borrowing charges are excluding assets specifically charged to term loan lenders, if any.
The loans repayable on demand mentioned above, carry interest at quarterly/ half yearly/ yearly MCLR/ Repo rate/ MIBOR/ TBILL plus spread margin ranging from 25 bps to 125 bps (March 31, 2022: 25 bps to 60 bps) for cash credit facility and ranging from 7.40% p.a. to 7.90% p.a. for WCDL facilities (March 31, 2022: 4.30% p.a. to 4.60% p.a.).
There has been no default in the payment of interest or repayment of principal in respect of the above loans/ borrowings.
Investment in equity / preference instruments: The Company''s investments consist primarily of investment in equity / preference shares of unquoted companies. Management has considered the cost to be approximating to fair value of such investments.
All of the resulting fair value estimates are included in Level 3 as the fair values have been determined based on present values and discount rates used are adjusted for counter party or own credit risk.
The Company has assessed that the fair value of cash and cash equivalents, trade receivables, other financial assets, trade payables, bank overdrafts, lease liabilities and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of investments, loans given and fixed rate borrowings are calculated based on fixed cash flows discounted using weighted average cost of debt as on balance sheet date and accordingly classified under level 2 fair values in the fair value hierarchy due to the use of significant observable inputs.
The finance department of the Company includes the team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. The team reports directly to the chief financial officer (CFO). Discussions of valuation processes and results are held between the CFO and the valuation team at least once every 3 months, in line with the Company''s quarterly reporting period. External valuer''s assistance is also taken for valuation purposes where required.
The main level 3 inputs used by the Company are derived and evaluated as follows:
⢠Discount rates are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
⢠Risk adjustments specific to the counter parties (including assumptions about credit default rates) are derived from credit risk grading determined by the Company''s internal credit risk management group.
⢠Volatility used for option pricing model is based on historical volatility of comparable companies.
⢠Contingent consideration - estimated based on expected cash outflows arising from the forecasted sales and the entities; knowledge of the business and how the current economic environment is likely to impact it.
The Company is availing of benefits under a government scheme - Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) wherein the Central Government is paying the employer''s contribution towards Employee Pension Scheme/Provident Fund in respect of new employees joined till March 31, 2019 meeting specified criteria. The grant is paid by the Government on a monthly basis in the first three years of employment of eligible new employees on fulfilment of certain conditions. Accordingly, such Government Grant is taken to profit or loss when the conditions are met.
The liability for earned and sick leave is recognized and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, attrition rates and pay increases through promotion and inflation have been taken into account.
(c) Defined contribution plans
The Company has certain defined contribution plans. Contributions are made to provident fund for employees at the rate of 12% of the salary (subject to a limit of H 15,000 salary per month) as per regulations. The contributions are made to a statutory provident fund administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual or constructive obligations in this regard.
Further, contributions are made in respect of Employees'' State Insurance Scheme, for specified employees, at the rate of 3.25% of the gross pay as per regulations. The contributions are towards medical benefits provided by the Government to the employees. The contributions are made to employees'' state insurance authorities administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual or constructive obligations in this regard.
Contributions to provident fund and employees'' state insurance scheme are recognized as an expense as they become payable which coincides with the period during which relevant employee services are received. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
In accordance with the Payment of Gratuity Act, 1972, the Company provides for a lump sum payment to eligible employees, at retirement or termination of employment based on the last drawn salary, years of employment with the Company subject to completion of five years of service and other conditions. The gratuity plan is a partly funded plan and the Company makes contributions to a fund administered and operated by a reputed insurance company. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
The Company has invested the 100% plan assets in the funds managed by insurance companies.
The following tables summarizes the components of net benefit expense recognized in the statement of profit or loss and the funded status and amounts recognized in the balance sheet for the respective plans:
The Company has no legal obligation to settle the deficit in the funded plans with an immediate contribution or additional one-off contributions. The Company intends to continue to contribute to the defined benefit plans to achieve a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
The above sensitivity analysis is based on a change in assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected credit unit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognized in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are market volatility, changes in inflation, changes in interest rates, rising longevity, changing economic environment and regulatory changes.
The Company has selected a suitable insurer to manage the funds in such a manner as to ensure that the investment positions are managed with an asset- liability matching framework that has been developed to achieve investments which are in line with the obligations under the employee benefit plans. Within this framework, the asset-liability matching objective is to match assets to the obligations by investing in securities to match the benefit payments as they fall due.
The insurer, on behalf of the Company, actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that failure of any single investment should not have a material impact on the overall level of assets.
The Company has two Employee Stock Option plans namely ESOP 2008 and ESOP 2016.
ESOP 2008 (pre share sub-division effect)
(a) Under ESOP 2008, the Company has granted 59,000 options, 30,000 Options, 30,500 Options, 3,500 options and 2,096 options in the financial year ended 2008, 2011, 2014, 2015 and 2016, respectively. All such granted options, have been either exercised or lapsed in accordance with the terms of the respective plan.
(b) All options under ESOP 2008 will now be governed by the terms of ESOP 2016 except in respect of vesting and exercise which will still be governed by the terms mentioned in the respective grant letters.
(c) The Options issued under ESOP 2008 will be adjusted for the bonus issue of ten equity shares for every equity share held as on September 20, 2016, as and when such options are exercised.
ESOP 2016 (post share sub-division effect)
(a) Under ESOP 2016, the Company has granted 2,432,000 options, 64,830 options, 21,000 options in the financial year 2016, 2018 and 2019, respectively. All such options granted, have been either exercised or lapsed in accordance with the terms of the respective plan as on March 31, 2023.
(b) During the year ended March 31, 2022, the Company issued a further 1,421,973 options to eligible employees which will vest over next four financial years and be eligible for exercise, subject to certain conditions, after June 01, 2025. Out of such options:
i. 116,486 options have been forfeited/lapsed till March 31, 2023.
ii. 11,199 options have been exercised uptil March 31, 2023.
iii. 258,858 options have been vested and not exercised/exercisable as on March 31, 2023.
(c) During the year ended March 31, 2023, the Company issued a further 35,700 options to eligible employees which will vest over next three financial years and be eligible for exercise, subject to certain conditions, after June 01, 2025. Out of such options:
i. 1,800 options have been forfeited/lapsed on account of the respective employees no longer in employment.
ii. No options have been vested and not exercised/exercisable as on March 31, 2023.
Options granted under the aforesaid plans carry no dividend or voting rights.
(e) The Code on Wages, 2019 and the Code on Social Security, 2020 have been notified through Gazette of India after assent of Hon''ble President of India which govern, and are likely to impact, the contributions by the Company towards certain employee''s benefits. Notification of the rules of these codes are pending. The effective date of implementation of these Codes has not yet been notified and the Company will assess the impact of these codes as and when they come into effect and will provide for the appropriate impact in its financial statements in the period in which, the Code becomes effective.
The Company records a liability when it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. The Company reviews these provisions periodically and adjusts these provisions accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. The Company believes that the amount or estimable range of reasonably possible loss, will not, either individually or in the aggregate, have a material adverse effect on its business, financial position, results of the Company, or cash flows with respect to loss contingencies for legal and other contingencies as at March 31, 2023.
Disputed claims against the Company, including claims raised by the tax authorities and which are pending in appeal / court and for which no reliable estimate can be made of the amount of the obligation, are not provided for in the accounts. However, the present obligation, if any, as a result of past events with a possibility of outflow of resources, when reliably estimable, is recognized in the accounts as an expense as and when such obligation crystallizes.
The Company is required to disclose segment information based on the ''management approach'' as defined in Ind AS 108-Operating Segments, which in how the Chief Operating Decision Maker (CODM) evaluates the Company''s performance and allocates resources based on the analysis of the various performance indicators. In the case of the Company, the CODM reviews the results of the Company as a whole as the Company is primarily engaged in the business of rendering security services in India. Accordingly, the Company is a single CGU, hence single segment Company. The information as required under Ind AS 108 is available directly from the financial statements, hence no separate disclosures have been made.
37. Business combinations and acquisition of non-controlling interests Acquisitions during the year ended March 31, 2023
(a) Acquisition of additional interest in Terminix SIS India Private Limited (''Terminix'')
During the year ended March 31, 2023, the Company acquired entire remaining shareholding of 49.99% in Terminix, subsidiary of the Company, for an aggregate consideration of H 7.77 Million which resulted in Terminix becoming a wholly-owned subsidiary of the Company.
Acquisitions during the year ended March 31, 2022
(a) Acquisition of additional interest in Uniq Security Solutions Private Limited (''Uniq'')
Effective February 01, 2019, the Company has acquired 51% of the outstanding equity shares of Uniq for an aggregate consideration of H 515.00 Million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by September 2020, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula.
During the year ended March 31, 2022, the Company acquired entire remaining shareholding of 49% in Uniq, Subsidiary of the Company, for an aggregate consideration of H 510 Million which resulted in Uniq becoming a wholly-owned subsidiary of the Company.
Terms and conditions of transactions with related parties
Transactions relating to dividends paid, subscription for new equity shares were on the same terms and conditions that applied to other shareholders.
The sales to, and purchases from, related parties are made on normal commercial terms and conditions and at market rates. Outstanding balances at the year-end are unsecured and carry interest equivalent to the market rate, where specified, in terms of the transactions, and settlement occurs in cash. For the year ended March 31,2023, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (March 31, 2022: H Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
The Company''s principal financial liabilities, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to support the financing of the operations of its subsidiaries, joint ventures and associates. The Company''s principal financial assets include trade and other receivables, cash and cash equivalents that derive directly from its operations, loans, security and other deposits.
The Company''s operations expose it to market risk, credit risk and liquidity risk. The Company''s focus is to reduce volatility in financial statements while maintaining balance between providing predictability in the Company''s business plan along with reasonable participation in market movement. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken.
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 currency risk and interest rate risk. Financial instruments affected by market risk include loans and borrowings, loans and deposits given, FVTOCI investments and derivative financial instruments.
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates which arises from assets and liabilities denominated in currencies other than the functional currency of the respective entities and foreign currency revenue and cash flows. The Company''s exposure to the risk of changes in foreign currency exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency) and the Company''s net investments in foreign subsidiaries. The Company has limited foreign currency transactions and has limited exposure to foreign currency assets and liabilities resulting in the foreign currency risk being low.
The exchange rate between the Indian Rupee and foreign currencies has fluctuated in recent years and may continue to do so in the future. Consequently, the results of the Company''s operations may be affected as the Indian Rupee appreciates/ depreciates against these currencies.
Credit risk arises from the possibility that counterparties may not be able to settle their obligations as agreed resulting in a financial Ioss. The primary exposure to credit risk arises from Trade receivables and Unbilled revenue (refer note 11 & 7 respectively). These are unsecured and are managed by the Company through a system of periodically assessing the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivables. No single customer accounted for more than 10% of the accounts receivable as of March 31, 2023 and March 31, 2022, respectively and revenues for the year ended March 31, 2023 and March 31, 2022, respectively. There is no significant concentration of credit risk. The Company uses the expected credit loss (''ECL'') method to assess the loss allowance for Trade receivables and Unbilled revenue taking into account primarily the historical trends and analysis of bad debts. The Company does not expect any credit risk or impairment in respect of amounts lent to its subsidiaries, associates and joint ventures, if any.
The credit risk for financial assets other than bank balances and trade receivables are considered Iow.
Significant estimates and judgments
Impairment of financial assets
The impairment provision for financial assets disclosed above are based on assumptions about risk of default and expected loss rates. The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on the Company''s past history and existing market conditions. The Company estimates loss arising on trade receivables as a percentage of sales based on past trends and such loss is directly debited to revenue instead of creating a provision for impairment of receivables.
Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Company''s treasury department in accordance with the Company''s policy. Surplus funds are invested in bank fixed deposits or used to temporarily reduce the balance of cash credit accounts to optimize interest costs.
Liquidity risk is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities. The Company consistently generates sufficient cash flows from operations and has access to multiple sources of funding to meet its financial obligations and maintain adequate liquidity for use.
The Company''s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, debentures, shareholder equity, and finance leases.
The Company has assessed the concentration of risk with respect to refinancing its debt and concluded it to be Iow. The Company has access to a sufficient variety of sources of funding and significant portion of short-term debt maturing within 12 months can be rolled over with existing lenders. The Company believes that it has sufficient working capital and cash accruals to meet its business requirements and other obligations.
The table below summarizes the maturity profile of the Company''s financial liabilities based on contractual undiscounted payments.
41. Additional capital disclosures
For the purpose of the Company''s capital management, capital includes issued equity capital, share premium, all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to maximize shareholder value and support its strategies and operating requirements. The key objective of the Company''s capital management is to ensure that it maintains a stable capital structure with a focus on total equity to uphold investor, creditor, and customer confidence and to ensure future development of its business. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements for the Company''s operations are generally met through operating cash flows generated and supplemented by long-term and working capital borrowings from banks.
The Company''s objectives when managing capital are to:
(a) safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and
(b) Maintain an optimal capital structure to optimize the cost of capital.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants to which it is subject. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a ratio, which is Net Debt divided by EBITDA. The Company defines Net Debt as borrowings and lease liabilities less cash and cash equivalents including bank balances and deposits irrespective of their duration/maturity.
In order to achieve this overall objective, the Company''s capital management, amongst other things, aims to ensure that it simultaneously meets financial covenants attached to its borrowings. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any borrowing in the current period.
The Company declares and pays dividends in Indian Rupees. According to the Companies Act, 2013 any dividend should be declared only out of accumulated distributable profits. A company may, before the declaration of any dividend, transfer a percentage of its profits for that financial year, as it may consider appropriate, to the reserves.
The Board, at its meeting dated May 03, 2023, has not proposed final dividend for the year ended March 31, 2023 (March 31, 2022: H Nil per share).
The Board of Directors at its meeting held on September 21, 2016 had approved the issue of bonus shares in the proportion of 10:1, i.e., 10 (ten) equity shares of H 10 each for every 1 (one) fully paid-up equity share held as on September 15, 2016 pursuant to resolution passed by the shareholders on July 27, 2016. The Company has not issued any bonus shares out of capitalization of its revaluation reserves or unrealized profits.
Mar 31, 2022
13 Equity Share capital (Contd.)
Pursuant to the approval of the Board of Directors of the Company, at its meeting held on February 15, 2021, and the shareholders, by way of a special resolution through postal ballot, on March 20, 2021, 1,818,181 equity shares of face value of H 5 each of the Company were offered for buyback by the Company to all eligible shareholders of the Company, through the tender offer process, for an aggregate amount not exceeding 1,000 million, being 1.24% of the total paid up equity share capital of the Company as on March 31, 2020, at H 550 per equity share, per the provisions of the Security and Exchange Board of India (Buyback of Securities) Regulations 2018, as amended and the Companies Act, as amended. The said buyback through the tender offer process was completed on June 21, 2021. The Company has funded the buyback from its free reserves as required under the said regulations. As a result of the buyback, 1,818,181 equity shares of face value of H 5 each of the Company were extinguished by appropriating a sum of H 990.91 million from the securities premium and an amount of H 9.09 million, being a sum equal to the nominal value of the Equity Shares bought back through the Buyback have been transferred to the capital redemption reserve account.
Notes (pre share sub-division effect):
a. 2,210,500 and 62,457,240 equity shares were allotted as fully paid Bonus Shares by capitalization of general reserve during the year ended March 31, 2006 and March 31, 2017 respectively.
b. Mr. Uday Singh was the holder of 79,000 unpaid shares in SIS International Holdings Ltd., a wholly owned subsidiary. In terms of a letter dated December 1, 2009, Mr. Singh had the option to exchange these shares
for shares of the Company in a manner reflecting the fair value of these shares, reduced by the amounts unpaid on them. Subsequently, in lieu of these shares and suitably adjusted for amounts unpaid thereon, Mr. Singh was allotted 40,565 Equity Shares during the year ended March 31, 2017, at a ratio as determined in accordance with a valuation report prepared by a SEBI registered merchant banker.
c. During the year ended March 31, 2018, the Company completed an Initial Public Offering (IPO) of its shares consisting of a fresh offer of 4,444,785 equity shares of H 10 each at a premium of H 805 per share and an offer for sale of 5,120,619 equity shares of H 10 each by the selling shareholders. The proceeds of the fresh offer component from the IPO amounted to H 3,410.47 (million) (net of issue expenses). The equity shares of the Company were listed on NSE and BSE effective August 10, 2017.
Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of H 5 per share. Each holder of equity shares is entitled to one vote per share and to participate in dividends in proportion to the number of and amounts paid on the shares held. The Company declares and pays dividends in Indian rupees.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the 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.
Nature and purpose of Reserves Securities Premium
Security premium is used to record the premium on issue of shares or other securities such as debentures or bonds. The reserve is utilized in accordance with the Companies Act, 2013.
The general reserve is the result of a company''s transferring a certain amount of profit from the account of retained earnings to the general reserve account. The purpose of setting up a general reserve account is to meet potential future unknown liabilities. In other words, the general reserve is a free reserve which can be utilized for any purpose after fulfilling certain conditions.
Retained earnings represents the amount of accumulated earnings of the Company and re-measurement differences on defined benefit plans.
Share Options outstanding Account
The share options outstanding account is used to recognize the grant date fair value of options issued to employees under the company''s'' employee share option plans. The Company has two share option schemes under which options to subscribe for the Company''s shares have been granted to certain executives and senior employees. The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to note 28 for further details of these plans.
Pursuant to the provisions of the Act, the Company is required to create debenture redemption reserve out of the profits which is to be utilized for the purpose of redemption of debentures. On redemption of the debentures, the related amount of this reserve will be transferred to retained earnings.
As per the Companies Act, 2013, Capital redemption reserve is created when a company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares so purchased is transferred to capital redemption reserve. This reserve can be utilized in accordance with the provisions of section 69 of the Companies Act, 2013.
Share application money pending allotment
Share application money pending allotment represents the exercise price received from employees of the Company against share options on which allotment is not yet made.
Notes:Long Term Borrowings - Secured:Bonds/debentures:
a) i) ICICI Prudential Assets Management Company
Limited has subscribed to 1,900 non-convertible debentures (NCDs) of H 1,000,000/- each. The NCDs carry interest @ 7.90% per annum, payable annually. The NCDs are secured against 85.68% shareholding in Dusters total solutions services private limited, a subsidiary of the Company. The debentures are redeemable after 2 years from the date of issue. i.e. March 30, 2023. As on March 31, 2022, ICICI Prudential Credit Risk Fund is holding the NCDs.
ii) ICICI Prudential Assets Management Company Limited has subscribed to 1,500 non-convertible debentures (NCDs) of H 1,000,000/- each. The NCDs carried interest @ 9.50% per annum, payable annually. The NCDs were secured against 85.92% shareholding in Dusters total solutions services private limited, a subsidiary of the Company. The debentures were redeemable after 3 years i.e. April 13, 2021. As on March 31, 2021, ICICI Prudential Credit Risk Fund was held the NCDs. During the year ended March 31, 2022, the NCDs has been redeemed/repaid.
b) Secured by way of first charge on the movable fixed assets of the Company purchased out of the term loan proceeds and second pari passu charge on stock and book debts of the Company both present and future. The loan is repayable in 16 equal quarterly instalments of H 9.53 million each, with repayment to commenced from November 2017 and has been fully repaid during FY 2021 - 22.
c) Secured by way of first charge on the movable fixed assets of the Company purchased out of the term loan proceeds and second parri passu charge on receivables/ current assets of the Company both present and future. The loan is repayable in 18 equal quarterly instalments commenced from the end of the 1st quarter of FY 2019-20 after the end of moratorium Period of six months and last installment repayment is scheduled in fourth quarter of FY 2023-24.
d) Secured by way of first charge on the Monitoring equipment of the Company purchased out of the term loan proceeds. The loan was repayable in 36 equal monthly instalments and shall be wholly paid by the last day of tenor i.e. by October, 2024.
e) Vehicle Loan from banks are secured by hypothecation of vehicles purchased against the loan taken from that
Bank. The loans have various repayment schedules and last instalment repayment is scheduled in FY 2028-29.
f) The terms loans mentioned above except vehicle loans, carry interest at quarterly/half-yearly/year MCLR plus spread margin ranging from 75 bps to 315 bps (March 31, 2021: 75 bps to 145 bps). The vehicle loans carry interest from 6.90% to 10.50% per annum.
g) Vehicle Loan from Other Financiers are secured by hypothecation of the respective vehicle(s) purchased against the loan taken from that financier(s). The loans carry interest from 9.00% to 10.50% per annum and have various repayment schedules and last instalment repayment is scheduled in FY 2025-26.
Long term borrowings - Unsecured:Bonds/debentures:
h) SIS Australia Group Pty Limited, a subsidiary, has subscribed to 750 Rupee Denominated Bonds (RDBs) of face value of H 1,000,000/- each. The RDBs will constitute direct, unconditional and unsecured obligations of the Company to repay the issue price plus interest @ 8% per annum. These RDB''s shall be redeemed within 9 years (redemption due by August, 2025) from the date of issue with a lock-in-period of 3 years from the date of issue and interest is payable half yearly.
Short term borrowings - Secured loans repayable on demand:
i) Secured by first pari passu charges over the current assets and immovable fixed assets and second pari passu charge over movable fixed assets.
j) Secured by first pari passu charges over the current assets and immovable fixed assets and first charge over movable fixed assets (both present and future) of the Company and second pari passu charge is with other working capital lenders.
k) The short-term borrowings charges is excluding assets specifically charged to term lenders, if any.
l) Secured by first pari passu charge over current assets both present and future.
m) The loans repayable on demand mentioned above, carry interest at quarterly/half yearly/yearly MCLR/ Repo rate/MIBOR/TBILL plus spread margin ranging from 25 bps to 60 bps (March 31, 2021: 25 bps to 80 bps) for cash credit facility and ranging from 4.30% p.a. to 4.60% p.a. for WCDL facilities.
There has been no default in the payment of interest or
repayment of principal in respect of the above loans/
borrowings.
The Company has assessed that the fair value of cash and short-term deposits, trade receivables, capital creditors, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of investments, loans given and fixed rate borrowings are calculated based on cash flows discounted using weighted cost of debt as on balance sheet date. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs.
The Company does not have any financial assets/liabilities in Level 3 items for the years ended March 31, 2022 and March 31, 2021.
19 Financial instruments by category (Contd.)Valuation processes
The finance department of the Company includes the team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. The team reports directly to the chief financial officer (CFO). Discussions of valuation processes and results are held between the CFO and the valuation team at least once every 3 months, in line with the Company''s quarterly reporting period. External valuer''s assistance is also taken for valuation purposes where required.
The main level 3 inputs used by the Company are derived and evaluated as follows:
⢠Discounts rate are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
⢠Risk adjustments specific to the counter parties (including assumptions about credit default rates) are derived from credit risk grading determined by the Company''s internal credit management group.
⢠Volatility used for option pricing model is based on historical volatility of comparable companies.
⢠Contingent consideration - estimated based on expected cash outflows arising from the forecasted sales and the entities; knowledge of the business and how the current economic environment is likely to impact it.
The Company is availing of benefits under a government scheme - Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) wherein the Central Government is paying the employer''s contribution towards Employee Pension Scheme / Provident Fund in respect of new employees joined till March 31,2019 meeting specified criteria. The grant is paid by the Government on a monthly basis in the first three years of employment of eligible new employees on fulfilment of certain conditions. Accordingly, such Government Grant is taken to profit or loss when the conditions are met and the grants are received.
(b) Unfunded Scheme - Leave obligations
Leave obligations cover the Company''s liability for sick and earned leave.
The provision for leave obligations is presented as current, since the Company does not have an unconditional right to defer settlement of any of these obligations. However, based on past experience, the Company does not expect all employees to take the full amount of accrued leave within the next 12 months. The following amount reflects leave that is not expected to be taken within the next 12 months:
The liability for earned and sick leave is recognized and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, attrition rates and pay increases through promotion and inflation have been taken into account.
(c) Defined contribution plans
The Company has certain defined contribution plans. Contributions are made to provident fund for employees at the rate of 12% of the salary (subject to a limit of H 15,000 salary per month) as per regulations. The contributions are made to a statutory provident fund administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual or constructive obligations in this regard.
Further, contributions are made in respect of Employees'' State Insurance Scheme, for specified employees, at the rate of 3.25% of the gross pay as per regulations. The contributions are towards medical benefits provided by the Government to the employees. The contributions are made to employees'' state insurance authorities administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual or constructive obligations in this regard.
In accordance with the Payment of Gratuity Act, 1972, the Company provides for a lump sum payment to eligible employees, at retirement or termination of employment based on the last drawn salary, years of employment with the Company subject to completion of five years of service and other conditions. The gratuity plan is a partly funded plan and the Company makes contributions to a fund administered and operated by a reputed insurance company. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
The Company has invested the 100% plan assets in the funds managed by insurance companies.
The following tables summarises the components of net benefit expense recognized in the statement of profit or loss and the funded status and amounts recognized in the balance sheet for the respective plans:
The above sensitivity analysis is based on a change in assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected credit unit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognized in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are market volatility, changes in inflation, changes in interest rates, rising longevity, changing economic environment and regulatory changes.
The Company has selected a suitable insurer to manage the funds in such a manner as to ensure that the investment positions are managed with an asset-liability matching framework that has been developed to achieve investments which are in line with the obligations under the employee benefit plans. Within this framework, the asset-liability matching objective is to match assets to the obligations by investing in securities to match the benefit payments as they fall due.
The insurer, on behalf of the Company, actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that failure of any single investment should not have a material impact on the overall level of assets.
(e) Parliament has approved the Code on Wages, 2019 and the Code on Social Security, 2020 which govern, and are likely to impact, the contributions by the Company towards certain employee benefits. The Code has been published in the Gazette of India. The effective date of these Codes has not yet been notified and the Company will assess the impact of these codes as and when they come into effect and will provide for the appropriate impact in its financial statements in the period in which, the Code becomes effective.
The Company has two Employee Stock Option plans namely
ESOP 2008 and ESOP 2016.
ESOP 2008 (pre share sub-division effect)
a) Under ESOP 2008 Employee Share options were granted in 2008, 2011, 2014, 2015 and 2016 and 59,000 options, 30,000 Options, 30,500 Options, 3,500 options and 2,096 options respectively have been granted.
b) All options granted in 2008 have been either exercised or lapsed.
c) Out of the 30,000 options granted in 2011, 21,700 options were exercised and the remaining 8,300 options have lapsed/forfeited.
d) Out of the 30,500 options granted in 2014, all were vested and exercised (including 1,500 options during the year ended March 31, 2018) during the year March 31, 2019.
e) Out of the 3,500 Options granted in 2015, all were vested and exercised during the year ended March 31, 2017.
f) Out of the 2,096 Options granted in 2016, the same will vest and be eligible for exercise over four financial years. Of these, 2,096 options have been vested and exercised.
g) All options under ESOP 2008 will now be governed by the terms of ESOP 2016 except in respect of vesting and exercise which will still be governed by the terms mentioned in the respective grant letters. The Options issued under ESOP 2008 will be adjusted for the bonus issue of ten equity shares for every equity share held as on September 20, 2016, as and when such options are exercised.
h) During the year ended March 31,2021, upon exercise of stock options by the eligible employees, the Company has allotted 5,764 equity shares of H 10 each.
ESOP 2016 (post share sub-division effect)
a) Under ESOP 2016, the Company granted 2,432,000 options on August 01, 2016 which will vest over four financial years and be eligible for exercise, subject to certain conditions, after August 1, 2020.
b) Of these options:
i 131,000 options have been forfeited on account of the respective employees no longer in employment.
ii 2,301,000 options have vested till March 31, 2022, out of these Options, a total of 2,169,956 options have been exercised.
c) During the year ended March 31, 2018, the Company issued a further 64,830 options to eligible employees which will vest over three financial years and be eligible for exercise, subject to certain conditions, after August 1, 2020. 64,830 have vested till March 31, 2022, out of these options, a total of 51,150 options have been exercised.
d) During the year ended March 31, 2019, the Company issued a further 3,000 options to eligible employee which will vest over three financial years and be eligible for exercise, subject to certain conditions, after October 3, 2020 and have been vested and exercised during the year ended on March 31,2021 and March 31, 2022 respectively.
e) During the year ended March 31, 2019, the Company issued a further 18,000 options to eligible employee which will vest over three financial years and be eligible for exercise, subject to certain conditions, after October 3, 2021. All options have been forfeited on account of the respective employees no longer in employment.
f) During the year ended March 31, 2022, the Company issued a further 1,421,973 options to eligible employee which will vest over four financial years and be eligible for exercise, subject to certain conditions, after June 1,2025.
i. 60,514 options have been forfeited/lapse on account of the respective employees no longer in employment.
ii. 1,443 options have vested till March 31, 2022, out of these Options, a total of 1,343 options have been exercised.
g) During the year ended March 31,2022, upon exercise of stock options by the eligible employees, the Company has allotted 547,473 equity shares of H 5 each.
Options granted under the aforesaid plans carry no dividend
or voting rights.
|
34. Commitments and contingencies (a) Capital commitment |
||
|
Particulars |
March 31, 2022 |
March 31, 2021 |
|
Estimated amount of contracts remaining to be executed on capital account (net of capital advances) and not provided for |
20.14 |
2.66 |
34. Commitments and contingencies (Contd.)
During the year ended March 31, 2020, the Company increased its ownership interest to 82.89% consequent to the fresh equity infusion in RHPL.
During the year ended March 31, 2021, the Company acquired entire remaining shareholding of 17.11% in Rare Hospitality and Services Private Limited (''RHPL''), a subsidiary of the Company, for an aggregate consideration of H 56.3 million which resulted in RHPL becoming a wholly owned subsidiary of the Company.
|
(c) Contingent liabilities |
||
|
Particulars |
March 31, 2022 |
March 31, 2021 |
|
Claims against the Company not acknowledged as debt: |
||
|
- Litigation matters with respect to direct taxes |
53.67 |
- |
|
- Litigation matters with respect indirect taxes |
102.29 |
102.29 |
|
Other money for which the Company is contingently liable |
7.70 |
2.55 |
|
Total |
163.66 |
104.84 |
|
The Company records a liability when it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. The Company reviews these provisions periodically and adjusts these provisions accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. The Company believes that the amount or estimable range of reasonably possible loss, will not, either individually or in the aggregate, have a material adverse effect on its business, financial position, results of the Company, or cash flows with respect to loss contingencies for legal and other contingencies as at March 31, 2022. Disputed claims against the Company, including claims raised by the tax authorities and which are pending in appeal / court and for which no reliable estimate can be made of the amount of the obligation, are not provided for in the accounts. However, the present obligation, if any, as a result of past events with a possibility of outflow of resources, when reliably estimable, is recognized in the accounts as an expense as and when such obligation crystallises. 35. Events occurring after the balance sheet date There were no significant events that occurred after the Balance Sheet date. |
Particulars March 31, 2022 March 31, 2021
Revenue from security services 33,178.47 30,040.79
EBITDA from security services 1,460.75 1,710.00
The Company is required to disclose segment information based on the ''management approach'' as defined in Ind AS 108-Operating Segments, which in how the Chief Operating Decision Maker (CODM) evaluates the Company''s performance and allocates resources based on the analysis of the various performance indicators. In the case of the Company, the CODM reviews the results of the Company as a whole as the Company is primarily engaged in the business of rendering security services in India. Accordingly, the Company is a single CGU, hence single segment Company. The information as required under Ind AS 108 is available directly from the financial statements, hence no separate disclosures have been made.
(b) Commitment for purchase of non-controlling interests
Commitment towards Uniq Security Solutions Private Limited (formerly known as ''Uniq Detective and Security Services Private Limited'') (''Uniq'')
Effective February 01, 2019, the Company has acquired 51% of the outstanding equity shares of Uniq for an aggregate consideration of H 515.00 million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by September 2020, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula.
During the year ended March 31, 2022, the Company acquired entire remaining shareholding of 49% in Uniq Security Solutions Private Limited, Subsidiary of the Company, for an aggregate consideration of H 510 million which resulted in Uniq becoming a wholly owned subsidiary of the Company.
Commitment towards SLV Security Services Private Limited (''SLV'')
Effective September 01, 2018, the Company has acquired 51% of the outstanding equity shares of SLV Security Services Private Limited for an aggregate consideration of H 505.00 million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by August 2020, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula. However, while a purchase consideration based on a specified formula is payable on exercise of such options, the final purchase consideration shall be computed only
after the three years of initial acquisition based on the overall remaining 49% shareholding, at the date of initial purchase of the shares by the Company, and any purchase consideration paid after the initial acquisition shall be treated as an advance for this purpose.
Effective February 10, 2020, the Company acquired an additional shareholding of 39.01% in SLV Security Services Private Limited, a subsidiary of the Company, for an aggregate consideration of H 254 million. With this acquisition, the Company held 90.01% of the outstanding equity shares in SLV as at March 31,2020.
During the year ended March 31, 2021, the Company has fulfilled its obligations of making the payment of all tranches through the escrow mechanism for acquisition of 100% of the share capital of SLV.
Commitment towards Rare Hospitality and Services Private Limited (''RHPL'')
Effective November 01, 2018, the Company has acquired 80% of the outstanding equity shares of Rare Hospitality and Services Private Limited for an aggregate consideration of H 319.66 million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by July 2020, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula. However, while a purchase consideration based on a specified formula is payable on exercise of such options, the final purchase consideration shall be computed only after the three years of initial acquisition based on the overall remaining 20% shareholding, at the date of initial purchase of the shares by the Company, and any purchase consideration paid after the initial acquisition shall be treated as an advance for this purpose.
37. Business combinations and acquisition of non-controlling interests Acquisitions during the year ended March 31, 2022a. Acquisition of additional interest in Uniq Security Solutions Private Limited (formerly known as ''Uniq Detective and Security Services Private Limited) (''Uniq'')
Effective February 01, 2019, the Company has acquired 51% of the outstanding equity shares of Uniq for an aggregate consideration of H 515.00 million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by September 2020, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula.
During the year ended March 31,2022, the Company acquired entire remaining shareholding of 49% in Uniq, Subsidiary of the Company, for an aggregate consideration of H 510 million which resulted in Uniq becoming a wholly owned subsidiary of the Company.
Acquisitions during the year ended March 31, 2021a. Acquisition of additional interest in SLV Security Services Pvt. Ltd (SLV)
On February 10, 2020, the Company acquired an additional 39.01% of the outstanding equity shares of SLV Security Services Private Limited, increasing its ownership interest to 90.01%. An interim cash consideration of H 254.00 million was paid to the non-controlling shareholders in terms of the agreement entered into at the time of initial acquisition of controlling interest in that company.
During the year ended March 31, 2021, the Company has fulfilled its obligations of making the payment of all tranches through the escrow mechanism for acquisition of 100% of the share capital of SLV.
b. Acquisition of Rare Hospitality and Services Pvt. Ltd (RHPL)
Effective March 04, 2021, the Company acquired entire remaining shareholding of 17.11% in Rare Hospitality and Services Private Limited (''RHPL''), a subsidiary of the Company, for an aggregate consideration of H 56.3 million which resulted in RHPL becoming a wholly owned subsidiary of the Company.
The Company''s principal financial liabilities, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to support the financing of the operations of its subsidiaries, joint ventures and associates. The Company''s principal financial assets include trade and other receivables, cash and cash equivalents that derive directly from its operations, loans, security and other deposits.
The Company''s operations expose it to market risk, credit risk and liquidity risk. The Company''s focus is to reduce volatility in financial statements while maintaining balance between providing predictability in the Company''s business plan along with reasonable participation in market movement. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken.
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 currency risk and
interest rate risk. Financial instruments affected by market risk include loans and borrowings, loans and deposits given, FVTOCI investments and derivative financial instruments.
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates which arises from assets and liabilities denominated in currencies other than the functional currency of the respective entities and foreign currency revenue and cash flows. The Company''s exposure to the risk of changes in foreign currency exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency) and the Company''s net investments in foreign subsidiaries. The Company has limited foreign currency transactions and has limited exposure to foreign currency assets and liabilities resulting in the foreign currency risk being low.
The exchange rate between the Indian Rupee and foreign currencies has fluctuated in recent years and may continue to do so in the future. Consequently, the results of the Company''s operations may be affected as the Indian Rupee appreciates/depreciates against these currencies.
Credit risk arises from the possibility that counterparties may not be able to settle their obligations as agreed resulting in a financial loss. The primary exposure to credit risk arises from Trade receivables and Unbilled revenue. These are unsecured and are managed by the Company through a system of periodically assessing the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivables. No single customer accounted for more than 10% of the accounts receivable as of March 31, 2022 and March 31, 2021, respectively and revenues for the year ended March 31,2022 and March 31,2021, respectively. There is no significant concentration of credit risk. The Company uses the expected credit loss (''ECL'') method to assess the loss allowance for Trade receivables and Unbilled revenue taking into account primarily the historical trends and analysis of bad debts. The Company does not expect any credit risk or impairment in respect of amounts lent to its subsidiaries, associates and joint ventures, if any.
The credit risk for financial assets other than bank balances and trade receivables are considered low.
Significant estimates and judgements Impairment of financial assets
The impairment provision for financial assets disclosed above are based on assumptions about risk of default
and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company''s past history and existing market conditions. The Company estimates loss arising on trade receivables as a percentage of sales based on past trends and such loss is directly debited to revenue instead of creating a provision for impairment of receivables.
Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Company''s treasury department in accordance with the Company''s policy. Surplus funds are invested in bank fixed deposits or used to temporarily reduce the balance of cash credit accounts to optimize interest costs.
Liquidity risk is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities. The Company consistently generates sufficient cash flows from operations and has access to multiple sources of funding to meet its financial obligations and maintain adequate liquidity for use.
The Company''s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, debentures, shareholder equity, and finance leases.
41. Additional capital disclosures
For the purpose of the Company''s capital management, capital includes issued equity capital, share premium, all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to maximise shareholder value and support its strategies and operating requirements. The key objective of the Company''s capital management is to ensure that it maintains a stable capital structure with a focus on total equity to uphold investor, creditor, and customer confidence and to ensure future development of its business. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements for the Company''s operations are generally met through operating cash flows generated and supplemented by long-term and working capital borrowings from banks.
a) safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and
b) Maintain an optimal capital structure to optimise the cost of capital.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants to which it is subject. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a ratio, which is Net Debt divided by EBITDA. The Company defines Net Debt as borrowings and lease liabilities less cash and cash equivalents including bank balances and deposits irrespective of their duration / maturity.
The Company declares and pays dividends in Indian Rupees. According to the Companies Act, 2013 any dividend should be declared only out of accumulated distributable profits. A company may, before the declaration of any dividend, transfer a percentage of its profits for that financial year, as it may consider appropriate, to the reserves.
The Board, at its meeting dated May 04, 2022, has not proposed final dividend for the year ended March 31, 2022 (March 31,2021: H Nil per share).
The Board of Directors at its meeting held on September 21, 2016 had approved the issue of bonus shares in the proportion of 10:1, i.e. 10 (ten) equity shares of H 10 each for every 1 (one) fully paid-up equity share held as on September 15, 2016 pursuant to resolution passed by the shareholders on July 27, 2016. The Company has not issued any bonus shares out of capitalisation of its revaluation reserves or unrealized profits.
Mar 31, 2019
1. COMPANY OVERVIEW
Security and Intelligence Services (India) Limited (âthe Companyâ) is a company limited by shares, incorporated and domiciled in India. The Company is listed on the BSE Limited (âBSEâ) and The National Stock Exchange of India Limited (âNSEâ). Its registered office is situated at Annapurna Bhawan, Telephone Exchange Road, Kurji, Patna, Bihar - 800010, India, and its principal place of business is situated at A-28 & 29, Okhla Industrial Area, Phase I, New Delhi - 1 10020
The Company is directly and indirectly engaged in rendering security and related services consisting of manned guarding, consulting and investigation (up to January 18, 2018), training, and indirectly engaged in paramedic and emergency response services; loss prevention, asset protection and mobile patrols; facility management services consisting of cleaning, house-keeping and pest control management services in the areas of facility management; cash logistics services consisting of cash-in-transit, ATM cash replenishment activities and secure transportation of precious items and bullion; and alarm monitoring and response services consisting of trading and installation of electronic security devices and systems through its subsidiaries, joint ventures and associates.
These financial statements were authorized for issue by the directors on May 02, 2019.
(i) Assets under construction
Capital work in progress (CWIP) as at March 31, 2019 and March 31, 2018 comprises expenditure for building in the course of construction.
(ii) Property, Plant and Equipment pledged as security
Refer note 16 for information on Property, Plant and Equipment pledged as security by the Company.
(iii) Contractual obligations
Refer note 34 for disclosure on contractual commitments for the acquisition of Property, Plant and Equipment.
No trade receivables are due from directors or other officers of the Company either severally or jointly with any other person and from firms or private companies respectively in which any director is a partner, a director or a member except as disclosed in note 39.
Refer note 40 for the Companyâs policy regarding impairment allowance on trade receivables and Companyâs credit risk management processes.
For outstanding balances, terms and conditions relating to related party receivables, refer note 39.
2. DEMERGER OF CERTAIN BUSINESS AND NON-CASH ASSETS
Demerging Business:
The Honourable National Company Law Tribunal, Kolkata Limited (formerly known as Tech SIS Access Management has vide its order dated December 22, 2017 approved a System Private Limited) and their respective shareholders composite scheme of arrangement under sections 391 to 394 and creditors (âDemerger Schemeâ). The Demerger Scheme of the Companies Act, 1956 between the Company, Service provides for the demerger, transfer and vesting of:
Master Clean Limited (âSMCâ), SIS Asset Management Private
(a) the consultancy and investigation business of the Company, including all related assets, properties, identified investments (direct, or through nominees), liabilities and provisions, employees, business contracts and movable and immovable properties, as well as certain compulsorily convertible preference shares allotted or deemed to be allotted pursuant to the Demerger Scheme (âSIS Demerging Businessâ), and
(b) the payroll outsourcing business of SMC, including all related assets, properties, identified investments (direct, or through nominees), liabilities and provisions, employees, business contracts and movable and immovable properties (âSMC Demerging Businessâ) to SIS Asset Management Private Limited, on a going concern basis (such transaction, the âProposed Demergerâ).
Revenues from the SIS Demerging Business (the âDemerging Businessesâ) accounted for Nil (March 31, 2018: Rs. 2.03 million).
Some of the key terms of the Demerger Scheme are as follows:
(i) The Demerger Scheme provides for the transfer of the Demerging Businesses to SIS Asset Management Private Limited, for Consideration (defined hereinafter) and in accordance with section 2(19AA) of the Income Tax Act. The Demerger Scheme has been drawn up to comply with the conditions relating to a demerger under section 2(19AA) of the Income Tax Act, and if found inconsistent with this section, shall stand modified to the extent required for compliance.
(ii) The âAppointed Dateâ for the Demerger Scheme is July 01, 2016.
(iii) The Demerger Scheme, inter alia, provides for, in consideration for the transfer of the Demerging Businesses, the issuance by SIS Asset Management Private Limited of (a) 43,070,000 fully paid-up compulsorily convertible preference shares of Rs. 10 each (âCCPSâ) proportionately for every 19,512,800 equity shares of Rs. 10 each of SMC held by shareholders of SMC on the Appointed Date, and (b) 16,520,000 equity shares of Rs. 10 each of SIS Asset Management Private Limited for every 6,202,659 Equity Shares held by shareholders of our Company on the Appointed Date (âConsiderationâ). Any CCPS allotted, or deemed to be allotted to the Company (on account of the Company being a shareholder of SMC) as consideration for transfer of the SMC Demerging Business would stand cancelled;
(iv) The difference between the carrying values of the assets and liabilities transferred and vested in SIS Asset Management Company Private Limited shall be adjusted against the share premium account of the respective demerging companies;
Upon the Demerger Scheme becoming effective on January 18, 2018 (being the date of filing of the order of th e honourable Nation al Company Law Tribun al, Kolkata with the Registrar of Companies, Patna), sixteen immovable properties owned by the Company and three investments owned by SMC (âDemerged Propertiesâ) stand transferred to, and vested with, SIS Asset Management Private Limited. The Demerged Properties of the Company consist primarily of land and buildings, including the Companyâs administrative office, training centres at Garwha, Jharkhand (including academic blocks and hostels), Dehradun and Cuttack, and investments by SMC in Lotus Learning Private Limited, Vardan Overseas Private Limited and Sunrays Overseas Private Limited, which own the Companyâs corporate office.
Notes:
a. Of the above, 2,210,500 and 62,457,240 equity shares were allotted as fully paid Bonus Shares by capitalization of general reserve during the year ended March 31, 2006 and March 31, 2017 respectively.
b. Mr. Uday Singh was the holder of 79,000 unpaid shares in SIS International Holdings Ltd., a wholly owned subsidiary. In terms of a letter dated December 1, 2009, Mr. Singh had the option to exchange these shares for shares of the Company in a manner reflecting the fair value of these shares, reduced by the amounts unpaid on them. Subsequently, in lieu of these shares and suitably adjusted for amounts unpaid thereon, Mr. Singh was allotted 40,565 Equity Shares during the
Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share and to participate in dividends in proportion to the number of and amounts paid on the shares held. The Company declares and pays dividends in Indian rupees. year ended March 31, 2017, at a ratio as determined in accordance with a valuation report prepared by a SEBI registered merchant banker.
c. During the year ended March 31, 2018, the Company completed an Initial Public Offering (IPO) of its shares consisting of a fresh offer of 4,444,785 equity shares of Rs. 10 each at a premium of Rs. 805 per share and an offer for sale of 5,120,619 equity shares of Rs. 10 each by the selling shareholders. The proceeds of the fresh offer component from the IPO amounted to Rs. 3,410.47 (million) (net of issue expenses). The equity shares of the Company were listed on NSE and BSE effective August 10, 2017.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the 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.
Share Options Outstanding Account
The Company has two share option schemes under which options to subscribe for the Companyâs shares have been granted to certain executives and senior employees.
The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to note 28 for further details of these plans.
Nature and purpose of Reserves Securities Premium
Security premium is used to record the premium on issue of shares or other securities such as debentures or bonds. The reserve is utilised in accordance with the Companies Act, 2013.
General Reserve
The general reserve is the result of a companyâs transferring a certain amount of profit from the account of retained earnings to the general reserve account. The purpose of setting up a general reserve account is to meet potential future unknown liabilities. In other words, the general reserve is a free reserve which can be utilized for any purpose after fulfilling certain conditions.
Share Options outstanding Account
The share options outstanding account is used to recognize the grant date fair value of options issued to employees under the companyâsâ employee share option plans. Refer note 28 for details.
Retained earnings
Retained earnings represents the amount of accumulated earnings of the Company and re-measurement differences on defined benefit plans.
Debenture redemption reserve
Pursuant to the provisions of the Act, the Company is required to create debenture redemption reserve out of the profits which is to be utilised for the purpose of redemption of debentures. On redemption of the debentures, the related amount of this reserve will be transferred to retained earnings.
Notes:
Long Term Borrowings - Secured:
Bonds/debentures:
a) I CICI Prudential Assets Management Company Limited has subscribed to 1,500 non-convertible debentures (NCDs) of Rs. 1,000,000/- each. The NCDs carry interest @ 9.50 % per annum, payable annually. The NCDs are secured against 85.92% shareholding in Dusters total solutions services private limited, a subsidiary of the Company. The debentures are redeemable after 3 years from the date of issue. i.e April 13, 2021.
Term loans:
b) Secured by way of first charge on the movable fixed assets of the Company purchased out of the term loan proceeds and second parri passu charge on stock and book debts of the Company both present and future. The loan is repayable in 16 equal quarterly instalments of Rs. 9.53 million each, with repayment to commenced from November 2017 and is scheduled to be repaid during FY 2021 - 22.
c) Secured by an exclusive charge on the specified assets acquired out of the loan and second pari-passu charge on the current assets of the Company. The loan was repayable in 15 equal quarterly instalments of Rs. 6.67 million each, prepayment of outstanding amount has been made during FY 2018 -19.
d) Secured by way of first charge on the movable fixed assets of the Company purchased out of the term loan proceeds and second parri passu charge on receivables/ current assets of the Company both present and future. The loan is repayable in 18 equal quarterly instalments beginning from the end of the 1st quarter after the end of moratorium Period of six months. Repayment will start from September 29, 2019.
e) Vehicle Loan from Banks are secured by hypothecation of vehicles purchased against the loan taken from that Bank. The loans have various repayment schedules and are scheduled to be repaid by November, 2023.
f) The terms loans mentioned above except vehicle loans, carry interest at MCLR plus spread margin ranging from 75 bps to 145 bps (March 31, 2018: 75 bps to 285 bps). The vehicle loans carry interest from 8.25% to 10.50% per annum.
Other loans and advances:
g) Vehicle Loan from Other Financiers are secured by hypothecation of the respective vehicle(s) purchased against the loan taken from that financier(s). The loans carry interest from 8.25% to 10.50% per annum and have various repayment schedules and are scheduled to be repaid by August, 2022.
Long term borrowings - Unsecured:
Bonds/debentures:
h) SIS Australia Group Pty Limited, a subsidiary, has subscribed to 750 Rupee Denominated Bonds (RDBs) of face value of Rs. 1,000,000/- each. The RDBs will constitute direct, unconditional and unsecured obligations of the Company to repay the issue price plus interest @ 8% per annum. These RDBâs shall be redeemed within 9 years from the date of issue with a lock-in-period of 3 years from the date of issue.
Term loans - unsecured:
i) The loan carries interest MCLR plus 50 bps and is repayable in 16 equal quarterly instalments of Rs. 9.37 million each, with repayment to commenced from November 2016 and is scheduled to be completed in August 2020.
Short term borrowings - Secured loans repayable on demand:
j) Secured by first pari passu charge over current assets and second pari passu charge over the movable fixed assets of the Company.
k) Secured by first pari passu charges over the current assets and immovable fixed assets and second charge over movable assets.
l) Secured by first parri passu charges over the current assets and immovable fixed assets and second charge over movable assets (both present and future) of the Company.
m) Secured by pari passu charge over the current assets of the Company.
n) Secured by first pari passu charges over the current assets and second pari passu charges over the movable fixed assets.
o) The loans repayable on demand mentioned above, carry interest at MCLR plus spread margin ranging from 20 bps to 95 bps (March 31, 2018: 90 bps to 135 bps).
The terms and conditions of the above financial liabilities are as follows:
a. Trade payables are non-interest bearing and are normally settled on credit terms ranging from 30-60 days which vary by vendor and type of service.
b. For outstanding balances, terms and conditions with related parties, refer to note 39
Based on the information available with the Company, the amount payable to creditors who have been identified as âsuppliersâ within the meaning of âMicro, Small and Medium Enterprises Development (MSMED) Act, 2006â is as below:
The Company has assessed that the fair value of cash and short-term deposits, trade receivables, capital creditors, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The Company does not have any financial assets/liabilities in Level 3 items for th e years ended M arch 3 1 , 201 9 and March 31, 2018:
Valuation processes
The finance department of the Company includes the team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. The team reports directly to the chief financial officer (CFO). Discussions of valuation processes and results are held between the CFO and the valuation team at least once every 3 months, in line with the Companyâs quarterly reporting period. External valuerâs assistance is also taken for valuation purposes where required.
The main level 3 inputs used by the Company are derived and evaluated as follows:
- Discounts rate are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
- Risk adjustments specific to the counter parties (including assumptions about credit default rates) are derived from credit risk grading determined by the Companyâs internal credit management group.
- Volatility used for option pricing model is based on historical volatility of comparable companies.
The Company is availing of benefits under a government scheme - Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) wherein the Central Government is paying the employerâs contribution towards Employee Pension Scheme / Provident Fund in respect of new employees meeting specified criteria.
- Contingent consideration - estimated based on expected cash outflows arising from the forecasted sales and the entities; knowledge of the business and how the current economic environment is likely to impact it.
The grant is paid by the Government on a monthly basis on fulfilment of certain conditions. Accordingly, such Government Grant is taken to profit or loss when the conditions are met and the grants are received.
(b) Unfunded Scheme - Leave obligations
Leave obligations cover the Companyâs liability for sick and earned leave.
The amount of the provision of Rs. 49.63 million (March 31, 2018: Rs. 39.84 million) included in note 20 is presented as current, since the Company does not have an unconditional right to defer settlement of any of these obligations. However, based on past experience, the Company does not expect all employees to take the full amount of accrued leave within the next 12 months. The following amount reflects leave that is not expected to be taken within the next 12 months:
The liability for earned and sick leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, attrition rates and pay increases through promotion and inflation have been taken into account.
(c) Defined contribution plans
The Company has certain defined contribution plans. Contributions are made to provident fund for employees at the rate of 12% of the salary (subject to a limit of Rs. 15,000 salary per month) as per regulations. The contributions are made to a statutory provident fund administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual or constructive obligations in this regard.
Further, contributions are made in respect of Employeesâ State Insurance Scheme, for specified employees, at the rate of 4.75% of the gross pay as per regulations. The contributions are towards medical benefits provided by the Government to the employees. The contributions are made to employeesâ state insurance authorities administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual or constructive obligations in this regard.
Contributions to provident fund and employeesâ state insurance scheme are recognized as an expense as they become payable which coincides with the period during which relevant employee services are received. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
The expense recognised during the period towards defined contribution plans is Rs. 2,445.28 million (March 31, 2018: Rs. 2,053.31 million).
(d) Defined benefits plans
In accordance with the Payment of Gratuity Act, 1972, the Company provides for a lump sum payment to eligible employees, at retirement or termination of employment based on the last drawn salary and years of employment with the Company. The amount of gratuity payable on retirement/ termination is the employeeâs last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of completed years of service, subject to completion of five years of service and other conditions. The payment of gratuity Act, 1972 has been amended during the previous year to enhance the gratuity ceiling from Rs. 1.00 million to Rs. 2.00 million. The gratuity plan is a partly funded plan and the Company makes contributions to a fund administered and operated by a reputed insurance company. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
The Company has invested the plan assets in the insurer managed funds.
The following tables summarises the components of net benefit expense recognised in the statement of profit or loss and the funded status and amounts recognised in the balance sheet for the respective plans:
The present value of defined benefit obligation relates to active employees only.
The Company has no legal obligation to settle the deficit in the funded plans with an immediate contribution or additional one-off contributions. The Company intends to continue to contribute to the defined benefit plans to achieve a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
The principal assumptions used in determining gratuity and post-employment benefit obligations for the Companyâs plans are shown below:
The above sensitivity analysis are based on a change in assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected credit unit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.
Risk Exposure
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are market volatility, changes in inflation, changes in interest rates, rising longevity, changing economic environment and regulatory changes.
The Company has selected a suitable insurer to manage the funds in such a manner as to ensure that the investment positions are managed with an asset-liability matching framework that has been developed to achieve investments which are in line with the obligations under the employee benefit plans. Within this framework, the asset-liability matching objective is to match assets to the obligations by investing in securities to match the benefit payments as they fall due.
The insurer, on behalf of the Company, actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that failure of any single investment should not have a material impact on the overall level of assets.
3. SHARE-BASED PAYMENTS
The Company has two Employee Stock Option plans namely ESOP 2008 and ESOP 2016.
ESOP 2008
a) Under ESOP 2008 Employee Share options were granted in 2008, 2011, 2014, 2015 and 2016 and 59,000 options, 30,000 Options, 30,500 Options, 3,500 options and 2,096 options respectively have been granted.
b) All options granted in 2008 have been either exercised or lapsed.
c) Out of the 30,000 options granted in 2011, 21,700 options were exercised and the remaining 8,300 options have lapsed/forfeited.
d) Out of the 30,500 options granted in 2014, all were vested and exercised (including 1,500 options during the year ended March 31, 2018) during the year March 31, 2019.
e) Out of the 3,500 Options granted in 2015, all were vested and exercised during the year ended March 31, 2017.
f) Out of the 2,096 Options granted in 2016, the same will vest and be eligible for exercise over four financial years. Of these, 1048 options have vested and been exercised
g) All options under ESOP 2008 will now be governed by the terms of ESOP 2016 except in respect of vesting and exercise which will still be governed by the terms mentioned in the respective grant letters. The Options issued under ESOP 2008 will be adjusted for the bonus issue of ten equity shares for every equity share held as on September 20, 2016, as and when such options are exercised.
h) During the year ended March 31, 2018, upon exercise of stock options by the eligible employees, the Company has allotted 36,014 equity shares of Rs. 10 each.
i) During the year ended March 31, 2019, upon exercise of stock options by the eligible employees, the Company has allotted 1 16,578 equity shares of Rs. 10 each.
ESOP 2016
a) Under ESOP 2016, the Company granted 1,216,000 options on August 01, 2016 which will vest over four financial years and be eligible for exercise, subject to certain conditions, after August 1, 2020.
b) Of these options:
i 45,240 options have been forfeited on account of the respective employees no longer in employment
ii 359,845 have vested on August 01, 2017, out of these Options, a total of 12,310 options were exercised during the year ended on March 31, 2019
c) During the year ended March 31, 2018, the Company issued a further 32,415 options to eligible employees which will vest over three financial years and be eligible for exercise, subject to certain conditions, after August 1, 2020.
d) During the year ended March 31, 2019, the Company issued a further 1,500 options to eligible employees which will vest over three financial years and be eligible for exercise, subject to certain conditions, after October 3, 2020.
e) During the year ended March 31, 2019, the Company issued a further 9,000 options to eligible employees which will vest over three financial years and be eligible for exercise, subject to certain conditions, after October 3, 2021.
f) During the year ended March 31, 2019, upon exercise of stock options by the eligible employees, the Company has allotted 12,310 equity shares of Rs. 10 each.
Options granted under the aforesaid plans carry no dividend or voting rights.
Proposed dividends on equity shares are subject to approval at the annual general meeting and are not recognised as a liability (including DDT thereon) as at the reporting date.
Also refer note 13 in respect of Demerger of certain business and non-cash assets.
4. COMMITMENTS AND CONTINGENCIES
(a) Leases
Operating lease commitments â Company as lessee
Operating lease arrangements comprise of office premises and Barracks. All the lease agreements are cancellable with a notice period ranging from 2 months to 6 months. Most leases also provide a renewal clause with an escalation in lease rental which is generally higher than the expected inflation rate. There are no minimum lease payments due under the existing lease agreements.
(c) Commitment for purchase of non-controlling interests Commitment towards SLV Security Services Private Limited
Effective September 01, 2018, the Company has acquired 51% of the outstanding equity shares of SLV Security Services Private Limited for an aggregate consideration of Rs. 505.00 million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by August 2020, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula. However, while a purchase consideration based on a specified formula is payable on exercise of such options, the final purchase consideration shall be computed only after the three years of initial acquisition based on the overall remaining 49% shareholding, at the date of initial purchase of the shares by the Company, and any purchase consideration paid after the initial acquisition shall be treated as an advance for this purpose.
Commitment towards Rare Hospitality and Services Private Limited
Effective November 01, 2018, the Company has acquired 80% of the outstanding equity shares of Rare Hospitality and Services Private Limited for an aggregate consideration of Rs. 319.66 million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by July 2020, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula.
However, while a purchase consideration based on a specified formula is payable on exercise of such options, the final purchase consideration shall be computed only after the three years of initial acquisition based on the overall remaining 20% shareholding, at the date of initial purchase of the shares by the Company, and any purchase consideration paid after the initial acquisition shall be treated as an advance for this purpose.
Commitment towards Uniq Detective & Security Services Private Limited
Effective February 01, 2019, the Company has acquired 51% of the outstanding equity shares of Uniq Detective & Security Services Private Limited for an aggregate consideration of Rs. 515.00 million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by September 2020, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula. However, while a purchase consideration based on a specified formula is payable on exercise of such options, the final purchase consideration shall be computed only after the three years of initial acquisition based on the overall remaining 49% shareholding, at the date of initial purchase of the shares by the Company, and any purchase consideration paid after the initial acquisition shall be treated as an advance for this purpose.
Commitment towards Dusters Total Solutions Services Private Limited
Effective August 19, 2016, the Company acquired 78.72% of the outstanding equity shares of Dusters Total Solutions Services Private Limited for an aggregate consideration of Rs. 1,169.03 million. In addition, the share purchase agreement (SPA), executed on August 06, 2016 provides for acquisition of 100% of the outstanding equity shares, by August 2019, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula. The SPA also provides an option to the non-controlling interests to sell a part of the shareholding each after one year and two years of the initial acquisition. However, while a purchase consideration based on a specified formula is payable on exercise of such options, the final purchase consideration shall be computed only after the three years of initial acquisition based on the overall remaining 21.28% shareholding, at the date of initial purchase of the shares by the Company, and any purchase consideration paid after one and two years of the initial acquisition shall be treated as an advance for this purpose.
The Company records a liability when it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. The Company reviews these provisions periodically and adjusts these provisions accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. The Company believes that the amount or estimable range of reasonably possible loss, will not, either individually or in the aggregate, have a material adverse effect on its business, financial position, results of the Company, or cash flows with respect to loss contingencies for legal and other contingencies as at March 31, 2019.
Disputed claims against the Company, including claims raised by the tax authorities and which are pending in appeal /court and for which no reliable estimate can be made of the amount of the obligation, are not provided for in the accounts. However, the present obligation, if any, as a result of past events with a possibility of outflow of resources, when reliably estimable, is recognized in the accounts as an expense as and when such obligation crystallises.
5. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE
Refer note 33 regarding dividend proposed by the Board of Directors in their meeting held on May 02, 2019. There were no other significant events that occurred after the Balance Sheet date.
The Company is required to disclose segment information based on the âmanagement approachâ as defined in Ind AS 108- Operating Segments, which in how the Chief Operating Decision Maker (CODM) evaluates the Companyâs performance and allocates resources based on the analysis of the various performance indicators. In the case of the Company, the CODM reviews the results of the Company as a whole as the Company is primarily engaged in the business of rendering security services in India. Accordingly, the Company is a single CGU, hence single segment Company. The information as required under Ind AS 108 is available directly from the financial statements, hence no separate disclosures have been made.
6. BUSINESS COMBINATIONS AND ACQUISITION OF NON-CONTROLLING INTERESTS Acquisitions during the year ended March 31, 2019
a. Acquisition of SLV Security Services Pvt. Ltd (SLV)
Effective September 01, 2018, the Company has acquired 51% of the outstanding equity shares of SLV Security Services Private Limited for an aggregate consideration of Rs. 505.00 million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by August 2020, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula. Refer note 34(c)
b. Acquisition of Rare Hospitality and Services Pvt. Ltd (Rare)
Effective November 01, 2018, the Company has acquired 80% of the outstanding equity shares of Rare Hospitality and Services Private Limited for an aggregate consideration of Rs. 319.66 million. In addition to the cash consideration, the Company injected Rs. 100 million by way of subscription of convertible loan instrument of Rare. Further, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by July 2020, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula. Refer note 34(c)
c. Acquisition of Uniq Detective & Security Services Pvt. Ltd (Uniq)
Effective February 01, 2019, the Company has acquired 51% of the outstanding equity shares of Uniq Detective & Security Services Private Limited for an aggregate consideration of Rs. 515.00 million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by September 2020, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula. Refer note 34(c)
d. Acquisition of additional interest in Dusters Total Solutions Services Pvt. Ltd
On August 03, 2018, the Company acquired an additional 7.14% interest in the voting shares of Dusters Total Solutions Services Pvt. Ltd, increasing its ownership interest to 93.06%. An interim cash consideration of Rs. 145.13 million was paid to the non-controlling shareholders in terms of the agreement entered into at the time of initial acquisition of controlling interest in that company. Refer note 34(c)
Acquisitions during the year ended March 31, 2018 Acquisition of additional interest in Dusters Total Solutions Services Pvt. Ltd
On July 31, 2017, the Company acquired an additional 7.20% interest in the voting shares of Dusters Total Solutions Services Pvt. Ltd, increasing its ownership interest to 85.92%. An interim cash consideration of Rs. 116.63 million was paid to the non-controlling shareholders in terms of the agreement entered into at the time of initial acquisition of controlling interest in that company. Refer note 34(c)
Acquisition related costs
Acquisition related costs of Rs. 17.85 million and Rs. Nil for the year ended March 31, 2019 and March 31, 2018 respectively that related to the acquisition of subsidiaries are included in cost of investment of such subsidiaries and in cash flows from investing activities in the statement of cash flows.
Terms and conditions of transactions with related parties
Transactions relating to dividends paid, subscription for new equity shares were on the same terms and conditions that applied to other shareholders.
Refer note 13 in respect of demerger of consultancy and investigation business.
The sales to, and purchases from, related parties are made on normal commercial terms and conditions and at market rates. Outstanding balances at the year-end are unsecured and carry interest equivalent to market rate, where specified, in terms of the transactions, and settlement occurs in cash. For the year ended March 31, 2019, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (March 31, 2018: Rs. Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
There is no allowance account for impaired receivables in relation to any outstanding balances, and no expense has been recognised in respect of impaired receivables due from related parties.
7. FINANCIAL RISK MANAGEMENT
The Companyâs principal financial liabilities, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Companyâs operations and to provide guarantees to support the financing of the operations of its subsidiaries, joint ventures and associates. The Companyâs principal financial assets include trade and other receivables, cash and cash equivalents that derive directly from its operations, loans, security and other deposits.
The Companyâs operations expose it to market risk, credit risk and liquidity risk. The Companyâs focus is to reduce volatility in financial statements while maintaining balance between providing predictability in the Companyâs business plan along with reasonable participation in market movement. It is the Companyâs policy that no trading in derivatives for speculative purposes may be undertaken.
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 currency risk and interest rate risk. Financial instruments affected by market risk include loans and borrowings, loans and deposits given, FVTOCI investments and derivative financial instruments.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates which arises from assets and liabilities denominated in currencies other than the functional currency of the respective entities and foreign currency revenue and cash flows. The Companyâs exposure to the risk of changes in foreign currency exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in a foreign currency) and the Companyâs net investments in foreign subsidiaries. The Company has limited foreign currency transactions and has limited exposure to foreign currency assets and liabilities resulting in the foreign currency risk being low.
The exchange rate between the Indian Rupee and foreign currencies has fluctuated in recent years and may continue to do so in the future. Consequently, the results of the Companyâs operations may be affected as the Indian Rupee appreciates/depreciates against these currencies.
Interest rate risk
Interest rate risk primarily arises from floating rate borrowing, including various revolving and other lines of credit. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Companyâs fixed rate borrowings are carried at amortised cost. They are, therefore, not subject to interest rate risk as defined in Ind-AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
Credit risk
Credit risk arises from the possibility that counterparties may not be able to settle their obligations as agreed resulting in a financial loss. The primary exposure to credit risk arises from Trade receivables and Unbilled revenue amounting to Rs. 3,473.77 million and Rs. 1,867.31 million respectively as at March 31, 2019 (Rs. 2,290.61 million and Rs. 1,845.88 million respectively as at March 31, 2018). These are unsecured and are managed by the Company through a system of periodically assessing the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivables. No single customer accounted for more than 10% of the accounts receivable as of March 31, 2019 and March 31, 2018, respectively and revenues for the year ended March 31, 2019 and March 31, 2018, respectively. There is no significant concentration of credit risk. The Company uses the expected credit loss (âECLâ) method to assess the loss allowance for Trade receivables and Unbilled revenue taking into account primarily the historical trends and analysis of bad debts. The company does not expect any credit risk or impairment in respect of amounts lent to its subsidiaries, associates and joint ventures, if any.
The credit risk for financial assets other than bank balances and trade receivables are considered low.
Significant estimates and judgements Impairment of financial assets
The impairment provision for financial assets disclosed above are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Companyâs past history and existing market conditions. The company estimates loss arising on trade receivables as a percentage of sales based on past trends and such loss is directly debited to revenue instead of creating a provision for impairment of receivables.
Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Companyâs treasury department in accordance with the Companyâs policy. Surplus funds are invested in bank fixed deposits or used to temporarily reduce the balance of cash credit accounts to optimize interest costs.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities. The Company consistently generates sufficient cash flows from operations and has access to multiple sources of funding to meet its financial obligations and maintain adequate liquidity for use.
The Companyâs objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, debentures, shareholder equity, and finance leases.
Approximately 6.64% of the Companyâs long-term debt will mature in less than one year at March 31, 2019 (March 31, 2018: 14.39%) based on the carrying value of borrowings reflected in the financial statements. The Company has assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and significant portion of short-term debt maturing within 12 months can be rolled over with existing lenders. The Company believes that it has sufficient working capital and cash accruals to meet its business requirements and other obligations.
The table below summarises the maturity profile of the Companyâs financial liabilities based on contractual undiscounted payments.
As a matter of policy, the Company does not carry out any hedging activities.
There have been no default in servicing borrowings and/ or breaches in loan covenants.
The entity has the following financial assets which are subject to the impairment requirements of Ind AS 109. On assessment of the future cash flows arising from these assets, the Company believes that there is no provision required to be made for impairment losses on these assets.
8. ADDITIONAL CAPITAL DISCLOSURES
For the purpose of the Companyâs capital management, capital includes issued equity capital, share premium, all other equity reserves attributable to the equity holders of the Company. The primary objective of the Companyâs capital management is to maximise shareholder value and support its strategies and operating requirements. The key objective of the Companyâs capital management is to ensure that it maintains a stable capital structure with a focus on total equity to uphold investor, creditor, and customer confidence and to ensure future development of its business. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements for the Companyâs operations are generally met through operating cash flows generated and supplemented by long-term and working capital borrowings from banks.
a) safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and
b) Maintain an optimal capital structure to optimise the cost of capital.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants to which it is subject. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is Net Debt divided by EBITDA. The Company defines Net Debt as borrowings less cash and cash equivalents, excluding discontinued operations, but including bank balances and deposits irrespective of their duration / maturity.
In order to achieve this overall objective, the Companyâs capital management, amongst other things, aims to ensure that it simultaneously meets financial covenants attached to its borrowings. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any borrowing in the current period.
Dividends
The Company declares and pays dividends in Indian Rupees. According to the Companies Act, 2013 any dividend should be declared only out of accumulated distributable profits. A Company may, before the declaration of any dividend, transfer a percentage of its profits for that financial year, as it may consider appropriate, to the reserves.
The Board, at its meeting dated May 02, 2019, has proposed a final dividend of Rs. 3.50 per share aggregating to Rs. 256.59 million for the year ended March 31, 2019 (March 31, 2018: Rs. 1.50 per share aggregating to Rs. 109.78). This dividend has not been recognised as a distribution to shareholders at the end of the reporting period.
Also, refer to note no 13 regarding demerger of certain business to SIS Asset Management Company Private Limited.
The Board of Directors at its meeting held on September 21, 2016 had approved the issue of bonus shares in the proportion of 10:1, i.e. 10 (ten) equity shares of Rs. 10 each for every 1 (one) fully paid-up equity share held as on September 15, 2016 pursuant to resolution passed by the shareholders on July 27, 2016. The Company has not issued any bonus shares out of capitalisation of its revaluation reserves or unrealised profits.
Mar 31, 2018
aa) Recently issued accounting pronouncements
Ind AS 12, Income Taxes: The amendments clarify the requirement for recognizing deferred tax assets on unrealized losses on debt instruments that are measured at fair value. The amendment also clarifies certain other aspects of accounting for deferred tax assets. The changes will not have any material impact on the financial statements of the Company.
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 has evaluated the effect of this on the Standalone financial statements and the impact is not material.
I nd AS 115, Revenue from Contract with Customers: On
March 28, 2018, Ministry of Corporate Affairs has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entityâs contracts with customers.
Along with the issuance of Ind AS 115, Revenue from contracts with customers, the Ministry of Company Affairs has also notified consequential amendments to various other Indian Accounting Standards.
The standard permits two possible methods of transition:
(i) Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8, Accounting Policies,
Changes in Accounting Estimates and Errors
(ii) Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach).
The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.
The Group will adopt the standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The effect on adoption of Ind AS 115 and consequential amendments to various other Indian Accounting Standards is not expected to be material.
Ind AS 40, Investment Property: On March 28, 2018, Ministry of Corporate Affairs has notified amendments to Ind AS 40, Investment Property. The amendments relate to clarifications in respect of transfer of a property to, or from, investment property, apart from other changes consequential to notification of Ind AS 115, revenue from contracts with Customers.
This amendment will come into force from April 1, 2018. The Group has evaluated the effect of this on the Standalone financial statements and the impact is not material.
Ind AS 28, Investments in Associates and Joint Ventures:
On March 28, 2018, Ministry of Corporate Affairs has notified amendments to Ind AS 28, Investments in Associates and Joint Ventures. The amendment clarifies accounting options in consolidated financial statements of a venture capital or similar entity and investment entity. These amendments are not applicable to financial statements of the Company.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
Use of estimates and judgment
The preparation of the financial statements in conformity with Ind-AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and other comprehensive income (OCI) that are reported and disclosed in the financial statements and accompanying notes.
Estimates and underlying assumptions are reviewed on an ongoing basis. They are based on historical experience and other factors including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Judgments
In the process of applying the Companyâs accounting policies, management has made various judgments, which have the most significant effect on the amounts recognized in the financial statements.
This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.
Critical estimates and judgments
The areas involving critical estimates or judgments are:
(i) Estimation of current tax expense and payable - Note 8
(ii) Estimated useful life of intangible assets - Note 2.3.d
(iii) Estimation of defined benefit obligation - Note 20
(iv) Recognition of deferred tax assets for carried forward of tax losses - Note 8
(v) Impairment of trade receivables - Note 40
(vi) Classification of leases as operating leases or finance leases - Note 2.3.v
(vii) Whether assets held for distribution to owners meet the definition of discontinued operations - Note 2.3.k
Impairment
The Company assesses impairment at each reporting date by evaluating conditions specific to the Company that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. There are no reasonable foreseeable changes in these key estimates which would have caused an impairment of these assets.
Share-based payments
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 models used for estimating fair value for share-based payment transactions are disclosed in Note 32.
Taxes
Deferred tax assets are 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 judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Refer Note 8
Defined benefit plans (gratuity benefits)
The cost of the defined benefit gratuity plan and other postemployment 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.
The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases, and gratuity increases are based on expected future inflation rates.
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 Discounted Cash Flows 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.
Intangible asset under development
The Company capitalizes development costs for a project in accordance with the accounting policy. Initial capitalization of costs is based on managementâs judgment that technological and economic feasibility is confirmed. In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits.
*Deemed cost being carrying value of property, plant and equipment measured as per Previous GAAP.
(i) Assets under construction
Capital work in progress (CWIP) as at March 31, 2017 comprises expenditure for building in the course of construction. The total amount of CWIP as at March 31, 2018 is Rs, 8.32 million (March 31, 2017: Rs, 3.05 million, March 31, 2016: Rs, Nil).
(ii) Property, Plant and Equipment pledged as security
Refer Note 16 for information on Property, Plant and Equipment pledged as security by the Company.
(iii) Contractual obligations
Refer Note 34 for disclosure on contractual commitments for the acquisition of Property, Plant and Equipment.
Aggregate deemed cost of those investments for which deemed cost as at April 1, 2016 is their Previous GAAP carrying amount is Rs, 556.62 million.
Effective August 19, 2016, the Company has acquired 78.72% of the outstanding equity shares of Dusters Total Solutions Services Private Limited for an aggregate consideration of Rs, 1,169.03 million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by August 2019, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula. In July 2017, the Company acquired a further 7.20% of the outstanding equity shares of Dusters Total Solutions Services Private Limited for an aggregate consideration of Rs, 116.63 million taking the total shareholding to 85.92%.
* Fixed deposits have been pledged as margin money against bank guarantees.
No loans or other advances are due from directors or other officers of the Company either severally or jointly with any other person and from firms or private companies respectively in which any director is a partner, a director or a member.
For the purposes of this clause, the term âSpecified Bank Notesâ shall have the same meaning as provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic affairs number S.O. 3407(E), dated November 08, 2016.
13. DEMERGER OF CERTAIN BUSINESS AND NON-CASH ASSETS
Demerging Business:
The Honourable National Company Law Tribunal, Kolkata has vide its order dated December 22, 2017 approved a composite scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 between the Company, Service Master Clean Limited (âSMCâ), SIS Asset Management Private Limited (formerly known as Tech SIS Access Management System Private Limited) and their respective shareholders and creditors (âDemerger Schemeâ). The Demerger Scheme provides for the demerger, transfer and vesting of:
(a) the consultancy and investigation business of the Company, including all related assets, properties, identified investments (direct, or through nominees), liabilities and provisions, employees, business contracts and movable and immovable properties, as well as certain compulsorily convertible preference shares allotted or deemed to be allotted pursuant to the Demerger Scheme (âSIS Demerging Businessâ), and
(b) t he payroll outsourcing business of SMC, including all related assets, properties, identified investments (direct, or through nominees), liabilities and provisions, employees, business contracts and movable and immovable properties (âSMC Demerging Businessâ) to SIS Asset Management Private Limited, on a going concern basis (such transaction, the âProposed Demergerâ).
Revenues from the SIS Demerging Business (the âDemerging Businessesâ) accounted for Rs, 2.03 million (March 31, 2017: Rs, 2.59 million).
Some of the key terms of the Demerger Scheme are as follows:
(i) The Demerger Scheme provides for the transfer of the Demerging Businesses to SIS Asset Management Private Limited, for Consideration (defined hereinafter) and in accordance with section 2(19AA) of the Income Tax Act. The Demerger Scheme has been drawn up to comply with the conditions relating to a demerger under section 2(19AA) of the Income Tax Act, and if found inconsistent with this section, shall stand modified to the extent required for compliance.
(ii) The âAppointed Dateâ for the Demerger Scheme is July 01, 2016.
(iii) The Demerger Scheme, inter alia, provides for, in consideration for the transfer of the Demerging Businesses, the issuance by SIS Asset Management Private Limited of (a) 43,070,000 fully paid-up compulsorily convertible preference shares of Rs, 10 each (âCCPSâ) proportionately for every 19,512,800 equity shares of Rs, 10 each of SMC held by shareholders of SMC on the Appointed Date, and (b) 16,520,000 equity shares of Rs, 10 each of SIS Asset Management Private Limited for every 6,202,659 Equity Shares held by shareholders of our Company on the Appointed Date (âConsiderationâ). Any CCPS allotted, or deemed to be allotted to the Company (on account of the Company being a shareholder of SMC) as consideration for transfer of the SMC Demerging Business would stand cancelled;
(iv) The difference between the book values of the assets and liabilities transferred and vested in SIS Asset Management Company Private Limited shall be adjusted against the share premium account of the respective demerging companies;
Upon the Demerger Scheme becoming effective on January 18, 2018 (being the date of filing of the order of the honourable National Company Law Tribunal, Kolkata with the Registrar of Companies, Patna), sixteen immovable properties owned by the Company and three investments owned by SMC (âDemerged Propertiesâ) stand transferred to, and vested with, SIS Asset Management Private Limited. The Demerged Properties of the Company consist primarily of land and buildings, including the Companyâs administrative office, training centres at Garwha, Jharkhand (including academic blocks and hostels), Dehradun and Cuttack, and investments by SMC in Lotus Learning Private Limited, Vardan Overseas Private Limited and Sunrays Overseas Private Limited, which own the Companyâs corporate office.
* 125 equity shares of '' 10 each fully paid up.
** The Compulsorily Convertible Debentures were converted into 22 equity shares of '' 10 each fully paid up.
Notes:
a. Of the above, 2,210,500 and 62,457,240 equity shares were allotted as fully paid Bonus Shares by capitalization of general reserve during the year ended March 31, 2006 and March 31, 2017 respectively.
b. Mr. Uday Singh was the holder of 79,000 unpaid shares in SIS International Holdings Ltd., a wholly owned subsidiary. In terms of a letter dated December 1, 2009, Mr. Singh had the option to exchange these shares for shares of the Company in a manner reflecting the fair value of these shares, reduced by the amounts unpaid on them. Subsequently, in lieu of these shares and suitably adjusted for amounts unpaid thereon, Mr. Singh was allotted 40,565 Equity Shares during the year ended March 31, 2017, at a ratio as determined in accordance with a valuation report prepared by a SEBI registered merchant banker.
c. During the year ended March 31, 2018, the Company completed an Initial Public Offering (IPO) of its shares consisting of a fresh offer of 4,444,785 equity shares of Rs, 10 each at a premium of Rs, 805 per share and an offer for sale of 5,120,619 equity shares of Rs, 10 each by the selling shareholders. The proceeds of the fresh offer component from the IPO amounted to Rs, 3,410.47 (million) (net of issue expenses). The equity shares of the Company were listed on NSE and BSE effective August 10, 2017.
The unutilised amounts of the issue as at March 31, 2018 have been temporarily deployed in the cash credit accounts of the Company with banks which is in accordance with objects of the issue. The same needs to be utilised by March 31, 2019.
Expenses incurred by the Company, amounting to Rs, 212.03 million (net of recovery from shareholders), in connection with the IPO have been adjusted towards the securities premium in accordance with Section 52 of the Companies Act, 2013.
Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of Rs, 10 per share. Each holder of equity shares is entitled to one vote per share and to participate in dividends in proportion to the number of and amounts paid on the shares held. The Company declares and pays dividends in Indian rupees.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the 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.
During the year ended March 31, 2018, 3,274 (March 31, 2017: 5,000) options issued to employees were exercised by them and equity shares allotted. Further, in terms of the ESOP 2008, the equity shares allotted on the exercise of the options shall be adjusted for the bonus issue of 10 shares for every 1 equity share announced by the Company on July 27, 2016. Accordingly, a total number of
36,014 (March 31, 2017: 55,000) equity shares were allotted by the Company on exercise of 3,274 (March 31, 2017: 5,000) options by the employees.
Shares reserved for issue under options Employees share options
Refer Note 28 for details regarding employee share options issued by the Company.
Share Options Outstanding Account
The Company has two share option schemes under which options to subscribe for the Companyâs shares have been granted to certain executives and senior employees.
The share-based payment reserve is used to recognize the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to Note 28 for further details of these plans.
Nature and purpose of Reserves
Securities Premium Reserve
Security premium reserve is used to record the premium on issue of shares or other securities such as debentures or bonds. The reserve is utilized in accordance with the Companies Act, 2013.
General Reserve
The general reserve is the result of a companyâs transferring a certain amount of profit from the account of retained earnings to the general reserve account. The purpose of setting up a general reserve account is to meet potential future unknown liabilities. In other words, the general reserve is a free reserves which can be utilized for any purpose after fulfilling certain conditions.
Share Options outstanding Account
The share options outstanding account is used to recognize the grant date fair value of options issued to employees under the companiesâ employee share option plans. Refer Note 28 for details.
Notes:
Long Term Borrowings - Secured:
Bonds/debentures:
a) Piramal Finance Limited has subscribed to 80 non-convertible debentures (NCDs) of Rs, 10,000,000/- each. The NCDs carry interest @ 12.70 % per annum, payable monthly. The NCDs are secured against investments of the Company in Service Master Clean Limited and Dusters Total Solutions Services Private Limited. The principal amount is to be repaid in 48 equal installments commencing 12 months from the deemed date of allotment of all the non-convertible debentures. Further, the Company is required to prepay 50% of the principal amount (together with interest) within 5 days of the completion of initial public offering of shares. Additionally the Company may make a prepayment of an amount not less than Rs, 100 million. The Company has a right to pre-pay the NCDs without any prepayment penalty with prior notice of 30 days.
Term loans:
b) Secured by way of first charge on the movable fixed assets of the Company purchased out of the term loan proceeds and second charge on stock and book debts of the Company both present and future. The loan carries interest @ 9.60 % per annum (1 Year MCLR 145 bps.) and is repayable in 16 equal quarterly installments of Rs,9.53 million each, with repayment to commence from November 2017 and is scheduled to be repaid during FY 2021 - 22.
c) Secured by an exclusive charge on the specified assets acquired out of the loan and second pari-passu charge on the current assets of the Company. The loan carries interest @ 11.50 % per annum (MCLR 285 bps) and is repayable in 15 equal quarterly installments of Rs,6.67 million each and scheduled to be repaid by September, 2019.
d) Secured by way of first pari-passu charge on current assets and all immovable and movable fixed assets of the Company and exclusive charge over specific immovable properties (Residential/Commercial) located in East of Kailash, Noida, Okhla or any other property in NCR acceptable to Bank. The loan carries interest @ 12.00 % per annum. The loan has a moratorium of 6 months and is to be repaid in equal 18 quarterly installments thereafter (i.e. first repayment to begin at the end of 9th month from the date of first disbursement)
e) Secured by way of first charge on the fixed assets purchased out of the loan and by a second charge on the current assets of the Company. The loan carries interest @ 10.70% per annum (MCLR 175 bps) as on March 31, 2017 and is repayable in 14 equal quarterly installments of Rs,7.10 million each.
f) Vehicle Loan from Banks are secured by hypothecation of vehicles purchased against the loan taken from that Bank. The loans carry interest from 10.03% to 10.60% per annum and have various repayment schedules and are scheduled to be repaid by January, 2023.
g) Secured by way of first exclusive charge on all present and future current assets and fixed assets acquired out of the loan and the investments in Service Master Clean Limited (59%) and Dusters Total Solutions Services Private Limited (78.72%) .The loan carries interest @ 12.70 % per annum. Repayment of the principal amount to be made in 48 equal instalments commencing 12 months from the draw down date. Further, the Company is required to prepay 50% of the principal amount (together with interest) within 5 days of the completion of initial public offering of shares. Additionally the Company may make a prepayment of an amount not less than Rs, 100 million. The company has a right to prepay the loan without any prepayment penalty with prior notice of 30 days.
Other loans and advances:
h) Vehicle Loan from Other Financiers are secured by hypothecation of the respective vehicle(s) purchased against the loan taken from that financier(s). The loans carry interest from 10.03% to 10.60% per annum and have various repayment schedules and are scheduled to be repaid by February, 2023.
Long Term Borrowings - Unsecured:
Bonds/debentures:
i) Theano Private Limited and AAJV Investment Trust have subscribed to 1,762,380 compulsory convertible debentures (CCDs) of Rs,100/- each on April 23, 2013. The CCDs are for a term of 18 years and non-interest bearing. The CCDs were to convert into a variable number of equity shares, subject to certain terms, at any time during the term of CCDs. The CCDs also carry various exit options after completion of 48 months from the date of issue. On Sept 26, 2016, the conversion ratio was fixed at 22 equity shares in lieu of all the CCDs. The holders converted the CCDs into shares on July 17, 2017.
j) SIS Australia Group Pty Limited, a subsidiary, has subscribed to 750 Rupee Denominated Bonds (RDBs) of face value of Rs, 1,000,000/- each. The RDBs will constitute direct, unconditional and unsecured obligations of the Company to repay the issue price plus interest @ 8% per annum. These RDBâs shall be redeemed within 9 years from the date of issue with a lock-in-period of 3 years from the date of issue.
Term loans:
k) The loan carries interest @10.75 % per annum (MCLR 50 bps) and is repayable in 16 equal quarterly installments of Rs, 9.37 million each, with repayment to commence from November 2016 and is scheduled to be completed in August 2020.
Short Term Borrowings - Secured Loans repayable on demand: full names of banks to be used
l) Secured by first pari- passu charge over current assets and second pari-passu charge over the movable fixed assets of the Company and carries Interest @8.50% per annum.
m) Secured by first pari- passu charge over current assets and second pari-passu charge over the movable & immovable fixed assets of the Company and carries interest @11.25% per annum.
n) Secured by first pari- passu charge over current assets and second pari-passu charge over the movable & immovable fixed assets of the Company and carries interest @11% per annum.
o) All bank overdrafts are secured against Fixed Deposit.
p) Secured by pari passu charge over all current assets (both present and future) and first charge on the movable and immovable fixed assets (both present and future), (excluding assets specifically funded by other banks) of the Company and have also been guaranteed by Mr. R K Sinha, Chairman and Mrs. Rita Kishore Sinha, Director, as well as by a first pari passu charge on specified immovable properties in the name of Mr. R K Sinha and Mrs. Rita Kishore Sinha located at Dwarka, Delhi and exclusive charge on Fixed Deposit of Rs, 68.30 million and carries interest @ 10.80% per annum.
q) Secured by pari passu charge over all the current assets (both present and future) and second charge over the movable and immovable fixed assets (both present and future) of the Company and carries interest @ 9.50% per annum.
r) Secured by pari passu charge over the current assets of the Company and carries interest @ 8.75% per annum.
Short Term Borrowings - Unsecured Loans repayable on demand:
s) The loan carries interest @ 10% per annum.
The terms and conditions of the above financial liabilities are as follows:
a. Trade payables are non-interest bearing and are normally settled on credit terms ranging from 30-60 days which vary by vendor and type of service.
b. For terms and conditions with related parties, refer to Note 39.
Based on the information available with the Company, there are no outstanding amount payable to creditors who have been identified as âsuppliersâ within the meaning of âMicro, Small and Medium Enterprises Development (MSMED) Act, 2006â as at March 31, 2018, March 31, 2017 and April 1, 2016.
For explanations on the Companyâs credit risk management processes, refer to Note 40.
Note: The Company/ other shareholders hold options to sell all or part of their shareholding or buy part of the shareholding in certain subsidiaries and Associates in terms of the respective shareholder agreements at a price and/or formula as mentioned in the respective agreements. The fair value of such options are not material on the balance sheet date and hence have not been recognized in the financial statements.
Valuation methodologies
Investments:
The Companyâs investments consist primarily of investment in equity shares of unquoted companies. Management has considered cost to be approximating to fair value considering the immateriality of such investments. Subsequently, the investments have been sold by the company at cost.
The following table presents the change in Level 3 items for the years ended March 31, 2018 and March 31, 2017:
The Company has assessed that the fair value of cash and short-term deposits, trade receivables, capital creditors, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
Valuation inputs and relationships to fair value
The following table summarizes the quantitative information about the significant unobservable inputs used in Level 3 fair value measurements.
Valuation processes
The finance department of the Company includes the team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. The team reports directly to the chief financial officer (CFO). Discussions of valuation processes and results are held between the CFO and the valuation team at least once every 3 months, in line with the Companyâs quarterly reporting period. External valuerâs assistance is also taken for valuation purposes where required.
The main level 3 inputs for investment in equity shares of unquoted companies used by the Company are derived and evaluated as follows:
Discounts rate are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
Risk adjustments specific to the counter parties (including assumptions about credit default rates) are derived from credit risk grading determined by the Companyâs internal credit management group.
Volatility used for option pricing model is based on historical volatility of comparable companies.
Contingent consideration - estimated based on expected cash outflows arising from the forecasted sales and the entities; knowledge of the business and how the current economic environment is likely to impact it.
The Company is availing of benefits under a government scheme - Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) wherein the Central Government is paying the employerâs contribution towards Employee Pension Scheme in respect of new employees meeting specified criteria. The grant is paid by the Government on a monthly basis on fulfillment of certain conditions. Accordingly, such Government Grant is taken to profit or loss when the conditions are met.
(b) Unfunded Scheme - Leave obligations
Leave obligations cover the Companyâs liability for sick and earned leave.
The amount of the provision of Rs, 39.84 million (March 31, 2017: Rs, 44.17 million, April 1, 2016: Rs, 30.62 million) included in Note 20 is presented as current, since the Company does not have an unconditional right to defer settlement of any of these obligations. However, based on past experience, the Company does not expect all employees to take the full amount of accrued leave within the next 12 months. The following amount reflects leave that is not expected to be taken within the next 12 months:
The liability for earned and sick leave is recognized and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, attrition rates and pay increases through promotion and inflation have been taken into account.
(c) Defined contribution plans
The Company has certain defined contribution plans.
Contributions are made to provident fund for employees at the rate of 12% of the salary (subject to a limit of Rs, 15,000 salary per month) as per regulations. The contributions are made to a statutory provident fund administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual or constructive obligations in this regard.
Further, contributions are made in respect of Employeesâ State Insurance Scheme, for specified employees, at the rate of 4.75% of the gross pay as per regulations. The contributions are towards medical benefits provided by the Government to the employees. The contributions are made to employeesâ state insurance authorities administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual or constructive obligations in this regard.
Contributions to provident fund and employeesâ state insurance scheme are recognized as an expense as they become payable which coincides with the period during which relevant employee services are received. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
The expense recognized during the period towards defined contribution plans is Rs, 2,898.96 million (March 31, 2017: Rs, 2,292.10 million).
(d) Defined benefits plans
In accordance with the Payment of Gratuity Act, 1972, the Company provides for a lump sum payment to eligible employees, at retirement or termination of employment based on the last drawn salary and years of employment with the Company. The amount of gratuity payable on retirement/ termination is the employeeâs last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of completed years of service. The payment of gratuity Act, 1972 has been amended during the year to enhance the gratuity ceiling from '' 1.00 million to '' 2.00 million. The gratuity plan is a partly funded plan and the Company makes contributions to a fund administered and operated by a reputed insurance company. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
The Company has invested the plan assets in the insurer managed funds.
The following tables summarizes the components of net benefit expense recognized in the statement of profit or loss and the funded status and amounts recognized in the balance sheet for the respective plans:
Expenditure to be recognized during the period:
Note: Past service cost of '' 8.32 million (March 31, 2017: Rs, Nil) has been shown as an exceptional item in the statement of profit and loss.
The present value of defined benefit obligation relates to active employees only.
The Company has no legal obligation to settle the deficit in the funded plans with an immediate contribution or additional one-off contributions. The Company intends to continue to contribute to the defined benefit plans to achieve a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
The principal assumptions used in determining gratuity and post-employment benefit obligations for the Companyâs plans are shown below:
The above sensitivity analysis are based on a change in assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected credit unit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognized in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.
Risk Exposure
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are market volatility, changes in inflation, changes in interest rates, rising longevity, changing economic environment and regulatory changes.
The Company has selected a suitable insurer to manage the funds in such a manner as to ensure that the investment positions are managed with an asset-liability matching framework that has been developed to achieve investments which are in line with the obligations under the employee benefit plans. Within this framework, the asset-liability matching objective is to match assets to the obligations by investing in securities to match the benefit payments as they fall due.
The insurer, on behalf of the Company, actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that failure of any single investment should not have a material impact on the overall level of assets.
28. SHARE-BASED PAYMENTS
The Company has two Employee Stock Option plans namely ESOP 2008 and ESOP 2016.
ESOP 2008
a) Under ESOP 2008 Employee Share options were granted in 2008, 2011, 2014, 2015, and 2016 and 59,000 options, 30,000 Options, 30,500 Options, 3,500 options, and 2,096 options respectively have been granted.
b) All options granted in 2008 have been either exercised or lapsed.
c) Out of the 30,000 options granted in 2011, 14,126 options were exercised, 8,146 options are vested and remaining to be exercised and the remaining 7,728 options have lapsed/forfeited.
d) Out of the 30,500 options granted in 2014, 28,000 options have been exercised (including 1,500 options during the year ended March 31, 2018) and the remaining 2,500 options are to vest and be eligible for exercise in the financial year 2018-19.
e) Out of the 3,500 Options granted in 2015, all were vested and exercised during the year ended March 31, 2017.
f) Out of the 2,096 Options granted in 2016, the same will vest and be eligible for exercise over four financial years. Of these, 524 options have vested and been exercised.
g) All options under ESOP 2008 will now be governed by the terms of ESOP 2016 except in respect of vesting and exercise which will still be governed by the terms mentioned in the respective grant letters. The Options issued under ESOP 2008 will be adjusted for the bonus issue of ten equity shares for every equity share held as on September 20, 2016, as and when such options are exercised.
h) During the year ended March 31, 2018, upon exercise of stock options by the eligible employees, the Company has allotted 36,014 equity shares of '' 10 each.
ESOP 2016
a) Under ESOP 2016, the Company granted 1,216,000 options on August 01, 2016 which will vest over four financial years and be eligible for exercise, subject to certain conditions, after August 1, 2020.
b) Of these options:
i 39,760 have been forfeited on account of the respective employees no longer in employment
ii 117,624 have vested on August 01, 2017
During the year ended March 31, 2018, the Company issued a further 32,415 options to eligible employees which will vest over three financial years and be eligible for exercise, subject to certain conditions, after August 1, 2020.
Options granted under the aforesaid plans carry no dividend or voting rights.
In respect of options granted by the Company prior to listing of its shares on stock exchanges, the market value of shares was determined on the basis of valuation carried out by a SEBI registered merchant banker. The valuation was carried out using a combination of Market Approach (by using market multiples of comparable listed companies) and Cost Approach.
(b) Commitment for purchase of non-controlling interests
Effective August 19, 2016, the Company acquired 78.72% of the outstanding equity shares of Dusters Total Solutions Services Private Limited for an aggregate consideration of '' 1,169.03 million. In addition, the share purchase agreement (SPA), executed on August 06, 2016 provides for acquisition of 100% of the outstanding equity shares, by August 2019, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula. The SPA also provides an option to the non-controlling interests to sell a part of the shareholding each after one year and two years of the initial acquisition. However, while a purchase consideration based on a specified formula is payable on exercise of such options, the final purchase consideration shall be computed only after the three years of initial acquisition based on the overall remaining 21.28% shareholding, at the date of initial purchase of the shares by the Company, and any purchase consideration paid after one and two years of the initial acquisition shall be treated as an advance for this purpose.
The Company records a liability when it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. The Company reviews these provisions periodically and adjusts these provisions accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. The Company believes that the amount or estimable range of reasonably possible loss, will not, either individually or in the aggregate, have a material adverse effect on its business, financial position, results of the Company, or cash flows with respect to loss contingencies for legal and other contingencies as at March 31, 2018.
Disputed claims against the Company, including claims raised by the tax authorities (e.g. Service tax) and which are pending in appeal /court and for which no reliable estimate can be made of the amount of the obligation, are not provided for in the accounts. However, the present obligation, if any, as a result of past events with a possibility of outflow of resources, when reliably estimable, is recognized in the accounts as an expense as and when such obligation crystallizes.
35. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE
Refer Note 33 regarding dividend proposed by the Board of Directors in their meeting held on May 09, 2018. There were no other significant events that occurred after the Balance Sheet date.
The Company is required to disclose segment information based on the âmanagement approachâ as defined in Ind AS 108- Operating Segments, which in how the Chief Operating Decision Maker (CODM) evaluates the Companyâs performance and allocates resources based on the analysis of the various performance indicators. In the case of the Company, the CODM reviews the results of the Company as a whole as the Company is primarily engaged in the business of rendering security services in India. Accordingly, the Company is a single CGU, hence single segment Company. The information as required under Ind AS 108 is available directly from the financial statements, hence no separate disclosures have been made. Further, there were no significant customers contributing more than 10% of revenues for the year ended March, 2018 and for the year ended March, 2017.
37. BUSINESS COMBINATIONS AND ACQUISITION OF NON-CONTROLLING INTERESTS Acquisitions during the year ended March 31, 2018
Acquisition of additional interest in Dusters Total Solutions Services Pvt. Ltd
On July 31, 2017, the Company acquired an additional 7.20% interest in the voting shares of Dusters Total Solutions Services Pvt. Ltd, increasing its ownership interest to 85.92%. An interim cash consideration of '' 116.63 million was paid to the non-controlling shareholders in terms of the agreement entered into at the time of initial acquisition of controlling interest in that company. Refer Note 34(b).
Acquisitions during the year ended March 31, 2017 Acquisition of Dusters Total Solutions Services Pvt. Ltd (DTSS)
Effective August 01, 2016, the Company has acquired 78.72% of the outstanding equity shares of Dusters Total Solutions Services Private Limited for an aggregate consideration of '' 1,169.03 million. In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by August 2019, in one or more tranches, and at a price to be determined according to a pre-agreed valuation formula. Refer Note 34(b).
Acquisition related costs
Acquisition related costs of '' Nil and '' 7.45 million for the year ended March 31, 2018 and March 31, 2017 respectively that related to the acquisition of subsidiaries are included in cost of investment of such subsidiaries and in cash flows from investing activities in the statement of cash flows.
The sales to, and purchases from, related parties are made on normal commercial terms and conditions and at market rates. Outstanding balances at the year-end are unsecured and carry interest equivalent to market rate, where specified, in terms of the transactions, and settlement occurs in cash. For the year ended March 31, 2018, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (March 31, 2017: '' Nil, April 1, 2016: Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
There is no allowance account for impaired receivables in relation to any outstanding balances, and no expense has been recognized in respect of impaired receivables due from related parties.
40. FINANCIAL RISK MANAGEMENT
The Companyâs principal financial liabilities, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Companyâs operations and to provide guarantees to support the financing of the operations of its subsidiaries, joint ventures and associates. The Companyâs principal financial assets include trade and other receivables, cash and cash equivalents that derive directly from its operations, loans, security and other deposits.
The Companyâs operations expose it to market risk, credit risk and liquidity risk. The Companyâs focus is to reduce volatility in financial statements while maintaining balance between providing predictability in the Companyâs business plan along with reasonable participation in market movement. It is the Companyâs policy that no trading in derivatives for speculative purposes may be undertaken.
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 currency risk and interest rate risk. Financial instruments affected by market risk include loans and borrowings, loans and deposits given, FVTOCI investments and derivative financial instruments.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates which arises from assets and liabilities denominated in currencies other than the functional currency of the respective entities and foreign currency revenue and cash flows. The Companyâs exposure to the risk of changes in foreign currency exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in a foreign currency) and the Companyâs net investments in foreign subsidiaries. The Company has limited foreign currency transactions and has limited exposure to foreign currency assets and liabilities resulting in the foreign currency risk being low.
The exchange rate between the Indian Rupee and foreign currencies has fluctuated in recent years and may continue to do so in the future. Consequently, the results of the Companyâs operations may be affected as the Indian Rupee appreciates/depreciates against these currencies.
There are no foreign currency denominated financial assets and financial liabilities as at March 31, 2018, March 31, 2017 and March 31, 2016.
Interest rate risk
Interest rate risk primarily arises from floating rate borrowing, including various revolving and other lines of credit. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Companyâs exposure to the risk of changes in market interest rates arises on borrowings with floating interest rate which is not material.
Credit risk
Credit risk arises from the possibility that counterparties may not be able to settle their obligations as agreed resulting in a financial loss. The primary exposure to credit risk arises from Trade receivables and Unbilled revenue amounting to Rs, 2,243.43 million and Rs, 1,845.88 million respectively as at March 31, 2018 (Rs, 1,496.08 million and Rs, 1,598.07 million respectively as at March 31, 2017). These are unsecured and are managed by the Company through a system of periodically assessing the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivables. No single customer accounted for more than 10% of the accounts receivable as of March 31, 2018 and March 31, 2017, respectively and revenues for the year ended March 31, 2018 and March 31, 2017, respectively. There is no significant concentration of credit risk. The Company uses the ECL method to assess the loss allowance for Trade receivables and Unbilled revenue taking into account primarily the historical trends and analysis of bad debts. The company does not expect any credit risk or impairment in respect of amounts lent to its subsidiaries, associates and joint ventures.
The credit risk for financial assets other than bank balances and trade receivables are considered low.
Significant estimates and judgements
Impairment of financial assets
The impairment provision for financial assets disclosed above are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Companyâs past history and existing market conditions. The company estimates loss arising on trade receivables as a percentage of sales based on past trends and such loss is directly debited to revenue instead of creating a provision for impairment of receivables.
Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Companyâs treasury department in accordance with the Companyâs policy. Surplus funds are invested in bank fixed deposits or used to temporarily reduce the balance of cash credit accounts to optimize interest costs.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities. The Company consistently generates sufficient cash flows from operations and has access to multiple sources of funding to meet its financial obligations and maintain adequate liquidity for use.
The Companyâs objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, debentures, shareholder equity, and finance leases.
Approximately 14% of the Companyâs long term debt will mature in less than one year at March 31, 2018 (March 31, 2017: 17%, April 1, 2016: 29%) based on the carrying value of borrowings reflected in the financial statements. The Company has assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and significant portion of short term debt maturing within 12 months can be rolled over with existing lenders. The Company believes that it has sufficient working capital and cash accruals to meet its business requirements and other obligations.
The table below summarizes the maturity profile of the Companyâs financial liabilities based on contractual undiscounted payments.
As a matter of policy, the Company does not carry out any hedging activities.
There have been no default in servicing borrowings and/ or breaches in loan covenants.
The entity has the following financial assets and liabilities at FVTPL which are mandatorily measured at FVTPL in accordance with the requirements of Ind AS 109.
The entity has the following financial assets which are subject to the impairment requirements of Ind AS 109. On assessment of the future cash flows arising from these assets, the Company believes that there is no provision required to be made for impairment losses on these assets.
41. ADDITIONAL CAPITAL DISCLOSURES
For the purpose of the Companyâs capital management, capital includes issued equity capital, share premium, all other equity reserves attributable to the equity holders of the Company. The primary objective of the Companyâs capital management is to maximize shareholder value and support its strategies and operating requirements. The key objective of the Companyâs capital management is to ensure that it maintains a stable capital structure with a focus on total equity to uphold investor, creditor, and customer confidence and to ensure future development of its business. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements for the Companyâs operations are generally met through operating cash flows generated and supplemented by long-term and working capital borrowings from banks.
The Companyâs objectives when managing capital are to:
a) safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and
b) Maintain an optimal capital structure to optimize the cost of capital.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants to which it is subject. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is Net Debt divided by EBITDA. The Company defines Net Debt as borrowings less cash and cash equivalents, excluding discontinued operations, but including all free bank balances and deposits irrespective of their duration / maturity.
In order to achieve this overall objective, the Companyâs capital management, amongst other things, aims to ensure that it simultaneously meets financial covenants attached to its borrowings. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any borrowing in the current period.
Dividends
The Company declares and pays dividends in Indian Rupees. According to the Companies Act, 2013 any dividend should be declared only out of accumulated distributable profits. A Company may, before the declaration of any dividend, transfer a percentage of its profits for that financial year, as it may consider appropriate, to the reserves.
The cash dividends paid per equity share were Rs, 2.00 for the year ended March 31, 2018 (March 31, 2017: Rs, Nil per share) aggregating Rs, 146.36 million (March 31, 2017: Rs, Nil) including an interim dividend of Rs, 2.00 aggregating Rs, 146.36 million (March 31, 2017: Rs, Nil) during the year ended March 31, 2018.
The Board, at its meeting dated May 9, 2018, has proposed a final dividend of Rs, 1.50 per share aggregating to Rs, 109.78 million for the year ended March 31, 2018 (March 31, 2017: Rs, Nil). This dividend has not been recognized as a distribution to shareholders at the end of the reporting period.
Also, refer to Note 13 regarding demerger of certain business to SIS Asset Management Company Private Limited.
The Board of Directors at its meeting held on September 21, 2016 had approved the issue of bonus shares in the proportion of 10:1,
i.e. 10 (ten) equity shares of Rs, 10 each for every 1 (one) fully paid-up equity share held as on September 15, 2016 pursuant to resolution passed by the shareholders on July 27, 2016. The Company has not issued any bonus shares out of capitalisation of its revaluation reserves or unrealised profits.
42. FIRST-TIME ADOPTION OF IND-AS
These financial statements, for the year ended March 31, 2018, are the first the Company has prepared in accordance with Ind-AS. For all periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with Previous GAAP, including accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended), read together with paragraph 7 of the Companies (Accounts) Rules, 2014. The date of transition to Ind-AS is April 1, 2016.
Accordingly, the Company has prepared financial statements, which comply with Ind-AS, applicable for periods ending on or after March 31, 2018, together with the comparative period data as at, and for the year ended, March 31, 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Companyâs opening balance sheet was prepared as at April 1, 2016, the Companyâs date of transition to Ind-AS. Ind-AS 101 requires that all Ind-AS standards that are effective for the first Ind-AS Financial Statements be applied consistently and retrospectively for all periods presented. This note explains the principal adjustments made by the Company in restating its Previous GAAP financial statements, including the balance sheet as at April 1, 2016 and the financial statements as at, and for the year ended, March 31, 2017.
Exemptions applied
Ind-AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind-AS.
The Company has applied the following exemptions:
Optional exemptions from retrospective application
a. A first-time adopter may opt to continue with the carrying value for all of its Property, plant and equipment (PPE), investment properties and intangible assets as recognized in its Previous GAAP financial statements as deemed cost at the transition date. However, it makes necessary adjustments for decommissioning liabilities to be included in the carrying value of PPE. If a first-time adopter opts to use the Previous GAAP carrying values as deemed cost at the transition date for all its PPE, investment property or intangible assets, the fact and the accounting policy will be disclosed by the entity. This disclosure is required in the entityâs first Ind-AS financial statements and will continue for financial statements of subsequent years also until those items of PPE, investment properties or intangible assets, as the case may be, are significantly depreciated, impaired or derecognized from the entityâs balance sheet. The Company has used this exemption to measure all its property, plant and equipment, and intangible assets at the Previous GAAP carrying amount as its deemed cost on the date of transition.
b. A first-time adopter may opt to continue with the carrying value for all of its investments in subsidiaries, joint ventures and associates as recognized in its Previous GAAP financial as deemed cost at the transition date. The Company has used this exemption to measure all its investments in subsidiaries, joint ventures and associates at the Previous GAAP carrying amount as its deemed cost on the date of transition.
c. Ind-AS 102 Share-based Payment has not been applied to equity settled grants in share-based payment transactions that vested before April 1, 2016.
d. Appendix C to Ind-AS 17 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 exemptions, and assessed all arrangements based for embedded leases based on conditions in place as at the date of transition.
e. The Company has designated unquoted equity instruments held at April 1, 2016 as fair value through profit or loss investments.
Mandatory Exemptions from retrospective application:
Estimates
The estimates at April 1, 2016 and at March 31, 2017 are consistent with those made for the same dates in accordance with Previous GAAP (after adjustments to reflect any differences in accounting policies).
Classification and measurement of financial assets and financial liabilities
Financial assets have been classified and measured on the basis of facts and circumstances existing on April 1, 2016 except for compulsorily convertible debentures which have been classified and measured based on facts and circumstances existing on the date of issue of such debentures.
Derecognition of financial assets
The Company has applied the exemption available under Ind-AS 101 to apply the derecognition criteria under Ind-AS 109 prospectively for transactions occurring on or after April 1, 2016.
Reconciliations
The following reconciliations provide the effect of transition to Ind-AS from Previous GAAP in accordance with Ind-AS 101:
1. Reserves as at April 1, 2016 and March 31, 2017; and
2. Net Profit after tax for the year ended March 31, 2017.
a. Trade recei
Mar 31, 2017
Note 1 - SHARE CAPITAL
Shares reserved for issue under options
Employees stock options
The Company has two Employee Stock Option plans namely ESOP 2008 and ESOP 2016. Under ESOP 2008 Employee Stock options were granted in 2008, 2011, 2014, 2015 and 2016 and 59,000 options, 30,000 Options, 30,500 Options 3,500 options and 2,096 options respectively have been granted.
All options granted in 2008 have been either exercised or lapsed.
Out of the 30,000 options granted in 2011, 12,876 options were exercised, 10,355 options are vested and remaining to be exercised and the remaining 6,769 options have lapsed.
Out of the 30,500 options granted in 2014, 26,500 options have been exercised (including 1,500 options during the year ended March 31, 2017) and the remaining 4,000 options are to vest and be eligible for exercise in the next 3 financial years.
Out of the 3,500 Options granted in 2015, all were vested and exercised during the year ended March 31, 2017.
Out of the 2,096 Options granted in 2016, the same will vest and be eligible for exercise over the next four financial years.
Options issued under ESOP 2008 will be adjusted for the bonus issue of ten equity shares for every equity share held as on September 20, 2016, as and when such options are exercised.
Under ESOP 2016, the Company granted 1,216,000 options which will vest over the next four financial years and be eligible for exercise, subject to certain conditions, after August 1, 2020.
COMPANY OVERVIEW
Security and Intelligence Services (India) Limited (âthe Companyâ) is engaged in rendering security and related services in the areas of manned guarding, consulting and investigation, training and facility management and cleaning services. The Company was incorporated on January 2, 1985 as a private limited company and converted itself into a public limited company on July 29, 1993. Consequently, the Company changed its name from Security and Intelligence Services (India) Private Limited to Security and Intelligence Services (India) Limited.
2. Leases:
The Company has entered into operating and finance lease agreements. Disclosures required under AS 19 - Accounting for Leases is as given below:
a. Operating leases
Operating lease arrangements comprise of office premises and Barracks. All the lease agreements are cancellable with a notice period ranging from 2 months to 6 months.
3. Employees Retirement Benefits
Till March 31, 2015, the Company was providing for gratuity and leave benefits on actual basis. In the year ended March 31, 2016, the Company applied Accounting Standard 15 (Revised). Accordingly, the Company changed the basis of providing gratuity and leave benefits, resulting in estimated liability of as at April 1, 2015 being higher by INR 167,133 and INR 26,999 respectively. During the year ended March 31, 2016, the Company accrued and provided for, and created a liability for, an amount of INR 219,124 towards gratuity and an amount of INR 30,624 towards leave as at March 31, 2016. Thus, the effective charge for the year ended March 31, 2016 towards the liabilities for gratuity and leave was INR 51,991 and INR 3,626 respectively.
4. Employee Stock Options:
ESOP 2008
In 2011, the Company announced a grant of stock options under which a total of 30,000 options were granted to 285 employees and the said options were to vest over a period of two years.
During the year ended March 31, 2012, the ESOP Remuneration Committee allotted 12,876 shares to 279 employees under the said scheme.
During the year ended March 31, 2013, the ESOP Remuneration Committee announced the vesting of 11,511 options to eligible employees and the remaining 5,613 options either lapsed or were forfeited in terms of the plan.
During the years ended March 31, 2014, 2015, 2016 & 2017, a further 259 options, 535 Options 362 options and 361 options respectively were forfeited in respect of employees who have left the company. The remaining 9,994 options to 173 employees, which vested in the year ended March 31, 2013, are now exercisable by the employees over a period of two years subject to certain conditions being fulfilled. In 2014, the ESOP Remuneration Committee announced another grant under which a total of 30,500 options were granted to 4 employees including one employee of a subsidiary company. Against this grant, 25,000 and 1,500 shares were allotted during the year ended March 31, 2016 and the year ended March 31, 2017 respectively. The remaining 4,000 options are to vest in tranches over the next 2 years.
In 2015, the ESOP Remuneration Committee announced another grant under which a total of 3,500 options were granted which were vested and exercised in the year ended March 31, 2017.
In 2016, the ESOP Remuneration Committee announced another grant under which a total of 2,096 options were granted which will vest and be exercised over a period of four year from the date of the grant.
ESOP 2016
In 2016, the ESOP Remuneration Committee announced ESOP 2016 under which it granted a total of 1,216,000 options which will vest over a period of four years from the date of the grant. The vested options will be eligible for exercise after August 1, 2020 subject to certain conditions being fulfilled. During the year ended March 31, 2017, 11,850 options were forfeited in respect of employees who have left the company.
All options under ESOP 2008 will now be governed by the terms of ESOP 2016 except in respect of vesting and exercise which will still be governed by the terms mentioned in the respective grant letters. The options granted under ESOP 2008 will be adjusted for the bonus issue in September 2016 when the same are exercised by the option holders.
5. Disclosure on Specified Bank Notes (SBNâs) - During the year, the Company had specified bank notes or other denomination note as required in the MCA notification G.S.R. 308(E) dated March 30, 2017 on the details of Specified Bank Notes (SBN) held and transacted during the period from November, 8 2016 to December,30 2016. The denomination wise SBNâs and other notes as per the notification is given below:
6. During the year, the Company has incurred a sum of INR 16,918 (previous year - INR 9,261) towards CSR activity and INR 3,604 (previous year - INR 200) for donation to others.
7. During the year, the Company has capitalized expenses incurred towards development of Computer Software amounting to INR 35,938 (previous year INR 3,658) as Intangible Fixed Assets in accordance with AS- 26.
8. Contingent liability: Disputed claims against the Company, including claims raised by the tax authorities (e.g Service tax) and which are pending in appeal /court and for which no reliable estimate can be made of the amount of the obligation, are not provided for in the accounts but are disclosed in notes to accounts as âClaims against the company not acknowledged as debtâ in Note 17. However, the present obligation, if any, as a result of past events with a possibility of outflow of resources, when reliably estimable, is recognized in the accounts as an expense as and when such obligation crystallises.
9. As per The Payment of Bonus (Amendment Act), 2015, notified by the Ministry of Labour & Employment, Government of India on December 31, 2015, there has been increase in the amount of bonus payable to eligible employees with effect from a retrospective date of April 1, 2014. As a result of this amendment, and in spite of several High courts having stayed the retrospective application of this amendment, as a matter of abundant caution, the Company has provided for an amount of INR NIL (previous year - INR 5,32,85) as additional bonus for the year ended March 31, 2015. As a result, the Companyâs profit for the year ended March 31, 2016 was lower by the said amount.
10. As of March 31, 2017, to the extent information is available, the Company does not owe sums exceeding INR 1,00,000 to any small scale industry.
11. Demerging Business:
The board of directors have, by resolutions dated September 20, 2016, November 11, 2016 and December 16, 2016, approved a composite scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 between the Company, Service Master Clean Limited (âSMCâ), SIS Asset Management Private Limited (formerly known as Tech SIS Access Management System Private Limited) and their respective shareholders and creditors (âDemerger Schemeâ). The Demerger Scheme contemplates the demerger, transfer and vesting of
(a) the consultancy and investigation business of the Company, including all related assets, properties, identified investments (direct, or through nominees), liabilities and provisions, employees, business contracts and movable and immovable properties, as well as certain compulsorily convertible shares allotted or deemed to be allotted pursuant to the Demerger Scheme (âSIS Demerging Businessâ), and
(b) the payroll outsourcing business of SMC, including all related assets, properties, identified investments (direct, or through nominees), liabilities and provisions, employees, business contracts and movable and immovable properties (âSMC Demerging Businessâ) to SIS Asset Management Private Limited, on a going concern basis (such transaction, the âProposed Demergerâ).
During the year ended March 31, 2017, revenues from the SMC Demerging Business and the SIS Demerging Business (collectively, the âDemerging Businessesâ) accounted for INR 14.64 million and INR 2.59 million, respectively.
The Company has filed the demerger scheme with the National Company Law Tribunal, Kolkata (âNCLTâ) who has the jurisdiction authority in this case, on January 13, 2017, for its approval. NCLT, Kolkata Bench, by its order dated May 26, 2017, has directed to convene the meeting of the equity shareholders of SIS and meetings of the secured and unsecured creditors of SIS and SMC for approval of the proposed scheme of demerger. Accordingly, the Demerger Scheme remains subject to (a) consents and approvals of the Central Government or any government authorities, (b) the approval of the shareholders and creditors of the respective companies, (c) the approval of the NCLT, (d) certified copies of the orders of the NCLT being filed with the ROC, and (e) compliance with any other conditions as may be imposed by the NCLT.
Some of the key terms of the Demerger Scheme are as follows:
(i) The Demerger Scheme envisages the transfer of the Demerging Businesses to SIS Asset Management Private Limited, for Consideration (defined hereinafter) and in accordance with section 2(19AA) of the Income Tax Act. The Demerger Scheme has been drawn up to comply with the conditions relating to a demerger under section 2(19AA) of the Income Tax Act, and if found inconsistent with this section, shall stand modified to the extent required for compliance.
(ii) The âAppointed Dateâ for the Demerger Scheme is proposed to be July 1, 2016.
(iii) The Demerger Scheme, inter alia, provides for, in consideration for the transfer of the Demerging Businesses, the issuance by SIS Asset Management Private Limited of (a) 43,070,000 fully paid-up compulsorily convertible preference shares of INR 10 each (âCCPSâ) proportionately for every 19,512,800 equity shares of INR 10 each of SMC held by shareholders of SMC on the Appointed Date, and (b) 16,520,000 equity shares of INR 10 each of SIS Asset Management Private Limited for every 6,202,659 Equity Shares held by shareholders of our Company on the Appointed Date (âConsiderationâ). Any CCPS allotted, or deemed to be allotted to the Company (on account of the Company being a shareholder of SMC) as consideration for transfer of the SMC Demerging Business would stand cancelled;
(iv) Upon approval of the Demerger Scheme, with effect from the Appointed Date, as noted by the board of directors by their resolutions dated September 20, 2016, November 11, 2016 and December 16, 2016, sixteen immovable properties owned by the Company and three investments owned by SMC (âDemerged Propertiesâ) shall be transferred to, and vest with, SIS Asset Management Private Limited. The Demerged Properties consist primarily of land and buildings, including our administrative office, our training centres at Garwha, Jharkhand (including academic blocks and hostels), Dehradun and Cuttack and investments by SMC in Vardan and Sunrays, which own our corporate office.
As on March 31, 2017, the book value of the assets pertaining to the SIS Demerging Business and SMC Demerging Business aggregated to INR 156.88 million and INR 430.00 million respectively. The board of directors of SIS Asset Management Private Limited has, by its resolution dated September 20, 2016, evinced an intention to enter into leasehold arrangements, on armsâ length basis with the Company post-demerger to enable us to continue to utilise certain identified Demerged Properties, including our corporate office, administrative office and our training centres at Garwha, Jharkhand (including academic blocks and hostels), Dehradun and Cuttack, post the demerger.
12. Effective August 1, 2016, the Company has acquired 78.72% of the outstanding equity shares of Dusters Total Solutions Services Private Limited for an aggregate consideration of INR 1,169,030 (INR 000s). In addition, the share purchase agreement provides for acquisition of 100% of the outstanding equity shares, by August 2019, in one or more tranches, and at a price to be determined according to a preagreed valuation formula.
13. During the year, the Company has filed a Draft Red Herring Prospectus with Securities Exchange Board of India on September 27, 2016 in connection with an Initial Public Offering (âIPOâ) of the equity shares of the Company. The Company has incurred expenses amounting to INR 89,440 towards the aforesaid IPO. As the process of the IPO is still continuing, these expenses have been recorded under Other Debtors and prepayments under Other current assets in Note 16.
14. The previous yearâs figures have been regrouped/ reclassified wherever necessary to conform to the current periodâs presentation.
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